Regulators are rather shadowy figures in the world of business. They avoid the limelight, they prefer to let the numbers do the talking. In an ideal world, perhaps, their field of interest would be so well-behaved that you would never hear of them at all - they invariably become well known only when something goes wrong. On that score, then, the fact that Regina Finn would not be recognised in the street is a good thing.

Yet Ms Finn appears to be ready to change that, to a degree at least. After piloting the industry through some treacherous waters since taking the helm in October 2006, the chief executive of Ofwat wants to seize the initiative and address the long-term future of the industry.

Imagine a time when you will be able to decide which company supplies your water. You could choose a tariff based on whether you had a 100ft lawn to water or merely a window box on a tower block balcony. As companies are forced to compete for your business, household bills should fall, just as they have done in the telecoms and energy sectors. At least, that is the theory.

“We are recommending to Government to change some legislation to make it possible to open up the water market, for business customers initially,” Ms Finn said. “The retail market will require a longer timeframe to open up.”

She believes that competition will help to tackle many of the challenges facing the industry. “When there is transparency of prices, as we have seen with electricity and gas, it will start to make a difference. Price comparisons are very important in opening up a retail market.”

In principle, the largest 2,500 business customers in England and Wales can already switch their tariffs, but in practice it has proved too difficult.

“We are saying: ‘Let's do this in steps. The competition regime we have doesn't work, let's acknowledge that and move on from there.'”

The Government is sympathetic to Ofwat's argument, particularly as it is becoming concerned about the affordability of water. Another consequence of retail competition in water markets would be industry consolidation. For years, Ofwat has objected to mergers between water companies, arguing that it needs the present number of companies to act as comparators and that any reduction in number would diminish its ability to regulate. But the mood may be changing: a couple of very small water-only companies - as opposed to water and sewerage companies - have merged recently, with only the smallest of objections and remedies proposed by Ofwat.

“The idea would be that if there were competition in retail, we would probably revert to the usual takeover regime,” Ms Finn said. “If there is effective competiton, Ofwat does not need its comparators.”

Market purists argue that if the market is allowed to develop, the most efficient companies could take over the least efficient. “Yes, you could see consolidation and, in theory, that would be good for customers,” she said.

“I'm not a market purist and I don't believe we can get a perfectly competitive market in water. Water has a certain natural monopoly. No one is going to dig up this country to put new pipelines in.”

And there will still be a need for a regulator. “If consolidation starts to happen - as we have seen in the electricity, gas and telecoms markets - a big part of our job is to regulate where competition cannot work.”

Ms Finn, 41, may deny being a market purist, but she has a tendency to sound like a market cheerleader. After starting out in life as a systems analyst, her experience in the Irish civil service and beyond has been almost purely in regulatory economics. Yet she clearly has an entrepreneurial streak or she would not have climbed so high, so quickly. In Ireland she set up the independent regulator for telecoms as that market was liberalised. Then she went to Guernsey, where she ran a telecoms company for its government, before overseeing its sale. On her return to Ireland, she set up an all-Ireland energy market, the first cross-border market in networks.

Then came the headhunters' call for the chief executive's role at Ofwat. Birmingham, where Ofwat is based, is now her home, although she still keeps a place in Dublin and can see herself returning there, one day.

First, however, there is work to be done. Indeed, there has been plenty to do already. Since Ms Finn took the job, the water industry has had its problems. Some of its biggest companies - Thames, Severn Trent and Southern Water - have been fined for misreporting data on customer services to the regulator. Severn Trent was convicted by a criminal court of deliberately misreporting leakage data, which meant that customers' bills were higher than they should have been. And during this period, Ofwat has been criticised on occasion for being too naive in its handling of the big companies that predominate in the sector.

All have inspired adverse publicity and there is the threat of more to come. While soaring energy bills have grabbed the headlines and government time, the cost of water, too, is set to climb significantly when the next round of price limits is set for bills in April 2010. If the poorest households are already struggling to pay their water bills (and industry bad debt is rising, indicating that they are), then that problem will get worse.

“Obviously, higher inflation and higher energy bills will feed into water,” Ms Finn said. “ Without saying whether water is too cheap or too expensive, we have to send the right signals. If people pay for what they use, that will help people to see what they use and how to value it. We support the government aim to have widespread metering, particularly in areas of high scarcity.”

