Centrica proposed rival rescue of energy supplier Bulb

Centrica pitched a rival plan to the Treasury to deal with the bailed-out energy supplier Bulb, claiming its proposal would have required less taxpayer support than a sale to Octopus Energy, court documents show.

Centrica, the owner of British Gas, wrote to the Treasury and energy regulator Ofgem in August and November proposing that Bulb’s 1.5mn customers be divided between “a group of energy suppliers who do not present financial viability risks”.

Bulb represents the biggest UK state bailout of a company since the financial crisis, with billions in pounds in costs set to be spread across almost every household’s energy bill next year.

A break-up and division of Bulb’s customers across multiple suppliers would have involved a “concomitant reduction in the amount of state support that would be required” to successfully transfer Bulb out of special administration, Centrica argued, court filings show.

Centrica, which grew out of the once state-owned British Gas business, is among a group of long-established energy companies, including Eon and ScottishPower, that are seeking a judicial review of the government’s decision to approve Bulb’s sale to Octopus in October. They have complained about a lack of transparency and the speed of the deal.

The High Court is set to decide on Wednesday whether to set a date for the Bulb deal to complete.

The legal process pits the old guard against one of the most prominent new “challenger” energy companies. Fast-growing Octopus was launched in 2016 by the technology entrepreneur Greg Jackson to break up the might of the “legacy” suppliers such as Centrica, which is led by Chris O’Shea, who has previously held senior roles at Shell and the former BG Group.

Bulb was placed into special administration in November 2021. Its effective nationalisation was supported initially with a £1.69bn loan but the UK’s Office for Budget Responsibility has estimated that the total bill to the taxpayer will soar to £6.5bn.

While the business department has argued the final total could be lower, without providing details why, almost every household is likely to be stung by higher energy bills next year as the costs associated with the Bulb rescue will hit consumer bills. The total could exceed £200 per household if the final cost of the bailout exceeds about £5.8bn, based on the number of homes in the UK.

The level of support that Octopus will receive to buy electricity and gas to serve the 1.5mn new customers has not been disclosed. It had previously been reported that Octopus had asked the government for £1bn to buy forward that energy but the money would be repaid as customers pay their bills.

In court documents, Centrica said it had written to the Treasury and Ofgem suggesting an alternative solution for Bulb customers that in its view could be achieved “through less distortive means”.

Centrica has also claimed in the documents that the sale to Octopus risked the “future stability” of Britain’s energy retail market, although this has been contested by people close to the deal. If the sale goes through, the Bulb business would be housed in a new entity that would form part of the wider Octopus group.

Octopus and the Treasury have been approached for comment.

Octopus has previously said it was “clear” other companies could also have asked for “hedging support” from the government, and warned that any further delay to the deal could mean even higher costs for taxpayers.

“Instead of doing so, they waited until a deal was announced and then launched expensive legal action which could cost taxpayers millions, even billions,” Octopus said.