Recommendation 4

HM Treasury, the Department and Ofgem’s preparedness for the failure of a major energy supplier like Bulb, did not include the full range of activities needed to oversee a Special Administration Regime (SAR). Between 2018 and 2021, HM Treasury, Ofgem and the Department tested various scenarios to understand how a SAR might work in practice if a major supplier failed. However, this scenario testing and the subsequent guidance and templates focused on starting a SAR and the immediate steps needed to appoint a special administrator. They did not extend to some of the later stages of running a SAR, such as the energy purchasing strategy or how to structure and run the sale process. The Department did not anticipate that volatile energy prices, or uncertainty arising from new regulations being proposed by the Department and Ofgem in response to supplier failures, would result in low interest from potential buyers. This led to the sale process taking 10 Bulb Energy 7 months to complete, longer than originally intended. The SAR achieved its primary objective of ensuring the continuity of energy supply to Bulb’s customers. However, as only the initial stages of the SAR were rehearsed, some of the risks and issues encountered during the SAR were unforeseen. The government and administrator recognise the importance of detailed planning in the event of a future SAR to enable all those involved to better understand the potential risks and how to mitigate them and allow decisions to be taken quickly. Recommendation 4: By the end of 2023, the Department and Ofgem should update their procedures for handling a supplier failure to ensure that they cover the entirety of the SAR process. This should clearly outline the key decision points during the SAR, the energy purchasing strategy, the sale process and exiting the SAR.