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Bulb Energy: Administration

Volume 704: debated on Wednesday 24 November 2021

(Urgent Question): To ask the Secretary of State for Business, Energy and Industrial Strategy if he will make a statement on Bulb Energy entering administration.

As many people in the House will know, when energy suppliers leave the market, the regulator, Ofgem, runs a competitive supplier-of-last-resort process. Last week, Bulb informed the Government and Ofgem that it would be leaving the market. Ofgem has advised that the supplier-of-last-resort process is not viable for Bulb because of the size of its customer book. Ofgem has, with my consent, applied to the court to appoint energy administrators. If appointed by the court, the administrators will continue to operate Bulb under what is called the special administration regime, which is set out clearly in legislation.

We will update the House once the court has made its determination, but I wish to clarify a couple of points. First, a special administration regime is a temporary arrangement that provides an ultimate safety net to protect consumers and ensure continued supply. The special administration regime will keep bills at the lowest cost that it is reasonably practical to incur while ensuring that the market remains stable. The House should understand that we do not want the company to be in this temporary state for longer than is absolutely necessary. Supplies remain secure and credit balances will be protected. Finally, all domestic customers in Great Britain are, of course, protected by the energy price cap, which remains firmly in place.

It is right that the Secretary of State has been forced to come to the House: 18 companies have gone bust since he last came to the House in respect of this issue, in September, and reassured us that there was nothing to worry about.

I have a series of questions. First, what is the Secretary of State’s estimate of the scale of costs the taxpayer faces as a result of the Bulb bail-out? That was not clear from his statement, but this is a taxpayer bail-out and the public deserve to know. Will he level with people about the costs that bill payers are going to have to pick up from all the other companies that have failed since September? How much will bills increase as a result?

Secondly, we are now in a position in which companies have banked profits but losses stretching to hundreds of millions incurred by those same companies are being borne by taxpayers and bill payers. So many companies going bust in just two months—something not happening anywhere else in the world—points to a systemic failure of regulation. Firms took risky bets and were allowed to do so, and the Government and Ofgem significantly deregulated the conditions of operation in 2016. Will the Secretary of State now take responsibility for this clear failure of regulation? Does this not suggest that there needs to be a proper review of the regulation of the market?

Thirdly, there is a global dimension to gas price rises but the truth is that we are more exposed as a country because of failures on onshore wind, solar, energy efficiency and gas storage, which is just 2% of our annual demand compared with 25% in other countries. Will the Secretary of State admit that Government inaction over the past decade has left us more vulnerable?

Finally, on the cost-of-living crisis, with further energy price rises coming, why are the Government making the situation worse with cuts to universal credit, by raising national insurance and by refusing to bring some relief by cutting VAT on energy bills? With businesses being hit, too, where is the support that he indicated was coming more than a month ago for energy-intensive industries?

We have seen a failure of policy over a decade, a failure of regulation and the Government making the cost-of-living crisis worse. Is not the truth that this Government cannot be the answer to this energy crisis because it is their crisis? It is businesses and families who are paying the price.

On a point of fact, the number is actually 22 companies, not 18, and I refer back to that—[Interruption.] No, that is the figure. That shows the incredible resilience of the systems that we have in place. We have the supplier of last resort, which has worked very effectively, and, as I outlined in my statement, we also have the special administration regime, which was designed precisely to deal with situations such as the one we are now in.

On regulation, Ofgem has launched a review of the retail market and how it operates. I will be directly involved in that and will study it very closely.

The right hon. Gentleman talks about the global market and the situation we are in post covid; he and his party predicted record levels of unemployment and recession, and of course they were completely wrong—they were absolutely wrong. We are growing the economy stronger than any other country in the G7. We are also creating jobs and creating investment, so the right hon. Gentleman’s prophecies of doom were completely misplaced, and he is completely without any firm arguments over our response to what was a global pandemic.

What action has the Secretary of State taken to ensure that, in future, there will be more UK domestic gas to replace unreliable and expensive imported gas, and what action is he taking to expand the capacity of our generating system for the days when the wind does not blow and the sun does not shine?

My right hon. Friend will know that this is the first Government in about 25 years or more who are firmly committed to nuclear power. He will understand that the Cabinet expenditure—the long-term commitment to nuclear power—will not necessarily bear fruit in a week or a month, but for the first time, we have made a very dramatic 100% commitment to increasing our nuclear capacity. That answers his point about security of supply overall.

