Octopus Energy is seeking £1bn in taxpayers’ money to take over collapsed rival Bulb from the UK government.
Bulb, which went bankrupt last November, is currently run by the state through energy regulator Ofgem.
The £1bn funding is part of a package under discussion which would also see Octopus pay more than £100m for Bulb’s customers and secure a profit-sharing deal with the Government.
The government declined to comment “out of commercial sensitivity”.
The government’s Bulb bailout is expected to already cost taxpayers around £2billion by next year. But the Office for Budget Responsibility, the government’s independent forecaster, said in March: “Given the volatility in global energy markets, uncertainty remains about ultimate costs.”
It is understood that the extra £1bn demanded by Octopus, first reported by Sky News, would be paid back in full over time.
It would be used to buy energy up front through a practice known as hedging.
Octopus Energy declined to comment.
Since Bulb’s collapse in November, wholesale gas prices are up 78%, exacerbated by Russia’s war in Ukraine and the Kremlin’s decision to cut energy supplies to Europe.
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Since Ofgem took over Bulb’s operations, it has unhedged its wholesale energy purchases, which sources say has resulted in higher costs.
Millions of British households are expecting another steep rise in energy bills later this year.
Ofgem had expected a typical household’s energy bill to increase by £800 to £2,800 per year. But it recently said it would be higher, and energy industry analyst Cornwall Insight said the typical household customer would likely be paying £3,244 a year from October.
Bulb was one of more than 30 energy companies to collapse last year after a spike in wholesale gas prices.
Bulb was the largest company to go bust with 1.6million customers, but Ofgem estimates the cost of all other energy companies to collapse in 2021 could reach £2.7bn – or £94 per customer. This includes the cost of transferring customers from failed utilities to new businesses.
The £2.7billion figure comes on top of the billions of pounds earmarked for Bulb, on which the government has already spent £900million to keep the company afloat, according to the National Audit Office.
Octopus was the only bidder for Bulb to request administration last year and if a deal is struck it would significantly increase Octopus’ 3.1 million customer base.
The Government has announced that households in England, Scotland and Wales will receive £400 in the autumn to help with rising fuel bills.
Tory leadership candidates Liz Truss and Rishi Sunak have also pledged to cut household energy bills.
Foreign Secretary Truss said she would temporarily scrap green electricity taxes, which would save around £153 a year, while former Chancellor Mr Sunak promised to reduce VAT on bills, saving around £160 a year.
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