Saturday, July 13, 2024
Powering Your Home

Octopus takeover of Bulb under scrutiny by spending watchdog

The spending watchdog is to examine Octopus Energy’s takeover of Bulb after the collapsed energy supplier was bought out of a state-handled administration.

Electric Home understands that the National Audit Office’s comptroller and auditor general, Gareth Davies, has commissioned work to scrutinise the deal.

The NAO, which is an independent parliamentary body, undertakes investigations into areas of government spending and publishes reports to increase transparency. It is understood the watchdog is in the early stages of its work and an update detailing the scope of the investigation will be published once approved by Davies.

The move comes amid calls for greater transparency around the terms of the deal, which was agreed late last month, and a court hearing to confirm the acquisition is to take place on Friday.

Neither Octopus nor the government have confirmed the price paid for Bulb, how long Octopus has been given to repay the costs of the government buying energy for Bulb customers this winter, or details of a “profit share” agreement. A price of £100m to £200m has been reported but has not been formally confirmed.

Octopus’s chief executive, Greg Jackson, said last week it was a “fair deal” for taxpayers who needed to see the “upside” of emergency government bailout deals. The energy company said it had paid “above market value” to acquire Bulb’s 1.5 million customers.

The Department for Business, Energy and Industrial Strategy (BEIS) refused to confirm the size of Bulb customers’ credit balances in response to a freedom of information request by the Guardian, citing a “commercial interest exemption”.

Estimates of the ultimate cost of bailing out Bulb have varied wildly from £1.2bn to £4bn due to the unpredictable wholesale gas market.

Bulb was among a wave of retail suppliers to go bust during the energy crisis. The NAO said in June that consumers would need to pay £2.7bn to cover the costs of 28 energy suppliers failing since June 2021, excluding Bulb.

The shadow energy minister, Alan Whitehead, said: “The details of this process are of central importance to all taxpayers, energy consumers and the energy sector.

“Yet the government are refusing to share any details about the terms of the deal; whether it has been subject to competition; or what the costs will be to households that are already struggling with the spiralling cost of living.”

He added: “Just repeatedly claiming that the details of this deal are commercially sensitive is not good enough and this lack of transparency stinks. The government must urgently publish the projected costs to the taxpayer and the terms of the deal.”

Dame Clare Moriarty, the chief executive at Citizens Advice, said: “The Bulb Energy deal is currently shrouded in secrecy. There are big, unanswered questions including what the costs are and how they’ll be paid for.

“This is deeply worrying given the huge cost of living pressures people are facing. We need urgent confirmation that the deal won’t, in any circumstances, add to customers’ already sky-high bills. People are still reeling from the energy market meltdown. Greater transparency is one key way to restore their faith in the system.”

Octopus beat a last-ditch attempt by its rival Ovo to snap up Bulb, while other bidders, including the British Gas owner, Centrica, fell away earlier in the process.

If the Bulb deal is approved, Octopus will have 4.9 million customers and be the third-largest UK energy supplier behind British Gas and E.ON. Octopus has said there will be no redundancies among Bulb’s 800-strong workforce.

The NAO and Octopus declined to comment. A government spokesperson said: “While we cannot comment on the specific financials of the commercial deal, due to high market volatility, the government is making sure that we get the best possible outcome for Bulb’s customers and the British taxpayer.”