In terms of gas, I am pleased to announce that I and the Minister of State, my right hon. Friend the Member for Chelsea and Fulham (Greg Hands), are driving the North sea transition deal. The key to that is transition—about trying to transition to net zero while securing jobs and security of supply from gas in the UK Continental Shelf. These are things of which we are apprised.

In 2018, there were more than 70 companies in the energy retail sector, but now there are fewer than 30—a reduction of 60%. Bulb is the 23rd company to go bust since August, a statistic that, somehow, the Secretary of State seemed to be happy about when he was at the Dispatch Box earlier. When are this Government going to get a grip on what is now a cost of living crisis and an energy supply crisis? As energy bills soar, the Treasury gets extra VAT, extra income on fuel duty, and, on top of the £350 billion-worth of oil and gas revenues from Scotland that it gets to squander, an extra £1.1 billion more that it predicted this year alone, because gas prices have increased, so when will it reinvest some of that money to support consumers and the sector?

Bulb was the seventh largest company, with 1.7 million customers. What is the plan for coming out of special administration, because the Secretary of State has still not told us that? When EDF, Scottish Power, Octopus Energy, Utilita and Good Energy all say that they cannot afford new customers, what will happen with these customers? Can the energy companies actually refuse to take new customers, and what discussions is the Secretary of State having on that?

The Secretary of State says that the energy cap is here to stay, but what will be the effect on consumers in fuel poverty when the cap invariably goes up by £400 to £600 in April? It is a disgrace. The Government have allocated £1.7 billion of taxpayers’ money to develop Sizewell C to final investment stage. Why not invest that money in energy efficiency and renewable energy and do stuff that actually brings down energy bills, rather than committing consumers to a 10 to 15-year contract for nuclear and six years on top of that? When will they get a grip on energy policy as a whole?

This is where the hon. Gentleman and I disagree. We are firmly committed to nuclear power; he is against it. We can do two things: we can commit to renewables, as we are doing with our 10-point plan, and commit to 40 GW of offshore wind. I hope that he recognises that we are committed to tidal for the first time in many decades—that is something that he should appreciate. He should also remember that we have the warm home discount and lots of mitigations protecting the most vulnerable customers across the winter and in the next few months.

I welcome the Secretary of State’s commitment to making sure that this temporary measure is indeed temporary, and I encourage him to make it as short as possible. I also welcome his commitment to the ongoing use of the price cap, but I urge him when the price cap legislation comes up for renewal in the next 12 months to think very carefully about reform in order to make the price cap much more fit for purpose. At the moment, it is not doing what we need it to do. We have companies going bust and an ongoing problem with the loyalty penalty, which was, after all, one of the key reasons for introducing it in the first place.

My hon. Friend will appreciate that Ofgem, as I alluded to in my statement, has already launched a consultation on precisely the issue of the retail price gap. It will be driving that forward and I am sure that his input will be welcome. We have had lots of mitigations to protect the most vulnerable consumers, but we clearly need to have a discussion about the retail market. Ofgem is leading that discussion and my Department is supporting a closer look at the retail market.

The Secretary of State mentioned the particular arrangements for Bulb customers, but constituents who have been moved from other energy suppliers that have collapsed—there were 21 when I mentioned this issue at business questions last week—are now facing long delays in being set up with suppliers of last resort, so they do not know what their bills are going to be, they face accumulating debt and they may miss out on the warm home discount. What are the Government doing to address that?

I am happy to talk to the hon. Lady about specifics in her constituency. The supplier of last resort process was set up for precisely this process. Generally, it is working, and customers have been successfully transferred to new suppliers.

I welcome my right hon. Friend’s attention to detail on this issue. One of the problems is that gas prices have dramatically increased across the world and we have to cope with that. What is he doing to ensure that we increase the supply of gas so that the market then reduces overall prices?

The House should understand that we have a security of supply. For example, in 2020, 50% of the gas was from the UK continental shelf, 30% was from Norway, 18% was essentially shipped and 2% came from interconnectors. That is a diversity and security of supply that other countries in the EU and on the continent frankly do not have. My hon. Friend will also appreciate that the supplier of last resort process and the energy price cap have protected consumers considerably through this difficult period.

Hundreds of my constituents have been in touch with me over the last few months as their energy suppliers have collapsed. As the Secretary of State said, 22 suppliers have now collapsed. We are moving back to an oligarchy of energy companies that are increasing their profits, while the supplier of last resort is socialising losses. What is he going to do to fix the broken energy market? This winter we are going to have a perfect storm of rising wholesale prices and collapsing companies. How is he going to resolve that, so that people do not end up in fuel poverty?

