The biggest UK state bailout since 2008 will move ahead after justices threw out a high court challenge to the government’s sale of the collapsed energy firm Bulb.
Three big energy suppliers – ScottishPower, British Gas and E.ON – had hoped to upend the £3bn deal to sell Bulb to rival Octopus Energy by calling for a judicial review.
The companies claimed an “unfair sale process” led to decisions “to commit billions of pounds of taxpayer money to facilitate the acquisition of a failed business” by Octopus.
However, in a ruling on Friday, Lord Justice Singh and Mr Justice Foxton rejected the legal challenge because it was “not reasonably arguable”.
The ruling draws a line under a year of uncertainty for 1.5 million Bulb customers, and the biggest government bailout since Royal Bank of Scotland went bust in 2008.
According to the National Audit Office, the gross cost to the taxpayer, calculated from Bulb’s collapse in November 2021 to the end of January this year, was just over £3bn.
But, under the terms of the deal Octopus is expected to repay £2.96bn, although not until 2024 and into 2025.
The judges were told at a hearing in London last month that the handling of the sale allegedly prevented British Gas making a “better” offer that could have saved money for taxpayers.
British Gas’s legal team also claimed “the process by which the subsidy was granted was seriously lacking in transparency, openness, fairness and equal treatment”.
The energy companies challenged two decisions taken by the then Department for Business, Energy and Industrial Strategy in October and November: to approve the takeover and to provide “very substantial central government funding” to help with the transfer.
The department’s lawyers said the claims against it were “without merit”, arguing that companies were aware they could seek government support.
They said the department made “rational” decisions after expert advice that Octopus’s offer represented “the value that the market is placing on Bulb in the current sector environment”.
Unwinding the sale now would be “liable to cause chaos”, the government’s lawyers warned.
Octopus argued its rivals’ complaints were a “rewriting of history” and that its purchase of Bulb would be “extremely beneficial” for the government and taxpayers.
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In October, Octopus announced a deal to buy its rival and take on Bulb’s approximately 1.6 million customers after the 650-employee firm was placed into special administration in November 2021.
It was later revealed in December that ministers were prepared to pay up to £4.5bn to help fund the takeover of Bulb but Octopus has claimed the government stands to make a £1.19bn profit from the transaction.
In their ruling dismissing the attempt by the energy companies, Singh and Foxton said: “The fact that there may be more than one means of achieving a particular objective … does not change the objective of the journey …
“It was open to the secretary of state on the material before him to conclude that the other options were inferior to proceeding with the Octopus bid, involving significant execution risks and higher forecast costs.”
The owner of British Gas, Centrica, described the decision as “disappointing”. A spokesperson said: “Both Ofgem and the National Audit Office have concluded that this deal is not without risks to taxpayers.
“We think state bailouts for energy companies puts a burden on the UK taxpayer and is avoidable. We felt the original bailout of Bulb was unnecessary … We believe that the way the deal was structured creates serious risk for taxpayers and energy consumers and will distort the energy market. We will review the judgment carefully and consider our options.”
An Octopus spokesperson said: “The high court’s findings are clear: Octopus paid a fair price for Bulb in an open and competitive process … The judge recognised the extensive level of information shared by Octopus, the government and the administrators, which far exceeded what would be normal.”
