Saving £2 billion in energy bills

Research on competition in the energy market have potentially saved UK households up to £2 billion a year. In September 2009 Ofgem, the regulator of UK electricity and gas markets, imposed a ‘non-discrimination clause’ on energy retailers. The clause prevented energy providers from offering lower prices to new customers when expanding into new regions, compared to customers in their current region.

Professors Morten Hviid and Catherine Waddams at the Centre for Competition Policy (CCP) carried out research which showed that non-discrimination reduced competition in standard tariffs between energy suppliers. They argued it was more likely that suppliers would close the gap by increasing prices in their new markets, rather than reducing them in their traditional region – with a potential cost to consumers of £2 billion per year.

The CCP researchers, together with former electricity regulator Professor Stephen Littlechild, made submissions to Ofgem urging them not to renew this measure after the trial period. The non-discrimination clause came to an end in 2012.