The UK government will temporarily run gas and electricity supplier Bulb as the energy crunch deepens, the first forced nationalisation of a British company since the 2008 banking crisis.
The government and energy regulator Ofgem will ensure uninterrupted supplies to Bulb’s 1.7 million customers by appointing a special administrator. Costs for running the seventh-largest retailer will be supported by Treasury.
The process is being carried out “in the quickest possible timeframe,” a government spokesperson said in a statement. “Bulb customers do not need to do anything, there will be no disruption to supply or current energy prices, and credit balances are protected.”
Ofgem said it will apply to a court to appoint an administrator who will run Bulb.
This is the first time the measure has been used in the energy sector, signaling a “tipping point” in the UK’s energy crisis, said Justina Miltienyte, an energy policy expert at Uswitch, a price-comparison service. Soaring gas and power prices have caused 21 suppliers to collapse since August, with most having sold energy at much lower fixed costs before prices almost quadrupled.
"Bulb will need quite a significant injection of cash that’s likely to come from the Treasury in the short term," said Ellen Fraser, a partner at consultancy Baringa Partners. "In the long term, the expectation is it will be charged to the industry and will find its way through to customer bills to recoup that cost."
The nationalisation comes after large energy suppliers have repeatedly warned they would soon struggle to take on more clients. Before today, more than 2 million UK customers were forced to switch suppliers, stretching the ability of companies left in the market to take on more.
Not including the costs associated with Bulb, about 2 billion pounds (R41 billion), or 75 pounds a household, will be added to bills next year to pay for failed suppliers, according to Martin Young, a utilities analyst at Investec Bank. "It is not hard to see why consumers might be hugely aggrieved," he said.
The government will work with Ofgem to find a way to move the customers to other suppliers over a longer time frame than the Supplier of Last Resort process would have allowed.
Uswitch advises households not to cancel payments or to switch suppliers as there are unlikely to be better deals available elsewhere right now.
“The administrator may decide to close the supplier down in the future and move customers elsewhere,” Miltienyte said. “But customers will be kept informed by Ofgem and the administrators about what will happen next.”
UK benchmark natural gas prices are now trading at almost four times what they were at the start of the year. As well as being tied into selling energy to customers for much less than they can buy it for, suppliers have estimated that they are losing about 1 000 pounds on each customer on the regulated price cap.
Bulb had been exploring funding options, but high prices - most recently relating to the slow approval process for the Nord Stream 2 gas pipeline to Europe from Russia - had derailed any agreement, the company said in a statement on its website.
The appointment of a special administrator will limit the risk of market chaos created by trying to quickly transfer a large number of customers to another supplier.
“We’ve put in place the powers and robust processes to ensure customers don’t experience disruption to their energy supply, and costs are minimized if a supplier does exit the market,” Boris Johnson’s official spokesman Max Blain told reporters.
- With assistance from Todd Gillespie.