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Home Utility Suppliers - UK - September 2009

At a time of recession, the dominant issue among consumers in the home utilities market is price, but for the companies the bigger, longer-term issue is that of reducing carbon emissions to tackle the problem of climate change. In the gas and electricity markets there has been a great deal of volatility in wholesale energy prices, which resulted in soaring energy bills through much of 2008. While the recession has resulted in prices falling back in the short term, the long-term trend is still upwards.

With a need to cut energy bills and carbon emissions, gas and electricity suppliers have been putting a big emphasis on helping their customers improve the energy efficiency of their homes, as well as investing in new technologies that will enable them to supply more energy from renewable sources.

The industry remains highly regulated, and as part of this regulation, Ofgem launched an investigation into its competitiveness and pricing during 2008, the findings of which were broadly favourable.

But the regulator would like to see more competition in the gas and electricity markets, something that does not exist at all in domestic water utilities market, and is particularly keen to introduce measures that will encourage more switching between suppliers. While switching is already well developed, there is a large degree of consumer apathy and certain groups that remain disadvantaged.

Key themes

  • Volatility of gas and electricity prices and consumer perceptions of the pricing policies of utility providers.

  • Extent to which households switch suppliers using switching and price comparison sites, and consumer apathy about switching.

  • Examining tariff options such as dual fuel (same supplier for gas and electricity), online accounts and fixed tariffs.

  • Consumer perceptions of the utility brands and main factors determining the choice of gas and electricity supplier, including reasons for switching.

  • The importance of renewable energy to consumers and whether consumers are willing to switch to a different supplier to help the environment, even if it is not the cheapest.

  • Initiatives by companies to encourage greater energy efficiency in the home and opportunities for products and services.

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Table of contents

  1. Issues in the Market

      • Key themes
        • Definitions
          • Abbreviations
          • Future Opportunities

            • Understanding energy usage
              • Demystifying household energy supply
                • Moving into new products and services
                • Market in Brief

                  • Higher prices send bills soaring
                    • A highly regulated industry
                      • Big six dominate in gas and electricity
                        • Tackling the issue of climate change
                          • Focus on metering
                            • Significant churn, but also consumer apathy
                              • Renewable energy, but not at a premium
                                • Growth through added value
                                • Internal Market Environment

                                  • Key points
                                    • Regulation and consumer representation
                                      • Energy prices
                                        • Figure 1: CPI annual price changes for electricity and gas, January 2008-July 2009
                                      • Water prices
                                        • Figure 2: CPI annual price changes for sewerage collection and water supply, January 2008-July 2009
                                        • Figure 3: Average household water bills – comparison of companies’ final business plan proposals and OFWAT draft determinations, at 2009-10 prices, 2014-15
                                      • Energy Supply Probe 2008
                                        • Review of competition in the water sector
                                          • Energy demand
                                              • Figure 4: Domestic consumption of electricity and gas, Quarter 1 2007-Quarter 1 2009
                                            • Investment in infrastructure
                                              • Water metering
                                                • Smart metering
                                                  • Energy efficiency and sustainability
                                                    • 2009 Budget
                                                      • Energy efficiency targets
                                                        • Energy saving in the home
                                                          • Water efficiency
                                                            • Fuel debt and disconnections
                                                              • Customer service
                                                                • Direct debit payment
                                                                • Broader Market Environment

