Bailing out bust energy supplier Bulb will cost taxpayers a “staggering” £6.5bn, official figures have revealed.
The Office for Budget Responsibility (OBR) said that an extra £4.6bn has been spent on handling the company in 2022-23, bringing the total to £6.5bn.
In March, the OBR said the rescue would cost £2.2bn over two years and the top end of previous formal estimates was about £4bn.
Bulb, which has about 1.5 million customers, collapsed in November last year and was put into a special government-handled administration, before a sale to rival Octopus Energy was eventually agreed last month.
It is expected to be the biggest government bailout since the nationalisation of the Royal Bank of Scotland during the financial crisis.
Bulb was founded in 2015 by entrepreneurs Amit Gudka and Hayden Wood with the intention of challenging the remaining dominance of the energy industry’s legacy supply giants, but was caught out by a sharp rise in wholesale energy prices last year.
Gudka and Wood cashed out £4m each in shares in 2018. Gudka left the business before its collapse to set up a battery storage company while Wood faced criticism over his £250,000 taxpayer-funded salary after it went bust.
The bailout threatens to add more than £200 on to bills for households, who have already suffered a £94 hit from the other 28 energy suppliers to have collapsed since the start of the energy crisis.
Octopus agreed to buy Bulb late last month after a lengthy process in which every other bidder, including British Gas owner Centrica, dropped out. Octopus won despite a late offer from rival Ovo. However, that deal has been criticised for its lack of transparency and will be scrutinised by the government’s spending watchdog.
Andy King, a member of the OBR committee, said: “The cost of the Bulb intervention has increased essentially because it lasted for more months than was factored into the March forecast.
“So the transfer to Octopus has happened six months later. The loss that was incurred operating Bulb in between those two time periods is the additional cost.”
The government has faced criticism for not allowing the company to buy power ahead, exposing it to volatile gas prices.
The former business secretary Kwasi Kwarteng described hedging – effectively insurance against huge swings in energy prices – as “very risky”. However, volatile gas and electricity markets appear to have undermined that decision and swollen the cost of rescuing Bulb.
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The deal is still awaiting court approval after rival suppliers complained over a lack of transparency over the terms of the acquisition, which cost Octopus a rumoured £100m to £200m. It is understood that officials fear the ultimate cost of handling Bulb could rise even further as the process to finalise the deal continues.
Octopus founder Greg Jackson vowed that it would be a “fair deal” for taxpayers. The Guardian revealed last week than the National Audit Office had begun work to scrutinise the acquisition.
The shadow climate change secretary, Ed Miliband, said: “The government should hang its head in shame over the Bulb fiasco and the staggering costs it is imposing on the British people of over £200 per household.
Octopus Energy reportedly closing in on takeover of Bulb Read more
“This is a direct result of a total failure of Conservative government regulation over the past decade and the inexplicable decision not to hedge the soaring energy costs when Bulb went into administration.”
Andy Prendergast, the national secretary of the GMB union, said: “The fact bailing out one failed energy company has cost £6.5bn is yet more proof the attempt to use the markets has been an unmitigated disaster.”