Britain’s biggest energy suppliers are set for a courtroom clash over whether the government handed preferential terms to Octopus Energy in allowing it to snap up Bulb from administration.
Octopus acquired Bulb’s 1.5 million customers late last year after the supplier spent a year in a government-handled administration.
Judges will next week hear a judicial review brought by rival suppliers Centrica, which owns British Gas, E.ON and ScottishPower over the decision to agree the deal by the energy secretary, Grant Shapps.
The trio claim there was a lack of transparency around the terms of the deal between Octopus and the Department for Business, Energy and Industrial Strategy.
It is understood they will argue that Octopus received promises of state aid not proffered to competitors in the process.
Octopus is expected to reject this claim and argue that administrators informed it and rivals that government support might be available and bidders needed to request what they would need to take on Bulb’s customers. It has labelled the legal action “desperate”.
Lawyers for Octopus are likely to argue that the fact that it submitted two alternative options for the deal showed that the company did not have insight into what structure of support would be available from government.
As part of the deal, the government offered support to enable Bulb to buy energy over the winter when wholesale gas prices were at high levels, inflated by the war in Ukraine.
The hedging support is expected to amount to about £1.8bn. However, as wholesale prices have fallen sharply in recent months, Octopus could pay back nearly £3bn to the government, equivalent to a £1.2bn profit from the deal.
Octopus will claim this backs up founder Greg Jackson’s claim that the transaction is a “fair deal for the taxpayer”.
However, rivals have argued that Octopus has effectively received a “dowry” from government and accused officials of “a mess-up worth billions of pounds” to the taxpayer.
The government provided a £4.5bn financing facility to fund Bulb’s operations under Octopus ownership until the end of March.
During hearings at the administrative court, scheduled to last for three days from Tuesday, judges will examine whether a fair process was run.
The trio of energy firms hope to see the deal reversed and a new process run, or some form of compensation awarded to allow for a perceived benefit to Octopus.
Bulb was founded in 2015 by entrepreneurs Amit Gudka and Hayden Wood as a challenger to the dominant large energy suppliers, but was caught out by a sharp rise in wholesale gas prices in 2021.
Gudka and Wood cashed out £4m each in shares in 2018. Gudka left the business before its collapse to set up a battery storage company and Wood faced criticism over taking a £250,000 taxpayer-funded salary after its collapse.
After the deal, Octopus has 4.9 million customers, making it the third-largest UK energy supplier behind British Gas and E.ON.
Next week Ofgem will confirm the price cap on what energy suppliers are allowed to charge customers from 1 April. On Monday, the regulator is expected say the cap has fallen by about £1,000 to £3,295, although the government’s energy price guarantee scheme means typical household bills are limited to £3,000 for 12 months from April.
