Britain’s top water regulator has been drawn into a conflict-of-interest row after taking an outside job with a $2bn (£1.2bn) New York fund looking to invest in European utilities. Jonson Cox, who has been Ofwat chairman for a year, agreed to join the former UN secretary general Boutros Boutros-Ghali as an adviser to Squared Capital earlier this month.
The move has infuriated the water companies Mr Cox regulates. One senior water-industry source said: “How on earth can a regulator be an adviser to a fund that invests in regulated utilities?” The accusations come at a delicate time for Mr Cox, as he is pushing water utilities to lower bills in 2015-20 and demanding that they “build trust” with their customers.
Ofwat insisted that Mr Cox would not be advising I Squared on the UK’s water industry, with a prohibition of discussing that sector written into his contract.
His critics argue that trust in Mr Cox has been undermined by the appointment. They say a regulator should not be allowed to work for a group that could potentially invest in British utilities and infrastructure. Rival investment firms worry that the appointment could give I Squared an edge on certain deals.
“It’s not just industry who worry about his judgement. It’s the financial community which is behind future investment in the water business – or not. The biggest issue for them is trust in the regulator. And this is just the sort of thing that spooks investors,” one executive said.
Gary Smith, the GMB union’s national secretary for utilities, was also dismayed by the appointment. “This is absolutely disgusting and is also very dangerous for a regulator in terms of transparency. People will think it stinks that a regulator who is supposed to be there to protect consumers is now advising companies who seek to profit from them on regulatory regimes,” he said.
I Squared, which was formed this year by a group of former bankers at Morgan Stanley, says it is looking to Mr Cox’s expertise in industrial sectors in which he has “relevant experience”, according to minutes from a recent Ofwat board meeting.
Its managing partner Sadek Wahba said that Mr Cox “has a unique combination of regulatory as well as operational experience in the infrastructure sector”.
Mr Cox was chief operating officer of Railtrack, before being fired in 2001, and spent the early part of his career at the oil giant Royal Dutch Shell. However, he is best known for his work in water utilities, having led Anglian Water from 2004 to 2010.
In barely 12 months at Ofwat, where he is paid a six-figure salary for a three-day week, Mr Cox has already courted controversy. Earlier this year he was accused of hypocrisy after criticising “morally questionable” tax structures in the sector, even though Anglian Water had paid only £1.6m in corporation tax during his six years in charge.
An Ofwat spokeswoman said: “Jonson Cox has been appointed on a 12-month contract to an international advisory panel for I Squared, a US-based investor in asset-based industries. The agreement with I Squared fully recognises Mr Cox’s Ofwat appointment and that he will not be providing advice on the UK water sector. This appointment was cleared in advance by government and was also declared in advance to the Ofwat board in October.”