Introduction

Cost-to-serve has a direct impact on the ability of energy retailers to remain cost competitive and is a key determinant in market share movements. Identifying the prime levers in controlling costs is essential as it allows efficient utility retail operations which in turn exert pressures on levels of customer churn.

Features and benefits

• An estimation of the cost-to-serve profiles of UK energy retailers. A review of the key metrics that make up cost-to-serve, function-by-function.
• A review of typical cost-to-serve breakdown by cost area. The need for good billing. Forecasted cost and benefit impacts from avoided site visits.
• The typical estimated UK average cost-to-serve for different metering options. UK domestic switching rates (2007-11).
• UK wholesale and retail electricity and gas prices (2009-11). Retail market share in the UK energy market (2001-11).
• The estimated aggregated total cost-to-serve of the UK energy retail market. Forecasted cost and benefit impacts from avoided site visits.

Highlights

Cost-to-serve is increasingly important for UK energy retailers under pressure from increasing wholesale prices and a rising cost base.

Cost-to-serve has a direct impact on the ability of retailers to remain cost competitive and is a key determinant in market share movements. New processes and technologies can reduce the cost-to-serve substantially, particularly for those customers where accessing meters is challenging.

Smart meters have the potential to bring cost-to-serve into focus and reduce it. Iterative improvements can also be made in cost-to-serve by changing the payment mix: dual fuel billing allows the cost-to-serve to be dramatically reduced for dual fuel customers.

Your key questions answered

• What is cost-to-serve? Why does it matter to energy utilties and why will it increasingly matter going forward?
• What are the benefits of cost-to-serve benchmarking? How do I best evaluate cost-to serve? What is the need for segmentation?
• How can cost-to-serve impact retail market share? What are the technologies and processes that drive down cost-to-serve?