Do wholesale electricity prices pass-through to consumers in contestable retail electricity markets? An examination in Victoria Australia

Burns, Kelly ORCID: 0000-0003-4031-3442 and Mountain, Bruce ORCID: 0000-0002-2093-2038 (2021) Do wholesale electricity prices pass-through to consumers in contestable retail electricity markets? An examination in Victoria Australia. Working Paper. Victoria Energy Policy Centre, Victoria University, Melbourne, Australia.

Abstract

Contestable retail electricity markets can cater for consumers’ diverse preferences, including price stability. We estimate prices for 18,997 households in Victoria, Australia, using all commonly available retail offers, once per month from January 2019 to March 2021 and relate these prices to monthly estimates of wholesale market prices. We find incumbent and established new entrant retailers incompletely pass-through wholesale prices (around 40 % of wholesale price variation is passed through in retail prices) when measuring cheaper offers (the 10th percentile cheapest offers). However new entrant retailers completely pass-through wholesale prices. The incomplete pass-through by dominant and established new entrant retailers is also observed in other countries. While this is commonly considered to reflect weak competition, it may reflect consumer preferences for stable prices, even if they are more expensive.

Dimensions Badge

Altmetric Badge

Additional Information

Working Paper 2108

Item type Monograph (Working Paper)
URI https://vuir.vu.edu.au/id/eprint/42485
DOI https://doi.org/10.26196/c6ra-wt76
Subjects Current > FOR (2020) Classification > 3801 Applied economics
Current > Division/Research > Victoria Energy Policy Centre (VEPC)
Keywords price stickiness; asymmetry; pass-through; market efficiency; retail competition
Download/View statistics View download statistics for this item

Data Citation/Attribution

Burns, K., & Mountain, B. (2021). Do wholesale electricity prices pass-through to consumers in contestable retail electricity markets? An examination in Victoria Australia. Victoria Energy Policy Centre, Victoria University. https://doi.org/10.26196/C6RA-WT76

Search Google Scholar

Repository staff login