Scottish Power has launched a broadside against ministers’ handling of the sale of Bulb, the nationalised utility, accusing them of “distort[ing] competition” in the energy retail sector.

Sky News has obtained a letter sent by Keith Anderson, chief executive of the Spanish-owned supplier, to Jacob Rees-Mogg, the business secretary, which effectively calls for the auction of Bulb to be scrapped and restarted.

Mr Anderson’s demand has emerged days after Sky News revealed that rival Ovo Energy was trying to gatecrash the Bulb sale, which had looked likely to conclude with a takeover by Octopus Energy in the coming weeks.

Industry sources said on Monday that both Ovo and Scottish Power were concerned that Octopus Energy would benefit from £1bn of temporary taxpayer funding.

In his letter to Mr Rees-Mogg, Mr Anderson wrote that that financing was “unfair” because “no other supplier in the UK has access to such government funding and…in the current circumstances we believe other suppliers would be willing to acquire Bulb for a materially smaller level of government support”.

Mr Anderson did not explicitly say that Scottish Power would be interested in acquiring Bulb’s 1.6m-strong customer base in its entirety, although energy executives believe it would be keen to take on a significant chunk of Bulb’s customers.

He said in his letter that any funding provided to Octopus Energy would place it “at a commercial advantage compared with other UK energy suppliers”.

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“This in turn is likely to distort competition in the market for energy supply,” he added.

“This is unfair to other energy suppliers such as Scottish Power and is not in the public interest.”

‘Procedural unfairness’

Mr Anderson also alleged “procedural unfairness” in the Bulb auction, saying that the original deadline for bids had been set prior to the government’s decision to intervene in the market through schemes such as the multibillion pound Energy Price Guarantee and the Energy Bill Support Scheme.

“Furthermore, at the time bids were invited there was no government support being offered to potential bidders.

“This background informed the approach which potential bidders, such as Scottish Power, took when deciding whether or not to submit a bid for Bulb.”

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One source suggested that Mr Anderson’s reference to “procedural unfairness” could hint at a potential legal action against the government in the form of a possible judicial review.

Scottish Power declined to comment on the letter.

Hopes of a deal with Octopus within weeks

A government spokesperson said: “The Special Administrators of Bulb are required by law to keep costs as low as possible.

“We continue to engage closely with them to ensure maximum value for money for taxpayers.”

Further details of Ovo’s interest in Bulb remain unclear.

Ministers are said to be hopeful of concluding a deal with Octopus within weeks.

Were it to be successful, a combined Ovo and Bulb would have about 5.5 million household customers – a size that could draw intense scrutiny from competition regulators, according to one analyst.

A £4bn rescue

Taxpayers’ rescue of Bulb is set to cost the government up to £4bn, Sky News revealed recently, with that figure including the £1bn of temporary funding provided as part of a sale to Octopus.

The last-gasp attempt to scupper Octopus’s deal comes at a time of extraordinary turmoil in UK energy markets.

The government has already been forced to spend billions of pounds buying gas to supply Bulb customers because the company did not hedge its purchases in order to fix its cost base.

Wholesale gas prices have soared over the last year, with Vladimir Putin’s invasion of Ukraine having a particularly pronounced impact on global energy markets.

The chancellor, Jeremy Hunt, announced this month that a huge subsidy package for consumers’ energy bills would be scaled back, but it is still expected to cost many billions of pounds.

Octopus is understood to have negotiated a deal that would see it paying between £100m and £200m to take on Bulb’s customer base, with a separate profit-share agreement giving the government a return for several years on earnings from Bulb customers.

Bulb’s collapse in November 2021 was the most significant among dozens of supplier failures, with Ofgem, the industry regulator, facing heavy criticism for its approach to licensing new entrants to the market.

It was unclear on Monday whether talks about the sale of Bulb would be further complicated by Rishi Sunak’s emergence as the new prime minister.

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