CER SME Gas Market Survey Results 2014 Prepared for: Prepared by: April 2014 &

2 Background ● Electricity and Gas SME surveys conducted during March 2014  Total of 400 electricity and 250 gas interviews completed  Margin of error on a sample size of 400 is  5% and 6% on a sample of 250. For smaller subsamples the margin will be greater. ● Survey data collection methodology was Computer Assisted Telephone Interviewing (CATI)  Survey length of approximately 20 minutes ● Respondents were decision makers for electricity or gas supply related issues within the organisation  Included both private sector and public sector, government organisations and sole traders ● The final respondent set comprises a broadly representative of the SME sector organisations with fewer than 250 employees in Ireland  Sample was quota controlled on number of employees and region. A spread across sector NACE code was also ensured.

Respondent & Market Profile

4 Respondent profile (Base: All Gas SMEs - 250) ● Population of respondents is spread across different business sizes in the SME gas market ● There is a higher representation of the <5 employee category compared with previous measurement Number of employees NACE Agriculture, forestry and fishing 1%2%- Industry Mining and quarrying Manufacturing 6%5%6% Construction 6% 3% Wholesale and retail trade; repair of motor vehicles and motorcycles 18%14%11% Business and Professional Services 19%14%25% Public administration and defence; social security, Education Human health and social work activities 29%16%20% Other Transportation and storage 2% Accommodation and food service activities Leisure hotels Arts, entertainment and recreation 8%13%19% Other service activities 7%24%6% Activities of extraterritorial organisations and bodies 4%5%- Charity --8%

5 Respondent profile (Base: All Gas SMEs - 250) ● Respondents sought for survey were those responsible for gas supply related issues – responsibility is dispersed across many different roles within SME organisations  The highest role proportion is the managing director/finance director role Role of Respondent Respondent Other/ shared Nobody Paying the bill 86%78%13%23%1%- Monitoring the level of usage 82%86%13%8%4%7% Reducing the size of the bill 85%88%12% 3% Deciding on the tariff that suits your organisation 80% 19%20%1%5% Making changes to your account 83%86%16%17%1%2% Billing details, payment methods etc 88%78%12%24%0%1% Deciding on which energy supplier will be used 79%86%20%22%1%

6 Expenditure on gas (Base: All Gas SMEs - 250) Annual expenditure on gas (€) ● Average expenditure on gas as a percentage of non-wage costs was 6.3% (2013:7%)  47% of respondents provided an answer to this question reflecting a combination of sensitivity and knowledge ● Average annual expenditure was €49,956 (2013: €47,224)  This included a small number of large consumptions  81% of respondents provided an answer to this question Expenditure on gas (% of non-wage costs) Excluding don’t knows

7 Energy management: Cost and Usage Reviews (Base: All Gas SMEs - 250) ● Business’ most commonly review both cost and usage annually  There has been a continued decline in the proportion stating they review usage annually, with minor increases in more frequent reviews ● A total of 19% of SMEs never review usage, while 11% claim to never review cost Frequency of gas cost and usage reviews CostUsage Annually 63%68%57%53%63%37% Every three months 10% 4%11%10%8% Every two months 4%5%8%5% 7% Monthly 9%6%8%10%6%15% Don't know 5%4%1%6%5%3% Never 9%8%11%15%10%19% Other 10%12%

8 Market share: SME gas suppliers (Base: All Gas SMEs - 250) ● Proportions weighted to be representative by market share ● Satisfaction with service by Supplier is high at 79% Market Share of each supplier based on CER data Satisfaction with service by Supplier in supporting the business 8

9 Satisfaction with SME gas suppliers (Base: All Gas SMEs - 250) ● Satisfaction with service by Supplier has declined marginally compared with previous measurements Satisfaction with service by Supplier 9 * Small sample size Unweighted Base Size:(93)(28)(61)(18)(29) * Caution small base

