Octopus Energy has bought Bulb Energy from the government, following the energy supplier’s collapse in November 2021.
Bulb was one of dozens of energy companies to go bust last year after a spike in wholesale costs caused by high demand for gas in the wake of the Covid-19 pandemic. The government stepped in to prop up the stricken supplier because it had 1.5 million customers.
The energy crisis has since deepened, with the Russia-Ukraine war driving the cost of living up for consumers and prompting warnings of potential blackouts this winter. As well as rescuing Bulb, the UK government has been forced to step in to help people with its energy support scheme and the energy price guarantee.
But what does Bulb’s takeover mean for its customers? Here’s everything you need to know.
What is Bulb Energy?
Bulb Energy is an energy supplier that specialises in renewable electricity and carbon-offset gas supplies. As well as offering low-cost tariffs, one of its key selling points to its customers before it collapsed was that it saved them an average 2.6 tonnes of CO2 emissions per year.
It had 1.5 million customers and 650 staff when it collapsed in late 2021. Its downfall was similar to the other 30 similar business failures by energy suppliers at the time in that the firm was caught out by a sudden, sharp rise in wholesale costs that it had not hedged against.
The difference between Bulb and the other suppliers was that it was deemed to be too big to fail as a result of the number of customers it had. With all the other major energy suppliers squeezed at the time, there was a fear that transferring 1.5 million customers to other providers - as UK energy rules stipulate - could collapse them.
So, since November 2021 Bulb has been in a special administration run by Teneo but overseen by the UK government’s Department for Business, Energy and Industrial Strategy. It meant that Bulb was able to continue providing a service.
However, it also meant the taxpayer was saddled with a reported £1.7 billion bill that was expected to double had the supplier remained in de facto public ownership this winter. The government has never confirmed the true cost of the Bulb bailout.
Who owns Octopus Energy?
Octopus Energy was one of Bulb Energy’s main competitors before the latter’s collapse. The two businesses had a similar renewable ethos, although Octopus had outgrown its rival by 2021 as it grew to around 3 million UK customers.
The supplier was one of the pioneers of app-based consumer energy supply, and has also been trialling off-peak schemes and electric vehicle charging tariffs. Consumer website Which? has repeatedly ranked it as one of the UK’s best energy suppliers since its launch in 2016.
Octopus is run by its founder Greg Jackson - an ecommerce entrepreneur. As of December 2021, it was worth $5 billion (£4.3 billion) having secured major backing from investment fund Generation Investment Management and the Canada Pensions Plan Investments Board.
It reportedly offered to purchase Bulb from the government earlier in 2022, once its own stability concerns had been addressed. But it was not until Saturday 29 October that a deal was agreed. The government said it would “protect consumers and taxpayers”, as well as provide “a stable new home for Bulb’s customers and 650 employees”.
Business and Energy Secretary Grant Shapps said: “This government’s overriding priority is to protect consumers and [this] sale will bring vital reassurance and energy security to consumers across the country 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.”
Meanwhile, Octopus said its takeover would bring to an end “taxpayer losses and uncertainty for Bulb customers and employees”. While the amount Octopus will pay for Bulb has not yet been disclosed, the supplier said the deal was “above market value”.
Labour has said the government “needs to come clean” about how much Bulb’s collapse and subsequent special administration has cost taxpayers. They have also called for more detail about the deal to provide reassurance that it “represents value for taxpayer’s money”.
What happens now?
While terms have been agreed, the sale will not be completed until a statutory process known as an energy transfer scheme takes place. This mechanism will move Bulb’s assets into a new separate entity that will “protect consumers during the transfer process”.
The process is subject to approval by Rishi Sunak’s new Business and Energy Secretary Grant Shapps and will take effect at a time ordered by the High Court. It is expected everything will be finalised by the end of November.
For the remainder of this winter, the government will provide financial support to the new entity so that Bulb customers continue to receive energy while Octopus absorbs the company. Separate from the energy price guarantee, this taxpayer support will be repaid at a later date, Octopus said.
The government will receive the money through a profit-share agreement. It will mean Bulb is essentially ringfenced off from the wider Octopus Energy Group, with shareholder payouts restricted until the Government is fully repaid, Octopus said.
What does Octopus Energy buying Bulb mean for you?
On its website, Bulb has said that its customers do not need to do anything following its takeover by Octopus. It says your energy supplies will continue at the same price and your credit balance will be protected.
For those with pre-pay meters, it says you can continue to top up your meter as and when you need it. Bulb has also urged its customers not to cancel their direct debits, as it said these would be transferred across to Octopus automatically.
Should Octopus’s buyout be completed, it will contact you directly - although there is no set date for when this will happen. Until it does, your Bulb account details will remain the same.
For more information about what is going to happen to Bulb customers, the firm is regularly updating a Frequently Asked Questions blog on its website.