Center for the Study of Energy Markets

Consumer choice is increasingly recognised as a crucial factor in industrial policy. To illustrate the implications of such choice we present an investment model of the switching choice in the UK residential natural gas market and examine responses to a specially commissioned survey of nearly seven hundred consumers, identifying search and switching costs. Through an assessment of the savings which consumers say they require to switch supplier, together with an evaluation of consumer switching behaviour, we deduce that the incumbent retains considerable market power, suggesting that some continued regulation may be necessary.