The legacy of Cathryn Ross

With a markedly different focus on company outputs and customer engagement, Ofwat’s outgoing chief executive has brought water regulation into the 21st century, industry players tell Utility Week.

Cathryn Ross took the reins of Ofwat when the regulator was at its lowest ebb. Fresh from the section 13 debacle, relationships with the water companies were in tatters, PR14 was looming and – unbeknown to all – Ofwat had a multi-million pound hole in its budget as it prepared for the price review.

Four years later, things look very ­different. Ross is that rare breed – a regulator who is respected and even liked by the companies she regulates. She takes no prisoners – as some battle-scarred former Ofwat employees could attest – but is widely seen to have been a firm and fair regulator who has achieved significant transformation of both her own organisation and the sector during her tenure.

Now, Ross is preparing to leap the fence into the realm of private enterprise, becoming head of regulatory affairs at BT, whose combative relationship with its regulator Ofcom is notorious. With just five months to go before she departs, the water sector is reflecting on her achievements – and the task that lies ahead of her successor.

The story of Ross’s tenure at Ofwat really begins in 2012, some months before she returned to the regulator, where she had previously worked, as chief executive. Her predecessor Regina Finn had presided over the section 13 fiasco, which saw it reach a stand-off with companies when it attempted to modify their licences to enable it to set prices differently in future.

The section 13 row simmered down when former water company chief executive ­Jonson Cox was revealed as the new chairman of the regulator. Unusual in being a “poacher turned gamekeeper”, Cox knew the only way to achieve his transformational agenda for the sector was to repair relationships with the companies. Soon afterwards, Finn left and Ross was appointed in early 2013. It quickly emerged that Ofwat had a £5.6 million hole in its budget as it prepared for the all-important PR14, and the regulator was forced to ask the companies it regulates for additional funding.

Such was the world Ross stepped into. No newcomer to the water sector, she had already served at Ofwat as director of markets and economics, but left for the Office for Rail Regulation in 2012.

An experienced regulatory economist – she has also served with the Competition Commission – Ross was back in her element. She knows regulatory theory inside out, but is also a pragmatist and wasted little time in making her mark.

“Our relationship with Ofwat has been pretty good even, importantly, in those areas where we haven’t agreed with them”

– Tony Smith, chief exectuive, Consumer Council for Water

Licking the PR14 process swiftly into shape, Ross implemented a regulatory framework that will be remembered in the sector’s history books. Its focus on company outputs and on customer engagement was markedly different to past regimes. It has challenged water companies, and brought the regulation of monopoly networks into the 21st century. PR14 was well advanced by the time Ross came into post, and she provided the stability that was required to see it through.

Ross’s approach to this transformation was not authoritarian. Learning from the mistakes of her predecessor, she made sure to reach out to a range of sector stakeholders from companies to consumer bodies, bringing them on board with her new vision for water regulation.

Ross launched an agenda for Ofwat, and the water sector itself, that centred on “trust and confidence”. Wessex Water chief executive Colin Skellett says: “Cathryn provided the long term, strategic thinking that was so important. Cathryn’s trust and confidence agenda is about making sure all the different stakeholders have confidence in the regulator.”

Described as “approachable” and “willing to listen”, Ross encouraged candid debate about the impact of new regulatory mechanisms on company performance, investment and customer service.

Tony Smith, chief executive of the Consumer Council for Water, tells Utility Week “she’s built bridges”, allowing for a strengthened relationship between the regulator and the consumer champion “even, importantly, in those areas where we haven’t agreed with Ofwat”.

For Smith, the key outcomes of Ross’s leadership have been her success in getting customers to “drive” the price-setting process and her willingness to tackle the regulator’s historical “generosity” on the cost of financing with a “firm” but not combative hand.

That said, Ross is no soft touch. Ranged against her many admirers, her ability to be ruthless in the delivery of her goals has also created a handful of battle-scarred critics, with a number of high-profile departures from the regulator – including former chief regulation officer Sonia Brown, who left in November 2015 – coming to mind. Ross was also quick to reassert her authority over the opening of the non-domestic water market following a period of working closely with the Water Industry Commission for Scotland and its chief executive, Alan Sutherland. The on-time opening of the market this year is another success to her credit.

Now attention is turning to PR19. With the launch of the methodology earlier this summer, detailed work can begin and Ross has stepped aside at what many would argue was the last possible moment for her to do so, until the price review is complete. She leaves her successor a regulator in good shape, with stable relationships with the companies it regulates. But with increasing scrutiny of customer bills, an uncertain political landscape and a price review fast approaching, the task will be no less challenging for that.

Here is what some of Cathryn Ross’s collegues from the industry had to say about her departure from Ofwat:

“Cathryn has been a transformational leader for Ofwat and the sector. As chief executive, she has created a dynamic and leading-edge regulator, effective in driving change across the water sector and putting customers first. We are sorry to see her go and wish her every success in her new role.”

Jonson Cox, chairman, Ofwat

“Cathryn has brought a powerful combination of professionalism, integrity and personality to her role. We wish her well for the future and look forward to a smooth handover to her successor.”

Michael Roberts, chief executive, Water UK

“Cathryn has brought stability, integrity and candour in a period of great change for Ofwat and the sector. She has also been an ambassador and role model for emerging talent right across our sector, a point rightly recognised through her recent Utility Week Guiding Star Award.”

Nick Ellins, chief executive, Energy and Utility Skills

“CCWater’s relationship with Ofwat since Cathryn’s been there has been very good, and she deserves some credit for improving the relationship of Ofwat, not just with CCWater but with other stakeholders around the sector as well. That’s not to say she’s not firm as a regulator, but she’s built bridges between the various stakeholders around the sector.

“It’s been good, CCWater’s and my relationship with Cathryn, and it’s a shame to see her move on in that sense.”

Tony Smith, chief executive, Consumer Council for Water

“Cathryn will be a great loss to Ofwat and the industry. She has done a ­tremendous job bringing new approaches to regulation.”

Colin Skellett, chief executive, Wessex Water

“We wish Cathryn all the very best in her new venture and look forward to working closely with her ­successor. During a time of transition for the water sector, Cathryn has consistently – and rightly – championed putting the customer at the heart of the industry and we’re sure that all her excellent work will be built upon.”

Stephen Bird, managing director, South West Water