The Public Accounts Committee (PAC) has today (1 November) expressed concerns on the recovery of the £3 billion committed to funding Bulb.
Failed energy supplier Bulb entered Special Administration in November 2021 amid the energy crisis and, in order to stabilise the energy supplier, the UK government invested £3.02 billion of taxpayer funds to ensure its 1.5 million customers remained insulated.
However, with Octopus Energy having successfully acquired Bulb in December 2022, the PAC has estimated that £2.96 billion of taxpayer funds could be recovered from Octopus, but this would incur a shortfall of £246 million to be borne by billpayers.
An additional burden for many households already preparing for yet another harsh winter period, with energy prices set to increase yet again.
But the costs to billpayers does not end here. PAC added that the £246 million shortfall is in addition to the estimated £2.7 billion incurred for the other energy suppliers that collapsed before Bulb.
It is worth noting that the recovery of funding is also dependent on the continued commercial success of Octopus Energy and could be deferred to September 2025 if wholesale energy market conditions worsen.
The PAC has also called for details of the final cost to the taxpayer, including how much has been repaid by Octopus and any shortfall that government plans to recover from consumers.
PAC calls out Ofgem’s ‘low bar’ approach in licencing
Another aspect considered by PAC is the “low bar” approach taken by energy regulator Ofgem in licensing energy suppliers. The Committee highlighted that between 2010 and May 2022, at least 73 new energy suppliers entered the market whilst at least 65 suppliers exited the market over the same period.
PAC stated that “Ofgem’s failure to ensure suppliers’ financial resilience resulted in costs to the public when companies failed” and that the energy regulator and government should work to ensure that only suppliers with the necessary financial resilience to survive challenging market conditions are granted licences at the same time as promoting healthy competition in the energy market.
Meg Hillier MP, chair of the Public Accounts Committee, said: “Our report is a sobering reminder that we are still living with the fallout of the failure of so many energy suppliers in 2021-22.
“While the government and regulators did the right thing in moving swiftly to protect consumers, the uncomfortable truth remains that the recovery of that investment hangs on the commercial success of one company. The public can ill afford such uncertainty, particularly in challenging economic times.
“It is now increasingly urgent that those who have yet to access government support are helped to do so. The wider question now for Ofgem and government is how to strike the right balance between resilience and competition in the energy market.”
Hillier added: “The ‘low bar’ approach to licensing new suppliers in the hope that competition and innovation would follow resulted in a market built on sand. This underlying fragility must now be firmly consigned to the past to ensure consumers are protected in the future.”