The taxpayer bill for failed retail energy supplier Bulb has soared to £6.5bn, making it the largest state bailout since Royal Bank of Scotland in 2008, according to official documents released on Thursday.
Bulb was effectively nationalised after collapsing with 1.6mn customers in November last year, after soaring gas and electricity prices exposed the fast-growing company’s failure to secure the energy it had promised customers in advance.
The total cost to taxpayers is now the equivalent of more than £200 for every household in the UK, according to figures published by the Office for Budget Responsibility on Thursday.
Bulb was the largest and highest profile of a string of energy retailer collapses in the past 18 months, leading to criticism of the government and regulator Ofgem’s failure to scrutinise the sector properly.
Customers of 28 other collapsed energy suppliers have been transferred to rivals at a cost of £2.7bn, which has already been added to every energy bill in the UK at a cost of £94 per household.
Bulb’s customer base was deemed too large to transfer, however, and was effectively taken over by the government until it was sold last month to Octopus Energy.
The cost of the government bailout of Bulb may be added to customer bills next year, the Treasury has previously said. It was initially estimated by the government at £1.7bn in March, while energy consultancy Auxilione estimated in August it would rise to around £4bn by spring 2023.
The jump to £6.5bn according to the OBR, the government’s official forecasters, covers the period to the end of 2023 despite the takeover by Octopus Energy.
The OBR figures will fuel the suggestion that part of the deal includes additional government support. Octopus did not respond to a request to comment.
The OBR said in an email that the cost took “account for the planned takeover by Octopus”.
Companies including British Gas, Eon, and Scottish Power are threatening to launch a legal challenge over the lack of transparency surrounding the agreement, with terms of the deal between the government and Octopus Energy not yet disclosed.
It was previously reported that the government had agreed to lock in Bulb’s fuel purchases at a cost of about £1bn, although the government would be repaid as the energy was used.
This year Octopus took over 580,000 customers of Avro Energy, another failed COMPANY, and will rival British Gas as one of the largest energy retailers in the UK after absorbing Bulb.
Taxpayers have paid for Bulb’s running costs, including the £240,000 a year salary for Hayden Wood, the company’s founder and chief executive, who stayed with the company until the end of July. He has since joined London-based Giant Ventures as a venture partner.
Together with co-founder Amit Gudka the pair earned more than £8mn from a Bulb share sale in 2018.
The company paid quarterly bonuses to retain staff in the wake of the state bailout.
Taxpayers are also on the hook for at least £34mn in administration fees including £25mn of fees charged by Teneo, the administrators of Bulb Energy, which is being scrutinised by the High Court, plus a further £3mn in pre-appointment costs that will ultimately be paid by the taxpayer.
Additional reporting by Michael O’Dwyer