UK Inquiry Tracker

Bulb Energy

Public Accounts Committee Closed Inquiry

Opened: 29 Mar 2023 Closed: 14 Feb 2024 Parliament page

Bulb Energy collapsed in the summer of 2021 and was placed in special administration by the government. This was the first time that the government had appointed a special administrator to operate an energy supplier to maintain the supply of energy to customers. In June 2022 the NAO reported on … Read more Bulb Energy collapsed in the summer of 2021 and was placed in special administration by the government. This was the first time that the government had appointed a special administrator to operate an energy supplier to maintain the supply of energy to customers. In June 2022 the NAO reported on the energy supplier market, and noted that £0.9bn had been spent by government on running Bulb through the special administration regime in 2021-22. In October 2022, following a sale process, Octopus Energy was identified as the acquirer of Bulb’s customers, business assets and liabilities, including customer credit balances. In November 2022 the government obtained court approval for the transaction agreement with Octopus. Three energy companies commenced legal proceedings relating to this agreement. Dame Meg Hillier MP, Chair of the PAC, commenting on the NAO report, said: “Government took a risk bailing out Bulb when it failed. Since November 2021, taxpayers have spent £3bn protecting Bulb customers' energy supply. Government needs to manage the recovery of the bulk of taxpayer funding for Bulb from Octopus over the next couple of years and we need to know if there are costs to be passed onto energy bill payers.” Based on the NAO’s latest report , the Committee will question two panels of witnesses on the special administration, sale process and transaction agreement; and on the amount of taxpayer support provided to Bulb Energy, the agreement with Octopus, and the government’s plans to recover this funding. The first panel will include the Chief Executive of the energy regulator Ofgem; the Chief Financial Officer of Octopus Energy and Teneo, the appointed special administrator. For the second panel the Committee will question senior officials at the new Department for Energy Security and Net Zero, and HM Treasury. If you have relevant evidence to inform the Committee’s questioning of either panel of witnesses, please submit it here by 23:59 on Wednesday 10 May 2023.Please have a look at the requirements for written evidence submissions and note the Committee cannot accept as evidence material that has been published elsewhere. Show less

4 Recommendations

21 Conclusions

1 Report

1 Oral session

1 Letter

1 Event

Activity timeline 5 events

14 Feb
2024

Report published

Treasury minutes: Government response to the Committee of Public Accounts on the Seventy-fourth report from Session 2022-23

1 Nov
2023

Report published

Seventy-Fourth Report - Bulb Energy

19 Jun
2023

Correspondence

Correspondence from Jonathan Brearley, Chief Executive, Ofgem, re Bulb energy, dated 14 June 2023

25 May
2023

Oral evidence

Bulb Energy

25 May
2023

Formal meeting (oral evidence session) · The Grimond Room, Portcullis House

Bulb Energy

Oral evidence sessions 1 session

25 May 2023

View on parliament.uk

Bulb Energy

Dan Osgood · Department for Energy Security and Net Zero James Bowler CB · HM Treasury Jeremy Pocklington CB · Ministry of Defence Jonathan Brearley · Department for Energy Security and Net Zero Jonathan Brearley · Ofgem Matt Cowlishaw · Teneo Phil Duffy · HM Treasury Stuart Jackson · Octopus Energy

Reports 1 report · click to expand

Title	HC No.	Published	Items	Response
Seventy-Fourth Report - Bulb Energy	HC 1232	1 Nov 2023	25	Responded

Recommendations & Conclusions

25 results

2 Conclusion Accepted

Seventy-Fourth Report - Bulb Energy

Require Ofgem and Department to outline steps promoting energy market competition and financial resilience.

