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Collapse of supplier Bulb could add more than £150 to energy bills

Collapse of supplier Bulb could add more than £150 to energy bills

 

Households could end up paying more than £150 extra on their energy bills because of the collapse of Bulb, as the price of bailing out the failed supplier threatens to top £4bn by next spring.

The cost of bailing out the UK company, which has about 1.4 million customers, has escalated because of rising wholesale gas prices since Russia’s invasion of Ukraine.

The Office for Budget Responsibility said in March that the bailout would cost £2.2bn over two years. The consultancy Auxilione forecasts that Bulb could lose a further £420m for the six months to October, when households use less energy, and £1.6bn during the colder winter months.

Bulb is in a special administration overseen by the UK government and run by the restructuring firm Teneo. The government has refused to allow it to hedge – where companies buy energy at a fixed price for a certain period – exposing it to rising gas prices.

Bulb was one of 29 suppliers to have collapsed during the energy crisis, with many caught out by sharp rises in prices combined with a lack of hedging.

The Auxilione director Tony Jordan told the Financial Times the government “was paying a high price for the lack of hedging, and costs could rise even higher if gas prices continue to soar”.

Bulb was considered too large to fail and the government stepped in to handle its administration. However, it has yet to find a buyer, with only Octopus, the UK’s fourth largest supplier, still interested in a deal.

Octopus has offered to take over Bulb’s customers if the government buys gas and electricity in advance at a cost of £1bn, the FT reported. Octopus has also offered terms under which it would share in the profits of Bulb’s customers with the government should they become profitable. The Octopus chief executive, Greg Jackson, declined to comment on the report.

Wholesale gas prices soared again on Monday – with the UK month ahead price up 16% to 535p a therm.

The Russian state energy company Gazprom said on Friday – after financial markets closed – that it would halt natural gas supplies to Europe through its main Nord Stream 1 pipeline for three days at the end of the month.

The unscheduled maintenance on the pipeline under the Baltic Sea will take place on 31 August until 2 September.

Industry watchers fear that Russia will not switch supplies into Europe back on, forcing countries to cut their gas consumption and risking a recession in Germany, which relies on Russian gas imports.

The energy crisis in Great Britain is expected to deepen this week when the regulator Ofgem announces the level of the industry price cap, to be introduced in October. It is forecast to rise from £1,971 to £3,582.

Dale Vince, the founder of the supplier Ecotricity, said Britain’s energy supply system is “broken” and consumers should not have to pay for the cost of suppliers’ failures in their bills.

He told BBC Radio 4’s Today programme: “This problem predates the Ukrainian war. We have a systemic failure in the energy market; the government does need to intervene. We shouldn’t expect customers to pay the cost of this failure and the Ukraine war.”

Jackson said energy supply retailers were a “profit-free zone”. “You can’t expect the energy customers or indeed retailers to carry the cost of a war.” Jackson said gas prices are nine to 11 times higher than normal. “If this was beer, we’re talking about the wholesale price being £25 a pint,” he added.

Vince backed the idea of a deficit fund, which energy suppliers have proposed to the government. Under the plan, energy bills would be frozen and suppliers would be able to access a fund to cover wholesale costs, which would be paid back over 10 to 15 years.

Blog post from theguardian