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Working Paper 18-10

A Postcode Lottery: Regional Electricity Price Variations for Inactive Consumers

AUTHORS: Deller D, Turner G & Waddams Price C

ABSTRACT: The introduction of a price cap for consumers who have not switched to cheaper deals in the energy market reflects increasing political concern about the higher prices paid by these consumers compared with their more active counterparts.  In this paper, we demonstrate the variations in prices paid by inactive consumers for electricity in different parts of Britain over the last 45 years. The regions identified as the cheapest and most expensive vary noticeably over the time period, while the magnitude of the regional differences are, if anything, lower since the introduction of competition than they were before privatisation. We explore the characteristics of consumers who have never switched supplier, and who were therefore subject to these regional price differences, using unique data from a consumer survey in 2011. Responses to the question ‘have you ever switched supplier’ identified several characteristics of inactive consumers which were consistent with the findings of previous studies: not being retired, not having access to broadband, not having a gas supply and using certain payment methods are associated with a consumer reporting never having switched. However applying a robustness test (namely observing whether consumers were still with their region’s incumbent supplier) raised a number of issues with relying solely on survey data to identify long term inactivity. 

CITATION: Deller D, Turner G & Waddams Price C (2018) 'A Postcode Lottery: Regional Electricity Price Variations for Inactive Consumers', CCP Working Paper 18-10

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