Taxpayers are being left in the dark over Bulb’s £6.5bn rescue
Millions of households will be on the hook for a large, unconfirmed chunk of the bill, reports Matt Oliver
Hauled in front of MPs earlier this year, the co-founder of Bulb had little to offer except a meek apology for the collapse of Britain’s seventh biggest energy supplier.
“I’m very sorry for the way things turned out,” said Hayden Wood, the former management consultant who continued to receive a £250,000 salary until July, eight months after his company had been bailed out by the Government.
His words may soon be on the lips of many taxpayers as well – though perhaps with more expletives thrown in – when the bill for Bulb’s special administration finally comes through.
Official forecasts have now put the number at as much as £6.5bn, making it easily the largest state rescue since the bailout of Royal Bank of Scotland during the financial crisis.
It is also almost three times larger than the £2.2bn predicted by the Office for Budget Responsibility in March, owing to the time it has taken to sell the company and soaring energy prices.
Millions of households stand to foot a large, unconfirmed chunk of the final sum through levies on their bills.
But the new forecast total also includes costs incurred through a deal with Octopus Energy, which is taking over Bulb with the help of massive government support.
The Government plans to continue bankrolling the costs of buying energy for Bulb throughout this winter, at a time when Russia’s invasion of Ukraine has sent energy prices soaring, through loans that will be paid back at a later date.
Yet three weeks after the Octopus deal was announced, taxpayers – and Bulb’s 1.5m customers – are still in the dark about the full terms, as well as whether it will actually go ahead.
Martin Young, an energy analyst at Investec, says the lack of clarity makes it “almost impossible” to understand the £6.5bn figure.
So thick is the shroud of secrecy surrounding the sale that it has become the subject of a court battle, with rivals including British Gas and Scottish Power seeking to delay its completion so that a judicial review can be launched. Such a ruling would mean Bulb remains on the public books for longer – potentially pushing the bill for taxpayers even higher.
The deal was originally scheduled to complete on Nov 15 but the legal challenge has since derailed that, with every subsequent day making the company a more expensive concern for any buyer to shoulder.
Bulb collapsed and was placed into special administration in November last year, after being financially ruined by rocketing gas and electricity prices.
The company imploded despite efforts by Wood and other bosses to find buyers, largely because it had failed to purchase energy far enough in advance – a practice known as hedging – meaning whoever took Bulb over would have to meet huge liabilities.
Since the company was effectively nationalised, the very same issue has dogged it, with Treasury rules banning any public entity from hedging. This meant rivals were still reluctant to take Bulb on when the Government brought in advisers to find a buyer.
After a bidding process, during which companies including British Gas owner Centrica and Scottish Power considered offers, only Octopus remained in the ring.
Eventually, the company struck a deal with administrators that will involve the Government loaning it money to pay for Bulb’s energy costs through the winter.
The cash the Government should be able to recover includes the money spent during the special administration, which it can recover through levies on bills, and the money provided to Octopus to help get Bulb through the winter, which will be repaid as a loan.
Octopus says it will also pay a “nine figure” sum for the business, thought to be around £250m, according to Sky News. For his part, Octopus founder Greg Jackson has insisted that the takeover of Bulb provides “good value for taxpayers”, while also providing badly needed certainty for the supplier’s customers.
“We take our responsibilities very seriously,” Jackson said.
Yet in court, Octopus’s rivals have cried foul and are seeking to unpick the highly secretive deal.
In legal filings, Scottish Power argued that Octopus is paying “little or no consideration” for Bulb and that Jackson and his company are “effectively being paid to acquire the company’s business by the Government”.
Both Scottish Power and British Gas say there was a lack of transparency during the bidding process, arguing that it was not clear the Government was willing to step in to such a degree.
“The most fundamental problem is that prospective bidders were not informed that HM Government would be willing to provide very significant financial support to the successful bidder (and to energy consumers),” Scottish Power said.
“Had this been known by all prospective bidders, the economic proposition for buying Bulb’s business would have been fundamentally different, and the consideration paid by the purchaser would likely be higher than the nominal amount which Octopus Energy will apparently be paying.”
One insider who was familiar with the deal process insists it was carried out with scrupulous fairness, not least because all involved expect it to be combed over by the National Audit Office in future.
But with the terms of the deal itself still hushed up – due to all involved being made to sign non-disclosure agreements – it remains hard for taxpayers to judge the issue either way.
On Thursday, a Treasury spokesman said the £6.5bn estimate by the Office for Budget Responsibility did not include repayments the Government expects to receive from Octopus, nor sums that can be clawed back through levies on household energy bills.
The Department for Business, which is ultimately responsible for Bulb’s administration, did not respond to a list of questions emailed by The Sunday Telegraph. Octopus did not comment.
During his testimony to MPs, Wood remarked that it had been “an extremely challenging time for the energy sector”.
For taxpayers, the true scale of the damage has yet to come out.