E.ON Next completes Ovo acquisition as UK energy market consolidates

E.ON Next has completed its acquisition of Ovo Energy, a move that results in just three suppliers serving almost three-quarters of households in Great Britain. The transaction concluded on Thursday following clearance from the UK competition watchdog, despite ongoing concerns that a reduced number of market participants may diminish consumer choice and reduce the incentive for suppliers to lower bills. This development marks a significant shift in the structure of the domestic energy sector, effectively ending the era of the Big Six suppliers.

The merger means that E.ON Next, which already supplied 5.6 million households, will now hold 25 per cent of the household energy market. This equates to 13.45 million gas and electricity accounts, positioning the company as Great Britain’s second-largest energy supplier. It sits narrowly behind Octopus Energy, which holds a 26 per cent share with 14.3 million accounts, and ahead of British Gas. The legacy incumbent, which was once the market leader, now serves approximately 23 per cent of the market, or 12.5 million accounts. Consequently, about 90 per cent of the household energy supply market will be held by only five suppliers when including EDF Energy and Scottish Power alongside the leading trio.

The consolidation deals a blow to decade-long efforts to dismantle the dominance of the original Big Six suppliers to increase competition and lower prices. In 2016, the Competition and Markets Authority warned that weak market competition meant customers were overpaying by roughly 1.4 billion to 1.7 billion pounds every year. Although a surge in new start-ups followed that investigation, the market began to shrink after SSE sold its household supply business to Ovo in 2019. The situation accelerated during the 2021 and 22 energy crisis, when dozens of suppliers went bust. Octopus became the biggest supplier after taking on 1.5 million customers from Bulb Energy, which entered administration in 2022.

Tom Goswell, energy supply lead at Cornwall Insight, noted that the Big Six have become the Big Three, raising questions about household choice and market health. He acknowledged that larger suppliers bring stability, particularly after around 30 firms dropped out of the market, leaving customers uncertain about who would send their next bill. However, he warned that fewer suppliers could ease competitive pressure, reducing the incentive to keep prices low or offer distinct products. The test over the coming years will be whether households shopping around find a genuine range of deals or merely three versions of the same thing.

Chris Norbury, chief executive of E.ON UK, rebuffed concerns about reduced competition. He described the market as fiercely competitive and stated that the company’s flexibility and scale would allow it to deliver for customers now and transform for the future energy system.