Ofwat is working with companies on introducing social tariffs for vulnerable customers, an idea that ministers are keen on, especially when talk turns to water becoming the next oil, with prices leaping as the commodity becomes more scarce worldwide.

“One of the big differences between water and oil is that water is still a national, even a regional product. What is produced in Scotland is used in Scotland,” Ms Finn said. It costs a lot of money to transport water, so, in effect, local regional monopoly companies will continue to own the pipes that bring water to your door through a system known as common carriage. It is only the name on the bill and the customer service operation that would change through market liberalisation.

Perhaps the local nature of water resourcing means that there is a natural ceiling to water prices and that speculators will find the market unattractive. If Ms Finn's team is not in the job of pondering what prices or the global supply will look like in 50 years' time, it is stretching its usual five-year parameter to 25 years in an attempt to make the industry think hard about long-term issues, in particular environmental impact and planning for water scarcity.

The improvement in British water quality has been immense since privatisation and European directives on cleaner bathing water and river basins have played a part in producing water that is ten times cleaner than it was. However, there is no denying that the changes have come at a cost. The sector has invested £70 billion in the past 20 years, twice the rate that was spent before privatisation. In the South West of England, for example, water bills are now very high, reflecting the amount of money that has been spent.

That can lead to grumbles about the profits that water companies make. According to Ms Finn, when people say that profits in the sector are too high, they need to remember that without these, the water companies would not be able to access either the debt or equity markets.

“Companies need to make sure they have an appropriate, AAA, rating. That's why profits look large, but they are not excessive. When people complain about excessive profits, they seem to forget that it is the regulator that says how much each company can make and stops profiteering,” she said.

Ms Finn argues that the fact that Severn Trent's fine of £35.8 million will eat into its profits this year shows how slim the margins can be.

One of Ofwat's main jobs is to keep the cost of financing water companies as low as possible. Given that most businesses are finding that because of the credit crunch the cost of finance has jumped severely, there are concerns that water companies will have similar problems. Ms Finn said: “For the last five years, companies have had access to some very cheap debt and have locked in long-term financing. Even though there is more turbulence now in terms of spreads, the risk-free rate of debt is still below what was assumed at the outset of this period review.”

Yes, the credit crunch will make a difference, but the regulator also needs to be an adept crystal ball-gazer. “The water industry is a pretty safe, defensive sector. People want to invest in it,” Ms Finn said.

Recent scandals on misreporting data could have jeorpardised that reputation, but Ofwat believes that it has taken the appropriate measures to put right the failures, compensate customers and act as a deterrent to future aberrations. Southern Water was fined £20 million, Thames Water £9 million and Severn Trent £35.8 million all for misrepresenting customer service levels.

“It's going to be hard for the industry to rebuild its reputation, but every customer has been paid back. This has come to light, the companies have been punished and customers have not been hung out to dry. That shows the regulatory regime is working.” Ms Finn said.

CV

Born: April 11, 1967

Education: Coláiste Dhulaigh, Dublin, and St John of God's Secondary School, Dublin; Trinity College, Dublin, diploma in financial information systems

Career: 1994-97: Republic of Ireland Department of Transport, Energy and Communications; 1997-2000: head of market operations, office of the director of telecommunications regulation, Ireland; 2000-05: director-general of Utility Regulation for the States of Guernsey; 2005-06: Commissioner, Commission for Energy Regulation, Ireland: 2006-present: Chief executive, Ofwat

Other interests: Travel

Q&A

If you could change one thing in the financial and commercial environment, what would it be?
To see companies take responsibility for delivering excellence for their customers, instead of looking to their regulators and government to tell them what to do

Who is or was your mentor?
My fantastically supportive colleagues over the years

Does money motivate you?
Not as much as doing something worthwhile

What was the most important event in your working life?
Seeing businesses faced with competition for the first time wake up to the reality of customer choice and then watching them transform their business model

What gadget must you have?
Whatever will keep me in contact - my IT team make sure I have always-on communication

What does leadership mean to you?
Being a role model

Which business person do you most admire?
Anita Roddick

How do you relax?
Spending time with family and friends