The UK’s competition watchdog has opened a full-scale investigation into the proposed merger of “big six” energy firms npower and SSE.
The announcement by the Competition and Markets Authority comes after it warned last month that the merger could lead to higher energy bills for households.
The CMA said the two companies did not put forward evidence to address its concerns, meaning they now face a more detailed investigation which could take about six months.
UK-listed SSE is the second largest of the big six by customer numbers, and Germany’s npower is the smallest, but together they would be nearly the same size as British Gas, the market leader.
The merger of the companies was announced last year, in the face of increasingly stiff competition from new challengers. There are now about 60 energy suppliers in the UK.
Npower and SSE believe the new company, in which SSE will hive off its supply business but remain in energy networks and power generation, will be more focused, more agile and have the economies of scale to offer competitive deals.
The new firm will be headed by the former Dixons Carphone UK chief executive Katie Bickerstaffe, who has promised a more innovative and efficient energy supplier.
Consumer groups welcomed the CMA’s scrutiny of the deal and its potential impact on consumers, noting that both firms scored badly in customer service rankings.
Alex Neill, the managing director of home products and services at Which?, said: “Mergers of big players in essential markets such as energy risk reducing competition and harming consumers.”
The companies appear to have factored in the likelihood of a deeper, six-month investigation, as they have always said the merger would likely complete in the final three months of 2018, or the start of 2019.
An npower spokesperson said: “We look forward to helping the CMA in its in-depth investigation of our merger with SSE’s retail and energy services business throughout the phase two process.
“We did not put forward measures to address the CMA’s concerns because we firmly believe this merger will be good for competition as it stands.”
