npower and SSE given green light over potential merger

The competition watchdog has provisionally given the green light to the merger of npower and the retail arm of SSE, removing the final hurdle to the biggest shakeup of the energy sector in years.

An investigation by the Competition and Markets Authority found that the two firms did not compete closely for customers on default tariffs which most people are on. Few people switched between the pair, it added.

Households on those tariffs would also soon be protected by the government’s price cap, the authority said in a provisional finding.

The inquiry was launched after the CMA raised concerns that billpayers on default tariffs would end up paying higher prices due to a substantial decrease in competition from the merger.

However, Anne Lambert, chair of the CMA’s inquiry group, said: “Our analysis shows that the merger will not impact how SSE and npower set their standard variable tariff [default] prices because they are not close rivals for these customers.”

The approval from the watchdog clears the German-owned npower and UK-listed SSE to create a behemoth with 11 million customers that is second in size behind market leader British Gas, which has 12.6 million.

The merger is expected to complete in the last quarter of 2018 or first quarter of 2019.

The big six will then shrink to the big five, though challenger companies including Ovo, First Utility and Bulb are not far behind.

SSE said it was pleased by the CMA’s finding. “The planned transaction presents a great opportunity to create a more agile, innovative and efficient company that really delivers for customers and the energy market as a whole,” said Alistair Phillips-Davies, the firm’s chief executive.

Innogy SE, npower’s parent company, said the verdict was an important milestone and its plans for the merger were on schedule.

The 34.4% stake held by Innogy SE in the new company is slated to be transferred over to rival German energy firm E.ON next year, as part of a huge asset swap between E.ON and Innogy SE owner RWE.

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