News, opinion by Mathew Carr
Dec. 20-21, 2022 — On Dec. 20, Octopus Energy took over rival Bulb, even before the deal is properly scrutinized by the U.K. judicial system, let alone taxpayers who are footing massive payments.
It means Octopus achieved a remarkable rise in Britain’s energy market, with the supplier now nearing the size of market leader Centrica / British Gas, based on this proxy data published in the dark of night earlier Tuesday.
The cost of taxpayers could be as high as £4.5 billion, the government said Wednesday (see below).
See the official government data, which excludes Wales, outlining who delivered what under a £3.7 billion payment program to help consumers deal with the energy crisis prompted by the Russia-Ukraine war:
Source: see link below.
Bulb got in trouble a year ago as surging natgas prices made the markets dangerous for undercapitalized utilities with questionable business strategies, and it is now being taken over by Octopus.
Including Bulb in Octopus’s figures means it distributed £615.1 million pounds under the program so far, compared with £747.4 million by Centrica / British Gas. The merged entity is also close to EON’s £637.7 million and far exceeds EDF’s £432.6 million.
Even the mighty Royal Dutch Shell, boosted by massive crude oil profits, has failed to keep up as it transitions to electricity, delivering just £175.9 million under the program.
OVO Electricity may feel badly treated, as it wanted to buy Bulb a year ago, according to this.
On Wednesday, Octopus said this (from an unnamed person):
WEDNESDAY 21st DECEMBER
Today, we are contacting all Bulb customers with this email:
“Last night – at 11:58pm – Octopus purchased Bulb’s energy supply business. I dearly hope this brings an end to over a year of uncertainty, and provides a good solution to UK taxpayers, the Bulb team, and, of course, to you.
I’m serious about that. For years, Bulb has stood for good value green energy with outstanding customer service. These are precisely the values Octopus was founded on, and you have my personal commitment we will deliver on them.
In terms of what happens next: we’ll work hard to make this as straightforward and simple for you as possible. You’ll still be supported by the same dedicated Bulb team and if you need anything simply contact Bulb, just as you usually would.
Over the next few months, we’ll transfer you to our award-winning energy platform: you don’t need to do anything.
There’s no change to your supply, and your balance will automatically transfer to Octopus.
If you pay for your energy by top-up, your top-ups are working as normal. If you pay by Direct Debit, we’ll automatically transfer that over to Octopus at the appropriate time, so you won’t need to lift a finger.
We’ll let you know when your account is moving across to Octopus systems, and we’ll share your new account details and help you get set up. Until then, you’ll still be able to use your Bulb account and app, just as you have up to now.
If you want to keep up with how the process is going, we’ll be refreshing https://octopus.energy/bulb/.
It’s a good thing that incumbents in Britain’s energy market are being challenged by newcomers. This is potentially healthy competition.
But how healthy is it? See stories linked 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 (see document below). This is the biggest bailout since the Bank of Scotland was saved by taxpayers during the global financial crisis more than a decade ago.
[It’s unclear whether we need to add the £4.5 billion and £6.5 billion together to get an understanding of the cost.]
The good news is the taxpayer will potentially share profits but it’s unclear what the total taxpayer risk is, if, say, the Russia-Ukraine war worsens. The risk post March seems unclear, still, but the business should be “fully hedged” by then (see below).
The terms, Octopus says, are as follows:
Octopus is paying the government a nine digit sum and in addition will be paying a high proportion of any profits made through Bulb. The total amount Octopus is paying will be in the hundreds of millions of pounds.
For more information about the deal, head to the government website here.
I reckon the UK should delay this takeover so there can be detailed parliamentary, regulatory and judicial scrutiny of it.
The context here is the U.K. government is desperate for a post-Brexit trade deal with the U.S. to justify (the unjustifiable?) Brexit and it’s unclear what the U.S. is asking for in return, probably ahead of any trade deal. These negotiations need to be brought to light. That’s my key point, given the involvement of former vice president Al Gore (see below).
Meantime at an even higher level, the Group of Seven countries and G20 are trying to clinch a deal to save the world’s climate, negotiations that are also apparently taking place largely in the dark of night.
Coming back to Bulb, see this from a UK parliamentary committee website from October:
The Government has swerved recommendations to improve how it deals with large energy firms after they go bust, made by the Business, Energy and Industrial Strategy Committee in its report, Energy and Pricing and the Future of the Energy Market.
- Government Response: Energy pricing and the future of the energy
- Inquiry: Energy pricing and the future of the energy market
- Business, Energy and Industrial Strategy
The report called on government to ensure that costs associated with the Special Administration Regime of Bulb Energy, which went bust in November 2021, should be paid for through general taxation, rather than being added to all consumers’ energy bills.
