Regulated and unregulated Nordic retail prices

Ole Jess Olsen, Tor Arnt Johnsen

    Research output: Contribution to journalJournal articleResearchpeer-review

    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.

    Original languageEnglish
    JournalEnergy Policy
    Volume39
    Issue number6
    Pages (from-to)3337-3345
    Number of pages9
    ISSN0301-4215
    DOIs
    Publication statusPublished - 2011

    Keywords

    • Electricity
    • Retail competition
    • Price regulation

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