A proposed merger between rival Big Six energy companies Npower and SSE could “lead to higher prices for some customers,” according to the competitions regulator.
SSE Retail and Innogy SE – Npower’s parent company – first announced plans to merge their household businesses to create a new energy company in November 2017.
However, the Competition and Markets Authority (CMA) has today concluded that the merging of the two companies could reduce competition in the market, which may then result in household bills rising.
It’s given Npower and SSE until 3 May to offer measures to address its concerns. If they fail to do so, the CMA will undertake a further investigation into the proposed merger.
Rachel Merelie, senior director at the CMA, says: “We know that competition in the energy market does not work as well as it might. However, competition between energy companies gives them a reason to keep prices down.
“We have found that the proposed merger between SSE Retail and Npower could reduce this competition, and so lead to higher prices for some customers. We therefore believe that this merger warrants further in-depth scrutiny.”
Richard Neudegg, head of regulation at comparison website uSwitch, adds: "It's completely right that the CMA addresses concerns that this deal could result in reduced competition among the bigger energy companies. As the CMA highlights, competition is crucial for delivering cheaper prices for energy customers.
"However, with over 60 suppliers in the market there needs to be a focus on the quality of competition, not just the number of suppliers.”
However, Alistair Phillips-Davies, chief executive of SSE, believes the merger will “deliver benefits” to households. He says: “We remain confident that the proposed merger will deliver benefits for customers and for the energy market as a whole and that we will be able to demonstrate this to the CMA in due course. We look forward to continuing to work constructively with the CMA and other interested parties.”
Martin Herrmann, chief operating officer retail at Innogy SE adds: “We are convinced that with the merger of Npower and the UK retail business and energy services activities of SSE we are creating an independent customer-focused British energy company that can offer our customers a more efficient and even better service, and bring benefits to the wider market as well.”