Jan 04 - Datamonitor

Energy purchasing in 2005 has continued to be dominated by high wholesale costs for gas and power as well as increased price volatility. Many buyers blame the government and the producers for these rises, but at the same time are not taking steps internally to mitigate the impact of these increased prices on their business.

The results of the recent Datamonitor annual survey of energy buyers, which questioned over 3,500 energy buyers, clearly describes the priorities and activities of the buyers within this GBP10 billion market.

Energy buyers in the UK are under ever-greater levels of pressure in 2005 as a number of technical and political issues feed through into the wholesale markets for both power and gas, inflating both wholesale prices and volatility to record-breaking levels.

One third of all buyers surveyed blamed the government for these price movements, however more than a half of all buyers took no action to mitigate the impact of these price increases themselves. This places further pressure on the government and regulator to take action.

Additionally, buyers felt that they were already meeting their company targets for the proportion of green energy that they were purchasing, indicating that growth in renewable generating capacity is unlikely to be driven by a strong demand from buyers. In fact it may only be achieved by additional regulatory pressure.

As part of its survey, Datamonitor questioned buyers about how satisfied they are with their supplier across a wide range of service criteria. Buyers overall were happier with the service level that they received from their suppliers than in previous years, however suppliers were still able to differentiate themselves.

The suppliers with excellent customer satisfaction ratings - British Energy and ScottishPower in electricity; British Gas Business and Shell Gas Direct in gas - have customers who value non-price reasons more highly when it comes to renewal decisions.

The survey clearly shows that suppliers with higher customer satisfaction ratings have both a smaller proportion of their contracts at risk and a greater percentage of their buyers that are likely to renew at the next contract round. Buyers on flexible contracts, as well as the very largest buyers, are the least concerned with price when renewing.