10 Bill Delivery and Frequency (Base: All Gas SMEs - 250) ● Majority of SME’s receive their bill by post with evidence of a continued increase in the website channel ● Lower reporting of monthly bill frequency, with increases in the reporting of a two month bill frequency Bill delivery channel Bill delivery channel – by Supplier Bill Frequency Monthly56%69%47% Two Monthly37%28%50% Quarterly5%3%1% Other2%0%3% * Caution small base

11 Payment Record and Arrears (Base: All Gas SMEs - 250) Stated bill payment record by Supplier Stated bill payment record ● 94% of SMEs claim to pay on time and in full, a decrease on previous measurements ● This continued high rate may reflect a ‘broad’ interpretation of what constitutes arrears and perhaps some reluctance to disclose such sensitive information Bord Gais Airtricity*FloGasElectric Ireland* Energia* Paid on time and in full 93%94%97%100%95% Sometimes in arrears, but not currently 2%3%2%-5% Currently in arrears 4%3%2%-- Refused1%---- * Caution small base

Competition & Deregulation

13 Perceptions of price change over time (Base: All Gas SMEs - 250) ● Just under half the SME respondents perceive that there has been an increase in the price charged by their supplier in the past 12 months ● This is most noteworthy in the case of Bord Gais Energy, where 60% held that perception * Caution small base

14 Agree with statement The cost of gas is a significant business challenge for my business 56%57%50% The cost of gas puts my business at a competitive disadvantage to businesses based in other EU countries. 32%33%21% Impact of gas cost on business and competition (Base: All Gas SMEs - 250) ● The response is not characterised by an excessive concern with the impact of the cost of gas on EU level competitive activity, with 79% either neutral or disagreeing that their business is put at a competitive disadvantage due to the cost.

15 Awareness of competitors ● Unprompted awareness reflects top of mind presence in the consumer mind and provides a good estimate of perception of competitive activity in a market ● 87% mentioned Bord Gáis (or related name) 48% mentioned Airtricity in 2014, down from 54% in ● Mention of Electric Ireland increased to 45% from 35% in Unprompted awareness of Natural Gas Suppliers Supplier Named - Unprompted Bord Gais (etc)79%85%87% Airtricity34%54%48% Flogas33%39%37% Energia30%34%46% Electric Ireland23%35%45% Vayu 6% 5%6% (Base: All Gas SMEs - 250)

16 Satisfaction with Aspects of Competition (Base: All Gas SMEs - 250) 16 Level of Competition Quality of Competition Range of Offers ● Notable decline across all metrics of competition, in particular Satisfaction with Range of Offers. ● The drop in satisfaction scores indicates consumers disengagement with competition as neither /nor scores have increased vs ● Relatively low levels of Satisfaction with Competition articulated by SME sector

17 Awareness that prices are not regulated (Base: All Gas SMEs - 250) ● There is a comparatively low level of market knowledge amongst the SME respondents, with 61% not aware that prices are no longer regulated ● There is very little variation by supplier for this measure Aware of non regulation of price Aware32%36%24% Somewhat Aware6% 15% Not Aware62%58%61% Aware of non regulation of price, by Supplier Q: Are you aware gas prices charged by suppliers are not regulated which means that suppliers can set their prices at whatever level they choose? * Caution small base

18 Improvement and Dis-improvement since Deregulation (Base: All Gas SMEs - 250) Cost of Gas Improved 25%30%27% Dis-improved 34%22%19% Level of service provided by suppliers Level of innovation in services provided by suppliers Responsiveness of suppliers to business needs Range of options available by suppliers to business customers Ability of businesses to select supplier that best meets their needs Improved 28% 34% Dis-improved 10%12%8% Improved 19%20% Dis-improved 10%15%19% Improved 24%29%44% Dis-improved 7%12%14% Improved 28%22%20% Dis-improved 10%15%16% Improved 26%25%18% Dis-improved 12%13%23%

19 Contact by Suppliers (Base: All Gas SMEs - 250) ● On average, SME respondents recall higher levels of contact from competitors to their gas supplier, with increased in the level of both mail and business visit contact Contact Channel Phone 23%28%26% Mail7%6%9% Business visit15%11%23% Yes: 35% No: 65%

