Taxpayers’ Bulb bailout cost plunges after Octopus supply deal with government
The cost to taxpayers of rescuing the biggest residential energy supplier to collapse during the recent industry crisis has plunged – a rare glimmer of good news after two years of turmoil.
Sky News has learnt that the latest figures sourced from insiders suggest that the demise of Bulb, which became insolvent in November 2021, will have been far less costly than forecast.
According to industry figures close to the situation, the bill to taxpayers between the timing of Bulb’s special administration and its takeover by Octopus Energy in December totalled £1.45bn.
However, executives close to the buyer are now said to believe that the government is expected to make a profit of up to £1.2bn on the supply of energy to Bulb between the date of the takeover and the end of March.
This unexpected windfall for the state has been caused by the difference between the wholesale prices paid by the government – which have plunged in recent months – and the fixed price, set at the level of the current industry cap, paid by Octopus to obtain that energy.
Sources said that dynamic was likely to reduce the overall cost of the Bulb bailout to several hundred million pounds, although the ultimate figure remains subject to change.
On a per customer basis, that would make the Bulb rescue cheaper than some of the supplier of last resort (SOLR) deals struck with Ofgem, the energy regulator, during the last two years.
Octopus Energy was appointed to take on Bulb, the first energy supplier to be put under ‘special administration’
Bulb, with more than 1.5m customers, was by far the largest residential energy player to collapse as wholesale prices soared.
At the time, it was the UK’s seventh-biggest gas and electricity supplier.
The reduced taxpayer bill may be relevant in the context of judicial reviews lodged by rival energy suppliers including Centrica, the owner of British Gas, which alleged that the sale of Bulb to Octopus Energy had been unfairly handled.
A three-day hearing has been scheduled to hear the suppliers’ challenged beginning on 28 February.
On Thursday, Centrica sparked a new political row when it reported record annual profits of over £3bn.
In December, the Department for Business, Energy and Industrial Strategy (BEIS) said it had been advised by Bulb’s special administrator to set an upper limit for the post-takeover funding facility of £4.5bn.
“The £4.5bn figure represents an estimated upper limit of the support based on forecasted energy costs during the period until 31 March 2023, which reflects the current volatility in global energy prices, BEIS said at the time.
Greg Jackson is Octopus Energy’s chief executive
“The extent of government support could be lower than £4.5bn, depending on energy prices this winter.”
The £4.5bn estimate was in addition to the estimated £1.45bn pre-sale cost to taxpayers, but the government’s fiscal watchdog – the Office for Budget Responsibility – went even further, suggesting that the Bulb bailout could ultimately cost the public purse as much as £6.5bn.
In a more recent statement provided to Sky News, a government spokesman said: “The sale of Bulb to Octopus Energy concluded on 20 December 2022 and the transfer of customers is now in progress. Ensuring that we get the best outcome for Bulb’s customers and the British taxpayer remains our priority.
“We worked with Special Administrators to ensure fair and open competition to give Bulb’s 1.5 million customers much needed reassurance, while providing best value for taxpayers.
“The government will provide the remaining funding necessary to ensure that the special administration is wound up in a way that protects customers’ energy supply. We will recoup these costs at a later date.”
As part of the sale to Octopus, it is said to have agreed to pay between £100m and £200m to take on Bulb’s customer base, with a separate profit-share agreement giving the government a return for several years on earnings from Bulb customers.
An Octopus Energy spokesperson said: “Octopus always said this is a fair deal and good value for taxpayers.
“It’s becoming increasingly clear how good a deal the government have got.”
Donald Trump’s victory was secured on an unequivocal promise to stretched American households that he would “end inflation”, but markets and economists are anticipating his second term will do the opposite.
A combination of corporate tax cuts, government borrowing, lower migration and swingeing tariffs on overseas imports are all expected to heat up the American economy and stoke price rises.
Bond yields on 10-year US Treasuries, effectively the price of borrowing for the American government, were up by 3.6% overnight, rising more than 15 basis points to above 4.4% as European markets opened.
That signals investors believe that borrowing will rise, and the Federal Reserve will be forced to slow rate cuts in order to tackle inflation.
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A clearer picture will emerge on Thursday when Federal Reserve chairman Jay Powell, who Mr Trump said will not be reappointed, announces the next move on rates.
Markets still expected a 0.25 percentage point cut (a similar move to that anticipated from the Bank of England earlier in the day) but Mr Powell’s comments will be scrutinised for signals of what Trump 2.0 means for the prospect of further cuts.
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Trump wins: Demographics and key issues
But higher prices for consumers are not necessarily bad news for corporate America, with the dollar surging against sterling and the euro as swing states fell to Mr Trump, and Wall Street futures trading indicating a rally when they reopen with him confirmed as president-elect.
Shares in US banks were boosted with J.P. Morgan, Goldman Sachs and Morgan Stanley all up more than 6% in pre-market trading, along with Tesla, boosted by more than 13% as markets anticipate a dividend for Elon Musk’s campaign-trail support.
Keep up with all the latest news from the UK and around the world by following Sky News
Defence stocks were higher too and not just in the US – BAE Systems and Rolls Royce were both up – reflecting likely pressure on America’s NATO allies to make good on their commitments to increase spending.
Bitcoin was also positive in anticipation of a more benign regulatory environment from a president who used the campaign platform to launch his own cryptocurrency.
By contrast renewable holdings, the target of much of Joe Biden’s economic stimulus, were in negative territory, with wind and solar priorities likely to be replaced by a pledge to “drill baby, drill”.
Of most concern to America’s trading partners and allies will be Mr Trump’s promise to erect barriers to free trade.
The man who said tariffs “is the most beautiful word in the world” has pledged a 60% levy on Chinese imports and 10% on those from elsewhere, a deeply protectionist move that could trigger a trade war with China and the EU.
These can only increase prices in the US, with importers paying the levies at the point of entry, and other trading blocs likely to respond in kind.
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The EU has already imposed its own 35% tariff on Chinese EVs to the dismay of the continent’s carmakers the measure is intended to protect.
While these tensions play out, post-Brexit Britain, a relatively small player outside the major trading blocs, is likely to be a spectator.
Post Office campaigner Sir Alan Bates is yet to receive a reply from Sir Keir Starmer, despite writing to him over a month ago.
Sir Alan said he had written to the prime minister to remind him the “clock is still ticking” on a financial redress deadline for victims.
In his letter, he demanded a March 2025 deadline for compensation for sub-postmaster victims of the Horizon scandal.
Sir Alan confirmed to Sky News he was yet to hear back from the prime minister.
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“It was over a month ago,” he said.
“I sent him a reminder yesterday. I told him the clock is still ticking and it’s now five months from the March deadline, which I’m told is still achievable by other professionals.
“So let’s get on with it, that’s all we want. Get on with it.”
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