State regulators on Thursday approved a new rate plan for National Grid that will raise the average residential customer's monthly bill by about 11 percent over three years.
The agreement approved by the state Public Service Commission spreads out the impact of the higher rates, adding $2.22 a month to the typical residential customer's bill immediately and by a total of about $8.50 a month by the time the third year of the deal takes effect, probably in the spring of 2020.
John B. Rhodes, the PSC's chairman, said the new rate plan is "much improved" over National Grid's initial proposal that would have increased delivery charges by 13 percent in a single year. Instead, the rate plan increases delivery charges by 2.9 percent in the first year, and then by 3.9 percent during the second and third years of the agreement.
By the time the agreement reaches its final year, the typical residential customer will be paying about $102 annually – or $8.50 a month – more for electricity than they do today.
The rate settlement matches the terms of an proposed agreement that was reached in January between National Grid, the commission's staff and 17 environmental groups, business customers and upstate municipalities, including Tesla Inc. and the City of Buffalo.
The deal would increase the monthly bill of a typical residential customer using 600 kilowatt-hours of electricity by $2.22, or 2.9 percent, in the first year, followed by an increase of $3.03 in year two and $3.25 in the final year of the agreement, beginning in 2020. The increases in the second and third years would increase bills by an average of 3.9 percent annually.
The agreement would increase a typical residential customer's monthly bill from around $76.40 today to around $84.93 after the third year of the rate increase takes effect in the spring of 2020, according to National Grid estimates, which could change if power prices rise or fall.
The agreement only applies to the delivery rates that National Grid charges its customers to provide electricity service to their homes and businesses. Those delivery rates will rise by more than 16 percent – 4.7 percent in the first year and by 5.7 percent in year two and 5.8 percent in the third year. Customer bills also include cost of the electricity consumed, but National Grid passes on those energy costs to consumers without markup.
The agreement includes about $76 million in savings that National Grid expects to receive because of the new federal tax law, which reduces the corporate tax rate from 35 percent to 21 percent.
National Grid executives have said the rate agreement will allow the company to invest another $2.5 billion over the next three years to upgrade its electricity and natural gas delivery networks, including improvements that would make it easier to connect renewable energy generation projects, such as solar and wind energy, to the power grid.
The agreement also continues National Grid's new Energy Affordability Programs, which will cause overall bills for many low-income customers to fall during the first year of the deal. The program, which is expected to involve 160,000 low-income customers, could reduce their power bills by as much as 55 percent by limiting energy costs to no more than 6 percent of their household income.
National Grid’s electricity delivery prices – the portion of the bill controlled by the utility – are lower than they were in 2004 when adjusted for inflation, the company said.
National Grid has about 580,000 customers in its Western Division, which spans the 10 westernmost counties in the state.