pounds 100m shock for National Power as judge re-opens hearing

National Power could face a bill for more than pounds 100m after a High Court judge decided to reopen a landmark court case over the way electricity companies removed surplus cash from their pension funds.

Mr Justice Robert Walker has taken the almost unprecedented step of convening a further hearing into the case in the High Court, starting today, despite having ruled last month that the use of pension surpluses to help fund redundancy programmes by National Power and National Grid was legal.

His earlier decision, which bitterly disappointed pensioners, overturned a historic judgment by the Pensions' Ombudsman, who ordered the Grid to repay pounds 46m into its pension scheme. The money, which formed part of a pounds 62m surplus identified by actuaries in 1992, was used to pay for more generous early retirement benefits.

National Power would have had to pay back more than pounds 200m into its pension scheme if it had lost the original hearing. It joined the Grid's case in a pre-emptive move to clarify the legislation, after the Ombudsman said the rules of the Electricity Supply Pensions Scheme, the industry- wide umbrella fund, specifically outlawed payments to the employer. The entire industry could have been forced to repay more than pounds 1bn.

The judge agreed to re-open the hearing last week after solicitors representing National Power pensioners discovered what they claimed was a flaw in his original ruling.

Angela Dimsdale-Gill, from solicitors Lovell White Durrant, said the decision to re-open the hearing was virtually unprecedented. "We are having a hearing to explore what we believe is a fundamental flaw in the judgment."

Though solicitors acting for Grid pensioners were watching the developments closely, the company was not directly involved.

The new claim centres on National Power's decision to inject extra cash into the pension scheme in instalments, to pay for its redundancy programme after privatisation. The move, at at time when its scheme was in deficit, enabled the company to spread the cost over several of years. By 1992 it had left National Power owing its pension fund a further pounds 58.7m.

When a pounds 303m surplus was identified in same year, the company used part of the cash to set against these outstanding liabilities. It emerged during the hearing that the scheme's trustees were not consulted on the company's decision to pay by instalments. An elected trustee told the hearing that the trustees were "simply informed" of National Power's decision.

Though Mr Justice Walker found against the Ombudsman in his judgment last month, he highlighted the issue of instalments payments, which he described as an "irregularity". However, he said the issue was overtaken by the discovery of such big surpluses in 1992 and again in 1995.

Lawyers for National Power pensioners will argue in court today that the company did not gain permission from the Inland Revenue when it allocated the surplus to cover its outstanding bill.

Lovell White Durrant said its calculations suggested National Power could have to repay pounds 100m if the judge found in the pensioners' favour.