I do not agree with the hon. Gentleman’s characterisation; I do not think that we are going back to an oligopoly, as he said. I have always maintained that competition is essential in this market. As my hon. Friend the Member for Harrow East (Bob Blackman) alluded to, there has been a huge mismatch between the wholesale price and the retail price cap. The retail price cap is there to protect consumers, otherwise we would have seen a huge increase in consumer prices and the hon. Gentleman’s constituents would have been under even more pressure.

I have been on something of an energy nomadic experience over the last few months. I started with Avro Energy a few months ago, but that went bankrupt and I was converted domestically to Bulb, and I am now in the support scheme within the space of three months. There was a 12% energy price rise at the last round, in August. Who knows what it will be in April next year? The policy of trying to sell ten pences for sixpence does not last very long. What we are going to see over this winter is the Treasury—that is, the taxpayer—making up the difference for these spot prices versus the reality of what energy is being sold for to domestic users. Will my right hon. Friend please see the vision that the only bridging energy supply, of which we have a lot domestically, is gas? We all want net zero sometimes, but it is not going to happen tomorrow; it is going to take a generation to get there. We have a domestic supply that can bring us the two key planks of energy: security of supply and affordability. Domestic users and the industry need that immediately.

I have two points in response to my hon. Friend. First, I am not embarrassed about the retail price cap. It has protected consumers effectively and we are proud to maintain it. On the security of gas, I could not agree with him more, but he should be addressing his comments to other Members of this House, who want essentially to shut down the UK continental shelf. We had a North sea transition deal precisely because we recognised that the transition would take a number of years.

The fact that another energy supplier has gone under is causing huge anxiety for constituents everywhere, who will be equally concerned that the supplier of last resort process has not worked in this case. Will the Secretary of State reassure them: how many other energy suppliers is he concerned about this winter and how many customers would that represent? If this process is not working, is he considering a Northern Rock-style energy company to take on customers of companies that have gone under, given that the process has not been working in this case?

As I have maintained, there are two forms of remedy to deal with this sort of situation: the supplier of last resort, and a special administrative regime. In the particular instance that is the subject of the urgent question, it was felt by Ofgem, not the Government, that the supplier of last resort mechanism was inappropriate, and we are therefore looking at the special administrative regime, as I said in my statement—but both the structures are working.

This will be a worrying time for Bulb customers, who will be concerned not only about the continuity of their supply, but about the protection of the payments that they have already made. Many of my constituents were with Avro and have been in touch with me, concerned about whether the payments that they have made by direct debit will be translated into future payments. Will the Secretary of State give them some reassurance that their payments have been and will be protected?

I mentioned in my initial response to the urgent question that consumer balances will be protected throughout the process.

The Secretary of State keeps on saying that it is all working, but to be honest, it does not feel like it is. I do not think that I have ever seen such an example of Government complacency at the Dispatch Box as bad as this. The truth of the matter is that millions of people are worrying about what their bills are going to be, businesses are going to struggle and 22 companies have gone under. How on earth is that, “Yes, it’s all working perfectly”? Will he please answer one simple question, to which taxpayers will want to know the answer: how much is the Government bail-out going to be in the end?

I will answer the hon. Gentleman’s latter question. There is no Government bail-out; the poor, failing companies have not been bailed out—I want to reiterate that. If he knows anything about the energy market, he will know that over the last few years, six or seven companies have exited the market and were dealt with through the supplier of last resort process. The stresses of this particular gas price situation—which, I remind hon. and right hon. Members, quadrupled in the last six months—meant that there was more pressure this year, but the system and structure of the supplier of last resort process and the special administrative regime are working.

The Kettering parliamentary constituency generates enough renewable energy from wind and solar to power all 45,000 local homes, and is one of the greenest constituencies in the whole country. If we are to reduce our exposure to volatile international gas prices, is it not crucial that we do more to diversify our source of supply?

Absolutely. My hon. Friend will be happy to realise that that is exactly what we are doing through the 10-point plan, with commitments to offshore wind, solar power, nuclear power and other technologies. It is a huge imperative for us—and for me as Secretary of State—to ensure that we have a diversity of supply.

Bulb was the seventh largest energy supplier in the United Kingdom. How much bigger does a supplier have to be before it is too big to be allowed to fail? What are the Secretary of State and his Cabinet colleagues going to do to ensure that the cost of this market failure is not borne by ordinary families, who are already struggling to pay their fuel bills this winter?