Sky News reported on 8th October that if Bulb is soon purchased by Octopus Energy this would see a total liability of up to £4bn. These costs have been pushed up unnecessarily by the Government’s failure to let Bulb’s administrator hedge gas and electricity for its 1.6 million customers.
And it is not even as though Octopus is a great operator.
In September, Octopus was in a large group of utilities assessed by regulator Ofgem to have “minor weaknesses” in their systems when supporting households who are having difficulty paying their energy bills.
Some of these don’t seem that minor to me. Ofgem:
“For this group of suppliers, we identified some weaknesses or gaps in their processes that they need to make improvements to. Examples include lack of signposting to third party specialists in communications, gaps in training and policy documents, issues providing accurate data to Ofgem, gaps in assurance and risk management processes that could potentially impact suppliers ability to identify risks and develop improvements and potentially not taking account of all relevant factors when setting customer repayment plans. We have started compliance engagement with these suppliers to secure improvements.”
I would note that the regulator does not seem to be that keen to hold these companies specifically to account, vaguely grouping them together like it does.
Octopus does seem to have some cool tech. But I’m pretty sure I never gave it permission to assess to what level my laptop was charged. So is Octopus within the law here?:
I asked Octopus to comment on my direct and implied criticisms and will let you know if I hear back. I’m still struggling to determined whether the competition in the British energy markets, or whether this deal, is fair. It’s still unclear what the risk to the taxpayer is, but the statement today helps. Please send comments to firstname.lastname@example.org
(More to come)
Bulb SAR: post transfer facility
Published 21 December 2022
Energy supplier Bulb was taken into special administration by an order of the court on 24 November 2021, with the business continuing to supply energy to its customers and operate as normal under a special administration regime, with financial support provided to Bulb in special administration by government via a funding facility. The special administrators are required to pursue their statutory objectives to secure that energy supplies are continued at the lowest cost which it is reasonably practicable to incur until such times as it becomes unnecessary for the special administration to remain in force for that purpose. They must perform their functions as quickly and efficiently as is reasonably practicable.
Bulb’s special administrators have run an open and competitive sale process which has identified a buyer for the business, Octopus Energy. The final agreement will see Bulb’s 1.5 million customers transferred to Octopus Energy.
In order to realise the sale of Bulb’s business and to protect consumers, government will assist Bulb in providing support to a new and separate entity, owned by Octopus Energy, which will serve Bulb customers until the transfer process has completed and those customers have been fully transferred to Octopus.
Bulb (in special administration) will retain access to its existing funding facility, which will be capped at a new, post-transfer figure for the purpose of settling outstanding pre-appointment costs and liabilities, administration and operating expenses of the special administration and to discharge any wind down costs of winding down the special administration.
A new funding facility will also be made available to Bulb post-transfer, which will be made available to discharge Bulb’s obligations in relation to:
(i) a cash injection of an amount to ensure the consideration paid by Octopus at completion is positive ;
(ii) payments (if needed) to adjust the initial consideration to reflect the actual as opposed to the estimated value of certain assets after transfer to the new entity;
(iii) the energy cost funding agreement between Bulb and the new entity put in place to meet the cost of purchasing wholesale energy for the transferring Bulb customers for a limited period until 31 March 2023;
(iv) certain energy purchase hedging costs related to the delayed date on which completion occurred;
(v) a payment (if needed) to adjust for actual as opposed to estimated energy consumption by the transferring Bulb customers; and
(vi) should it be necessary, to indemnify the new entity for any regulatory liability that it might incur as a result of Bulb’s actions prior to the transfer.
Government has been advised by the special administrators that they estimate the new post-completion funding facility, limited in the manner described in the paragraph above, has an upper value of £4.5 billion. Repayments of element (iii) above, which is a significant part of the support that government will be providing for the transfer, will be made by reference to actual consumption of the transferring customers, calculated using the relevant wholesale cost element of the price capped energy unit price.
The objective of government providing this support is
(i) to address the social hardship that would be caused to Bulb’s customers if Bulb were to be forced into a ‘hard close insolvency’ resulting in Bulb being unable to continue supplies of electricity to its customers and
(ii) to remedy the failure of the loan market in terms of its willingness to provide affordable finance to energy companies in the current economic climate, by enabling the business which is being transferred to become fully hedged in respect of its wholesale energy purchases from April 2023 onwards.
The £4.5 billion figure represents an estimated upper limit of the support based on forecasted energy costs during the period until 31 March 2023, which reflects the current volatility in global energy prices. The extent of government support could be lower than £4.5 billion, depending on energy prices this winter.
