'Energy anorak' at the centre of a storm

For a man at the centre of a storm over Britain's "greedy" energy companies, Alistair Buchanan appears remarkably calm - chipper even - at his offices at London's Millbank overlooking the Thames.

As chief executive of Ofgem, the Office of Gas and Electricity Markets, it is Buchanan's job to ensure that the people who supply our power are properly regulated - and are not overcharging customers - and his overall view of the sector over which he presides is that it has been working "incredibly successfully" over the last five years.

But if you go to the House of Commons a few steps down the road, you will think the 46-year-old former City man has failed. British Gas and its peers are public enemies numbers one, two and three down there - accused of making mountains of money off the back of the consumer - worst of all exploiting some of Britain's most vulnerable: pensioners and the poor.

The dapper Buchanan, all smart shirt and smiles, seems anything but bothered about the furore, perhaps taking comfort from the knowledge that he is as under fire from some of the utilities as he is from their customers.

He cannot be accused of complacency. Ofgem might have presided over a situation where British Gas's parent company announced a surge in annual profits only weeks after raising its retail prices 15% but the regulator has responded to mounting political and public concern by instigating a review of the way the market is working.

That should have taken some of the heat out of the situation, but instead it has led to accusations that Buchanan is trying to save its own bacon, pandering to newspaper headlines and a panicky government. So is that true? "It's on behalf of consumers that we are doing this review and if there was a feeling we were being kicked around by the government to do this really that does not stand up to detailed analysis ... We would not be acting unless we thought we should. Media and consumer groups all represent public opinion and I think that looking at public opinion in general at the moment there is clearly concern and it is my and Ofgem's responsibility to respond to that," he says.

Fuel poverty

Despite almost annual autumnal scares about whether Britain will have enough power to go round, Buchanan claims that Britain has enjoyed "an incredibly successful market" both in absolute terms - with regard to consumer choice and range of product - but also in relative terms to any other country.

"Consumers are not, understandably, terribly bothered about whether our market is performing better than that of Germany or the US, but they are concerned about prices. That concern was raised by quite a few notches in late January and early February when the power companies put up their prices in very quick succession, immediately, and virtually all at the same price. Now it could be that this is a signal that competition is working very, very, well ... but that pricing reaction by a lot of companies led to a lot of questions."

Whatever the reasonably calm reaction in public from the City and the companies to that particular problem, no one should imagine the industry is wildly happy, the regulator hints. He points out that in 2004, when there was a similar look at how the upstream gas market was operating, there were visits to his office from senior executives from Shell, ExxonMobil and BP who were "very, very unhappy" about Ofgem's use of Enterprise Act powers.

Buchanan says the latest inquiry will look at how the big six utilities including British Gas, E.ON and Scottish and Southern Energy are operating in the upstream power market as well as downstream sector but he is happy to point out that industry is under increasing price pressure from wholesale gas and coal prices and environmental measures.

"Of the £1,000 annual average gas and electricity bill for homeowners, £80 is already related to the environment and that element of the cost is only going to go one way - upwards," he argues with reference to the Emissions Trading Scheme and British obligations to support renewable power schemes.

The allegation that Buchanan is too close to the industry has been heightened by the enormous political heat being generated around "fuel poverty" and in particular pre-payment meters. Companies have been accused of milking the most vulnerable customers by charging them more for such services.

While the chancellor, Alistair Darling, was preparing to put pressure on companies to drop special charges for pre-payment meter customers as part of his budget, it transpired that an Ofgem briefing paper from last summer had counselled against that kind of move saying it would just "rob Peter to pay Paul".

Yesterday the regulator defended its position claiming that 80% of those using pre-payment meters were not classed as "fuel poor" customers and forcing others to pay for the cost of administering the scheme would end up putting a further burden on those whom everyone wanted to help.

"We specifically did research last year with energy customers on pre-payment meters and found they were less aware than others of the value of switching suppliers. To counter that we undertook an extensive public relations campaign to make people more aware of the benefits of switching and continue to press every company to do more," he argues.

He can also point to a rather more dramatic move by Ofgem in recent weeks which tends to undermine the charge that he is too close to the companies he presides over. Buchanan has just imposed a £42m fine - a record for the energy sector - on the National Grid, which operates much of England's pipes and pylons, alleging it engaged in uncompetitive behaviour.

The Grid is furious and is appealing against the decision, but Buchanan is relaxed. "There is a lot of chaff being pushed up as you would imagine around a case like this but actually I think it is a fundamentally simple case. When the metering market was opened up to competition five years ago National Grid did two things that affected how the competition would work by stepping in with very long 18-year contracts which had the effect of foreclosing the market to competitors and in terms of being able to switch away from National Grid they did allow people to switch away but put such heavy terms and conditions on them that it did not look like a company welcoming competition."

The regulator has also underlined his determination to keep National Grid and other network operators on their toes by undertaking a separate review of this sector too. An outside team is to be brought in to do this but Buchanan has also taken the heat off companies - and allowed critics to suggest he might be too soft - by saying it will also look at whether regulation is too heavy-handed and complex and hinted it might not be needed at all in future.

He points with interest to a recent settlement being looked at by the Civil Aviation Authority, another industry regulator, where it is proposing to step back and allow a "constructive dialogue" over landing charges to take place directly between Manchester airport and the airline users.

Buchanan is also willing to admit he has failed in some respects when energy price deals undertaken by Ofgem are so lacking in transparency. "I do get uncomfortable that formulae we have decided on are so complex that only a few people in a company are able to understand them."

It could be easy to make the argument that he is too close to industry if it is just a matter of background because he has been deeply engaged around the corporate end of the industry for much of his working life. He studied politics at Durham University and he started his work career as an accountant at City firm KPMG before moving into the utilities arena by becoming an equity analyst at Smith New Court.

Buchanan was one of the analysts of the privatisations of the electricity industry in the early and then mid-1990s before moving to New York to work with another investment bank Salomon Smith Barney.

He returned to London and became head of utilities at ABN Amro where he was involved in the early stages of privatisation of EDF, the French group which is now a significant player in the British retail energy scene.

His CV suggests Buchanan is a dry old suit. Yet he genuinely seems excited by his job at a time when energy has a very high political profile due to the twin problems of security of supply and the environment - never mind record profits and rows over fuel poverty. But he can also be self-deprecating - referring to himself as an "energy anorak" and one who can also talk about music and sport as much as "RPI-X" utility price formulae.

A season ticket holder at rugby club Wasps, Buchanan admits he has watched the recent ups and downs of the England rugby team without the same calm he has tried to apply to the gas game.

CV

BornDecember 22 1961

Education Malvern College and Durham University (St Chad's College), reading politics

CareerQualified as a chartered accountant at KPMG

1987 Smith New Court (now part of Merrill Lynch) - utility analyst

1995-2003Head of research at BZW investment bankSalomon Smith Barney (New York) - head of utilities researchDLJ European utilities analystABN Amro - head of utilities research

2003Joined Ofgem as chief executive

FamilyMarried to Linda with three children

HobbiesSeason ticket holder of London Wasps rugby club, enjoys keeping fit and listening to classical music