24 Retail  Energy Review of  Operations Retail Energy 2012 2011 Operating EBIT ($m) 332.8 305.1 Operating EBITDA ($m) 391.9 348.9 Operating cost/gross margin 49.2% 48.8% Consumer market electricity volume (GWh) 15,410 14,674 Consumer market gas volume (PJ) 60.1 62.6 Consumer market gross margin ($m) 654.5 595.9 Average consumer market customers (’000s) 3,373.2 3,254.2 Average consumer market gross margin per customer ($) 194.03 183.12 Financial Performance Main achievements in 2012 Retail Energy’s Operating EBIT of  $332.8 million was up 9.1% on last year due  mainly to improved margins and increases  in customer numbers. Business operating  costs increased by 10.7%, mainly due to  the additional campaigning and advertising  costs incurred to respond to the increased  intensity of competition in Australian energy  markets, and the higher amortisation of  costs incurred in increasing our electricity  customer base in New South Wales. During the year AGL acquired over 180,000  new customer accounts. Of these, 152,000  are new electricity customers in New South  Wales, as a direct result of the three year  organic growth strategy we commenced  in 2011. Our electricity customer base in  New South Wales now exceeds 620,000,  which puts us on track to achieve the target  of at least 800,000 customers by FY2014.  The number of “dual fuel” customers also  increased by over 10% during the year to  1.62 million. Changes were made during the year to  a number of the call handling processes  at our Customer Service Centres. These  changes have resulted in improved first  During the year, AGL introduced a range  of additional initiatives to attract and retain  customers. In April 2012, AGL entered  into a partnership with the Coles  flybuys loyalty program which rewards customers  for everyday spending on electricity and  gas. To date, more than 200,000 of our  customers have linked their accounts  to  flybuys . AGL is providing energy solutions to  help customers manage their energy  consumption and help reduce their energy  bills. AGL’s Smarter Living Centre and  Smarter Living Store were launched in  October 2011. They offer energy efficiency  products, personalised services and  practical solutions to reduce energy use. AGL’s consumer market churn rate continues  to be significantly lower than the total  market. AGL’s actual churn rate improved  with a reduction year on year from 16.2%  to 15.4%, despite the total market churn  increasing from 20.0% to 20.3%. AGL operates in some of the world’s most  competitive retail energy markets, with  Victoria having the highest level of customer  switching or churn in any deregulated  energy market globally. In 2012, AGL received an award from  independent research company Canstar  Blue for most satisfied customers, electricity  providers – New South Wales 2011. AGL’s share of complaints made by  customers to the Ombudsman in each  State was also significantly below  market share. call resolution of customer enquiries and  a reduction in the time taken to respond  to, and deal with, customer calls. We  have started to see the benefits of these  improvements through increased levels  of customer satisfaction. AGL’s Energy Online service has grown  steadily during the year, allowing customers  to switch to AGL, manage their accounts  or move home at their convenience. Of the  300,000 registered users, more than half  receive their bills electronically and self- serve on simpler transactions. Key challenges Providing an excellent  experience for our customers AGL retails natural gas, electricity and energy related products and  services to almost 3.5 million customers across New South Wales,  Victoria, South Australia and Queensland. Retail Energy sources its  energy from AGL’s Merchant Energy Business.