Watch out Big Six: Shell snaps up household energy challenger First Utility

 
Courtney Goldsmith
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Shell is entering the UK's household energy market (Source: Getty)

Royal Dutch Shell is preparing to take on the UK's Big Six energy suppliers after it announced today it would buy First Utility, a leading challenger firm.

The move represents an expansion of Shell's energy supply business from commercial and industrial customers to the residential sector.

First Utility co-founder and chief financial officer Darren Braham said the acquisition will allow the firm to develop more innovative new services for its customers, including capitalising "on all the opportunities provided by digitalisation, decarbonisation and the move to battery technology and electric vehicles".

Read more: The boss of First Utility is leaving the business

Shell's executive vice president of new energies, Mark Gainsborough, said the company's move into Britain's household energy market would improve choice for customers.

"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," he said.

“We believe that the time is right to build upon our strong relationship with First Utility by investing to grow its business."

First Utility, which serves around 825,000 homes in the UK, began a wholesale energy trading partnership with Shell in 2013, and in 2015 it signed a licensing agreement with Shell that allowed it to operate in the German household energy sector under Shell's brand.

Shell Energy Europe Limited (SEEL), Shell's 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, and First Utility will operate as a stand-alone entity and subsidiary of Shell within its new energies division, the companies said.

The deal, which was announced for an undisclosed sum, is expected to complete in early 2018.

It comes amid government plans to cap energy prices, which critics have said could reduce competition and investment in the sector.

Shell's shares rose 1.6 per cent to 2,470.97p after the announcement.

Read more: Big Six firms are facing questions on the energy price cap this week

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