The Treasury has set aside up to £1.7bn to cover the cost of running Bulb Energy through a special administrator this winter after the supplier’s collapse on Monday.
Britain’s seventh-largest supplier has become the first energy company to be put forward for a “special administration” process so it can continue to provide gas and electricity to its 1.7 million customers through the winter after going bust on Monday.
The energy regulator, Ofgem, proposed to the courts that the global advisory firm Teneo take over the running of Bulb while the fate of its customers is decided. The administrator is expected to have access to up to £1.7bn in public money to cover the cost of supplying homes with energy during the energy market crisis.
Kwasi Kwarteng, the business secretary, told MPs in the House of Commons that the new regime was a temporary arrangement, “which provides an ultimate safety net to protect consumers and ensure continued supply”.
“We do not want this company to be in this temporary state longer than is absolutely necessary,” he added.
Energy industry sources believe it could take “somewhere between six weeks and six months” for the fallout of the Bulb collapse to be resolved by the administrator and a team of banks, which are due to be appointed in the coming weeks.
Ofgem urged Bulb customers not to worry and said they would “see no disruption to their supply, their price plan will remain the same and any outstanding credit balances, including money owed to customers who have recently switched, will be honoured”.
The provision for a special energy supplier administrator was first set in legislation in 2011 but has never been used, in part because previous supplier collapses have been small enough in scale to find a new buyer relatively quickly.
Bulb is by far the largest energy supplier to go bust after a string of more than 20 company collapses since September. The cost of running the company through the winter, to be shouldered by the Treasury, may run into hundreds of millions of pounds for UK taxpayers. The administration could also lead to higher energy bills if parts of these costs are shared across the energy market.
In total the cost of managing the impact of the energy market crunch on failed energy suppliers could run to about £2bn this winter, according to the Investec analyst Martin Young. But the final tally remained unknown as “Bulb’s failure takes us into uncharted waters”, he said.
Staff and customers were told by Bulb on Monday that the company had made the “difficult decision” to agree to a special administration process after its plans to raise more funds were scuppered by the energy crisis.
The company was in dire need of fresh funds as debt repayments loomed but investors were understood to be wary of backing energy companies amid record high gas and electricity market prices, and may have been unconvinced by Bulb’s recent performance.
A spokesperson for the Department for Business, Energy and Industrial Strategy said: “The special administration regime is a longstanding, well-established mechanism to protect energy consumers and ensure continued energy supply when a supplier fails.”