Collapsed energy supplier Bulb’s auction was abandoned by Centrica, the company that owns British Gas, making it difficult for the UK government to complete a competitive bidding procedure.
Following a spike in natural gas costs and a failure to acquire fresh capital, Bulb collapsed last November, they were also the first supplier to do so. The government, which had intended to sell the company by the end of July, intervened to ensure that its 1.6 million consumers continued to get electricity.
This Thursday is the deadline for closing bids in a Lazard’s-managed sale.
With Centrica withdrawing, there are now just two verified possible bidders: Masdar, an energy business from Abu Dhabi, and Octopus Energy, the UK’s fifth-largest provider.
One of the participants suggested that the two collaborate, with Masdar supplying the funding and Octopus, which has never turned a profit, acquiring Bulb’s clientele.
The Department for Business, Energy, and Industrial Strategy appears to be expecting the buyer would take on more of Bulb’s obligations than the energy firm would have liked.
Moreover, Centrica could have received advice from the Competition and Markets Authority that, as the largest home energy provider, the regulator would not likely want it to increase market share.
According to several media sources, Ovo Energy is still considering a last-minute bid, although it would need to raise money in the midst of thousands of layoffs and market turbulence.
How will this affect Bulb customers?
The government’s rescue of Bulb will cost at least £2.2 billion, making it the largest state bailout since Royal Bank of Scotland in 2008.
According to research, Bulb has spent £1.5 billion on purchasing gas and electricity for its clients. In addition, £371 million in “industrial costs” were charged.
Additionally, it is raising prices for consumers; according to estimates from administrators revealed this week, Bulb lost £886 million in the six months following its nationalisation.
The company has about 1.5 million customers, so it has lost nearly £600 for each household to which it supplies gas and electricity.
In the past when smaller energy companies have gone bust their customers have been switched over to different firms. But with 1.7 million customers, Bulb is too big for that to happen. Instead, Bulb is being run by the Government through Ofgem.
According to the Governments website, customers of Bulb are continuing to receive energy and are being billed by Bulb as normal.
Boris Johnson hints at new plans to slash energy bills
The severe effects of a worldwide energy crisis are already being felt by households in the UK, causing wholesale gas prices to soar over the past year.
The Government is urgently looking for solutions to lessen the burden being placed on millions of households experiencing fuel poverty as household energy costs are projected to hit nearly £3,000 by this October.
In an effort to reduce the effects of rising gas prices, Boris Johnson hinted in a recent interview at the ways to revamp the UK’s energy industry.
Ministers are developing measures to remove the system wherein the wholesale cost of gas dictates the price of electricity for consumers, which might be the major reform of the UK’s energy sector in decades.
Speaking to BBC 4, he said that because the price that consumers pay is connected to a marginal price, because much of Britain’s electricity is generated by natural gas.
“People are being charged for their electricity prices on the basis of the top marginal gas price, and that is frankly ludicrous.
“We need to get rid of that system and we need to reform our energy markets as they have done in other European countries.
“That is one of the ways, by reforming the market, by changing the way things work, you can get prices down.”
One alternative under discussion is to acquire electricity from a special low-carbon market, which would provide end users with substantially lower-cost power, while a second more costly market would run alongside it, enabling access to less variable but more expensive gas power when needed.
These new developments come as The Times revealed that National Grid is working on proposals to pay homes to lower peak power usage in order to assist customers cut costs and the danger of outages this winter.
National Grid’s proposed scheme would pay consumers with smart meters to ration their usage voluntarily when supplies are scarce. The approach is expected to be less costly than ramping up power plant generation, given sky-high gas prices that are set to rise higher still over the winter.
However, the possible boost to the renewable energy sector came at the same time that Johnson signaled his intention to increase fossil fuel output in response to mounting energy security concerns.
RWE may rethink its £15bn investment in Renewables due to UK tax on Electricity Generators
RWE’s CEO has warned that if the government imposes a windfall tax on electricity generators, the company’s £15 billion investment in the UK’s renewable energy industry would be reconsidered.
RWE is one of the main power producers in the United Kingdom, delivering roughly 15% of the country’s electricity through assets such as gas-fired facilities and wind farms.
Speaking to the Financial Times, Markus Krebber, Cheif executive of RWE said:
“With the current framework our commitment is to invest £15bn in the UK until the end of this decade,” Krebber told the Financial Times. “[That is] net investment from RWE, it will be higher with our partners and if things change, we reconsider.”
“If the environment changes — and part of that is of course the regulatory framework and political decisions — everybody would reconsider.”
In May it was announced by Rishi Sunak that a windfall tax on energy firms would be implemented.
Right now, Energy corporations will now face an additional 25% tax on high earnings, on top of the 40% they now pay.
However, companies that reinvest their earnings in British oil and gas exploration will get 90% of the new tax back in relief, according to Mr Sunak.
The tax offset only applies to investment in the oil and gas sector, meaning companies will receive no tax relief for investment in renewables.
Paul Flood, a portfolio manager at Newton Investment Management, which has invested just under £1bn in renewables in Britain, said his group would “think very carefully about our current holdings in the UK” if Sunak imposed additional taxes on generators.
Climate activists have cautioned that the windfall tax is only a “sticking plaster” designed to give temporary comfort from high energy prices while actually encouraging further oil and gas extraction.
The tax, according to Greenpeace UK, would increase the UK’s reliance on fossil fuels rather than encouraging a shift to renewable energy.
This is because instead of driving money into clean energy solutions, companies will be much more inclined to re-invest in profits in British oil and gas exploration.