UK government sets aside £1.7bn to support Bulb customers
|bbc.com 25 Nov 2021 at 06:20|
The government loan of nearly £1.7bn will mean the administration is managed in a way that the lights stay on for Bulb s 1.7 million customers.
Teneo estimates it will cost around £2.1bn to keep Bulb trading until the end of April next year.
Business Secretary Kwasi Kwarteng can provide more money for the company if needed.
Without the cash, Bulb would not have been able to keep going past the middle of December, court documents show.
Due to its size, Bulb will be run as normal for the time being, rather than its customers being immediately transferred to other suppliers, as has happened with other failing energy providers.
By April, the cap on energy prices may have increased significantly, which would mean higher revenues for the business.
The company is three times larger than any other energy supplier that has failed in recent years.
Normally regulator Ofgem lets a firm fail and moves its customers to a new supplier.
At the High Court in London, Justice Adam Johnson said that if left unresolved uncertainty over Bulb would be "bound to have an effect on customers, employees and suppliers".
He said that the administration was designed "to keep the energy supply company going, with a view to it being rescued if that is possible".
He added that an alternative would be to appoint a supplier of last resort, adding: "That is thought to be impractical here, given the size and importance of Bulb as a supplier".
The judge said that the £1.7bn would be "of existential importance to Bulb".
Earlier in the day, Mr Kwarteng said the special administration regime was a temporary arrangement to provide "an ultimate safety net to protect consumers and ensure continued supply".
He told the House of Commons: "We do not want this company to be in this temporary state longer than is absolutely necessary."
Image source, Alamy
For Labour, shadow business secretary Ed Miliband said: "With so many companies going bust in just two months, something not happening anywhere else in the world, it points to a systemic failure of regulation.
"Firms took risky bets and were allowed to do so and the government and Ofgem significantly deregulated the conditions of operation in 2016.
Mr Miliband called for "a proper external review of the regulation of the market".
As a result of a cap limiting what companies can charge their customers, some businesses have been forced to sell energy for less than they bought it for.
Bigger companies tend to buy their gas further in advance, helping them avoid large hits from the price spike. However smaller firms that are less able to do that have come under pressure.
Since the beginning of September, 22 energy suppliers have failed following a spike in gas prices.
Labour MP Alex Sobel said: "We re moving back to an oligopoly of energy companies who are increasing their profits whilst the supplier of last resort is socialising losses.
Mr Kwarteng replied: "I ve always maintained that competition is absolutely essential in this market.
"What s happened is there s been a huge mismatch between the wholesale price and the retail price cap, and the retail price cap is there to protect consumers."
Liberal Democrat MP Layla Moran suggested a "Northern Rock-style energy company to take on customers of companies that have gone under" if the current process is not working.
Consumer group Which? said the support "should provide reassurance" to Bulb customers.
"We recommend Bulb customers to do nothing and wait for more information about the special administration process," said Which? home products and services editor Lisa Barber.
"Its customers will continue to see their bills limited by the price cap, which is likely to be the best deal for them at the moment.
"There are few savings to be made by switching and some suppliers are not taking on new customers due to high wholesale gas prices," she added.