Octopus Energy ‘not guaranteed’ to meet bill for £3bn

The energy regulator has admitted there is no guarantee that Octopus Energy will repay almost £3 billion that it owes the taxpayer after taking on Bulb, the failed supplier.

Jonathan Brearley, Ofgem’s chief executive, described Octopus — which is lossmaking and which became Britain’s third biggest energy supplier after the Bulb takeover — as being on a “journey” to a “more financially resilient position”. However, he said he believed it was more likely than not that it would repay the cash.

Bulb collapsed in 2021 with 1.6 million household customers on its books and it was placed in taxpayer-backed special administration. Octopus bought it out of administration late last year and was handed billions of pounds by the government to fund the purchasing of wholesale energy for Bulb’s customers. Octopus is required to pay back almost £3 billion that it then charged Bulb customers for this energy.

The National Audit Office concluded this year that the total costs to the taxpayer of the bailout stood at more than £3 billion but that this could be reduced to about £240 million if Octopus were to repay the funds it owes.

However, the public spending watchdog warned that “risks remain” to the repayment and it disclosed that the regulator had concluded that Octopus had “a weaker financial position than other large suppliers”.

MPs on the Commons’ public accounts select committee were told yesterday that under present market conditions Octopus has until September 2024 to repay the funds, although the supplier could seek to extend that schedule for a further year if market prices were to change significantly.

Brearley said: “Octopus, like many companies, is on a journey — and we are on that journey together — to a more financially resilient position.” He said he could not “offer any full guarantee of what might happen there”, but said the odds of repayment were “more than 50-50” and that Ofgem was “satisfied” with what it could see.

Octopus, which reported a loss of £166 million in the year to April 2022, has dismissed concerns raised by rivals over its financial health. Stuart Jackson, 50, its chief financial officer and co-founder, said that Octopus fully expected to repay the cash in full and was “well funded”.

“We’ve taken £1.1 billion worth of investment over the last three years and to put that into context that’s 20 times more than Bulb took,” he said. “Our shareholders are large organisations and pension funds. We are not anticipating any issues in returning the cash to the government.”

The NAO report showed that as of the end of January total expenses charged by the administrator Teneo, including for advisers it hired from Lazard and Linklaters, stood at £49.9 million. Matt Cowlishaw of Teneo said yesterday this was ultimately expected to increase to about £60 million. However, this forecast cost increase was already factored into the NAO’s estimate of the eventual cost of the process.