The UK competition watchdog has referred the proposed merger between household energy suppliers SSE and Npower for an in-depth investigation after the two companies failed to provide remedies to ease competition concerns.
The Competition and Markets Authority said the decision followed an initial investigation that found the deal could potentially lead to higher prices for some consumers. A decision on the merger will now be made by an independent panel supported by a case team of CMA staff. The deadline for the final report is 22 October.
The watchdog said last month it was concerned the merger, which was announced last November, could impact competition. The companies had seven days – until midnight last Thursday – to offer undertakings to address these concerns.
The combination of the household supply business of London-listed SSE and Npower, owned by Germany’s Innogy, would reduce Britain’s “big six” energy suppliers to five and create a new company with just under 13m customer accounts. It would have a larger share of electricity supply than British Gas, the market leader, with a 24 per cent share compared with 22 per cent. Its market share for gas, however, would still be dwarfed by British Gas.
Concerns are likely to focus on the impact of the proposed deal on “standard variable tariffs”, the most common type of energy tariff. The government has promised to tackle “rip off” energy bills. and legislation is going through parliament to cap SVTs. SSE has the highest proportion of customers on SVTs among the “big six” suppliers.
Npower owner Innogy is in turn controlled by Germany’s RWE. The merged business would initially be part-owned by SSE shareholders with a minority share held by Innogy. Since the merger was announced in November, a separate deal has been agreed whereby RWE has agreed to sell Innogy to Eon, another German supplier which also has a UK retail business.