Two of the UK's so-called 'Big Six' energy suppliers – SSE and Npower – are in "well advanced" talks about a possible merger, both companies confirmed on Tuesday (7 November).

London-listed SSE, which is the UK's second largest energy supplier, and Npower, owned by Germany's Innogy, said the idea was to merge their respective gas and electricity supply businesses into an independent entity.

SSE, formerly known as Scottish and Southern Energy, serves 7.77 million households, while Npower had 4.8 million customers.

Should the merger be approved by regulators, the combined entity would bridge the gap to Centrica-owned British Gas, with a combined market share of 22.5% compared to the market leader's 27%.

SSE's shares ended Tuesday's trading session 2.62% higher on the merger talk. In a statement, it said: "In discussions, SSE is mindful of the requirements of customers and the concerns of employees. It will disclose the outcome of the discussions as soon as they are concluded."

Innogy also confirmed the two were in "advanced exclusive discussions".

The merger plans come as the government published draft legislation that would give energy regulator Ofgem the power to cap energy prices for people on standard tariffs.

Furthermore, the Big Six are also losing market share to a growing band of small independent suppliers who currently account for around 10% of the market.