The Competition and Markets Authority (CMA) has been assessing whether Npower and SSE Retail'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.
The removal of such competition could therefore lead to higher prices for some customers.
According to Rachel Merelie, senior director at the CMA, "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.
View further details about this merger case.
The combination of London-listed SSE and Npower, owned by Germany’s Innogy, would reduce the big six to five and create a new company with just under 13 million customer accounts.
The merged company would have a larger share of electricity supply than British Gas, 24% compared to 22% respectively.