The founder of Octopus Energy has said taxpayers need to benefit from the “upside” of emergency government bailout deals, after snapping up stricken former rival Bulb.
Greg Jackson’s Octopus bought Bulb out of government-handled special administration last weekend and is set to take control of the company later this month, a year after it collapsed.
Jackson said that the acquisition represents a “fair deal” for taxpayers and “will bring to an end a period when the taxpayer is exposed to incredibly volatile energy prices”. The government will also benefit from a profit share agreement for up to four years, although no details have been released on how much that could recoup.
The £100m to £200m Octopus is understood to have paid for Bulb represents an “attractive” price of between £33 and £67 a customer, analysts said.
Jackson said: “As well as the fact we’re paying over the market rate we’ll be able to return some profit to taxpayers. We don’t want a world where taxpayers get the downsides and companies get the upside, we need to share both.
“[The structure of the deal] ensures that if Octopus does make any money as a result of the acquisition the taxpayer gets a fair share of it … If markets improve they’ll get the benefit.”
Although soaring wholesale gas prices have put energy suppliers’ balance sheets under pressure, industry executives hope any rapid fall in prices could improve their fortunes. The government has already stepped in to cover wholesale costs beyond the levels of the energy price guarantee.
Jackson’s comments came as MPs debated whether public ownership of energy companies, which has been suggested by the Green party, would help to generate funds to fuel 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 regime costs for Bulb?
“What we have seen in this energy market – and in the retail market in particular – is similar to what we have seen in other markets, particularly the rail market: profits are being privatised, but the debts and the risks lie with the people. How can that be a fair system?”
The full cost to the government of bailing out Bulb remains unknown. Worst-case estimates put the bill at £4bn by next spring, making it the most expensive bailout since Royal Bank of Scotland during the financial crisis.
However, Investec analyst Martin Young said that he expects the final cost to be “far below” that figure and nearer to the £1.28bn regulator Ofgem initially estimated it would cost to quickly transfer Bulb’s customers to another provider. Jackson declined to comment on the estimates.
The National Audit Office has said that consumers will pay a collective £2.7bn to cover the cost of 28 suppliers failing since 2021, excluding Bulb. The failures will cost about £94 a customer and will be recovered through household bills.
Bulb was blocked from hedging its power purchases while in public ownership, sending the cost higher amid volatile gas markets. However, the government will now provide financial support to allow Bulb to hedge, which will later be repaid.
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Octopus beat a last-ditch attempt by rival Ovo to snap up Bulb, which has about 1.5 million customers, while other bidders including British Gas owner Centrica fell away earlier in the process. Octopus took on 580,000 customers stranded when Avro Energy collapsed last year. After the Bulb deal, it will have 4.9 million customers and be the third largest UK energy supplier behind British Gas and E.ON.
“The most important thing is 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 customers to “sit tight” and that they will all have been moved over to Octopus within months. He said there will be no redundancies 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 scheme 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 businesses. It has about 60 employees and was not included in the Octopus deal.
Before its collapse Bulb grew rapidly, partly due to its slick billing technology and marketing.