UK - Power firms will have to increase bills to cover their pension scheme deficits, utility watchdog Ofgem (Office of Gas and Electricity Markets) warns.
Its consultation paper – Developing Monopoly Price Controls: Initial Conclusions – states average bills will rise by £2-3 to plug the shortfall.
But the regulator said the amount would be reviewed on a case-by-case basis and their pension records compared to other private sector schemes.
Managing director of regulation and financial affairs David Gray said: “Our guidelines aim to set out where costs can be fairly passed on to consumers through price controls and the circumstances where this would not be right.”
He said the paper aimed to improve the incentives for companies to run their businesses more efficiently and invest for the future.
He added: “It is important for companies to have confidence that their efficiently incurred costs can be recovered and for customers to know they are paying no more than is necessary.”
Separately, energy companies’ ratings will be cut unless they are allowed to pass on increased pension costs to customers, Standard & Poor’s has cautioned.
S&P said it would determine the impact on the financial profiles of companies where a full pass-through of pension costs was not allowed by Ofgem.
The ratings agency added: “Higher pension costs alone are unlikely to trigger a rating change, unless a company is facing financial pressure where costs are substantial.”
The British Medical Association (BMA) has warned chancellor Philip Hammond to reform the NHS pension scheme rules or doctors will reduce their working hours.
The lifetime allowance should be scrapped and replaced with a lower annual allowance, last week's Pensions Buzz respondents said.
Action for Children Pension Fund has outsourced its pensions administration to Trafalgar House.