U.K. Financial Conduct Authority Should Investigate Al Gore Over Octopus-Bulb Deal (2)

Opinion by Mathew Carr

Nov. 30, 2022 — The British Financial Conduct Authority should investigate the role of Al Gore, former U.S. vice president, in the sale of failed energy utility Bulb to Octopus Energy.

The High Court should halt the deal while the investigation takes place, instead of approving it today. [Note, the High Court indeed gave the go ahead. See notes below.]

The demise of Bulb has cost U.K. taxpayers a staggering £6.5 billion ($7.8 billion), according to the Office for Budget Responsibility.

‘The total cost of the Bulb Energy bailout has reached £6.5 billion, with £4.6 billion of that in 2022-23 included in the Autumn Statement

OBR

Why should Mr Gore’s role, specifically, be investigated? Because of his “influence” (or lack of influence in the U.S.) on climate action, his links to the Biden administration and his role as Chairman of key Octopus shareholder Generation Investment Management.

The Competition and Markets Authority should also investigate to ensure there was no anti-competitive activity between Bulb and Octopus as natgas prices surged and they considered a merger. Is the Octopus-Bulb deal substantially eroding competitive tension in the British market?

On 27 September 2021, Octopus Energy announced “a major strategic partnership with Generation Investment Management, a firm established in 2004 to back businesses driving sustainability and the fight against climate change, in a deal that valued the U.K. entech pioneer at $4 billion pre-deal, and up to $4.6 billion post-deal.”

It was a vague deal of “up to $600 million of additional investment” from Generation IM for 13%.

At the time, global natural gas prices had already doubled in the past six months, putting financial pressure on Octopus (and Bulb).

Natgas prices have since skyrocketed and plunged.

Higher wholesale energy prices can reduce the profit margins of energy retailers or even completely eliminate profits, which has been a key factor behind multiple failures the past several years in the U.K. energy industry.

It’s unclear whether Octopus would have been able to survive without Generation IM’s investment.

A few days after the Generation IM deal, Octopus was simultaneously warning it was at the end of its financial capability taking on customers of failed companies, while perhaps / maybe / maybe not wanting to buy Bulb — way back then. And, yet, more than a year later the Bulb-Octopus deal seems to be being pushed through under the distraction of government polycrisis.

Check out two snips of this Daily Mail story from more than a year ago (linked above) – an apparent interview with Octopus CEO Greg Jackson:

Something smells funny.

What was Generation IM/Octopus’s role in seeking government /taxpayer help, hedging finance? (Hedging — usually buying energy futures contracts — is what energy retailers need to do to make sure they can make a profit on their retail contracts, even as wholesale prices rise.)

What was Generation IM’s role in pushing for the government’s energy price guarantee program?

It was the current conservative government in the U.K. (though different leaders) that encouraged new energy companies to start up, as Russia-Europe/US relations soured.

The UK government’s price-guarantee program might cost taxpayers/consumers well over £100 billion. It was needed largely because of the Russia-Ukraine war’s huge impact on energy prices.

Octopus has since soaked up market share, hiked its prices, all while playing the victim and saying it can’t afford to keep bailing out failures (see link above).

But, is it really a victim? Why can it afford it now? Because of the huge taxpayer subsidy?

The Financial Conduct Authority is among regulators who should investigate. The FCA’s role right now is this (I add emphasis):


We regulate the conduct of 50,000 firms in the UK to ensure that our financial markets are honest, competitive and fair. Find out more about our role.

Our role

Financial markets must be honest, fair and effective so consumers get a fair deal. We work to ensure that these markets work well for individuals, for businesses and for the economy as a whole

We do this by:  

  • regulating the conduct of around 50,000 businesses 
  • prudentially supervising 48,000 firms 
  • setting specific standards for around 18,000 firms 

The economy as a whole includes taxpayers. One of the firms the FCA regulates is Generation IM.

The FCA is kind of rudderless right now, making the Octopus-Bulb deal’s timing more intriguing and an investigation more urgent.

Richard Lloyd took over as Interim Chair of the FCA Board on 1 June 2022 and a new chairman won’t be in place until January. 

Lloyd joined the FCA Board in April 2019 and has been Senior Independent Director, Chair of the Board Risk Committee and Chair of the Oversight Committee.  

Lloyd may be qualified to investigate partly because he was a leader at consumer-advocacy group Which? — as executive director from 2011 to 2016. He may also be conflicted as he is too close to the U.K. government.

