The cost of bailing out energy supplier Bulb Energy could balloon to £4bn by April unless it can be sold sooner.
Bulb became the first energy firm to fall into special administration last November, as it struggled with spiralling wholesale costs and the constraints of the energy price cap.
But Bulb is currently gobbling up cash as a result of government rules that do not allow it to hedge — buying in advance the energy it sells.
It has since been topped up with public funds, which are estimated to be in excess of £2bn.
Because of its inability to hedge, and rising wholesale gas prices, energy consultancy Auxilione said it predicts the cost of the bailout could soar to more than £4bn by April next year.
The prediction was confirmed to City A.M. by Auxilione after it was first reported by the Financial Times.
The forecast comes as the government weighs up Bulb’s future after the auction process for the firm only attracted one bid.
Octopus Energy has submitted an offer for Bulb, provided the government coughs up £1bn in taxpayer funds. It has asked for the public money in order to set up a hedging strategy at its former rival.
A spokesperson for the government said: “The special administrator of Bulb is 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.”
Both Bulb and Teneo, the company’s administrator, declined to comment on the forecast and the ongoing sale process.