UK - Trade unions have raised concerns over possible pension cuts for energy workers directly linked with Ofgem, following an earlier call for the abolition of the competition authority.

Ofgem, the UK's competition authority for gas and electricity companies, published a consultation in August reviewing the 'Price Control Pension Principles' following a sharp rise in defined benefit (DB) costs and changes in the pension environment.

The aim of the paper, which closed to submissions on 26 September, included assessing whether scheme sponsors have "adequate incentives to mitigate and manage pension costs effectively".

Ofgem claimed since it set the existing principles in 2003 "we have continued to observe a sharp rise in employer contribution rates and deficit repair payments, for which gas and electricity customers are paying higher network charges".

It added it was concerned about the risk of creating the "wrong incentives", leading employers to take a more relaxed stance and trustees to implement an excessively  cautious funding strategy because of a belief Ofgem will allow them to recover additional costs from consumers.

The document also looked at a number of aspects of pension schemes including incentives for schemes to complete a buyout, scheme valuations, deficit recovery periods and administration costs, although it stressed the proposals "will not be intended to direct the trustees of the pension schemes to make particular decisions regarding the funding of those schemes".

However the GMB claimed the proposals would lead to inferior pensions for energy workers, and is now intending to raise its concerns with the organisation face-to-face at a seminar at which Ofgem is scheduled to present an overview of the responses to the consultation.

Gary Smith, national secretary for the GMB, said: "In the current economic crisis, it is madness to threaten pension funds. It is time for Ofgem to re-think these proposals. For them to attack the pensions of the workers in the industry is the last straw for GMB.

"Ofgem needs to get on with protecting the four million consumers who, according to Ofgem yesterday, were ripped off by the energy companies and leave the pensions of the workforce alone," he added.

The union is expected to loudly voice its concerns after it passed a motion at the Trades Union Congress (TUC) meeting in September calling for the body's abolition and claimed the proposals were a "scapegoat" to avoid taking decisive steps over energy prices.

The motion stated: "Congress notes with dismay that Ofgem's proposals include removing statutory protections for pensions implemented when these utilities were privatised in the 1980s. Ofgem's proposals will have a far-reaching impact upon the pension rights of employees, without bringing any substantial benefit to hard-pressed consumers struggling to meet their energy bills.

"Congress categorically refutes any suggestion that the pension schemes of companies in the gas and electricity industries are the cause of soaring energy prices. Congress wholeheartedly condemns this attack by Ofgem, which represents an attempt to scapegoat gas and electricity workers as an alternative to Ofgem taking the decisive steps necessary to help lower energy prices and protect consumers," it added.

However a spokesman for Ofgem said: "The GMB is just wrong. We haven't made any proposals to change workers pensions. All we've done is ask the question whether there are sufficient incentives for companies to manage their pension costs effectively.

"We're just asking questions at the moment and the GMB is wrong to ask us to drop our proposals as we haven't made any. They seem to have misunderstood the document," he added.

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