When Kenneth D. Daly stepped into the job as president of National Grid's New York operations in April, the Syracuse-based utility was under fire.
Just three months earlier, the state Public Service Commission approved a $113 million rate increase for the company, which was less than a third of the $360 million hike in electric rates it had sought.
In response, the company said it would cut roughly one of every five management and administrative employees across its U.S. operations -- 1,200 positions in all -- under a cost-cutting program.
And all the while, the company was facing withering criticism for questionable expenses that ratepayers were being asked to cover, ranging from shipping an executive's private wine collection from Britain to paying private school tuition.
Daly discussed National Grid's restructuring in New York and its outlook for the future.
>Q: How has National Grid's recent restructuring impacted operations in Western New York?
A: The restructuring really had two main purposes. One was to reposition the way that we serve the customers. To become more local.
It's almost back to the future. There's a lot of benefits to being a global company. We can do a lot of things other utilities probably can not, in terms of investment, in terms of sharing technology. But we really wanted to make sure we had that local feel. A big part of it -- my role, making me dedicated to New York, and my team's role -- is to reconnect with the local communities. That part has gone flawlessly and has been well-received.
The second part is getting a cost structure that we believe our customers can afford. As part of the restructuring, we have a target of reducing $200 million in costs throughout our U.S. business. Roughly a quarter of that would be for the upstate portion. The goal is, by the end of this year, to achieve that.
Q: What's been the impact in Western New York?
A: The things we've done previously, we'll do more than ever. Working with the community. Supporting local community groups. Supporting charitable organizations. We'll look to do more of that.
The investment we'll make -- the amount of money we'll put in our gas and electric systems -- will be as much as ever or more.
The impact has been on restructuring. We had a lot of vacancies, so we didn't fill those roles, and we did give a lot of employees the opportunity to leave the company on their own terms. By doing that, it really minimized the number of employees who left the company involuntarily.
In terms of employees in Western New York, it was relatively small. The job reductions here were all management, and there was not a large management structure here to start with.
Q: The company has said it needs to invest in infrastructure. But how will it handle the Public Service Commission granting much less of a rate hike than was sought?
A: We committed, four years ago, at the time of the Keyspan merger, that we would spend, over the ensuing five years, $1.5 billion upstate. That was double what we had spent previously and more than double what was in our rate allowance, but we believed, and the commission believed, that was the level of investment required to maintain and improve reliability. We've met the commitment ahead of schedule and we're performing as good, or better, than our peers.
Our plan is to continue to invest at those levels. The challenge is that we ultimately need to get those types of investments funded and pass on those costs to customers. In the last filing, we had a request for a rate increase. It did not exactly go as intended.
What we're doing now is preparing ourselves in the likelihood that we'll refile next year.
Q: In January?
A: We haven't nailed the exact time frame, we're probably looking at the first half of the year.
Q: Why does the upstate electrical system require this level of investment?
A: Upstate is in good company. It's pretty much across the United States. For a lot of different reasons, bill impacts being one of them, it's been very difficult to upgrade and replace old infrastructure. We have, in some cases, a 100-year-old system. We have tried to upgrade that as responsibly and as readily as we can, but to move into 2011-type technology requires a further step-up.
Q: What would new infrastructure do?
A: It will improve reliability, and you're now sizing it for today's usage, for future needs, not what was contemplated 50 or 60 years ago.
Q: There's been a lot of speculation about how committed National Grid is to its U.S. operations and New York, given the low rate of return it's earning here. Can you address that?
A: We're absolutely committed. New York is 60 percent of our U.S. business. It is a critical part of our business. We have 11,000-plus employees in New York. We have more employees in New York than in the whole United Kingdom.
We also think New York is a good place to do business. We had a tough outcome the last time, and that will happen. But if you look at the framework for doing business with the New York regulator, with the new governor, with the communities we support, we believe it's the type of business the company and its customers can thrive in. There's no plans whatsoever to exit New York at this time.
>Q: Overall, talk a little bit about what you've seen in your first six months in the job.
A: We learned a long time ago there are two things that are important to our customers. It's the reliability of the power we provide and it's the cost to those customers for that power. I think we've made good progress on both of those.
For the first six months, it's very much been about re-establishing our relationships, credibility and trust with what we consider our key stakeholders, our customers, our regulator, the government officials and local elected officials, the media and then employees. I've spent most of my time with those stakeholder groups.
What we're hearing from them is that they're seeing a difference. They feel like we're more local. They feel like we're more in tune with the customers' needs.