National Grid 2008 Annual Report Download - page 269

BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 19430
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-2.B.6.1, Doc: 6, Page: 63
Description: EXH 2(B).6.1
0/2667.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/667/2*
BOWNE INTEGRATED TYPESETTING SYSTEM
CRC: 19430
Name: NATIONAL GRID
Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: [phone]Site: BOWNE OF NEW YORK
Y59930.SUB, DocName: EX-2.B.6.1, Doc: 6, Page: 63 Description: EXH 2(B).6.1
0/2667.00.00.00Y59930BNY
[E/O] EDGAR 2 *Y59930/667/2*
There is also a MADTA imposed 10 year base rate freeze for firm customers in place for the Issuer’s KeySpan Massachusetts
gas utility companies that expire in 2009.
Rhode Island
The Issuer’s distribution rates in Rhode Island are also governed by a long-term rate plan. Between May 2000 and the end of
October 2004, rates were frozen, and the Issuer was subject to an earnin
g
s sharin
g
mechanism. Effective from November 2004
until December 2009 the Issuer has agreed to lower the Issuer’s rates by 10 million before tax per year.
From January 2005 onwards the Issuer is able to keep an amount equal to 100 per cent. of the Issuer’s earnin
g
s up to an
allowed return on equity of 10.5 per cent., plus a specific before tax amount, which represents the Issuer’s share of
demonstrated savin
g
s subsequent to the acquisition of Eastern Utilities Associates in 2000. Earnin
g
s above that amount up to
an additional 1 per cent. return on equity are to be shared equally with the Issuer’s customers, while additional earnin
g
s will be
allocated 75 per cent. to customers and 25 per cent. to the Issuer. The Issuer determines its earned return on equity based on
a hypothetical capital structure of 50 per cent. common equity, 5 per cent. preferred equity and 45 per cent. debt.
New Hampshire
In New Hampshire, the Issuer’s electricity distribution network serves over 40,000 retail customers, whilst the Issuer also own
transmission assets consisting of substations and interconnections with the Issuer’s other electricity operations in New En
g
land.
The Issuer has reached an agreement for a five year rate plan for the Issuer’s electricity distribution operations in New
Hampshire. This was approved by the New Hampshire Public Utilities Commission on 12 July 2007. The rate plan includes a 9
per cent. reduction in electric distribution rates. Over the term of the plan, earnin
g
s in excess of the allowed return of 9.67 per
cent. are retained by the Issuer up to 11 per cent. Any earnin
g
s over 11 per cent. would be shared with customers. In addition,
the plan allows for incremental increases in rates for capital expenditure incurred under the Issuer’s reliability enhancement
programme.
National Grid USA’s Keyspan New Hampshire
g
as distribution utility company base rates continue as set by the NHPUC in
1993.
Market and Regulatory developments
The recovery of historical investments and costs under commodity contracts followin
g
industry restructurin
g
in New En
g
land
and New York is done pursuant to applicable state le
g
islation and approvals from the various utility commissions in the states in
which the Issuer operates.
U.S. electricity transmission
In the United States, consistent with FERC’s transmission pricin
g
policy, the Issuer has applied for an increased rate of return
on the Issuer’s investment in transmission assets in New En
g
land. FERC approved this application in October 2006, but has
yet to determine its response to several parties which have sought to appeal this approval.
The Issuer has been pursuing a regional planning process with the Independent System Operator in New York (“ISO – New
York”) to identify regional reliability and economic transmission needs. Progress has been made and the ISO-New York is in
the second year of its reliability plannin
g
process implementation. The Issuer has proposed a re
g
ulated transmission solution to
reliability needs identified by the ISO-New York. In addition, as part of FERC’s recent open access transmission tariff reform,
the ISO-New York is developing a process to address economic planning.
63