The UK government has been accused of costing energy bill payers more than £200 per household following its “inexplicable” decision to bar nationalised retailer Bulb from hedging energy purchases for its customers.
The Office for Budget Responsibility, the fiscal watchdog, revealed this week that the projected cost of Bulb’s bailout had soared £6.5bn, most of which will ultimately have to be repaid by almost every home in the country. The government had predicted in March that it would total about £1.7bn.
Ed Miliband, the former Labour party leader, said the spiralling cost of Bulb’s effective nationalisation a year ago was “staggering” — and stemmed not just from the company’s errors, but through the way the government had handled its rescue.
Treasury guidance limits government-controlled companies from hedging, or buying customers gas and electricity in advance. In a year of hugely volatile energy prices, that has sent the bill for Bulb’s rescue soaring.
“The government should hang its head in shame over the Bulb fiasco and the staggering costs it is imposing on the British people of over £200 per household,” Miliband said.
The Department for Business, Energy and Industrial Strategy, BEIS, on Friday disputed the OBR figures, saying the government’s independent forecaster did not have visibility of the deal to sell Bulb to one-time rival Octopus.
BEIS said the total could be lower as it did not include the price of the company’s sale or potential repayments Octopus may make to the exchequer over time. The government has yet to reveal details of the sale, which has seen rival energy retailers consider launching a judicial review.
One senior Tory MP said the government was facing growing pressure to reveal the details of the planned sale to Octopus.
“It would be ludicrous if the government doesn’t come clean and publish the details of the deal, the sooner the better,” the MP said. “This isn’t something they’ll be able to keep secret forever.”
Under the sale announced last month, Octopus would absorb Bulb’s 1.6mn customers to become one of the largest companies in the retail energy space, rivalling Centrica’s British Gas.
BEIS did not deny that the bill for Bulb’s rescue would largely have to be absorbed by households through their energy bills. Households are already paying about £94 each to cover the cost of transferring customers from other smaller failed energy suppliers.
Michael Lewis, chief executive of energy provider E. ON UK, highlighted that the £6.5bn projected cost of the Bulb rescue was more than the £6bn allocated by chancellor Jeremy Hunt for energy efficiency projects such as home insulation over three years from 2025. He warned that a “frightening number of customers” risked falling into debt next year, putting more pressure on “an already fragile industry”.
“A lot of money is going towards tackling the symptoms of this crisis,” Lewis said. “The underlying causes — the inefficient use of energy and our reliance on imported fossil fuels — is still not being addressed at scale.”
Darren Jones, the Labour MP who chairs the Commons Business, Energy and Industrial Strategy Committee, said members had “long been concerned about the cost of the Bulb administration”. He added there were particular concerns over “ministers’ decision to prevent the administrators from hedging against future energy price rises”.
“It looks like bill payers are picking up the tab whilst many of those who created the problem walk off scot-free,” Jones added.
Hayden Wood, the CEO co-founder of Bulb, stayed with the company for more than six months following the government bailout and continued to receive his £240,000 a year salary during the period. He has since joined London-based Giant Ventures as a venture partner.
Conservative MP Kwasi Kwarteng, who had a brief stint as chancellor under Liz Truss’s shortlived leadership, was business secretary during Bulb’s initial move into administration. He said in May that the government had avoided hedging Bulb’s future energy sales because hedging was considered “risky”.
Gillian Cooper, head of energy policy at Citizens Advice, said the charity was concerned that Bulb’s costs would be transferred to households at a time when typical energy bills are already set to rise to about £3,000 next year from £2,500 this winter, as the government tapers support for bills.
“From the start there hasn’t been enough transparency about the costs involved and how they’ll be paid for,” she said.