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Consumer switching in retail electricity markets: Is price all that matters?

Ndebele, T; Marsh, D; Scarpa, R.

Consumer switching in retail electricity markets: Is price all that matters? Thumbnail


Authors

T Ndebele

D Marsh



Abstract

We model consumer switching in retail electricity markets in New Zealand to identify important determinants of switching and estimate willingness to pay (WTP) for six non-price attributes of electricity services, namely, call waiting time, length of fixed rate contract, renewable energy, loyalty rewards, supplier ownership, and supplier type. The results provide important insights into residential consumer switching, which inform policy and enable suppliers to differentiate their products. The analysis is based on 2688 choice responses generated using an online choice experiment administered to a sample of 224 residential bill-payers. A latent class model is used to distinguish important determinants of switching and preference heterogeneity. We find that non-price attributes of electricity services are significant determinants of consumer switching. Three latent classes with distinct preferences for the attributes are identified. The first class (40%) is mainly concerned about power bills and would switch supplier to save at least NZ$125 per year in power bills, ceteris paribus. This value mainly captures the status quo effect or preference for incumbent traditional suppliers. The second class (46%) exhibits no status quo preference, values all attributes, and particularly dislikes entrants from other sectors. These suppliers must charge NZ$135 per year less than traditional suppliers for a 50% chance of attracting customers. The third class (14%) consists of captive and loyal customers who are unlikely to switch supplier for any realistic power bill savings.

Citation

Ndebele, T., Marsh, D., & Scarpa, R. (2019). Consumer switching in retail electricity markets: Is price all that matters?. Energy Economics, 83, 88-103. https://doi.org/10.1016/j.eneco.2019.06.012

Journal Article Type Article
Acceptance Date Jun 15, 2019
Online Publication Date Jun 18, 2019
Publication Date Sep 1, 2019
Deposit Date Sep 14, 2019
Publicly Available Date Dec 18, 2020
Journal Energy Economics
Print ISSN 0140-9883
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 83
Pages 88-103
DOI https://doi.org/10.1016/j.eneco.2019.06.012
Public URL https://durham-repository.worktribe.com/output/1321845

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