We have reviewed the pension costs of the Northern Ireland Electricity Networks Limited (NIEN) for the Utility Regulator (UREGNI).
The regulator oversees Northern Ireland’s electricity network and determines whether certain historic pension costs should be passed onto consumers and that ongoing costs are reasonable.
As part of its regulatory function UREGNI asked the Government Actuary’s Department (GAD) to look at NIEN pensions costs and the RP7 pension cost allowances.
GAD’s assessment
Regulated companies have historically passed on pensions costs to consumers. At this review, the proposal was to refund consumers, which was reflective of the improved funding environment.
GAD reviewed NIEN’s proposal to refund consumers and future pension cost allowances over a 6-year period. The report from GAD (PDF, 1267KB) analysed the principal factors which determine NIEN’s cash pension contributions, and the pension cost allowances requested for RP7.
We checked that the proposal to reimburse consumers was reasonable and that NIEN has behaved in a competitive way.
Many regulators have the power to set the price which is charged to consumers. Where charges are deemed to be excessive, they can restrict the level of pension costs due to be passed on.
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Supporting regulators
GAD undertook benchmarking on defined benefit and defined contribution pension scheme benefits. This work for UREGNI is just one of a number of regulators we support. As a tool, benchmarking against other, similar schemes can help support regulators’ decisions, and GAD’s reviews can explore:
- benefit design
- investment strategy
- funding strategy
- pensions policy
- the context of defined benefit (DB) funding regulation
We benchmarked pension scheme expenses and assumptions underlying the latest DB valuation, considering scheme-specific features, and taking account NIEN’s circumstances and position.
Review conclusion
Actuary Simon Gray led the project and said: “We review the pension costs associated with NIEN’s business plan at the start of each reporting cycle, which is typically every 6 years. Our advice to UREGNI in this report focuses on NIEN’s pension scheme.”
