A typical National Grid residential customer’s monthly electricity bill would drop by nearly 7 percent beginning in April and then rise modestly during each of the following two years under a proposed rate agreement between the utility and the State Public Service Commission’s staff.
After the initial drop in the average monthly bill, a typical residential customer’s estimated bill would rise by a projected 3.3 percent in April 2014 and another 2.1 percent in April 2015, although those average bills still would be 1.5 percent lower at the end of the three-year rate plan than they were at the start, according to PSC documents.
The joint proposal between the utility and the PSC’s staff still must be reviewed by the PSC’s commissioners, who could make changes to the agreement when they make their decision on the case, probably in March. The proposal also is being backed by several other groups representing various ratepayers, including the Multiple Intervenors group that represents big industrial customers, the New York Power Authority and the utility intervention unit of the state Division of Consumer Protection.
“We think it’s a good proposal,” said Stephen F. Brady, a National Grid spokesman. “We’re hopeful for its success.”
The joint proposal allows National Grid to reduce average bills while increasing its electric revenues by about $123 million during the course of the agreement by offsetting the impact of higher rates with 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 latest rate proposal would take effect.
The joint proposal is the result of negotiations among the utility, the PSC’s staff and interested ratepayer groups during the last eight months, following National Grid’s filing last April for a one-year, $131 million hike in its electric rates.
“This is spread over three years, instead of one,” Brady said.
“We believe the outcome will benefit our customers and meet the goals of our original proposal for rate stability, continued system investment and expanded low-income and economic development programs,” said Kenneth Daly, National Grid’s New York president, in a statement.
Under the proposal, a typical National Grid residential electric customer, using 600 kilowatt-hours of electricity a month, would see the monthly bill drop from $82.49 today to $77.05 during the first year of the agreement. The typical bill would then rise by 3.3 percent to $79.57 during the second year and by another 2.1 percent to $81.24 during the final year of the proposed settlement.
Typical bills for small commercial and industrial customers would drop by 6.2 percent to 8.4 percent during the first year and then rise by 1.5 percent to 4.2 percent during the second year and by 1.5 percent to 2.8 percent during the third year. Typical bills for big industrial customers would drop by 1.5 percent to 3.8 percent during the first year and then rise by 1.9 percent to 2.2 percent during the second year, followed by an increase of 0.4 percent to 1 percent in the third year, the filing said.
The joint proposal, if adopted, would continue a trend in rate agreements that has seen average customer bills decline by offsetting the impact of higher delivery rates with savings from expiring surcharges and past costs that are no longer being collected.
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 a range of 4 percent to 11 percent, while the reduction averaged 13 percent to 23 percent for large commercial and industrial customers.
The bill projections include a forecast that the commodity costs of electricity, which are passed on to consumers at cost and can vary with market conditions, will essentially hold steady over the next three years. Electricity commodity costs have declined in recent years because of plunging natural gas prices, which have increased moderately since hitting a 10-year low this spring.
The joint proposal itself only covers what National Grid charges to deliver electricity to customers’ homes and businesses. Those delivery charges, excluding the actual cost of electricity, would drop by 10.4 percent for residential customers in the first year and by 11 percent to 13 percent for small commercial and industrial customers. Delivery charges for big industrial customers would fall by 5 percent to 9 percent during the first year.
The proposal would continue National Grid’s program to invest heavily in upgrading its aging electricity transmission network, which company executives have long argued is badly in need of improvements.
National Grid, which has invested $1.7 billion over the last five years in its electricity delivery system, would spend more than $1.3 billion during the next three years on upgrades to its transmission lines and other equipment.
The rate plan also would add a bill credit, equal to $4.80 a year, for customers who choose to receive their monthly bills electronically.