The competitions watchdog has opened an investigation into the proposed merger of SSE's retail unit and German-owned Npower.

In November, the firms announced a deal where Britain's second-largest supplier, SSE, would merge and spin off its household energy and supply business to create an independent supplier with Innogy's Npower.

The Competition and Markets Authority (CMA) will now assess whether the tie-up could significantly reduce competition in the supply of energy to domestic customers in the UK.

The CMA will make its initial decision by 26 April. Last month, SSE confirmed it was on track to complete the merger by the last quarter of 2018 or the first quarter of 2019.

“The scale and pace of change in the GB energy market continues to be significant and requires us to evolve to stay relevant, competitive and sustainable. We remain confident that the creation of a new, combined, standalone retail business will best serve the needs of customers, employees and shareholders in the long term," said Alistair Phillips-Davies, chief executive of SSE.

The energy market has already been in the spotlight over a lack of competition following an in-depth report by the CMA which said customers were paying £1.4bn more than they would in a fully competitive market.

The government is set to introduce a price cap on default energy tariffs next year to tackle what it calls a "broken" market.

Read more: The market share of the Big Six energy firms is now at a record low

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