The Competition and Markets Authority (CMA) has warned that the proposed merger between Npower and SSE has the potential to lead to higher energy bills and that the two Big Six firms must provide “undertakings” to address the authority’s concerns.
The competition watchdog said that if “undertakings” were not given it would be forced to begin a “stage two” investigation into the proposed company that would serve around 7 million households around the UK – making it’s the country’s largest household electricity supplier a second biggest gas supplier.
According to the CMA, the merger would lead to “substantial lessening of competition”, resulting in higher bills.
Its initial investigation found “that the rivalry between the large energy companies, including SSE and Npower, is an important factor in how they set tariffs. The removal of such competition could therefore lead to higher prices for some customers.”
Unions have also opposed the deal due to the threat it poses to jobs. Kevin Coyne, Unite’s national energy officer, said: “job losses could be on the cards to feed insatiable shareholder hunger”.
The deal comes as the UK government introduces legislation that will allow energy regulator Ofgem to put a price cap on standard variable tariffs (STVs) to address the matter of increasing energy bills.
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.”
Alistair Phillips-Davies, chief executive of SSE, said: “We remain confident that the proposed merger will deliver benefits for customers and for the energy market as a whole and that we will be able to demonstrate this to the CMA in due course. We look forward to continuing to work constructively with the CMA and other interested parties.”