The "Big Six" energy suppliers may soon need to be renamed the "Big Seven", according to Npower's chief executive Paul Massara, after the utility giant struck a £218m deal with Telecom Plus that will transform the smaller company into Britain's largest independent gas and electricity retailer.
As part of the package, Npower has agreed to supply energy from its generation unit to Telecom Plus at a reduced rate for 20 years.
The deal will see 770,000 customer gas and electricity accounts transferred to Telecom Plus's Utility Warehouse subsidiary. This already manages the accounts on behalf on Npower. Andrew Lindsay, the Telecom Plus chief executive, said the deal would increase competition and boost his ability to keep a lid on prices, potentially shaking up a retail market that stands accused of inflating prices.
"The anticipated acquisition of our own energy supply licences from Npower enabled us to keep our recent price rises significantly below the average of those which had previously been announced by the Big Six," he said.
Earlier this week, Npower was revealed to have the highest complaint rate among the Big Six, according to research by Consumer Futures.
Yesterday, Mr Massara played up the idea that this deal was good for the consumer, saying: "In one move we have helped create the biggest independent competitor in Britain's household energy supply market… Britain is well on the way to having a Big Seven rather than a Big Six."
British Gas, Edf, Eon, Npower, Scottish Power and SSE comprise the Big Six.
Asked by The Independent if he would like to be one of the Big Seven, Mr Lindsay said: "At one level yes and on the other, categorically no. We do have the legs to become the size of a Big Six company, yes, but do we want to be termed as a member of the Big Seven? No."
He added: "The Big Six are vertically integrated – with a generating and a retail arm – whereas we are a customer-centric, multiple-utility, offering telephone, mobile and broadband services as well as gas and electricity.
"We offer a good price, service and the convenience of a single-utility supplier."
Asked whether that put his business at odds with the Big Six, he said: "I'm not going to denigrate the Big Six, but we think we deliver exceptional customer service and great value."
Following the deal, Utility Warehouse will have half a total of a million customers, or households, to which it will supply a total of 1.75 million gas, electricity, broadband and other services. Just under 800,000 of the service contracts will be for gas and electricity. In the "medium term", Mr Lindsay wants to supply about 1m customers, at which point he expects the number of energy services it supplies to have almost doubled to 1.5 million.
Although this is a significant customer count, it would put it well behind the Big Six – Npower will have about 4.7 million customer accounts after this deal, while British Gas has more than 10m.
However, Mr Lindsay said Utility Warehouse eventually had the potential to be the size of a Big Six company, adding that growth would be achieved organically rather than through acquisitions.
He said he hoped to attract new customers largely through price and pledged to pass on any cuts in the green levies to be announced in the Chancellor's Autumn Statement next month. "We intend to maintain consistently competitive energy prices in future as we continue to grow," he said.
The Telecom Plus deal with Npower will be partly financed through a £130m share placing. Telecom Plus also reported a 10 per cent rise in first-half profits and raised its interim dividend by 23 per cent.Reuse content