Customers could see bills increase if SSE and Npower merge
Customers could see their bills increase if energy giants SSE and Npower merge
- Competition & Markets Authority raised concerns merger could bring high costs
- The group has previously said a lack of competition has led to overcharging
- British Gas, SSE, Npower, EDF, Eon and Scottish Power dominate the market
Watchdogs have warned a planned merger between two of Britain’s biggest energy firms could lead to higher prices.
The Competition & Markets Authority (CMA) has raised concerns that combining SSE with Npower could be bad news for customers.
The CMA has previously raised concerns that a lack of competition has led to overcharging on standard variable tariffs amounting to £1.4billion a year.
Currently, the market is dominated by six big energy firms – British Gas, SSE, Npower, EDF, Eon and Scottish Power.
The market is dominated by six big energy firms – British Gas, SSE, Npower, EDF, Eon and Scottish Power
Combining SSE, which is the UK’s second biggest supplier, with German-owned Npower in a company with 11.5 million customers would bring this down to five, so reducing competition.
In theory, captive customers might find that prices rise and customer service standards, which are already unsatisfactory, could deteriorate.
There is already concern about a series of price hikes announced in recent weeks, which will make the cost of keeping the lights on and staying warm more expensive next winter.
Senior director at the CMA, Rachel Merelie, (correct) 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.’
She added the deal ‘warrants further in-depth scrutiny’, but said the two firms have until May 3 to offer measures to address the CMA’s findings.
Under the proposed deal, the new company will be listed on the London Stock Exchange with SSE shareholders holding 65.6per cent and Npower owner Innogy holding 34.4per cent.
The managing director of home products and services at the consumer group Which?, Alex Neill, said: ‘Mergers of big players in essential markets such as energy can mean consumers get a raw deal, so the competition authorities are right to warn that this merger of two big energy suppliers could reduce competition and lead to higher bills.
The new company will be listed on the London Stock Exchange with SSE shareholders holding 65.6per cent and Npower owner Innogy holding 34.4per cent
‘Given that both of these energy suppliers also struggle on customer service, coming in the bottom half of our satisfaction survey, it’s vital that there is thorough scrutiny of the impact on consumers before allowing any venture to go ahead.’
Head of regulation at the price comparison website uSwitch.com, Richard Neudegg, (correct) said: ‘It’s completely right that the CMA addresses concerns that this deal could result in reduced competition among the bigger energy companies.
As the CMA highlights, competition is crucial for delivering cheaper prices for energy customers.
‘However, with over 60 suppliers in the market there needs to be a focus on the quality of competition, not just the number of suppliers.
‘Whatever decision the CMA reaches it’s vital that consumers are put front and centre and that they can access good value deals in this market.’ SSE said it will ‘take its time’ to assess the CMA’s statement.
Chief executive, Alistair Phillips-Davies, 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.’
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