The Victoria Energy Policy Centre (VEPC) is a research centre focussing on policy challenges in energy in Australia, with a particular focus on Victoria.
The VEPC's core research discipline is economics, but we encourage collaboration between experts from different academic traditions. We combine academically rigorous research and analysis, with a practical understanding of government processes.
Our latest working paper
Loyalty taxes and search costs in retail electricity markets: have we got it wrong?
By Bruce Mountain, Director, VEPC, and Kelly Burns, Senior Research Fellow, VEPC
A common view in retail electricity market is that retailers discriminate based on consumers’ loyalty: loyal consumers pay more. The premium is colloquially known as a “loyalty tax”. Reflecting this understanding, Australia’s governments, regulators and consumer advocates have encouraged consumers to switch electricity retailers. We test whether the Victorian retail electricity market bifurcates on consumer loyalty using a sample of 48,088 household electricity bills to estimate the annual available saving if each consumer switched to the cheapest available offer. We find consumers that switched retailer in the previous year reduced their annual available saving by AU$45 relative to consumers who remained with their retailer. The small difference (around 3% of the typical annual bill) suggests that the loyalty tax, while statistically significant, is not large. Evidently search costs are far higher than hitherto assumed. Reducing search costs is essential for effective consumer participation in retail markets.
Download the working paper (1mb) by clicking on the image (left).
Our latest report
Ensuring reliable electricity supply in Victoria to 2028: suggested policy changes
By VEPC Director, Associate Professor Bruce Mountain and
Dr Steven Percy, VEPC Research Fellow.
This report looks at whether markets and regulations will ensure reliable electricity in Victoria over the coming decade, and examines the power system to understand the effect of renewable electricity expansion, and the possible closure of Alcoa's Portland smelter. The report recommends that the Victorian Government ask the Australian Energy Market Operator (AEMO) to develop an appropriate reliability standard and strategic reserve and that the Government prepares the administrative arrangements to implement this.
Download the report (2.3mb) by clicking on the image (left).
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