There was a moment, near the beginning of the energy crisis, when Gareth Miller first saw his company’s forecasts for how far the UK energy regulator Ofgem would have to raise its price cap – and considered not publishing it. “It was [a] public interest [thing], I don’t know. By publishing these numbers, it kind of made it real,” he says. “Would it create anxiety and worry among people that saw them?”
Cornwall Insight did publish its figures, and they were almost immediately seized upon by the consumer rights campaigner Martin Lewis, who tweeted a year ago about the energy consultancy’s “catastrophic” prediction. Since then, as Ofgem’s quarterly price cap changes have become a central part of the national conversation, the accuracy of Cornwall’s forecasts have regularly generated headlines, providing households with one of the few available clues on what their finances will look like in three, six, nine months’ time. In the process, the company has become as close to a household name as it is possible for a smallish, Norwich-based energy consultancy to be.
There are sceptics, of course. “You see a lot of people almost conflate our analysis with the cap, like our analysis is driving the cap,” Miller, the company’s chief executive, says. “Some people on social media [say]… this is just to get likes and stories in newspapers. When we first started doing this, it was a really finely balanced decision: we knew it would get media coverage, but we equally knew… this is people’s real lives, and we have a responsibility. It definitely wasn’t commercially motivated.” The company’s link with Lewis, who still regularly cites its figures during TV appearances, might have helped with the coverage – but Miller says it was never planned. “We don’t really ever speak directly to Martin,” he says.
Having watched the cost-of-living crisis unfold, Miller admits that the predicament facing households is “frustrating”. “We have always had issues with the price cap,” he says. “Going back to when it was introduced, we were writing about what would happen in a high-commodity-price environment.” The cap “was never intended to keep prices down for consumers. There’s been an implicit transmogrification of the price gap into ‘that’s its purpose’, but it was [originally designed] to try to address loyalty penalties and people drifting off fixed contracts into standard variable tariffs.”
Cornwall Insight began life as an email newsletter in 2005, a retirement project for its founder, the energy commentator Nigel Cornwall. Miller, who had previously run Barclays’ renewables investment division, joined as an independent consultant in 2013, “employee number 16 or 17”, with a brief to broaden its scope from producing reports to consulting. Almost a decade later, it has 125 employees, with offices in Ireland, Australia, and “we’re thinking about where next”, says Miller.
Is it unfair to say the company has had a good crisis? Miller shakes his head. The price cap forecasts are “a very, very small fraction of the business that we do”, he says. “We felt that not enough light was being shone on what we consider to be an issue of impending importance, not only for the energy sector, but the broader economy… We genuinely want to try to inform the debate constructively.” That’s not to say Cornwall isn’t doing well: the most recent accounts are for the year ending March 2021 show Cornwall made a pre-tax profit of £1.1m, up from just over £143,000 the year before.
Miller is deeply concerned that almost no one appears to be planning ahead for next winter. “[It has] been absent in the debate so far – there’s been a lot of focus on getting through this winter. In our estimation, as we stand today, it’s going to be really challenging next winter as well.”
With the sanctions against Russia and the enormous Nord Stream 1 pipeline between Russia and Europe out of commission, prices are likely to be just as high, if not higher, next winter, as European nations seek to replace Russian gas by competing to buy liquefied natural gas (LNG). In the UK, the ensuing rise in prices will come just as households receive less protection from the government’s Energy Price Guarantee (EPG) scheme, which will be scaled down in April as Ofgem increases its price cap from £2,500 to £3,000, and as support for businesses also appears set to be reduced.
“To a degree, households and businesses haven’t felt the full price effects of last summer. And if we move into a new environment where the prices are going to be elevated at around the same level without the same level of support, it could get really challenging,” says Miller. “There’s a risk that it could be as difficult, price-wise, for 2023 and into 2024, as it has been in 2022. The question is what the policymakers do about that.”
Miller studiously avoids criticism of the government, but admits that opportunities have been missed. The fixes he suggests – improving energy efficiency in homes, decarbonising heating – are so difficult to implement that successive governments have been arguing about them for years. There are dozens of ideas on how to reduce the UK’s reliance on gas central heating, for example, but policymakers are yet to decide on the solution. Miller believes the government must now pick one proposal and stick with it. “If we had [made improvements in these areas], the demand picture going into this kind of environment would be very different. As a result, prices would be less hysterical and costs would be lower. That is frustrating,” says Miller.
He is sceptical of the energy windfall tax, because of the “risk premium” investors will charge for putting their cash into the UK. To hit the UK’s goal of a net zero energy grid by 2035, we need “£50bn to £60bn of new investment per annum”, he says. “If the cost of capital on that investment moves, even by a fraction, that’s still a material impact on bills.” He isn’t against the windfall tax, but wishes the government had shown its workings. “That kind of analysis I think has been a bit lacking, which I really would have liked to have seen.”
For Gareth Miller, it was inevitable that his sector would eventually become the centre of aggressive political debate. “I like to think about energy as being kind of [an] underground river… we take for granted that we flick a switch and a light comes on,” he says. “It’s obviously terrible that people are suffering high prices. But if we can take one positive out of this, it’s this higher level of engagement in energy.” Although, he concedes: “I hoped it would have come about in a slightly different way to this.”
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