‘The house should understand that we do not want this company to be in this temporary state longer than is absolutely necessary,” said Kwasi Kwarteng, the business secretary, when he authorised the nationalisation of Bulb, the failed retail energy supplier, last November.
Was it such dreams of a quick sale and a rapid return to the private sector that persuaded the government that there was no need to put in place hedging contracts to cover the cost of buying energy for Bulb’s 1.4 million customers? If so, the decision was a shocker. Nine months later, Bulb still sits on the state’s books and the price of running an unhedged operation increases with every spike in the gas price, up about 20% since last Friday.
At the outset, the government advanced £1.7bn of public money to run Bulb for six months, with the hope of getting a large chunk back via a sale. Then, as wholesale energy prices continued to climb, the Office for Budget Responsibility said in March that the bailout would cost £2.2bn over two years. Now we’re talking properly serious sums.
Take your pick from any number between £3bn and £4bn. Energy consultancy Auxilione forecasts plausibly that Bulb could lose a further £420m over this summer and potentially £1.6bn during the winter. The no-hedging policy has made a rotten financial position worse.
As it happens, Kwarteng didn’t mention his “no longer than necessary” timetable when quizzed on the approach by a select committee in May. Instead he said this: “The issue with hedging is that it is very risky because, essentially, you are taking a bet or trying to insure yourself against price movements. That insurance … costs money. In terms of managing public money, the Treasury, rightly, does not think that that is what
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