The state Public Service Commission today approved a settlement in which National Grid gave up claims to $196 million in future rate revenues.
The settlement resolved a dispute between the utility and PSC auditors over cost increases that can raise National Grid's rates above the levels established in 2001, when its unprecedented 10-year rate freeze was approved.
As he advised the commissioners to approve the settlement, Administrative Law Judge Jeffrey Stockholm also warned them to be wary of such long-term rate plans.
"It may well be that if we start estimating things too far in the future, that administering the plan itself can be made even more complicated than would be the case if we had shorter rate plans," Stockholm said.
In 2001, the PSC approved a rate plan that froze National Grid's electric delivery rates through 2011. But every two years National Grid's rates can be adjusted if its unanticipated expenses exceeded $100 million.
Among the expenses that can prompt rate increases are extraordinary storm costs, pension cost increases and regulatory changes that have an impact on revenues.
In 2005, Niagara Mohawk estimated its extra expenses at $697 million through December 2007. That set off an accounting war with PSC auditors, who wanted the amount reduced by $272 million.
In the settlement approved today, National Grid agreed to reduce its estimate by $196 million. That leaves a balance of $501 million as of December 2007, of which $300 million will have been collected through higher rates in 2006 and 2007.