competition and entry in the gb electricity retail market.pdf - Frontier ...

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6 Frontier Economics | January 2011 It is too early to assess whether these remedies have changed switching rates amongst different customer groups. Further, as we discuss later in this report, we have some concerns that these remedies may actually lead to an overall reduction in competition in this market. 1.2 Evolution of market structure The number of suppliers was at its highest in the period immediately following market opening. At this time all 14 former public electricity suppliers (PESs) and British Gas were in the market and a number of new suppliers also entered. A period of exit and consolidation then followed and there are now six large suppliers, 9 who have a combined market share of over 99% of domestic supply, and a small fringe of suppliers, who have less than 50,000 customers each. There are also a number of “affinity deals” whereby companies with established brands (such as Sainsbury and Marks and Spencer) market the energy of a supplier. This pattern of new entry followed by exit and consolidation is not surprising: there is inevitably a process of learning what business models work in a newly liberalised market. Further, initial competition was buoyed as price controls on the incumbents were in place and were set to ensure that the supply margin was high enough to attract new entry. As we discuss later in this report, changes to the wholesale market arrangements and availability of credit have also had an impact. Yet despite this consolidation, the number of suppliers still compares well with the rest of Europe, as illustrated in Table 1. 9 E.ON, RWE npower, SSE, EDF Energy, British Gas and Scottish Power. How competitive is the market?
Table 1. Retail Market Position in Electricity, 2008. Electricity Companies with market share over 5% in whole retail market January 2011 | Frontier Economics 7 Market share of three largest companies in whole retail market Number of nationwide suppliers Slovenia 7 58 13 Denmark 7 n/a 16 Poland 6 44 19 Great Britain 6 59* 17 Austria 6 62 10 Norway 5 36 26 Romania 5 48 138 Finland 4 40 25 Hungary 4 81 78 Ireland 4 84 9 Spain 4 85 75 Northern Ireland 4 90 18 Luxembourg 4 94 7 The Netherlands 4 n/a 21 Germany 3 52 17 Italy 3 59 23 Slovak Republic 3 60 176 Bulgaria 3 98 1 Czech Republic 3 99 310 Sweden 3 n/a 104 Portugal 2 100 4 How competitive is the market?
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