‘A mess-up worth billions’: energy rivals attack Bulb-Octopus deal

<span>Photograph: Leon Neal/PA</span>
Photograph: Leon Neal/PA

British Gas has accused the government of trying to hide “a mess-up worth billions” from taxpayers as it attempted to secure a deal to sell collapsed energy supplier Bulb.

British Gas, ScottishPower and E.ON challenged the deal which will see Octopus Energy take on Bulb’s 1.5 million customers.

Bulb collapsed a year ago as the biggest casualty of a string of corporate failures which saw 28 of the smaller energy suppliers go to the wall. Octopus agreed a deal to takeover Bulb in October and a court has approved a transfer of the customers by 20 December.

Octopus’s three rivals have argued that there has not been enough transparency around the terms of the deal and applied for a judicial review.

Lawyers for Octopus said all legal issues needed to be resolved as quickly as next week to “achieve certainty and finality” for the companies involved.

The three energy firms have argued there is not enough time to scrutinise the terms as part of the judicial review, which could ultimately result in the Octopus-Bulb deal being unwound. The court agreed more time was needed and gave the firms until Thursday to suggest a suitable timeline, expected to run into the first few months of next year.

The Office for Budget Responsibility estimated last month that the cost of bailing out Bulb has reached £6.5bn. The government disputes the figures.

At a high court hearing in London on Tuesday, Paul Harris, a lawyer for British Gas, accused the government of “a mess-up worth billions of pounds”.

The companies challenging the deal claim “they were not all made aware of the potential existence, and certainly not the structure or scale, of the government funding on offer which was made available to Octopus”.

“Despite [the Business, Energy and Industrial Strategy department’s] continued resistance to providing transparency … it is apparent that very serious questions arise as to the lawfulness of the decisions [to grant the sale],” they said.

“If the claimants had been told subsidies were on offer, that would fundamentally change the landscape in what they were participating in the bidding process,” Harris said.

As part of the deal, the government will provide financial support to Bulb, which will be ringfenced from the main Octopus operation, during this winter.

Octopus has argued it is well capitalised and has received significant funding from investors including Origin Energy, Tokyo Gas, CPP Investments and Generation Investment Management, the sustainable investment fund co-chaired by Al Gore, which invested $600m (£494m) last year.

If rivals are successful, Bulb could be left in special administration again. Lawyers for Octopus have warned that if Bulb’s customers are not transferred before 31 December, Octopus “will lose its wholesale energy supply arrangements, with the result that it will not be able to ensure continuity of supplies for customers”.

Separately, it has emerged that Citizens Advice chief executive, Dame Clare Moriaty, wrote to business secretary, Grant Shapps, last month to raise concerns over Bulb.

She said: “We are particularly concerned about how costs arising from the Bulb administration, and from this proposed deal, could impact customer bills and would like clarification on the proposed approach to these costs, including the potential scale and recovery timings.”

She added: “We would also like assurances that the financial support provided to the new ringfenced entity will also not, in any circumstances, be funded or recovered through customer bills and would like details of this support to be provided.”

Greg Jackson, the founder of Octopus, has said the acquisition represents a “fair deal” for taxpayers and said rivals were “repeatedly” offered the opportunity to participate in negotiations to buy Bulb.