                                                                  • Key points
                                                                    • Energy bills add to pressure on household budgets
                                                                      • Figure 5: Trends in GDP, PDI and consumer expenditure, at current prices, 2004-14
                                                                    • Still a lack of activity in the housing market
                                                                      • Figure 6: UK housing market – number of transactions, average house prices and number of years between moves, 2004-14
                                                                    • Growth in households will drive new accounts
                                                                      • Figure 7: UK households and size of households, 2004-14
                                                                    • Ageing population concerned with cutting energy bills
                                                                      • Figure 8: Structure of the UK population, by age, 2004-14
                                                                    • Affluent population the most well informed
                                                                      • Figure 9: Structure of the UK adult population, by socio-economic group, 2004-14
                                                                    • Growth in internet penetration will help drive switching
                                                                      • Figure 10: British internet penetration at home/work/place of study or elsewhere, by gender, socio-economic group and age, 2002-09
                                                                    • Gas the first choice for central heating
                                                                      • Figure 11: Ownership and purchasing of central heating, 2004, 2006 and 2008
                                                                    • Majority keen to reduce energy use
                                                                      • Figure 12: Agreement with attitudinal statements, 2004, 2006 and 2008
                                                                  • Competitive Context

                                                                    • Key points
                                                                      • Soaring gas and electric prices push up bills
                                                                        • Figure 13: Comparison of spending on utility bills with other spending, at current prices, 2004-08
                                                                        • Figure 14: Household spending on utility bills as a proportion of consumer spending, 2004-08
                                                                    • Strengths and Weaknesses in the Market

                                                                      • Strengths
                                                                        • Weaknesses
                                                                        • Who’s Innovating?

                                                                          • Key points
                                                                            • Smart meters
                                                                              • Tracking and reducing energy use
                                                                                • Charging points for electric cars
                                                                                  • Carbon capture technology
                                                                                    • Protecting vulnerable customers
                                                                                      • Renewable energy projects
                                                                                      • Market Size and Forecast

                                                                                        • Key points
                                                                                          • Higher energy prices push up utility bills
                                                                                            • Figure 15: Consumer spending on home utilities, 2004-14
                                                                                          • Gas increases its share of total spending
                                                                                            • Figure 16: Breakdown of consumer spending on home utilities, by segment, 2004, 2006 and 2008
                                                                                            • Figure 17: Trends in consumer spending on home utilities, at current prices, 2004-08
                                                                                          • Differential pricing impacts on annual bills
                                                                                            • Figure 18: Average annual domestic standard electricity and gas bills, by method of payment, 2008
                                                                                        • Market Share

                                                                                          • Key points
                                                                                            • Big six suppliers dominate gas and electricity
                                                                                              • Figure 19: Estimated market shares of domestic GB electricity and gas supply markets, by number of domestic customer accounts, 2008
                                                                                            • Regional monopolies in water and sewerage treatment
                                                                                            • Companies and Brands

                                                                                              • Gas and electricity suppliers
                                                                                                • British Gas
                                                                                                  • EDF Energy
                                                                                                    • E.ON UK
                                                                                                      • npower
                                                                                                        • Scottish Power
                                                                                                          • Scottish and Southern Energy
                                                                                                            • Other companies
                                                                                                              • Water companies
                                                                                                                • Anglian Water
                                                                                                                  • Severn Trent Water
                                                                                                                    • Thames Water
                                                                                                                      • United Utilities
                                                                                                                        • Other companies
                                                                                                                          • Figure 20: Other water and sewerage companies in the UK, and the regions they operate in, 2009
                                                                                                                          • Figure 21: Other water companies in the UK, and the regions they operate in, 2009
                                                                                                                      • Brand Elements

