the times | Saturday August 1 2020 1GM 55
The ManifestoBusiness
there,” Mr Brearley says. Second, he
plans to almost halve companies’
returns on investment to an
“unprecedented low level” of only
3.95 per cent. While Ofgem boasted
that the plans would save households
billions on their energy bills, analysts
at Bernstein doubted they were
“financeable”. Speaking via video callfrom his home a fortnight after the
announcement, Mr Brearley is
relaxed about the criticism, which he
says was to be expected. “There’s a
robust debate to be had, but there’s
only one thing that will change our
mind and that is clear evidence.
“I’m very aware that there is a need
to invest to get to net zero, and it’s
something I fully support. I would
argue my career has really been about
trying to support the country to get to
net zero. But equally, my experience
has shown me that if you don’t keep
public confidence, then that
investment becomes hard to sustain
over time.” Ofgem’s role is “to get the
balance right between shareholders
and customers”.
The regulator’s last price controls,
for the eight years to 2021, were
widely criticised as too generous to
the network companies, including by
Citizens Advice and the National
Audit Office. Citizens Advice, a
consumer body which accused the
regulator of gifting companies billions
in excess profits, notably welcomed
the new plans as striking “the right
balance”.
Mr Brearley admits “there were
lessons to be learnt” from the last
settlement. He may be mindful, too,
of his time at the energy and climate
change department, where initial
subsidy contracts for wind farms were
awarded without competition and
were also found by the NAO to have
been too generous, fuelling criticismEnergy market’s man in the middle
seeks to foster a climate for change
Ofgem boss must tread
carefully to satisfy the
interests of consumers
and power suppliers,
Emily Gosden writes
of the industry. He acknowledges that
“you end up not getting everything
perfectly right” and that the
subsequent introduction of
competition “absolutely drove down
the price and pushed investors to be
more efficient”.
“That’s been good for the industry
in the long run. When I think about
these network price controls, we’re
trying to do the same thing.”
Executives at companies such as
Scottish Power, part of Spain’s
Iberdrola, complain that the returns
on offer are so low that they will be
unable to make the case for investing
in the UK. That calls into question
whether they will want to lobby
Ofgem to make the additional
£10 billion investments in net-zero
projects, even if they are needed.
Mr Brearley is “very confident that
even at the rates we have set out, this
will be an attractive investment for
companies”. But he also has an
ultimatum for the monopoly network
groups: if they don’t want to build
these projects for the returns on offer,
Ofgem may invite other companies to
do so instead. He says this could apply
to large standalone projects of more
than £100 million in value, such as
new power lines to help to cope with
new offshore wind farms. “That’s a
good area where you could imagine
running some kind of competitive
process. We are working closely with
the government and we hope to get
powers that allow us to tender these
sorts of projects out.”
While the network settlements
have dominated recent headlines,
there is plenty else on Mr Brearley’s
plate. His promotion to run the
regulator came just as the pandemic
started to hit. Ofgem took steps to
help energy suppliers to survive the
increased costs and lower incomes
they faced, such as by brokering
payment holidays on certain industry
charges. But there are increasing
warnings that a deeper crisis is
looming as the economic impact of
the pandemic starts to take its toll,
leaving more customers unable to pay
their bills and suppliers struggling
financially.
“Right now, we don’t see a problem
but we will keep a close watching
brief and make sure customers are
looked after, even if a company does
fail,” Mr Brearley says. He
acknowledges that “companies need
to cover their costs” and that the
energy price cap, which limits
standard tariffs for millions of
households, may need to be adjusted
next year so companies can charge
other customers more to make up for
bad debt from those who cannot pay.
There are also wider questions over
the future of the price cap, which he
says has been “a really good
mechanism” for protecting consumers
from unfair pricing. Suppliers suggest
that it may not be compatible with
new types of bundled tariff that offer
electric vehicle services as well as
household energy — the kind of
innovation Mr Brearley says he is
really excited about. “That’s the sort
of thing we will look at when we ask
ourselves, is there a case for change?”
