National Grid to File Innovative Electric Rate Proposal with New York Public Service Commission

ALBANY, NY & BUFFALO, NY & SYRACUSE, NY--(BUSINESS WIRE)--National Grid today will submit a comprehensive proposal to establish new electric delivery rates for the former Niagara Mohawk service area in upstate New York for three years while allowing the company to continue its significant investment in the electric transmission and distribution system to meet the growing and changing needs of customers. The plan would have little to no impact on typical customer delivery bills.

“We recognize that these are difficult economic times, so we started with the premise that this proposal would have as little impact on customer bills as possible”

The proposal will be filed today with the New York Public Service Commission (PSC) and, if approved, would take effect January 2011.

National Grid today operates under a rate plan that does not recover ongoing operational costs. In the new proposal, the company will file for recovery of out-of-pocket costs it will incur of more than $390 million per year over current rate levels.

To offset this, the company has proposed to delay the full recovery of previously incurred costs and instead will spread those over an additional three years through the end of 2014, resulting in little or no change in bills for the vast majority of customers. Under the current rate plan, National Grid is eligible to collect most of those deferred costs by the end of 2011.

“We recognize that these are difficult economic times, so we started with the premise that this proposal would have as little impact on customer bills as possible,” said Tom King, president of National Grid in the U.S. “At the same time, it is imperative that National Grid be in a financial position to continue the efforts we’ve made to support and improve our infrastructure for the benefit of customers.

“We believe this proposal will allow us to address the goals of providing safe and reliable service to customers at a reasonable cost, and help them to manage their energy bills and reduce their carbon footprint. At the same time this provides the company the financial stability to continue to invest in our networks and earn adequate returns to attract necessary capital.”

The company’s proposal would allow National Grid timely recovery of current and ongoing operations and maintenance costs, continued funding for infrastructure investment, enhancements to programs for low-income customers and continuation of upstate-specific economic development programs. The filing also includes a decoupling mechanism that will encourage continued expansion of energy efficiency programs for all customers.

King said the company was able to reduce the size of its revenue request through recent austerity measures valued at more than $12 million, and a productivity offset that provides an average $9 million savings per year to customers over the life of the proposal.

Last delivery rate increase in 1995

National Grid is currently operating under a rate agreement that was put in place in 2002 following its merger with Niagara Mohawk. That plan initially lowered electric delivery rates by an average of eight percent, and kept them stable over the subsequent years with periodic adjustments to reflect changes in purchased electricity costs and other items that, by their nature, could not be predicted years in advance. The existing plan is scheduled to expire at the end of 2011.

National Grid’s new proposal, if approved, would replace the final year of the current plan and continue through the end of 2013 for approximately 1.6 million residential, commercial and industrial customers across 24,000 square miles of upstate New York. The company has not had a base electric delivery rate increase since 1995.

“The environment for energy delivery is changing rapidly, as the needs of our customers and the goals of policy makers continue to evolve,” King said. “We need a 21^st century grid to meet the demands of 21^st century customers. This proposal also will allow us to help the state meet the aggressive goals it has established for energy efficiency, energy supply from renewable sources and climate change mitigation.”

Investment in a reliable network

National Grid continues to invest heavily in its physical networks to maintain reliability and service standards. Since 2002, the company has invested more than $1.4 billion in its upstate network, which is approximately $750 million more than was included in the current rate plan.

Like many northeast utilities, parts of National Grid’s network are decades old and are reaching – or have passed – their useful life expectancy. The company’s recent investment has shown positive results as the company has met or exceeded all electric reliability targets in the past two years. King stressed that more work is needed, both to continue to maintain reliability and to meet growing and changing customer needs.

The filing also will propose a revenue decoupling mechanism as required by the PSC. The proposal would benefit customers by changing the way the utility recovers its costs. Decoupling severs the tie between revenues and kilowatt hour sales, thereby removing an obstacle to aggressive utility pursuit of energy efficiency, demand response and distributed generation programs.

Increased support for low-income customers

National Grid will also propose to enhance its support programs for qualifying low-income customers, increasing program funding by approximately $9 million. The company will increase credits to qualifying customers in its LICAP AffordAbility Program and the Low Income Credit Program, and add two positions to its consumer advocacy staff to increase outreach efforts to help customers who are having trouble paying their bills.

In New York, National Grid employs approximately 11,500 workers, including some 5,000 in its upstate electric and gas service areas. Electric service is provided to all or parts of 37 counties across the upstate region. In that area the company has approximately $4.7 billion in assets and pays more than $156 million in property taxes.

National Grid is an international energy delivery company. In the U.S., National Grid delivers electricity to approximately 3.3 million customers in New York, Massachusetts, New Hampshire and Rhode Island, and manages the electricity network on Long Island under an agreement with the Long Island Power Authority (LIPA). It is the largest distributor of natural gas in the northeastern U.S., serving approximately 3.4 million customers in New York, Massachusetts, New Hampshire and Rhode Island. National Grid also owns over 4,000 megawatts of contracted electricity generation that provides power to over one million LIPA customers.