Source · Select Committees · Public Accounts Committee
Recommendation 11
11
Acknowledged
Anticipated shortfall in Bulb recovery likely to be passed onto energy consumers.
Conclusion
When we examined the regulation of energy suppliers in November 2022, we found that the SoLR intervention was expected to cost £2.7 billion. This cost was expected to be passed onto energy consumers and resulted in an increase in average bills by £94 per household.16 We therefore asked the Department how it would determine whether there was a shortfall at the end of SAR and how much of this would also be passed onto customers. The Department told us that it expected to recover the majority of the £3.02 billion taxpayer funding, but that it expected that there would be a shortfall. At the time of the NAO report, Octopus was expected to repay £2.96 billion to meet the cost of the collateral and the wholesale energy costs for Bulb. This would leave a shortfall of £246 million that will also need to be recovered (including accrued interest, which was applied to the taxpayer funding at a market rate of interest set at a level that was not a form of subsidy). At the time of our evidence session, Teneo reported that the estimated amount Octopus would be due to repay to government was £2.8 billion. HM Treasury explained that recovery of the shortfall through energy consumer bills formed part of the system set in place by the legislation included in the Energy Act 2011. It explained that this was originally set up to ensure continuity of energy supply to consumers, but that the cost of such processes go back to energy consumers. The Department explained that it had not yet been decided whether the shortfall will be recovered through energy consumers or taxpayers, but that it had already set out to Parliament its intention to recover the cost from energy consumers. The Department and Teneo told us that should this be the case, this would cost an estimated 75p per month or £8 to the average household for a year, or £4 per year over two years.17 15 Q 105; C&AG’s Report, paras 13–15, 2.7, Figure 5 16 House of Commons Committee of Public Accounts, Regulation of energy suppliers,
Government Response Summary
The government agrees with the conclusion, confirming the SAR's expected conclusion in autumn 2025 or 2026 when final costs will be known, including any shortfall. It commits to providing the Committee with a written update on final confirmed amounts and timelines for recovery by December 2025.
Government Response
Acknowledged
HM Government
Acknowledged
3.5 The government agrees with the Committee's recommendation. Target implementation date: December 2025 3.6 Bulb will remain in SAR until such time as the administrators have fully discharged their statutory duties, have submitted their final progress report and a court application to end the SAR, with Secretary of State’ consent, has been made and duly ordered by the court. 3.7 Full repayment is not expected until September 2024 (or 2025 if Octopus exercise their right to defer if certain market conditions are met). Following this, a further 12-month wind-down period is expected for the administrators to close any remaining matters. As such the conclusion of the SAR will not occur until sometime in autumn of 2025 or autumn of 2026 at which point, we will have details of the final costs to the taxpayer and how much has been repaid. 3.8 The recovery of any shortfall is dependent on final amounts calculated by the administrators which is still progressing. The department will inform the Committee once it has the final confirmed amounts and expects to provide a written update as to estimated outturns and timelines by end of December 2025. However, in the meantime it will keep the Committee updated of estimated outturns over the remaining SAR period.