22 November 2021

1.7 million households affected as Bulb enters special administration

22 November 2021

Britain’s seventh biggest energy supplier Bulb which provides gas or electricity to 1.7 million households, plans to enter special administration as it was squeezed out of the market.

The company becomes the latest and the largest in a list of more than 20 energy suppliers that have failed since the start of September as gas prices soared.

Bulb said it would back regulator Ofgem’s efforts to appoint a special administrator – a process designed to protect customers when a large energy supplier can no longer trade.

“We’ve decided to support Bulb being placed into special administration, which means it will continue to operate with no interruption of service or supply to members,” the company said on Monday.

“If you’re a Bulb member, please don’t worry, as your energy supply is secure and all credit balances are protected.”

Bulb’s parent company, Simple Energy, will enter administration. However Bulb’s international businesses in France, Spain and the US will continue trading.

Ofgem said: “Customers will see no disruption to their supply and their account and tariff will continue as normal. Bulb staff will still be available to answer calls and queries.”

Bulb becomes the first energy supplier to rely on regulator Ofgem’s special administration regime.

In the past Ofgem has dealt with collapsed energy suppliers through its supplier-of-last-resort process, which simply moves thousands of customers from the failed company to another supplier.

(PA Graphics) (PA Graphics)

However the SoLR process has never dealt with a company as big as Bulb. Before Monday the biggest supplier to collapse was Avro Energy, which had 580,000 customers.

Insiders at other big suppliers have in recent months worried that Ofgem might force them to take over Bulb’s 1.7 million customers, a hugely expensive process.

It could have created a domino effect, where the collapse of one supplier puts too much pressure on an otherwise stable rival, which itself ends up failing.

To avoid this Ofgem will now use this special administration process to find an administrator for Bulb, with the backing of Business and Energy Secretary Kwasi Kwarteng.

The administrator will continue to run the company until it can be sold off, the customers join another supplier, or it can be restructured.

Under the scheme’s rules, the business secretary can give or loan money to Bulb and other suppliers in special administration.

This signals the tipping point of the UK energy crisis

According to reports from Sky News, Bulb’s biggest creditor was in discussions about refinancing the business, however, it appears they have now withdrawn that support.

In July this year, Prime Minister Boris Johnson visited Bulb’s offices, where he said that the company was “leading the way in the renewables revolution.”

On Monday, his official spokesman said: “The special administration regime, which Bulb will fall under, is a longstanding, well-established mechanism to protect energy consumers and ensure continued energy supply when a supplier fails.”

However, while the SAR system has been in place for a decade, this will be the first time it is used.

Ofgem is also likely to have to protect thousands more customers before the end of the year as other failures are likely.

Emma Pinchbeck, the boss of trade body Energy UK, said: “We cannot rule out well run, financially responsible companies exiting the market – in addition to those that have already left.”

The Prime Minister’s spokesperson added: “We will seek to appoint the administrators who will effectively run it and provide energy through that system but at this stage it’s too early to say what the future of that provider is going forward.”

Labour shadow business secretary Ed Miliband said: “The Business Secretary has buried his head in the sand for too long. The Government was warned by Ofgem over a year ago about ‘systemic risk to the energy supply sector as a whole’.”

He added: “Labour will scrutinise the special administration regime to ensure it protects bill-payers and secures value for money for taxpayers.”

ScottishPower chief executive Keith Anderson said: “Sadly, today’s news has been a long time coming.

“The Government has had to step in to protect customers from a failure of unprecedented size, and it will have to use taxpayers’ money to do so. That should focus minds on how the market operates, why so many companies have been allowed to operate so recklessly for so long, and how the industry needs to be able to fully recover the legitimate costs of supplying energy.”

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