Exclusive: Government has botched Bulb crisis, says Westminster chair
The Government has wasted billions of pounds during Bulb Energy’s (Bulb) protracted and pricey stint in administration, driving up costs for consumers, argued the chair of a leading Westminster body.
Darren Jones, chairman of the BEIS Select Committee told Morning Wire that Government ministers have “exposed” bill-payers to a “huge amount of additional costs” by refusing to allow Bulb to hedge for its energy needs.
Unlike other suppliers, which buy energy months in advance over long-term strategies, Bulb has been forced to pay costly spot prices amid mass volatility across wholesale markets.
This has caused the cost of Bulb’s de-facto nationalisation to rise to £4bn, with prospective buyer Octopus Energy demanding £1bn hedging support to take on its 1.6m customers.
Jones argued the Government had been trying to put “square pegs in round holes” by failing to reform outdated value-for-money guidelines amid record gas prices and wholesale costs, which have seen nearly 30 suppliers collapse since last summer.
He said: “Anybody running an energy company sensibly knows that you’ve got to hedge against forward prices in order to guarantee prices to your customers.”
Bulb was deemed too large to enter the supplier of last resort process, and instead entered a special administration regime, approved by then Business Secretary Kwasi Kwarteng.
The troubled supplier is now on the brink of being taken over by Octopus, after rival suppliers including British Gas owner Centrica and Masdar Energy dropped their bids.
It first fell into administration last November, exposed by soaring wholesale costs and its insufficient hedging strategy.
Bulb costs should be shifted to taxation
Energy bills have climbed to all-time highs following Russia’s invasion of Ukraine, forcing the Government to intervene with historic support packages, estimated at a combined cost of over £100bn.
The committee estimates that under current Government plans, households will face charges of up to £150 per year to swallow the £4bn bill for Bulb’s administration period.
The Government has seemingly rejected the committee’s recommendations for dealing with large energy firms on the brink of collapse- which it published in July.
The committee has called on the Government to shift the costs associated with the special administration regime of Bulb Energy to be paid through general taxation.
However, the costs are instead expected to be added to all consumers’ energy bills, as part of the ‘shortfall mechanism.’
Jones criticised the decision as “less progressive” than putting the costs onto general taxation.
He believed it was counter-productive to “whack another charge which increases people’s energy bills,” while putting the costs onto taxation would ensure people who can afford to foot the bill for Bulb’s fall from grace could afford it.
Jones called on the Chancellor Kwasi Kwarteng to change course, and noted he had previously called for the costs to be put onto taxes during his time as Business Secretary.