The Dutch power market: High levels of churn, low customer service satisfaction

22 July 2003 – Eighteen months after large business users in the Netherlands were given the right to choose their electricity supplier, competition in this sector is hotting up. The latest research from independent market analyst, Datamonitor reveals that approximately half the country’s major power users switched suppliers when their contracts were last up for renewal, and up to 60 per cent switched at least once since market opening.

At a time when the choice of supplier is ever increasing, customers are not only switching in search of savings but are also driven away by poor service. Datamonitor’s survey also reveals that Electrabel and Delta lead the way, with the highest levels of customer service satisfaction.

As of June 2003, one in two eligible electricity users in the Netherlands switched their largest supplier the last time their contract was up for renewal Datamonitor’s research on Dutch major power users (defined as those with at least one over-1GWh site) was conducted in two waves in October-December 2002 and in April-June 2003. This category has been eligible to choose electricity supplier since January 2002.

Of the respondents interviewed during the second wave, 52 per cent switched suppliers when their contracts were last up for renewal. This represents some of the highest levels of customer churn among the liberalised Western European power markets. Since becoming eligible, three out of five major power users in total have changed supplier at least once, and many have done so repeatedly.

This is partly a result of the wide choice of suppliers available to Dutch eligible users, with 20 new entrants in 2002 alone. These have included major foreign utilities such as EnBW and Vattenfall, local start-ups such as the “green” supplier EnergyXS, and Dutch regional distributors who have not only started targeting customers outside their traditional catchment areas but, in some cases, have expanded from gas and district heat to electricity supply (e.g. Cogas).

The switching process has also become considerably easier, with half the respondents unable to identify any barriers to changing supplier. Even the remaining barriers were mostly related to suppliers’ own failings, such as insufficient flexibility, rather than to institutional obstacles (network access, etc.).

Despite an overall improvement since last year, Dutch major power users’ customer service satisfaction is among the lowest in Western Europe. While half of switchers changed their suppliers purely for price reasons, the remaining half were strongly influenced by other factors, such as a poor level of service they received from their previous supplier.