First Utility says Shell deal aims to keep energy bills down

LONDON Mon Dec 9, 2013 2:04pm GMT

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LONDON (Reuters) - First Utility, Britain's biggest independent energy supplier, said a deal signed with Royal Dutch Shell Plc would help it keep prices low as it seeks to break the stranglehold of the biggest players in the market.

The group said on Monday it had agreed an energy trading partnership with Shell Energy Europe to source electricity and gas from the trading business of Europe's largest oil company.

"The reason we're doing this deal is so that we can really establish ourselves as the low-cost provider in the market," First Utility Chief Executive Ian McCaig said in an interview.

Soaring energy costs have become a big political issue in Britain since Ed Miliband, leader of the opposition Labour party, said in September he would freeze consumer bills for 20 months if he wins power in an election due in 2015.

The "big six" utilities which supply 98 percent of homes have since stoked the debate by announcing price hikes for this winter of more than 3.7 percent, well above the country's 2.2 percent inflation rate.

In response, politicians have urged Britons to shop around to find a better deal, including looking at smaller providers.

First Utility, which supplies 1 percent of British homes, has promised not to raise its prices this winter as part of its effort to lure new customers by undercutting the big six of British Gas-owner Centrica, SSE, RWE's npower, Iberdrola's Scottish Power, E.ON and EDF Energy.

McCaig said the company had a target of supplying 500,000 customers within three years, up from 300,000 now.

"This deal means we have access to all products from all markets at all times, so it is a broader and deeper deal than the one we had before," he said.

Privately-held First Utility, which is solely an energy retailer as opposed to the big six energy companies which are also energy generators, previously sourced its energy via investment bank Morgan Stanley.

McCaig said he did not support Labour's call for a price freeze, but agreed with some of its calls for a shake-up of the energy market.

"We would very much like to see a greater level of transparency and a greater level of liquidity and a greater level of competition in the wholesale side of the UK energy market," McCaig said.

(Editing by David Holmes)

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