The Competition and Markets Authority (CMA) has decided to open a full investigation, expected to last until 22 October, into SSE’s plans to merge its retail business with that of Npower.

An initial investigation by CMA found that the deal could reduce competition, because “the rivalry between the large energy companies, including SSE and Npower, is an important factor in how they set tariffs”. Removing such competition could lead to higher prices for some customers. The Authority said, “SSE and Npower did not offer measures to address the CMA’s concerns”.

David Gilchrist, head of utilities at law firm DWF, said: “The proposed tie up between SSE and nPower is ultimately bad news for consumers. Not only would the consequent reduction in competition inevitably drive up energy prices, it would create a powerful new entity formed of two companies with repeatedly low-scores on the Which? Customer satisfaction survey.

“… Despite analyst scepticism, the two companies were confident that the merger will be approved with minimal, if any, concessions – as the combined entity would still have less customers than British Gas. But the Competition Markets Authority must assess what is best for competition and consumers, and reducing the number of energy companies doesn’t bode well for either.The impact of the E.On/RWE deal in Germany could well put a spanner in the works of any proposed deal, too.”

Alistair Phillips-Davies, chief executive of SSE, said: “A Phase 2 referral is a well-established process for transactions of this nature and we remain confident that the proposed merger will deliver benefits for customers and the energy market as a whole. The formation and listing of the new company remains on track for completion in the last quarter of 2018 or the first quarter of 2019.”