Bulb sale to Octopus faces further delay as rivals mount challenge

The sale of semi-nationalised energy retailer Bulb to rival Octopus Energy is facing further delays as rivals challenge the UK government’s decision in court.

Bulb, which was taken over by the government last November to ensure its 1.5mn customers continued to receive gas and electricity after the fast-growing start-up ran out of cash, was due to be transferred to Octopus after a long sales process.

But the government has been criticised over a lack of transparency around the sale, with terms not yet disclosed and taxpayers or bill payers potentially on the hook for billions of pounds in costs.

The deal needs to be approved by the High Court, where a ruling is expected on Wednesday, but is now facing judicial review challenges from rival suppliers including British Gas, Scottish Power and Eon.

The delay, which has the potential to lead to a rerun of the sales process, threatens to push up costs for taxpayers but also to draw renewed criticism of the government’s handling of Bulb’s quasi-nationalisation.

It is already projected to cost as much as £6.5bn, according to the government’s Office for Budget Responsibility, equivalent to £4,300 per Bulb customer or more than £200 for each UK household, which are likely to have to absorb the cost through future energy bills.

Rival suppliers say the sale includes a government subsidy that would help Octopus buy the energy for Bulb’s customers but the government has not said how much public money may be at risk.

Iberdrola-controlled Scottish Power, Eon and Centrica-owned British Gas argued on Tuesday that the sale should be halted pending their separate judicial reviews to scrutinise the deal.

The process to sell Bulb was “defective” and rival energy suppliers were not informed that “any large-scale government support would be available to the successful bidder”, ScottishPower told the High Court on Tuesday.

Stephen Robins KC, barrister for ScottishPower, said the deal would in effect provide a “dowry” to Octopus as an “incentive to enter into the transaction”.

He argued that there had been “no reference in the sales documents to the possibility of the UK government (or any other UK public sector body) providing financial assistance to potential bidders”.

Teneo, the consultancy appointed by regulator Ofgem to handle Bulb’s administration, rejected ScottishPower’s allegations and said there had been a full sales process. ScottishPower’s submissions “ultimately all tend to the conclusion that the marketing process should be rerun”, giving the competitors a “second bite of the cherry”, Teneo said.

The government had planned to sell the business by the end of July but the process, run by investment bank Lazard, drew only Octopus’s bid.

Ovo Energy then made a late play for the company last month but was rejected. If the deal goes ahead it would make Octopus the third-largest UK energy supplier, behind British Gas and Eon, with 4.9mn customers.

One senior industry figure said that when the business department first sounded out potential buyers it did not make clear that additional financial support may be available.

“If Octopus is willing to profit share with the government, as they’ve indicated, it’s quite conceivable the government must be giving them some funding,” the person said. “And if it is such a good deal for the taxpayer why not be open and upfront on the agreed support?”

A High Court judge is also scrutinising the £25mn in fees charged by Teneo.

Octopus said on Tuesday it was “clear that other companies had many opportunities to bid, knew they could propose hedging support, and were invited to counterbid against Octopus. Instead of doing so, they waited until a deal was announced and then launched expensive legal action which could cost taxpayers millions, even billions.

“We will continue to work hard to get this resolved as fast as possible, bringing stability for Bulb customers and staff and ending the huge financial exposure for taxpayers.”

Bulb, which was founded in 2015 by former management consultant Hayden Wood and former energy trader Amit Gudka, grew rapidly to become one of the biggest energy suppliers by the time of its collapse.

The company faced criticism for enticing customers with low-cost deals but was caught out when energy prices started to soar last year, exposing its failure to successfully hedge the energy it had promised.