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National Grid to cut 1,200 jobs in U.S. ; Move to eliminate non-union workers partly tied to curb in rate hike by PSC

National Grid plans to eliminate 1,200 non-union jobs -- roughly one of every five management and administrative employees across its U.S. operations -- under a cost-cutting program that company executives said Monday was partly in response to state regulators last month granting the utility a rate increase that was two-thirds less than it wanted.

It was not immediately clear how the job cuts, which will slash National Grid's overall U.S. work force by about 7 percent, will affect the company's operations in Western New York, where it has about 900 employees overall. That Western New York work force includes about 140 non-union positions, which are subject to the cost-cutting program that is expected to save the company about $200 million a year.

"It's way too soon to say" how many Western New York jobs may be affected, said Stephen F. Brady, a National Grid spokesman in Buffalo.

But Tom King, the president of National Grid's U.S. operations, said during a conference call that the company's New York operations, especially those upstate, stand out for their "marked underperformance."

"It can really be centered in New York and on Niagara Mohawk," King said, referring to the old name of National Grid's upstate utility business.

King said the State Public Service Commission's ruling earlier this month that granted the utility a $112.7 million rate increase, less than a third of the $360 million the company had initially requested, is "far short" of what the company needs to recover its costs and investment in its upstate service territory.

"If it was $360 million, I think you'd find a significantly smaller impact on the announcement," King said.

But that shortfall does not necessarily mean the company's workers in upstate New York will absorb a greater share of the cuts, because many of the non-union jobs are linked to National Grid operations in New England, as well as New York.

"We definitely have the largest cost gap at Niagara Mohawk, but it doesn't mean there's going to be a disproportional impact," King said.

King said the company will continue to make investments needed to ensure that the electric system upstate is reliable and safe. However, the company will be less inclined to make broader, more extensive investments that its executives believe are needed to upgrade the aging upstate electricity grid, he said.

"The real objective is to live within the means that we're funded," King said. "We're going to be very cautious about overinvesting until we get a better handle on cost recovery."

James Denn, a State Public Service Commission spokesman, said regulators do not dictate the size of a utility's work force, although companies like National Grid are required to meet state-imposted safety and reliability standards.

National Grid executives said the restructuring will make the company more locally focused and help increase the efficiency and productivity of its U.S. business. It also will allow National Grid to more closely match expenses and revenues within an individual state.

"We've got a clear indication across the board in the U.S. of where regulators are willing to fund the business" through recent rate cases, King said.

"The real objective is to live within the means that we're funded," said King, who will become the executive director and president of the restructured U.S. business. "We're also reacting to what regulators have told us about the level they clearly want to fund."

National Grid said the new organizational structure will take effect in April. The job cuts will take place during the next several months and are expected to be completed by the end of summer. No early retirement incentives will be offered as part of the job-cutting program, King said.

The job cuts are part of a broad restructuring that will alter the way its U.S. businesses are organized to a state-oriented structure, rather than one that is based on National Grid's main business lines, from electricity distribution and generation to natural gas distribution and electricity and natural gas transmission.

Ken Daly, National Grid's global finance controller, was named president of the company's restructured New York business. He previously held senior positions in the company's finance, human resources and customer service operations in New York.

The company's U.S. shares rose $1.05, or 2.4 percent, to $45.05, Monday.


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