Seventy-Fourth Report - Bulb Energy

Select Committee

Public Accounts Committee HC 1232 1 November 2023

Report Status Government responded

Conclusions & Recommendations 25 items (4 recs)

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Government Response (AI assessment · 24 of 25 classified)

Accepted 16

Acknowledged 5

Not Addressed 3

Government response

Treasury minutes: Government response to the Committee of Public Accounts on the Seventy-fourth report from Session 2022-23 · published 14 Feb 2024

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Recommendations & Conclusions

5 results

5 Conclusion Acknowledged

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

Conclusion

The complex nature of the Special Administration Regime and sale process has required specialist skills and advice that are in limited supply within government. During the SAR and sale process for Bulb, government sought and appointed various advisers to support … Read more

Government Response Summary

The government agrees with the recommendation, outlining that the GCFP continuously evaluates its purpose and will include raising awareness of specialist skills in its forward plan, as well as continuing to monitor and update knowledge-sharing tools and arranging seminars.

HM Treasury

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7 Conclusion Acknowledged

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

Conclusion

The SAR will continue until Octopus has repaid the taxpayer funding and Bulb’s outstanding costs and liabilities have been settled. We asked the Department how it was managing the recovery of the temporary taxpayer funding provided to Octopus. The Department … Read more

Government Response Summary

The government agrees with the implied need for ongoing management and monitoring of the Bulb SAR. It states that lessons learned activities are ongoing and will continue throughout the SAR lifecycle, and the department will conduct a benefits analysis towards the SAR's conclusion.

HM Treasury

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8 Conclusion Acknowledged

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

Conclusion

The NAO reported that the estimated amount Octopus was expected to pay back was £2.96 billion, based on the wholesale cost allowance in Ofgem’s price cap methodology. This included the one-off payment of £1.06 billion made by BEIS on 20 … Read more

Government Response Summary

The government acknowledges the estimated repayment of £2.8 billion by Octopus, expected by September 2024 with a potential deferral to September 2025. It further states that it does not expect full recovery and intends to recover any shortfall from energy consumers, with the final cost to be calculated at the SAR's conclusion.

HM Treasury

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10 Conclusion Acknowledged

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

Conclusion

The total cost of the taxpayer funding committed to the sale and supporting Bulb was made up of a number of areas of spend. These included: £0.16 billion to offset Bulb’s remaining liabilities; a one-off loan of £1.06 billion to … Read more

Government Response Summary

The government agrees with the conclusion, confirming that the actual cost of the SAR will be known only after its conclusion, expected in autumn 2025 or 2026. It commits to informing the Committee of final confirmed amounts and providing a written update on estimated outturns and timelines by December 2025.

HM Treasury

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11 Conclusion Acknowledged

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

Conclusion

When we examined the regulation of energy suppliers in November 2022, we found that the SoLR intervention was expected to cost £2.7 billion. This cost was expected to be passed onto energy consumers and resulted in an increase in average … Read more When we examined the regulation of energy suppliers in November 2022, we found that the SoLR intervention was expected to cost £2.7 billion. This cost was expected to be passed onto energy consumers and resulted in an increase in average bills by £94 per household.16 We therefore asked the Department how it would determine whether there was a shortfall at the end of SAR and how much of this would also be passed onto customers. The Department told us that it expected to recover the majority of the £3.02 billion taxpayer funding, but that it expected that there would be a shortfall. At the time of the NAO report, Octopus was expected to repay £2.96 billion to meet the cost of the collateral and the wholesale energy costs for Bulb. This would leave a shortfall of £246 million that will also need to be recovered (including accrued interest, which was applied to the taxpayer funding at a market rate of interest set at a level that was not a form of subsidy). At the time of our evidence session, Teneo reported that the estimated amount Octopus would be due to repay to government was £2.8 billion. HM Treasury explained that recovery of the shortfall through energy consumer bills formed part of the system set in place by the legislation included in the Energy Act 2011. It explained that this was originally set up to ensure continuity of energy supply to consumers, but that the cost of such processes go back to energy consumers. The Department explained that it had not yet been decided whether the shortfall will be recovered through energy consumers or taxpayers, but that it had already set out to Parliament its intention to recover the cost from energy consumers. The Department and Teneo told us that should this be the case, this would cost an estimated 75p per month or £8 to the average household for a year, or £4 per year over two years.17 15 Q 105; C&AG’s Report, paras 13–15, 2.7, Figure 5 16 House of Commons Committee of Public Accounts, Regulation of energy suppliers, Show less

Government Response Summary

The government agrees with the conclusion, confirming the SAR's expected conclusion in autumn 2025 or 2026 when final costs will be known, including any shortfall. It commits to providing the Committee with a written update on final confirmed amounts and timelines for recovery by December 2025.

HM Treasury

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