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National Grid seeks $131 million rate hike; Customers' overall bills will actually decrease due to expiration of other surcharges

National Grid is seeking a $131 million hike in its electric rates, but the utility's customers actually would see their bills go down because the proposed increase would be more than offset by the expiration of other surcharges its customers now pay.

The one-year rate plan, which would take effect next April and extend into April 2014, would reduce the overall electric bill for a residential customer using 600 kilowatt-hours of power, by 2.1 percent, or about $1.74 a month. Residential bills dropped by an average of 6 percent under the current rate plan, which took effect in January.

Average bills for a typical small commercial or industrial customer would drop by 3.3 percent, while large commercial and industrial customers would receive a 2 percent decrease in their average bills.

"This is good news for our customers," said Kenneth Daly, National Grid's New York president. "The bottom line is that, when our customers open their bills this year, they're down. And when they open them next year, they'll be down even more beyond that."

The rate proposal covers only the cost of delivering electricity to customers' homes and businesses. Customer bills also include a separate charge for the commodity cost of the electricity they use, but National Grid passes that on to consumers at cost. Because of plunging natural gas prices, electricity commodity costs also have declined.

National Grid's restructuring and cost-cutting program over the last five years also has generated about $50 million in savings that are being passed on to customers, Daly said.

In all, the impact of the increase in National Grid's electric rates would be more than offset by the elimination of about $190 million in past costs that the company currently is collecting from its customers. That surcharge is scheduled to expire at the end of March 2013, just before the new rate proposal would take effect.

"Our goal has been to keep customer bills stable, while also continuing to invest in our energy infrastructure to further improve reliability and expand our support for the economic growth and vitality of the local communities we serve," Daly said.

National Grid's current rate plan, which took effect in January, reduced the average residential electric bill by 6 percent through a similar mix of higher delivery rates offset by a reduction in the surcharges and past costs collected from its customers. Small commercial and industrial bills dropped by 4 percent to 11 percent, while the reduction averaged 13 percent to 23 percent for large commercial and industrial customers.

National Grid's rate plan for 2013-14 must be approved by the state Public Service Commission, which could revise the proposal during a review process that typically takes 11 months. Daly, in testimony filed with the PSC, also said the company would be willing to discuss a two- or three-year rate plan with state regulators.

The rate proposal also would continue National Grid's recent push to upgrade and maintain its electric transmission network across upstate New York -- an aging system that Daly said is badly in need of improvement.

National Grid, which has invested $1.7 billion over the last five years in its electricity delivery system, is proposing to spend another $450 million on upgrades during the 2013-14 rate plan.

"We absolutely must continue to invest in the electric poles, wires and substations that we maintain across upstate New York," he said.

The plan also would increase National Grid's rate of return, which the company said has been insufficient in recent years. Under the proposed rate plan, National Grid hopes to earn a return on equity of up to 10.5 percent. Without a new rate plan, the company estimates that it would earn a 6.8 percent return on equity during the one-year period covered by its proposal.

"National Grid is looking for a return that's fair," Daly said.

The rate plan also would add a bill credit, equal to about $5 a year, for customers who choose to receive their monthly bills electronically. "We're going to give them back the cost of sending those bills out to them," Daly said. "It's obviously good for the environment."