Who’s in the frame for Ofwat chief executive?

Three strong candidates have emerged as the frontrunners in the race to succeed Ofwat chief executive Cathryn Ross, but there are others who could also steal the crown, industry players tell Utility Week.

The Sunday Telegraph recently ran a story tipping the frontrunners for Ross’s replacement as David Black, a senior director at Ofwat, Hannah Nixon from the Financial Conduct Authority, or Richard Moriarty from the Civil Aviation Authority.

Industry sources have confirmed the three are likely contenders – but say others fit the profile, too. There are potential candidates in equally senior positions at other regulators or related bodies, for example Alan Sutherland, chief executive of the Water Industry Commission for Scotland – admittedly a long-shot, but a possibility.

Equally, there are well-qualified people who have alternated between regulators and companies, and are currently on the company side. However, the pay drop they would face if moving back to a regulator would likely be too great to incentivise such a move. Ross’s replacement is likely to receive a salary of £200-250,000 per year, against a circa £500,000 enjoyed by some company directors.

One market participant tells Utility Week that although some people from water companies may try for the role, they would have to offload shares – an off-putting prospect.

Equally, it is unlikely Ofwat would have both a chief executive and chair from the water industry at the same time, so those from other regulators, or possibly even an energy company, are considered more likely contenders.

Ross, who announced she would step down at the end of the year to pursue a career as head of regulatory affairs at telecoms giant BT, is well-respected in the water sector.

The new chief executive comes into the company at an important time, and market sources have suggested history may be repeating itself. When Ross took up her role the approach to the price review was already set and she made it clear that she would not interfere with it and, although the timing is slightly different, the same thing may be happening again. Ross has confirmed she will be finalising the rules for PR19 before leaving. This creates an interesting dynamic and challenge in attracting and recruiting a new chief executive who will already have the plan and rules set for the next five years.

Utility Week rounds up the frontrunners and the outliers who could be the next to head up the water regulator.

The frontrunners

Hannah Nixon, managing director, Payment Systems Regulator

Nixon is managing director of the payment systems regulator, which was formed by the Financial Conduct Authority in 2015.

She may not have experience in the water sector, however, she was formerly a senior director at energy regulator Ofgem – where she led on the development and implementation of the RIIO framework. Before her role at Ofgem she was head of regulatory economics at the Office of Rail Regulation, a senior consultant and founding member of the Cambridge Economic Policy Associates – which provides economic and financial consultancy services – and a vice president of Deutsche Bank’s global markets economics team.

Richard Moriarty, group director of consumer and markets, Civil Aviation Authority

Moriarty re-joined the Civil Aviation Authority (CAA) in January 2016 as group director of consumers and markets, and deputy chief executive. He is responsible for the CAA’s economic regulation, competition, consumer protection and consumer enforcement activity.

Before joining the CAA, Moriarty was chief executive of the Legal Services Board – which oversees the regulation of the legal profession in England and Wales. He has also held senior public and private sector roles in a number of regulated sectors including director of regulation at Affinity Water and director of policy and market development at the Social Housing Regulator (the TSA).

David Black, senior director of Water 2020, Ofwat

Black joined Ofwat in July 2012. He is currently leading the regulator’s Water 2020 programme – covering wholesale markets and design of PR19. He has extensive knowledge of the water sector, having been a member of the 2014 price review delivery board and led the finance and modelling workstreams for PR14.

Black is also an experienced economist. Prior to joining Ofwat, he held a number of roles in economic consulting – advising on issues such as access and wholesale regulation and pricing, cost benefit analysis, vertical integration and the cost of capital. Before he began consulting, he was an economist at Oftel and the New Zealand Treasury and New Zealand Commerce Commission.

The outliers

Paul Smith, head of policy, Payment Systems Regulator

Smith stepped into the role of head of policy at the Payment Systems Regulator (PSR) in February 2016, with responsibility for leading the development of regulatory policy and working with the industry to deliver the statutory objectives of the organisation. This includes ensuring that payments systems are operated and developed in the best interests of businesses and consumers, promoting competition within the industry and supporting innovation in payments systems.

An economist by trade, Smith has a strong track record in economic regulation in both Britain and Australia. He has held various roles at Ofgas (now Ofgem) and Postcomm (now Ofcom).

Immediately prior to joining PSR, Smith was chief executive of the Australian Energy Market Commission, having been promoted from the position of senior director of strategy and economic analysis. He also spent four years as principal of Cambridge Economic Policy Associates.

Nick Fincham, strategy and regulation director, Thames Water

Fincham was appointed strategy and regulation director in April 2011, having previously served as head of regulation from June 2010. Before joining Thames Water in 2010, he spent six years as director of economic regulation and competition policy at the CAA – where he helped pioneer the use of ‘constructive engagement’ in price control reviews, and successfully promoted the deregulation of Manchester and Stansted airport.

Prior to the CAA, Fincham held senior positions at a number of economic regulators including Ofgem, OFFER, Ofgas and Postcomm. In these roles, he oversaw a number price control reviews. In 2003, he also set up a small consultancy company – Black Island Consulting – to provide advice to regulators and the UK government.

Tony Ballance, director of strategy and regulation, Severn Trent

Ballance is director of strategy and regulation at Severn Trent. His extensive experience in utility policy and regulation leaves him ideally placed to lead the company’s strategic and regulatory work, and make him a prime candidate for the role of Ofwat chief executive. Prior to joining Severn Trent, he held the posts of chief economist for Ofwat, director of London Economics and director of Stone and Webster Consultants.

The dark horse

Alan Sutherland, chief executive, Water Industry Commission for Scotland

Sutherland has been chief executive of the Water Industry Commission since it was established in 2005. Prior to the Scottish regulator’s establishment, he was the water industry commissioner – a role he took up in 1999.

Sutherland is a well-respected and well-known figure in the Scottish water industry, and has extensive experience in both price controls and market competition. Under his supervision, the sector has become much more efficient – both operating and capital costs are down by around 40 per cent on a like for like basis – and performance standards have improved markedly. Competition was successfully introduced into the Scottish market in 2008, and became the first open water market in the world.