Consumer attitudes
toward energy
provision
Spring 2015
Consumer attitudes toward energy provision
Spring 2015
Executive summary
The UK’s large energy suppliers
currently provide gas and electricity
to around 26 million UK homes.
This group has dominated the retail energy
business in the UK since the introduction of
liberalisation in the late 1990s. However, in
recent years, there has been a raft of new
entrants, some of which are well placed to
challenge that market domination.
In the wake of the recession, and stimulated
by political and other interventions, UK
householders are now more mindful of their
energy costs, and many of the smaller firms
have been able to offer cheaper bills than
their more established rivals. As a result, the
challengers’ share of the household market
has risen from 2% to almost 9% since 2012.
To explore this area further, we commissioned
a survey to look at consumers’ attitudes
toward energy provision, their energy
suppliers, their bills and their willingness to
switch providers when they are dissatisfied
with any of the aforesaid.
Our survey, conducted by market researcher
OnePoll in February 2015 among 2,000 UK
consumers, revealed that almost one-quarter
of consumers (24%) switched gas or electricity
supplier in 2014. The same survey shows that
this trend is likely to continue, with almost
one-quarter of consumers (22%) stating that
they are likely to switch supplier in 2015.
Our survey also looked at why
consumers switch energy suppliers,
along with the importance of energy
costs and environmental matters in
their decision-making process.
Our survey suggests that it is inertia, rather
than loyalty, that has kept many consumers
tied to their existing energy suppliers as many
express a willingness to switch if they think
doing so would result in cheaper bills.
Key findings include:
• Almost one-quarter of UK consumers (24%)
switched gas or electricity supplier in the
last year — and more than 8 in 10 (81%) of
this group would consider switching again in
the near future.
• Thirty-nine percent of respondents
identified billing errors by their existing
supplier as the most likely reason to cause
them to look for an alternative supplier.
• More than three-quarters (78%) of
consumers stated that price was the single
most important factor they would consider
when choosing a new supplier.
• Only 12% of consumers have a completely
clear understanding of what their energy
bill means in terms of energy supply and
affordability.
• Nearly one-third of respondents (29%)
said that their energy bill is the household
bill that they worry most about being able
to afford.
With price dominating the drive to switch,
and more than one-third of consumers (42%)
believing that the increases in energy bills
were being driven by the desire by energy
companies to increase their profits, energy
suppliers need to understand what these
changing consumer attitudes might mean
for them.
Contents
Consumer attitudes
toward switching
suppliers are changing
2
Why are consumers
switching suppliers?
3
Consumer attitudes
toward energy
suppliers
4
Consumer attitudes
toward energy bills
6
Changing attitudes
toward the environment
8
Conclusion9
Consumer attitudes
toward switching
suppliers are changing
Despite the fact that more than three-quarters of consumers
(76%) did not change gas or electricity supplier in 2014,
there appears to be a strong appetite for switching.
Our survey found consistently high numbers
of consumers across the whole of the UK have
either switched supplier or are considering
doing so, but the greatest number of changes
were found in the East Midlands, where almost
one-third of consumers (32%) have switched
supplier in the last year.
A significant number of respondents in the
North East and East Anglia (28%) and London
(24%) have also changed supplier in the last
year. By contrast, only 17% of consumers in
Wales decided to switch in the last year.
The regional differences can be attributed,
in part, to the price differences across the
country, where the cheapest supplier varies
by area, and also by the success of some
suppliers in maintaining loyalty or affinity.
28%
24%
32%
17%
24%
2
Looking forward to 2015, over one-third of
Londoners (35%) are considering moving to a
different supplier for their gas and electricity.
Energy consumers in the North West, West
Midlands and the South West are the most
likely to switch.
Almost a quarter of UK consumers (24%)
switched gas or electricity supplier in the last
year — and, strikingly, more than 8 in 10 (81%)
of this group would consider switching again
in the near future. This may suggest that a
minority, but nonetheless very active, part of
the customer base now sees switching as a
norm, and the experience is worth repeating.
