- Two of the energy sector’s so-called “Big Six” suppliers in the UK have announced plans to leave the household sector and merge under a new company.
- The plans would reduce the number of main suppliers in the UK to only five.
- The news comes in the wake of the government’s attempt to crack down on energy prices, despite warnings from the sector it could hurt profits.
LONDON — Two of the so-called “Big Six” energy providers in the UK announced plans on Wednesday to merge their UK household energy supply businesses into a new company.
SSE and npower said they have reached an agreement to combine their consumer businesses, reducing the “Big Six” household energy suppliers to only five. In September, SSE and npower served an estimated 11.5 million British customers between them.
Alistair Philips-Davies, CEO of SSE, said in a statement: “The scale of change in the energy market means we believe a separation of our household energy and services business and the proposed merger with npower will enable both entities to focus more acutely on pursuing their own dedicated strategies, and will ultimately better serve customers, employees and other stakeholders.”
The government has been attempting to clamp down on “rip off energy prices” and promote competition in the sector. Prime Minister Theresa May promised in October to cap energy prices until at least 2020 in a bid to improve efficiency, competition, and value in the energy market. The promise came despite warnings the cap could curtail growth.
George Salmon, an equity analyst at Hargreaves Lansdown, said in an email: “Politicians from both sides have moved to come down on the big energy suppliers, with standard variable tariffs a high-profile target for change.
“Of the major players, SSE has the highest percentage of customers on these tariffs, so it’s perhaps no surprise to see it taking action.”
SSE said the creation of a new standalone retail business would allow it to focus “entirely on strategic and operational developments in the GB [British] retail sector, including the competitive and regulatory environment.”
SSE also published its half-year results on Wednesday, which showed profit down 8% and earnings per share down 8.8%. SSE and npower’s proposed plan is expected to be completed by the end of 2018 or early 2019.
“We’re proud of our track record in customer service and have plenty to build on, but there is a huge amount of competition and we need to do more than ever to compete by providing value for money and excellent experiences for customers,” said Tony Keeling, CEO of SSE Retail.
On Tuesday, Scottish Power CEO Keith Anderson urged the government to either fully regulate the energy market or to back free market competition. Anderson said: “We need clarity one way or the other,” according to Energy Voice.
He said a price cap would “not help to engage those customers who could still find a better deal. It will be bad for customers, energy companies big and small, as well as investor confidence.”