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NATIONAL GRID FILES PROPOSAL FOR GREATER INVESTMENT IN MASSACHUSETTS NATURAL GAS DISTRIBUTION SYSTEM
NATIONAL GRID FILES PROPOSAL FOR GREATER INVESTMENT IN MASSACHUSETTS’ NATURAL GAS DISTRIBUTION SYSTEM

April 16, 2010 -

Waltham, Mass. –National Grid today filed a comprehensive proposal with the Massachusetts Department of Public Utilities to establish new natural gas distribution rates for its more than 850,000 gas customers across the state. The plan is designed to help meet customers’ future energy needs by enhancing system integrity and safety, reducing greenhouse gas emissions that contribute to climate change and allowing for significant continued investment in the gas delivery system to enable reliable operation in years to come.

Distribution Rate Proposal

Currently, the total annual bill for a typical National Grid residential heating customer using 1,000 therms per year is between $1,400 and $1,600 or, on average, $116 to $133 per month, depending on customers’ locations. If the company's proposal is approved, the total annual bill would increase $64 to $175 or, on average, $5 to $15 per month. It is important to note that the proposed increase does not reflect any changes in the cost of the gas itself, which makes up the majority of the customer’s total bill. However, if current trends in the future price of natural gas continue, this winter’s gas prices will be lower than last winter’s costs. If gas costs are in fact lower this winter, there will be an offset to this increase and the net effect on a typical residential heating customer’s total annual bill could be an increase of $1 to $111 or, on average, $0 to $9 per month.

Efficiency Measures, Rate Plan History and Customer Savings

“As a customer, the first question I would ask is ‘what have you done, National Grid, to keep your costs down before asking for a rate increase?’” said Nick Stavropoulos, executive vice president of U.S. Gas Distribution for National Grid. “It’s a very valid question, and the answer is – plenty.”

According to Stavropoulos, National Grid has implemented a broad range of cost-control and efficiency measures in the areas of work practices, procurement, facilities consolidation, as well as new technologies and systems. The company also has taken significant steps to streamline, standardize and consolidate diverse processes and procedures in place at its three legacy Massachusetts gas companies.

National Grid is operating under natural gas rate agreements that were put in place long before its 2007 merger with KeySpan. It has been at least 14 years since the last comprehensive rate review of the predecessor companies that served customers in the Greater Lowell area, on Cape Cod and in the Essex County area. The distribution rates for customers in these areas have been held constant, saving them approximately $160 million during this timeframe.

The legacy company that serves customers in the greater Boston area, the north and south shores and parts of central Massachusetts, has operated under a rate plan that allowed modest rate increases over the last six years. Even with the adjustments, the company’s distribution rates have lagged behind the steadily escalating costs to maintain and improve its system.

Aggressive Infrastructure Program

The key driver of the rate proposal is the need for continued significant investment in the gas system. Since 2002, National Grid has invested $1.2 billion in its Massachusetts gas distribution system and has replaced more than 300 miles of gas mains.

The company also has shown positive results in meeting its state and federal goals that focus on operating the gas system efficiently and safely, demonstrating its commitment to public safety and outstanding service delivery standards.

In its rate proposal, National Grid plans to implement an ongoing, comprehensive gas main replacement program across its service territory, and plans over the next five years to invest a total of $1 billion that will be used to replace 1,000 miles of gas mains and 110,000 services, enhancing the safety and reliability of the region’s gas networks and providing significant environmental benefits through the reduction of gas leaks that contribute to climate change.

“It’s a well-known fact that the gas system in the Northeast is one of the oldest in the U.S. We continue to maintain and upgrade our system so it operates safely, but just as the region’s roads, water systems and other key infrastructure need major updates and replacement as they age, so does the gas system, and the time has come for us to do that,” Stavropoulos said. “Our proposal to ramp up construction also is a plus for the state, potentially creating more than 400 local jobs by 2015.”

National Grid’s proposal also would allow for timely recovery of operation and maintenance costs, and recovery of other significant costs that help maintain rate stability over time. The filing includes a decoupling mechanism, as required by the DPU, designed to enable the company to aggressively promote energy-efficiency.

“The needs of our customers and the energy delivery landscape in which we presently operate continue to evolve,” Stavropoulos explained. “Our proposal better positions us to meet the current and future expectations of our customers and policy makers alike.”

If approved, the new gas distribution rates would take effect November 1, 2010.

National Grid is an international energy delivery company. In the U.S., National Grid delivers electricity to approximately 3.3 million customers in Massachusetts, New Hampshire, New York and Rhode Island, and manages the electricity network on Long Island under an agreement with the Long Island Power Authority (LIPA). It is the largest distributor of natural gas in the northeastern U.S., serving approximately 3.4 million customers in Massachusetts, New Hampshire, New York and Rhode Island. National Grid also owns over 4,000 megawatts of contracted electricity generation that provides power to over one million LIPA customers.