Octopus Energy to pay back nearly £3billion to Government for Bulb takeover

21 June 2024 , 12:39

800     0

Octopus Energy took over Bulb in 2022 with a package of Government support (Image: PA Archive/PA Images)

Octopus Energy is set to pay the Government nearly £3 billion to reimburse the public funds it received to take over the collapsed energy supplier Bulb.

This repayment will provide an early windfall for the next Government, with the payment promised by September, and it means almost all of the costs of temporarily nationalising Bulb in 2021 will have been recovered by the public purse. Bulb went under in 2021 after wholesale prices surged above the price cap set by regulator Ofgem, forcing suppliers to sell energy at a loss.

The Government stepped in to keep the lights on for Bulb's 1.5 million customers under a new process called a special administration regime (SAR). In late 2022, the Government sold Bulb's customers to Octopus.

It provided more than £1.6billion in temporary taxpayer support to cover the energy needed to supply those customers. The nearly £3billion repayment, confirmed on Friday, was part of the terms, based on estimated future costs.

The repayment was first reported by the Financial Times. The fact that the price of energy has now fallen means the Government makes a profit of nearly £1.3billion on the deal, which in turn covers all but £6million, about 99%, of the total costs associated with temporarily nationalising Bulb.

Britain faces the worst recession among G7 partners, economists predict

When the Government sold Bulb to Octopus, rivals such as ScottishPower, British Gas and E. On brought a legal challenge against the deal, saying it was an "unfair sale process" and took their grievances to court. However, the high court rejected their legal challenge.

Octopus Energy, later in the year, swelled to become Britain's largest energy supplier, overtaking British Gas by snapping up 1.3 million customers from Shell Energy. Octopus founder Greg Jackson 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."

Lawrence Matheson