The Competitions and Markets Authority (CMA), the UK’s mergers and acquisitions regulator, has approved a proposed company formed out of parts of SSE and Npower, two of the so-called ‘Big Six’ energy providers.
The CMA has concluded that the particular niches in the market occupied by SSE and Npower (owned by Innogy, the German energy firm) are dissimilar enough that the merger would not lead to a lack of options for customers, and thus an unfair monopoly. Concerns were raised that market competition on providing Standard Variable Tariffs (SVTs) would be significantly weakened by the move, and that the Big Six (soon to be Big Five, with the new merged company alongside British Gas, E.On, Scottish Power, and EDF) would be able to raise their prices in response.
Announcing that the move had been greenlit, Anne Lambert, chair of the CMA’s inquiry group, said: “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.”
Recently, hundreds of thousands of customers leave the major firms for smaller providers who offer more competitive rates and more intuitive internet-based management. The CMA was initially concerned that major firms may need to hike their prices in response to falling numbers, and that the merger would only exacerbate the problem.
The plan, to merge SSE’s household energy division into Npower’s UK setup, was announced in November 2017, with the inquiry from the regulator taking up much of the intervening year. The new, as yet unnamed, provider would be the country’s second largest energy firm, after British Gas, by market share. SSE’s retail business would be divested from its domestic supply arm, the latter being the division to merge with Npower into a new listed company. The positives for the firms are based on administrative cost-cutting and the possession of even greater weight on the supply chain, allowing for lower gas and electricity prices.
Alistair Phillips-Davies, SSE’s Chief Executive, said: “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 retailers 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 enquiry.”
Likewise, Martin Herrmann, COO of Innogy, the parent company behind Npower, was pleased that the merger had been given the go-ahead: “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 retail businesses have to offer and build a better company for customers.”