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Block Proposed SSE Merger

Thursday, November 16, 2017

Secretary of State Must Block Proposed SSE Merger

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 says GMB.

GMB, the union for energy workers, has called on Greg Clark, Secretary of State for Business, Energy and Industrial Strategy to block the proposed merger of energy companies SSE and Npower.

Turning the Big Six energy providers into the Big Five would create ‘a chokehold that is bad for customers, workers and the wider economy.’ [see notes to editors for full copy of letter sent on Thursday 16 November 2017].

The letter from GMB states that the proposed merger meets all the criteria for a referral to the Competition and Markets Authority for investigation but if they do not initiate investigations then BEIS should use its powers under the Enterprise Act 2002 to block it on the grounds of public interest.

Justin Bowden, GMB National Secretary for Energy 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.

“Professor Helm, in his Cost of Energy review, found that despite technological advances, and the benefits that market forces were supposed to deliver, ‘prices have gone up, not down, for many customers.’

"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.

“The Helm report was clear: it is for the Government to set out an energy policy to guarantee an energy supply that is secure, low carbon and the least expensive without repeating some of the ‘spectacularly bad’ decisions of the past; and, all operators in the sector are effectively contractors, and consequently Ministers have a duty towards the sector beyond that owed to other industries that are genuinely outside of the Government’s control and direction.

“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.”

ENDS

Contact: Justin Bowden on 07710 631351 or GMB press office on 07958 156846 or at press.office@gmb.org.uk

Notes to Editors:

[1] Copy of letter sent to Greg Clark on Thursday 16 November 2017:

Dear Secretary of State

I am writing to you following the announcement Npower and SSE plan to merge. GMB, as the union for energy workers, is extremely concerned that any “consolidation” of the market from the current Big Six to a remaining Big Five will create a chokehold that is bad for customers, workers and the wider economy.

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. As the facts appear, the proposed merger meets all the criteria for a referral to the Competition and Markets Authority for investigation.

If the CMA does not imminently initiate its own investigation, GMB calls on you to use your powers under the Enterprise Act 2002 on public interest grounds to block it. This issue of potential price hikes associated with a reduction in providers is particularly relevant following the publication of Professor Dieter Helm’s independent review of energy (BEIS, Cost of energy: independent review).

As you know, Professor Helm found that despite technological advances - and the benefits that market forces were supposed to deliver - ‘prices have gone up, not down, for many customers.’ 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.

The Helm Report was clear: (i) It is for the Government to set out an energy policy to guarantee an energy supply that is secure, low carbon and the least expensive without repeating some of the ‘spectacularly bad’ decisions of the past; and (ii) that all operators in the sector are effectively contractors – and that consequently Ministers have a duty towards the sector beyond that owed to other industries that are genuinely outside of the Government’s control and direction.

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 SSE/Npower merger is a test of that duty and until there is a settled energy policy, we risk a private cartel if SSE and Npower are allowed to merge.

GMB is not suggesting at this stage what the new policy mix should be that Government should follow - (clearly gas, nuclear and renewables will all feature strongly) - that is a second order question. What GMB is saying now is that Government must set the structure as it cannot be left to the market because the market fails UK consumers and citizens in all respects, and what we do next is key for the country’s future for at least a generation.

An internal market may make sense in some parts of the energy sector but there is absolutely no way that a classical free market can operate to deliver all three of the key objectives set out by Helm, and 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.

[2] See the full Helm Report here: https://www.gov.uk/government/publications/cost-of-energy-independent-review

Previous press releases:

GMB SUPPORTS HELM 'COST OF ENERGY REVIEW' RECOMMENDATIONS

Friday, November 10, 2017

Helm exposes that competition in the sector is in fact a mirage and radical overhaul is required if the fleecing of consumers is to stop and damage to vital infrastructure through thousands of short-sighted job losses at SSE, NPower and across the energy sector are to be avoided says GMB

Read more: http://www.gmb.org.uk/cost-energy-review-downgrade-ofgem

GMB Calls Again for 'toothless' Ofgem To Be Scrapped

Monday, July 3, 2017

Ofgem should be abolished with all its regulatory functions taken over by the government itself making its regulatory role subject to scrutiny and accountable to parliament says GMB.

Read more: http://www.gmb.org.uk/newsroom/toothless-ofgem-scrapped

GMB Response To Energy Price Cap

Tuesday, May 9, 2017

Ofgem must distinguish between profiteering and the resources needed to generate jobs and pay for the infrastructure needed to maintain our power networks says union.

Read more: http://www.gmb.org.uk/newsroom/energy-price-cap

GMB Responds To Theresa May's renewed pledge for Energy Price Cap at Tory Conference

Thursday, October 5, 2017

Ofgem should be abolished and all its regulatory functions taken over by the Government itself, making its regulatory role subject to scrutiny and accountable to parliament with the powers to cap prices if deemed necessary part of the forthcoming legislation says GMB.

Read more: http://www.gmb.org.uk/newsroom/energy-price-cap-response

Ofgem Must Be Scrapped

Thursday, August 4, 2016

GMB Calls For Ofgem To Be Scrapped And For Government To Take Over As Regulator Accountable To Parliament Government cannot duck taking the decisions needed to keep the lights on and ensure the decarbonisation of the sector says GMB

Read more: http://www.gmb.org.uk/newsroom/ofgem-must-be-scrapped-says-gmb Share this page

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