Electricity retail competition: the case of the UK

Abstract

The objective of liberalising electricity supply was to create competitive retail markets where asset-light suppliers would compete on price. This paper explores the quantitative and dynamic relationship between domestic retail prices and the wholesale price since one would expect a symmetric pattern with a stable and low retail margin. In this article, taking the UK market for analysis, a time-series approach is applied to calculate the extent and timing of pass through between wholesale and retail price variations. The preliminary results indicate that the impact effect and long-run effects from the wholesale to the retail market is quite low.