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.”
Royal Mail is to be allowed to scrap Saturday second-class stamp deliveries, under a series of reforms proposed by the communications regulator.
From 28 July, Royal Mail will also be allowed to deliver second-class letters on alternate weekdays, Ofcom said.
The post will still be delivered within three working days of collection from Monday to Friday.
Money blog: Top chef reveals thing he hates about customers
The proposals had already been raised by Ofcom after a consultation was announced in 2024, and the scale back was proposed early this year.
Royal Mail had repeatedly failed to meet the so-called universal service obligation to deliver post within set periods of time.
Those delivery targets are now being revised downwards.
Rather than having to have 93% of first-class mail delivered the next day, 90% will be legally allowed.
Please use Chrome browser for a more accessible video player
The sale of Royal Mail was approved in December
The target for second-class mail deliveries will be lowered from 98.5% to arrive within three working days to 95%.
A review of stamp prices has also been announced by Ofcom amid concerns over affordability, with a consultation set to be launched next year.
It’s good news for Royal Mail and its new owner, the Czech billionaire Daniel Kretinsky. Ofcom estimates the changes will bring savings of between £250m and £425m.
A welcome change?
Unsurprisingly, the company welcomed the announcement.
“It is good news for customers across the UK as it supports the delivery of a reliable, efficient and financially sustainable universal service,” said Martin Seidenberg, the group chief executive of Royal Mail’s parent company, International Distribution Services.
“It follows extensive consultation with thousands of people and businesses to ensure that the postal service better reflects their needs and the realities of how customers send and receive mail today.”
Citizens Advice, however, doubted whether services would improve as a result of the changes.
“Today, Ofcom missed a major opportunity to bring about meaningful change,” said Tom MacInnes, the director of policy at Citizens Advice.
“Pushing ahead with plans to slash services and relax delivery targets in the name of savings won’t automatically make letter deliveries more reliable or improve standards.”
Acknowledging long delays “where letters have taken weeks to arrive”, Ofcom said it set Royal Mail new enforceable targets so 99% of mail has to be delivered no more than two days late.
Changing habits
Less than a third of letters are sent now than 20 years ago, and it is forecast to fall to about a fifth of the letters previously sent.
According to Ofcom research, people want reliability and affordability more than speedy delivery.
Royal Mail has been loss-making in recent years as revenues fell.
Read more from Sky News:
Greater risk to UK economy from Trump tariffs, BoE warns
What is a wealth tax and how would it work?
In response to Ofcom’s changes, a government spokesperson said: “The public expects a well-run postal service, with letters arriving on time across the country without it costing the earth. With the way people use postal services having changed, it’s right the regulator has looked at this.
“We now need Royal Mail to work with unions and posties to deliver a service that people expect, and this includes maintaining the principle of one price to send a letter anywhere in the UK”.
Ofcom said it has told Royal Mail to hold regular meetings with consumer bodies and industry groups to hear their experiences implementing the changes.
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Sports2 years agoButton battles heat exhaustion in NASCAR debut
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike