Shell UK cuts home bills
Shell stepped closer to becoming the world’s biggest power company with an aggressive move into the UK retail market by offering one of the cheapest tariffs available. Shell Energy, formerly First Utility, said it has a fixed-rate power-supply tariff, for UK customers, of £970 (€1,133) a year, or £81 a month until July 2020.
The move is part of its rebranding of its UK utility business. This undercuts former cheapest UK power supplier, Bulb Energy Ltd, which has a deal available for £981 a year, and is 18% cheaper than power supplied by Centrica-owned British Gas, according to data from UK power regulator Ofgem.
Shell plans to become the world’s biggest power company within 15 years and is spending as much as €1.7bn a year on its new-energies division, which suggests it sees climate change as a significant threat to the fossil-fuel business.
“Shell has been increasingly vociferous about its ambitions in electricity markets, and we see it as a significant, competitive-disruptive force over the coming years for traditional, utility energy suppliers-retailers,” said RBC Capital Markets.
The bank said Shell’s plan to invest about €1.7bn a year on its new energies division is only 5% of the company’s annual capex (capital expenditure) and, “hence, has significant room to grow”.
It added that it is “difficult to rule out” Shell buying other UK-based utilities, such as the retail unit of SSE or Npower, which are both up for sale.
The move will bring yet more pressure to the UK power market, where swathes of customers have abandoned the traditional Big Six utilities for smaller, cheaper suppliers. Surging wholesale prices for power and gas have driven several companies out of business.
Last year, more businesses folded than in the previous 16 years combined. Earlier this month, Brilliant Energy, which has about 17,000 domestic customers, became the tenth firm to cease trading in the past 12 months.
Britsh Gas, which lost 742,000 customers last year, held a 19% share of the UK’s electricity market in the third quarter of 2018, according to Ofgem. Bulb, which has about one million customers, had a 3% stake in the market. As well as announcing the rebranding, Shell also said it has switched its existing, 700,000 UK customers to power supplied entirely by renewable sources of energy, such as wind, solar, and biomass.
