LONDON (Reuters) -Centrica's British Gas and E.ON were on Tuesday given the go-ahead to continue their legal battle over Britain's financial support for Octopus Energy to acquire collapsed energy supplier Bulb.
The two rival suppliers are challenging Octopus' takeover of Bulb, which was one of the largest energy suppliers to collapse in 2021 due to soaring wholesale gas and electricity prices.
The addition of Bulb's customers catapulted Octopus into becoming the country's third-largest domestic energy supplier behind British Gas and E.ON.
The two suppliers took the government to court last year, arguing Britain unlawfully committed billions to prop up Bulb without considering the potential impact on the market.
Their case was dismissed by London's High Court in March, but British Gas and E.ON's lawyers asked the Court of Appeal to allow them to challenge that decision on Tuesday.
The suppliers argued the High Court largely rejected their case because it was brought too late, meaning it did not rule on "the legality of a very substantial subsidy running to almost 3 billion pounds worth of taxpayers' money".
Britain's energy department said permission should be refused, with its lawyer Patrick Halliday arguing in court filings that changes in wholesale energy prices meant Octopus would now pay "substantial net sums" to Britain.
However, Judge Nicholas Underhill ruled that British Gas and E.ON should be allowed to challenge the High Court's ruling, with an appeal likely to be heard next year.
A Centrica (LON:CNA) spokesperson welcomed the decision, saying in a statement: "We believe that the way the deal was structured creates serious risk for taxpayers and energy consumers and will distort the energy market."
E.ON did not immediately respond to a request for comment.
Amanda Gerrity, General Counsel at Octopus Energy, said in a statement: "We remain confident that this was the best deal and we will support the appeal process to demonstrate that once and for all."
A Department for Energy Security and Net Zero spokesperson said: "We are disappointed with the court's decision and will carefully consider our next steps so we can continue to support Bulb's former 1.5 million customers."