The UK competition watchdog is to further scrutinise the planned merger of SSE plc's (LON:SSE) retail power and gas business in the UK with Npower, owned by German rival Innogy, as it believes it could lead to higher prices for customers.
The Competition and Markets Authority said the merger would be referred for a longer Phase 2 investigation unless the parties offer acceptable undertakings to address the competition concerns.
Rachel Merelie, senior director at the CMA said: "We know that competition in the energy market does not work as well as it might.
"However, competition between energy companies gives them a reason to keep prices down.”
She added: "We have found that the proposed merger between SSE Retail and Npower could reduce this competition, and so lead to higher prices for some customers.
“We therefore believe that this merger warrants further in-depth scrutiny."
In a statement in response to the CMA announcement, SSE said that it will take its time to assess the CMA's statement, but continues to believe that the proposed merger will deliver benefits for the energy market and energy customers.
Alistair Phillips-Davies, chief executive of SSE, said: "We remain confident that the proposed merger will deliver benefits for customers and for the energy market as a whole and that we will be able to demonstrate this to the CMA in due course.
“We look forward to continuing to work constructively with the CMA and other interested parties."