SSE has insisted the planned £500 million sale of its household supply business to Ovo will be good news for consumers although the competition watchdog has launched a probe into it.

The CMA said it had launched an investigation to consider whether the deal announced by Perth-based SSE in September could be expected to result in a substantial lessening of competition.

Perth-based energy giant SSE sells household supply arm

The deal would see around 3.5 million household customers and 8,000 employees transfer from SSE to Ovo, which has headquarters in Bristol.

The CMA’s decision represents an unwelcome complication for SSE. The group has spent months trying to exit the retail business in order to focus on power generation and supply.

The CMA could block the deal with Ovo or impose onerous conditions if it decides there are sufficient grounds for concern.

Its decision to launch a phase one investigation comes amid persistent claims that the big six giants that dominate the retail market are not playing fair by consumers, which they deny.

The proposed deal would see SSE exit the retail market and result in a big increase in Ovo’s size.

Ovo has grown to become the biggest player in a cohort of independents that are trying to win market share from the giants.

The CMA previously conducted an in depth, phase two, investigation into the proposed merger of SSE’s retail operations with those of Npower, which also belongs to the big six.

Profits plunge at SSE amid customer exodus

It cleared the deal after deciding SSE and Npower were not close rivals for customers on more expensive variable tariffs.

However, the groups scrapped the planned merger in December, ahead of the introduction of a cap on energy prices. They cited the likely impact of challenging market conditions.

Yesterday SSE’s chief executive Alistair Phillips-Davies said the deal agreed with Ovo would help strengthen the market for the supply of energy to households.

“We have long believed that a dedicated, focused and independent retailer will ultimately best serve customers, employees and other stakeholders – and this is an excellent opportunity to make that happen,” he said.

The CMA has invited comment on SSE’s move ahead of the December 18 deadline for the completion of its phase one enquiry. It will decide then whether to complete a more detailed phase two investigation.

SSE suffered a setback on Wednesday when the energy regulator Ofgem told the firm to rethink its proposals to develop two electricity transmission links connecting Shetland and the Western Isles with the mainland.

Scots energy giants hit renewables obstacles

Ofgem highlighted concern that consumers could end up paying for significantly underutilised transmission links.

Funding rules allow companies to charge customers an added cost on their energy bills to fund upgrades to the infrastructure.

Separately, Scotland’s energy minister Paul Wheelhouse said the UK Government needed to ensure firms are encouraged to invest in boosting pumped storage hydro (PSH) capacity in Scotland. This can be used to generate energy on demand, to help compensate for fluctuations in the amount of power produced from other renewable sources.

Drax has said it could make hefty investment in the giant Cruachan PSH plant in the Western Highlands if it gets the right support.

Drax mulls plans for hefty investment in Scottish assets

The existing Cruachan facility can generate enough energy to power 90,000 homes, based on moving water between a reservoir in the hills and Loch Awe, which lies about 450 yards below. It can generate power within seconds.

The head of the firm’s generating arm, Andy Koss, has said the plans under consideration include one which would involve developing a new reservoir and turbine hall. The cost would probably run into hundreds of millions of pounds.

Drax acquired Cruachan with the £700m portfolio of assets it bought last year from ScottishPower, which has decided to focus on renewable energy.

The portfolio also includes the Lanark and Galloway hydro-electric facilities on rivers in South West Scotland, and a biomass fuel plant near Glasgow, along with four gas-fired power stations in England.

After visiting Cruachan on Wednesday, Mr Wheelhouse said the flexibility and resilience it offered would help to support the growth of renewables and efforts to reduce carbon emissions in Scotland to zero by 2045, net of amounts absorbed.

“The real value the technology adds every day to our energy system is the reason why we, and industry partners, continue to call on UK Ministers to take action to ensure that they provide the revenue certainty developers need to underpin further proposed investments in pumped storage hydro capacity in Scotland,” he said.

Drax noted the turbine hall at Cruachan is located one kilometre within the hollowed-out mountain of Ben Cruachan and houses four generators.

“Cruachan has been providing stability to the power network since 1965 when the turbines were first installed .... As we move to a system with more renewables, the services that Cruachan provides are becoming more essential,” said Mr Koss.