Consumer choice amongst the biggest energy firms set to reduce as Competition and Markets Authority (CMA) gives green light to company merger.
The so-called “Big Six” is set to become the “Big Five” after the CMA gave its final assent to the merger deal between two of the largest energy firms serving UK households, SSE and Npower. It gave provisional clearance on 30 August.
The regulator says it does not believe consumer choice or prices will be affected as both firms Standard Variable Tariffs (SVTs) are mostly affected by changing wholesale costs rather than consumer demand.
SVTs tend to be the most expensive way to buy energy, with cheaper fixed-rate deals offering significant savings by comparison.
Anne Lambert, chair of the CMA inquiry group, says: “With many energy companies out there, people switching away from expensive SVTs will still have plenty of choice when they shop around after this merger.”
Uswitch energy expert Rik Smith comments: “This merger will create one of the largest energy suppliers in Britain. SSE and Npower have previously said that the proposed company will be different from its traditional rivals.
"In a highly competitive market, around nine million households could be affected by this merger and will be looking for attractive prices and strong customer service.”
Martin Herrmann, chief operations officer for retail innogy SE, Npower’s parent company comments: “We will continue to work to complete everything required to create the new company. Today’s final CMA clearance is a further step in setting up this new company which will combine the best of what both retail businesses have to offer, and build a better company for customers.”
Alistair Phillips-Davies, chief executive of SSE, adds: “We are very pleased that the final report of the CMA’s investigation confirms its provisional findings that the proposed merger of SSE Energy Services and Npower does not raise any competition concerns.
“This is a complex transaction and there is still much work to do in the coming weeks and months. However, we’ve always believed that the creation of a new, independent energy and services retailer has potential to deliver real benefits for customers and the market as a whole and it is good to see that the CMA has cleared the transaction following what was a comprehensive and rigorous inquiry.”
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Energy market failures
The merger underscores what is currently a tough time for households, with prices rising across the board by inflation-busting amounts this year.
The issue has grown such that the government has now stepped in and set out a price cap on SVTs through the regulator Ofgem.
Stephen Murray, energy expert at MoneySuperMarket, says the merger “doesn’t mean a shrinking energy market or less choice for consumers".
He adds: “Regardless of whether it’s a Big Five or emerging supplier, households seeing today’s news should use it as an opportunity to check their energy bill and lock in their prices for this winter and possibly next by switching to a fixed rate tariff today.
“Both winter and the price cap are coming but if you switch now you could save £250 and give yourself peace of mind that your bills won’t be affected by any market changes.”
What this means for customers of both firms
Currently there is no official announcement on the name of the new firm once it is merged, but this is expected in due course.
As far as costs for customers go the firms say that by combining forces they will be able to offer a "stronger competitor" in the market for household energy. It says combining the firms will help increase efficiency.
This, Npower says, is good news for customer bills. It says efficiency savings will help customers receive an "even more attractive proposition".
Overall, there is little change for existing customers, for now, as the merger of the two firms will likely take time for fall into place. Npower estimates changes will likely take place in the first quarter of 2019, so keep an eye out for contact from either firm if you are a customer.
However, if you're looking to save as much money as possible on your energy now, the message is still clear: shop around online and look for a cheap fixed-rate deal. If you're on a SVT you will most likely be paying more than you should be.