The proposed SSE-Npower merger has been referred for a second stage of investigation by the Competition and Markets Authority (CMA).

The two energy giants announced in November that their British household energy supply and services businesses would join forces, reducing the big six energy suppliers to five.

But now the deal to merge Npower and SSE’s retail operations has been referred for a full investigation, (known as a phase two in-depth inquiry), after the initial probe found the tie-up could potentially reduce competition, which might lead to higher prices for consumers.

The CMA said Innogy’s Npower and SSE had failed to offer measures to address its competition fears, having earlier set a deadline of 3 May for the pair to put forward proposals.

But when approached for comment by Utility Week, a spokesperson from Npower said not responding to the CMA’s request for further measures was always the intention. He said: “We did not put forward measures to address the CMA’s concerns because we firmly believe this merger will be good for competition as it stands.”

He added: “It will create an independent, customer-focused company, offering customers a more efficient, improved service – and bring benefits to the wider market as well.”

As to the next stages of the procedure, he said: “We look forward to helping the CMA in its in-depth investigation of our merger with SSE’s retail and energy services business throughout the phase two process.”

Meanwhile in response to the news, David Gilchrist, head of utilities at law firm DWF, said:The rationale behind the deal is creating cost efficiencies and a more ‘agile’ and ‘innovative’ business capable of competing with the multiplying low-cost ‘challenger’ brands at a lower price point. But will consumers really see a benefit from a better balance sheet – or will it be the shareholders that go home happy?”

A decision on the merger will now be made by a group of independent panel members, and a final report detailing their reasoning will is currently scheduled to be published on 22 October.

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