While energy companies might well expect
those familiar with the process of switching
to consider doing so again, they may be
surprised by the relatively small proportion
of consumers who are unlikely to switch
supplier in the next 12 months, which stands
at just 38%. This indicates that levels of brand
loyalty are diminishing.
Why are consumers
switching suppliers?
Our survey found that price dominates the drive to switch
supplier; more than three-quarters (78%) of consumers stated
that price was the single most important factor they would
consider when choosing a new supplier.
suppliers falling by up to 20%, according to the
Department for Energy and Climate Change.
Energy suppliers argue that increasing energy
bills are largely caused by high or fluctuating
costs in the wholesale market, but our
research shows that this message has not
been communicated effectively to consumers,
with 42% believing that rising energy bills
are designed to increase the profits of
energy companies.
Comparatively, customer service was
considered the most important factor
when choosing a new supplier by only 9% of
respondents, and brand was chosen by even
fewer respondents (6%).
However, when asked what customer service
elements would most likely cause them to
switch their energy supplier, more than onethird (39%) of consumers cited inaccurate
bills. Quality of service appears to be an
insignificant factor when selecting a new
supplier, yet the biggest reason for customers
to decide to move on.
Households faced rising energy bills
between mid-2013 and mid-2014 despite
the cost of gas and electricity to energy
For this reason, perhaps, less than one-fifth
of consumers (18%) would trust suppliers
to provide them with advice on energy
consumption. More than two-thirds (68%) feel
that they themselves are most responsible for
reducing the energy consumption in their own
homes, while only 15% consider their energy
supplier to be most responsible.
These results highlight the fact that
consumers are trying to take more control
over their energy consumption and costs
but also reveal a lack of trust in their energy
supplier. The challenge for the industry,
therefore, is to invest in ways to restore the
confidence and loyalty of its consumer base
through innovative services and an enhanced
and trouble-free customer experience,
especially if they are unable to improve
on price.
39%
16%
12%
of consumers
responded that
inaccurate bills
would lead them to
switch providers
received
unfriendly
service when
calling the
helpline
long complaint
processes were also
among the top reasons
that would trigger a
decision to switch
Consumer attitudes toward energy provision Spring 2015
3
Consumer attitudes
toward energy suppliers
New entrants are the preferred choice for 37% of consumers
that intend to switch, compared to 24% who would move
within the “Big Six” …
4
When consumers who were currently thinking
of switching energy supplier were asked which
energy company they would be most likely to
choose, more than one-third (37%) selected a
new entrant (smaller energy suppliers).
Less than a quarter (24%) would be likely to
switch to one of the large suppliers; however,
almost 4 in 10 (39%) consumers remain unsure
whether they would switch to a large supplier
or a new entrant.
While the large suppliers currently hold the
majority of the consumer market, the fact
that more than three-quarters of consumers
(76%) who would consider switching supplier
would not automatically consider one of these
suppliers is striking. This underscores the fact
that there are significant opportunities for new
entrants to the market to erode the market
share of the large suppliers.
Equally, the large players still have the
opportunity to find better ways of engaging
with their consumers and retaining the
“swing voters.”
33%
of consumers
stated that they
believe the UK
energy market
needs more
suppliers.
Consumer attitudes toward energy provision Spring 2015
5
Consumer attitudes
toward energy bills
Currently, only 12% of consumers feel that they have a completely
clear understanding of what their energy bill means in terms of
energy supply and affordability, while half (50%) of the consumers
are either unsure or unclear to a greater or lesser degree as to
what their energy bill means.
This lack of understanding perhaps reflects
the sense that consumers do not believe that
energy suppliers are billing transparently, and
also highlights the importance of regulators
and energy suppliers alike finding better,
clearer ways to communicate both pricing and
the individual components of energy bills.
What do consumers want from
their energy suppliers?
UK households appear to have little desire
for energy suppliers to provide additional
services, particularly those unrelated to
energy provision.
6
It appears that consumers have a conservative
attitude toward financial planning and feel
more comfortable with predictable costs, even
if they’re higher. As such, concerns remain
about the fact that energy bills often fluctuate.
