If a week is a long time in politics, six years is positively a lifetime. That surely must be what Ofgem chief Dermot Nolan is feeling as he prepares to step down in February. The interviews for his replacement are due to start today.
In the spring of 2014 when the career regulator and economist stepped into the role, a Conservative government was all for jettisoning rules and regulations, the term Brexit hadn’t been coined and the odds of Jeremy Corbyn becoming leader of the Labour party must have been a million to one. Yet during his time in office, there has been a backlash against big business, Brexit is imminent and renationalisation is a distinct possibility. The principles-based regulation on which Nolan said he would guide his tenure gave way to what, six years ago, was another implausible development: the prescriptive rule of the price cap, followed by the regulator’s increasing shift towards a fairness agenda.
The task for Nolan’s successor is formidable. Pressure has mounted to keep down costs, while at the same time transforming the energy market into a decentralised and decarbonised one. Striking a balance between the two will be an enormous undertaking for whoever takes over. The growing share of renewable generation has been one of the UK’s great success stories, but reaching net zero needs the incoming regulator to quickly get to grips with designing a flexibility-led market, galvanising efforts to decentralise at scale and shape regulation at the grid edge as we move into an era of electric vehicles.
There are those in the sector who say that whoever lands the £200,000 a year job may struggle to pull off this feat because Ofgem’s remit has not kept pace with the scale of the challenge – and that the regulator needs to have greater legal oversight in the journey to net zero. There is a school of thought, too, that a change at the top affords the ideal time to shake up regulation – perhaps with one over-arching body across water, energy and telecoms for consumers, and another for infrastructure. Eyes will be on the National Infrastructure Commission’s report into regulation to get a sense of the direction of travel.
Significantly, in a departure from past recruitment, Ofgem is looking for someone with strong commercial experience. This would help as it pushes for quicker progress while keeping bills down.
All agree the new appointment comes at a critical time for the sector. As one retailer asks: are Superman or Wonder Woman in the market?
Denise Chevin, intelligence editor, denisechevin@fav-house.com