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Competitiveness

The absence of a single satisfactory measure of competitiveness in energy markets and the differing characteristics of the gas and electricity markets means that an assessment of energy market competitiveness is not straightforward.

The DTI has a Public Service Agreement target to: "Ensure the UK ranks in the top 3 most competitive energy markets in the EU and G7 in each year…". In order to inform the measurement of this target, a methodology has been developed by OXERA on behalf of DTI, based on indicators of energy market liberalisation at each stage of the supply chain (upstream, wholesale markets, network and retail) and applied to energy markets in the EU and G7. The methodology has also been reviewed by independent energy market experts.  Application of the methodology is repeated each year in order to inform the PSA target on an annual basis and the annual reports produced so far, and which are available below, suggest that the UK is the most competitive energy market in the EU and the G7.

The latest (2006) report provides preliminary ranking for 2005 and offers some projections on possible future ranking. It seems unlikely that the PSA target will be missed over the next few years.

As part of its initial remit for this project, OXERA, also produced energy price projections for the UK to 2008/09, and how this will compare to prices in other EU and G7 countries. The final 2004 report is available below. In recent years the price projections have not been reported given the significant price fluctuations experienced in the energy market.