Analysis of asymmetries in the price formation process in the Swedish consumer market for electricity

The major electricity market reform of 1996 aimed to create more favourable conditions for business start-ups, competition and more efficient use of resources in the production and trading of electricity. However, in direct contrast to these ambitions, the number of electricity trading companies has recently decreased substantially, as illustrated by the 2/3 market share of the three dominant energy groups. As electricity prices have steadily increased since the 1990s, media and consumers have demonstrated increasingly widespread dissatisfaction. Through a unique access to all electricity market companies' prices since 2008, this project aims to analyze competition and efficiency in the electricity market through so-called asymmetric price transmission models. The primary research question is to analyze whether electricity trading companies have a greater tendency (both in terms of level and time) to increase customers' electricity prices after producer price increases on Nord Pool, compared to the tendency to reduce consumers' electricity prices after corresponding producer price reductions on Nord Pool. This means that the electricity trading companies, at the expense of consumers, take a larger share of the margin than the risk premium justifies. However, as long as customer mobility (in terms of the propensity to switch to a cheaper electricity trading company) is low, there are limited incentives for the larger electricity trading companies to compete on price to any significant extent - and the inefficiencies can thus be allowed to continue.