February 25, 2010
February 23, 2010
Note of meeting between GPC and ESB – FEB 2010
ESB was represented by Mr. Tom McMahon and Ms. Marie Collins
Tom McMahon briefed us on where talks between the Group of Unions and the Company were at. He said that the issues were not just the pension fund, but also the parlous state of finances for the company. The ESB has already lost 500,000 customers and are losing another 5000 a week, with the forecast of a total of 700,000 by September. When the number of lost customers reaches a certain level the handcuffs will be removed by the government. He told the unions that the cost base of the company was way out of line, including the matter of pay. The management had taken a 10% cut and the staff were being asked for a 5% cut, and the unions had said no to that request. They also objected to this being a new factor introduced to the talks, and after a debate of two days talks were suspended. All parties are very far apart. He had made it clear to the unions that whatever is done, there will be an effect on the finances of both the company and the fund. He did say that the area they were looking at for pay cuts was in the area of non-superannuable pay. He had also emphasised that no current staff member was looking at 50% of final salary as pension, instead it would be 50% of career pay levels. It will also be necessary to de-risk the scheme, e.g., many pensioners had got a promotion within five years of retiring, and this had greatly increased the pensions.
Billy Kelly asked what percentage of domestic customers had been lost and was told it was approximately 30%. He also asked what was the level when the cuffs would be taken off and Tom said that the company had not been told, even though it is in regular contact with government departments. Carl O’ Sullivan asked what state was the deficit at this point in time, and Marie Collins said it was now about €1.7 billion. Tom then warned that it was unwise to factor in any advance in the market and this approach had been strongly backed by the Pensions Board. Eamon Flavin said that he presumed there was no quick fix and this was confirmed by the ESB representatives. He also said it was unfortunate that the Board was mixing the pension fund and the company problems, particularly as the Board had introduced the VSS scheme, which had not been requested by staff. Tom replied that the company would play its part in the pension fund solution, but everyone else would also have to play a part. He emphasised once more that pensioners will not get any cut in the current pensions. The company was looking at areas such as expenses, purchasing etc. for cuts in the cost base. Seamus O’Donohoe pointed out that the company had given between a half and three quarters of €1 billion to the government in dividends, and he also pointed out that for over 80 years the company had operated on a breakeven policy, so why could not these dividends have been used to fix the pension fund?. Tom replied that he could understand why the government was asking for dividends in the current economic crisis. Jerry Corcoran said that the government had picked their people for the board and it is they who had agreed the dividends.
Eamon said the part of the trouble is the way the company had been managed. The biggest customer area was the industrial side and we were competing well there, and we should be able to compete on the domestic side as well once the cuffs were taken off. He could understand the loss in the pension fund due to the value of stocks declining a few years ago, but they were starting to climb again. Marie said that a huge change had taken place over the last two years. If the pension fund were closed right now there will be nothing left to cover payment of pensions to the current staff. Billy asked where the company was with the talks and Tom replied that they both accept that doing nothing is not an option. Marie also pointed out that the Trustees needed to submit a funding plan to the Pensions Board by the end of the year, and if they are forced to take action now that action may not be very pleasant.
Tom then said that he was working on the website and was prepared to talk about this with the pensioners with the help of an outside person. Eamon asked was it not best to use Electrical Mail for communications, as many pensioners were not on the Internet and Tom replied that this would all be taken into consideration. Billy asked if the company had ever quantified the cost of their proposed solution. Tom replied that they had not, but the deficit would have to be addressed and risk taken out of the scheme as well. The company had hired an outside actuary company called LCP and his brief was to sit in on the negotiations and work for both sides. He was a very down-to-earth person and was taking a neutral attitude. Billy replied that the LCP website shows that it is mostly a management support company and he doubted its neutrality. Carl questioned the longevity figure of 87 years average, while the CSO is quoting 83 years. He said that there was up to half a billion deficit in this factor. Marie replied that there were many other factors involved in the deficit. Dan Hickey asked if there was a time limit on the fix and Tom replied that it would have to be done soon and agreed with the Trustees. Seamus asked about the Governance Structure Review and reminded the board representatives that we had requested a meeting with the people doing the review. In that respect he asked for a copy of the terms of reference on which they were operating. Tom replied that he would have to ask Kieran Sweeney about this and would get back to us.
The meeting with the board representatives then closed.
NOTE OF MEETING BETWEEN SEAMUS O’DONOHOE AND UNITE FEB. 2010
The Joint meeting with ESB had ended abruptly when the ESB tried to link pay cuts talks with pension talks. The unions had been willing to forego some bonuses and this would have given about €75 million per annum to the pension fund. However the ESB are also looking for a two-year pay freeze from the staff, with no promotions or increments paid.
The Group have accepted that the talks must take account of de-risking the fund as well as eliminating the 1.7 billion deficit, and this meant that it would take about €2.8 million to fix the matter entirely. The Group had been moving towards agreeing a major contribution towards this deficit. They had told the company that, in accordance with the usual ratio of a fix (2.1:1) the company should find the balance. They were also wanting the ESB to make a cash injection.
The Group had sought legal advice about the pension fund Rules and changes in the pension fund. This advice was very definite that the Rules of the fund were paramount, and that there was no point in pursuing the legal road of legitimate expectations. The Group had hoped to fix the fund without changing the Rules, but now accept that they will have to be changed.
After the Budget reductions in medical benefits the ESB has followed suit. This means that it will only refund the full cost of one dental and one eyesight examination per year to staff not eligible to claim under Social Welfare. Nothing else will be paid out by ESB.
See details under ‘Health’ on this site