Source · Select Committees · Public Accounts Committee
Recommendation 13
13
Accepted
Early planning, collaboration, and suitable corporate structures are key SAR lessons.
Conclusion
We asked Teneo to explain what lessons could be learned from the SAR process. Teneo told us there were two main lessons, the first of which was around the importance of planning at an early stage. It explained that this included planning even before the appointment of the special administrators to identify what needed to be taken control of and stabilised, and how. It explained that this planning should be undertaken by all those invovled in the special administration, and from its perspective would involve undertaking operational planning at a granular level to ensure that the potential risks and how to mitigate them were understood from the very start of the SAR. Teneo also told us that the second key lesson was around the importance of collaboration and keeping all involved parties up to date (including the relevant Departments, the regulator, and the administrator) on the strategy for the implementation of the SAR. It explained that this would allow decisions to be made and views taken quickly.23 Ofgem told us that planning and collaboration were also key lessons from the SAR. In addition, it explained that the major lesson it had learnt from the SAR was the importance of having a corporate structure 18 Qq 52, 67, 72; C&AG’s Report para 1.6 19 Q 73 20 Qq 72, 73 21 C&AG’s Report, para 1.6, Figure 9 22 Qq 18, 73, 119 23 Qq 48–49, 51 14 Bulb Energy set up within energy companies that would allow the administrator access to everything needed to be able to make sure that the company could be run and financially managed properly. It told us that it was working to introduce this through new regulations.24
Government Response Summary
The government agrees with the committee's observation on lessons learned from the SAR process, noting that 'lesson learned' activities were undertaken in 2022 and 2023 to shape ongoing preparations, and that lessons will continue to be consolidated into contingency planning, with a benefits analysis to be completed by October 2024.
Government Response
Accepted
HM Government
Accepted
3.1 The government agrees with the Committee’s recommendation. Target implementation date: October 2024 3.2 A lesson learned activity on Bulb Special Administration Regime’s (SAR’s) initiation and operation was undertaken in early 2022, followed by one before summer recess 2023. This has helped shape ongoing preparations for any future SAR and enhanced the generic SAR planning products, the routine staff training and the DESNZ-Ofgem SAR Handbook (a tool which sets out how to establish a SAR and explains how an administration would operate). Lessons learned exercises will continue to take place throughout the lifecycle of the SAR, from initiation, operation and ultimately exit. Lessons from these exercises will be consolidated into the department's SAR contingency planning activity to ensure it can continue to respond effectively as market conditions evolve. This will obviously be dependent on the timings surrounding the completion and exit of the SAR. 3.3 The department will be completing a benefits analysis towards the conclusion of the SAR, to review how the objectives have been achieved and whether value has been achieved for customers and taxpayers alike. 3.4 The department continues to engage with the administrators of Bulb who provide regular reporting and progress updates as per the requirements of the Administration Funding Agreement. HM Government monitors and provides the appropriate level of scrutiny and oversight in ensuring the objectives of the SAR remain on track to be achieved such as delivery at the lowest possible cost and the successful full recovery of the Wholesale Adjustment Mechanism Agreement (WAMA) (a framework entered between the administrators and Octopus as part of the transaction) funding provided. However, the responsibility ultimately falls on the administrators as officers of the court, in ensuring the relevant parties fulfil their contractual repayment obligations as stated under the WAMA.