E.ON Next completed its takeover of Ovo Energy yesterday, giving the supplier 25 per cent of Great Britain’s household energy market and leaving almost three-quarters of homes served by three companies.
The deal went through after the Competition and Markets Authority cleared the acquisition on 1 October, at the end of a phase 1 inquiry launched on 2 September. The watchdog published the full text of its decision on Tuesday.
The clearance came despite concerns that a shrinking number of household suppliers could leave bill payers with less choice and suppliers with less incentive to lower bills.
There will be no immediate change for the four million households supplied by Ovo. E.ON Next, which already supplied 5.6 million households, now holds 13.45m gas and electricity accounts and becomes Great Britain’s second-largest energy supplier.
That places it narrowly behind Octopus Energy, which holds a 26 per cent share, or 14.3m accounts. British Gas, once the largest supplier, serves about 23 per cent of the market, or 12.5m accounts.
Including EDF Energy and Scottish Power alongside the three largest companies, about 90 per cent of the household supply market is now held by five suppliers.
Tom Goswell, energy supply lead at the consultancy Cornwall Insight, said: “The big six have become the big three, and there have been questions raised over how this will impact household choice and the health of the market.”
Chris Norbury, chief executive of E.ON UK, described the market as “fiercely competitive”. He said the company’s “flexibility and scale” would allow it to “deliver for customers now and to transform for the energy system to come”.
The completion follows a decade of efforts to reduce the dominance of the “Big Six” suppliers in order to increase competition and lower energy prices.
British Gas, EDF Energy, E.ON UK, SSE, Scottish Power and npower held about 85 per cent of the energy market in 2016. That year the CMA’s energy market investigation warned that customers were overpaying by roughly £1.4bn to £1.7bn every year because of weak competition.
A number of new suppliers entered the market after 2016, led by Octopus, Ovo and Bulb Energy. The market began to shrink after SSE sold its household supply business to Ovo in 2019, and dozens of suppliers went bust during the 2021/22 energy crisis.
Octopus became the largest supplier after taking on 1.5 million customers from Bulb, which went into administration in 2022.
E.ON agreed to buy Ovo’s retail arm in May. The price was not disclosed, although Business Matters reported at the time that industry sources understood the deal to be worth up to £600m.
Stephen Fitzpatrick, who founded Ovo in 2009, said when the sale was announced: “Energy retail is now more regulated, more capital intensive and increasingly dependent on long-term investment and scale.”
Goswell said larger suppliers also offered stability.
“Larger suppliers do bring with them a degree of stability, and after about 30 firms dropped out of the market, leaving customers wondering who would be sending their next bill, stability is not something to dismiss lightly,” he said.
He added: “The concern with fewer suppliers is that the pressure to compete eases off, taking with it some of the incentive to keep prices low and offer something different. The big suppliers have the resources to give people real choice, and the test over the next few years will be whether households who shop around find a genuine range of deals waiting for them rather than three versions of the same thing.”
