Ovo’s acquisition of SSE’s energy services business is expected to complete late this year or early next year.
SSE, one of the UK’s big six energy suppliers, said it plans to use the proceeds of the disposal to cut net debt.
The deal comes after the collapse of a planned merger between SSE and Npower’s retail arms last year.
SSE chief executive Alistair Phillips-Davies said: "We have long believed that a dedicated, focused and independent retailer will ultimately best serve customers, employees and other stakeholders - and this is an excellent opportunity to make that happen.
He added: "Following the transaction, SSE will be able to give an even greater focus to delivering the low carbon infrastructure needed to help the UK reach net zero emissions.
Phillips-Davies said the company has a “clear strategy” around developing, operating and owning renewable energy and electricity network assets.
“With a large and growing renewable energy pipeline and a leading position in the electricity networks needed to deliver low-carbon energy reliably to homes and businesses in an increasingly electrified economy, we are well placed to create value from the low-carbon transition,” he said.