Fixing Nova Scotia Power Pensions

July 30, 2012

June 28, 2012

Fixing NSP pension shortfall not up to ratepayers, critics say

Higher contributions and dipping into profits are among options Nova Scotia Power should look at to make up a shortfall in its employees’ pension plan before digging into ratepayers’ pockets, critics said Wednesday.

The utility said it needs an extra $26 million next year because of the plan’s $185-million shortfall, and that’s part of the reason it’s seeking a three per cent rate hike next year.

Bill Tufts, a frequent commentator on pension issues based in Hamilton, Ont., said the company could look to employees for a greater contribution.

“It’s unfair to ask taxpayers, ratepayers, to continually dig into their pockets to fund these pension plans. Most Canadians will not have anything near what (these) pensions will be.”

Tufts, author of Pension Ponzi, a book about the expense of public-sector pensions, said it’s simply time for the public sector and regulated monopolies to move away from defined-benefit plans like the one Nova Scotia Power’s employees have.

Such plans promise a certain level of pension benefit. Most plans suffered deep losses after the 2008 market meltdown and are still a long way from full recovery.

Defined-contribution plans, in which contributions but not benefits are guaranteed, are more sustainable, Tufts said.

“Not only is it going to help keep the rates down long term in the province of Nova Scotia, helping businesses stay more competitive, but it’s going to prevent any long-term problems from recurring the way they do.”

Nova Scotia Power has tried to move to a defined-contribution plan in its attempts to manage pension costs over the last decade, said information filed with the provincial Utility and Review Board.

Nova Scotia Power introduced a defined-contribution option in 2001. Changes to the pension plan that affect union employees are part of collective bargaining, and the company said the International Brotherhood of Electrical Workers hasn’t allowed members to take the defined-contribution option.

After bargaining with the union, there were changes in 2004 to the retirement age, bridge benefits and indexation to reduce benefit costs.

The company said if the union did agree to benefit or contribution changes now, it would want other concessions that would likely offset savings from the pension changes.

Nova Scotia Power spokesman David Rodenhiser wouldn’t comment on pension issues Wednesday, pointing instead to extensive information filed with the board and saying the company would talk about the pension plan at the hearing.

The two sides have been in negotiations for a new collective agreement for three months.

Consumer advocate John Merrick said part of the rate hearing scheduled for September will address possible options for the pension shortfall other than going to ratepayers.

Merrick said he will oppose that part of the utility’s application.

“Why should Nova Scotia Power’s employees have the benefit of a more luxurious plan than most other employee groups, at least if the utility intends to pass on costs to ratepayers? Now if the utility wants to pick up that cost themselves, so be it.”

Merrick said he expects the pension issue will be a hot hearing topic.

Liberal Leader Stephen McNeil said the utility could look to profits as a source of funding for the shortfall, and repeated his past calls for a performance-value audit of the company and breaking up its monopoly.

Having to compete for business would make it less likely the utility would ask customers to fund the shortfall, McNeil said.

He said he didn’t have enough details about the pension plan to suggest whether contributions should be increased or benefits reduced.

The Liberals will argue at the September hearing that no increase should be granted, whatever the utility’s reasoning is, McNeil said.

“We’ve said all along this company should have a performance-value audit done of it, and that has not happened.”

Progressive Conservative Leader Jamie Baillie also said the company needs to look inward to deal with the pension issue, just as other companies do.

“The fact they have a captive customer audience does not mean they get to just pass the problem on,” Baillie said.

“They want ratepayers to bail out their pension plan when the majority of ratepayers don’t have a pension plan at all. It’s not fair.”

The Tories will oppose the pension bailout at the hearing, he said.

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