In this research project we considered the question whether vertical integration affects the conditions of electricity standard contracts. A standard contract is a universal service obligation (USO) as it ensures energy provision in the case of the drop-out of a provider or if a household does not actively switch (e.g. when moving).
Retail energy providers are usually vertically integrated with upstream companies. Thus, it might be the case that (despite access regulations) vertical integration affects downstream contracts because of the bottleneck property of the grid. Alternatively, the integration with transportation grid providers might also have an impact on contracts as these providers are usually engaged in the retail segment, too.
For our analysis we use cross-sectional data concerning the ownership structure of former regional monopolists from the Creditreform database, contract information from Verivox, grid information from E’net and customer data from Acxiom. Endogenous variables of the model are the standard contract price, network access charges and alternative measures of competition. No significant difference was found neither for fully-integrated standard contract providers and grid owner nor for standard contract providers being owners of grid owners nor the other way round. Our findings therefore provide a strong contradiction to the common opinion in micro-theory which expects a relationship between retail and wholesale prices due to vertical integration in the electricity industry.