Ofgem’s internal transformation programme has “not gone well at all”, the nominee to take over the regulator’s chair has said, pledging to tackle the high turnover of staff at the organisation.
Mark McAllister, who has been named by the government as its preferred candidate to take over the chair of Ofgem, received a pre-appointment grilling by the House of Commons energy security and net zero (ESNZ) committee on Wednesday (18 October) afternoon.
Probed on whether he would be prepared to have “difficult conversations” with current chief executive Jonathan Brearley, the chair-designate said: “There has been an internal transformation project going on in Ofgem over the last couple of years that has not gone on well at all internally.
“I want to understand and make sure we are on top of internal resource. A strong public body has a deep technical knowledge and has a good corporate memory.
“The problem with Ofgem at the moment is turnover is so high that corporate memory gets eroded and technical knowledge is diluted.
“I want to press Jonathan Brearley and team on how to get the best organisational capability within Ofgem.
“The high turnover we have seen due to low morale is like running up a down escalator and we need to do something about it.”
He also expressed concern that public satisfaction levels with Ofgem and the industry are “uncomfortably low and deteriorating”, which he wants to reverse.
But McAllister put Ofgem’s internal problems in the context of the recent challenges the organisation has faced, which he described as unprecedented over the course of his 40-year career in energy.
“Morale is low, they’ve had a lot of criticism over the last couple of years and the regulatory regime has been stress tested with those really high gas prices.”
While admitting preparedness to fire the chief executive if necessary, such a step would only be taken if the other tools at his disposal had not worked out, McAllister said: “The chair’s role is to challenge and encourage the chief executive. There will always be dynamic tension in that relationship.”
Quizzed on specific areas of Ofgem’s activities, he told the committee there is a “good chance” the price cap is no longer the “right solution”, while stressing that his focus would be on helping to bring about the energy transition.
McAllister said previous reports, including one by ESNZ’s predecessor business, energy and industrial strategy committee (BEIS), showed that Ofgem had been “naïve” around its approach to new entrants to the industry, many of which went bust as gas prices spiked following Russia’s 2022 invasion of Ukraine.
Responding to a comment by Mark Pawsey MP that he did not know the name of existing chair Professor Martin Cave despite serving on the BEIS committee for several years, McAllister said this was “not a good thing”.
“The job of chair is to be public face of the organisation to key stakeholders. The chair has an important role to play and that will be one of my priorities.”
McAllister, who is currently serving as chair of the Office of Nuclear Regulation (ONR), will take up his appointment in November if it is confirmed by the ESNZ committee.
He took up the ONR role in 2019 after a 40-year career as an oil industry executive, which included chairing the group that formulated the joint response of the North Sea oil industry, trade unions and government to the Macondo blowout in the Gulf of Mexico.