Evidence from the record · What it means for leaders
Bulb
When the rules make prudence uncompetitive.
The one where the company may not be the problem
Every other study in this series finds the failure inside the organisation. This one mostly does not.
Bulb collapsed alongside dozens of other British energy suppliers in 2021. The National Audit Office and a parliamentary committee examined why, and their conclusions pointed heavily at the conditions rather than the competitors: a licensing regime with a deliberately low bar, no meaningful ongoing financial requirements, and a market in which companies taking substantial risks could undercut the ones that did not.
That makes this the most uncomfortable case in the set for anyone currently competing hard. It is the study of an organisation doing what its market rewarded, right up until the market stopped.
The same decision, made twice
Bulb did not adequately hedge its future energy purchases. That exposure is central to why it failed.
After it collapsed, the government took it over and instructed the administrators to buy energy on the day-ahead market rather than hedge—the same decision, taken deliberately, for different reasons. That one reduced the cost to the taxpayer.
Two identical choices. Opposite outcomes. It is as close to a controlled experiment as organisational failure ever provides.
Dozens admitted.
Dozens collapsed.
The costs moved elsewhere.
New suppliers licensed between 2010 and May 2022
Suppliers that failed during the 2021 collapse
Bulb customers—too many for the normal failure process
And only use of the energy special administration regime
What happened
A company doing well in conditions that were quietly doing the work for it.
The door is opened deliberately
To encourage competition and innovation against the established suppliers, the regulator adopts what a parliamentary committee later calls a low bar for licensing. Dozens of new entrants arrive, several with minimal capital and little industry experience.
Bulb is founded
It builds a genuinely efficient, well-liked operation—simple tariffs, low cost to serve and strong customer sentiment. It grows quickly.
The structural exposure builds
Suppliers can grow using customers’ credit balances and operate with little or no hedging against future wholesale prices. Those that take that risk can price below those that do not. A committee later finds that such companies took substantial risks to undercut more responsible suppliers.
New rules arrive, and change little
The regulator introduces tighter requirements. A parliamentary committee later concludes that they had no meaningful impact on suppliers’ practices.
Wholesale prices rise, and the cap holds
Suppliers must buy at market prices but cannot charge above the cap. Anyone unhedged is now selling at a loss on every unit. Around twenty-eight suppliers fail in quick succession.
Bulb enters special administration
Too large to be absorbed through the normal supplier-of-last-resort process, it becomes the first and only company placed into the energy special administration regime.
Sold
The customer base transfers to a company owned by Octopus Energy.
When this many organisations in one market fail at once, the explanation is unlikely to be twenty-eight separate leadership failures.
It is usually one shared exposure that nobody was required to hold capital against.
Who ended up
paying.
The costs did not disappear when the companies did. They moved.
Estimated cost of the supplier-of-last-resort process
Gross expected cost at the time of the 2023 investigation
Consultants and lawyers working on the Bulb administration alone
These companies took
substantial risks
to undercut responsible suppliers.
House of Commons Business, Energy and Industrial Strategy Committee, 2022, on suppliers operating with no or inadequate hedging and relying on customers’ money to fund growth.
The word “responsible” is doing a lot of work
It concedes that some suppliers were behaving prudently—hedging properly and holding capital—and that their reward was to be undercut on price by those that were not.
Prudence was not merely unrewarded. It was actively punished, every day, in the only competition customers could see.
The market was selecting
for fragility
Competition is supposed to select for the best operator. It selects for whatever the rules make cheapest.
Carries the cost of resilience
- Hedges its forward energy supply
- Holds capital against disruption
- Prices its offer to cover the risk
Carries almost no visible cost
- Buys energy at the spot price
- Grows using customers’ credit balances
- Prices below the hedged cost
What the market rewards
Every year the rules stay unchanged, the second column gains share
The exposure is not on anyone’s balance sheet, so it costs nothing to carry—until the year it costs everything.
