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Npower and SSE merger ‘could lead to higher prices’

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Written by: Paloma Kubiak
26/04/2018
The proposed merger between Npower and SSE ‘warrants further scrutiny’, the competition watchdog has said, following concerns it could push up prices for some customers.

In November 2017, two of the UK’s biggest energy markets agreed to merge to create a major independent supplier towards the end of 2018/early 2019.

At the time of the announcement, the firms served 11.5 million customer accounts and if approved, it would take the UK’s ‘Big Six’ energy providers to the ‘Big Five’, along with British Gas, EDF, E.ON and ScottishPower.

The move was subject to approval from German Innogy SE – behind the British retail business of Npower – SSE shareholders plus the competition and regulatory bodies.

But now, the Competition and Markets Authority (CMA) has assessed whether the move could reduce competition, and as such, it said the merger ‘warrants further scrutiny’.

As part of its initial investigation, the CMA said the rivalry between the large energy companies, including Npower and SSE is an important factor in how they set tariffs. “The removal of such competition could therefore lead to higher prices for some customers”, it said.

Rachel Merelie, senior director at the CMA, said: “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.”

The CMA has given the energy firms until 3 May to offer measures to address the concerns. If they fail to meet this, the CMA will refer the merger for a more in-depth investigation’, carried out by independent panel members, which can take up to 24 weeks.

Richard Neudegg, head of regulation at uSwitch, said: “It’s completely right 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. Whatever decision the CMA reaches it’s vital consumers are put front and centre and that they can access good value deals in this market.”

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