Octopus Energy has announced plans to repay nearly the entire £3bn cost of the government bailout for Bulb, a defunct energy provider. This move ensures that UK taxpayers will recover almost the full amount of the financial support extended for Bulb’s rescue.
Bulb collapsed in 2021 due to unsustainable losses driven by rising wholesale gas prices, which were not offset by the price cap set by Ofgem. In a bid to stabilise the situation, Octopus Energy took over Bulb in 2022, backed by a government funding facility amounting to £4.5bn.
Despite the available funds, Octopus utilised only £1.6bn. The company, the UK’s second-largest energy supplier, indicated in January that it planned to repay just over £2.8bn to the Treasury, opting not to defer this repayment. This includes a £1.2bn return in profits generated from the drop in wholesale energy costs during the winter of 2022 and 2023—a condition stipulated in the bailout agreement.
Accounting for the £1.5bn incurred during the special administration regime, the net cost of Bulb’s failure to the taxpayer will be approximately £6.1m. This figure is significantly lower than the £19.6m forecast by Bulb’s administrators in February.
Jeremy Pocklington, permanent secretary for the Department for Energy Security and Net Zero, noted in a letter to Dame Meg Hillier, chairwoman of the Commons’ public accounts committee, “This represents an approximately 99 per cent-plus recovery of amounts owed to HMG. There are still a number of uncertainties to work through, and the final quantum of any shortfall will not be known until the end of the SAR period in 2025.”
Initially, the Office for Budget Responsibility had estimated the potential liability at £6.5bn in November 2022, making Bulb’s bailout potentially the most expensive since the 2008 financial crisis. At the time of its collapse, Bulb had 1.6 million customers and was heavily exposed to rising energy prices during its special administration.
The bailout faced a High Court challenge from three of Octopus’s competitors, including Centrica, the owner of British Gas. These firms argued that the deal posed a risk to the stability of the energy supply market and consumers due to Octopus’s financial position.
Greg Jackson, founder and CEO of Octopus Energy, commented on the outcome, stating, “Octopus worked hard in the darkest depths of the energy crisis to create a fair deal, meaning that although Bulb went bust with billions of liabilities, it has cost the government almost nothing.”
Octopus Energy has since reported its first profit since its inception eight years ago, achieving a pre-tax profit of £283m in the twelve months leading to April last year, compared to a pre-tax loss of £166m in the previous period.
The comprehensive repayment plan by Octopus Energy signifies a crucial development in the aftermath of Bulb’s collapse, ensuring minimal financial burden on UK taxpayers. Octopus Energy’s strategic financial management during a turbulent period underscores its resilience and responsible approach in the energy market.
