The True State of the Market an Analysis of Dual Fuel Switching in the UK Energy Market

Table of Contents

• DATAMONITOR VIEW
  • CATALYST
  • SUMMARY
  • SOURCES
• ANALYSIS
  • There has been a high level of switching in the UK since market opening
    • The OFGEM Domestic Retail Market report indicates that roughly half the market has switched supplier since market opening
    • There are two markets in the UK: the dual fuel market and the electricity only market
    • In the dual fuel market customers can embrace competition in three ways
    • Taking dual fuel customers into account, 80% of UK households have switched supplier since market opening
  • Companies have benefited from market opening to differing degrees
    • In electricity British Gas is the market leader with 22% of the market
    • Looking at the relative success of each company in retaining its historical customer base there are marked differences in retention rates
    • At the group level there are different balances between retention in area, and acquisition outside area
    • The gas market is still dominated by the presence of British Gas
    • Datamonitor analysis allows us to look at the split between gas only, electricity only and dual fuel contracts in the market
    • 83% of British Gas' s new contracts are based on a dual fuel proposition
  • Based on these dual fuel assumptions a similar in and out of area picture can be calculated
    • British Gas has been the most successful player in gaining dual fuel customers
  • Customers using both gas and electricity have demonstrated the highest propensity to switch supplier
    • Analysis indicates that around 80% of households that have both fuels available have indeed embraced the competitive market
    • At the overall market level, 70% of households have switched supplier
    • SSE and Scottish Power are the winners in the game of customer acquisition and retention over the last 5 years
    • SSE has consistently used price to gain market share, exploiting their cost to serve leadership in the market-place
  • Companies are innovating in order to retain and win back customers
  • Companies have invested in building differentiated win-back capabilities to try to stem the losses of customers
    • The churn experience has also started companies looking for signs of ' propensity to switch
    • Losing high numbers of customers has led companies to provide different tariff options
    • Suppliers face a challenging dilemma
• APPENDIX
  • Methodology
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • List of Tables
    • Table 1: The vast majority of companies' new dual fuel contracts are out-of-area
    • Table 2: BG has gained 4.9 million dual fuel customers ' in area'
  • List of Figures
    • Figure 1: Dual fuel households outnumber electricity households by over four to one
    • Figure 2: British Gas accounts for almost half of the UK' s electricity market
    • Figure 3: SSE has retained 80% of its incumbent share
    • Figure 4: All of British Gas' s customers are out-of-area
    • Figure 5: British Gas' s accounts for 47% of the UK gas market
    • Figure 6: Gas only households represent a minute proportion of the market
    • Figure 7: All of British Gas' gas customers are ' in area'
    • Figure 8: Dual fuel customers are more likely to switch than electricity only customers
    • Figure 9: SSE has seen its share of total electricity customers increase by 5 percentage points
    • Figure 10: SSE has seen its share of total gas customers increase by 7 percentage points
    • Figure 11: SSE was €23 cheaper per annum than EDF Energy in 2007