* Nationalgrid
Total Page:16
File Type:pdf, Size:1020Kb
-* nationalgrid The Honorable Jaclyn A. Brilling Secretary, New York Public Service Commission 3 Empire State Plaza Albany, NY 12223-1350 RE: CASE 06-M-0878 -Joint Petition of National Grid PLC and KeySpan Corporation for Approval of Stock Acquisition and other Regulatory Authorizations. CASE 06-G-1185 -Proceeding on Motion of the Commission as to the Rates, Charges, Rules and Regulations of The Brooklyn Union Gas Company d/b/a KeySpan Energy Delivery New York for Gas Service. CASE 06-G-1186 -Proceeding on Motion of the Commission as Charges, Rules and Regulations of KeySpan Gas East Energy Delivery Long Island for Gas Service. Statement of National Grid plc and KeySpan Corporation in Support of the Merger & Gas Revenue Reauirement Joint Provosal Dear Secretary Brilling: Enclosed for filing pursuant to Judge's Lynch's Ruling of July 5,2007 in the above-captioned proceedings please find enclosed an original and fifteen copies of the Statement of National Grid plc and KeySpan Corporation in Support of Merger Joint Proposal. We have also enclosed a copy of this cover letter and would please ask that you date stamp the service copy and return it to me in the enclosed prepaid, pre-addressed envelope. Respectfully s mitte OA,&~L, STATE OF NEW YORK PUBLIC SERVICE COMMISSION Case 06-M-0878 Joint Petition of National Grid plc and KeySpan Corporation for Approval of Stock Acquisition and Other Regulatory Authorizations. Case 06-6-1185 Proceeding on Motion of the Commission as to the Rates, Charges, Rules and Regulations of The Brooklyn Union Gas Company for Gas Sewice Case 06-G-1186 Proceeding on Motion of the Commission as to the Rates, Charges, Rules and Regulations of KeySpan Gas East Corp. d/b/a Brooklyn Union of Long Island for Gas Sewice STATEMENT OF NATIONAL GRID, plc AND KEYSPAN CORPORATION IN SUPPORT OF MERGER JOINT PROPOSAL Catherine L. Nesser, Esq. Thomas G. Robinson KeySpan Corporation Robert Hoaglund One MetroTech Center National Grid Brooklyn, N.Y. 11201 25 Research Drive Ph: (7 18) 403-3073 Westborough, MA 01582 Fax: (718) 403-2698 Ph: (508) 389-2877 cnesser@kevs~anenerw.com Fax: (508) 389-2463 thomas.robinsonOus.ngrid.com [email protected]~d.com Kenneth T. Maloney Cullen and Dykman LLP 11nl Ii'mtrtc--nth '2trec-t N W TABLE OF CONTENTS I . Requested Approvals................................................................................. 2 11 . Procedural Background .............................................................................. 4 I11 . The Merger Joint Proposal Is Consistent With The Commission's Guidelines Governing Settlements. Fully Supported By The Record And Otherwise In The Public Interest ....................................................................................7 A . Standard of Review and Issues Raised ................................................... 7 B . The Merger Joint Proposal provides significant economic benefits to customers .....................................................................................9 1 . The Merger Joint Proposal provides for rate plans that are. from KEDNY's and KEDLI's customers' perspective. superior to the rate plans that likely would have resulted from a Commission decision on KEDNY's and KEDLI's stand-alone rate plans .................. 9 2 . The Merger Rate Plans Are Consistent With or Compare Favorably to the Merger Rate Plans Proposed by the Signatory Parties ................15 a . Synergy Savings .......................................................... 16 b . Capital Structure......................................................... 18 c . Cost Deferrals And Other Provisions ................................. 19 d . Gas Cost Savings......................................................... 20 3 . Benefits To Niagara Mohawk Customers ......................................21 4 . Benefits To LIPA Customers ....................................................22 C . The Financial Protections in the Merger Joint Proposal Assure that +I.. +I.. P.., D...G +. .$+I.. k~ ..... A.. xi-& n~..+ D .. r ....... A P..A. , E. The Merger Joint Proposal Together With the Joint Proposal in the Stand-Alone Rate Cases Assure that Service Quality and Safety Will Not Be Compromised.................................................................... .25 F. The Merger Joint Proposal Assures that the Combined Entity Will Be Fully Responsive to the Commission.. ..............................................27 Conclusion.. ..................................................................................................29 STATE OF NEW YORK PUBLIC SERVICE COMMISSION Case06-M-0878 Joint Petition of National Grid plc and KeySpan Corporation for Approval of Stock Acquisition and Other Regulatory Authorizations. Case 06-G-1185 