The Competitions and Markets Authority is seeking new assurances from both SSE and Npower over their proposed merger, considering that the move could be detrimental to consumers.
Chief among the regulatory body’s concerns is that the proposed merger could reduce the amount of competition in the sector, potentially leading to higher prices for some customers.
Rachel Merelie, senior director at the CMA, said that while competition in the energy market “does not work as well as it might”, it provided suppliers with 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,” she said.
Both entities now have a week to offer measures to address the concerns. If they elect not to or fail to do so, the CMA will refer the merger to a Phase 2 investigation.
The decision to take a closer look at the proposed deal will be welcomed by the Business, Energy and Industrial Strategy select committee, with chair Rachel Reeves calling for a full investigation.
"The energy market isn't working for consumers. The proposed merger between SSE and Npower risks damaging the development of a more competitive energy market, reducing consumer choice, and threatening to be a bad deal for energy consumers," she said.
"The CMA needs to look at the potential impacts of this merger and launch a full investigation if there is any risk to competition within the energy market”.
SSE however has responded by saying it will take its time to assess the CMA’s update, but stressed it continues to believe the merger would deliver benefits to consumers and the wider energy market.
“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,” Alistair Phillips-Davies, chief executive at SSE, said.
SSE and innogy confirmed that a proposed merger of their respective supply divisions had been agreed in November 2017, prompting the CMA to formally open its investigation in late February 2018.