energy

Bulb’s £1.7bn rescue came despite cheaper alternative, documents show


Bulb, the collapsed energy supplier, could have been rescued at a much lower cost to UK taxpayers than the £1.7bn deal chosen by the government, newly unveiled court papers show.

The documents filed on behalf of Britain’s energy regulator Ofgem reveal that allowing Bulb to be rescued by a so-called supplier of last resort, through which households are quickly transferred to another provider, would have cost £1.28bn.

Bulb, Britain’s seventh-biggest supplier with 1.6m customers, was placed into “special administration” last week after admitting it could no longer cope with the soaring wholesale gas and electricity prices that have sparked the biggest crisis in the sector for 20 years.

Under the scheme, which has not been used before, the government said it would put up £1.7bn in working capital to allow Bulb to continue trading while it is managed by the administrators.

Ofgem claimed in its written arguments that it had opted against the cheaper process because of uncertainty about whether another provider would be able to manage the transfer of Bulb’s 1.6m customers and fears this could ultimately precipitate a much larger energy supplier failure in the future.

The Ofgem documents also show that Bulb had total net liabilities of £325m by the end of October and had anticipated a total loss of £782m between October and March 2022. It forecast a total peak cash requirement of £893.8m in April 2022.

Officials have insisted that the £1.7bn set aside is a loan to be drawn down as and when needed, and that if wholesale gas prices were to fall then the taxpayer outlay would be lower.

Ofgem argued in its written statement that this route “would be funded by government, which has the ability to control how and when that funding is repaid and if and when it is passed on to other energy market participants”.

The supplier of last resort mechanism has been used for the 24 other energy suppliers that have collapsed since the beginning of August.

Energy suppliers that rescue customers this way can recoup their costs through an industry levy that is funded by bills. Ofgem said in its written arguments that given the number of failed suppliers so far this year it estimates at present that extra costs for each consumer in 2022-23 will amount to £80 to £85.

Ofgem said in a statement that its “top priority is to protect customers” and that it was aware that “people are struggling with costs and any additions to bills are unwelcome”.

However, it added that “the current £80-£85 estimate of costs per household should be treated with caution. It will continue to move up and down into next year as global gas prices remain volatile. We’re continuing to work with government and consumer groups to keep costs on customers’ bills as manageable as possible.”

Ofgem had previously refused to disclose the court documents, citing statutory restrictions on making the information public. However, after a challenge from the Financial Times and Bloomberg News, judge Adam Johnson ordered it to do so.

“The proceedings in question are of obvious interest and importance to the public,” he said. “The public are entitled to know the background to the court’s decision and the issues at play.”



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