When tasked with helping Simple Energy expand in Europe, I also agreed to move my family to Sweden in order to be closer to our customers. And we did just that, recently moving into a beautiful house on the west coast of Sweden. Shortly after, I received a letter from the local utility, welcoming us and informing me that they were our default electricity supplier. The letter outlined the standard price (provider of last resort) but also explained that we were free to switch to another electricity retailer of our choice. They even provided us with three different competitive options to choose from – how nice!
Having lived all my life in regulated utility markets, this felt a bit like stepping out of a cave into the bright sunshine.
The main goal of deregulation is to make the retail price of electricity more transparent to the wholesale market and to give the power of choice back to the consumer. In many deregulated markets, such as Sweden, there are companies that take an advisory role to help consumers compare prices. All I had to do was go online, put in my address, and voila, 100 electricity retailers instantly wanted my business!
I was presented with an abundance of alternatives, including fixed-price contracts with durations ranging from several months to three years, a market price contract that adjusted every month based on the wholesale price from the regional market operator- Nord Pool, and even a product where the electricity price adjusts every hour! There is even one company that offers to sell electricity at the monthly wholesale rate with a small fixed mark-up – it doesn’t get much more transparent than that.
If Sweden’s goal of deregulation was to create market transparency and to give the power of choice back to the electricity consumer, I can say after my recent experience that they have succeeded.
So I decided to do some cost comparison shopping, focusing on the adjustable monthly rate products and comparing the top 10 offers. While there is definitely a large cost reduction moving from the utility of last resort’s standard price, roughly 28% among the top 10 offers, overall there was less than an 8% difference. It definitely makes sense as a consumer to do some comparison shopping but there is diminishing return spending a lot of time trying to find the “absolute best” offer.
Turning this around from the utility side, there definitely is a race to the bottom from a price perspective. The direct exposure to the wholesale market makes it very easy for the consumer to see how much margin the utility is adding to the cost.
More on Swedish utility efforts to compete in a deregulated market in a future blog. Norman Vickers is the Managing Director, EMEA at Simple Energy.