Following an exhaustive and competitive selling procedure, the UK government authorizes a deal between the special administrators of Bulb and Octopus Energy to acquire Bulb’s 1.5 million consumers. The move provides a stable new home for Bulb’s customers and 650 staff.
Bulb customers are not required to take any action and will suffer no disruptions while organizations collaborate to ensure a seamless, market-driven exit from special administration.
In a move that will protect consumers and taxpayers, special administrators of Bulb and Octopus Energy struck a deal last night, the UK government confirmed today.
In recent months, the special administrators of Bulb have conducted a competitive and thorough sale procedure within the market for Bulb. They have finally struck a final deal with Octopus Energy to transfer Bulb’s 1.5 million subscribers.
Energy Transfer Scheme (ETS) will transfer Bulb’s relevant assets to a new business that will protect consumers during the transfer process. The process is subject to approval by the Business and Energy Secretary and will take effect at a time ordered by the High Court, expected by the end of November.
Customers of Bulb will not experience any alterations or interruptions to their energy supplies as a result of this transition. There is no change to either Bulb or Octopus customers’ supply arrangements, and credit balances are protected. Customers are therefore not required to take any action; all direct debits will be moved automatically.
The government will collaborate closely with Ofgem and Bulb’s special administrators to ensure that the exit from special administration and transfer of consumers to Octopus results in the best possible conclusion for Bulb customers, taxpayers, and the industry as a whole. Alongside the ongoing measures the UK government and independent regulator, Ofgem, are doing to strengthen the financial stability of the sector, a settlement was reached last night.
Minister of Business and Energy Grant Shapps stated:
Priority number one for this government is protecting customers, and last night’s sale will provide essential confidence and energy security to households across the nation at a time when they need it most.
This is a fresh start and means Bulb’s 1.5 million customers can rest easy, knowing they have a new energy home in Octopus.
In the future, I plan to do everything in my power to guarantee that our energy system serves everyone with secure and inexpensive energy.
Octopus will continue to use Bulb’s technology and brand throughout a time of transition to provide a seamless transition for Bulb’s consumers. In addition, customers will continue to benefit from Ofgem’s supply licensing protections, such as the need that energy suppliers offer vulnerable customers with guidance through current financial support initiatives.
Greg Jackson, chief executive officer and creator of Octopus Energy Group, says:
We take our obligations extremely seriously. We will work really hard to provide value for taxpayers and to take care of Bulb’s employees and customers.
We began as competitors, but we had the same mission: to create a cleaner, cheaper energy system with people at its center. We recognize the importance of this to Bulb’s devoted customers and employees, and we are determined that Octopus will provide them with a stable future home.
Matthew Cowlishaw, Senior Managing Director of Teneo and Special Administrator of Bulb Energy, stated:
When the energy administrators were appointed in November 2021, our key goals were to allow Bulb to continue business as usual while minimizing the expense to taxpayers. Following a thorough and extensive examination of all alternatives over the course of nearly a year, we and BEIS determined that this transaction would provide the greatest value to the taxpayer.
We are pleased that the objectives of the special administration have been met, especially in light of the broader disruption of the energy market, and that the transition of employees and customers will provide certainty for both parties moving forward.
The government will provide the remaining funds required to ensure that the special administration is wound down in a manner that protects the supply of customers.
The government can recover these costs in the future, ensuring the best possible outcome for Bulb’s customers and British taxpayers.
A multitude of causes, including Putin’s illegal invasion of Ukraine and the weaponization of energy, as well as the worldwide recovery from the COVID pandemic, are driving the present spike in wholesale energy prices. Recent fluctuations in global gas prices have highlighted the need to create more energy independence to protect households over the long term by generating clean power domestically.
The Energy Price Guarantee remains in effect and will continue at the same level this winter, saving the average household approximately £700 based on what energy prices would have been under the existing price cap, so decreasing bills by approximately one-third. This is in addition to the £400 savings on energy costs for each household and the ongoing rollout of further targeted support for the most disadvantaged, including £1,200 in direct payments this year.
Remarks to editors
Bulb consumers can learn more about this transaction and what it entails for them on the Bulb blog and receive frequent updates on Octopus Energy’s information page.
The deal reached last night was the result of a lengthy and competitive sale process conducted by Bulb’s special administrators.
Once the transfer becomes effective, Bulb UK Operations Limited will immediately assume the role of energy supplier for all consumers, as the program takes care of everything.
The terms and circumstances of tariffs and credit balances have not changed, and consumers should continue to pay in the same manner. Following this, Bulb UK Operations Limited will become a wholly-owned subsidiary of Octopus Energy Group Limited, Octopus Energy Retail 2022 Limited.
As part of our strengthened duties to protect the interests of existing and future energy customers, Ofgem has assessed this transaction under their trade sale framework. please refer to the Ofgem guidance on Significant commercial developments and senior personnel changes
There are three primary components to the transaction’s structure:
The sale will now be executed utilizing the Energy Transfer Scheme, which will transfer Bulb’s assets to a new organization. This entity will be sold to Octopus and will be segregated from its primary operations for a predetermined period. The transfer is contingent on the approval of the Secretary of State for Business, Energy and Industrial Strategy (BEIS) and will take effect at the time ordered by the courts, most likely on November 11; for the transfer to become effective, most likely on November 17, the government will provide financial support to the new entity for the procurement of energy for Bulb customers during Winter 2022. This financial assistance will be reimbursed by the new corporation according to an agreed-upon repayment plan, and a profit-sharing arrangement will be established for the ringfenced firm until Octopus has repaid the agreed-upon cash. Under this structure, payments from the ringfenced business to shareholders or the broader Octopus group would be prohibited until the repayable financing to the government is reimbursed.
Additional background
In November 2021, Bulb was placed under special administration. Special administration is intended to protect customers in the event that a major energy provider becomes insolvent. It enables a business to continue operating normally and, if circumstances permit, to be sold in full or in part at the appropriate moment.
A Special Administration Regime (SAR) is a long-standing, well-established method for protecting consumers and ensuring sustained energy delivery in the event of the failure of a large supplier.
Due to the extreme volatility of the market, it is impossible to accurately predict the exact cost of Bulb SAR.
The special administrator of Bulb is required to maintain administrative expenses as minimal as possible. Government has the option to recover expenses through the current shortfall recovery process, which would impose a fee on industry, thereby maximizing public value for money.
The government cannot promise that there will be no future energy provider failures.
Some businesses will fail in a competitive market, and the energy supply market is no exception, with new entrants and exits occurring often over the past decade.
In the event that a supplier fails, the government and Ofgem have comprehensive tools in place, including the competitive Supplier of Last Resort (SoLR) process and, if SoLR is impractical, the Special Administration Regime (SAR), to assure supply continuity and minimize consumer inconvenience.
To encourage the financial resilience of suppliers, Ofgem has implemented new rules for suppliers entering the market as well as modifications to existing regulations. This contains the Financial Responsibility Principle, a principle-based obligation for suppliers to ensure they efficiently manage their finances and actively mitigate the risk of leaving expenses to be mutualized in the case of their failure.