The deal to merge Npower and SSE’s retail operations has been given the provisional green light after the competition watchdog said there is “plenty of choice” in the UK market.
The Competition and Markets Authority (CMA) dismissed fears that it would have an impact on the most expensive deals as its inquiry found the providers – two of the Big Six in the UK – do not compete closely on standard variable tariffs (SVTs).
There had been initial concerns that the tie-up would affect these tariffs – the most common and expensive energy deals.
Anne Lambert, chairwoman of the inquiry group at the CMA, said: “With more than 70 energy companies out there, we have found that there is plenty of choice when people shop around.
“But many people don’t shop around for their energy. So, we carefully scrutinised this deal, in particular how it would impact people who pay the more expensive standard variable prices.
“Our analysis shows that the merger will not impact how SSE and Npower set their SVT prices because they are not close rivals for these customers.”
The CMA had launched a full inquiry into the merger in May after its initial probe found the tie-up could reduce competition, potentially leading to higher prices for households.
Its in-depth probe looked at evidence from the Big Six suppliers, as well as smaller providers, customer groups and regulators.
It said this also included hearings with consumer groups and suppliers in Scotland, where SSE – formerly known as Scottish and Southern Energy – has a large share of consumers.
“None of these raised substantive concerns about the effects of the merger on householders,” added the CMA.
The regulator’s fears were further eased by high levels of customer switching – the highest in a decade – while it also found the proportion on SVTs has fallen.
But it was the impact on those people who do not switch and are stuck on the so-called rip-off SVTs that most worried the CMA.
After looking into the effect on these households, it found if SVT customers switch, they would generally change to a cheaper fixed tariff.
And if people do switch, it would not tend to be between SSE and Npower, but instead another provider.
The CMA added that the incoming government-enforced price cap will also help protect customers on variable deals.
Npower and SSE announced in November that their British household energy supply and services businesses would join forces, reducing the Big Six energy suppliers to five.
Under the proposed deal, the new company will be listed on the London Stock Exchange with SSE shareholders holding 65.6% and Npower owner Innogy holding 34.4%.
SSE is Britain’s second biggest energy supplier and the merged group will serve around 11.5 million customers.
Centrica, Iberdrola (Scottish Power), E.On and EDF make up the remainder of the Big Six.
SSE boss Alistair Phillips-Davies welcomed the CMA’s provisional findings.
He said: “The scale and pace of change in the Great Britain energy market continues to be significant and requires us to evolve to stay relevant, competitive and sustainable.
“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.”