20 Awareness and understanding of offers available (Base: All Gas SMEs - 250) ● There is an increase in the proportion of respondents indicating that they are not aware of other offers, of which SME’s might avail ● There has been no change in the level of understanding of those in the Some/Mostly/Full categories Level of understanding of other offers No/Small Understanding 18%25%13% Some understanding 27%18%16% Mostly/Fully understand 28%37%34% Not aware of the offers available 26%20%37% Level of understanding of offers x supplier Q: Thinking about the different offers available from gas suppliers, please rate your understanding of the offers available.? * Caution small base

21 Ease of comparison of other offers Awareness and understanding of offers available (Base: All Gas SMEs - 250) ● The comparatively low level of market understanding is confirmed in the high proportion of SME’s (over 1/3) who report that they have not compares offers ● The ease of comparison of offers has decreased by 6% since 2013 Ease of comparison of other offers % 30% 24%

Switching

23 Gas Switching experience – level of switching (Base: All Gas SMEs - 250) ● The reported rate of switching, within the past 12 months, has increased form 16% in 2013 to 22% in While the total amount of SMEs who have ‘ever’ switched gas supplier is now at 64%. ● The proportion of SME’s who indicate that they have never switched has decreased to 36% from 46% in just over 70% of Bord Gais’s SME respondents report that they have never switched supplier. ● Amongst the switchers, 34% have switched once or more than once on the last 12 months (84% of these switched more than 3 months ago) and 18% reported that they had switched back to a previous supplier. How many times have you switched gas suppliers – by supplier? How many times have you ever switched gas suppliers? * Caution small base

24 Among switchers, which supplier did you consider switching to? Switching experience – level of switching for gas Base: All who switched supplier in past 12 months - 59 ● In general SME’s that report having switched tend to look at a number of other suppliers, with Flogas exhibiting a slightly different pattern in Among switchers, considered switching to: Current Customers of: Bord Gais*Airtricity*Flogas* Electric Ireland* Energia* No other supplier considered 24%21%19%39%16%7% Electric Ireland 27%21%41%15%72%24% Bord Gais 43%21%33% 56%67% Airtricity 34%-47%30%45%42% Energia 37%48%57%21%29%49% Vayu 9%-33%10%12%- *Small base size

25 Gas - Switching Package/option with existing supplier ● Among non switchers, 14% reported changing package to avail of discounts related to direct debit or online billing * Caution small base

26 Gas - Changing Payment channel and Bill frequency with existing supplier (Base: All Gas SME – 250) ● Comparatively low levels of engagement in the areas of changing bill frequency and payment channel, but similar to previous years Q: Have you changed the payment channel or frequency of payment in the past 12 months (* Question reworded during fieldwork)

27 How many times have you switched Electricity suppliers? Switching experience – level of switching among SME gas customers with Electricity (Base: All Gas SME – 250) ● The level of switching for an alternative supplier of electricity among SME gas customers, is comparatively high with 46% indicating they had switched at least twice ● Of these, 34% switched in the past 12 months ● Of those SME’s who did not switch, 37% considered switching to an alternative electricity supplier How many times have you switched Electricity suppliers – by supplier?

28 Gas – Switching consideration (Base: All non-Gas switchers – 191) Switching consideration: ● Increase noted in both the category of SME’s who considered switching and of those, the proportion who contacted an alternative supplier Switching consideration – by supplier? * Caution small base

29 Gas Switching – Dual Fuel vs Non Dual Fuel ● Those on dual fuel are more likely to have switched gas suppliers, with 2 in 5 dual fuel customers switching gas suppliers more than twice. How many times have you switched gas suppliers?

