Bulb Energy – The Special Administration

Bulb Energy, which supplies more than 1.7 million customers, has collapsed and will be the first energy supplier to be placed into the Special Administration Regime (SAR).

Rumours have been circulating for a while and the news has been long expected by rival suppliers after it struggled to find a buyer or financial investment. Octopus Energy, Ovo Energy, Shell Energy Retail and the owner of British Gas, Centrica, have all expressed varying degrees of interest.

The process of ‘special administration’ is used when a supplier ceases trading, but is too big to have its customers transferred to another energy supplier.

This means Bulb, the largest UK energy company to cease trading since the beginning of the energy crunch, will continue to operate as usual. Existing customers will experience no interruption of service or supply.

 

The Special Administration Regime (SAR)

This is different from the general process seen recently when a supplier goes out of business where a supplier of last resort (SOLR) is appointed by Ofgem, to take on customers of a failed supplier.

Under SAR, the government can make grants and loans to Bulb, whilst its future is resolved. This may come in the shape of a takeover; the sale of parts of the business or customers being transferred to another supplier.

The SAR has been in place since 2011 and is like the bailout scheme that kept British Steel running with help of government funding. Although Ofgem are yet to comment, Bulb may be in SAR for more than a year.

Talks are ongoing between the government and Sequoia Economic Infrastructure Income Fund, which has an outstanding secured loan of approximately £50m to Bulb's parent company Simple Energy.

Government Support

Teneo has been appointed administrator, until either a buyer is found or customers are moved to other energy suppliers.

The UK government has set aside a £1.7bn loan, around £1,000 per customer, to enable Bulb to continue trading. 

Teneo estimates it will cost around £2.1bn to keep Bulb trading until the end of April 2022.

Short term, the news will relieve the pressure on the other large energy suppliers, as they do not now have the apprehension of being burdened with Bulb customers, who they clearly will not have hedged for.

If the energy crunch hasn’t already, the news should act as a wake-up call for energy regulator, Ofgem and the government.

If a supplier the size of Bulb Energy, formed in 2015 and as green, with 100% of its electricity coming from renewable sources; solar, wind and hydro and its gas being 100% carbon neutral, can go bust, a restructure of the UK energy industry is long overdue.

Gillian Cooper, head of energy policy for Citizens Advice, said “It's clear reforms are needed to prevent consumers and taxpayers from paying the price for supplier failures in future.”

Shadow business secretary Ed Miliband said: "With so many companies going bust in just two months, something not happening anywhere else in the world, it points to a systemic failure of regulation. Firms took risky bets and were allowed to do so and the Government and Ofgem significantly deregulated the conditions of operation in 2016."

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