The proposed merger between Big Six energy suppliers SSE and Npower has been provisionally approved by regulators, which found there’s “plenty of choice” in the domestic energy market.
The two suppliers announced last year their intention to merge operations in November 2018. The resulting firm will be the UK’s second biggest energy supplier, after British Gas.
The Competition and Markets authority launched an inquiry into the proposed merger earlier this year, focusing on how the union of two of Britain’s largest energy suppliers would impact the cost of standard variable tariffs for consumers. The competition watchdog had previously raised concerns that as the Big Six dwindled to the Big Five, loss of competition could drive up the cost of these tariffs, which are the most expensive, but also the most common, on the market.
The CMA announced Wednesday that its investigation had revealed that SSE and NPower do not compete closely on the prices of standard variable tariffs and that impact on the cost to consumers would be negligible.
“It is vital that householders have a range of energy suppliers to choose from so they can find the best deal for them,” said Anne Lambert, chair of the inquiry group at CMA.
“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,” she said.
The report noted that there are more than 70 energy companies competing for consumers’ bills in the UK and pointed to recent improved rates of switching, particularly the number of customers moving away from Big Six suppliers to upstart suppliers.
Lambert also added that the government’s cap on energy prices, due to be implemented by Ofgem before the end of the year, would also protect customers on standard variable tariffs.
Alistair Phillips-Davies, chief executive of SSE, welcomed the approval. “Following a thorough and in-depth investigation, we are pleased the CMA has provisionally concluded that the proposed merger of SSE Energy Services and Npower does not raise competition concerns,” he said.
“The planned transaction presents a great opportunity to create a more agile, innovative and efficient company that really delivers for customers and the energy market as a whole.”
He added that he was “confident” that the merger would be complete by the end of the financial year.
The Competitions and Market Authority will deliver a final report on the merger by 22 October.
