Proposals by Ofgem to reduce pension costs are "inconsistent with government policy and guaranteed to cause industrial unrest if pursued", warns the union for 21,000 energy professionals, Prospect.

Ofgem's latest consultation reportedly recommends that companies split pension costs into three categories: liabilities for past pension provision; the ongoing costs of defined benefit (DB) schemes; and the cost of servicing a defined contribution (DC) scheme.

"We hear Ofgem's latest consultation on the future approach to pension funding in the regulated network businesses displays an attitude that is anti-defined benefit pension schemes," said deputy general secretary at Prospect, Mike Clancy.

"Yet when Ofgem commissioned the Government Actuary's Department to assess how the network's businesses mange their DB schemes, GAD concluded there were no issues of concern to consumers. Moreover these schemes are underpinned by legal guarantees which frame the pension obligations of the companies concerned. There is no good reason for Ofgem to change the pension cost pass-through principles which have been well established in previous price control reviews."

Clancy accused Ofgem of mimicking the pressures that are driving scheme closures elsewhere in the private sector, and said the approach is based on "equality of misery". "The unions have won and defended the legal protections supporting these pension schemes and fought off an earlier threat from Ofgem last autumn. We will continue to prevent Ofgem from applying pressure to companies to consider closing their defined benefit schemes to existing contributors. Ofgem should leave pensions alone and focus on how its price regime impacts on health and safety, the skills shortage and the need to modernise the ageing energy infrastructure to meet the challenges of climate change."

An Ofgem spokesperson told Pensions Age: "Prospect's interpretation of Ofgem's attitude is premature and misleading. We have not made any decisions. Our priority is customers. Our aim is to ensure companies have incentives to manage the rising costs of defined benefit pension schemes."

Prospect's full response, available here, says that Ofgem is interfering out of a 'misguided sense' that companies are not running the pension schemes in an efficient manner. The matter will be raised by Prospect and the industry unions with Energy Minister Ed Miliband at this week's Trades Union Congress (TUC) Congress in Liverpool, and Prospect will also meet with Ofgem chief executive Alistair Buchanan.

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