                                                                                                                        • Key points
                                                                                                                          • Brand map
                                                                                                                              • Figure 22: Attitudes towards and usage of home utility supplier brands, May 2009
                                                                                                                            • Brand qualities of home utility supplier brands
                                                                                                                              • British Gas both best and worst
                                                                                                                                • Figure 23: Personalities of various home utility supplier brands, May 2009
                                                                                                                                • Figure 24: Key personality aspects of various home utility supplier brands, May 2009
                                                                                                                              • Experience of home utility supplier brands
                                                                                                                                • British Gas most used, others lack experience
                                                                                                                                  • Figure 25: Consumer usage of various home utility supplier brands, May 2009
                                                                                                                                • Brand intentions for home utility supplier brands
                                                                                                                                  • Brands lack attraction, but British Gas has highest retention
                                                                                                                                    • Figure 26: Consideration of various home utility supplier brands, May 2009
                                                                                                                                  • Brand satisfaction for home utility supplier brands
                                                                                                                                    • E.ON and Southern Electric most positively endorsed
                                                                                                                                      • Figure 27: Satisfaction with various home utility supplier brands, May 2009
                                                                                                                                    • Brand commitment to home utility supplier brands
                                                                                                                                      • Utility suppliers lack affection
                                                                                                                                        • Figure 28: Commitment to various home utility supplier brands, July 2009
                                                                                                                                      • British Gas
                                                                                                                                        • What the consumer thinks
                                                                                                                                          • Figure 29: Attitudes towards the British Gas brand, May 2009
                                                                                                                                        • E.ON
                                                                                                                                          • What the consumer thinks
                                                                                                                                            • Figure 30: Attitudes towards the E.ON brand, May 2009
                                                                                                                                          • npower
                                                                                                                                            • What the consumer thinks
                                                                                                                                              • Figure 31: Attitudes towards the npower brand, May 2009
                                                                                                                                            • EDF Energy
                                                                                                                                              • What the consumer thinks
                                                                                                                                                • Figure 32: Attitudes towards the EDF Energy brand, May 2009
                                                                                                                                            • Brand Communication and Promotion

                                                                                                                                              • Key points
                                                                                                                                                • Advertising dwarfed by total spending on utilities
                                                                                                                                                  • Figure 33: Main media advertising expenditure on redidentaial utilities, 2005-08
                                                                                                                                                • British Gas leads top advertisers
                                                                                                                                                  • Figure 34: Main media advertising expenditure on residential utilities, by company, 2005-08
                                                                                                                                                • Media type
                                                                                                                                                  • Figure 35: Main media advertsing on residentail utilities, by media type, 2005-08
                                                                                                                                                • Green issues a dominant theme
                                                                                                                                                  • Sponsorship key part of building brand awareness
                                                                                                                                                  • Switching Energy Suppliers

                                                                                                                                                    • Key points
                                                                                                                                                      • Significant churn in the energy supply sector
                                                                                                                                                        • Figure 36: Incidence of changing gas or electricity supplier in the last 12 months, 2008
                                                                                                                                                      • Lack of enthusiasm for switching energy supplier
                                                                                                                                                        • Figure 37: Agreement with statements on changing energy suppliers, July 2009
                                                                                                                                                      • Internet key part of the switching process
                                                                                                                                                        • Figure 38: Switching energy supplier via the internet, by age and socio-economic group, July 2009
                                                                                                                                                      • But more switch as a result of direct selling
                                                                                                                                                        • Figure 39: Switching supplier as a result of doorstep visit or phone call, by age and socio-economic group, July 2009
                                                                                                                                                      • An element of distrust and some desire for direct contact
                                                                                                                                                        • Qualitative research
                                                                                                                                                          • Quick and easy to compare prices
                                                                                                                                                            • Strong media exposure
                                                                                                                                                              • Users generally satisfied with switching/price comparison sites
                                                                                                                                                                • As comprehensive as they need to be
                                                                                                                                                                  • Cold-calling/doorstep selling
                                                                                                                                                                  • Tariff Choices and Energy in the Home

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Saving money and reducing carbon footprint
                                                                                                                                                                        • Figure 40: Agreement with statements relating to tariffs and energy in the home, July 2009
                                                                                                                                                                      • Home insulation to keep down heating bills
                                                                                                                                                                        • Figure 41: Have had home insulated to save on energy bills, by age and socio-economic group, July 2009
                                                                                                                                                                      • Renewable energy, but not at any cost
                                                                                                                                                                        • Figure 42: Attitudes towards renewable energy, by age and socio-economic group, July 2009
                                                                                                                                                                      • Duel fuel and fixed tariffs seen as ways to cut bills
                                                                                                                                                                        • Figure 43: Take-up of dual fuel and fixed price tariffs, by age and socio-economic group, July 2009
                                                                                                                                                                      • One in ten struggling to pay their energy bill
                                                                                                                                                                        • Most have enough information on energy saving
                                                                                                                                                                          • Online accounts save paper and money
                                                                                                                                                                            • Mixed messages on billing and metering
                                                                                                                                                                            • Consumer Typologies

