Electricity disclosure: will It transform electricity markets?

In a regulated monopoly environment, the utility bill is often the only perceived characteristic of electricity service. With the liberalization of electricity markets, electricity becomes a product with multiple characteristics. The option of choosing between products and providers naturally creates the need for more information related to the electricity the consumer is buying. Therefore, electricity disclosure—providing the consumer with information related to the characteristics of purchased electricity—is becoming an integral component of liberalized markets.Following the footsteps of several states in the US and some other pioneers worldwide, in June 2003 the European Union adopted Directive (2003/54/EC). The directive required, among other rules and principles for the completion of the internal electricity market, mandatory disclosure of information on the origin of the electricity from suppliers. A European-wide, sixinstitute research project titled “Carbon Consciousness and Consumer Choice in Electricity” has been providing guidance for the efficient design of the European scheme. The project has studied residential and commercial consumers’ preferences (through focus groups and a large EU-wide telephone survey) towards a disclosure regime, as well as making an attempt to understand the potential impacts of disclosure.The present paper will present some of the results of the project, combined with evidence from the literature documenting the impacts of disclosure schemes worldwide, and answer the following questions. Does, or will, electricity disclosure transform electricity markets towards more environmentally sustainable ones? If we empower the consumer with information on their electricity product or supplier, will this influence their choice? Beyond the consumer effect, can disclosure transform the market through other pathways? How will disclosure interact with existing policies, such as existing voluntary markets for ‘green’ electricity? What other characteristics of disclosure make it an essential component of liberalised electricity markets?