Bulb Energy’s bailout by the government could be far cheaper than originally anticipated, the National Audit Office has said, after the government avoided hedging gas prices.
Due to falling wholesale energy costs, which are now lower than pre-Ukraine war levels, the NAO said the Bulb fiasco could cost just £246mln, significantly lower than the £4.5bn forecasted in December.
The government, alongside administrator Teneo, opted to buy gas for Bulb’s 1.5mln customers on the day-ahead market rather than well in advance, against the advice of regulator Ofgem.
“The decision resulted in an unplanned taxpayer benefit from the reduction in wholesale energy prices from the peak in August 2022 to the prices in January 2023,” the NAO said.
It added “several risks remain” to recovering costs, meaning bills could still be upped to absorb the financial burden of Bulb’s takeover.
The government spent £52.7m on external consultants from Teneo and Linklater lawyers, while other firms including Ernst & Young received fees.
Octopus Energy, the long bidder and buyer of Bulb, paid £113mln for its customer book meanwhile, helping it to become one of the UK’s largest energy suppliers.
Concerns had been raised over its ability to handle the rapid expansion, given its “weaker financial position than other large suppliers,” including Centrica PLC (LSE:CNA) owned British Gas, E.ON and ScottishPower, though Ofgem ruled it was able to carry out the takeover.
Octopus and the government have faced scrutiny over the takeover from rivals however, which allege the deal lacked transparency and that they were not told of government support.