UK regulator probes SSE, Npower merger due to price concerns

8th May 2018 | Residential Energy

British regulators have launched an in-depth investigation into the tie-up between the retail power unit of SSE Plc and Npower, owned by German’s Innogy, saying it may reduce competition and increase prices for some households. The merger would create Britain’s second-largest retail power provided and reduce the “Big Six” dominating the market to five companies when they are already facing political scrutiny for their tariffs and pressure from smaller rivals.

It also comes as Germany energy giants RWE and Eon plan to carve up Innogy. The deal would make Eon another of the “Big Six”, the parent company of Npower. Analysts say this may complicate the SSE-Npower merger. The Competition and Markets Authority (CMA) warned at the end of April it would launch a deeper probe, which typically lasts 24 weeks and can be extended, unless the two companies propose solutions that would lift its concerns.

SSE NPower

“SSE and Npower did not offer measures to address the CMA’s concerns, and so it has referred the merger for a more in-depth, Phase 2 investigation,” the regulator said in a statement. “The deadline for the final report is October 22.”

Combined, SSE and Npower would have 11.5 million customers, making the new company second only to Centrica’s British Gas, which has more than 14 million customer accounts. Eon Chief Financial Officer Marc Spieker said he expected the SSE-Npower deal to go ahead but should it be blocked, Eon’s own plans for a larger asset swap with Innogy’s parent company, RWE, would not be affected.

Even before the announcement of the merger last November, the industry had faced criticism as household bills doubled over the past decade despite years of market liberalisation that was mean to make energy more affordable. Last month, the influential Business, Energy and Industrial Strategy Committee of lawmakers said the deal could damage competition and would reduce consumer choices. They had already called the energy market “broken”.

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