Communication-Based Approach for Promoting Energy Consumer Switching: Some Evidence from Ofgem’s Database Trials in the United Kingdom

Abstract

Prompted by rising concern about weak consumer switching and the practice of price discrimination, over the period of 2016–2019, the Office of Gas and Electricity Markets (Ofgem) undertook a series of trials on communication-based interventions to encourage consumer switching in the United Kingdom. The main purpose of this paper is to assess the experience of these Ofgem trials with a view to draw some lessons for policy makers. The analytical framework adopted for this purpose is informed by existing literature on the barriers for consumer switching. The results of the analysis suggest that while the Ofgem trials have made positive impacts on consumer switching, these impacts varied significantly across the trials, suggesting that some interventions were more effective than others. Further, the overall impacts of the Ofgem trials were moderate, as around 70% of participants did not switch suppliers even in the most impactful trial. This reflects a general lack of understanding in the literature about the behaviour-influencing factors, their impacts, and their context-connects. By implication, the difficulty in stimulating consumer switching, as demonstrated by the Ofgem trials, suggests that weak consumer switching and the practice of price discrimination may simply reflect significant competition, rather than a lack of it, especially if retail margins are not greater than the competitive level. In this case, the communication-based intervention aimed at encouraging consumer switching may lead to further price discrimination, especially for the most vulnerable consumers, who are more likely to stay with their incumbent suppliers.

A Framework for the Analysis of the Sustainability of the Energy Retail Market

“…In conclusion, words related to market structure (i.e., market structure, vertical integrated/integration, and their synonyms) are less frequent. These topics are discussed in [39,44,62,64].…”

“…In conclusion, words related to market structure (i.e., market structure, vertical integrated/integration, and their synonyms) are less frequent. These topics are discussed in [39,44,62,64]. The most referenced works are useful for determining the trend of the most studied topics and for providing a potential chronological interpretation.…”

“…Diversification impact on efficiency [41] Financial issues for investor-owned utilities [47] High negative impact on R&D expenditure [48] Low Competition [50] Ownership impact on efficiency [45] Possible abuse of market power by retailers [42] The RPS program was more influential than the electric prices [51] Companies' size impact on market strategies [66] externalities for small firms [66] utilities could not recover their energy procurement [47] Withdrawal of the cheapest offers from the market in case of a price cap [68] Not analyzed [46,51,58,61,67,73] Liberalized market competitive advantage for horizontally integrated retailers [44,52,63] Difficulties for incumbents [38,60] Failure to prevent market concentration [55] Competitive advantage for vertically integrated retailers [13] Increased risk for small and non-integrated companies [13] Increased service costs for independent retailers [38] Negative correlation between price and market concentration of the largest retailer [32] Negative impact on retailers only (externalities) [64] Possible double margin for an incumbent [70] Service quality impacts information transparency [57] Supplier stimulated to be more efficient [60] unstable dynamics of energy prices [69] Not analyzed [14,39,53,74] Market in transition Higher power charges [59] Increase in operating costs…”

“…The final regulated price leads to low consumer awareness by customers [47] In some cases, higher price [42] Lower Prices [67] Not lower prices [42,59] Not optimal outcomes for consumers. [46] Ownership impact on the price [45,46,73] Possible future lower price [61] Possible higher Base price [68] Small discount for new (Active) customers [68] Transitory price reduction [58] Impact of utility dimension impact on the price [66] Not analyzed [41,48,51] Liberalized market Impact of country heterogeneity impact on switching rate [63] Increased switching rate [39] information asymmetry [13,32,74] Limited benefit for household customers in case of market concentration [63] Limited Benefits for Small and residential consumers [13] Limited effect on residential prices [14] Lower price for commercial and industrial sectors [14] Table 4. Cont.…”

Tripartite Coordinated Regulation of New Energy Vehicles Based on Dynamic Bayesian Game

“…Consumers are important stakeholders, who not only affect the environmental performance of manufacturers but also influence the efficiency of regulation (Hammami et al, 2018;Yang et al, 2020). However, the current research mainly pays close attention to discussing how manufacturers respond to government policies.…”