For a leader inside the first column, this is genuinely hard. You are watching a competitor grow faster on terms you believe are unsound, and you have no way to prove it until the cycle turns. Your board sees lost market share. It does not see the risk you are declining to take, because that risk is invisible by construction.
Risk that nobody is required to hold capital against looks exactly like efficiency.
The natural
experiment.
This is the part of the case that is genuinely unusual, and worth more than the rest of the study put together.
Bulb failed in large part because it was not sufficiently hedged. The government then took the company over and instructed the administrators not to hedge—buying on the day-ahead market instead—on the grounds that hedging with public money would be too close to speculation.
Wholesale prices then fell. The auditor found that this decision reduced the cost to the taxpayer by a substantial margin.
One is called recklessness.
The other is called judgement.
The only difference between them is what the wholesale price did next—which neither party knew and neither party controlled.
If you judge decisions by their outcomes, you will learn the wrong lesson from both. You will conclude that Bulb’s management were fools and the Treasury was shrewd, when in fact both took an unhedged position and one got the weather.
Not the choice—the capacity to absorb being wrong
The government could carry an unhedged position because it could absorb the loss if prices rose. Bulb could not. The identical exposure was survivable for one and fatal for the other.
That is the real question behind every risk decision, and it is rarely the one that gets asked. Not “is this likely to go wrong?” but “what happens to us if it does?”
What was missing
The Shortboard model describes twelve attributes an organisation builds across three cumulative waves.
Wave One is Lean Dependability—the ability to do what you say you will do, honestly and without drama. Wave Two enables scalable growth. Wave Three creates perpetual relevance.
Capabilities in the later waves cannot hold when Wave One is hollow, because there is nothing underneath them to take the weight.
Two attributes are marked as not evidenced, and that is a statement about the record rather than the company. The investigations examined the market and the administration, not Bulb’s boardroom. There are no board minutes here and no inquiry into how decisions were taken internally. Where we cannot see, we do not judge.
Lean Dependability
Scrappy resourcefulness
Using limited resources deliberately while understanding and evidencing how the operation performs.
Healthy
conflict
Surfacing disagreement early and allowing evidence to challenge authority before decisions are made.
Ruthless consolidation
Choosing what to stop so attention, money and capacity remain focused on what matters most.
Distributed ownership
Placing authority and accountability close to the people with the knowledge required to act.
New Growth
Continuous reinvention
Continually renewing propositions instead of treating current success as permanent.
Structural fluidity
Reconfiguring people and resources rapidly around emerging priorities and opportunities.
Strategic optionality
Maintaining several credible paths rather than committing too early to a single answer.
Platform thinking
Building reusable capabilities that make future growth faster, easier and less expensive.
Perpetual Relevance
Pioneer sanctuaries
Protecting emerging ideas from the demands and assumptions of the established organisation.
The awe-driven mindset
Remaining curious about what is becoming possible instead of defending what is already known.
The pioneer’s leap
Acting decisively when evidence is incomplete but the cost of waiting is greater.
Supply-driven optionality
Creating new possibilities from emerging capabilities before established demand is visible.
Two gaps, and two we cannot see
It would be easy to assume that a company that failed this way must also have lacked internal challenge and clear ownership. Easy, and unsupported.
Filling in the gaps a framework expects to find is exactly how a model stops being evidence-led. If the volumes on Bulb’s internal governance are ever written, this assessment changes.
What the record does
and does not support.
Only the first two assessments rest on published findings.
Ruthless consolidation
Customer numbers grew faster than secured supply. Growth was the visible measure and the exposure was not, so there was no point at which adding another customer was treated as adding another unhedged liability. In a market-force sense, this is the whole failure: the business scaled the part it could see.
Scrappy resourcefulness
Genuinely present in the customer operation—low cost to serve, a simple product and efficient service. Absent in the supply operation, where the model depended on customers’ credit balances and buying at spot. Real resourcefulness in one half of a business does not offset structural exposure in the other.
Healthy conflict
We have no board minutes, internal correspondence or inquiry testimony about how the hedging position was discussed internally or whether anyone argued against it. Absence of evidence is not evidence of absence.
