The UK government has defended its decision to pay millions of pounds in bonuses to staff at collapsed energy supplier Bulb, despite the fact that it was effectively nationalized as part of a bailout that could cost £2.2 billion pounds to taxpayers.
Quarterly “retention bonuses” were deemed necessary to prevent an exodus of staff that could have sabotaged efforts to keep the business afloat while a buyer is found, multiple sources familiar with the matter said.
“The alternative is that hundreds of people leave and you can’t sell it,” a Whitehall source said. “You can’t provide energy to people if there’s no one working in the business.”
Bulb Energy, which has more than 1.5 million customers, is currently run by consultancy Teneo, appointed under the ‘special administration’ scheme after the energy provider became the world’s biggest 20 to collapse under the weight of exorbitant energy prices.
The arrangement is the first test of a system designed to kick in when an energy supplier is too big for its customers to transfer immediately to a competitor.
As part of the deal, a court appointed Teneo to manage day-to-day operations on behalf of the government, which is funding the costs. Financial advisory firm Interpath has been recruited to run Bulb’s parent company, Simple Energy.
The decision to pay quarterly bonuses, first reported by the Financial Times, appears to be up to Interpath as the payroll is handled by Simple Energy.
A Department of Business, Energy and Industrial Strategy spokesperson said: ‘Bulb’s directors have implemented an employee retention program to maintain operational efficiency and customer support.
“Bulb’s special administrator remains legally bound to keep the costs of the administrative process as low as possible – which is what the employee retention program is compatible with.
“The government will seek to recoup the costs at a later date, ensuring that we get the best value for taxpayers.”
The cost of running Bulb could be as high as £2.2bn, the Office for Budget Responsibility has said, while some reports suggest £3bn is not unrealistic.
A government source insisted the costs had yet to reach the £1.7billion originally planned. The cost includes a much criticized £250,000 salary for Bulb boss and co-founder Hayden Wood, who has apologized for the company’s demise.
An Interpath spokesperson said: ‘The teams at Simple and Bulb have worked incredibly hard since the companies entered bankruptcy last November, ensuring the companies were able to continue trading and ensuring continuity of service. for 1.5 million customers, and all against the context of personal uncertainty that any administration inevitably causes.
British Gas owner Centrica and Abu Dhabi-based renewable energy company Masdar are said to be the first to buy Bulb Energy, with the government hoping investment bank Lazard can find a buyer by June.
Four other parties have expressed interest, according to a Whitehall source, and could be tapped if Centrica and Masdar drop out.