National Grid 2012 Annual Report Download - page 24

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Gas Rate Case Filing
In May 2009, the NYPSC approved a joint proposal that provides for a two-year rate plan, with an annual increase of
$39.4 million with incremental adjustments in the second year to reflect changes in certain expenses based on an allowed
return on equity of 10.2% and an equity ratio of 43.7%. The joint proposal also includes a revenue decoupling
mechanism, negative revenue adjustments for failure to meet certain service quality performance metrics and a
commodity-related bad debt recovery mechanism that adjusts for fluctuations in commodity prices. The new rates went
into effect on May 20, 2009. In April 2010, Niagara Mohawk filed to increase rates by approximately $13.9 million
effective May 20, 2010 based on increases in certain costs. The NYPSC ordered the new rates to go into effect on a
temporary basis and in August 2010, the NYPSC approved the rates on a permanent basis effective with the date of such
order.
Electric and Gas Rate Case Filing
On April 27, 2012, Niagara Mohawk filed to adjust its base electric and gas rates, which, if adopted, would be effective
from April 1, 2013 through March 31, 2014. Niagara Mohawk’ s filing seeks to increase electric delivery base revenues
by approximately $130.7 million and gas delivery base revenues by approximately $39.8 million, which is partially
offset by the elimination of a base rate allowance of $15.3 million of deferral recovery, for a net gas base rate increase of
$24.5 million. On July 16, 2012, the Company updated its filing to reflect certain corrections and updates. The revised
electric and gas revenue requirements are $145.4 million and $29 million, respectively.
Transmission Rate Case Filing
In February 2008, Niagara Mohawk filed with the FERC a formula rate (the “Transmission Service Charge” or “TSC”)
for customers that take transmission service under the NYISO tariff. The rate took effect on October 1, 2008 subject to
refund. The FERC directed hearing and settlement judge proceedings to resolve the remaining contested issues in the
proceeding. On April 6, 2009, Niagara Mohawk filed a settlement agreement which was accepted by the FERC by its
order issued on June 22, 2009, and which resolved all issues in the proceeding. The settlement provided for an authorized
return on equity of 11.5%. The effective date for the settlement was January 30, 2009 with a phase-in of the settlement
rate over the period January 30 through June 30, 2009. In July 2009, Niagara Mohawk refunded to customers a total of
$7.1 million, inclusive of FERC-required interest, for amounts collected in excess of the settlement rates for the period of
October 2008 through June 2009. Under the NYISO tariff, Niagara Mohawk is required to submit an “Annual Update” to
FERC in June of each year, updating Niagara Mohawk’ s TSC rate under the FERC-approved formula to become
effective as of July 1st of that year. Certain parties have raised issues with Niagara Mohawk’ s Annual Update filings. In
February 2010, the FERC accepted a proposed Stipulation and Agreement modifying the calculation of the Long-Term
Debt Cost of Capital Rate submitted in the 2009 Annual Update. In January 2011, the FERC accepted in an unpublished
letter order Niagara Mohawk’ s negotiated settlement of the limited issues raised by the parties on the 2010 Annual
Update filing, including removal from the formula rate a component reflecting the Temporary State Energy & Utility
Conservation Assessment (“Temporary State Assessment”) under Section 18-a of the New York Public Service Law to
prevent duplicate charging of that 18-a assessment to entities who are directly assessed or are otherwise exempt from
such assessment. On December 9, 2011 Niagara Mohawk submitted TSC rate adjustments to the FERC resolving issues
raised in response to Niagara Mohawk’ s 2011 Annual Update. On March 30, 2012, Niagara Mohawk filed revisions to
the TSC formula seeking FERC approval to increase depreciation rates to track those approved by the NYPSC in January
2011 for state jurisdictional rates. The change would increase TSC-related revenues by approximately $250,000
annually. On May 29, 2012, the FERC accepted the proposed changes for the TSC rates effective as of July 1, 2012.
The revenues resulting from the TSC formula rate are charged to wholesale transmission customers and credited back to
retail electric distribution customers through the Transmission Revenue Adjustment Clause mechanism.
Other Regulatory Matters
In February 2011, the NYPSC instituted a statewide proceeding to review its policies regarding the funding mechanisms
supporting SIR expenditures and directing the New York State's utilities to assist in developing a comprehensive record
of: (1) the current and future scope of utility SIR programs; (2) the current cost controls in place by utilities and
opportunities to improve such cost controls; (3) the appropriate allocation of costs among customers and, potentially,
shareholders; and (4) methods for recovering SIR costs appropriately borne by customers in a way that minimizes the
impact. In accordance with the NYPSC’ s order the Administrative Law Judge issued a Recommended Decision on
November 3, 2011. The NYPSC has not yet ruled on these recommendations.
In November 2010, the FERC commenced an audit of Niagara Mohawk for the period from January 1, 2009 through
December 31, 2010 to evaluate Niagara Mohawk’ s compliance with the FERC’ s: (1) Uniform System of Accounts for
public utilities; (2) Form No. 1 Annual report requirements of major electric utilities; and (3) Form No. 3–Q, Quarterly