Octopus Energy: UK's biggest energy supplier to repay £3 billion - what does it mean for customer tariffs?

• Octopus Energy will repay nearly £3 billion, reimbursing public funds
• Firm’s founder says news ‘is a great result for taxpayers’
• The repayment, expected by September, will provide an early financial boost to the next Government
• The repayment covers 99% of the total costs associated with temporarily nationalising Bulb
• The recovery of public funds could have broader economic benefits

Octopus Energy will repay nearly £3 billion to the Government, reimbursing the public funds it received to take over the collapsed energy supplier Bulb.

This repayment, expected by September, will provide the next Government with an early financial boost. It also means that almost all the costs incurred from the temporary nationalisation of Bulb in 2021 will be recovered by the public purse.

Bulb collapsed in 2021 when wholesale energy prices surged beyond the price cap set by the regulator Ofgem, forcing suppliers to sell energy at a loss.

To maintain service for Bulb’s 1.5 million customers, the Government temporarily took control under a new process called the special administration regime (SAR).

In late 2022, the Government sold Bulb’s customers to Octopus. It provided more than £1.6 billion in temporary taxpayer support to cover the energy needed to supply those customers.

The nearly £3 billion repayment, confirmed on Friday (21 June), was part of the terms, based on estimated future costs.

Promotional toys at the headquarters of Octopus Energy in London (Photo: LEON NEAL/POOL/AFP via Getty Images) | POOL/AFP via Getty Images

Since energy prices have now fallen, the Government makes a profit of nearly £1.3 billion on the deal, covering all but £6 million, or about 99%, of the total costs from temporarily taking over Bulb.

When the Government sold Bulb to Octopus, other energy companies like ScottishPower, British Gas and E.On challenged the deal, calling it an "unfair sale process." The high court rejected their challenge.

What does it mean for customers?

The repayment is intended to reimburse the Government and taxpayers for the money spent on temporarily nationalising Bulb and ensuring the continuity of energy supply to its customers.

Greg Jackson, founder of Octopus, said: “This outcome is a great result for taxpayers. Octopus worked hard in the darkest depths of the energy crisis to create a fair deal, meaning that although Bulb went bust with billions of liabilities, it has cost the Government almost nothing.”

But Octopus and former Bulb customers will not see any of this repaid money directly, and the repayment of nearly £3 billion is going back to the public funds, not into customers' accounts.

In late-2023, a report from MPs warned of “uncertainties” around the recovery of the £3 billion, with concerns that extra costs could be added to people’s bills “at a time when many are already struggling with energy prices”.

The Public Accounts Committee (PAC) said that consumers may have ultimately been left to foot the bill if the funding was not fully recovered, a scenario which has now been avoided.

The recovery of public funds also potentially reduces the need for future government borrowing or spending cuts, which could have broader economic benefits.

Do you think the repayment will positively impact the energy market? How do you feel about the Government's handling of Bulb's collapse and its subsequent sale to Octopus? Share your opinions and join the conversation in the comments section.