There are 3 key time limits attached to this support:
1. actual costs of wholesale energy incurred by the new entity during the ‘Initial Period’ until the end of March 2023;
2. base proposal: 100% of repayable funding to be repaid not later than September 2024; and
3. repayment can be deferred to not later than September 2025 should objective criteria be met (it is this timeline which has been declared on the Subsidy Transparency database).
The government has worked closely with Ofgem and Bulb’s special administrators to ensure the exit from special administration and transfer of customers to Octopus achieves the best outcome practicable for Bulb customers, the industry, and taxpayers.
Despite Brexit: Octopus’ Bulb deal could trigger EU involvement, says lawyers: City AM
SOURCE DOC, spreadsheet
The Department for Business, Energy and Industrial Strategy (BEIS) has collected information about the payments made under the Energy Bills Support Scheme GB (EBSS GB) in England, Wales and Scotland. Electricity suppliers were asked to provide data on their payments to eligible customers.
The spreadsheet shows the monthly and total amount of money that each electricity supplier in England, Wales and Scotland:
- was allocated from central government
- distributed to customers
The data are presented by:
- electricity supplier
- electricity meter type
More documents here
Document Name: Gazette Notice of Energy Transfer Scheme
Document Link: https://www.ips-docs.com/DocumentViewer/Index/abbfe900-4eeb-4102-9570-0742ff42ca06/696df340-e4e6-4b17-b095-f4fe760f0ab4
Document Name: Notice to Unsecured creditors of Energy Transfer Scheme
Document Link: https://www.ips-docs.com/DocumentViewer/Index/145d0206-f8f5-4450-946b-0900e809aec1/121fbd26-2c4d-4d40-bb08-f22e70d4aaad
Document Name: Joint Energy Administrators statement of Proposals dated 19 January 2022
Document Link: https://www.ips-docs.com/DocumentViewer/Index/86c5038b-87f9-4772-98c1-0b5c7cfef84c/bc248f1b-9a47-41c3-8d8d-087eb0706cdc
Document Name: ESCA 12
Document Link: https://www.ips-docs.com/DocumentViewer/Index/894fc8b6-ad95-4487-b37b-2e0726bf85e8/062821c6-7353-43c3-a8c7-a50ea7624d01
Document Name: Bulb Energy Ltd (in Energy Supply Company Administration) – Notice of Effective Time
Document Link: https://www.ips-docs.com/DocumentViewer/Index/2b3a4a4f-4866-40b7-95d0-30a55fad05b6/f83c300b-dfea-42c7-abd8-c921878e3004
Document Name: Notice of Hivedown Effective Time
Document Link: https://www.ips-docs.com/DocumentViewer/Index/5284f43b-715e-462f-a15d-368d1c8f1695/76ce4037-018c-46e4-8ef0-a00237f62e0b
Document Name: Proof of Debt form
Document Link: https://www.ips-docs.com/DocumentViewer/Index/1d61177e-4298-41bf-82c0-43d1af275435/dd1c8248-ce7d-4a30-9464-f276bef2c9f1
Document Name: Letter to all creditors regarding the Joint Energy Administrators Proposals
Document Link: https://www.ips-docs.com/DocumentViewer/Index/a51b4f1f-0965-42dd-9799-5a69ecc17060/9dfa2fcb-5fc2-42bd-bca7-440532ef8933
Document Name: Statement of insolvency practice 2 – Investigations by office holders
Document Link: https://www.ips-docs.com/DocumentViewer/Index/d794fa90-a2ef-44f4-a027-5ca74aadcf16/ab62fd4c-1de8-4be5-9033-a730b64efc96
Document Name: Adjournment Notice
Document Link: https://www.ips-docs.com/DocumentViewer/Index/c996c6ee-a6da-4bd4-ae99-64b8b13b515c/a89fb236-8af6-49fd-af2a-fbc3cb007f74
Document Name: Letter to Creditors re Progress Report to 23 May 2022
Document Link: https://www.ips-docs.com/DocumentViewer/Index/dfb6e958-cb9e-4bbc-96aa-72662ae28d5d/83fde952-c15c-40b8-92d9-2440b526a1c4
Document Name: UK insolvencies EC Regulations Translations – Invitation to lodge claim
