Explosive growth in purchasing utility services online is set to continue

The use of e-commerce in the gas and electricity utilities market has increased dramatically since its introduction in the UK and Scandinavia in 1999 and is predicted to burgeon Europe-wide.

According to information released on 16 August the value of e-commerce transactions in the European utilities market reached US$36 million in 1999, including payments made online via a credit card and those generated through e-billing, as well as revenues amassed by online contract completion.

However, the study predicts that the value of on-line utilities business will rocket to US$23.7 billion by 2006, as an increasing number of power companies introduce on-line billing facilities, as well as providing initiatives such as lower

billing costs and increased service offerings for using e-business. By this time it is predicted that on-line transactions will account for 9.2% of the total gas and electricity market.

Mark Kavanagh, Research Analyst at marketing consulting company Frost & Sullivan, who conducted the study, reports that globally, utilities account for about 25% of the repetitive bills market. “This by itself is a clear incentive for utility companies to convert from the reliance on paper to the electronic methods. Due to the high billing costs, many utilities will be trying to promote e-billing to obtain cost savings, which will enable them to remain competitive,” he said.

The report states that by far the largest sector of the utilities e-commerce market was the residential user sector, with revenues predicted to rise from US$22 million in 1999 to US$8.3 billion in 2006. The second most important area was the industrial market, worth US$9 million in 1999, and predicted to be valued at US$10.3 billion in 2006. The third area is the commercial end-user market, worth US$5 million in 1999, but US$5.2 billion in 2006.

However Frost and Sullivan warn that security concerns will pose a major obstacle for the expansion of online trading as a number of issues surrounding safety and legitimacy of online transactions remain as yet unsolved. The company predicts that cautious behaviour amongst consumers, triggered by scares such as the

recent Barclays and PowerGen security scandals, will act as a restraint on growth, and that lack of confidence in the security of online transactions will force unknown companies out of the market.

Another obstacle in the development of e-commerce for electricity and gas is the prevalence of established and convenient alternatives, such as electronic data interchange (EDI), direct debit and pre-payment meters.

The report also states that local monopoly companies who are responsible for the generation and the transmission of electricity, e.g. GDF and EDF, are currently muscling into new markets outside their former territories, but that they are slow to implement e-business services, as their dominant situation enables them to postpone the introduction of e-business services.

Examples of companies be spearheading e-business services include: astromo.de; ampere.de; Servista and Independent Energy.

The report (code 3643) will be available from September 2000 at a cost of 4,950 Euros.

Contact Frost and Sullivan at:

Tel. +44 (0) 20 7343 8376 or Fax. +44 (0) 20 7343 8380

[email protected]

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