Fossil giant Shell is to buy the UK’s largest independent energy supplier First Utility.
The move, subject to regulatory approvals, represents a significant challenge to the established order. It is due to complete early next year.
Shell confirmed it was entering the I&C supply market in August. Buying First Utility gives it around 825,000 household customers, or 3% of the market.
“The supply and demand of residential energy is rapidly changing, driven by new technologies that enable householders to better manage their energy use, and the need for a low-carbon energy system,” said Mark Gainsborough, Shell’s executive vice president of New Energies.
“This combination will enable Shell to enter a new part of the energy market in the UK and to improve choice for customers by delivering innovative services at competitive prices.”
Shell said its European gas and power marketing and trading business, will continue to supply wholesale gas and electricity to energy retailers in the UK and Europe, including First Utility.
In 2015, a licensing agreement between Shell Brands International and First Utility enabled them to operate in the German household energy sector under the Shell brand.
“We believe that the time is right to build upon our strong relationship with First Utility by investing to grow its business,” Gainsborough said.
The move will pile further pressure onto market incumbents. SSE and Npower are attempting to stem customer losses and untether other aspects of their businesses by creating a joint retail entity.
The remainder of the ‘Big Six’ suppliers are losing customers to more nimble rivals. With lower legacy costs and overheads, some of the smaller independents do not have to pay certain policy costs, which are then pushed back onto Big Six customer bills, exacerbating price differentials.
Meanwhile, other big guns are entering the market. Vattenfall, owned by the Swedish state, bought independent energy retailer iSupply in June, though the firm had a more modest customer base. The utility has also entered the B2B market and recently acquired a distribution licence with an eye on smart grid opportunities.