What Bulb Energy’s collapse means for you

Energy provider Bulb – the seventh largest in the UK – has collapsed into “special administration”; it’s now the biggest casualty of the current energy crisis.

Bulb is effectively now nationalised, and the company will be run both by the government and Ofgem, the energy regulator.

What happened and how does it affect those involved – including its many customers?

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What happened?

Bulb, which supplies energy to around 1.7 million households, was put into “special administration” on Tuesday. Normally when an electricity provider goes bust – as many have in recent months – customers of the insolvent company are transferred to a new supplier. But given the size of Bulb, its customers will not immediately be transferred to a new supplier. Instead, the firm will continue to operate under a special administrator chosen by Ofgem.

Bulb was founded about seven years ago and had grown quickly to become the UK’s seventh-largest energy provider. The administrators are looking to appoint Lazard, a US financial adviser, to run an auction of the collapsed firm, says Sky News. Lazard has already been advising Bulb and is in talks with a number of potential bidders, including Shell Energy Retail and Octopus Energy, who might be interested in buying the company out of administration once the winter is over.

Why has Bulb collapsed?

It’s for the same reason that many other energy companies have already gone under: wholesale prices for gas and electricity have shot higher for several reasons, while many of the tariffs the suppliers have agreed with consumers are either fixed or capped. As a result, many suppliers – particularly those who haven’t hedged their price risk effectively – are now making a loss on the energy they sell to consumers. And the smaller ones don’t have the cash resources to survive such losses.

Since September, 22 small energy providers have collapsed, including PFP Energy, Avro Energy and People’s Energy. The 22 suppliers who went bust had roughly 2.1 million customers. Before Bulb’s collapse, Avro Energy was the largest company to go bust, which had 580,000 customers.

When these other providers went bust, Ofgem switched customers to a “supplier of last resort”. In other words, a new supplier would take over and any existing credit would be transferred to them – but existing deals would not be honoured.

However Bulb is different. It’s the biggest collapse so far, so there was no supplier of last resort willing or able to take on its customers. As a result, Bulb is the first supplier ever to be taken into “special administration”, whereby the firm essentially continues to operate under the auspices of the government and the regulator (via an administrator – in this case Teneo) – until the group is either sold, restructured or its customers are transferred to other suppliers.

What should I do if I’m currently with Bulb?

According to consumer champion Martin Lewis (founder of MoneySavingExpert.com), the best thing Bulb customers can do is simply to stay put. Bulb only offers one variable tariff for credit meter customers and one for prepay customers, both of which are priced at the maximum allowed under energy regulator Ofgem's price cap. But given the state of the energy market, there are no cheaper rates available right now, and indeed, switching could end up costing current Bulb customers more.

(The energy price cap refers to the maximum price per kwH that energy providers can charge for gas and electricity. Given average usage, this should add up to £1,277 for a typical household in the UK, but of course it can be more or less than this depending on how much energy you actually use).

Credit that customers already have is protected and will be as and when another supplier. Also, any credit consumers have with Bulb will be protected when Ofgem moves them to another supplier. However, one caveat is if you are a business customer. It is unclear how Bulb’s collapse will affect businesses, so it is worth checking directly with Bulb to see how it may affect you.

How will this affect investors?

The collapse of a key green energy provider is significant as “Bulb pushed older legacy firms to go green,” reckons the New Scientist. Bulb’s green image saw it grow to take 6% of the domestic energy market; it also played a key role in launching the Tech Zero taskforce, a group of UK tech leaders committed to tackling climate change.

That said, the collapse is unlikely to have a “big bearing on renewables’ investment”, says Aurora Energy Research’s analyst, Richard Howard.