Nearly one-third of respondents (29%) said
that their energy bill is the household bill that
they worry most about being able to afford,
compared to only 18% of respondents who
worry most about their mortgage and only
9% who worry most about their food bill.
When asked, nearly two-thirds (65%) of
consumers replied that they would not be
interested in purchasing additional services
from their energy supplier. Fewer than 10% of
consumers would be interested in purchasing
insurance cover or mobile services, and only
one in five (22%) would be interested in boiler
care, even though this is directly related to
their energy service.
However, despite their fears about energy
costs, 85% of consumers can usually afford
their bills and only 10% have missed a payment
in the last year. The disparity between the
apparent anxiety over the cost of energy
bills and the reality of consumers’ ability
to pay their bills may be linked to the fact
that consumers are regularly presented
with news that suggests that they are being
overcharged, or that bills are contributing to
an inappropriate level of profit for the
energy companies.
Instead, our survey indicates that consumers
appreciate greater control where their energy
bills are concerned, with 62% reporting that
they would like to receive their energy bills
monthly or more frequently. Only 3% reported
that they would like to receive their bills on
less than a quarterly basis, which is the
market standard.
The results of our survey indicate that
while consumers want more control of their
energy usage and bills, they want this in a
straightforward manner. As such, energy
suppliers must find a way of convincing
consumers that they are acting transparently,
and must also empower their customers to
feel in control of their energy bills.
50%
of consumers
are either unsure
or unclear to a
greater or lesser
degree as to what
their energy bill
means.
Consumer attitudes toward energy provision Spring 2015
7
Changing attitudes
toward the environment
Responses from consumers in our survey indicate that
green issues remain important.
More than three-quarters (77%) of consumers
surveyed now receive paperless bills through
emails, smartphones or tablets, which is also
a sign that consumers are more conscious of
their impact on the environment, as well as
a sign that they desire more immediate and
accessible communication.
26%
of respondents would be
willing to pay higher energy
bills if the extra money were
to go toward investment in
renewable energy, and 22%
would be equally willing if the
extra money paid were to
combat climate change.
8
There are limits to the level of further costs
consumers are willing to incur in order to be
more environmentally friendly, however.
While 20% would be willing to pay up to
£10 extra per month to fund investment in
renewable energy, a smaller number (15%)
would be willing to pay this same amount to
combat climate change or to fund essential
energy infrastructure projects in their region.
Just 1 in 10 respondents (10%) said they’d
be willing to pay this amount each month
to support the exploration of new forms of
energy, such as fracking.
Finally, three-quarters (75%) of householders
were familiar with the concept of a smart
meter, which aims to help households cut
down on their energy bills by enabling them to
see their own energy use in real time.
Conclusion
The results of EY’s survey, Consumer attitudes toward energy
provision, highlight the fact that energy suppliers will have to work
harder to gain consumers’ trust and make their services appealing
to them. Differentiation through service innovation is what will
drive market share moving forward.
While the larger suppliers currently retain
the dominant market share, there is an
evident and growing appetite among
customers to shop around for a better deal.
The ongoing Competition and Markets
Authority investigation may yet propose
remedies that further encourage or enable
“stuck” customers to benefit from more
competitive tariffs.
A key problem for energy
companies is that many
customers believe that energy
suppliers are quick to pass
on higher costs, but rarely
pass on price cuts, in order to
protect their profits.
If energy companies can find a better way of
communicating their pricing so that it is more
easily understood by the customer, customers
may be less likely to feel like they have
received a poor deal.
The more transparent, error-free and flexible
the billing process becomes for the consumer,
the more likely consumers are to remain with
their existing supplier. Conversely, where
mistakes are made with bills, consumers will
readily start to explore their options with other
suppliers and will move based on price.
While protecting the environment is a concern
for many customers, government should
keep in mind that there are limits to the costs
that consumers are willing to bear in order to
find more environmentally friendly ways of
producing energy.
Consumer attitudes toward energy provision Spring 2015
9
For further information,
please contact the
authors below
Tony Ward
Partner, Head of Power and
Utilities for UK&I
EY | Assurance | Tax | Transactions | Advisory
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