Grid appeals on pension ruling

National Grid yesterday appealed to the High Court against a ruling by the Pensions Ombudsman ordering the company to pay back pounds 46.3m of surplus cash removed from its pension fund.

The move followed a final judgment last month by the Ombudsman, Dr Julian Farrand, which argued the Grid had misused the money, part of a pounds 62.3m surplus identified in 1992. About 30 per cent of the surplus was used to increase pensioners' benefits while 70 per cent was used to improve the pensions element of the Grid's voluntary redundancy scheme.

The Grid also asked the court to postpone payment until the full hearing, expected in the next few months. However, the preliminary application to postpone the settlement could take place before the end of the group's accounting year, which runs to the end of March.

So far the Grid's accountants have argued the company does not need to make a formal charge for the pensions problem from its profits. Instead the amount will be listed in the accounts as a contingent liability. The Grid said if it lost the case it would also have to increase its contributions to the fund by about pounds 600,000 a year.

Last night a Grid spokesman insisted that the company believed it had acted lawfully over the pensions surplus. "We are challenging this on points of law. We will be arguing that the way we allocated the surplus was fair and lawful."

If the Grid loses the case, privatised electricity companies could have to hand back almost pounds 1bn to their pension funds, which had their origin in a single scheme. National Power has already issued its own court proceedings to clarify the argument, while Eastern Electricity has said it could be forced to pay back pounds 75m.