Octopus purchases Bulb for £113 million

Octopus Energy Limited paid £113 million to the government to purchase Bulb, the government has confirmed in its response to the Committee of Public Accounts. The sale completed on 20 December 2022 through the Energy Transfer Scheme, which moved Bulb's supply licence, certain business assets, rights and liabilities, and its full customer book to Octopus without the usual contractual forms and permissions¹.

Bulb announced it could no longer continue trading in November 2021. With around 1.5 million customers it was the largest supplier to fail and was judged too large for a Supplier of Last Resort, so on 24 November 2021 Ofgem and the Department for Energy Security and Net Zero placed it in a Special Administration Regime, with three individuals from Teneo appointed by the High Court as joint energy administrators¹. A sale process launched in February 2022 and took 10 months to complete¹.

As part of the deal, government agreed to support Bulb by paying its wholesale energy costs up to 31 March 2023, allowing it to build enough capital to cover those costs from 1 April 2023. The total estimated cost to the taxpayer of 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.

"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 consumers."

The committee's report notes 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 29 energy suppliers failed between July 2021 and May 2022, affecting nearly four million households¹. The government response also sets out Ofgem measures to strengthen supplier financial resilience, including capital adequacy requirements with a common minimum capital requirement due to take effect from Q1 2025, alongside a Capital Floor, Target and associated compliance framework¹.

Why it matters for households

The £113 million purchase price is far below the £3.02 billion of taxpayer funding committed to keeping Bulb supplied, and the government has said it does not expect to recover the full amount, with the shortfall intended to be recovered from energy consumers¹. How that recovery would be levied, and over what period, has not been reported in the government response. For a household, the practical effect is that the cost of a supplier failure can return through bills rather than through the tax system, which sits alongside the wider question of how far a home's energy arrangements depend on the financial resilience of the company it buys from, a subject covered in Energy Suppliers and Household Energy Independence. Bulb's customers moved to Octopus without a break in supply, and comparisons between Octopus and other large suppliers are set out in Octopus Energy vs British Gas and Octopus Energy vs E.ON Next.

What happens next

Bulb will remain in the Special Administration Regime until the administrators have discharged their statutory duties, submitted a final progress report and obtained a court order ending it with the Secretary of State's consent¹. Full repayment is not expected until September 2024, or September 2025 if Octopus exercises a right to defer under certain market conditions, followed by an expected 12-month wind-down. The government states the regime will therefore not conclude until autumn 2025 or autumn 2026, when final costs and repayment amounts will be known¹. The government has agreed to write to the committee with the final cost to the taxpayer, including any shortfall it plans to recover from consumers, by December 2025¹.

Sources1 cited

1. Government response to the Committee of Public Accounts Session 2022-23, committees.parliament.uk