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

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.