Bulb Energy has gone bankrupt and will be placed into an untested bailout process that will rely on public money to manage the aftermath of the collapse of the UK’s largest energy supplier.
The company will be assigned a “special administrator” who will have access to government funds to keep gas and electricity supplies running for 1.7 million household customers.
Costs to taxpayers are expected to soar through the winter and could also be shared by households in the form of higher household energy bills in the future if the government is unable to recover the costs. from a new company through a rescue agreement.
Bulb is by far the largest energy supplier to go bankrupt after a chain of more than 20 companies collapsed since September. According to Investec analyst Martin Young, the total cost of the energy market crisis has could reach around £2 billion this winter. But the final tally is unknown because “Bulb’s failure puts us in uncharted waters,” he said.
Bulb told his staff they had made the “difficult decision” to support a special administration. It added that there would be no “disruption of service or supplies” and urged customers not to worry “as your power supply is secure and all credit balances protected.” “.
The company’s demise has long been expected by industry rivals after they struggled to find new investment or a ready buyer in the face of the winter energy crisis looming in the UK.
“It’s like watching a zombie movie – you know they’re dying but you can’t be sure when they’ll stop moving,” said a senior industry source. “They have long since died, but recent events in the energy markets have been the catalyst for what is to come.”
Bulb blamed the rise in energy prices in the market as a result of the global gas crisis upsetting its plans to raise capital to fuel continued growth, including new businesses in France, Spain and Texas.
“As we began to explore fundraising options, we were pleased to receive a great deal of interest from investors to fund our future growth and business plans, ” the company said in a blog post on Monday. “However, the growing energy crisis in the UK and around the world has raised concerns among investors that it cannot continue while wholesale prices are too high.”
The company is also targeting the UK’s rising energy price cap, which was designed to set affordable energy prices to around 15 million homes on standard energy tariffs but has failed to keep up with the growing demand for energy. rapidly increasing in the wholesale energy markets.
A record increase in energy bills has caused 21 suppliers to collapse since early September, prompting regulator Ofgem to find new suppliers to take on more than 2 million customers. Bulb’s collapse brings the number of households affected by a failed energy supplier to more than 3.7 million.
The size of Bulb’s customer base meant that Ofgem could not find a supplier willing or able to take on all of Bulb’s customers through its normal safety net process. Instead, the regulator will need to use the untested law, which has been in effect since 2011, to put the company under special regulatory authority while a complicated plan for its future has been drawn up. describe.
A spokesman for the Prime Minister said: “Bulb is about three times larger than the largest company that has defaulted in recent weeks. That is why we are adopting a special management mode approach.
“We will be looking to appoint administrators who will efficiently run and power that system, but at this stage it is too early to say what the future of that provider will look like. .”
Ofgem intends to apply to the court to appoint an administrator after it has been approved by the business secretary, Kwasi Kwarteng.
“Customers will see no disruption to their supply and their accounts and fee schedules will continue as normal,” the regulator said. “Bulb staff will remain available to answer calls and inquiries.”
The process is similar to other bailout schemes used to keep critical infrastructure companies, including British Steel and railways, afloat with the help of government funds.
Ofgem is expected to work alongside the Departments of Business, Energy and Industrial Strategy and the Treasury to keep the company running through the winter and until the fate of its customers is decided.
Some energy industry sources believe that the company could be left in the “particularly limbo” for up to a year, at considerable cost to the government, as it would be easier in finding new private sector investment or willing buyers when energy prices have begun to return to normal.
Gillian Cooper, Citizen Consulting’s head of energy policy, said Bulb’s customers will be protected by a special regulatory process and “won’t see much change to their service for now”. .
But when the country’s seventh-largest supplier fails, serious questions need to be raised about the state of the market and how it is regulated. It is clear that reforms are needed to prevent consumers and taxpayers from paying the price for future supplier failures. “
In recent weeks, the regulator has acknowledged that “strong action” is needed to overhaul the energy market due to the ongoing supply-market crisis.
An Ofgem spokesperson said: “Bulb customers need not worry – Bulb will continue to operate as usual.”