                                                                                                                                                                              • Key points
                                                                                                                                                                                • Money saving above environment in the recession
                                                                                                                                                                                  • Younger, affluent groups more environment focused
                                                                                                                                                                                    • Figure 44: Consumer typologies relating to tariffs and energy in the home, July 2009
                                                                                                                                                                                  • Money saving focused the biggest switchers
                                                                                                                                                                                      • Figure 45: Agreement with statements about switching energy suppliers, by typology, July 2009
                                                                                                                                                                                    • Qualitative research
                                                                                                                                                                                      • Price overrides everything else
                                                                                                                                                                                        • Return on investment matters
                                                                                                                                                                                        • Appendix – Internal Market Environment

                                                                                                                                                                                            • Figure 46: Ownership of central heating, by demographics, 2008
                                                                                                                                                                                        • Appendix – Switching Energy Suppliers

                                                                                                                                                                                            • Figure 47: Agreement with statements on changing energy suppliers, by demographics, July 2009
                                                                                                                                                                                            • Figure 48: Agreement with statements on changing energy suppliers, by demographics, July 2009
                                                                                                                                                                                        • Appendix – Tariff Choices and Energy in the Home

                                                                                                                                                                                            • Figure 49: Agreement with statements relating to tariffs and energy in the home, by demographics, July 2009
                                                                                                                                                                                            • Figure 50: Agreement with statements relating to tariffs and energy in the home, by demographics, July 2009
                                                                                                                                                                                        • Appendix – Consumer Typologies

                                                                                                                                                                                            • Figure 51: Consumer typologies relating to tariffs and energy in the home, by demographics, July 2009

                                                                                                                                                                                        Companies Covered

                                                                                                                                                                                        • Anglian Water Services
                                                                                                                                                                                        • Asda Group Ltd
                                                                                                                                                                                        • British Gas
                                                                                                                                                                                        • British Market Research Bureau (BMRB)
                                                                                                                                                                                        • Centrica Plc
                                                                                                                                                                                        • Citizens Advice Bureau
                                                                                                                                                                                        • Co-operative Group
                                                                                                                                                                                        • Department for Environment, Food & Rural Affairs
                                                                                                                                                                                        • EDF Energy
                                                                                                                                                                                        • Energy Saving Trust
                                                                                                                                                                                        • Eon Energy
                                                                                                                                                                                        • Football Association (The)
                                                                                                                                                                                        • Google UK
                                                                                                                                                                                        • ITV plc
                                                                                                                                                                                        • J. Sainsbury
                                                                                                                                                                                        • Macquarie Group
                                                                                                                                                                                        • Market & Opinion Research International (MORI)
                                                                                                                                                                                        • Marks & Spencer
                                                                                                                                                                                        • National Grid Wireless Ltd
                                                                                                                                                                                        • Powergen Limited
                                                                                                                                                                                        • Procter & Gamble UK & Ireland
                                                                                                                                                                                        • Royal Automobile Club
                                                                                                                                                                                        • Scottish and Southern Energy Plc
                                                                                                                                                                                        • Scottish Power Plc
                                                                                                                                                                                        • Southern Electric Plc
                                                                                                                                                                                        • Southern Water
                                                                                                                                                                                        • Tesco Plc
                                                                                                                                                                                        • Thames Water
                                                                                                                                                                                        • Waitrose
                                                                                                                                                                                        • Wembley National Stadium
                                                                                                                                                                                        • Wm Morrison Supermarkets
                                                                                                                                                                                        • Yahoo! UK & Ireland

                                                                                                                                                                                        Home Utility Suppliers - UK - September 2009

                                                                                                                                                                                        US $2,648.76 (Excl.Tax)