Energy utility Centrica has agreed a five-year supply deal with Drax Group, the owner of Europe's biggest coal-fired power station.
The firm, which provides energy to 11 million households under the British Gas brand, said the move would give it access to around 600 megawatts of power.
That was enough to meet around eight per cent of its forecasted peak residential electricity demand.
It said the deal would see Centrica get energy from the Drax power station at Selby, North Yorkshire, from October 2007 through to the end of 2012.
The company also said it would be able to supply 65 per cent of peak British Gas power user demand from its own sources.
Centrica has been looking to boost its power generation capacity to protect itself from buying power on the volatile and often expensive electricity market.
It said a fresh surge in wholesale energy costs was the reason it lifted gas and electricity bills by more than a fifth from March.
A spokesman said the agreement "brings increased fuel diversity to Centrica's electricity supply mix" enabling it to further "stabilise the cost of sourcing electricity to supply its British Gas customers."
UK wholesale gas prices, which set the benchmark for domestic bills, have risen to record levels as cold weather stoked demand amid mounting worries about dwindling stocks and storage problems offshore.
Wholesale costs have also risen as supplies of North Sea oil and gas started to fall.
Centrica said it expected to consider more power purchase arrangements, tolling deals and equity assets in its bid to meet its energy needs.
Drax said the power would be supplied to Centrica at agreed prices, which includes Centrica paying Drax for the coal used and paying for carbon emission allowances used.
The Drax plant is Britain's largest electricity production facility.