The Government granted billions of pounds in unlawful subsidies to Octopus Energy for its deal to acquire a collapsed provider, rivals of the firm have claimed. British Gas, E.On and ScottishPower have brought a legal challenge against Octopus’ Bulb takeover deal. The Government approved it in October and dished out £4.5billion of taxpayers’ cash to help the UK’s third largest power company purchase energy for Bulb customers.

But Octopus’ rivals have called on the High Court to overturn the December deal. They claimed that it was unjust due to the fact that they were not offered the same financial support during the sales process.

British Gas’s lawyer reportedly told the court that if it was informed about Government assistance, “there would have been a bid by British Gas and [there] would have been a lower taxpayer cost”.

But the Government, which became Bulb’s administrator when the company collapsed, says the case should be dropped and warned that scuppering the takeover would impact Bulb’s 1.5 million customers.

Lawyers representing the Department of Business, Energy and Industrial Strategy said in “written arguments” that potential bidders were in fact made aware of the available state support. However, it admitted that it was not proactively offered “to avoid ‘leading the market’ towards requiring support”.

Meanwhile, Octopus claimed the deal would be “extremely beneficial” for the taxpayer and will make a profit of around £1.2billion for the Government.

The company’s CEO, Greg Jackson, has previously 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’s award-winning systems.”

Bulb was founded in 2015 by entrepreneurs Amit Gudka and Hayden Wood with a plan of challenging the dominance of the energy industry’s legacy supply companies. However, it went bust amid the spiralling wholesale cost of gas and electricity prices sparked by Russian supply constraints.

It was one of a staggering 32 UK-based energy companies to collapse during a turbulent period in the market. Bulb 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.

The agreement for Octopus to snap up the firm out of special administration was reached via a new process known as the Energy Transfer Scheme (ETS).

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It was approved by the then Business and Energy Secretary Grant Shapps on November 7, with the High Court ruling that the transfer could go ahead. It later set a commencement date for the ETS to occur at 23:58 on 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.”

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