Families face big increases in their electricity and gas bills after the struggling energy supplier First Utility was sold to the firm Npower, the government has warned.
On Monday, Npower’s 2.1 million customers joined First Utility after the acquisition for £50m, but much of the provider’s price increases have not yet been put to customers.
“This deal means people across the country will be paying more for their electricity and gas,” said Claire Perry, the energy minister. “Npower, which saw profits of £135m last year, will have to keep all of the money they make from the merger, which should mean an increase in prices for customers.
“My message to the Npower and First Utility bosses is don’t make customers pay for the failure of the business and do not increase prices.”
But Npower said that energy companies should no longer be compared with each other as they are different business models and prices.
“If you look at a single comparison of prices, that’s misleading to consumers as prices in the private sector could have been reduced, because the industry would need to use all of the money saved to make the market more competitive,” it said.
“What is clear is that, if the market is competitive, our two businesses are better off working together.
“We have an appetite to use the better savings to further reduce prices.”
In a share-price update ahead of a much more significant news, Npower said its adjusted earnings for 2019 would be at the lower end of its forecast range, due to higher employee costs and an increase in pension liabilities, offset by “expected benefits from the merger of First Utility and Npower”.
The company said it was increasing its dividend for the year by 4.3% to 4.16p.
The energy regulator Ofgem said it was the merger’s first day that Npower had not been given green light by the regulator.
However, it also expects the sale to deliver long-term benefits for the combined network operators SSE and Innogy. It will also keep the parent firm’s internet-connected smart meter technology, which will make it easier for customers to see how much they pay for their energy each month.
First Utility’s 454 staff will become Npower employees once the merger is complete, according to the company.
Recent figures from Comparethemarket showed that at least two of the big six British energy firms – Scottish Power and SSE – were planning price increases for households this year.