Utility Week

10 | JULY 2022 | UTILITY WEEK Interview his own ringside seat as the industry went from public to private ownership, oen diversifying beyond all sense and reason in the process. In 2008, at Anglian, he made headlines by pro- nouncing that water companies should be bor- ing. Does he still believe that? "Water companies of the past believed the sexy thing to do was to go off and buy water companies in other jurisdictions… I meant, they should focus on the regional franchises they had, and make the best of it, and do it calmly, quietly and reliably – and I still hold to that." A few months into post, in early 2013, he used a lecture at the Royal Academy of Engineering to set out a wide-ranging programme of activity centring on six points: customers; water resources; financial transparency; regulatory reform; less intrusive regulation; and stronger board leadership (see box). Cox is particularly proud of his record on customers. When he arrived in post, inflation had boosted companies' values (shades of today), and water companies were seen by the City as assets where financial wizardry could yield high returns. "You could make so much more money out of thinking of it as a financial asset than you could out of thinking of it as operations – and I really wanted to get back to operations." Cox drove this agenda hard, and points to a renewed focus on performance – performance commitments, Outcome Delivery Incentives (ODIs), a clutch of eye-watering fines – as evidence of success. Tackling the real heart of investors The environment also ranked highly among his six points – of which, more later – but perhaps the one closest to Cox's heart, and most associated with his chairmanship, is financial resilience. Cox freely admits that his robust public pronouncements on financial resilience – by which he broadly means, not over-gearing the companies – have made him "very unpopular" over the years: "If I'm critical of myself, I should have gone harder and faster on the financing issue. If I'm more generous, I would say this is tackling the real heart of investors." He points to the recent restructure of Southern Water, which bears Ofwat's "fingerprints", though it was conducted under the radar, as a success story. However, the job is far from finished: "There's a couple [of water companies] who have got some way to go," he says with careful significance. You fill in the blanks. Cox has also been vocal about board leadership, firmly believing that investor representation on boards should be balanced with independent non-executives. "Every chief executive was saying to me in 2012, this really is difficult, we have far too many people round the board table." Under Cox's guidance, companies have restructured their governance with a higher proportion of independent non-executives, and Cox believes "there's been a definite increase in the quality of non- execs." From the start, Cox's willingness to air the industry's dirty laundry in public has proved controversial. In 2017, he made waves in Utility Week with a high-profile attack on Thames Water for failing to get its house in order – an attack that led to a management overhaul, the installation of well-respected industry grandee Ian Marchant as chairman and ultimately, arguably, the arrival of Sarah Bentley as chief executive and her subsequent programme of reform. But it's a very different approach to the gentle whispers exchanged in the dusty corridors of power by which things more oen get done. Does he regret it? "The answer to that is around heat and light – how much has it achieved versus how much frustration has it caused?" he replies, ever thoughtful. "It's got issues on the table, it's got them considered." A long pause. "It comes at quite a high personal price. Anyone who wanted to have a dig at me has had a dig at me. That's not been easy." Cox is the first to admit that his vigorous views and public pronouncements have made him "personally very unpopular" in some quarters. But by no means all. One senior Ofwat figure recalls the mission shaping Cox's actions: "He was trying to bring about a fundamental change – to be a regulator that made a difference and pushed the sector. He was trying to reassert the legitimate authority [of the regulator], not just crank the handle." The former colleague remembers how Cox was "hugely generous with his time", regardless of rank: "He's non-hierarchical, willing to invest in people and their capability." They acknowledge that Cox's uncompromising approach can ruffle feathers: "He occupies a lot of space, but he delivers a lot." Cox's real world knowledge of the water sector and its investors "crashed through the economic models", says the former colleague, and enabled Ofwat to achieve something really quite unique – a sort of pre-emptive ra of pragmatic reform. Compare its performance to Ofgem over the same period and the consequences for the energy sector, hauled over the coals since then- Labour leader Ed Miliband's seminal speech in 2013, and the water sector, which has escaped quite such heights of political attention, Jeremy Corbyn's nationalisation agenda notwithstanding: "The industry needs a strong regulator – it got a strong regulator." Cox has been characteristically robust on the issue of river health. Not high on the agenda when he came into post in 2012, it has become front of mind since the pandemic drove more people out into nature. Cox declared himself "shocked" at the scale of the problem, both at the extent to which storm overflows – meant for occasional use – have actually been deployed, and the extent of unpermitted sewage discharges from wastewater treatment plants, which emerged last year. Fixing it will cost the industry billions, though Cox is "delighted" that some companies have "risen to it". Continued pressure on the rest will follow. The impact of the CMA appeals Looking back at it all, perhaps the most difficult episode has been the highly public row with three major water companies – Anglian, Northumbrian and Yorkshire Water – which took the regulator's PR19 settlement to the CMA (Bristol Water appealed too, but on a separate, and smaller, matter). The resultant year-long inquiry played out against the backdrop of the pandemic, and "You can't ignore affordability for customers because it goes to legitimacy, to how they think about you." continued from previous page "The companies went into it imagining that we would just do a data dump to the CMA and would take no further part in it. Well, when you're having your homework marked… of course you're engaged."

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