Familiar face steps into the unknown at Ofgem

The appointment of Jonathan Brealey as the new chief executive of Ofgem seems unlikely to herald a drastic shift in direction of the regulator. But, despite his long association with the sector, Jonathan Brearley faces unpredictable challenges. Jane Gray discusses the implications of this key appointment.

Jonathan Brearley is not the new CEO that Ofgem set out looking for. But, he could be just the ticket for helping the regulator square up to its undeniably big challenges.

When the current chief executive Dermot Nolan confirmed his intention to step down in February next year, a brief was created to recruit a new leader in a new mould. The application pack asked for an “experienced commercial and entrepreneurial leader with an innate ability to be a champion for the consumer”. Notably, it did not ask for an experienced economic regulator with deep technical knowledge of the system – and yet this is what Brearley undoubtedly is.

Acknowledging this, it might be easy to assume a number of things.

Firstly, you might conclude that the Ofgem board simply choked when it came to the crunch of appointing a chief executive in a very different style to either Nolan or Ofgem chair Martin Cave.

Brearley is no carbon copy of these two Ofgem leaders, but he is an economist extraordinaire with a cut to his jib that says tough – combative when necessary – regulator all over.

Secondly, and possibly uncharitably, you might assume that Ofgem was overambitious in targeting an entrepreneurial go-getter given the salary scale it had to offer and simply failed to attract big hitting competition to internal candidates.

Linked to this, there is the possibility that Ofgem’s outward profile and the unenviable responsibilities of a CEO caught between the need to pacify the policy demands of populist politics and ensure resilience in critical national infrastructure which is under unprecedented strains, were unappetising for many.

But let’s take a step back. Brearley is no institutional shoo-in. He’s not an Ofgem lifer but has rather had experience in both the public and private sectors, making considerable stamps on the utilities sector on both sides of the fence.

Those that have worked with him over the years describe him as a good listener and a “fair” thinker. They also note his passion on issues relating to climate change – founded on his time shaping government policy in this area at the department for energy and climate change.

Brearley’s personal concern and commitment to tackling climate change should stand him in good stead as Ofgem responds to calls for a review of its remit in light of the recent net-zero emissions commitment.

As director of systems and networks, Brearley also has detailed knowledge of the very many critical projects in flight to adjust the way our energy systems and markets function – and this is no bad thing given the urgency with which new rules and frameworks for a decentralised, dynamic and low carbon energy system are need.

Brearley knows the detail of the targeted charging review, for example, inside out and understands the significance of this work to the evolution of our energy networks, markets, business models. As well as its implications for the way consumers and society should the responsibility of decarbonisation.

The lingering question though among those in the market that find Brearley’s appointment a little disappointing, is whether his closeness to projects like the TCR and RIIO2 will make him unable to raise his eyes above the detail and consider the need for a big change to the “fundamental genetics of the regulatory role” – as one industry source put it.

Having had such an influential role in shaping Ofgem’s current direction of travel for framework and market reforms, he will undoubtedly be strongly wedded to this trajectory and it will be hard for him to contemplate the potential a more radical shake-up of the status quo.

One source suggested to Utility Week that Brearley might be well advised to create a new direct report with responsibility for challenging incumbent thinking and advocating bold action, simply to ensure he does not allow his own unconscious bias on regulatory style to prevail.

Another challenge for Brearley as he takes the helm at Ofgem will be stepping into the spotlight as the industry’s front man for consumer protection. While he undoubtedly understands very clearly the big implications and potential risks to consumers and social equity that are inherent in the wide-ranging changes underway across our energy system, he has not previously taken a lead role in communicating these on a very public stage.

While his time working in government will mean he is no stranger to handling political hot potatoes, being the public face for these is quite a different demand.

But for all the inevitable speculation about how Brearley’s appointment came about and how well he will handle the responsibilities of his new role, there’s no changing the fact the die is cast.

Brearley will vacate his important role at the head of Ofgem’s systems and networks division in February next year – or possibly sooner if Nolan decides that having an internal shadow for several months is too awkward – and pick up the reigns at the top.

His job will need filling – capable deputies like Akshay Kaul and Frances Warburton could easily be in the frame – and he will assume a big wedge of responsibility for making or breaking the UK’s shift to a dynamic low carbon economy.

As one industry source put it: “For better or worse, he’s in now. Let’s hope he does a good job. There’s a lot riding on it.”