Britain’s seventh biggest energy supplier ‘Bulb’ went into special administration on Wednesday under what has been dubbed a ‘too-big-to-fail’ alternative to Ofgem’s usual process, and will be ‘run as normal’ by administrator Teneo.
Though the situation is anything but normal to the British government as it marks its first time placing a firm under administration in the UK energy sector.
The UK government has set aside £1.7 bn of taxpayers’ money in a crucial effort to keep the firm’s 1.6 million customers from losing energy this winter; the possibility of which is a very real concern. It has been reported that, at the High Court in London, Justice Adam Johnson announced a prophecy of “uncertainty” over Bulb’s demise, claiming that “if left unresolved is bound to have an effect on customers, employees and suppliers”.
However, this claim has been juxtaposed by Hands’ proclamation that “The appointment of administrators will ensure the supply of energy remains normal to Bulb customers across the country, providing vital reassurance while an enduring solution is agreed,”, helping set those affected at ease.
A plan has been made to retain Bulb in its current position until it can be sold, restructured or a solution can be found regarding its civilian dependents as there is a hope that it will be possible to offload them to a different supplier.
Though Bulb is the only energy supplier to have received such extensive help from the UK government in its bankruptcy, it is not the only one to have struggled recently. Since September, at least 20 energy companies have gone bust, suggesting a developing pattern. Bulb has blamed its demise on the global surge of wholesale gas prices and Britain’s price cap for more than 15m households, which, it said, forced suppliers to sell energy “at a significant loss”.
This accusation is not the most troubling aspect of the whole situation to the government, nor is the opportunity cost of the money spent on keeping the company afloat; the vital concern the government faces is the likely rise in calls to government aid by other energy firms which are facing similar problems to Bulb, and thus the ensuing political pressure this will wreak on them.
Furthermore, there is a substantial argument that there will be an impending increase in risk-taking in the sector as some firms may form a dependence on the government for help, assuming that they would easily be rescued from financial ruin if they were to run into any issues. Ergo, this may lead to riskier business practices, which may lead to a subsequent rise in the price of energy as more firms collapse.
Written by Maya Hood
Research compiled by Billy Ryan