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Extended Expert View: Tier 1 Still Prevails in Residential Energy Retail

DateJul, 2005
Pages0

€516 

Report Information | Custom-Tailored Research | Product Trade Lead


Abstract:

Introduction
 
This analysis examines the conversion of Tier 1 energy customers into Tier 2 customers. The conversion of Tier 1 energy customers into Tier 2 customers is a key dynamic in the UK residential energy retail market: for suppliers it is the measure of success in the market, and for the regulator it is the measure of success of market liberalisation.
 

 
Scope
 
An analysis of the composition of the UK residential energy market in terms of Tier 1 and Tier 2 customers, both single fuel and dual fuel.
 
An examination of the success with which each of the six major UK suppliers has been able to convert Tier 1 customers onto dual fuel.
 
Explanation of the factors that have influence the Tier 1 / Tier 2 balance.
 
Highlights
 
There are 19 million Tier 2 accounts in the UK 11 million are part of a Tier 1 dual fuel combination, helping suppliers retain valuable Tier 1 accounts, but 8 million (17%) are purely Tier 2 accounts and represent a net loss of margin to energy retailers.
 

 
``40% of energy accounts are Tier 2, with most suppliers replacing lost Tier 1 accounts at the expense of Centrica. 8.6million gas accounts and 10million electricity accounts are Tier 2 (42% and 38% of the market respectively).
 

 
Reasons to Purchase
 
Gain insight into the Tier 1 / Tier 2 balance in the UK residential energy retail market.
 
Gauge the success of the six major utilities in replacing lost Tier 1 customers, and the types of strategies that they have followed to achieve it.
 




Table of contents:
 TABLE OF CONTENTS
 
EXECUTIVE SUMMARY 3
 
There are 19 million Tier 2 accounts in the UK – 11 million are part of a Tier 1 dual fuel combination, helping suppliers retain valuable Tier 1 accounts, but 8 million (17%) are purely Tier 2 accounts and represent a net loss of margin to energy retailers 3
 
INTRODUCTION 7
 
This document examines the conversion of Tier 1 energy customers into Tier 2 customers 7
 
TIER 1 STILL PREVAILS IN RESIDENTIAL ENERGY RETAIL 8
 
Four key factors affect the Tier 1 / Tier 2 customer balance 8
 
Examination of the Tier 1 / Tier 2 balance of each supplier clearly illustrates their differing strategic positions 9
 
40% of energy accounts are Tier 2, with most suppliers replacing lost Tier 1 accounts at the expense of Centrica 10
 
74% of dual fuel customers are Tier 1, principally because of Centrica’s success in the market 12
 
E.ON UK has been the most successful at winning Tier 1 dual fuel customers; ScottishPower the least so 13
 
Centrica has acquired electricity accounts most successfully in the Eastern region, least so in the Scottish Hydro region 14
 
APPENDIX 16
 
Research methodology 16
 
Future readings 16
 
Writing team 16
 
How to contact experts in your industry 17
 

 

 
LIST OF FIGURES
 
Figure 1: Breakdown of electricity customer bases (2004) 9
 
Figure 2: Percentage breakdown of electricity customer bases (2004) 10
 
Figure 3: Tier 2 accounts gained in relation to Tier 1 accounts lost (2004) 11
 
Figure 4: Dual fuel customer breakdown (2004) 13
 
Figure 5: Tier 1 dual fuel as a percentage of the available market (2004) 14
 
Figure 6: Distribution of Centrica’s electricity customers (hundred thousands) 15
 

 




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