Utility Week

10 | 6TH - 12TH SEPTEMBER 2019 | UTILITY WEEK Policy & Regulation Analysis T he summer's search is building to a cre- scendo. Applications have come in, the cut has been made, first assessments done, and interviews for the shortlisted can- didates are set to begin on 5 September. The stage is set for the appointment of the energy sector's lead player – the new chief executive of Ofgem. Ever since Dermot Nolan, Ofgem's cur- rent chief, announced he would be stand- ing down in February 2020 aƒer six years in the job, speculation has mounted as to who might step into his shoes. Or to put it another way, be prepared to take on what has become one of the most thankless roles in the sector. Will it be one of his three lieutenants, Sarah Cox, Mary Starks or Jonathan Brearley? Per- haps someone from an energy firm – poacher turned gamekeeper, as it were? A regulator from abroad? Or could it instead be someone completely unknown? Whoever lands the £200,000 a year post will certainly have a task on their hands, pulling off the supreme balancing act of keeping bills low for consumers while transi- tioning to a decarbonised, digital and decen- tralised energy market. As Martin Cave, Ofgem's chair, said in the application pack issued by headhunter Gatenby Sanderson: "We are looking for someone who will rel- ish the challenge of playing a big role in the transition of a major sector of the economy, and in the transformation of its regulator." The application pack does not set out a timetable for the appointment – that could prove a hostage to fortune. But the choice will be made by a panel chaired by Rosie Glazebrook, a Civil Service Commissioner. Besides Ofgem's Cave, other members are: Stephen Carter, group chief executive, Informa Plc (the founding chief executive of Ofcom); Lynne Embleton, chief executive IAG Cargo and NED at Ofgem; and Joanna Whittington, the director general Energy & Security, BEIS. The new chief executive will preside over an administration with more than 700 staff and will have the choice to be based in either London or Glasgow. Having a change at the top is seen as an opportunity for Ofgem to re-equip itself for the challenges ahead in the sector that it reg- ulates. "If it doesn't make some changes, it will increasingly become part of the problem rather than part of the solution," is the view of one former regulator. So what kind of leadership is needed? What obstacles lie in their way? And what legacy is Nolan leaving? The ideal candidate Anyone coming in must be able to handle different pressures, champion the consumer, work with government and have a thick skin. They'll also need to be resilient and politi- cally astute, and understand the need for innovation and the need to change. But additionally, there is a requirement for commercial and entrepreneurial experi- ence – something that's not previously been such an explicit criterion. The job description says: "To be successful in this role you will be an experienced commercial and entrepre- neurial leader with an innate ability to be a champion for the consumer whilst maintain- ing the trust and credibility of colleagues and stakeholders. Your background could be in either the public or private sector." Notes one senior industry observer: "It's interesting that they are not looking for an economist or someone with regulatory expe- rience this time round. "Martin Cave brings that kind of experience and the three existing senior partners also have that expertise. Bringing in someone with commercial experience gives a broader mix across the senior team. It also helps when going head-to-head with energy companies to have been on the other side." This observer adds: "That's not how it is currently. Dermot Nolan and Martin Cave are fairly similar, with the same personality type. If they were different, he might have stayed," referring to the fact that Nolan agreed to stay on for a year aƒer his first five- year term as Cave took over from previous chair David Gray, rather than sign up for another five years. Nolan, a graduate of Trinity College Dublin, is a former academic and subsequently career economist and regulator. He took up the role in March 2014, joining from the Commission for Energy Regulation in Ireland where he had been a Commissioner since 2008 and its chair since May 2011. Likewise, Cave, who specialises in competition law, was deputy chair at the UK Competition Commission and deputy panel chair of the Competition and Markets Authority from 2012 to January 2018. He was the competition watchdog's lone voice arguing for a price cap, nearly a year before the Conservatives adopted the policy as a flagship election pledge. He became Ofgem's chair on October 2018. The aspiration to appoint a new Ofgem chief with commercial experience appears to have been well received. The combination of commercial/regulation backgrounds has worked well at Ofwat with chair Jonson Cox coming from the water sector and chief executive Rachel Fletcher being applauded for her stance since moving across from Ofgem. Notes a former energy firm chief execu- tive: "Rachel Fletcher has been very impres- sive at Ofwat. She has set out to transform it. She has introduced the notion of a social contract and wants to make water the poster child of climate change. PR19 won't be the transformative price review period, but PR24 where conversations are starting, will be." A senior figure in energy retail comments: "It's no bad thing for a regulator to have commercial experience. Ofgem staff have a hypothesis of how companies behave, which is not necessarily how it works in practice. "And it would be great to have someone who understands consumers and with con- sumer-facing experience. Perhaps someone from supermarket retail, a sector which has done well for consumers. Certainly, they need to better understand the energy revo- lution that is upon us now and move away from systems thinking and an infrastructure- driven world." However, the same observer is a little baffled by the desire for entrepreneurial Replacing Dermot Nolan The process is underway to find a new chief executive of Ofgem who will "transform" the organisation. Denise Chevin looks at who could fit the bill, the challenges they'll face, and the legacy left by the present incumbent.

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