British Gas, ScottishPower and E.ON have been unsuccessful in their attempt to challenge the government’s handling of the sale of Bulb.
The energy giants filed a legal action, citing the government’s decision-making process as “flawed and unlawful”.
However, earlier today, Lord Justice Singh and Mr Justice Foxton dismissed the challenge in their recent ruling.
In their ruling, Singh and Foxton said: “In circumstances in which there may have been more than one means of achieving the desired objective of avoiding the social hardship which would follow from ‘a hard close insolvency’, each with their own risks and opportunities, it was for the secretary of state to form a rational view as to which of those alternatives was the most proportionate means of achieving the desired object.
“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.”
A Centrica spokesperson told ELN: “Both Ofgem and the National Audit Office (NAO) have concluded that this deal is not without risks to taxpayers. We think state bailouts for energy companies put a burden on the UK taxpayer and are avoidable.
“We felt the original bailout of Bulb was unnecessary and the NAO report this week concluded there were risks and uncertainties in recovering these funds from Octopus.
“It’s regrettable that Centrica, Scottish Power and E.ON had to bring this case to court in the first place and it’s a disappointing judgement. The decision to bring this case was made after failed attempts to obtain transparency on the terms of the transaction and the level of state bailout being offered to Octopus/Bulb.
“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 judgement carefully and consider our options.”
Sources close to ScottishPower said it is understood energy company will not seek leave to appeal.
Commenting on today’s High Court ruling, Michael Lewis, E.ON UK Chief Executive Officer, said: “A huge amount of public money has been used to subsidise this transaction and it’s absolutely correct that any use of public money to help a private company grow in this way should be thoroughly scrutinised.
“We will analyse the detail of today’s ruling and consider our next steps, including whether to appeal, but we remain concerned about the amount of taxpayers’ money that has been used to subsidise the deal.
“Only an open, fair and transparent process would have ensured this truly represented value for money for the public and we still cannot see how this was the case with only one bidder in the key stage of the negotiations.
“A recent NAO investigation found almost £3 billion of taxpayer money would need to be repaid by Octopus for energy costs through winter 22/23 but the repayment won’t begin until 2024 or 2025. No other supplier gets to use taxpayers like a bank in this way, nor should they.”
Michael Lewis added: “The background to this whole issue is a lack of proper financial controls on new entrants to this market and that their risk-taking behaviour was never properly managed. These failings allowed companies like Bulb – and nearly 30 others – to effectively use and lose customers’ money, leaving a trail of destruction when they failed, with the British public picking up the tab.
“We urgently need to establish rules that mean customers’ money cannot be used to fund a business when suppliers have no equity on their balance sheet.”
In a statement, Octopus said: “The High Court’s findings are clear: Octopus paid a fair price for Bulb in an open and competitive process.
“The High Court was equally clear that there was no merit at all in the case brought by British Gas and the other legacy companies.
“It’s clear that the case was a desperate attempt by those organisations to defend their waning market positions against a more efficient and customer-focused rival.
“The Judge recognised the extensive level of information shared by Octopus, the government and the administrators, which far exceeded what would be normal.
“Our focus is now on delivering the best service possible to our new and existing customers.”
Greg Jackson, Chief Executive Officer and Founder of Octopus Energy Group said: “This belated and expensive Court action has always smacked of desperation – and today’s finding confirms that. Octopus worked hard to find a solution, while others chose not to bid.
“Fair play won. After more than a year of uncertainty, it’s a huge relief for Bulb’s employees and customers and good news for taxpayers.
“We’ll continue to relentlessly innovate to create a cheaper, cleaner energy system and better service for customers.
“Looking at the records of some of these companies, it’s clear they’d be better businesses if they focused on putting their own houses in order.”
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