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Regulators expected to freeze, then reduce National Grid rates

State regulators have crafted a rate proposal for National Grid that would freeze rates this year and lower them next year -- with large industrial customers such as factories receiving the greatest benefit.

The five-member state Public Service Commission heard testimony Wednesday from its staff on a draft rate proposal, much of which the commission is expected to adopt next Thursday at its monthly meeting.

London-based National Grid, which operates in New York and New England, wants to raise delivery rates for its upstate New York customers by $360 million to get its revenues more in line with its costs.

That plan was structured so that total monthly bills would not increase. But the commission staff recommends a smaller increase -- $109 million -- for the delivery portion.

Any new rate would take effect Feb. 1.

Bills would remain the same this year for both residential and commercial customers, but an overall rate decrease -- nearly 50 percent for some the largest customers -- would start next year.

"This is generally a very good news case," Garry Brown, commission chairman, said Tuesday during a special meeting on the case, filed by National Grid a year ago.

Under the commission's plan, National Grid would delay until next year the collection of roughly $200 million in retirement benefits, storm restoration costs and site remediation costs that customers would have paid this year.

Next year, however, customers will stop paying the so-called competitive transition charges that National Grid has been collecting as part of the deregulation of utilities in the late 1990s. Those charges total more than $500 million a year.

Although these charges constitute a relatively small part of residential customers' bills, they represent a significant portion what large industrial and commercial customers pay. So when they finally are paid off by the end of this year, electricity bills will drop substantially for large customers.

National Grid originally sought to spread out the charges over several years to collect more revenue and keep bills flat. But industrial customers did not like the idea, preferring to pay off the charges entirely this year.

National Grid's reaction to the commission's plan was not clear. Company spokesman Steve Brady said the utility will not comment until after a final decision is made next week.

Because the commission is likely to approve a significantly lower rate increase than the utility says it needs, National Grid is expected to file a new request later this year.

But staff members said the commission could offer National Grid a financial incentive to wait until next year, including allowing its return on equity to rise to 9.3 percent from 9.1 percent, equal to roughly $5 million in additional revenue from ratepayers.

National Grid wants return on equity to exceed 10 percent. Brady, its spokesman, said the utility would consider any incentives, but declined to comment specifically on the plan.

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