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Power surge

Energy firms to merge – amid job loss fears
Hajera Blagg, Wednesday, November 8th, 2017

As winter nears, so too does the prospect of paying sky-high energy bills.


Despite the government pledging in October to rush through a cap on energy prices, we know now that the cap won’t come into effect this winter – and it might not even be ready for next winter either.


Now, two of the biggest of the ‘big six’ energy firms – Npower and SSE – have planned to merge. Combined, the two firms would be the largest energy supplier after British Gas, with nearly 12.7m customers.


But while the news might be good for business, as is so often the case with mergers, for consumers and employees it’s anything but.


SSE and Npower already have a poor reputation for high prices and bad customer service.


Npower has the highest price for standard variable tariffs – which have widely been known for ripping consumers off – clocking in at £1,166 a year for the average customer. SSE has the highest proportion of its customers on standard variable tariffs.


Npower was rated worst for customer satisfaction in a survey, and SSE did not fare much better – it was rated 17th out of 23 energy companies.


In 2015, Npower was slapped with a £26m fine by Ofgem for failing to treat its customers fairly after problems with its IT system caused a massive billing glitch.


In fact, the two companies have done so poorly in the eyes of consumers that both are haemorrhaging customers – SSE lost nearly a quarter of a million customers at the beginning of the year, while npower lost about 80,000 and also posted £90m profit loss year.


But two ailing companies joining together to form a larger one doesn’t mean that there’s isn’t money to be made.


In fact, even as job losses may on the cards after the vicious cost-cutting that is often the hallmark of mergers, and consumer-robbing price hikes are all but guaranteed, shareholders will not lose out – just the opposite; they’ll continue to rake in ever larger sums in dividends.


After all, SSE pledged in 2016 that dividends will rise with inflation each year for the next three, even in the face of consumer failure as customers leave.


Unite national officer for energy Kevin Coyne called the merger “a flagrant example of rampant capitalism designed to solely benefit the shareholders.”


“The SSE share price rose on the merger news – with scant regard for the workforce and the hard-pressed consumer,” he pointed out.


Coyne urged the Competition and Markets Authority to “take a critical look at the merger”.


Market ‘stranglehold’

“The ‘big six’ energy companies, with an estimated 80 per cent market share, would become the ‘big five’,” he said. “Their stranglehold on the energy market will increase.”


Which? managing director of home products and services Alex Neill agreed.


“Mergers of such big players in essential markets, such as energy, are rarely a good thing for consumers, especially given the low levels of competition,” he said.


“As both businesses struggle on customer service, coming in the bottom half of our satisfaction survey, the competition authorities must take a hard look before allowing any venture to go ahead.”


Coyne slammed the way SSE has treated its workers as news of the merger came to light.


“The fact that the SSE management told its dedicated workforce of the news by podcast is shameful and an insult,” he added.


“This is all about placating shareholder demands as the dividend is linked to the retail price index, with the future of its staff very much a secondary consideration. SSE chalked up profits of a reported £1.54bn.


“We have apprentices just starting their working lives and those with mortgages facing a year of uncertainty as this merger plays out with German-owned npower,” Coyne noted. “We fear that job losses could be on the cards to feed insatiable shareholder hunger.


He demanded urgent assurances over jobs for the 21,000-strong SSE workforce, where Unite is the largest union.


“Unite wants an urgent meeting with SSE management to seek assurances about jobs and we would also like a wide-ranging campaign to reverse this decision which is not in the interests of the householder and employees.”


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