Prior to his role at Which?, he was chief executive of the world federation of consumer organisations, Consumers International; head of policy at the housing charity, Shelter; and worked for two years in No. 10 Downing Street as a special adviser to the Prime Minister. He was awarded an OBE in 2019 for services to the economy and consumer rights, according to his biography.

It’s no wonder Centrica, ScottishPower and Eon are among companies pushing back on this deal, as the Financial Times reported this morning. Centrica is challenging the deal in the High Court and has reportedly offered to provide a rival rescue deal.

CarrZee reached out to Generation IM for comment on my stance (see notes).

(Updated Dec. 1 with Daily Mail snips from last year to save readers from having to click the link, earlier added Guardian news on High Court approval. See notes)

NOTES

One

FT

Two

Snip of Guardian story on High Court decision published late today (Nov. 30).

The takeover of the collapsed energy supplier Bulb in a deal which would create the UK’s third largest gas and electricity provider has been approved in a London court.

Octopus Energy agreed last month to buy Bulb out of a government-handled administration process which has lasted for nearly a year.

Judge Antony Zacaroli was deciding whether to approve a scheme which will move some of Bulb’s assets into a new separate entity, and when to set a date for the transfer.

“I have made a decision that I should and will set an effective date,” he said, naming 20 December for the takeover.

The decision comes despite rivals E.ON, Centrica and Scottish Power lodging separate judicial reviews on Tuesday over what they claim is a lack of transparency around the terms of the deal between Octopus and the government.

Zacaroli said the judicial review proceedings were for an administrative court to decide and can run separately. The review could still delay or block the takeover.

If they failed in their reviews, then the suppliers could be liable for significant damages to Octopus and the administrators, sources said. It is understood that Octopus’s rivals are assessing their legal options.

The scrutiny around the collapse of Bulb has increased since the Office for Budget Responsibility said the cost of running the business in administration had hit £6.5bn. The government disputes this figure.

A spokesperson for Octopus Energy said: “The high court has rightly given the green light for the transfer to go ahead in December. Taxpayers will be saved from millions – even billions – of costs that could have been incurred if the process was dragged out.

“This is positive news for Bulb’s customers and staff, and starts to bring to an end the huge financial exposures for government and taxpayers.”

Zacaroli said he did not have “either visibility or control over the timing of judicial review proceedings”, the newspaper said.


Three

What I asked Generation IM’s press relations person, be email, earlier today (Nov. 30):

I’m a reporter about to publish a story about the Octopus-Bulb deal.

I believe there needs to be an investigation by the UK FCA into the role of Al Gore / Generation IM – because of the risks involved for UK taxpayers/energy consumers.

Would your client Generation IM like to comment on my stance? If your client does not believe there should be an investigation, do you mind saying why not?

What precisely was Generation IM / Octopus’s role in lobbying for or against the UK government’s energy price guarantee program?

Why is Octopus lobbying for / obtaining “hedging support” when the geopolitical risks in relation to Russia and Ukraine have been evident in markets for most of the past decade?

I won’t be publishing before 2pm London time today. I wanted to make sure I gave you the chance to comment.

Four

FCA’s new brief (but not until July 2023, so probably too late for this deal):

See here.

What we are changing  

We are introducing rules comprising: 

  • A new Consumer Principle that requires firms to act to deliver good outcomes for retail customers.  
  • Cross-cutting rules providing greater clarity on our expectations under the new Principle and helping firms interpret the four outcomes (see below).  
  • Rules relating to the four outcomes we want to see under the Consumer Duty. These represent key elements of the firm-consumer relationship which are instrumental in helping to drive good outcomes for customers.

These outcomes relate to:  

  • products and services  
  • price and value   
  • consumer understanding  
  • consumer support  

Our rules require firms to consider the needs, characteristics and objectives of their customers – including those with characteristics of vulnerability – and how they behave, at every stage of the customer journey. As well as acting to deliver good customer outcomes, firms will need to understand and evidence whether those outcomes are being met.  

Who this affects    

This policy and guidance is likely to interest:    

  • regulated firms, including those in the e-money and payments sector  
  • consumer organisations and individual consumers 
  • industry groups/trade bodies 
  • policy makers and regulatory bodies 
  • industry experts and commentators 
  • academics and think tanks 

Next steps   

The rules and guidance we are introducing come into force on a phased basis:  

  • for new and existing products or services that are open to sale or renewal the rules come into force on 31 July 2023  
  • for closed products or services, the rules come into force on 31 July 2024
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