The UK Government pioneered market liberalisation of the utility industries since the mid-1980s. In the energy sector, much faith was put in the ability of consumers to put pressure on suppliers to control profits and prices as a result of their ability to change energy supplier through a relatively simple ‘switching’ process.
The 2016 CMA report estimates that consumers have been overcharged by about £1.4bn per year over the period 2012-15. This finding has led the Government to propose a temporary cap on energy bills to give consumers relief from high charges until new suppliers become more established and competition more effective. This intervention, however, was not one of the recommended remedies put forward in the CMA report.
This lecture will present evidence on consumers’ behaviour in the retail energy market with a focus on the monetary incentives to switch supplier, but also on non-price preferences that consumers have for different suppliers.
In the light of this evidence, the lecture will attempt to assess the potential impact of the proposed price cap on consumer behaviour and energy bills, but also its indirect effects on broader energy policy objectives, such as environmental protection and increasing energy efficiency.