The owner of the Utility Warehouse brand said the deal, to be partly funded by a share placing, would allow it to offer “even more competitive tariffs” to its customers.
Telecom Plus sold its Electricity Plus and Gas Plus subsidiaries to Npower in 2006 to cut its exposure to volatile wholesale energy prices, but said it was buying the businesses back because of new rules forcing power companies to reduce the number of tariffs they offer.
The deal, which is expected to complete before the end of the year, will see Npower enter into a 20-year energy supply agreement with Telecom Plus, which also provides fixed-line telephone and broadband internet services.
RWE Npower chief executive Paul Massara said: “In one move we have helped to create the biggest independent competitor in Britain’s household energy supply market.
“This is good for competition and good for consumer choice. Today’s announcement shows that Britain is well on the way to having a ‘big seven’ rather than a ‘big six’.”