Bulb Energy owed £254m to customers who had paid for their electricity and gas in advance when it had to be bailed out with a £1.7bn UK taxpayer loan last year, according to administrators.
The British energy supplier was rescued on behalf of the UK government via a “special administration” process in November after regulators considered it was too big to be dealt with via the normal industry process for failed electricity and gas companies.
Bulb was Britain’s seventh-biggest energy supplier with 1.5m customers. Its demise, because of soaring wholesale gas prices and inadequate hedging, triggered the biggest UK taxpayer bailout since the rescue of Royal Bank of Scotland during the 2008-09 financial crisis.
On October 31, just weeks before it admitted to British energy regulator Ofgem that it could no longer survive the wholesale market volatility, Bulb had £640m of liabilities, of which £254m were “credit balances” paid in advance by customers, according to a report by special administrators at Teneo.
Customers whose accounts were in credit will not lose out but the cost of honouring the balances could ultimately be met by taxpayers or energy bill payers under the funding deal struck with the UK government.
Rival energy suppliers such as Centrica have called for such credit balances, built up by direct-debit payments, to be ringfenced so companies are not able to use them for other purposes.
Ofgem, which has come in for fierce criticism for its oversight of the retail energy sector, promised in December to consult on tightening rules to protect customers’ money.
A total of 27 energy suppliers have gone bust since the start of August, with Bulb by far the largest. All the other failed companies were processed via Ofgem’s “supplier of last resort” system whereby their customers are passed on to a rival business following an auction.
During the seven months to October 31, Bulb racked up an operating loss of £35m, according to unaudited accounts contained in the administrators’ report, although they point out this figure benefited from a one-off exceptional item “without which the operating loss for the period would have been £116m”.
Bulb had £119m of cash with its bank but, separately to the credit balances, it was also owed £193m by customers for the supply of gas and power, including for unbilled amounts, the report details.
Bulb will remain in special administration until it can be rescued or sold. “This might not be possible until spring 2022,” the report states, although industry experts believe that date might be optimistic given the current state of the energy retail market.
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Teneo states in the report that it is “not currently anticipated” there will be a need to increase the £1.7bn of funding that has been agreed with the UK government, although it adds that “this could be revisited”.
Suppliers face losing a total of £110m owed to them by Bulb when it went into administration. That is because it is “unlikely” there will be assets left over for distribution to repay unsecured creditors, according to the administrators.
Teneo charged almost £1.6m in fees for advising Bulb before it entered administration. A similar amount was spent on legal advice from Linklaters and other counsel as the company fought to avoid disruption to customers’ energy supplies.
Teneo did not disclose how much it would charge for its work on the administration but said it would report its costs to the government every two weeks.