Independent supplier First Utility has signed an energy-buying deal with Shell that it is hoped will deliver cheaper bills and help it challenge the Big Six.
Shell will act as an intermediary for First, using its scale to get better prices when buying wholesale energy on the global market.
The firm, which supplies gas and electricity to 300,000 residential and business customers in the UK, hopes it will be able to pass on some of the saving to customers.
Trading under the deal begins next week. Shell already has similar arrangements with suppliers in the US and in Europe.
Shell will receive an equity stake in First thought to be in the single-figure percentage. The agreement replaces the supplier’s arrangement to buy energy on wholesale markets through Morgan Stanley.
First Utility says the partnership is designed to accelerate growth and support the development of new product offerings for customers.
Chief executive Ian McCaig said: “This is a significant milestone in First Utility’s journey.
“Our agreement with Shell provides us with the ideal strategic partner to support our growth and underpin our proposition to offer customers competitive rates in the market.
“Shell’s experience with independent providers in North America and Europe demonstrates the exciting potential that this deal brings.”
The UK energy supply market is dominated by the so-called Big Six - Centrica (trading as British Gas), npower, SSE, Scottish Power, E.ON and EDF.
Unlike smaller independent providers, they all also have their own power stations producing energy.
Regulators see opening up the market to allow smaller players better access to wholesale energy as key to improving competition.
First Utility has already promised not to increase its prices over the winter.
British Gas customers have been told they face a 9.2% tariff hike, with SSE rates going up 8.2%, npower 10.4%, and Scottish Power 8.6%. However, they have said they will pass on savings from a shake-up on green levies by the Government that it is estimated could shave £50 off bills.
Last week, E.ON announced because of the changes, its rise was lower than it otherwise have been, at 3.7%. EDF had previously announced a 3.9% rise, saying it was holding back the full impact of increasing costs in anticipation of the Government’s changes.