The hon. Gentleman makes a point about Bulb. It was a very large company, which is precisely why the supplier of last resort was not felt to be an appropriate mechanism in this instance. [Interruption.] Hon. Members chunter from a sedentary position. The solution is the special administrative regime, which I outlined—I hope, clearly—in my initial statement.

My right hon. Friend the Secretary of State has made various references to nuclear power and it is great to hear that there is a mix and a commitment to nuclear power. How long is it since the latest round of commissioning of nuclear power stations that the last nuclear power station was commissioned and how many more are planned in the future?

Being a close student of the energy White Paper, as I am sure he is, my hon. Friend will know that we have had a commitment to invest in one more large-scale nuclear project before the end of the Parliament. He will also know that we have committed to small modular reactors. I was very pleased to go to Sheffield to make that announcement only last week. Nuclear is clearly a big part of our energy mix and will help us in the future.

The Government’s headlong rush to net zero is already showing through in people’s fuel bills and levels of fuel poverty in the United Kingdom. Despite what the Secretary of State has said about licences to help through the transition period, we will still be reliant for 50% of our gas on outside sources, which does not give us energy security. At the same time, we have enough gas under the ground in the UK to keep us totally supplied for the whole country for 150 years, which could help the levelling-up agenda in the north-west of England, and help my constituents who currently find themselves at the end of a very expensive pipeline and are very vulnerable. Why are the Government not prepared to exploit the resources that we have to deal with fuel poverty and fuel security and to help the levelling-up agenda in poorer parts of England?

I do not apologise for the net zero agenda. We saw big strides at COP26. We could have gone further. That is an area in which we are showing leadership and that is something we should be proud of. On, as the right hon. Gentleman put it, exploiting gas resources, we looked at fracking. There were issues with regard to the Richter scale, earthquakes and that sort of thing. People objected to that and we imposed a moratorium. But I am very happy to discuss this issue with him if he wishes.

The UK Government are responsible for families facing a cost of living crisis due to the triple whammy of rising gas prices, looming tax rises and cuts to universal credit. Thankfully, in Wales, our Labour Government are providing an additional one-off cash payment of £100 for vulnerable households to support them in paying their fuel bills this winter. This Government are more concerned with bailing out energy companies like Bulb than supporting the most vulnerable. Will the Secretary of State do the right thing and follow Wales’s lead in supporting the most vulnerable in fuel poverty?

Supporting the most vulnerable is exactly what we are doing through the warm home discount and the extension to it. That is exactly why we have maintained the energy price cap, which many of the companies have protested against. We are always mindful to protect consumers and to protect the most vulnerable.

The Federation of Small Businesses has found that 77% of Scottish businesses have seen an increase in their overheads since this time last year, and fuel costs make up a huge proportion of that. What assessment has the Secretary of State made of the likelihood of these costs being passed on to consumers, who are also paying higher prices at the tills because of inflation and Brexit?

One word that the hon. Lady did not mention was covid. As a consequence of covid, my right hon. Friend the Chancellor of the Exchequer has put £400 billion into the economy to support the very businesses that she refers to. Many, many of the businesses in Scotland have been supported by that.

Just since the Budget, several companies have gone under. Will the Secretary of State inject some urgency into this matter and look again at the suggestion, now that the Treasury has the freedom to do so, to lift the VAT burden both on households and on small businesses, so that we could have an immediate lift that will happen in this country regardless of what is happening to global prices?

The hon. Lady will appreciate that matters to do with taxation, VAT and all those things are subject to the Chancellor of the Exchequer’s departmental policy. She will also know that there is urgency about this. I speak to Ofgem every day. We monitor the market extremely closely. We are looking at how the supplier of last resort process is working—it is working reasonably well. As I have said, we are looking at the special administration regime with regard to Bulb.

This is not happening in other countries. If this is evidence of the system working, I would hate to see it if it was not working. The Government have ruled out any bail-out from the Treasury. Will the Secretary of State give the same undertaking that customers will not be forced to pay huge bills in order to pay for the Government’s failure of regulation?

I would like to point out that an energy price cap such as we have does not occur in other countries, so consumers here are being protected. Many of those who are actually bearing the brunt of this crisis are the very firms that, for whatever reason, have had to leave the market. The structure is working. It is protecting consumers, and companies that have fallen foul of these very high prices have been forced out of the market.