SSE and npower merger to go ahead

An investigation by the Competition and Market Authority (CMA) has concluded that a merger between npower and SSE should be allowed to go ahead.

The anticipated merger was referred to the CMA on the 8th May, 2018, amid concerns that such a move could affect competition in the energy market. Following review, the CMA concluded that the merger should be allowed to go ahead.

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The CMA decision

The full clearance for this merger to go ahead comes following a provisional clearance issued by the CMA at the end of August.

The main concerns for the investigation included the impact of the merger on general pricing and, in particular, the standard variable tariffs (SVT). They believed that although competition in the market was high, reducing competitors through a merger could lead to inflated prices.

However, the CMA concluded that the companies were not 'close' rivals in terms of default (SVT) tariffs. With more than 70 firms in the marketplace and SVTs set to face a government price cap from this winter, they assured there was no risk to consumer.

The Chair of the Inquiry Group, Anne Lambert, said that there were enough energy companies out there to allow people to 'switch away from expensive standard variable tariffs'. She said that customers would still have 'plenty of choice' following the merger.

This means that pretty soon the so called 'big six' will become the big five. Currently, the two companies are the third and sixth biggest energy suppliers in the UK.

The six largest energy firms currently supply just less than 80% of the domestic market. That's down from 95% in 2013. Should SVTs be uncompetitively priced, the CMA was confident that further switching away would be instigated.

They found that the number of customers choosing to switch energy provider was at its highest in a decade. Predictions are that a further 2.4m customers will be lost by the big six by the end of 2018.

What does a merger mean for customers of npower and SSE?

When the merger goes ahead, the new company will have the biggest share of customers in the industry at 24%. Currently npower supply 10% and SSE 14%. This would make it larger than the currently largest supplier, British Gas, who supply 20% of the market.

Right now, around nine million households could be affected by the merger and, understandably, some are feeling concerned about what it would mean.

As yet, the new company name has not been announced. It's likely that no name, branding or offers will be released until the merger actually takes place.

In terms of pricing, npower and SSE have both insisted that, by combining forces in this way, they will be able to offer a 'stronger competitor'. They claim that, by increasing efficiencies, they will be able to become a 'more attractive proposition' for customers.

For the time being, there is no change for the existing customers of either company. However, those already on SVTs are encouraged to shop around sooner rather than later, as they are inevitably paying too much for their energy.

According to the CMA report, the merger is expected to go ahead in either the last quarter of 2018 or the first of 2019.