Kwarteng pressed on £1.3bn bill increase for Bulb rescue

The Business, Energy and Industrial Strategy Committee has accused ministers of refusing to allow Bulb’s administrators to re-hedge prior to Russia’s invasion of Ukraine, exposing taxpayers to £1.3 billion of additional costs from the rescue of the failed supplier.

The committee has written to business and energy secretary Kwasi Kwarteng in advance of next week’s Spring statement by the chancellor of the exchequer and the anticipated publication of the government’s energy independence plan.

The committee’s chair Darren Jones said the refusal to allow the administrators of Bulb, which was taken into the Special Administration Regime (SAR) in late 2021, to re-hedge ahead of the Russian invasion has raised the government’s exposure to energy costs by “at least” £1.3 billion when compared to the £1.7 billion originally estimated.

The letter asked Kwarteng to confirm whether the decision was taken by ministers in the Treasury or the Department for Business, Energy and Industrial Strategy (BEIS), and if the advice of administrators, with experience of running energy companies, was rejected.

The committee said that in the absence of further hedging, Bulb’s losses have continued to rise since it went into the SAR as wholesale gas prices have continued to climb following the invasion.

Jones’ letter also asked Kwarteng if BEIS has asked the chancellor to provide more support for high energy bills ahead of the Spring statement.

It pointed out that the government’s package of support announced last month “could be too little, too late” to help customers cope with the large hike to the price cap now widely expected in October on top of the substantial increase that is already due next month.

The chancellor’s previous announcement of council tax rebates and a repayable discount on electricity bills, together worth £350, will be “out of date” when the price cap rises in October, increasing the projected number of households expected to be in fuel poverty.

The letter probed Kwarteng on BEIS’ long-term assessment of both the effectiveness of the energy price cap and the knock-on impact on the energy system if consumers can no longer afford to pay their energy bills.

The committee additionally pressed the secretary of state on when the government will outline a replacement for the cancelled Green Homes Grant home insulation scheme and whether the Boiler Upgrade Scheme due to commence in April will be adjusted to speed up the delivery of low-carbon heating measures.

And in the light of the heightened urgency surrounding the need for co-operation between the UK government and the European Commission in order to exploit the North Sea’s renewable energy potential, the letter asked whether the UK has participated in the North Sea Energy Cooperation Forum since Brexit.

On publication of the letter, Jones said, “It’s right that there are special administrative measures for energy companies that have gone bust. But what does the government plan to do if another large energy company needs to be essentially nationalised? The Spring Statement is a good opportunity to address these issues as well as bringing forward better immediate support for bill payers.”

As lobbying intensifies ahead of next week’s Spring Statement, the All-Party Parliamentary Group on Nuclear Energy has published a five-point plan for the government to kickstart the sector’s revival.

This includes setting a target of 15GW of nuclear power by 2035, rising to “at least” 30GW by 2050, including a mix of large, small and advanced reactors.

The APPG also called on the government to classify nuclear as green in the UK sustainable investment taxonomy.

The group urged ministers to ensure EDF’s Sizewell C project reaches Final Investment Decision within the next 12 months, order ten small modular reactors in the current parliament and immediately allocate pre-development funding to the Bechtel/Westinghouse joint venture at Wylfa on the Isle of Anglesey, where Hitachi pulled out of plans for a new nuclear plant in 2019.