Utility Cost-to-Serve Analysis: A Growing Priority
NEW YORK, Nov. 29, 2011 /PRNewswire/ -- Reportlinker.com announces that a new market research report is available in its catalogue:
Utility Cost-to-Serve Analysis: A Growing Priority
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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. 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.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. 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?
OVERVIEW
•Catalyst
•Summary
•Methodology
THE NEED FOR COST-TO-SERVE
•Cost-to-serve defined
•Energy utilities and cost-to-serve
•Cost-to-serve and economic decline
•Cost-to-serve in a rapidly changing energy market context
•Cost-to-serve analysis benefits
EVALUATING COST-TO-SERVE
•The need for segmentation
•Deductive and inductive analysis
•Utility billing, cost-to-serve, and customer retention
- Cost-to-serve metrics: closely interlinked and interdependent
COST-TO-SERVE AND MARKET SHARE
•Customer churn
•Pricing power
TECHNOLOGIES AND PROCESSES THAT DRIVE DOWN COST-TO-SERVE
•Cost-to-serve differentials between utilities
•Smart metering
- Smart meter cost-to-serve benefits
- Network benefits
- Smart meter cost-to-serve downside
•Payment mix
- Online payments
•Dual fuel billing
CONCLUSIONS AND RECOMMENDATIONS
•Utilities must recognize the value of automated, detailed, and continuous cost-to-serve monitoring
- European suppliers should focus on increasing self meter reads to reduce service-related calls in the short term and smart metering in the long term
- Suppliers need to ensure that vendors deliver the efficiencies they promise – whether it is through bespoke information billing systems or off-the-shelf systems – to achieve lower cost-to-serve
- Utilities should, whenever possible, transfer customers to low-cost payment channels
- Retail utility businesses must use cost-to-serve findings to drive down customer churn
- Cost-to-serve studies must be used to improve the profitability of loss-making accounts
APPENDIX
•Ask the analyst
•Disclaimer
TABLES
•Table: Retail power and gas standard tariff increases in the UK, by implementation date
FIGURES
•Figure: Estimated cost-to-serve profile of three retailers in the UK, contrasted with the profile for another European retailer operating in a near-monopoly
•Figure: An accurate evaluation of cost-to-serve is often carried out on a function-by-function basis, taking into account company-wide cost center recharges
•Figure: Key metrics across the retail business functions
•Figure: The clear tension between cost-to-serve and service levels does not apply in all cases; reducing cost-to-serve intelligently can actually increase customer satisfaction
•Figure: British Gas recorded a huge spike in complaints during its billing migration
•Figure: Meter asset often has the highest degree of influence on the remaining cost-to-service metrics
•Figure: UK domestic switching rates, October 31, 2007 to July 31, 2011
•Figure: Cost-to-serve has a direct impact on the ability of retailers to remain cost competitive and grow their customer bases
•Figure: Typical cost-to-serve breakdown by cost area in the UK
•Figure: Estimated aggregated total cost-to-serve of the UK energy retail market
•Figure: Paradigm shift facing the majority of major EU energy suppliers
•Figure: Forecasted cost and benefit impacts from avoided site visits (per meter)
•Figure: Typical estimated UK average cost-to-serve for different metering options, 2007
•Figure: Present value of smart meter benefit items after sensitivity analysis
•Figure: Smart metering functionality introduces a far greater level of complexity to customers
•Figure: Core processes are impacted by the introduction of smart meters and advanced metering infrastructure (AMI)
•Figure: Typical estimated average cost-to-serve for different payment classes
•Figure: Typical estimated average cost-to-serve by billing functionality
Companies mentioned
Essentially, Hutchison 3G UK Limited, RWE npower
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Energy & environment Industry: Utility Cost-to-Serve Analysis: A Growing Priority
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