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BOWNE INTEGRATED TYPESETTING SYSTEM

CRC: 3681

Name: NATIONAL GRID

Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: (212)924-5500Site: BOWNE OF NEW YORK

Y59930.SUB, DocName: EX-2.B.6.1, Doc: 6, Page: 105

Description: EXH 2(B).6.1

0/3709.00.00.00Y59930BNY

[E/O] EDGAR 2 *Y59930/709/3*

BOWNE INTEGRATED TYPESETTING SYSTEM

CRC: 3681

Name: NATIONAL GRID

Date: 17-JUN-2008 03:10:51.35Operator: BNY99999TPhone: (212)924-5500Site: BOWNE OF NEW YORK

Y59930.SUB, DocName: EX-2.B.6.1, Doc: 6, Page: 105

Description: EXH 2(B).6.1

0/3709.00.00.00Y59930BNY

[E/O] EDGAR 2 *Y59930/709/3*

recover environmental response costs over a ten year period, establishes a new weather normalization clause and allows for

the sharing of non-firm mar

ins (which is mar

in earned from interruptible customers with the ability to switch to alternative

fuels). The weather normalization clause is desi

ned to miti

ate the impact of weather volatility on customer billin

s, which

assists customers in payin

bills and stabilize the revenue stream. New En

land Gas Company defers the mar

in impact of

weather that is greater than two percent colder-than-normal and will recover the mar

in impact of weather that is

reater than

two percent warmer-than-normal. The non-firm mar

in incentive mechanism allows New En

land Gas Company to retain

25 percent of all non-firm mar

ins earned in excess of $1.6 million. In Au

ust 2006, National Grid completed the acquisition of

the Rhode Island

as assets of New En

land Gas Company. Pursuant to the Division order approvin

the acquisition, National

Grid a

reed to honour the provisions of the former New En

land Gas Company rate settlement and committed to file a new rate

plan within one year of the acquisition date.

Granite State Electric Company

In May 2007, Granite State entered into a settlement a

reement with the staff of the New Hampshire Public Utility Commission

and the New Hampshire Office of Consumer Advocate related to issues surroundin

the mer

er of National Grid USA and

KeySpan Corporation (the 2007 Settlement). Amon

other thin

s, the 2007 Settlement provides for a $2.2 million reduction in

the Company’s base distribution rates in two steps, the first $1.1 million reduction effective 30 days from the NHPUC approval

of the mer

er and the second $1.1 million reduction effective January 1, 2008. The 2007 Settlement also contains a distribution

rate plan spannin

10 years effective January 1, 2008 (Rate Plan). In the first five years of the Rate Plan distribution rates are

frozen except for rate adjustments in the event of certain uncontrollable exo

enous events and moderate annual rate

adjustments related to specific Reliability Enhancement and Ve

etation Mana

ement Plans (REP/VMP). The Rate Plan also

includes an earnin

s sharin

mechanism based on an imputed capital structure of 50 percent debt and 50 percent equity and a

ROE sharin

threshold of 11 percent, equal to an allowed ROE of 9.67 percent plus an allowance for mer

er syner

y savin

of 1.33 percent. Earnin

s above 11 percent ROE are shared equally between customers and the Company. The Rate Plan also

establishes a storm contin

ency fund and customer service commitments by the Company. The 2007 Settlement is subject to

the approval of the NHPUC and contin

ent on the closin

of the mer

er. However, the $2.2 million distribution rate reduction,

REP/VMP, storm contin

ency fund and customer service commitments are subject only to NHPUC approval of the mer

er and

are not contingent on the closing of the Merger.

NOTE C – COMMITMENTS AND CONTINGENCIES

Environmental issues

The normal on

oin

operations and historic activities of the Company are subject to various federal, state and local

environmental laws and regulations. Like most other industrial companies, the Company’s transmission and distribution

companies use or

enerate a broad ran

e of hazardous materials. Under federal and state Superfund laws, potential liability for

the historic contamination of property may be imposed on responsible parties jointly and severally, without fault, even if the

activities were lawful when they occurred.

Federal and state environmental regulators, as well as private parties, have alleged that the Company’s transmission and

distribution companies are potentially responsible parties under Superfund laws for the remediation of over 180 contaminated

sites in New England and New York. The Company’s

reatest potential Superfund liabilities relate to manufactured

as plant, or

MGP, facilities formerly owned or operated by the Company’s subsidiaries or their predecessors. MGP by-products included

fuel oils, hydrocarbons, coal tar, purifier waste and other waste products that may pose a risk to human health and the

environment. The Company is investigating or remediating these sites, or both, as appropriate.

Management believes that ongoing operations and the Company’s response to the impact of the Company’s historic operations

are in substantial compliance with environmental laws, and that the obli

ations imposed are not likely to have a material

adverse impact on the Company’s financial

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