Distributed ownership
The public record covers what the regulator permitted and what the administration cost. It does not reach the question of who inside the company owned the risk position, or whether they had the standing to change it.
The market force did most of the damage here, and a large part of that force was set by the regulator rather than the company.
Which raises the question this study exists to ask: how much of your own risk appetite did you choose, and how much was chosen for you by the terms you compete on?
The cost moved,
and then it shrank
The final bill turned out to be far smaller than anyone forecast, for reasons that had nothing to do with anyone’s management.
At the height of the crisis, the Bulb administration was expected to cost around £3 billion gross. When wholesale prices fell through late 2022 and into 2023, the auditor’s estimate of the eventual net cost dropped dramatically—to a small fraction of the earlier figures.
The improvement came from the weather, the war and the gas market. It did not come from a better decision.
Special administration
The process begins, funded initially by a large taxpayer loan.
Prices peak
Forecast costs rise to several billion pounds. Parliament criticises the regulator sharply.
Customers transfer
Bulb’s customers transfer to a company owned by Octopus Energy.
The estimate collapses
Wholesale prices fall, the estimated net cost drops dramatically and rules on supplier resilience are tightened.
The regime has since changed.
Suppliers face stronger capital and hedging expectations, and the regulator has worked on how customers’ credit balances are protected. The specific hole is being closed, as holes generally are, after something has fallen through it.
Nobody in this story got what they deserved
A company took a risk its market encouraged and was destroyed by it. A government took the same risk for different reasons and was rewarded. Households paid for both through their bills.
Outcomes are a poor teacher and an even worse judge. If you want to know whether a decision was sound, you have to examine the reasoning at the time it was made—which is why these studies bother with dates.
Know which risks
you chose.
Most of the risk in a business was never decided on. It was inherited from the terms you compete on.
No one at Bulb sat down and elected to bet the company on wholesale gas prices. The exposure arrived gradually, as the natural consequence of competing in a market where carrying it was free and declining to carry it was expensive.
That is how most serious risk enters an organisation. Not as a decision, but as an adaptation—and adaptations are invisible, because everyone around you is making the same one.
Where are we being undercut by someone taking a risk we have declined—and can we name that risk precisely?
Which of our margins depends on something we neither control nor have secured?
The last time something went our way, did we record it as luck or bank it as validation?
Write down what would kill you
Not a risk register with twenty amber rows. One page: the three things that, if they moved sharply against you, would end the business rather than dent it. Then, for each, write down the honest answer to how long you could survive it.
If the answer for any of them is measured in weeks, you have found your real strategy question—and it is not the one on the agenda.
How we know this,
and what we don’t.
Good evidence about a market. Almost none about a boardroom.
Two National Audit Office reports—one on the supplier market and one specifically on Bulb—with access to departmental and regulatory records.
Parliamentary committee inquiries took evidence directly from the regulator, the department and ministers.
The costs, licensing decisions and hedging instruction are all documented with dates and figures by bodies with statutory access.
None of it examines how Bulb was run internally. There is no equivalent of board minutes or an inquiry into its own governance.
Committee language is political as well as analytical, and the criticism of the regulator was made during a period of intense public anger about energy bills.
Cost figures moved enormously between reports as prices changed, so any single number is a snapshot rather than a fact.
We cannot say Bulb had no alternative
Other suppliers competed in the same market, hedged properly and survived. That matters: the conditions made prudence expensive, but they did not make it impossible.
Treat this as evidence that market rules shape risk-taking powerfully—not as proof that any individual company was compelled to take the risk it did.
Comptroller and Auditor General, The Energy Supplier Market, HC 68, National Audit Office, June 2022 · Comptroller and Auditor General, Investigation into Bulb Energy, HC 1202, March 2023 · House of Commons Public Accounts Committee, Bulb Energy · House of Commons Business, Energy and Industrial Strategy Committee, Energy Pricing and the Future of the Energy Market, 2022.
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