The row over the €1.1 billion pension deficit at the ESB has worsened with unions rejecting proposals aimed at addressing the problem that would involve both employees and the company increasing their contributions.

The company's joint industrial council recently recommended that contributions to the company's pension fund should increase by 6.5 per cent of salary. The proposals also included provision for a lump sum payment to staff of €1,500 a year for the next four years in exchange for change. The lump sum proposal was designed to sidestep superannuated increases that would simply worsen the deficit.

Based on an actuarial valuation this deficit stands at €511 million, but under FRS 17 accounting rules, the net liability is €1.1 billion.

The ESB's joint industrial council, which includes management and union representatives, had hoped to address the pension problem by getting the company to pay an additional 4.5 per cent of staff salaries, with staff paying an additional 2 per cent. These changes were meant to apply from January 1st.

The package also left the door open for further increases in pay. The recommendation - from the industrial council - said discussions should also take place at local level concerning change. It was possible lump sum arrangements might have emerged from these talks.

The services of the industrial council are likely to remain available to the two sides over the next few months. There is little sign at this stage of industrial relations problems over pensions, but the longer the issue remains unresolved, the greater the danger of industrial strife. Several union representatives recommended a so-called "cooling off" period until the new year on the pensions issue.

The latest proposals were rejected in a ballot by all the ESB unions, with the Technical Engineering and Electrical Union (TEEU) voting by 95 per cent against the proposals.

The cohesive response of the different unions has surprised some company observers. Previously, the unions had different positions on how to address the pension liability. The latest vote suggests there is now a more united front.

The company itself said the votes of individual unions was not its concern. But a spokesman said the company remained available for talks on pensions and related issues.

At present the total salary bill for staff at the company comes to €561 million, excluding expenses. Based on this figure the average salary per employee of ESB works out at over €60,000 a year.

Some trade unionists originally lobbied for an increased shareholding at the company, but this idea is not being actively pursued at present.

The Minister for Communications, Marine and Natural Resources Noel Dempsey has asked consultants Deloitte to present an interim report shortly.

This is expected to recommend that some ESB stations be sold off or leased out.