Letter from the Editor: Ofgem’s opportunity for a reshuffle

It’s all change at Ofgem. The announcement that two senior staffers are following Rachel Fletcher out the door, prompting a reorganisation at the highest level of the regulator, comes just weeks after the news that chairman David Gray will be standing down at the end of his term in September. The latest departures, E-serve managing director Chris Poulton, and senior partner and one-time interim chief executive Andrew Wright, see the organisation streamlined into three departments – broadly speaking, retail, system operation and networks, and corporate services. While the headlines of the restructure were set out in a brief press release last week, the details have yet to come, with some fairly major questions – such as the future place of Martin Crouch’s Improving Regulation department – yet to be answered.

The jungle drums suggest the departures have been amicable, rather than a sign of deeper troubles. Nevertheless, they leave chief executive Dermot Nolan facing the latest in a long line of challenges. On the one hand, he will finally be in a position to build his own top team, bringing more of his own people to follow former policymaker Jonathan Brearley, his surprise appointment top job for networks in 2016. On the other hand, he will be all too aware of the risk of losing corporate memory and expertise following such a flurry of senior departures, and at such a critical moment in the energy transition.

Nolan will also be aware, as ever, of ministers looking over his shoulder. In her first public appearance as energy secretary last week, Claire Perry rather ominously suggested that Ofgem “needs to change”, promising to “hold them to some very explicit requirements”. Her comments relate to the ongoing argy-bargy over the price cap, a long-standing bone of contention between the regulator and government. For ministers, Gray’s departure from the chair offers an opportunity to change the direction of the regulator without any need for more overt intervention. Gray, while widely respected, is also strongly associated with a pro-competition stance – something that may have proved inconvenient to government these last few months.

Will Nolan stay in post as all around him changes? Probably, is the consensus. While few would envy him the role, most market observers agree the job won’t be done until the targeted charging review, RIIO2, and of course the price cap are all in place. And that’s just the day job. Nolan also has potentially game-changing long-term thinking to do, about the DSO model, for example. Watch closely: it’s set to be an interesting year.