E.ON is reportedly in discussions to merge with rival OVO Energy, a move that would create the largest household energy supplier in the United Kingdom. According to Sky News, the two companies have "accelerated talks in recent weeks," though it remains unclear whether a deal will ultimately be reached.
Potential Market Impact
If a takeover is announced, the combined entity would boast a customer base larger than that of British Gas and Octopus Energy. E.ON currently serves approximately 5.7 million customers, while OVO has around 4 million. Sky News also reports that EDF Energy and Telecom Plus have expressed interest in OVO, which has been exploring options to raise capital or sell its retail business. It is uncertain whether the OVO Energy brand would survive following a takeover.
Industry Context
British Gas was overtaken by Octopus Energy last year as the UK's largest household energy supplier. This week, Octopus announced it had surpassed 8 million UK customers. The potential merger comes amid forecasts of rising energy bills, with analysts at Cornwall Insight predicting the price cap could increase to £1,837 per year in July due to the ongoing Iran war. In early March, the same analysts warned that annual bills could surge by £332 to £1,973 from July, though a slight easing in wholesale energy costs since the war began on February 28 has led to a lower forecast. The current price cap stands at £1,641 per year, with Ofgem set to announce the July cap level by May 27.
Government and Market Response
The Government has stated it will consider further targeted support as part of contingency planning. Earlier this week, the Government extended upcoming electricity bill support to 10,000 firms, providing some relief to businesses not covered by the household energy price cap. Wholesale energy costs are not expected to return to pre-war levels until the Strait of Hormuz, through which a fifth of the world's oil and seaborne gas is transported, is reopened. The blockage and supply disruptions, combined with attacks and stoppages at energy infrastructure across the Middle East, have driven gas prices higher and pushed crude oil costs up to as high as $120 per barrel.
OVO Energy declined to comment when contacted by the Mirror, while E.ON has been approached for comment.
