Ovo Energy Lines Up Takeover Bid for Bulb

Ovo Energy executives are in talks to acquire Bulb Energy to become the UK’s second-largest supplier of energy. Bulb Energy has around 1.7 million customers in the UK. Ovo Energy currently has about 5 million customers, following its successful bid for SSE in January last year.

Bulb Energy has been around since 2013 and supplies energy to the United Kingdom, Texas (USA), Spain, and France. Unlike many other energy companies, Bulb has remained competitive by offering energy at market prices on its single variable tariff. By March 2020, it had 1.5 million customers, representing 5% of the domestic market share. However, despite attracting venture capital and rapid customer growth, the supplier made significant financial losses.

Rising Gas Prices to Blame for Bulb's Downfall

As many of our readers will know, energy prices have risen rapidly in the last few months, and this has pushed Bulb customers’ bills higher than ever before. Those who took advantage of the low gas prices of recent years have seen their bills skyrocket by as much as 80% with Bulb. This has caused consternation for Bulb customers who are now facing a choice between expensive bills, or a cold winter with the heating switched off.

Industry followers had speculated that Octopus Energy would bid for Bulb. Unconfirmed reports had claimed that Bulb was looking for investors or a government bailout to secure its future. However, after Octopus agreed with industry regulator Ofgem to take on failed supplier Avro Energy’s 580,000 customers on September 22, Octopus said that it wouldn’t be able to support such a  large customer base and subsequently pulled out of any bidding for Bulb.

Will My Tariff Stay the Same?

So what does this mean for Bulb customers if the takeover goes ahead? We expect Bulb customers to be transferred to the Ovo Energy 2 Year Fixed tariff, which for a 2-3 bedroom house will cost around £150 a month for dual fuel, and about £102 a month for electricity only customers.

Whilst customers would likely see their bills go up under Ovo, there is security under a fixed tariff. Although fixed tariffs are currently more expensive than they were a few months ago due to soaring wholesale gas prices, analysts are predicting tariffs could rise by as much as £800, while experts forecast the energy price cap to also increase by £500 in April 2022. A fixed tariff today will almost certainly be cheaper than a fixed tariff next year.

With the Ovo 2 Year Fixed tariff, your energy company locks in your unit rates and standing charge for 2 years, which in the volatile energy market we’re experiencing could be a good thing. However, should energy prices drop during those 2 years, customers will continue to pay the higher prices unless they spend £60 (£30 per fuel) to exit the contract early.

Can I Get a Better Deal?

Here at Selectra, we recommend customers shop around for a fixed tariff with zero exit fees. You will secure your energy rates should the price of energy continue to go up, but you have the flexibility to leave your deal and find a cheaper one if prices come down.

Whilst Bulb is not reporting that it is at risk of going bust, a takeover by Ovo would be a favourable option as if the supplier were to cease trading it would risk placing customers in limbo by transferring its customers to a supplier of last resort, as per Ofgem regulations.