Lightbulb sale ‘a fair deal for taxpayers’, says boss of new owner, Octopus

The founder of Octopus Energy has said taxpayers must benefit from the “upside” of emergency support deals from the government, after snapping up embattled former rival Bulb.

Greg Jackson’s Octopus bought Bulb out of government-run special administration last weekend and will take control of the company later this month, a year after it collapsed.

Jackson said the acquisition represents a “fair deal” for ratepayers and “will end a period where ratepayers have been exposed to incredibly volatile energy prices”. The government will also benefit from a profit-sharing agreement for up to four years, although no details have been released on how much it could earn.

The £100m to £200m Octopus has paid for Bulb represents an “attractive” price of between £33 and £67 per customer, analysts said.

Jackson said: “In addition to the fact that we are paying above the market rate, we will be able to return some profit to the taxpayer. We don’t want a world where taxpayers get the downside and businesses get the upside, we have to share both.

“[The structure of the deal] making sure that if Octopus makes any money as a result of the acquisition, taxpayers get a fair share of it… If the markets improve, they will get the benefit.”

Although rising wholesale gas prices have put energy suppliers’ balance sheets under pressure, industry executives hope a rapid price drop could improve their fortunes. The government has already stepped in to cover wholesale costs beyond the energy price guarantee levels.

Jackson’s comments came as MPs debated whether public ownership of energy companies, which has been proposed by the Green Party, would help generate funds to drive Britain’s green energy transition.

SNP MP Alan Brown said in Parliament on Monday: “[Bulb] has cost the taxpayer billions of pounds. What is the government’s estimate of the special administration costs for Bulb?

“What we’ve seen in this energy market – and in the retail market in particular – is similar to what we’ve seen in other markets, particularly the rail market: the profits are being privatised, but the liabilities and risks are with the people. How can that be a fair system?”

The total cost to the government to save Bulb remains unknown. Worst-case estimates put the bill at £4bn by next spring, making it the costliest bailout since the Royal Bank of Scotland during the financial crisis.

However, Investec analyst Martin Young said he expects the final cost to be “well below” that figure and closer to the regulator’s £1.28bn, which Ofgem initially estimated it would cost to quickly transfer Bulb’s customers to another supplier. Jackson declined to comment on the estimates.

The National Audit Office has said consumers will pay a total of £2.7 billion to cover the cost of 28 suppliers that have failed since 2021, excluding Bulb. The faults will cost around £94 per customer and will be recovered through household bills.

Bulb was blocked from hedging its power purchases while in public ownership, driving the cost higher amid volatile gas markets. But the government will now provide financial support for Bulb to secure, which will later be repaid.

Octopus beat off a last-ditch attempt by rival Ovo to snap up Bulb, which has around 1.5 million customers, while other bidders including British Gas owner Centrica dropped out earlier in the process. Octopus took in 580,000 customers stranded when Avro Energy collapsed last year. After the Bulb deal, it will have 3.9 million customers and be the third largest UK energy supplier behind British Gas and E.ON.

“Most importantly, we have a strong track record of migrating large numbers of customers,” Jackson said of the Bulb deal.

In 2017, the serial entrepreneur was laughed at by MPs when he told a select committee he wanted the company to become the “Amazon of energy”.

Jackson urged Bulb’s customers to “sit tight” and that they will all have been moved to Octopus within a few months. He said there will be no layoffs among Bulb’s 800-strong workforce.

He also said Octopus has had “hundreds of thousands” of households sign up to a National Grid scheme to shift energy use away from peak times to avoid blackouts this winter. That arrangement formally began on Tuesday.

It is understood administrators are still on the hunt for a buyer for Bulb’s technology business, which aims to license its software to other companies. It has around 60 employees and was not included in the Octopus deal.

Before its collapse, Bulb grew rapidly, in part due to its smart billing technology and marketing.

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