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CMA puts brakes on tie-up

SSE and Npower merger ‘could lead to higher prices’

Electricity billCompetition watchdogs have put the brakes on plans by SSE and Npower to merge their operations into a new energy company.

The Competition and Markets Authority says the tie-up could lead to higher prices for some bill payers and says it needs further scrutiny.

The CMA has been assessing whether SSE Retail and Npower’s proposal to create a new energy company for domestic retail customers could reduce competition.

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.

It said in a statement this morning: “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 3 May 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.

Responding the CMA’s announcement, SSE said it “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, 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.”

The company has announced that Kate Bickerstaffe is to be chief executive of the new company.

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