High Court rules government plans to sell Bulb to Octopus can proceed

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The High Court has ruled that the UK government’s plan to sell bailed-out energy supplier Bulb to Octopus can proceed, despite challenges from rivals ScottishPower, Eon and British Gas owner Centrica.

But opponents to the deal could still apply for a court order to suspend the transfer of Bulb’s 1.5mn customers to Octopus ahead of a potential judicial review. The transfer is set to take effect on December 20.

Centrica, Eon and ScottishPower, which have criticised the opacity and the speed of the sale, this week confirmed that they had lodged judicial reviews of the government’s decision in October to approve the rescue deal, the biggest state bailout since the financial crisis.

Centrica has claimed in court documents that the deal poses a threat to the stability of the energy sector and disclosed that it had proposed to ministers an alternative plan, which it says would be better value for taxpayers.

The financial rescue of Bulb has ballooned, with taxpayers on the hook for potentially hundreds of pounds per household.

The total could exceed £200 per household if the final cost exceeds about £5.8bn, based on the number of UK homes. The Office for Budget Responsibility has estimated that the bill to the taxpayer will soar to £6.5bn.

The sale to fast-growing Octopus would create a challenger to British Gas and Eon as the merged company would become one of the biggest retail energy suppliers in the UK.

But the deal has become increasingly contentious, with the government declining to reveal the terms of the sale and rivals complaining that Octopus is probably receiving “state aid” to take on Bulb’s 1.5mn customers.

Octopus and Teneo, special administrator to Bulb, have argued that companies interested in buying the failed supplier could also have sought funding from the government during the lengthy sales process.

The legal battle has pitted the old guard against one of the most prominent new “challenger” energy companies.

Octopus was launched in 2016 by the technology entrepreneur Greg Jackson to break up the might of the “legacy” suppliers such as Centrica, which is led by Chris O’Shea, who has previously held senior roles at Shell and the former BG Group.

Bulb was placed into special administration in November 2021. Its effective nationalisation was supported initially with a £1.69bn loan, of which £1.14bn has so far been drawn down.

While the UK business department has argued that the final bailout total could be lower than the estimated £6.5bn by the OBR, without providing details why, almost every household is likely to be stung by higher energy bills next year as the costs associated with the Bulb rescue are transferred to consumer bills.

Court filings this week show that Centrica pitched a rival plan to the Treasury, proposing that Bulb’s customers be divided between “a group of energy suppliers who do not present financial viability risks”.

A break-up and division of Bulb’s customers across multiple suppliers would have involved a “concomitant reduction in the amount of state support that would be required” to successfully transfer Bulb out of special administration, Centrica argued in the documents.

Centrica claimed in court filings that Octopus’s support for allowing energy retailers to use customer credit balances to help finance their operations posed a risk to the industry.

Centrica has pushed regulator Ofgem to introduce ringfencing for customer balances, which are generally built up in the summer months to help smooth bills over the winter.

The level of government support that Octopus will receive to buy electricity and gas for Bulb’s former customers has not been disclosed but it was previously reported that the company had asked for £1bn, which would be repaid as customers pay their bills.

Octopus said the High Court’s decision on Wednesday to give the transfer a green light would save taxpayers “millions, even billions, of costs that could have been incurred if the process was dragged out”.

Eon said: “It’s important we shine a light on the exact terms of this deal.

“The British public deserves an honest explanation of where their money is going and how they might, in the future, get some of it back.”

Centrica and ScottishPower did not immediately respond to requests for comment.

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