Bulb collapsed in 2021

Scottish Power, Centrica and Eon have lost a legal bid to unwind the UK government’s sale of Bulb to the energy company Octopus after the High Court ruled the deal was lawful.

Bulb was placed in special administration in November 2021 and, almost a year later, Octopus Energy announced it had reached a deal to buy the firm and take on its 1.6 million customers, making it the UK’s third biggest energy supplier.

The three rival energy companies challenged the deal on the grounds that Octopus was offered terms unavailable to other parties.

They argued that by approving the takeover, the Department for Business, Energy and Industrial Strategy provided “very substantial” central government funding for it.

There were also claims that the way the government handled the sale had prevented British Gas from making a more competitive offer.

It was later revealed the government had been prepared to pay up to £4.5bn to help fund the takeover, but Octopus has said the government stands to make a profit of £1.2bn from the deal.

The High Court has now ruled there was no unlawful subsidy. The judges concluded that the government’s offer to help Octopus buy energy for Bulb’s customers was a “proportionate response” to the rise in energy prices after Russia invaded Ukraine last year.

The court documents revealed that the other options available to the government included deferring the sale or winding down Bulb and handing financial payments to customers to move to other suppliers.

Lord Justice Singh and Mr Justice Foxton concluded the government had avoided a course of action that would have cost the taxpayer more.

They dismissed the energy companies’ case as “not… reasonably arguable”. Lawyers for the department had said the claims against it were “without merit” and companies were aware they could seek government support.

Scottish Power said it will not seek to appeal against the ruling, while the British Gas-owner Centrica and Eon said they would review the judgment.

A Centrica spokesman described the judgment as “disappointing”, adding : “We felt the original bailout of Bulb was unnecessary and the National Audit Office report this week concluded there were risks and uncertainties in recovering these funds from Octopus.

“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.

Michael Lewis, chief executive of Eon UK, said it was right for the deal to be “thoroughly scrutinised”.

He added: “We remain concerned about the amount of taxpayers’ money that has been used to subsidise the deal.

Greg Jackson, chief executive of Octopus, said: “Octopus paid fair value for Bulb through a transparent and competitive process, giving the best available deal to taxpayers.

“There were no improper subsidies and the case brought by British Gas and their stablemates was entirely without merit . . . Octopus worked hard to find a solution, while others chose not to bid.”