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Price dispersion in Australian retail electricity markets

Tim Nelson (), McCracken-Hewson, Eleanor, Whish-Wilson, Patrick and Stephanie Bashir

Energy Economics, 2018, vol. 70, issue C, 158-169

Abstract: Simshauser and Whish-Wilson (2017) examined the restructured Victorian retail electricity market and found it to be efficient as the marginal unit produced was sold at marginal cost. This article extends their analysis of price dispersion by considering the heterogeneous nature of electricity consumption when measured by volume sold (kWh). We find that customers on ‘standing offer’ tariffs use 18% less electricity than customers on ‘high discount’ products, indicating the presence of market segmentation and implicit second-degree price discrimination. Climate change policy and the emergence of new technologies such as household solar PV, battery storage and home energy management systems will create further price dispersion in Australian electricity markets due to even greater product heterogeneity. We contend that policy makers will need to facilitate, rather than prevent, both price and tariff structure dispersion with the objective of improving consumer outcomes.

Keywords: Electricity markets; Price discrimination; Energy policy (search for similar items in EconPapers)
JEL-codes: D40 D20 D22 L11 (search for similar items in EconPapers)
Date: 2018
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