For a man who started out
expecting only a brief stint in the
energy sector, Mr Brearley is now so
enthusiastic about it he says it’s “very
hard to see myself moving elsewhere.
I’m absolutely loving the job that I’m
doing. I’m having a fantastic time.”Jonathan Brearley, below, has been accused of jeopardising the net-zero goal but says keeping public confidence is keyALAMYW
hen Jonathan
Brearley was an up-
and-coming civil
servant he was asked
by the environment
secretary, then David Miliband, to
establish a government office of
climate change. “I knew very little
and my permanent secretary Helen
Ghosh asked me a very basic question
on day one, which I simply didn’t
have the answer to,” he recalls. As he
struggled to muster a response about
the EU Emissions Trading System, his
new boss was unimpressed. “She
rolled her eyes and gave me a book:
Avoiding Dangerous Climate Change,
by the [Met Office’s] Hadley Centre.”
It was 2006 and Mr Brearley had
taken the role, expecting perhaps a
six-month stint in energy and climate.
“Reading that book changed my
perspective. It laid out in a very clear
and dry way the reason why we need
to act. It made me realise this wasn’t
tomorrow’s problem, this was
something that we absolutely had to
act on now.”
Fourteen years later Mr Brearley
can boast plenty of action on climate
change, from leading the
development of the 2008 Climate
Change Act that set Britain legally
binding targets for reducing its carbon
emissions, to six years at the
Department of Energy and Climate
Change overseeing legislation to
decarbonise the electricity sector,
unleashing a wave of offshore wind
development.
Yet today, as the UK aims for a goal
of “net zero” emissions, Mr Brearley,
47, finds himself accused of standing
in the way of climate action. He is
chief executive of Ofgem, the
regulator for the energy industry, a
role he took on in February. Last
month he announced a crucial draft
price control determining the
investments that electricity and gas
network companies can make over
the next five years — and how much
they can charge consumers on their
energy bills to pay for it. The
companies were furious.
“Ofgem’s draft determination
fundamentally fails on net zero,” SSE
cried. The plan “jeopardises the
delivery of the energy transition and
the green recovery”, National Grid
claimed. “This was Jonathan
Brearley’s first big test as the new
Ofgem chief executive and he’s
flunked it,” Scottish Power said.
They were unhappy for two main
reasons. Firstly, Mr Brearley had
slashed £8 billion from companies’
investment plans as “unjustified”,
reducing the initial amount they can
spend — and ultimately recoup from
consumers — to £25 billion. A
further £10 billion of projects to
support net zero will only be
approved if companies come back
over the next five years and prove
they are really needed.
“We want these things to
happen, but we want to do it in a
flexible way that makes sure we
adapt to the world that’s out
Q&A
Who, or what, is your
mentor?
Lord Carter of Barnes,
the former chief
executive of Ofcom.
Does money motivate
you?
Not hugely, no. The
reason I’ve stayed in the
public side of thisdebate is the chance to
make a big impact and
make decisions that
make a difference.
What was the most
important event in
your working life?
The moment we knew
the Climate Change Act
would go through.
Which person do you
most admire?
I used to be part of the
anti-apartheid
movement and admire
Nelson Mandela.
What is your favourite
TV programme?
At the moment,
Chernobyl. That’s such
an energy geek’s
answer.
How do you relax?
I love walking. I’ve been
walking in lockdown
as opposed to
commuting.CV
Age 47
Education BSc Maths &
Physics, Glasgow; MPhil
Economics, Cambridge
Career 2000-02: Bain &
Co; 2002-06: prime
minister’s strategy unit;
2006-09: UK
government office of
climate change; 2008-
14: Department of
Energy and Climate
Change (director of
energy markets and
networks); 2014-16:
Consultancy; 2016-
Ofgem (chief executive
since February)
Family Married with
two young sons
Lives Near High
Wycombe