Martin Lewis discusses Octopus Energy's acquisition of Bulb
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Octopus Energy announced that it will acquire Bulb and its 1.5 million customers last night in a move that could save taxpayers millions of pounds after a year of uncertainty, according to claims. The agreement was reached via a new process known as the Energy Transfer Scheme (ETS), putting Bulb out of “Special Administration” and into the hands of the private renewable energy supplier. Bulb went bust last November after it failed to cope with the surging cost of wholesale gas prices which were largely sparked by Russia’s supply cuts to Europe.
It was one of a staggering 32 UK-based energy companies which collapsed in the space of just a few months amid spiralling energy costs. The firm was then put into “Special Administration”, leaving it under the control of Ofgem, the Government’s energy regulator.
The move allowed Bulb to keep trading until officials and administrators figured out what to do with the 1.5 million customers that relied on Bulb to keep the lights on in their homes. But according to Octopus Energy’s CEO Greg Jackson, the Government’s special administration came with “huge financial exposures for taxpayers”.
Speaking on the deal, he said: “This starts to bring an end to the huge financial exposures for taxpayers and paves the way for a better and more certain future for Bulb’s staff and customers.
“For now, we’d ask Bulb customers to sit tight – they will still be looked after by the Bulb team. We’ll be in touch with customers as and when their account is ready to move to Octopus’ award-winning systems.”
The deal was first approved by the Business and Energy Secretary Grant Shapps on November 7 and the High Court ruled that the transfer can go ahead. It later set a commencement date for the ETS to occur at 23:58 on the December 20.
Mr Shapps said back in November: “This Government’s overriding priority is to protect consumers and last night’s sale will bring vital reassurance and energy security to consumers across the country at a time when they need it most.
“This is a fresh start and means Bulb’s 1.5 million customers can rest easy, knowing they have a new energy home in Octopus. Moving forward, I intend to do everything in my power to ensure our energy system provides secure and affordable energy for all.
However, energy companies such as Centrica (the owner of British Gas) have warned that the deal could distort market competition. Judicial Reviews have been received against the Business and Energy Secretary’s decision to approve the sale of Bulb, with court dates for the reviews set for next year.
Octopus’ attempted takeover of Bulb includes an alleged provision of state aid to help make the sales process smoother. The aid, which is another term for the Government’s provision of financial support for a business, will then be repaid to the Government over time, along with a profit-sharing deal for Bulb’s 1.6 million customers.
But this is usually banned if it threatens to distort competition between companies unless it can be justified on the grounds of public interest. Centrica is moving to block the agreement in court, citing these concerns and the “UK’s compliance with its international obligations under the UK/EU Trade and Cooperation Agreement” and the “Ireland/Northern Ireland Protocol”. Octopus also operates a heat pump company in Northern Ireland, complicating matters.
Because of this, lawyers have warned that the EU may be able to get involved in the process. Ben Rayment, barrister and competition expert at Monckton Chambers, told City A.M: “The fact is that, even though we left the EU, under the special arrangements that apply to Northern Ireland, we did retain the EU state aid rules for trade between Northern Ireland and the Republic.
“It is not a payment directly relating to Octopus heat pumps in Northern Ireland – if it is a subsidy, it’s indirect….. It’s certainly not expressly related to Octopus’ heat pump business. It’s about support to Bulb.”
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Octopus’s acquisition of Bulb then is still subject to the deal receiving final approval from the Government and Ofgem, and the court confirming the timing for the “Energy Transfer Scheme” to take place, after which point Bulb customers will finally be transferred to Octopus.
The Government has previously said that Bulb customers will not experience any change or disruption to their energy supplies as part of the transfer, with no differences for either Bulb or Octopus customers’ supply arrangements, while credit balances remain protected.
The state will pay up to £4.5billion to help fund the takeover, PA News Agency reports, although documents from the Department for Business, Energy and Industrial Strategy (BIES) have warned that the financial assistance could be lower depending on energy prices this winter. The Office for Budget Responsibility previously estimated that bailing out Bulb would cost the taxpayer around £6.5billion.
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