Doubts over rescue deal for Bulb Energy raise fears of imminent collapse

UK’s seventh largest supplier seeks funding as regulator promises to protect families

Growing doubts over a rescue deal for Bulb Energy have raised fears that the UK is on the brink of its biggest supplier collapse yet, even as the regulator promises “bold action” to protect millions of households from the deepening energy crisis.

Bulb, the UK’s seventh largest energy supplier, is locked in talks with multiple companies to secure a bailout so it can continue serving its 1.7 million household customers amid record wholesale prices for gas and electricity this winter.

But sources have told the Guardian that the cost of rescuing Bulb, which is understood to be carrying between £600m and £1bn of debt, could be too steep for most companies to shoulder without government help, meaning the number of households that have been forced to find a new energy supplier since the start of September could almost double from its current level of about 2.1 million.

Previously when energy firms have exited the market, their existing customers have been allocated to a rival under the government’s supplier of last resort scheme.

However, a collapse as large as Bulb would probably require the regulator to use a special administrator to keep the company running over winter before prices normalise and potential buyers come forward to snap up the supplier, one source said.

Other sources confirmed reports that Ovo Energy, Octopus Energy and Shell Energy have shown an interest in buying Bulb. Centrica is also understood to be interested in Bulb and may opt to preserve the brand and business as a sister company to British Gas, which it owns.

A Bulb spokesperson said the company was in discussions “with multiple parties to secure additional funding” and the talks continued to make good progress.

In the past two months 13 energy suppliers have gone bust because they were unable to afford rocketing energy market costs, which have outpaced the rise of the regulator’s cap on standard energy bills. Three others collapsed earlier in the year.

In an open letter to the industry on Friday, the regulator Ofgem promised to begin a consultation on how the energy price cap is calculated as soon as next month to make sure it allows suppliers to recover their costs.

Ofgem did not suggest any specific changes but the industry is expected to take the opportunity to call for the price cap, which changes only twice a year, to be more responsive to swings in the market by changing as often as once every quarter.

“These are challenging times, requiring bold action,” Jonathan Brearley, the regulator’s chief executive, wrote.

This would be the first major change to the price cap since it was introduced in early 2019 to protect households from unfair energy bills by imposing a maximum based on the costs of buying and supplying gas and electricity.

However, any shake-up would come too late for many struggling energy suppliers that are expected to go bust this winter. The regulator plans to consult on changes in November and expects to bring them in as soon as February before the next energy price rise predicted for April.

A spokesperson for Ofgem said that in the event of further suppliers going bust it and government had “robust processes in place” to ensure customers’ electricity and gas supply continues and that their credit balances are protected.

Ofgem is also promising to begin “raising the bar” on its standards for energy supplier finances to ensure they offer “a sustainable business model” that minimises risks to consumers.

The regulator also plans to underline its expectations on how suppliers must help households that are struggling to pay their bills by offering debt payment plans or other financial support “to their most vulnerable consumers”.

Ofgem named and shamed a string of seven suppliers on Friday that are likely to miss a late payment deadline for a total of £17.9m in renewable energy subsidies collected from their customers’ energy bills by 31 October.

The regulator has ordered Ampower, Whoop Energy, Delta Gas and Power, Entice Energy, MA Energy, Neon Reef and Together Energy to meet the deadline or they risk losing their supplier licences. Typically, suppliers that struggle to meet their financial obligations often run a higher risk of going bust.

Brearley said the “unprecedented and unexpected rise in gas and electricity prices over recent months has put energy markets under severe strain”.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Up to 15 million households faced one of the steepest bill increases on record this month after Ofgem lifted the cap on standard tariffs by about 12.5%.

Fuel poverty charities have warned that the altering the price cap to react more often through the year would create a “desperate situation for consumers” if “unmanageable price increases” emerged every quarter.

Peter Smith, a director at the fuel poverty charity National Energy Action, said: “Ofgem need to remember millions of energy consumers will have faced a very bleak winter and the prospect of further, more regular rises will be unthinkable.”

Contributor

Jillian Ambrose Energy correspondent

The GuardianTramp

Related Content

Article image
Economy Energy collapse leaves 235,000 in the lurch
Ofgem urges customers to take meter readings after ninth small UK supplier goes bust in a year

Adam Vaughan Energy correspondent

08, Jan, 2019 @12:59 PM

Article image
UK households pick up £80m bill left over from failed energy firms
Ofgem criticised over cost of dealing with fallout from collapse of eight companies

Adam Vaughan

16, Dec, 2018 @3:35 PM

Article image
Ovo Energy to pay £8.9m after sending inaccurate bills
Supplier criticised by Ofgem over problems that affected more than 500,000 customers

Mark Sweney

29, Jan, 2020 @11:05 AM

Article image
Regulator sorry for not capping UK consumers' energy bills sooner
Ofgem chief Dermot Nolan to not receive bonus as MPs liken him to ‘a bystander, rather than active participant in the market’

Adam Vaughan

10, Jan, 2018 @1:13 PM

Article image
Energy firms join charity push for social tariff to offset fuel poverty
Millions of households face highest bills in a decade as regulator Ofgem raises energy cap

Jillian Ambrose Energy correspondent

06, Aug, 2021 @4:38 PM

Article image
Energy schemes to add £100 to UK household bills within five years
Energy subsidies designed to keep lights on and support low-carbon electricity will have risen 124% by 2020-21, review finds

Terry Macalister Energy editor

19, May, 2016 @11:01 PM

Article image
Energy bills for millions of households to fall after gas prices halve
Market prices plummet in Europe after record high gas imports from US, Russia and Qatar

Jillian Ambrose Energy correspondent

26, Dec, 2019 @3:41 PM

Article image
Energy bills to fall for about 15m households as price cap lowered
Ofgem makes decision due to falling cost of gas and power on wholesale market

Jillian Ambrose Energy correspondent

07, Feb, 2020 @8:37 AM

Article image
Energy bills to be cut by around £75 for more than 11m households
Ofgem figure falls short of £100 promised by Theresa May for customers on poor-value tariffs

Adam Vaughan

06, Sep, 2018 @6:39 AM

Article image
Energy bills to be cut by £84 for 11m UK households
Ofgem will also lower cap for pre-payment energy meter customers by about £94 a year

Jillian Ambrose Energy correspondent

07, Aug, 2020 @3:19 PM