National Grid 2013 Annual Report Download - page 30

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On February 22, 2013, a joint proposal was filed with the NYPSC that memorialized an agreement between Staff and
Brooklyn Union for a two year rate settlement covering Brooklyn Union’ s rate years ending December 31, 2013 and
December 31, 2014. On June 13, 2013, the NYPSC issued an order adopting the settlement. As a result, Brooklyn
Union’ s revenue requirements for calendar years 2013 and 2014 have changed as follows: (i) there is no change in base
delivery rates, other than those previously approved by the NYPSC in the rate plan, (ii) the allowed ROE has decreased
from 9.8% to 9.4%, and (iii) the common equity ratio in the capital structure has increased from 45% to 48%.
Additionally, the joint proposal provides that 80% of any earnings above the 9.4% allowed return will be applied as a
credit to Brooklyn Union’ s SIR balance for the benefit of customers.
Carrying Charges
During fiscal year 2013, the New York Gas Companies received an order from the NYPSC relating to SIR, requiring that
carrying charges on SIR related balances be calculated net of deferred taxes. As a result, management concluded that all
of its carrying charges should be calculated in the same manner and recognized impairment on existing carrying charges
deferred within regulatory assets of $62.7 million and derecognized existing carrying charges accrued within regulatory
liabilities of $32.2 million.
Other Regulatory Matters
In June 2009, the New York Gas Companies made a compliance filing with the NYPSC regarding the implementation of
the Temporary State Assessment. The NYPSC authorized recovery of the revenues required for payment of the
Temporary State Assessment subject to reconciliation over five years, July 1, 2009 through June 30, 2014. On June 14,
2013, the New York Gas Companies submitted a compliance filing proposing to maintain the currently effective
combined surcharge of $38.9 million for the July 1, 2013 through June 30, 2014 collection period. The New York Gas
Companies had a combined deferred payable balance related to the Temporary State Assessment in the amount of $12.7
million at March 31, 2013. The New York Gas Companies had a combined deferred receivable balance related to the
Temporary State Assessment in the amount of $4.6 million at March 31, 2012.
In February 2011, the NYPSC selected Overland Consulting Inc., a management consulting firm, to perform a
management audit of NGUSA’ s affiliate cost allocation, policies and procedures. The audit of these service company
charges sought to determine if any service company transactions have resulted in unreasonable costs to New York
customers for the provision of delivery service. A final report was provided to the New York Gas Companies by the
NYPSC in October 2012. In its January 16, 2013 Order Directing Submission of Implementation Plan and Establishing
Further Findings, the NYPSC disclosed the findings of the Overland Audit of the affiliate cost allocations, policies and
procedures of NGUSA’ s service companies as applicable to its New York utilities. The final audit report concluded that
the New York Gas Companies were overcharged $35.5 million in service company related costs. The New York Gas
Companies dispute the audit conclusions as they believe that sampling amounts found by Overland to be in error should
not have been extrapolated to the larger population. The NYPSC has ordered that further proceedings be conducted to
address the New York Gas Companies’ disagreement with the testing results and statistical extrapolation. Reserves of
$5.0 million and $15.0 million have been recorded in KeySpan Gas East Corporation’ s and Brooklyn Union Gas
Company’ s financial statements, respectively.
On December 2009, the NYPSC adopted the terms of a Joint Proposal between Staff and the New York Gas Companies
that provided for a RDM to take effect as of January 1, 2010. The RDM applies only to the New York Gas Companies’
firm residential heating sales and transportation customers, and permits the New York Gas Companies to reconcile actual
revenue per customer to target revenue per customer for the affected customer classes on an annual basis. The RDM is
designed to eliminate the disincentive for the New York Gas Companies to implement energy efficiency programs by
breaking the link between sales volumes and revenues. The New York Gas Companies had deferred receivable balances
related to the RDM in the amount of $3.7 million at March 31, 2013. Payable balances are fully refundable and
receivable balances fully recoverable from the affected customer class.
Boston Gas and Colonial Gas (the “Massachusetts Gas Companies”)
In November 2010, the DPU issued an order in the Massachusetts Gas Companies’ 2010 rate case approving a combined
revenue increase of $58 million based upon a 9.75% ROE and a 50% equity ratio. In November 2010, the Massachusetts
Gas Companies filed two motions in response to the DPU’ s November 2010 rate order, whereby in its motion for
recalculation, the Massachusetts Gas Companies had requested that the DPU recalculate certain adjustments that it made
in determining the $58 million increase approved in its order, which would have resulted in an additional $10.4 million