Utility Week

UTILITY WEEK | JULY 2022 | 11 Interview while the companies walked away with some gains, including a 0.2% increase in their cost of capital, the episode was brutal all round. Cox insists that the companies didn't "win" and is quick to point out that one of the gains, which saw two of the companies receive higher returns, was made only because the CMA had an additional year of data at its disposal, which changed the outputs of the • nancial models: "The CMA upheld our cost models, it upheld our focus on performance commitments and ODIs. People will make a lot of that small increase in the cost of capital but that aside, our model was vindicated." That's • ghting talk, and industry observers mutter darkly that Cox and David Black, then acting and now permanent chief executive, took the whole appeal very personally. Did they? "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 and you're really interested to learn, of course you're engaged. Of course we had to explain why we did what we did." We seem to have hit a nerve – "do I sound defensive?". As he reŠ ects, Cox recalls the peculiar di‹ culties of the timing of the appeal, in early 2020 as the pandemic struck: "You'd connect to people at home and they'd be sharing a room with the children either needing to be occupied or doing their school work. I can still visualise some of those calls." Black, he says, did an amazing job of "holding [the team] all together", and the little snatch of insight into the homes and families of Ofwat provides a glimpse of why it did, perhaps, feel personal. Cox has words of praise for all three chief executives since Finn – Cathryn Ross, Rachel Fletcher and now Black. He speaks highly of Ofwat's • rst director general, the renowned Sir Ian Byatt. Speaking to Utility Week, Byatt is scathing about the outcome of the CMA (the increase in the cost of capital was "a silly thing to do") and has high praise for Cox: "I would rate him as a very good chairman of Ofwat – good for customers." Byatt, no stranger to controversy in his own time at the helm, says Cox was "good at dealing with ministers, getting prices down, looking a™ er customers", and praises him for not being "frightened of the City". Looking ahead to PR24 It will take time for memories of the CMA appeal to fade, but all eyes are now • rmly on PR24. Cox won't be around to see this price review through, but will he o› er any insight into what's ahead? He comments early in the interview that one of the surprises of his time in post has been the relative lack of weight the non-listed water companies placed on the reputational bene• ts of enhanced status, and says now: "You'll see further build towards the longer term, towards more incentives for really ambitious companies and even more weighting on operational and performance outcomes." Does water face its own version of the energy industry's "trilemma", balancing a› ordability, sustainability and resilience? "We have a four-parter, a quadrilemma," exclaims Cox, leaning in and listing a› ordability; the need for investment in net zero, water resources, and cleaning up rivers; the "phenomenal" impact of inŠ ation on company values and subsequent need to maintain legitimacy; and environmental pressures, as public expectations around river health rise. "You can't ignore a› ordability for customers because it goes to legitimacy, to how they think about you. You've clearly got to invest, you can't ignore the environment. You've got to deliver all four of those things. And a™ er all, why should it be easy, running a water company?" And there it is – the question that sums up Cox's time at Ofwat. He doesn't believe it should be easy to run a monopoly water company, because he believes it's a privilege and the companies should be driven, hard, to deliver for customers. Unusually for a regulator, this creed has been shaped by his own leadership in the regulated industry. It's also an ethos he applies to himself – as he occasionally pauses and searches for the right words to recall painful times, it's clear that his tenure at Ofwat has been far from easy. But even his detractors would admit that it's been driven by principle. He's lived up to his own advice – "be brave" – and le™ the water sector in better shape than he found it. Utility Week wouldn't be surprised if he made a return to the sector one day, perhaps on the board of a forward-thinking water company – though he dismisses the suggestion of any such move and pronounces himself looking forward to a break and to his new role as chairman of the Port of London Authority. We're not convinced – he'll be back one day. But until then, he'll be missed. Ellen Bennett, portfolio director Cox's scorecard Cox has been well known for his six-point reform agenda. Here's how he rates his performance: • Getting a fairer deal for customers: "I really wanted to get back to the operating focus, and if you think about it, that message has been really clear… I think no one is in any doubt that actually how you perform really matters." • Managing water resources more e ciently: "I leave that feeling I've done the bits I originally set out to do [on water resources and mak- ing a commitment to tackle operating emissions], but there's a way still to go." • Promoting „ nancial transparency: "In terms of the art of the pos- sible, I probably did as much as could be done. Am I satis„ ed with it? No. I'm pleased to have got Southern on a new track – I would have liked to have seen a couple of others restructure." • Evolutionary reform of water regulation: "That was quickly dealt with because it was basically about resolving Section 13." • Less intrusive regulation: "I did say in PR19 that that would be 'peak intrusion', and I meant that. I thought we had to get more prescrip- tive to then be able to back o– ." • Stronger board leadership: "There's been a de„ nite increase in the quality of non-execs. I see some evidence of more ambition." "I would rate him [Cox] as a very good chairman of Ofwat – good for customers." Sir Ian Byatt, Ofwat's „ rst director general

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