The competition watchdog has provisionally cleared the proposed merger between rival ‘Big Six’ energy companies SSE Retail and Npower after it concluded that prices would not be materially affected.
The Competition and Markets Authority (CMA) had previously raised concerns that the merger could reduce competition in the market and lead to higher standard variable tariffs (SVTs).
However, after investigating how the merger would affect householders, the CMA has provisionally cleared the deal. It concluded that SSE and Npower “do not compete closely on SVT prices”.
If the deal goes ahead it will create Britain’s largest energy retailer and reduce the Big Six (who currently dominate the market) to five companies.
Despite concerns that the merger will narrow choice for consumers, the CMA points out that there are now over 70 providers in the UK energy market, with levels of switching at their highest in a decade.
Anne Lambert, chair of the CMA, says: “It is vital that householders have a range of energy suppliers to choose from, so they can find the best deal for them. With more than 70 energy companies out there, we have found that there is plenty of choice when people shop around.”
But Ms Lambert cautions: “Many people don’t shop around for their energy, so we carefully scrutinised this deal. In particular, how it would impact people who pay the more expensive standard variable prices.
“Our analysis shows that the merger will not impact how SSE and Npower set their SVT prices because they are not close rivals for these customers. Looking ahead, Ofgem’s price cap is also expected to protect SVT customers.”
Stephen Murray, energy expert at MoneySuperMarket, says it doesn’t come as a huge surprise that the CMA review has given provisional clearance to the SSE/Npower merger.
He comments: “Competition has never been as strong in the residential energy market and with increasing switching numbers recorded month-on-month, the choices for existing SSE/Npower customers are significant - nearly all of which would result in lower prices, should they decide to move away from the merged supplier.”
Mr Murray adds: “In fact, creating a clear reason for the large number of customers on SVTs to take a look at their current energy deal can only help further engagement in the switching market, even if it is to a cheaper deal from their current supplier.”
The CMA is now consulting on its provisional decision and the final report is due by 22 October.