Document Link: https://www.ips-docs.com/DocumentViewer/Index/22ed2d09-0cac-406f-9f89-78bc188349d4/b05ee0b3-5565-473e-9e36-0430aae48682
Document Name: Notice for creditors 26.08.22
Document Link: https://www.ips-docs.com/DocumentViewer/Index/bfa16aef-9cbf-4e1e-a30f-7e47b86f6086/1d964653-9aec-446a-881c-fcad437e917e
Document Name: Scheme Summary
Document Link: https://www.ips-docs.com/DocumentViewer/Index/aa9d3e58-dbb3-49d7-afdd-84a6a2478fc0/d012037d-9f8a-4e46-9338-89f3ca8abd87
Document Name: Letters to Creditors re appointment
Document Link: https://www.ips-docs.com/DocumentViewer/Index/e2e389c8-cfd9-4fe2-bb16-85ac12ed6a23/aec8cee2-5671-4e06-b4c3-caa8c56ccb9a
Document Name: Court Order Second Hearing Notice
Document Link: https://www.ips-docs.com/DocumentViewer/Index/a927aab0-5792-47cf-b7f9-86d6214c421a/34216e01-077a-4ae7-a7b4-0c1690117cf1
Document Name: Letter to Unsecured Creditors & Members Remenuration Application
Document Link: https://www.ips-docs.com/DocumentViewer/Index/90de4b2d-6a55-4502-a815-8771690048fe/70bb2dc6-15ea-4fab-afd9-52be01a17119
Document Name: Second Hearing Notice
Document Link: https://www.ips-docs.com/DocumentViewer/Index/6417f011-a62d-439a-a1a5-a12412d8027c/be55e60e-c685-49b1-85bd-753e5a3ebea3
Document Name: Important notice – creditors’ details
Document Link: https://www.ips-docs.com/DocumentViewer/Index/6b03b419-17ef-4e73-bd7a-a344ebcbe058/45f809dd-424d-4907-a673-103c81b7a6e6
Document Name: Joint Special Administrators Progress Report to 23 May 2022
Document Link: https://www.ips-docs.com/DocumentViewer/Index/6031d0d8-9795-441d-92af-b824aec9a4d0/864d09d2-bd20-481b-80b0-8831e1c211ea
Document Name: ICAEW Code of ethics insolvency practitioners May 2020
Document Link: https://www.ips-docs.com/DocumentViewer/Index/04099585-d30a-45b4-8979-c9da4e7c9a8b/f8f3b3f1-5e2f-4fa2-85a8-7e7945955b54
Document Name: Information for creditors
Document Link: https://www.ips-docs.com/DocumentViewer/Index/f67aa319-3813-4bd8-9610-ca6242ffd081/0a1adce8-282e-4fa8-acce-348b95b46e08
Document Name: 007 The Insolvency Practitioner Complaints Gateway 010621
Document Link: https://www.ips-docs.com/DocumentViewer/Index/b3fec29b-ff12-45af-8231-cc17932f9f83/6986f83e-4a88-49e0-b7d1-a918b01f5f84
Document Name: Bulb Energy Ltd (In Energy Supply Company Administration) – Sealed Scheme Order – CR 2021 002181
Document Link: https://www.ips-docs.com/DocumentViewer/Index/95e47912-e22c-4373-aef6-dd4e4b486228/83fbe47a-797d-4378-a94e-9ccd887ce476
Document Name: Notice of Joint Energy Administrators Proposals
Document Link: https://www.ips-docs.com/DocumentViewer/Index/26a50ed9-2c65-4d34-b139-deff0fe90af4/ea62016b-288a-4596-bc11-cc505e522397
Document Name: Court Hearing Notice
Document Link: https://www.ips-docs.com/DocumentViewer/Index/1f6fb629-d673-42ec-8431-e8bdf1928c98/d810d0f6-e3a2-4143-b0a6-b47c41f4d2ca
Document Name: Letter to Unsecured Creditors & Members Expenses Application
Document Link: https://www.ips-docs.com/DocumentViewer/Index/b59b2778-282f-4b72-8f34-ea62868ef204/3abc2beb-dea8-428d-8775-f325d82558e3
Document Name: Court Order – Bulb Energy Ltd (In Energy Supply Company Administration) – Customer creditor exclusion from reporting
Document Link: https://www.ips-docs.com/DocumentViewer/Index/af145132-071d-4b5e-b88b-ed716390b54c/fce66d35-93b0-4e61-afe6-ff1f909caee3
Document Name: Notice of Proposed Effective Time
Document Link: https://www.ips-docs.com/DocumentViewer/Index/9a8be8fc-6823-4506-8e58-f15cbeee041a/95dfae6b-6cae-4743-8ef9-eed60b29b5fe
Document Name: Scheme Document
Document Link: https://www.ips-docs.com/DocumentViewer/Index/68b3f82f-ff48-42a1-9999-f4fdd0f503f8/b4ede918-f41d-4f91-9780-2a4bbd066bbe