Consumers facing £50m bill for NIE’s pensions shortfall
Northern Ireland's beleaguered consumers may have to plug a gap in NIE's pension fund of up to £80m, it has emerged.
That sum includes around £30m that customers have already been paying since 2007 through their utility bills.
And now the company has asked the Utility Regulator to allow it to recoup a further £50m in the same way from next year.
The figures emerged during a Stormont committee meeting yesterday, when NIE officials admitted there was no ‘Plan B' to cope with the pension black hole should the Regulator say ‘no’.
It also emerged that some of the deficit could have been avoided when monetary difficulties in the pension fund first became apparent in 1992 – almost 20 years ago.
In addition, members heard of a proposal to pass on to consumers the cost of a network upgrade worth £600m – which is double current expenditure.
NIE put the £50m deficit down to the financial crisis which began in 2008 and has caused the value of stocks and shares to fall.
The committee was told that consumers’ bills would see an annual increase of less than 1% if the company was permitted to recoup the sum.
That means a hike of around £6 per year for the average householder whose bill is around £582, according to the Northern Ireland Consumer Council.
Green Party member Stephen Agnew (below) asked if NIE was going to see a reduction in profits at the same time as consumers were being billed more.
Referring to his firm’s business model, Managing Director Barry McCracken said there was “absolutely no room for NIE to decide that some of those shareholder value profits should go to customers”.
Sinn Fein committee member Sue Ramsey asked the managing director about NIE’s ‘Plan B’ if “the Regulator says ‘no’”.
Mr McCracken replied: “Well, we’ll have a problem if the Regulator says ‘no’, that’s for sure.”
Regulator Chief Executive Shane Lynch — who will be investigating whether NIE has dealt with investments prudently – told the committee that electricity consumers are currently paying £5-6m a year for the pension deficit in the 2007-2012 period.
SDLP committee chairman Alban Maginness said he was “taken aback” by the revelation – which could be viewed as having set a precedent.
NIE ended its final pension scheme for new recruits from 1998, six years after it had been privatised.
UUP committee member Mike Nesbitt asked if some of the deficit over that six year period – for which the consumer is now paying – could be classified as “avoidable”.
Mr Lynch replied: “If NIE recruited new recruits in that period and offered them final salary pension schemes that was an avoidable cost.”
NIE deputy Managing Director Peter Ewing said the deficit had reduced in recent times.
The pension rate paid to pensioners has also been changed to a different index, reducing the cost of the scheme.
The shortfall will affect around 6,000 pensioners and also 1,000 others.
NIE was bought by the Republic’s Electricity Supply Board (ESB) in January 2010. Since then it has reduced its pension shortfall by almost £100m – but a £50m black hole remains. The company wants to recoup these costs from consumers in its next five-year spending plan which starts in 2012. This request is currently being considered by the Utility Regulator. NIE owns Northern Ireland’s transmission and distribution network, which includes the poles and wires. Its former sister company NIE Energy is Northern Ireland’s largest electricity supplier but the two businesses are separate.