Ofgem’s failure to ensure that energy suppliers were financially resilient resulted in costs to energy consumers and taxpayers when these energy companies failed. To encourage new suppliers into the market and encourage price competition and innovation, Ofgem took a ‘low … Read more Ofgem’s failure to ensure that energy suppliers were financially resilient resulted in costs to energy consumers and taxpayers when these energy companies failed. To encourage new suppliers into the market and encourage price competition and innovation, Ofgem took a ‘low bar’ approach to licencing new retail energy suppliers. Between 2010 and May 2022, at least 73 new energy suppliers entered the market. However, over the same period, at least 65 suppliers exited the market. Between July 2021 and May 2022, 29 energy suppliers (including Bulb) failed, affecting nearly four million households. This has resulted in an estimated cost of £2.7 billion to use the SoLR process to transfer customers over to new energy suppliers, in addition to the estimated cost of £3.02 billion of taxpayer funding for placing Bulb in SAR and supporting its wholesale energy requirements up until 31 March 2023. Government expects to recover £2.96 billion of the taxpayer funding for the Bulb process from Octopus in September 2024. If Octopus repays the £2.96 billion in full, the government will be left with an estimated shortfall of £246 million (including a charge for accrued interest) which the government expects to recover from energy consumers. Ofgem asserts that it has introduced measures to test the financial resilience of energy suppliers and the standard of service they provide more effectively, and that these will apply to all suppliers in future. Ofgem considers 6 Bulb Energy that monitoring and assessing the financial and operational resilience of suppliers is the best means to address the risk of supplier failure and hence reduce the burden on taxpayers and energy consumers. But this needs to be balanced with the need to promote healthy competition between suppliers. Recommendation 2: By the end of the year, Ofgem and the Department should write to the Committee, setting out the steps they are taking to promote healthy competition in the energy market while only granting licences t Show less

Government Response

The government states that Ofgem has implemented a package of measures since 2021 to strengthen supplier financial resilience, including customer credit balance ringfencing and capital adequacy requirements taking effect by Q1 2025. Ofgem is also undertaking a Non-Domestic Market Review and published a statutory consultation in December.

HM Treasury

Bulb Energy

Activity timeline 5 events

Oral evidence sessions 1 session

Reports 1 report · click to expand

Recommendations & Conclusions

Require Ofgem and Department to outline steps promoting energy market competition and financial resilience.

Require Department to report on SAR lessons learned for taxpayer funding recovery and final Bulb costs.

Update Department and Ofgem procedures for supplier failure to cover entire SAR process.

Update Government Corporate Finance Profession strategy to ensure civil service skills for supplier failures.

Set out information for Accounting Officers making commercial decisions on publicly-owned companies.

Committee took evidence from various bodies on Bulb Energy's transfer and sale.

Department closely monitoring ringfenced Bulb entity to ensure full recovery of taxpayer funding.

Estimated repayment from Octopus decreasing, subject to volatile wholesale energy market conditions.

Ofgem identified financial risks during Octopus sale, now monitoring company's resilience.

Estimated total taxpayer funding for Bulb sale reaches £3.02 billion; final cost unknown.

Anticipated shortfall in Bulb recovery likely to be passed onto energy consumers.

SAR preparedness did not fully match reality, revealing unforeseen challenges.

Early planning, collaboration, and suitable corporate structures are key SAR lessons.

SoLR process deemed more efficient than SAR for ensuring continuity of energy supply.

Inadequate hedging strategies or collateral funding contributed to energy supplier failures.

Government directed minimal hedging for Bulb, diverging from industry-standard practices.

Bulb's unhedged position and market volatility limited bidders, delaying its sale.

Novelty of the SAR complicated benchmarking and scrutiny of professional advice fees.

Government departments are actively developing corporate finance and insolvency expertise.

Insufficient financial regulation contributed to mass energy supplier failures amidst market volatility.

Ofgem explores new regulations to protect hedging contract assets during supplier failures.

Government implemented extensive £69 billion financial measures to support energy bill payers.

Improve administrative processes to increase energy bill support voucher redemption rates for vulnerable customers.

Ofgem's energy price cap directly impacts average household energy bills.

Energy Bill Discount Scheme excludes some energy-intensive businesses from higher support

Government Response AI assessment · 24 of 4 classified

Correspondence 1 letter