Britain’s Competition and Markets Authority has given the green light for a proposed merger between two of the UK’s ‘Big Six’ energy utilities to go ahead.
The CMA ruled that the alliance between SSE Retail and npower – already nicknamed ‘Senpower’ – does not raise competition concerns.
The planned merger involves the domestic supply side of both businesses. It does not cover SSE’s generation and distribution, nor its supply to business customers.
The merger would create Britain’s second-largest retail power provider, with a 23 per cent market share behind British Gas, which holds 27 per cent.
A CMA inquiry investigated how the merger would affect householders, following concerns over the potential impact on standard variable tariffs, which are the most common and expensive energy tariff.
As inquiry has provisionally decided to clear the deal after finding that SSE and npower do not compete closely on standard variable tariffs (SVT) prices.
Anne Lambert, chair of the inquiry, said: “It is vital that householders have a range of energy suppliers to choose from so they can find the best deal for them. With more than 70 energy companies out there, we have found that there is plenty of choice when people shop around.
“But many people don’t shop around for their energy. So, we carefully scrutinized 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 standard variable tariffs prices because they are not close rivals for these customers.”
She added that a planned price cap by UK energy regulator Ofgem’s “is also expected to protect standard variable tariffs customers”.
The CMA found that the number of people switching energy provider is the highest in a decade and the proportion on SVTs has fallen.
However, as previously outlined in its energy market investigation, the CMA has found that those people who do not switch are usually on one of the large energy suppliers’ standard variable tariffs and pay higher prices. Therefore, the CMA carefully examined whether the merger would change how the large energy suppliers set these prices.
The CMA found: if SVT customers switch, they usually change to a cheaper, non-SVT, tariff; the risk of losing customers as a result of an SVT price rise will not change with the merger; few customers switch between SSE and npower, instead preferring to move to other suppliers; and SVT prices are mainly driven by changing wholesale costs.
npower is owned by German energy giant innogy. Martin Herrmann, chief operating officer for retail of innogy, said: “Our plans for a new British retail energy company are clearly on schedule and the UK Competition and Markets Authority announcement is another important milestone. We believe that the new organisation will combine the best from both companies to meet evolving customer expectations and address advancing market challenges.”
Preparations for the new British retail energy company are progressing: SSE’s shareholders approved the transaction in July and the designated chief executive Katie Bickerstaffe is now in place. Bickerstaffe was previously chief executive of the UK and Ireland arm of telecoms and electrical retailer Dixons Carphone and was a non-executive director of SSE for seven years.