30 Gas – Reasons for switching, amongst switchers Base: All switched supplier in past 12 months – 49* Top 5 reasons Important Not Important To achieve a reduction in the total cost of electricity 68%92% 12%4% The previous supplier had recently announced a price rise 40%51% 44%35% My business’ bill increased in size because my previous supplier had increased prices 36%50% 48%37% To avail of a combined offer for electricity and natural gas 24%38% 48%49% The new supplier offered greater assistance on energy reduction initiatives 37% 48%46% ● Among SME’s using natural gas, the Top 5 considerations for switching focus on the quest for a reduction in cost * Caution small base

31 Gas – Reasons for switching, amongst switchers Base: All switched supplier in past 12 months – 49* Important Not Important The new supplier offered a more flexible tariff structure 40%36%40%37% I expected the customer service from the new supplier would be better 20%34%52%51% My business was not satisfied with the service provided by our former supplier 24%27%52%65% I was unhappy with the service I have received from my former supplier 24%20%48%69% To get more information on electricity usage 16%15%56%59% I preferred the online billing option from my new supplier 28%14%48%69% ● Additional considerations for switching include increases in the relevance of meeting service expectations * Caution small base

32 Gas – Reasons for switching back to old supplier, amongst switchers Base: All switched back to previous supplier – 10* Top 6 reasons:Important Not Important To achieve a reduction in the total cost of electricity94%0% The business expected to get more savings by returning to my original supplier94%0% To avail of a combined offer for electricity and natural gas62%24% The price the business received from my new supplier was not as good as I had expected43% My business’ bill increased in size because my previous supplier had increased prices29%64% The previous supplier had announced a price rise35%59% ● Top 6 reasons for returning to the original supplier all relate to price considerations * Caution small base

33 Gas – Reasons for switching back to old supplier, amongst switchers Base: All switched back to previous supplier – 10* Other Reasons citedImportant Not Important The business was not satisfied with the service provided by our new supplier 24%57% The service from the new supplier was not as good as the service received from my original supplier 16%65% I preferred the online billing option from my original supplier13%87% The business’s original supplier offered greater assistance on energy reduction initiatives 10%62% The original supplier offered a more flexible tariff structure10%62% I did not find the bill of my new supplier understandable0%85% I did not like the frequency with which I received a bill0%94% ● Top amongst non price considerations in the decision to return to the original supplier is service falling short of expectations * Caution small base

34 Understanding of Discount agreement (Base: All switched last 12 months – 59) Price Guarantee Period Q: Are How long does the discount offered when you switched last for? NO restrictions on future switching? %30%34% Period of restriction months0%8%3% 1 year93%75%88% 2+ years7%8%7% Don’t know0%8%2% * Caution small base

35 Gas – Non Switchers – reasons for not switching Base: All non switchers Top 7 reasons Important Not Important We are satisfied with the service that we receive from our current supplier 57%56%58% 18% We do not believe that the level of discount is sufficient to justify switching 26%34%46% 23% Other priorities have meant that this has not been considered36%45%41% 38% We do not believe that the prices will stay as low as the alternative suppliers claim 28%36%38% 35% We do not believe that the prices will be as low as the alternative suppliers claim 25%34% 40% We are concerned about whether the alternative supplier will be as responsive if there is a leak - 26%25%53% We are concerned about whether the alternative supplier will provide a reliable supply of gas 23%33%25%60% ● The top scoring considerations for not switching focus on their assessment of the alternative options and offers

36 Gas – Non Switchers – reasons for not switching Base: All non switchers Other reasons Important Not Important We are concerned that the alternative suppliers may not stay in the electricity market for long 26%19%56% We are not able to switch because of the contract with our current supplier 13% 75% The offers from the other suppliers are too complex23%13%57% We would be charged a penalty and the saving to be made with a new supplier would not cover this penalty 10%76% We would have had to pay a large deposit 9%81% We do not believe that we are able to switch because of arrears on the business’ account 11%8%86% We do not want a new supplier to ask about our current supplier if there were arrears on the business’ account 10%6%87% It is not possible for my business to switch due to outstanding arrears on our business’ gas account 23%1%92%

37 Experience of switching process Base: All switched last 12 months - 59 The overall rating of the experience of switching increased from 78% in 2013 to 95% stating that it was easy or very easy – the process of switching is not a barrier to switching Of those who switched, 3% indicated that they were required to pay a deposit Rating the overall experience of switching by Supplier 37 * Caution small base

