Get ready to say farewell to Bulb, the bust energy supplier that has been hanging around in quasi-nationalised form for the past 12 months. The high court is scheduled to approve Bulb’s transfer out of administration at the end of this week, at which point Octopus Energy will become the owner of a business with 1.5 million customers.
Prepare also, no doubt, to hear another round of boasts from Grant Shapps, the business secretary, about how the sale is a great deal for the public purse. Do not, though, expect him – or anybody associated with the transaction – to offer evidence to support that claim. The level of transparency around this deal is shockingly poor.
Here are a few big items that Shapps’s department has not disclosed: what Octopus is paying for Bulb (£100m to £200m has been reported, but never officially stated); how long Octopus has been given to repay the costs of the energy that the government will buy for Bulb customers this winter; the interest rate payable by Octopus on such sums; and details of the “profit share” agreement that will apply until Octopus has repaid the funding.
In place of presentation of basic financial facts, all we have been given are warm – but terribly vague – assurances from Greg Jackson, boss of Octopus, that there may be an upside for taxpayers. “[The structure of the deal] ensures that if Octopus does make any money as a result of the acquisition the taxpayer gets a fair share of it … If markets improve they’ll get the benefit,” he said last week.
What does that mean? How, for instance, will a “fair share” for taxpayers from the ringfenced Bulb entity be calculated? Since Bulb has never reported a hard bottom-line profit (and nor has Octopus, incidentally), are we talking operating profits, the pre-tax or even post-tax variety? Nobody will say.
The lack of openness – which seems to be driven by the business department, rather than Octopus – has even extended to refusing information about the size of customers’ credit balances held by Bulb. This newspaper’s freedom of information request on that score was denied by government on grounds of commercial confidentiality. Given that Ofgem, the energy regulator, is in the process of working up industry-wide proposals to ensure hard separation of deposits to prevent companies from funding themselves with customers’ money, you’d think ministers would prefer reasonable disclosure. Apparently not.
A degree of uncertainty around the eventual loss to the public purse from rescuing Bulb was inevitable, it should be said. Outsiders’ estimates of the hit to the public purse are so wide – from £1.2bn to £4bn – partly because so much depends on the price of gas this winter. But that explicable haziness is no excuse for wrapping the details of the transaction with Octopus in so much secrecy.
The deal – who knows? – may be the best the government could do in difficult circumstances. And it may be sensible to get it done when the wholesale price of gas has fallen from its highs. But the grumbling elsewhere in the energy industry about lack of scrutiny, and the suspicion of hidden subsidies, is understandable. Bulb, the UK’s seventh-largest energy supplier, is being handed to the fourth-largest under terms that are opaque. If it’s a good commercial deal for taxpayers, why make it so mysterious?
Bumper bonuses boost chief executives’ pay
Hang around long enough at the top of a FTSE 100 company and, sooner or later, one of the elements of your multitiered remuneration package is bound to come up trumps. So it is in the latest crop of pay awards. PwC calculates that chief executives’ pay climbed 23% to £3.9m on average last year with annual bonuses providing most of the leg-up.
In past years of inflation-beating pay rises, the bosses have usually had their share-based long-term incentives schemes to thank. The return to the spotlight of the old-fashioned bonus seems to owe everything to the fact that targets were set low in the depressed Covid year. When the economy recovered, (almost) all got prizes.
Chief executives’ bonuses were paid at a rate of 86% of maximum (versus 58% in the previous year) – a ratio so high that the notion of a bonus as a reward for exceptional performance loses its meaning. The payment becomes more like a semi-guaranteed entitlement, with annual fluctuations quickly ironed out for most participants. It’s a racket.