The cost to the taxpayer of running Bulb, the failed energy supplier, could spiral by £1 billion or more as gas prices hit fresh record highs, according to industry estimates.
Britain’s seventh biggest energy supplier collapsed last month with 1.6 million household customers and was placed in government-backed special administration with a £1.7 billion taxpayer loan to fund its operations.
Sources have said that the government had opted for Bulb’s administrators to buy the vast majority of its wholesale energy needs at short notice, as little as a day in advance, leaving it exposed to surging costs.
Gas prices hit new highs yesterday as Russian supplies to Europe fell further while cold weather pushed demand higher. Benchmark UK month-ahead gas prices were up more than a fifth at about 450p a therm last night — about nine times higher than a year ago — having touched 470p a therm.
Thomas Rodgers, a gas analyst at Icis, the price reporting agency, said: “There is clearly a level of panic and distressed buying in the market.”
Day-ahead gas prices have more than doubled since Bulb was placed in special administration, while day-ahead baseload electricity prices have risen by close to half. One well-placed source estimated that this could inflate the cost to taxpayers of running Bulb by at least £1 billion if high prices persist this winter; another suggested a rise by as much as £2 billion.
The latest rally threatens to pile more misery on households, with analysts already saying that the price cap on domestic energy bills could rise by more than half to £2,000 a year from April without government intervention.
Emma Pinchbeck, chief executive of Energy UK, which represents leading suppliers, called on the chancellor to respond. “It’s like we’ve spotted a live grenade in a room full of people and we’ve been told to put a pillow over it and cross fingers rather than worry anyone,” she said.
Bulb is the biggest of more than two dozen energy suppliers to collapse this year, many after failing to guard against rising wholesale prices by buying in advance, or “hedging”. Suppliers left exposed to high short-term wholesale costs have been unable to pass these on to customers because of the government’s energy price cap.
When it collapsed, Bulb was understood to have at most a few months of hedging in place, much less than most companies of its scale.
Sources said that when special administrators from Teneo took over running Bulb last month they still did not buy in advance because of a Treasury policy against hedging.
Many in the industry are shocked at the apparent scale of risk to the taxpayer and to consumers, who may end up paying for it on their energy bills.
A spokeswoman for Bulb declined to comment. A government spokeswoman said: “The special administrator of Bulb is obligated to minimise costs of the administration process and we continue to engage closely with them throughout to ensure taxpayer value is maximised.”