David Jefferies, chairman of the Grid, said the company would reject the ruling in its formal response, due to be submitted today.
If the ombudsman, Dr Julian Farrand, upholds his original conclusion that the cash was wrongly removed from the fund, a move which is widely expected, then the Grid is certain to take the case to the High Court.The Grid is thought to have examined whether it needs to write off the pounds 44m in its accounts for the year to April as an exceptional charge. Even if Dr Farrand rules against the company in his final judgment, the Grid believes it would not automatically have to make provisions for the cash until the outcome of a court case.Dr Farrand is thought unlikely to make his final judgment for several months, but the case is being closely watched by other privatised electricity companies, which together could be forced to repay a total of almost pounds 1bn. More than 200,000 fund members across the power industry stand to benefit from the ruling, because each of the companies’ funds is also part of the main Electricity Supply Pension Scheme.Yesterday Mr Jefferies made it clear that the Grid’s only option was to fight the ombudsman in the interests of shareholders. He said: “Obviously there’s some way to run on this issue, but we believe there’s been a very fair distribution of benefits to staff and to the company.”Meanwhile, the head of another electricity company, who did not want to be named, expressed concern that the City had still not realised the serious implications of the dispute: “An awful lot of big investors haven’t thought through what this really means It could be important for them. Also some of the companies involved don’t seem to appreciate it.”In his judgment, made before Christmas, Dr Farrand said the Grid had misused a pounds 62.3m surplus in its pension fund, identified after an actuarial valuation in 1992.

The company had allocated 70 per cent of the surplus to itself in order to fund early retirement and redundancy payments, while pension scheme members were paid the rest in enhanced benefits. Dr Farrand argued the rules of the electricity supply scheme specifically blocked such payments to employers.The total surplus cash removed by privatised power companies after the 1992 valuation was some pounds 500m, but it has subsequently emerged that another actuarial valuation was carried out in 1995, where similar surpluses were also identified.. The protracted power struggle at Daimler-Benz came to a head yesterday when Helmut Werner, chairman of Mercedes-Benz, its luxury car and trucks unit, resigned in protest over the reshaping of Germany’s biggest industrial group. Mr Werner had unsuccessfully resisted attempts by Juergen Schrempp, Daimler’s chief executive, to merge Mercedes within the overall structure of the parent company. Mercedes, which accounts for three-quarters of Daimler’s sales and is regarded as the group’s cash-cow, will lose its seven-year independence as a result of the restructuring.
In a statement the company said it was Mr Werner’s “feeling that the new organisational structure of Daimler-Benz did not offer a scope of responsibility commensurate with his industrial experience”.Other positions for Mr Werner within the Daimler-Benz board had been discussed but none satisfied his expectations, the statement said.

Last night it remained unclear when Mr Werner’s resignation would take effect. In accordance with German corporate practice no mention of Mr Werner’s pay-off was made either.Mr Werner was reported to be the only board member to vote against the restructuring plan, though Daimler insisted he had offered his “full support and agreement to the new structure” proposed by the parent company’s board.Analysts broadly welcomed the move. “There wasn’t room for Werner and Schrempp in the one company. Schrempp had to get clear and undisputed control,” said Peter Schmidt of Automotive Industry Data.

“Werner is a very capable guy but he ran Mercedes as though it was his own company and an autonomous group and this just is not the case.”Mr Werner’s departure, the latest in a series of top-level management changes at Daimler, draws a line under the German industrial conglomerate’s ill-fated late-1980s attempt to diversify away from its core car business and build a national defence and aerospace champion on the back of Mercedes’ commercial success.Daimler has been on the road to recovery since reporting a massive DM5.7bn (pounds 2.13bn) loss in 1995 after massive provisions were taken at its DASA defence and aerospace division, which is part of the European Airbus consortium.Mr Schrempp, who took over from Edzard Reuter two years ago, has cut back unprofitable businesses and exited from Fokker to help Daimler return to profit.. The senior official from the electricity watchdog, Offer, charged with implementing the move to full domestic competition in 1998, yesterday hit back at legal moves by the industry to block the planned timetable. Tony Boorman, Offer’s director of supply competition, told a conference of industry executives that the six-month timetable, which would see all 23 million customers able to shop around for electricity by September 1998, was tight but fully achievable.
Commenting on the private protests by some of the regional power suppliers at the speed of the move to competition, he said: “Certainly it is a very challenging programme … but I don’t think on the other hand we should over-egg this pudding.”It is a change which should come as no surprise to anyone as it was there for all to see in 1989 when the industry was privatised.”He also vented his frustration at the legal challenge, which was made public in a leaked letter from the law firm Herbert Smith, which is acting for the 12 regional electricity companies (RECs) and two Scottish power producers.He told the gathering: “It’s a rather tedious aspect of the industry that members tend to leak things.”There’s a natural reaction to overstate rather than understate the problem.”The letter, dated 19 November, said it would be unlawful for the regulator, Professor Steven Littlechild, to proceed with competition if the system had not been fully tested by April 1998.Professor Littlechild has turned down industry requests that the process be phased in over 18 months, instead setting the six-month timetable towards full competition, a transition which companies have estimated will cost between pounds 500m and pounds 1bn.Mr Boorman said he would be meeting with Herbert Smith in a few days’ time to try to resolve the objections, but there was nothing in the letter which was of such concern that it could not be sorted out.In particular, he insisted there was no serious difficulty over concerns that suppliers operating outside their own franchise area would be unable to recover unpaid bills..