National Grid renegotiates New York energy contract

14th Jun 2013 09:05

National Grid has received new terms for its New York consumer energy rates with a lower allowed return on equity (ROE).The new two-year rate plan was approved by the New York Public Service Commission, with its current allowed ROE of 9.8% falling to 9.4% for National Grid's KeySpan Energy Delivery New York (KEDNY) gas utility business. However National Grid said the plan, which will apply from the end of the previous five year rate plan on December 31st, is "financially equivalent" to the terms of the original five year rate plan as it included a higher 48% equity structure in the business compared to 45% before. The new plan had been demanded by the Commission due to a reported growing concern about the level of KEDNY's high earnings from the contract, where the utility supplies gas customers in Brooklyn, part of Queens and Staten Island. Under the new plan, 20% of any earnings over 9.4% will be retained by KEDNY and the remaining 80% would be allocated to fund recovery of prior environmental deferrals.Previously earnings over the ROE rate were shared above 10.5%, although a review of actual historical earnings had found KEDNY had exceeded its allowed return and exceeded its earnings-sharing target between 2008 and 2011.The FTSE 100 group said the new plan proposed to increase customer service and other performance metric requirements. Ken Daly, National Grid President for New York, said: "On behalf of our New York Gas customers, we are pleased that the new plan sets out a framework of increased investment, stable customer rates, and performance metrics to deliver high standards of customer service, safety and reliability. "The plan also provides a sharing mechanism that should allow the business to continue to provide excellent service to New York customers, while delivering appropriate returns."Shares in National Grid were up 0.7% to 746.84p at 09:45 on Friday. OH