38 Rating the overall experience of switching Impact of switching process Base: All switched and received a bill - 56 The impact of the switching process is as expected for the SME’s who switched, with the exception of price where under 62% agreed that it reduced by the amount they expected AgreeDisagreeAgreeDisagreeAgreeDisagree My business’ bill was reduced by the amount I expected 63%11%71%9%62%5% The service from my new supplier was satisfactory 79%0%80%3%85%2% We understood the terms and conditions of the offer the business had signed up for 84%3%89%5%85%2%

39 Impact of switching process (Base: All changed package –30/Changed supplier & received a bill –56) SME’s who have changed supplier seem to have greater understanding of the terms and conditions compared with those who remained with their existing supplier, but changed package Changed Package - Agree Changed Package - Disagree My business' bill was reduced by the amount I expected 57%15% We understood the terms and conditions of the offer the business had signed up for 67%11% We have complied with the terms and conditions (for instance online billing or payment by direct debit) 80%5%

Dual Fuel

41 Dual Fuel Saving and convenience considerations are the more frequently cited benefits for switching to a single supplier for gas and electricity Factor in the decision to change to a single supplier for dual fuel (Base: All dual fuel – 68) Benefit Not at all a benefit The greater reduction in electricity prices offered when your business also used the same supplier for gas 62%16% The greater reduction in gas prices offered when you also used the same supplier for electricity 62%17% The greater saving overall70%10% The convenience of having a single supplier for both 59%24% Aspects of the service provided by your supplier - for both electricity and gas 44%26% Factor in the decision not to have a single supplier for dual fuel (Base: All non-dual fuel – 182) Benefit Not at all a benefit The savings are greater if your business uses two different suppliers 32%44% Satisfied with the service provided by our current supplier for each and see no reason to switch 55%23% You do not trust a single supplier to provide both electricity and gas 14%72% Do not want to receive a single bill for both gas and electricity 19%68% You are concerned about what would happen if your business fell behind on payments for either 17%72% Have not got around to switching to a single supplier 19%62%

Billing & Payment

43 Bill Understanding and impact (Base: All gas SME – 250) Change vs 2013 (-12%)(+11%)(-13%)(-17%)(-6%) Understand the calculation of the bill Bill is easy to understand Bill makes it easy to understand the gas used Makes it easy to understand the gas charged for Change vs 2013 (-11%)(=%)(-25%)(+5%)(+1%) Change vs 2013 (-14%)(-6%)(-18%)(-2%)(-13%) Change vs 2013 (-14%)(-3%)(-23%)(-6%)(-7%) * Caution small base

44 Bill Frequency (Base: All gas SME – 250) My business would prefer to receive bills more frequently Business would prefer to receive bills more frequently– by Supplier? * Caution small base

Complaints

46 Experience and knowledge of Complaint process ● 5% of SME respondents reported that they had complained within the last 12 months ● The most common category of complaint is in relation to billing and payment (81%) ● Networks related issues such as reliability of supply followed at 16% Proportion of respondents who complained over last year (Base: All gas SMEs – 250) Complaint topic (Base: All who made a complaint – 15*) 2014 Billing and payment81% Reliability of supply/power failures/supply issues 16% Other2% % 3% 2% * Caution small base

47 Experience and knowledge of Complaint process ● 3 in 5 of the respondents complained to Suppliers in the first instance, followed by Networks. ● Data are based on very small samples and are therefore exhibiting large changes over time Yes: 66% Yes: 66% Complaint made to (Base: All who made a complaint – 15*) Your current or previous supplier 63%59% ESB Networks50%16% The Commission for Energy Regulation 0% Other0%25% Don't know0% * Caution small base

48 Satisfaction with complaint handling (Base: All who made a complaint – 15*) ● 2014 Satisfaction with problem handling is based on small samples and data should be used as directional Satisfaction with COMPLAINT HANDLING Satisfaction with COMPLAINT OUTCOME * Caution small base

49