It’s accepted wisdom among UK and European policy makers that one of the best ways to lower carbon emissions is through marketisation and cross-border trade. This manifests itself in the phenomenon of what can be called ‘market imagination’, where entirely new markets are created to serve particular policy goals. The problem with these types of markets is that, if designed badly, they can produce perverse outcomes. One such market is the European Guarantee of Origin system. Under this system one ‘certificate’ is created for every MWh of electricity generated from renewable sources. This market is terribly designed, and has meant that green electricity is being double sold and consumers are being mislead.
Continue reading “How European Guarantee of Origins are deceiving consumers”
The recent provisional findings from the Competition and Markets Authority (CMA) investigation into energy markets includes the less than shocking revelation that SMEs overpay for their utilities. It found that most micro-businesses overpay for their energy usage and that 45% are on default tariffs that they had never negotiated with their suppliers. Consequently, suppliers are free to set high prices and enjoy profit margins of 8%, which are exorbitant compared to the 3% in domestic markets. Why does this appear to be the case? In this post I’ll be exploring some of the arguments made in the provisional CMA report as well as reflecting on my own experience running a small business and switching our electricity provider.
Continue reading “Do small businesses overpay for utilities? Evidence from the CMA and the real world”
Last week I wrote a post that looked at the effect of standing charges on consumer understanding of energy tariffs. Standing charges are set daily fees that consumers pay regardless of their actual energy usage. I argued that eliminating standing charges is the best possible way to simplify energy tariffs. This would make switching easier for consumers and would lead to a better deal for low-energy consumers. Today I will take a different approach to the issue and will focus on the inter-relation between energy efficiency and the standing charge. As far as I can tell this issue is too boring for any academic research to have been undertaken, so the statistics here are based on my own calculations from Ofgem data. Continue reading “Standing charges – the hidden enemy of energy efficiency”
Price comparison sites have grown hugely in the past few years. There have been expensive advertising campaigns to try and differentiate among several websites that are all almost identical in functionality. Recent research by Consumer Futures finds that 52% of consumers have switched or purchased directly through a price comparison website. Despite their growth there has been little research done to examine how beneficial they are for consumers, how they should be regulated and how sustainable the business model is likely to be.
Continue reading “Price comparison websites – consumer champions or well branded middlemen?”