As submitted by the New York State Public Service Commission
ALBANY, NY – The New York State Public Service Commission today ordered Niagara Mohawk Power Corporation, doing business as National Grid, be required to set aside $8.8 million in shareholder money and put it toward the benefit of ratepayers as a result of the company’s failure to achieve a required service standard in 2006. Because National Grid also failed the same standard in 2004 and 2005, the revenue adjustment paid by shareholders was doubled from $4.4 million to $8.8 million.
“Our approval of National Grid’s acquisition of Niagara Mohawk five years ago hinged on the requirement that the company would provide high levels of service quality in all areas of its performance,” said Commission Chairwoman Patricia L. Acampora. “With respect to the electric reliability standards, National Grid’s performance reports during the past three years indicate that it has failed a key measure of service reliability. This repeated failure is not acceptable. Therefore, as per our earlier order, we hold the company’s shareholders financially accountable.”
If the company exceeds the threshold in future years the revenue adjustment could be even greater. The company’s existing merger rate plan expires 2011.
To ensure that National Grid would provide reliable service under the terms of its merger agreement, a service quality assurance program was adopted. Pursuant to the service quality assurance program’s stated purpose, National Grid had been encouraged to provide high levels of service quality in all areas of performance. The service quality assurance program set forth revenue adjustment provisions should the company fail to meet the performance standards for customer service and electric reliability. The plan also provides additional protections if reliability performance targets are repeatedly missed.
Specifically, the merger rate plan provided that if the maximum revenue adjustment for a single electric reliability measure is reached in one year and was also reached in any two of four of the prior years, then the Commission shall commence a proceeding to investigate the failure to achieve the measure and to determine if the maximum revenue adjustment for such measure should be doubled for the most current year as well as for all future remaining years of the merger rate plan.
The reason for the doubling of the revenue adjustment was because National Grid failed the System Average Interruption Frequency Index (SAIFI) measure, an industry index that helps define the interruption reliability of utilities by measuring the number of interruptions per thousand customers.
The Commission’s decision today, when issued, will be available on the Commission’s www.dps.state.ny.us Web site by accessing the File Room and searching for Case 07-M-0773. Many libraries offer free Internet access. Commission decisions can also be obtained from the Files Office, 14th floor, Three Empire State Plaza, Albany, NY 12223 (518-474-2500).
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