Energy crisis: Government sets aside £1.7bn to save ‘too-big-to-fail’ supplier Bulb
Nearly £1.7bn is set aside by the government to allow Bulb to continue supplying energy to its customers as it tumbled into administration.
In court on Wednesday, the company was put into special administration, which will allow it to continue to trade for the time being.
The £1.69bn loan will be set aside by Government to support the administrator’s work, and ensure that lights stay on for Bulb’s 1.6 million customers.
Business Secretary Kwasi Kwarteng can free up more money for the company if needed, court documents show.
The announced funds for Bulb means that every customer is being supported by the taxpayer to the tune of about £1,000, according leading tax and advisory firm Blick Rothenberg
Without the cash, Bulb would not have been able to keep its doors open past the middle of December, they show.
Under what has been dubbed a too-big-to-fail alternative to Ofgem’s usual process, Bulb will be run as normal by administrator Teneo, until a potential buyer can be found, or until its customers leave.
The administrators estimate that it will cost around £2.1bn to keep Bulb trading until the end of April next year.
By that time, the cap on energy prices will likely have been increased significantly, which could free up more money for the business.
The company is three times larger than any other energy supplier that has failed in recent years. Normally Ofgem simply lets a firm fail and moves its customers to a new supplier.
At the High Court in London, Justice Adam Johnson said that “uncertainty” over Bulb “if left unresolved is bound to have an effect on customers, employees and suppliers”.
He said that the administration was designed “to keep the energy supply company going with a view to it being rescued if that is possible”.
He added that an alternative was to appoint a supplier of last resort, adding: “That is thought to be impractical here given the size and importance of Bulb as a supplier”.
The judge said that the £1.7bn would be “of existential importance to Bulb”.
Bulb chief executive Hayden Wood was at the hearing on Wednesday. He declined to comment.
Earlier in the day, Mr Kwarteng said a special administration regime was a temporary arrangement “which provides an ultimate safety net to protect consumers and ensure continued supply”.
He told the Commons: “We do not want this company to be in this temporary state longer than is absolutely necessary.”
For Labour, shadow business secretary Ed Miliband said: “With so many companies going bust in just two months, something not happening anywhere else in the world, it points to a systemic failure of regulation. Firms took risky bets and were allowed to do so and the Government and Ofgem significantly deregulated the conditions of operation in 2016.
“Will the Business Secretary now take responsibility for the clear failure of regulation there has been and doesn’t it suggest there needs to be a proper external review of the regulation of the market.”
Since the beginning of September, 22 energy suppliers have failed. They were pushed out of the market by a spike in gas prices.
As a result of these prices, and a cap on what companies can charge their customers, businesses have been forced to sell energy for less than they bought it for.
Some of the biggest companies buy their gas far enough in advance that they have avoided the worst impacts of the price spike.
However those who have not have been placed under unprecedented pressure.
Labour MP Alex Sobel (Leeds North West) warned in the Commons: “We’re moving back to an oligopoly of energy companies who are increasing their profits whilst the supplier of last resort is socialising losses.
“What’s he going to do to fix the broken energy market?”
Mr Kwarteng replied: “I don’t agree with his characterisation. I don’t think we’re going back to an oligopoly, as he said. I’ve always maintained that competition is absolutely essential in this market.
“What’s happened is there’s been a huge mismatch between the wholesale price and the retail price cap, and the retail price cap is there to protect consumers.”
Liberal Democrat MP Layla Moran (Oxford West and Abingdon) suggested a “Northern Rock-style energy company to take on customers of companies that have gone under” if the current process is not working.