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National Fuel Gas Co. will pay $7.5 million to customers and homeowners in Western New York as part of a settlement with the State Public Service Commission for earning excessive profits.

A portion of the money will be returned to 516,000 commercial and residential customers in Western New York, a portion will pay for energy-efficiency upgrades for homeowners, and a portion will be returned to the company’s pension fund.

The agreement, announced late Friday afternoon, also includes an additional $2.7 million to pay for future employee pension and benefits.

The settlement was reached after several months of confidential negotiations. PUSH Buffalo, the community housing organization, was sitting at the table with National Fuel, the PSC and several other interested parties.

“We’ve been in the trenches fighting to hold National Fuel accountable to the ratepayers, fighting to hold the PSC accountable to the ratepayers for years,” said Aaron Bartley, executive director of PUSH Buffalo.

National Fuel was not accused of overcharging customers – rates have not gone up since 2008. But the utility earned more than the 9.1 percent earnings target set by the PSC.

Here is how the settlement breaks down:

• $1.77 million will be refunded to commercial customers.

• $3.72 million will be refunded to residential customers.

• $1.75 million will go toward weatherization upgrades for low-income residential ratepayers, which will be administered by the state’s EmPower program. The program provides funding for such things as new doors, energy-efficient windows and insulation.

• $250,000 will fund a furnace replacement program for recipients of the Home Energy Assistance Program.

• $2.7 million will be returned to the company’s pension fund, which will benefit National Fuel retirees.

Residential customers will see a one-time bill credit of $7.74, while commercial customers will receive credits of varying amounts.

The larger impact will be in the funding for weatherization upgrades and the furnace replacement program, said James J. Duggan, the attorney for PUSH who helped negotiate the settlement.

Public Service Commission staff worked with the parties on the agreement, which will be considered by commission in the near future, according to a spokesman.

Under the joint proposal filed with the PSC on Friday afternoon, rates would remain unchanged through Sept. 30, 2015. And should National Fuel earn above the benchmark, the agreement establishes an “earnings sharing mechanism” and formula that would give some of the extra earnings back to the ratepayers.

National Fuel also has agreed to credit HEAP recipients $12.50 per month for the five winter months for up to three years, said spokeswoman Karen L. Merkel.

“Given the varying interests of the parties, we believe that the terms and conditions in the filing propose a fair and reasonable rate plan that will provide benefits for all stakeholders,” Merkel said in a statement.

“Over the last several weeks and months, we made it clear to the Public Service Commission that we could make a significant and long-lasting impact on the quality of life for thousands of Western New Yorkers,” State Sen. Tim Kennedy said. “To their credit, they heeded our call, and the result is a very positive one for Buffalo’s homeowners.”

Western New York has a large stock of aging homes, translating into increased energy costs, Kennedy said.

“For us, that’s about keeping people warmer in their homes, it’s about addressing the crisis of energy use that we see every day out here. It’s about ending the $600 gas bill that comes as a surprise. It’s about ending the cycle of cutoffs that we see again year in and year out that happen in May,” Bartley said.

email: jterreri@buffnews.com and bobrien@buffnews.com