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SSE and Npower merger given green light: what it means for customers

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Written by:
10/10/2018
The ‘Big 6’ energy suppliers could soon become the ‘Big 5’ after the competition watchdog gave the go ahead for the SSE and Npower merger to proceed.

The Competition and Markets Authority (CMA) looked specifically into how the deal would impact ‘standard variable tariff’ prices and found the two firms were “not close rivals” on these tariffs.

Anne Lambert, chair of the inquiry group, said: “With many energy companies out there, people switching away from expensive standard variable tariffs will still have plenty of choice when they shop around after this merger.

“But we know that the energy market still isn’t working well for many people who don’t switch, so we looked carefully at how the merger would affect SVT prices.

“Following a thorough investigation and consultation, we are confident that SSE and Npower are not close rivals for these customers and so the deal will not change how they set SVT prices.”

The CMA found that the number of people switching energy provider is the highest in a decade and the proportion on SVTs has fallen, with customers usually switching to a cheaper, non-SVT, tariff.

It added that Ofgem’s price cap is also expected to protect people on standard variable tariffs.

Alistair Phillips-Davies, chief executive of SSE, said: “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.”

What is means for customers

SSE and Npower announced plans to merge in November 2017. At the time of the announcement, the firms had around 11.5 million customers combined.

The merger will create one of the largest energy suppliers in the UK.

Rik Smith, energy expert at uSwitch.com, said: “In a highly competitive market, around 9 million households could be affected by this merger and will be looking for attractive prices and strong customer service. And with regulatory intervention due to be in place by the end of the year, how will the new supplier engage those customers who are still on poor value standard variable tariffs and get them onto better deals?

“The average Big Six standard tariff is currently £300 more expensive than the cheapest on the market, so the message to all customers remains to shop around and choose the best possible deal.”

Peter Earl, head of energy at comparethemarket.com, said: We think that many customers will continue to remain on uncompetitive tariffs, which will be priced just below Ofgem’s cap. We are concerned that the price cap will play into the likes of SSE-Npower’s hands, lulling people into thinking that they won’t need to switch to get the best deal. SSE-Npower will clearly be hoping that this comes to pass.”

Alex Neill of consumer group Which? said: “We will be keeping an eye on this situation to ensure that, as temperatures drop, already hard-pressed households don’t face even higher energy bills as a result of this decision.

“Consumers unhappy with their current energy provider should consider switching to a better deal, as they could save around £400 a year.”

Related: See YourMoney.com’s A guide to switching energy provider for more information.

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