National Grid upbeat on Niagara Mohawk rate plan proposal

National Grid announced on Monday that, following the rate case filing in April last year, both it and the New York Public Service Commission (NYPSC) have filed a joint proposal for a three-year rate plan settlement for the Niagara Mohawk Power Corporation electric and gas distribution utility.

The FTSE 100 company said that the final decision from the commission was expected in the spring, with new rates effective as of April this year.

It said the joint proposal, which covers fiscal years 2018-2019 to 2020-2021, includes revenue increases over each of the three years, an allowed 9% return on equity for both utilities, a “significant” capital programme of $2.5bn in total, and incorporates estimated customer savings of $76m related to the prospective impact of US tax reform.

“The joint proposal includes the use of deferred credits to mitigate the impact on the customer bill,” the National Grid board said in its statement.

“Revenues, before the impact of the deferred credits, would increase by $206m in 2018-2019 which compares to National Grid's initial request of $317m.

“For 2019-2020 and 2020-2021 incremental year-on-year revenue increases would be $36m and $60m, respectively.”

National Grid said it believes the rate settlement provides the opportunity to earn “close” to the allowed return from year one.

It added that the IFRS revenue profile would more closely reflect the customer billing profile, after the impact of deferred credits.

The filing allowed an increase of $57m in 2018-2019, and an incremental $108m in 2019-2020 and $112m in 2020/21.

“Under the joint proposal, we expect significant capital to be invested over the three-year period, totalling $2.5bn,” the board added.

“This comprises $1.9bn in the electric business and $0.6bn in the gas business to enhance the resilience of the electric system and modernise gas infrastructure.”

National Grid explained that the settlement would contribute to the “improving financial performance” of its US operations, and allow the company to continue to meet customer needs and support the local communities it serves, while managing the customer bill impact over three years.