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The CMA’s Assessment of Customer Detriment in the GB Retail Energy Market

Author

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  • Littlechild, S.
Abstract
The Competition and Markets Authority (CMA) has recently investigated the GB energy market and found an Adverse Effect on Competition (AEC) in the retail market for domestic (residential) customers. It estimated the associated customer detriment to be an average of £1.4 billion per year over 2012-15, rising to almost £2 billion in 2015. Citing these figures, the Government has introduced a Bill to require the energy regulator Ofgem to impose a price cap on most domestic energy tariffs. The CMA’s calculation is unprecedented with respect to its nature, magnitude and policy impact. It has implications for the conduct of competition policy and beyond. This paper seeks to understand and appraise the nature of this calculation, and to question whether it is appropriate as a basis for future policy.

Suggested Citation

  • Littlechild, S., 2017. "The CMA’s Assessment of Customer Detriment in the GB Retail Energy Market," Cambridge Working Papers in Economics 1707, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:1707
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    References listed on IDEAS

    as
    1. Agustin J. Ros, 2020. "Does electricity competition work for residential consumers? Evidence from demand models for default and competitive residential electricity services," Journal of Regulatory Economics, Springer, vol. 58(1), pages 1-32, August.
    2. Xiaoping He & David Reiner, 2018. "Consumer Engagement in Energy Markets: The Role of Information and Knowledge," Working Papers EPRG 1835, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    3. Stephen Littlechild, 2020. "The CMA’s assessment of customer detriment in the UK retail energy market," Journal of Regulatory Economics, Springer, vol. 57(3), pages 203-230, June.
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Amenta, Carlo & Aronica, Martina & Stagnaro, Carlo, 2022. "Is more competition better? Retail electricity prices and switching rates in the European Union," Utilities Policy, Elsevier, vol. 78(C).
    2. Stephen Littlechild, 2021. "The challenge of removing a mistaken price cap," Economic Affairs, Wiley Blackwell, vol. 41(3), pages 391-415, October.
    3. Stephen Littlechild, 2020. "The CMA’s assessment of customer detriment in the UK retail energy market," Journal of Regulatory Economics, Springer, vol. 57(3), pages 203-230, June.
    4. Haar, Lawrence, 2021. "The competitive disadvantages facing British assetless electricity retailers," Energy Policy, Elsevier, vol. 155(C).

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    More about this item

    Keywords

    Retail energy markets; market power; price discrimination; efficient costs;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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