UK competition watchdog clears SSE-npower retail energy merger

The Competition and Markets Authority (CMA) said the proposed tie-up would not affect householders

  • It found the Big Six suppliers are not 'close rivals' for customers on standard variable tariffs (SVTs)
  • The number of people switching energy suppliers is the highest in a decade and the proportion of SVTs is said to have fallen
  • SSE and npower said the new company will combine the best of what both retail businesses have to offer

Big Six suppliers SSE and npower have been given the final clearance to merge their retail energy businesses by the UK’s competition watchdog.

The decision comes after the Competition and Markets Authority (CMA) provisionally cleared the tie-up after investigating the effect it would have on householders.

The CMA has now given the final go-ahead following a period of consultation after finding SSE and npower are not “close rivals” for customers on standard variable tariffs (SVTs).

It also found the number of people switching energy suppliers is the highest in a decade and the proportion of SVTs – the most expensive tariff on the market – has fallen, with customers switching to cheaper deals.

However, although consumers who don’t switch are usually on one of the larger suppliers’ SVTs, the investigation reveals SVT prices are mainly driven by wholesale costs “but the large energy suppliers take account of each other’s tariff changes when choosing the size and timing of their own”.

The CMA says bad publicity from being the first to increase prices means more of their customers switch to different suppliers.

It found SSE and npower “do not pay special attention to each other”, therefore the merger is not expected to have a significant impact on SVT pricing.

Anne Lambert, Chair of the Inquiry Group said: “With many energy companies out there, people are 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.”

Responses

SSE said it is “pleased” the CMA’s investigation confirms the proposed merger does not raise any competition concerns.

Chief Executive Alistair Phillips-Davies added: “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.”

Martin Herrmann, COO Retail of innogy, npower’s parent company said: “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.”

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