Default contracts in the Swedish retail electricity market: is consumer inertia a matter of concern?

Abstract: The purpose of this thesis is to examine whether the presence of default contracts distorts the market mechanism in the Swedish deregulated retail electricity market. A default contract is an inactive form of contract which electricity consumers receive if they do not make an active choice of electricity supplier. Approximately 12% of Swedish electricity consumers today have a default contract. The sources of the consumer inertia (a resistance to change behaviour and become an active electricity consumer) behind the default contracts is investigated in order to conclude whether these 12% of consumers on default contracts causes such a problem that regulations might be justifiable. We seek to provide a basis for improved understanding and awareness of the impacts of consumer inertia to be considered when deregulating markets in the future. Our findings support that the inertia concerning the default contracts is primarily caused by information asymmetries amongst different types of consumers, as well as brand awareness. We find is that younger consumers and low-consumption households are most frequently find on default contracts. However, the findings are not robust due to limited data availability of consumers on default contracts.