Octopus Energy will reimburse the government nearly £3 billion, fulfilling its commitment to return taxpayer money used for rescuing Bulb, a collapsed energy supplier. This move will allow the Treasury to recoup almost the entire cost of Bulb’s temporary nationalisation in 2021.
The initial forecasts had suggested that the bailout could become one of the government’s largest since the financial crisis. However, declining wholesale energy costs have significantly reduced the expected final bill.
According to the Financial Times, Octopus has already started the repayment process and expects to complete it by September. This repayment offers a financial uplift for the impending general election.
Politicians had previously expressed concerns that the rescue's additional costs could burden customers, especially during a time of widespread financial struggle.
Bulb collapsed along with numerous smaller energy suppliers due to a spike in wholesale gas prices, influenced by the end of Covid restrictions and the ongoing war in Ukraine. At the time of its collapse, Bulb had 1.5 million customers in the UK.
Initially placed into a Special Administration Regime (SAR), Bulb was managed by the government through Ofgem, the energy regulator, for less than a year while a buyer was sought.
Octopus Energy eventually acquired Bulb, agreeing to cover energy costs for Bulb’s customers to ensure uninterrupted supplies. The government bought the energy, incurring costs of £1.63 billion based on wholesale prices.
The repayment agreement between Octopus Energy and the government was tied to the energy price cap set by Ofgem. With the continued decline in wholesale gas prices, the government is set not only to recover its expenditure but also to make a profit of £1.28 billion from the deal.
“This outcome is a great result for taxpayers,” said Greg Jackson, founder and CEO of Octopus Energy. “Octopus worked hard in the darkest depths of the energy crisis to create a fair deal, meaning that although Bulb went bust with billions of liabilities, it has cost the government almost nothing.”
Approximately £6.1 million of other costs related to the SAR remain outstanding, significantly reduced from the £19.6 million forecast in February, according to a recent letter from the permanent secretary for energy security to the Public Accounts Committee. This means the government will recover over 99% of the money lent to Octopus Energy.
There are still some uncertainties to resolve, so the final figures may change slightly. The SAR model, used for Bulb, might also be considered for other companies, such as Thames Water, if they face financial collapse. The Treasury, the Department for Environment, and the regulator Ofwat have been preparing for a scenario where financial consultants would manage the company on the government’s behalf.