Proceeding on Motion of the Commission as to the Rates, Charges, Rules and Regulations of The Brooklyn Union Gas Company for Gas Sewice Case 06-6-1186 Proceeding on Motion of the Commission as to the Rates, Charges, .Rules and Regulations of KeySpan Gas East Corp. d/b/a Brooklyn Union of Long Island for Gas Service STATEMENT OF NATIONAL GRID, plc AND KEYSPAN CORPORATION IN SUPPORT OF MERGER JOINT PROPOSAL In accordance with the procedural schedule established in the above-captioned proceedings, National Grid plc ("National Grid") and KeySpan Corporation ("KeySpan") (collectively "the Petitioners") hereby submit this statement in support of the Merger and Gas Revenue Requirement Joint Proposal dated July 6, 2007 (hereinafter "Merger Joint Proposal"). The Merger Joint Proposal was filed with the Commission in these proceedings on July 6, 2007. The signatories to the Merger Joint Proposal include National Grid, and its affiliate Niagara Mohawk Power Corporation ("Niagara Mohawk"), KeySpan, and its fully regulated jurisdictional affiliates,' the Staff of the New York State Department of Public Service ("Staff'), the New York State Consumer Protection Board ("CPB"), the City of New York, the Public ! 5 1381 As discussed more hlly below, Petitioners respectfully request that the Commission take action at its August 22,2007 session to approve this Merger Joint Proposal and to issue an order setting forth such approval no later than August 23, 2007. Prompt Commission approval will ensure that the significant public interest benefits arising from this Merger Joint Proposal will be realized by affected New York State consumers. 1. Requested Approvals By adopting the Merger Joint Proposal, the Commission would provide regulatory approvals necessary to permit: (a) the acquisition of KeySpan by National rid;* (b) KEDNY and KEDLI to adopt fiscal years ending March 3 1;3 (c) National Grid to implement a consolidated corporate service structure following the merger and adopt cost allocation methods similar to those currently followed by ~e~~~an;~ (d) KEDNY and KEDLI to transfer or lease personal or real property under Sections 69 and 70 of the Public Service Law if the transfer or lease is for $3 million or less; (e) KEDNY and KEDLI to participate in a regulated money pool in which those entities, other regulated affiliates of National Grid, and National Grid's Service Company could participate as lenders or borrowers and National Grid's United States holding company could participate as a lender only;6 (f) a five-year rate plan for KEDNY that would take effect January 1, 2008, nrcnlminn rnmnletinn nf the merrier inA xumalrl inrlllrle the fnllnnrinn termr. (i) There would be no increases in gas delivery service rates during each of the five years. However, certain costs that are now recovered through gas delivery service rates would be transferred from those rates and instead recovered through KEDNY's Gas Adjustment Clause ("GAC") andlor Transportation Adjustment Clause ("TAC"), including the Return Requirement Associated With Gas In Storage, the Return on Gas Purchase-Related Working Capital, the Uncollectible Expense Associated With Gas Costs, the Gas Cost-Related Portion of Sales Promotion Expense, Gas Procurement Expenses and Gas-Cost-Related Credit and Collection ~x~enses.'Offsetting these expenses to some degree, certain revenues would now be credited to the GAC, including certain margins derived from services provided to power generation customers and the increased portion of Temperature Controlled customer rates that represents a payment of pipeline demand charges. In addition, state income tax expense, which is currently surcharged to customers, will be reflected in gas delivery service rates. The net effect of these adjustments in Rate Year One is forecast to be an increase of $26.7 million annually, or 1.3% of total revenues; (ii) KEDNY would be permitted to defer for future recovery certain costs above the levels reflected in its gas delivery service rates including (a) pension and other post- employment benefits ("P&OPEB costs"), (b) real property and special franchise taxes, (c) site investigation and remediation ("SIR") expenses, (d) costs associated with citylstate construction, and (e) exogenous costs.8 (iii) Earnings in excess of certain earnings thresholds would be subject to sharing.9 (g) a five-year rate plan for KEDLI that would take effect January 1, 2008, assuming completion of the merger, and would include the following terms: (i) A $60 million annual increase in gas delivery service rates in Rate Year One. There would be no further increase in such rates for the remainder of the rate (ii) The same transfers of cost recovery responsibility between gas delivery service rates and the GAC/TAC/surcharges as described above for KEDNY. The