Bill payers could be on the hook for almost £6bn to cover the cost of bailing out suppliers that went bust during the energy crisis, according to the government’s spending watchdog.
The public accounts committee (PAC) has issued a “sobering reminder” that the government has no guarantee that it will be able to recover almost £3bn in costs for rescuing about 1.5m households affected by the collapse of Bulb Energy.
In addition to the cost of bailing out 29 suppliers that collapsed between July 2021 and May last year, the energy crisis could pile a further £2.7bn on to home energy bills at a time that households “can ill afford such uncertainty”.
In a new report the committee said that the cost of bailing out Bulb Energy, which collapsed in November 2021, is expected to be covered by Octopus Energy, which agreed to pay £2.96bn by September 2025 to buy the company.
But the committee warned that bill payers would have to cover a £246m shortfall, and could still run the risk of being in line for the full cost of the bailout if Octopus is unable to meet its commitment.
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Dame Meg Hillier, the chair of the committee, said: “Our report is a sobering reminder that we are still living with the fallout of the failure of so many energy suppliers in 2021-22. While the government and regulators did the right thing in moving swiftly to protect consumers, the uncomfortable truth remains that the recovery of that investment hangs on the commercial success of one company. The public can ill afford such uncertainty, particularly in challenging economic times.”
The committee urged the government to undertake a review of its energy support schemes after it found that some of the most vulnerable and hard-to-reach customers have yet to benefit from the government schemes. About 76% of vouchers issued to households to support them with their energy bills have been redeemed, it said.
Ministers ended a scheme that automatically paid all households £400 towards their energy bills last winter. In its place the government will offer targeted support including a £900 payment for those on means-tested benefits, £300 for pensioners and an extra £150 for disabled people. These are in addition to the £150 payment available through the warm home discount.
However, researchers at the University of York’s social policy research unit warned earlier this year that about 1.7m households in severe fuel poverty will miss out on this extra help because they are not registered to receive these benefits.
“It is now increasingly urgent that those who have yet to access government support are helped to do so,” Hillier said.
“The wider question now for Ofgem and government is how to strike the right balance between resilience and competition in the energy market. The ‘low bar’ approach to licensing new suppliers in the hope that competition and innovation would follow resulted in a market built on sand. This underlying fragility must now be firmly consigned to the past to ensure consumers are protected in the future.”
An Ofgem spokesperson said: “Protecting consumers is our top priority and we worked tirelessly with government to put measures in place to shield customers from the impact of Bulb going out of business. Since then, we have taken a range of firm steps to strengthen the resilience of the sector to reduce the risk of future supplier failures and to limit the impact on consumers if they do fail.”
A spokesperson for the UK government said: “Placing Bulb into a special administration regime was the only viable option to ensure Bulb’s 1.5 million customers were protected, while providing best value for the British taxpayers.”
“We are reviewing the committee’s report and will respond to their recommendations in due course,” the spokesperson added.
