A merger between two of the so-called “big six” energy firms has been delayed after the regulator proposed a cap to default energy prices.
SSE, whose deal with Germany’s Innogy – owner of NPower – would have created the second-biggest energy supplier behind Centrica-owned British Gas, said the “proposed combination would be delayed beyond Q1 of 2019”.
It went on to say the “impact of some recent market developments mean that the commercial terms associated with the proposed combination will need to be reconsidered”.
The industry has been under pressure to scrap controversial standard variable tariffs, which were described as a “rip-off” by the prime minister and which are often the most expensive.
The default rates are currently paid by almost half of UK households, despite a pick-up in switching rates.
The energy regulator, Ofgem, said it wanted to cap the default electricity and gas bill at £1,136 a year. The cap will be in place by the end of the year. It should save households about £1bn.
SSE issued a profit warning in September, saying earnings at its household supply business will be significantly lower if Ofgem’s cap is implemented.
Alistair Phillips-Davies, chief executive of SSE, said: “We continue to believe that creating a new, independent energy supplier has the potential to deliver real benefits for customers and the market as a whole, and that remains our objective.
“In assessing potential changes to the commercial terms of the proposed SSE Energy Services/npower combination, the interests of customers, employees and shareholders will be paramount.”
SSE was expected to hold 65.6% of the stock on the new company that would be listed on the London Stock Exchange.
Germany’s Innogy owns Npower.
The announcement came after the close of trade on Thursday.