National Grid unveiled a proposed rate settlement Friday with New York regulators that would increase a typical household’s electric and gas bill by $22 a month starting in September.
By the third year of the deal, an average residential customer would pay $50 a month more than today for electricity and gas. That’s $600 a year.
The proposed rate increases, the largest in recent decades, still require approval from the state Public Service Commission before they can take effect. The PSC is likely to rule on the request this summer, said Phil DeCicco, National Grid’s general counsel for New York.
National Grid negotiated the three-year deal after asking the PSC for a one-year rate hike that would have increased annual revenues by $525 million for electricity and $148 million for gas. Instead, the multiyear agreement allows lower revenue hikes during the first year but phases in increases over three years totaling $708 million for electricity and $194 million for gas.
Utility officials say the higher rates are necessary to cover inflation-driven cost increases and to pay for upgrades to the electric and gas networks, energy efficiency programs and low-income customer discounts. The utility also plans to hire 480 new employees in addition to the current work force of 5,400.
National Grid worked with PSC staff for months to scale back the rate increases as much as possible, DeCicco said.
“This is a reasonable proposal on balance,‘’ DeCicco said. “That said, I am mindful that we are proposing to raise rates at a time when affordability is top of mind for our customers.‘’
The proposal comes on the heels of a harsh winter when many customers complained of high bills. One in seven residential customers of National Grid’s Upstate territory – more than 213,000 households — are more than 60 days late paying their bills, according to PSC data.
In addition to the PSC staff, more than a dozen groups signed onto the proposal, including large commercial customers, environmental groups and unions.
The Public Utility Law Project, which advocates on behalf of low-income utility customers, was not among those who agreed to the deal.
“While PULP acknowledges the efforts to limit the proposed increases, the reality is that over 210,000 customers are already behind on their upstate National Grid bill,‘’ said Theresa Hotte, a PULP lawyer. ”The additional increases proposed by the joint proposal risk pushing essential services further out of reach for many more low- and fixed-income households who are already facing mounting financial pressure.”
Although the rate increases are historically large, they are in line with recent rate proposals from other utilities in New York and around the country. The dollar value of utility rate increases has jumped significantly since 2020, according to the U.S. Energy Information Administration.
For an average household using 625 kilowatt-hours per month, the National Grid proposal would increase the monthly bill by $14.32 in the first year; $6.44 in the second year; and $4.34 in the third year. Over three years, that’s an increase of 20%.
For a typical household burning 78 therms of gas per month, the monthly bill increases would be $7.66 in the first year; $8.08 in the second year; and $9.18 in the third year. Over three years, that’s an increase of 27%.
National Grid’s original proposal would have raised electric rates 15% and gas rates 20% for one year, after which the utility could have sought new increases.
The current proposal would increase National Grid’s potential profits, raising its allowed return on equity from 9% to 9.5%. PSC staff proposed that rate of return based on the cost of providing capital, DeCicco said. National Grid had asked for a 10% return.
National Grid’s Upstate territory includes 1.7 million electric customers and 640,000 gas customers in a region stretching from Albany to Buffalo.