However it is far from a “done deal” and, because of the significant market share and turnover of the potential new business the move may take some time to receive the approval of the Competition and Markets Authority and not see the conclusion until the end of 2018.
So should we be surprised at this move, and is it an unintended consequence of the Government proposals to introduce a price cap?
Well as SSE seemed to abandon their plans to update their customer service and billing systems and seemingly considering its domestic retail business as “more trouble than it’s worth”. In addition SSE have recently announced plans to abandon their Standard variable Tariffs in domestic markets, the very tariffs which would be subject to capping under proposals presently being scoped for legislation.
Meanwhile Innogy, the German parent company of Npower has been trying for a while now, if the views of many are to be believed, to divest itself of the UK supply business which has had less than a glowing reputation for customer service in recent years. This does not fit with their global strategy of being in the top 3 ranking in relevant markets (Npower are currently ranked sixth in the UK), so again no surprise here.
The new supply business, if formed, would see it challenge British Gas’ 22% market share. Indeed in SSE’s core territories of the South of England, South West and North Scotland they would already have 25% share, with over 50% in Northern Scotland.
Questions remain about which markets this merger will cover, with expectations that it will mainly involve domestic supplies and services. It may be likely to impact, for example, on TEC’s procurement activity for members in the fixed term markets with perhaps one less supplier to select.
Either way the experts within each business must be confident that the planned merger will go ahead with CMA approval, with savings to result from the process but not without impact on the many domestic customers, some of whom will never have changed supplier.
It is, however, clear that the new company, owned 66/34 by SSE and Innogy respectively, will not own any power stations or other generation assets leaving this less troublesome business activity in the same hands, for now!
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