A PYMNTS Company

Non‐Discrimination Clauses in the Retail Energy Sector

 |  September 23, 2012


Morten Hviid & Catherine Waddams Price (University of East Anglia – Centre for Competition Policy (CCP)) discuss Non‐Discrimination Clauses in the Retail Energy Sector.

ABSTRACT: The British energy regulator has recently reviewed a non‐discrimination licence condition imposed to ensure that energy retailers charge the same mark‐up in different regions. Loyalty by many to incumbent firms necessitated heavy discounting by entrants to attract customers, which had led to regional price discrimination. Matching characteristics of the energy market to models of discrimination, we identify the necessary conditions for the licence condition to have a positive effect for consumers, and particularly ‘vulnerable’ consumers. The licence condition is likely to have reduced competition in the mainstream energy markets, which seems confirmed by the regulator’s subsequent review of the retail market.