The special administration of Bulb will be backed by a £1.7 billion government loan.
The energy retailer, which supplies 1.7 million customers, officially entered the special administration regime (SAR) on Wednesday after announcing its insolvency at the start of the week.
It is the single biggest failure the market has seen yet, much larger than that of even Avro Energy which failed earlier this year with 580,000 customers.
The move came after energy secretary Kwasi Kwarteng formally accepted Ofgem’s argument that the supplier of last resort (SoLR) process was not fit to support the volume of customers served by Bulb.
Teneo has been appointed to run the business while it is in administration, with the government pledging that customers will not see any immediate increase in their bills and existing credit balances are protected.
Additionally the retailer has announced that Interpath has been appointed administrator of Simple Energy, Bulb’s parent company.
The scale of state backing was set out in the High Court yesterday, with Justice Adam Johnson saying it would be of “existential importance” to the continued operation of the supplier.
The Department for Business, Energy and Industrial Strategy (BEIS) said its priority was to “ensure the exit from the SAR achieves the best outcome practicable for Bulb customers, taxpayers, and the industry”.
Energy minister Greg Hands said: “Our overriding priority is to protect consumers and 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.
“The administrators will now take temporary charge of operating Bulb, and that includes ensuring if a new owner cannot be found customers are safely moved to another supplier.”
Following a flurry of supplier failures this year, massive Last Resort Supply Payment claims are expected to be made by retailers who have taken on the customers of those who have exited. As such, concerns have been raised about the impact this will have on consumer bills.
Speaking to Utility Week in the wake of Bulb’s demise Energy UK’s deputy chief executive Audrey Gallacher said the government should consider picking up the tab for Last Resort Supply Payment claims to spread out the costs of the industry levy and protect consumers from a sharp increase in energy bills next year.
“The big ask on government would be, is there any way we can smooth these costs? We already know that there’s a big supplier levy claim going to be coming through for the 2 million customers that have already been involved in SoLRs,” she said.
“We would say the government could step in and cover the supplier levy and then reclaim it back over time through network charges. They could even sell it on as a type of government bond,” she added.
In a blog outlining the rationale of its decision, Bulb said it had received “lots of interest” from investors when it began exploring fundraising options earlier this year.
“However, the rising energy crisis in the UK and around the world has concerned investors who can’t go ahead while wholesale prices are so high and the price cap—designed to protect customers—currently means suppliers provide energy at a significant loss,” it explained.
The company added that wholesale prices have skyrocketed and continue to be extremely volatile, with the gas supply shortage combined with lower exports from Russia and increased demand meaning they remain “high and unpredictable”.
“Prices have hit close to £4.00 per therm recently, compared with 50p per therm a year ago. We’ve always been big supporters of the idea of a price cap to protect customers, but the current price cap is set at a level around 70p per therm, well below the cost of energy,” it continued.