THE merger of two of the “Big Six” energy giants will leave UK households at the mercy of a “cartel”, a union claims.
The GMB union has urged Business Secretary Greg Clark to block a deal between Perth-based SSE – the UK’s second largest supplier – and German-owned Npower.
The major players confirmed plans to combine their domestic arms and form a new company earlier this month. It is expected to serve around 11.5 million households and SSE retail’s chief operating officer Tony Keeling said the new operator will be “more efficient, more agile and more innovative for customers”.
But GMB has now written to Clark claiming it would create a “chokehold that is bad for customers, workers and the wider economy” instead.
The letter claims the proposal meets the criteria for referral to the Competition and Markets Authority and, if the government does not involve this body, argues it should use its powers to prevent the deal on the grounds of public interest.
GMB national energy secretary Justin Bowden said: “This is an obviously worrying time for SSE and Npower employees who will be concerned that job cuts will inevitably follow a merger.
“However, any merger should also be a worrying development for the government.
“The creation of a Big Five will only exacerbate a situation that is already failing consumers and reduce further what little competition currently exists.
“Should the merger be allowed to proceed, then it will lead to the ‘cartelisation’ of a market that will be without competition, effective oversight or strong central direction. “
He went on: “We are at a genuine crossroads in terms of the UK’s future direction for its energy strategy and policy for at least a generation to come.
“The merger between SSE and Npower is a test of that duty and until there is a settled energy policy, we risk a private cartel if the merger is given approval.
“GMB urges the Secretary of State to exercise existing powers to prevent yet more needless price hikes that are the penalty for a dysfunctional energy market.”
The merger plan comes as SSE recovers from a 14 per cent drop in pre-tax profits in the six months to September.
Its shareholders would own almost 66 per cent of shares in the new venture, with the other 34 per cent to be held by Npower’s parent company Innogy. That firm also reported a half-year loss for Npower in August, which it attributed to “fierce competition and political pressure”.
The deal also comes as the market prepares for the introduction of a price cap on poor-value tariffs as part of Westminster reforms geared towards protecting consumers on the lowest incomes.
Innogy chief executive Peter Terium said the merger would make his operation “better placed to offer value to our customers and our shareholders”.
However, the GMB letter states: “Going from a Big Six to a Big Five will reduce even further what little competition exists currently.
“I urge you to exercise your existing powers to prevent yet more needless price hikes that are the penalty for a dysfunctional energy market.”
Responding, a spokesperson from the Department for Business, Energy and Industrial Strategy said: “We remain committed to tackling the cost of consumers’ energy bills.
“Despite there being more than 60 energy suppliers in the market, most consumers are still not feeling the benefits of this increase in competition and we have published a draft bill to cap poor-value tariffs to address this.
“We are aware of the decision by SSE and Npower to merge their retail customer businesses. The independent Competition and Markets Authority is the watchdog with oversight of mergers.”
Other large operators have also revealed a drop in fortunes this year, with around 200,000 customers leaving E.On.
In October, Nicola Sturgeon announced plans for a publicly-owned power provider by 2021 as part of her programme for government.
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