Octopus Energy is poised to repay the UK government almost £3bn to cover the state support it received to take over the collapsed energy supplier Bulb.
Octopus will reimburse the government by September in a move that will enable the Treasury to effectively claw back almost all the costs of temporarily nationalising Bulb.
Bulb collapsed in 2021 after it was forced to sell energy at a loss when wholesale prices spiked above the price cap set by the regulator, Ofgem. The government stepped in to ensure its 1.6 million customers still received energy and Bulb was taken into state control temporarily under the special administration regime.
In late 2022, Bulb was sold to Octopus, which is the UK’s second largest energy supplier, with billions of pounds of taxpayer support in a sales process run by the UK government and Teneo, which acted as special administrator to Bulb.
The repayment of the state support, first reported by the Financial Times, comes as a result of an agreement when the takeover was struck under which Octopus would repay the state support by the end of this year, or extend the agreement into 2025.
The Octopus deal prompted accusations of unfairness from rivals ScottishPower, British Gas and E.ON. The energy companies brought a high court judicial review last year against the UK government, claiming that its decision-making process was flawed in allowing the Bulb sale to go ahead.
However, the high court rejected the legal challenge and ruled that the sale process had been conducted as an “open, non-discriminatory and competitive bidding process”.
The Bulb bailout was at one time estimated to be the UK’s most expensive rescue since the 2008 financial crisis with one figure putting taxpayer support to be as high as £6bn. However, this was revised downwards as energy costs fell, and the Office for Budget Responsibility last March put the cost of the rescue at £3bn.
The structure of the deal struck by the Treasury with Octopus effectively means that the bailout of Bulb is costing the government almost nothing.
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Greg Jackson, the founder of Octopus, said: “This outcome is a great result for taxpayers. 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.”
Earlier this year, Octopus reported its first annual profit since it was formed in 2015. It has 6.9 million customers in the UK.
