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Regulated and unregulated Nordic retail prices

Author:
Johnsen, Tor Arnt, Olsen, Ole Jess
Source:
Energy policy 2011 v.39 no.6 pp. 3337-3345
ISSN:
0301-4215
Subject:
consumers (people), electricity, households, market power, markets, monopoly, prices, profits and margins, purchasing, Denmark, Finland, Norway, Scandinavia, Sweden
Abstract:
Nordic residential electricity consumers can now choose among a number of contracts and suppliers. A large number of households have continued to purchase electricity from the incumbent supplier at default contract terms. In this paper, we compare the situation for such passive customers. Danish default prices are regulated whereas default prices in the other countries are unregulated. Systematic price differences exist among the Nordic countries. However, as wholesale prices sometimes differ the gross margin is a more relevant indicator. Regulated gross margins are lower in Denmark than in Sweden but higher than in Norway and Finland. Because of market design Norwegian default contracts are competitive whereas Swedish contracts provide the retailer with some market power. We interpret the low Finnish margins as a result of municipal retailers continuing traditional pricing from the monopoly period. Danish margins are higher than the competitive Norwegian margins but are earned from a much lower level of consumption. The annually margins earned per consumer are very close in the two countries, which indicates that the Danish regulation is achieving its objective of approaching competitive prices.
Agid:
967642