This week we heard that SSE and npower are in talks to merge their domestic energy supply businesses. This is great news if you're a shareholder in SSE or npower, but bad news if you're one of their customers. And it's bad news for the energy industry too.
Executives at both companies argue the merger will bring greater efficiency. At Bulb, we just don't see how this can be the case. Since the start of 2013, npower have the largest number of complaints per 100,000 customers received by any of the Big Six suppliers.
Source: Ofgem Customer Service data
And, SSE are no better. They have the highest proportion of their customers on what Theresa May justifiably describes as "rip off" tariffs of any Big Six supplier. These customers are paying higher bills than customers who switch more frequently. They are effectively paying a loyalty 'fee'.
Source: Ofgem analysis of supplier data submissions
The merger between SSE and npower would be a consolidation of worst practices. It's hard to see how one inefficient supplier buying another would achieve greater efficiency. A merger isn't going to help families get better customer service or reduce their energy bills. Instead, we think SSE and npower should focus on increasing the efficiency of their operations and improving the service they deliver to customers.
Historically, a small number of suppliers have dominated the energy market, stifling competition. A classic oligopoly. More recently, however, competition has been improving. Around 15 years ago there were just six energy suppliers in the UK. Today there are 60. And the new entrants are growing faster than any of the Big Six. A merger between SSE and npower would give them 22% market share. Going from the Big Six to the Big Five would undo the great progress we've made.
At Bulb, we're calling on the Competition and Markets Authority to investigate this merger. To reduce customer bills, suppliers need to lower their costs and that demands innovation. Consolidation does not count as innovation. Fewer suppliers means less competition and less competition means higher prices.
Along with other small suppliers, Bulb is driving change in the sector, pushing bills down and leading the uptake of renewables. Small suppliers are rising to the challenges of the energy transition and engaging with government proposals to reform the energy market. SSE and npower should do the same.
Hayden Wood is cofounder of Bulb