DP1814 Competition in Electricity Supply: Will '1998' be Worth it?

• Richard Green Tanga McDaniel
31 Mar 1998

Starting in 1998, the electricity market in England and Wales will be opened up to full competition, and all consumers will be allowed to choose their electricity supplier. This promises to result in lower prices, but there will be additional transactions costs exceeding £100 million a year for the first five years. Relative to a counterfactual without competition, there are likely to be large transfers from electricity companies (and the coal industry) to consumers, but the companies lose more than consumers gain. This conclusion might be reversed, if competitive pressure leads to significant additional cost savings in the future.