The Competition and Markets Authority (CMA) said on Thursday it has decided the proposed merger of Perth-based SSE Retail and Innogy subsidiary Npower “warrants further in-depth scrutiny.”
The CMA said it found that the merger of SSE Retail and Npower “could lead to higher prices for some billpayers, following its initial investigation.”
Energy giant SSE said in November it agreed to demerge its household energy and services business in Great Britain with Innogy subsidiary Npower to form a new listed UK company.
The combination, if allowed, would create the UK’s second largest energy supplier.
“The Competition and Markets Authority (CMA) has been assessing whether SSE Retail and Npower’s proposal to create a new energy company for domestic retail customers could reduce competition,” said the CMA.
“Its initial Phase 1 investigation has found that the rivalry between the large energy companies, including SSE and Npower, is an important factor in how they set tariffs.
“The removal of such competition could therefore lead to higher prices for some customers.”
Rachel Merelie, Senior Director at the CMA, 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.
“We therefore believe that this merger warrants further in-depth scrutiny.”
SSE and Npower now have until May 3 to offer measures to address the CMA’s concerns.
“If they do not provide such ‘undertakings’, the CMA will refer the merger for a Phase 2 investigation,” said the CMA.
SSE responded by saying: “SSE plc notes today’s statement by the Competition and Markets Authority (CMA) about the proposed merger of SSE Energy Services, SSE’s household energy and services business in GB, and Innogy SE’s (innogy) retail business, npower.
“SSE will take its time to assess the CMA’s statement, but continues to believe that the proposed merger will deliver benefits for the energy market and energy customers.”
Alistair Phillips-Davies, Chief Executive of SSE, 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.”