Abstract
This paper compares consumer prices under vertical integration and verticial separation of the electricity industry in England and Wales and considers the costs and benefits of mergers between electricity supply and water companies. The impact of vertical integration is important given the proposals for merger between electricity generating and supply companies in 1996. The paper concludes that there could be small benefits to consumers if competition in the electricity industry is limited. In a fully competitive industry the impact of vertical integration on the consumer is neutral. Regarding competition, vertical merger might limit the extent of new firm entry in the electricity supply market after liberalisation in 1998. Inter industry merger will yield cost savings but may limit new firm entry in electricity supply.
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