For Immediate Release - September 15, 2010

AG Coakley Seeks to Reject National Grid Rate Hike

Continues Calls for Full Audit of National Grid Expenses Which May Lead to Further Cost Reductions

BOSTON - Today, Attorney General Martha Coakley's Office will request that the Department of Public Utilities (DPU) reject National Grid's $104 million rate hike request for its three local gas distribution subsidiaries. National Grid's request would be the largest gas distribution rate increase in Massachusetts history if approved by the DPU in full.

These cuts are in addition to the inappropriate employee reimbursement costs that the Attorney General identified in a filing made with the DPU in August. In response to the Attorney General's inquiry into these employee reimbursement expenses, National Grid has agreed to remove approximately $800,000 in inappropriate expenses from its cost of service, such as a special shipment of a National Grid executive's wine collection from Great Britain to the United States, attendance by executives to the presidential inauguration and other political activities, and tuition to send children of a National Grid executive to an exclusive British private school.

"National Grid has removed many of the inappropriate expenses that we uncovered in our review, but those costs only scratch the surface," AG Coakley said. "We believe that National Grid has attempted to pass on millions in unnecessary costs to Massachusetts consumers and businesses. We also continue to ask for a complete audit of National Grid's expenditures which may ultimately lead to further reductions for consumers."

In addition to potentially uncovering more inappropriate employee reimbursements, the Attorney General believes that a full audit may reveal at least $100 million in costs that should have been allocated to National Grid's New York, New Hampshire, and Rhode Island subsidiaries, rather than to Massachusetts customers.

The Attorney General's Office will also request regulators reject National Grid's requested increases. Specifically, the Attorney General's Office requested that the DPU deny the entirety of National Grid's request to increase rates to its Boston Gas Company subsidiary's customers by $75 million, because National Grid is attempting to break a ten-year rate plan approved by the DPU in 2003. Breaking that plan early would take away $350 million in financial benefits that were supposed to have accrued to customers, and instead would cost them an average of $580 per customer between now and 2013.

The Attorney General's Office is also asking the DPU to reject the requested $3 million rate hike to customers of Essex Gas Company and over $26 million to customers of Colonial Gas Company.

The Attorney General's Office also argues that National Grid's return to shareholders should be reduced to 9 percent from 11.3 percent as proposed by the company in its filing to bring it more in line with comparable gas distribution companies.

In its filing, the Attorney General's Office also criticized National Grid's pattern of deferring maintenance until a rate case in order to justify a large rate increase. Further, the Attorney General's Office requested that the DPU reject an accelerated mechanism for recovering the costs of pipe replacement as unnecessary and unwarranted considering the company's past pattern of investment.

"Instead of upgrading and maintaining its pipelines consistent with its obligation to provide safe and reliable gas distribution service, over the past decade National Grid pocketed for its shareholders the revenues that were supposed to have been spent on these upgrades," said AG Coakley. "It is unfair for National Grid now to ask ratepayers to bear the full burden on an accelerated basis for those needed upgrades under terms that are very favorable to the company's shareholders."

National Grid USA operates three gas distribution subsidiaries in Massachusetts: Boston Gas Company, Essex Gas Company, and Colonial Gas 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. National Grid provides gas distribution service to over 850,000 residential, commercial, and industrial customers in Massachusetts.

A link to a list of Massachusetts communities where National Grid provides gas services to is available on our <strong>website</strong> pdf format of National_Grid_Gas_Cities_and_Towns_List.pdf .

The DPU must issue a ruling on the rate hike request by November 1, 2010.

The Attorney General's Office of Ratepayer Advocacy serves as the utility ratepayer advocate and is authorized to intervene in administrative and 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.

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