CMA clears SSE/Npower retail merger

The Competition and Markets Authority (CMA) has given the go-ahead to a merger between SSE Retail (SSE) and Npower.

The CMA said its panel had specifically examined competition concerns around how the deal would impact ‘standard variable tariff’ prices. It concluded that SSE and Npower are not close rivals for customers on these tariffs.

Anne Lambert, chair of the inquiry group, said: “With many energy companies out there, people switching away from expensive standard variable tariffs will still have plenty of choice when they shop around after this merger.

“But we know that the energy market still isn’t working well for many people who don’t switch, so we looked carefully at how the merger would affect SVT prices. Following a thorough investigation and consultation, we are confident that SSE and Npower are not close rivals for these customers and so the deal will not change how they set SVT prices.”

Switching levels are rising but non-switchers are usually on one of the large energy suppliers’ already expensive SVTs. The CMA said SVT prices are mainly driven by changing wholesale costs, but the large energy suppliers take account of each other’s tariff changes when choosing the size and timing of their own. Bad publicity from being the first to increase charges or make bigger increases means more of their customers switch away. The CMA therefore carefully considered whether a reduction in the number of large suppliers would encourage larger or earlier tariff changes.

But it said, “In this case SSE and Npower do not pay special attention to each other, consistent with the evidence that they are not close rivals for SVT customers, who instead prefer to move to other suppliers. Therefore, the merger is not expected to have a significant impact on SVT pricing”.

The CMA also said that Ofgem’s planned price cap would also protect people on standard variable tariffs.

 

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