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New York approves 'dramatically' reduced gas, power rate plan for National Grid

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New York approves 'dramatically' reduced gas, power rate plan for National Grid

New York regulators adopted a joint proposal by National Grid USA, the state and 17 stakeholders that reflects much lower rate hikes for electric and natural gas services during the first year of a three-year plan than originally sought by the utility.

The New York State Public Service Commission on March 15 approved what they claimed is a "dramatically" lowered rate plan that cuts into National Grid's originally requested hike of $407 million by $351 million, or 86%, during the first year of the plan. The new rates take effect April 1 for subsidiary Niagara Mohawk Power Corp. and were hashed out after months of negotiations that followed National Grid's April 2017 filing of the details of the initial year of the plan.

"After more than a decade of bill stability, we are pleased that our discussions with parties representing our customers and other key stakeholders have resulted in an agreement that will phase in delivery price increases," said Ken Daly, National Grid’s New York president, in a news release. "This plan allows us to invest $2.5 billion over the next three years in our energy infrastructure, while reducing the short-term impact on bills and providing customers a level of delivery price assurance."

Instead of National Grid's original request to boost electric rates approximately $326 million (13%) and natural gas rates roughly $81 million (14%) during the first year, the approved plan will limit revenue hikes during that first year to approximately $43 million (1.7%) for electric customers and approximately $13 million (2.4%) for natural gas customers. Thereafter, electric rates will increase by roughly $89 million (3.4%) the second year and roughly $90 million (3.4%) the third year. Natural gas revenues will increase by approximately $13 million (2.4%) the first year, followed by almost $21 million (3.5%) the second year and $21.5 million (3.5%) the third year.

According to the utility, its new delivery prices reflect more than $75 million of savings due to recent reductions in federal corporate income tax rates. Under the utility's new rate plan for 2018 through 2021, a typical residential customer using 600 kWh of electricity per month would see its total monthly bill increase by $2.22 (2.9%) in the first year starting in April 2018. During the second year, the typical residential customer will see an electric rate hike of $3.03 (3.8%) and then $3.25 (3.9%) in the third year.

In comparison, a typical residential customer using 77 therms of gas per month would see a total monthly bill increase of $1.20 (1.7%) in the first year followed by a second-year increase of $3.10 (4.5%) and a third-year increase of $3.18 (4.4%).

"We are pleased to adopt a progressive rate plan that is much improved over what the company initially proposed," said Commission Chair John Rhodes in a news release.

Rhodes said that the broadly-supported rate plan notably "includes a nation-leading affordability policy that substantially lowers bills for most low-income customers," and advances the state's climate agenda and clean energy transition by expanding energy efficiency while funding nonwire alternatives and other initiatives for smarter investments.

The plan also establishes a low-income discount program that seeks to limit energy costs to no more than 6% of a household's income for approximately 2.3 million households and is expected to reduce energy bills for most low-income households by up to 55%.

Under the plan, $2.5 billion will be used to reinforce and modernize National Grid's electric transmission and distribution systems, including investments to help the grid withstand the ever-increasing frequency and severity of storms. The regulators also directed the utility to seek out nonwires alternative projects that are cheaper than traditional infrastructure investments.

In addition, the rate proposal will increase National Grid's energy efficiency targets by 40% while boosting funds for its energy efficiency program by 20%.

As for gas, the commission signed-off on National Grid using shareholder funds to enhance gas safety through the distribution of residential methane detectors, initiatives aimed at pipeline damage prevention, and enhanced first responder training programs. The company will also invest about $138 million to replace 150 miles of leak-prone pipe.

In addition, the PSC agreed to update existing metrics based on recent performance, which is in line with metrics of other investor-owned utilities in New York, including areas of performance measured for leak-prone pipe removals, leak management, damage prevention, emergency response and gas safety regulations.