The sale process for Bulb Energy Limited was launched in February 2022 and took 10 months to complete, according to the government's response to the Committee of Public Accounts1. Bulb, which had around 1.5 million customers, announced that it could no longer continue trading in November 2021, and on 24 November 2021 Ofgem and the Department for Energy Security and Net Zero placed it in a Special Administration Regime (SAR)1. Three individuals from Teneo were appointed by the High Court as joint energy administrators1.
On 20 December, Octopus Energy Limited paid £113 million to the government to purchase Bulb1. The sale was completed through the Energy Transfer Scheme, which allowed Bulb's supply licence and certain business assets, rights, liabilities and full customer book to transfer to Octopus without the usual contractual forms and permissions1. As part of the deal, government agreed to support Bulb by paying for its wholesale energy costs up to 31 March 2023, allowing Bulb to accumulate enough capital to pay its own wholesale costs from 1 April 20231. As a result, the total estimated cost to the taxpayer for funding Bulb was £3.02 billion as of the end of January 20231.
On 25 May 2023, Teneo reported that the estimated amount Octopus would be due to repay to government was £2.8 billion1. This is currently expected to be repaid by September 2024, but government and Octopus have agreed conditions under which repayment could be deferred to September 20251. Government does not expect to recover the full amount of taxpayer funding committed to Bulb and has indicated that it intends to recover the shortfall from energy consumers1. The Department will calculate the final cost to the taxpayer when the SAR ends1.
The Committee's report noted that average annual household bills for gas and electricity rose from £1,200 in winter 2021-22 to £3,300 in spring 2023, and that between July 2021 and May 2022, 29 energy suppliers failed, affecting nearly four million households1. Bulb was considered too large for a Supplier of Last Resort1.
"A sale process was launched in February 2022 and took 10 months to complete."
Why it matters for households
Bulb's failure and the terms of its sale shaped costs that households ultimately carry. Government has said it does not expect to recover the full £3.02 billion committed to funding Bulb and intends to recover the shortfall from energy consumers1. That places the residual cost of the largest supplier failure of the period on bills rather than on the taxpayer alone.
For the 1.5 million Bulb customers, supply transferred to Octopus through the Energy Transfer Scheme, which moved the customer book without the usual contractual forms and permissions1. The practical effect for a household is that the supplier named on the bill changed while the physical supply did not. Households wanting to understand how supplier failures and transfers affect choice and standing can read our guide to energy suppliers and household energy independence, and those comparing the two largest suppliers can see Octopus Energy vs British Gas.
The Committee also concluded that Ofgem's failure to ensure suppliers were financially resilient resulted in costs to consumers and taxpayers when companies failed1. Ofgem has since introduced measures including enhanced licence application and monitoring, stress testing, ringfencing of Renewable Obligation receipts and customer credit balances, and capital adequacy requirements due to take effect from Q1 20251. For households, these are the mechanisms intended to reduce the likelihood and cost of future failures being passed on to bills.
What happens next
Full repayment is not expected until September 2024, or 2025 if Octopus exercises its right to defer under certain market conditions1. A further 12-month wind-down period is then expected, so the conclusion of the SAR is not expected until autumn 2025 or autumn 2026, at which point final costs to the taxpayer and amounts repaid will be known1. The Department has agreed to write to the Committee with the final cost to the taxpayer, including how much Octopus has repaid and any shortfall it plans to recover from consumers, with a target implementation date of December 20251. A separate review of the effectiveness of support mechanisms has a target implementation date of December 20251.
Sources1 cited
- Government response to the Committee of Public Accounts Session 2022-23, committees.parliament.uk