With the ongoing energy crisis and the record high gas prices, many providers are struggling to continue providing their services as it becomes financially unsustainable for them to keep on working. Twenty-two energy companies have already gone bust and many more are expected to follow this path.
You’ve probably heard – Bulb Energy, which has 1.7 million customers, has announced that the firm will be put into special administration.
Although Bulb is considered to be one of the biggest providers in the UK, it has been struggling too and has failed to get through the difficult financial situation it has been in for several weeks.
What is happening with Bulb?
Bulb has been in the news for the past few weeks, since the energy market crisis hit the company hard and it ended up seeking a bailout. Bulb made £63 million in losses in the year to 31 March 2020 and owes a £55 million loan due for repayment at the end of this year. The 6th biggest energy provider announced in September that they were hoping to be backed up by an investment bank in order to stabilise and survive the market crisis. The company even stopped registering new customers to keep their expenses lower. There were many speculations about Bulb’s future and the potential options to save the supplier from going bust.
In September, Bulb appointed investment bank Lazard to look into restructuring options, which included a joint venture or merger with another firm, and a cash injection from existing shareholders. Octopus Energy and Ovo were considered to be potential candidates for the acquisition of Bulb.
Is Bulb going bust?
Unfortunately, Bulb did not manage to find a way out from the energy market crisis and was forced to enter a special administration process. The company said that the energy crisis and the continuous hikes in gas prices prevented them from being able to raise the financing it needed from investors to keep on operating. Bulb became the first energy company to be placed into “special administration”, where it is run by the government through the energy regulator Ofgem.
What does special administration mean?
The government’s energy watchdog Ofgem set up the Special Administrator Regime (SAR) for a situation when an energy supplier goes bust but is too big to have its customers transferred to another supplier. This is the situation in which Bulb is currently in, since it provides energy to 1.7 million of customers, unlike smaller companies whose customers were transferred to other suppliers after they went bust. The objective of the special regime is to stop financial failure spreading across the industry.
Under the SAR scheme, the government can make grants and loans to the company while its future is sorted out. This means that Bulb will continue to provide energy to its customers for the time being, while it is financially supported by the government. The SAR scheme was approved by the law 10 years ago and it is the first time that it will be put into force. The special administrator has the obligation to consider customers’ interests as well as those of creditors who are owed money by Bulb.
What will happen with Bulb’s customers?
If you are a customer of Bulb, you will still be provided with energy by the supplier and you will not feel any difference. The service will operate as normal and you do not need to do anything.
Under the current situation, you should:
Continue to pay your direct debit as normal: do not cancel it because Bulb will still bill you for your energy
Top up your meter as usual, if you have a prepayment meter
Continue to pay repayments as normal, if you are on a repayment plan
If you need a smart meter installed, you will still be provided with
If you are receiving the Warm Home Discount, you will still get it from Bulb
This means that in the short-term, you will still be on your current tariff, your credit balance and bills will continue as usual. However, it is still unclear what will happen in the future and what decisions will be made.
What to do if your supplier goes bust?
In case of your supplier going bust, you will still be provided with gas and electricity. Ofgem will quickly transition you to another supplier and you will be contacted with further information and instructions about your account, outstanding bills or credits.
If you are waiting to receive money back from your old supplier, you should not worry about this. The credit will be paid back by one of the two suppliers, depending on their agreement. If you are in debt to your previous supplier, you will be contacted with instructions on how to proceed and to which supplier you should pay back the outstanding amount. While waiting for them to contact you, you can take a note of your consumption and a meter reading for reference.
Should you switch suppliers now?
You might be wondering if it is best to switch immediately to a new provider that is less affected by the energy crisis. As the situation is still unclear and is changing with every day, it is not known which suppliers will stay on the market and which will go bust.
Therefore, it is best to wait and see how the situation will develop and make a better informed decision. In case your supplier goes bust and you are transferred to another one, you will be put on a deemed contract by the supplier that Ofgem will appoint.
Deemed contracts can be on a higher tariff and might not be the best available deal on the market. If you are not happy with this tariff, you can simply switch to another cheaper supplier, once the transfer is completed.