For Immediate Release - October 15, 2009

Attorney General Martha Coakley Requests Regulators Reject National Grid's $111 Million Rate Hike Proposal and Order Rate Reduction

BOSTON - Attorney General Martha Coakley's Office requested that the Department of Public Utilities (DPU) reject a $111 million rate increase sought by National Grid and instead reduce National Grid's rates by approximately $36.4 million. The Attorney General's Office requested this rate reduction in a brief filed late yesterday with the DPU. The rate reduction is proposed in conjunction with the modifications set out earlier this month in a September 28 brief to the DPU that focused on issues related to National Grid's decoupling proposal and rate plan specifically.

"At a time when many consumers in Massachusetts are experiencing layoffs or are taking home smaller paychecks, National Grid is seeking to improve its own bottom line with a massive rate hike and rate plan that almost exclusively benefits the company and its shareholders," said Attorney General Coakley. "We urge state regulators to put the interests of ratepayers above the Company's shareholders and reject the company's $111 million rate hike. Such an increase is neither warranted nor justified during the best of economic times yet alone when consumers can least afford it."

The Attorney General's Office of Ratepayer Advocacy serves as the utility ratepayer advocate and is authorized to intervene in administrative and/or judicial proceedings on behalf of consumers in connection with any matter involving the rates, charges, prices or tariffs of any electric company doing business in the Commonwealth. Over the past several months, through discovery and 21 days of evidentiary hearings that included presentation of expert witness testimony, Attorney General Coakley's Office has scrutinized National Grid's filing and found many of its rate increase proposals unsupported by the evidence and inconsistent with DPU precedent.

The Attorney General's request includes:

  • Changes to National Grid's debt structure - adding short-term debt and changing the costs of long-term debt more in line with other utilities;
  • elimination of a proposal to recover close to $30 million from ratepayers for costs associated with restoration efforts during the December 2008 ice storm, with a recommendation that these cost be spread out over several years;
  • elimination of a cost recovery mechanism for an inspection and maintenance program for which the utility is already required to do;
  • elimination of non-union salary and benefits cost increases;
  • elimination of certain Company rent and lease expenses;
  • reductions in the company's rate case expense (the cost associated with the filing of its case);
  • elimination of executive incentive compensation;
  • changes to the companies depreciation rates;
  • a reduction in rates to account for likely synergy savings from the National Grid- Keyspan merger completed in 2008; and
  • a downward adjustment of the cost of equity (the return shareholders require for their investment in the company)from 11.6% to 9.5%;

These adjustments combined with others outlined in the Attorney General's briefs filed in this case result in the elimination of the Company's $111 million rate increase and require a downward adjustment to the Company's rates of an additional $36.4 million.

National Grid USA operates two subsidiaries in Massachusetts, Massachusetts Electric Company and Nantucket Electric Company. National Grid USA is wholly owned by National Grid plc., based in London, UK, and is one of the largest investor-owned utilities in the world and the second largest utility in the United States. Massachusetts Electric and Nantucket, together doing business as National Grid, provide electric distribution service to approximately 1.2 million residential, commercial and industrial customers in 168 Massachusetts communities. Nationally, National Grid delivers electricity to approximately 3.3 million customers.

The Department of Public Utilities must render a decision on National Grid's petition on or before November 30, 2009, for rates effective January 1, 2010.