Issue of the week: why did Bulb flicker out?
The energy crisis has claimed its largest scalp to date. Is the market irretrievably broken?
The collapse of Bulb energy – the UK’s seventh-biggest energy supplier – has plunged the industry into uncharted waters, said Rachel Millard in The Daily Telegraph. Because rivals have baulked at absorbing Bulb’s 1.7 million customers, the company has “effectively been nationalised” after running out of money owing to soaring wholesale energy costs. Bulb is “by far the largest” of the 20 energy suppliers that have collapsed since the onset of “a global gas supply crunch” in September, and its failure will add to demands for reform of the market and a price cap on bills. Meanwhile, “taxpayers face a bill of potentially hundreds of millions of pounds” to keep
Bulb operating – until it is restructured or sold, or its customers are transferred to other suppliers.
When Boris Johnson visited Bulb’s London HQ in July, he was full of praise for a “wonderful company” that offered customers 100% renewable energy. “Seems incredible to me,” he remarked. And so it has proved, said Nathalie Thomas and Jim Pickard in the FT. Bulb blames its demise on the price cap, which was introduced in 2019 by Theresa May’s government after years of pressure over “rip-off” energy bills, and is reviewed just twice a year. Others in the industry point to “a spectacular failure of regulation” that encouraged a race to the bottom on prices as new entrants vied to gain market share. “Many gambled that wholesale energy prices would not rise and had inadequate hedging strategies”, while a “light touch” regulatory regime failed to assess whether their financial model could withstand price shocks. So the “blame game” runs on, said Emily Gosden in The Times. No one disputes that the industry has faced an unprecedented shock – Bulb claims the cap allowed it to charge only 70p per therm, while wholesale gas prices have rocketed to as much as £4 a therm. But the debacle probably has its roots in “a potent cocktail” of “flawed government policies, ill-advised business practices” and “lax regulation”.
You can’t blame customers for swallowing Bulb’s hype, said Ben Marlow in The Daily Telegraph. It promised to challenge “the sleepy established order” with its “heady mix” of “proprietary technology that could reduce bills and save the planet too”. But financial backers of the self-proclaimed “fastest-growing company in Europe” – including DST Global and JamJar Investments – must be kicking themselves too. A “shiny app” and good IT “doesn’t enable any company, however brilliant its idea or wellmeaning its intentions, to defy the basic laws of economics”. It’s a painful lesson that “a generation of tech hopefuls” may be forced to learn in the coming months as the economic cycle turns.