The effect of liberalizing UK retail energy markets on consumers

This paper describes the evolution of supply competition in the UK residential energy market and the extent to which consumers in general, and vulnerable households in particular, have benefited from liberalization. It concludes that earlier fears about higher prices for vulnerable groups from tariff rebalancing have not so far been realized. However, in assessing the extent to which suppliers may be able to exploit individual or joint market power, increasing concentration in the downstream market may result in adverse effects on all consumers, especially low-income households. This poses a threat to the government's programme to reduce fuel poverty, particularly at a time when upstream costs are expected to rise to reflect environmental concerns.