British ministers will shell out £ 1.7bn of taxpayers’ money to continue running the failed energy provider Bulb while it is run by government administrators.
Bulb, which was Britain’s seventh largest supplier with 1.6 million customers, admitted earlier this week that it to support the process to be placed in “special administration”, a mechanism to protect customers of a large supplier when it becomes insolvent.
It emerged on Wednesday that the UK government would make £ 1.7bn of working capital available to support the company until it sells, restructures or transfers its customers to an alternative supplier. This is the first time that the special administration process has been deployed in the energy sector, even though it has existed since 2011.
Energy Minister Greg Hands said the government’s priority was “to protect consumers”.
“The appointment of administrators will ensure that the supply of energy remains normal to Bulb customers across the country, providing vital reassurance while a lasting solution is agreed,” Hands added.
The £ 1.7 billion government support was first reported by Bloomberg.
Bulb is the largest energy supplier to have collapsed in Britain in almost 20 years and the 23rd since early August as the industry has struggled to cope with rising wholesale prices.
Its failure has bolstered calls for tighter regulation of Britain’s energy supply sector, with many analysts and executives warning that there was a disaster waiting to happen as too many companies offered loss-making deals and had no, or inadequate, hedging policies. has to protect them from. upward swing in wholesale energy prices.
Kwasi Kwarteng, business secretary, told the House of Commons earlier on Wednesday that, in the case of Bulb, regulators were unable to fall back on the UK’s normal safety net for failed suppliers, where households are quickly transferred to a competitor. because of the size of his client book.
“A special administration is a temporary arrangement,” Kwarteng insisted, adding that it would keep accounts at the “lowest cost that is reasonably practical to incur while ensuring the market remains stable”.
“The House needs to understand that we do not want this company to be in this temporary state any longer than is absolutely necessary,” he added.
Shadow Secretary Ed Miliband said the crisis in the sector indicated a “systemic failure of regulation”.
“Businesses have taken risky bets and have been allowed to do so,” he added.
Light bulb was described as “wonderful” by Boris Johnson, British Prime Minister, less than four months ago, when he visited his London headquarters. But it has long been at the center of speculation in the energy industry over its financial health and ability to offer prices that were often below Britain’s energy price limit.
Keith Anderson, CEO of ScottishPower, one of Britain’s top six suppliers, said on Monday that Bulb’s failure was “long overdue”.
Bulb blamed its downfall on wholesale prices and Britain’s price cap for more than 15 million households, which he said forced suppliers to sell energy “at a substantial loss”.
Further supplier accidents are expected by the end of winter.
Baringa Partners, a consulting firm, has estimated that as few as 10 suppliers could stay afloat by the end of winter. There were another 50 at the end of June, according to Ofgem data.
Additional post by Kaye Wiggins in London