British Fuel-owner Centrica has accused the federal government of endangering the “future stability” of the UK vitality market if it pushes forward with a plan to promote semi-nationalised retailer Bulb to rival Octopus Vitality.
In a Excessive Court docket problem to the sale, which has confronted criticism for its lack of transparency, Centrica revealed in filings that it had written to the Treasury and regulator Ofgem warning about Octopus’s monetary place and questioning its suitability to tackle Bulb’s 1.5mn prospects.
Centrica is amongst a gaggle of firms, together with Scottish Energy and Eon, difficult a sale that was agreed final month however about which the federal government has to date not launched the main points. Taxpayers or invoice payers are probably on the hook for billions of kilos in prices.
Centrica mentioned in a submitting to the courtroom that it was involved about Octopus’s alleged apply of utilizing buyer balances to assist finance its operations, primarily based on Octopus’s public opposition to the regulator contemplating requiring suppliers to ringfence buyer funds.
“[There exists] a transparent danger to the way forward for the soundness of the vitality provide market in gentle of Octopus’s monetary place,” Centrica wrote, including that if Octopus was to fail sooner or later different invoice payers may in the end want to fulfill the price of making buyer balances entire.
Prospects who pay by direct debit typically construct up balances with their suppliers throughout the low-demand summer season months that assist clean out payments over the yr.
Centrica chief govt Chris O’Shea has been a vocal opponent of the apply of permitting vitality retailers to faucet into buyer balances.
On Tuesday, O’Shea warned that he expects extra vitality retailers to collapse this winter with some already “struggling for money” and prone to be buying and selling whereas technically bancrupt, following the failure of greater than 30 suppliers since January 2021.
Bulb was by far the biggest provider to break down and is already projected to price as a lot as £6.5bn, in keeping with the federal government’s Workplace for Price range Accountability, equal to greater than £200 for every UK family, that are prone to have to soak up the price by future vitality payments.
Octopus was approached for touch upon the Centrica allegations.
Sources near the deal mentioned that if there was a profitable judicial evaluation delaying the sale then Bulb’s prospects would stay with the federal government at appreciable danger to taxpayers.
Rival suppliers say the agreed sale features a authorities subsidy that might assist Octopus purchase the vitality for Bulb’s prospects.
The method to promote Bulb was “faulty” and rival vitality suppliers weren’t knowledgeable that “any large-scale authorities assist can be out there to the profitable bidder”, ScottishPower advised the Excessive Court docket on Tuesday.
Stephen Robins KC, barrister for ScottishPower, mentioned the deal would in impact present a “dowry” to Octopus as an “incentive to enter into the transaction” and that there had been “no reference within the gross sales paperwork to the potential of the UK authorities (or another UK public sector physique) offering monetary help to potential bidders”.
Teneo, the consultancy appointed by regulator Ofgem to deal with Bulb’s administration, rejected ScottishPower’s allegations and mentioned there had been a full gross sales course of.
The federal government had deliberate to promote the enterprise by the tip of July however the course of, run by funding financial institution Lazard, drew solely Octopus’s bid.
Ovo Vitality then made a late play for the corporate final month however was rejected. If the deal goes forward it will make Octopus the third-largest UK vitality provider, behind British Fuel and Eon, with 4.9mn prospects.
One senior business determine criticised the federal government’s lack of transparency saying “whether it is such a very good deal for the taxpayer why not be open and upfront on the agreed assist?”
Octopus mentioned on Tuesday it was “clear” that different firms may have requested for “hedging assist” from the federal government.
“As an alternative of doing so, they waited till a deal was introduced after which launched costly authorized motion which may price taxpayers tens of millions, even billions.”
Bulb, which was based in 2015 by former administration marketing consultant Hayden Wooden and former vitality dealer Amit Gudka, grew quickly to develop into one of many greatest vitality suppliers by the point of its collapse.
The corporate confronted criticism for engaging prospects with low-cost offers however was caught out when vitality costs began to soar final yr, exposing its failure to efficiently hedge the vitality it had promised.
This text has been amended to attribute a quote about some suppliers treating prospects’ cash “like an curiosity free bank card” to Ofgem, reasonably than incorrectly to Centrica chief govt Chris O’Shea.