Projo Biz Blog

But "under the current rate, we spent more than we collected," spokesman David Graves said.

The filing is being done now because the five-year distribution rate freeze that took effect in 2005 is poised to expire.

"We recognize that there's never a good time to ask for a rate increase. It's particularly difficult when the economy is in such difficult times," said Michael D. LaFlamme, vice president for regulatory pricing, electricity distribution and generation.

Consumers see their electric bills fluctuate all the time, but that's because the cost of buying electricity rises and falls. National Grid simply passes along those costs, which make up the bulk of an electric bill, without a markup.

In contrast, this increase in the distribution rates, if approved, would be the first since 1998.

In the intervening 11 years, there have been two decreases in distribution rates, one in 2000 and another in 2004. Both were the result of economies of scale as National Grid acquired other utilities, including the former Blackstone Valley Electric and Newport Electric.

Those decreases saved consumers a total of $22.6 million, the company said.

The new filing will raise $70 million to $75 million in additional revenue in 2010.

The PUC now has, in effect, seven months to rule on the application, which comes in 11 volumes.

Tom King, president of National Grid's U.S. division, said in a statement that the company needs the money for "increasing the reliability and safety of the system."

"We have an aging infrastructure and we're trying to replace it in a balanced way," said LaFlamme.

Ronald T. Gerwatowski, the company's deputy general counsel, said the increase is also need to recoup the nearly $300 million National Grid has spent in Rhode Island since 2000 to upgrade and expand its distribution system.

"Years ago, a flicker would not have affected a business. Today, [a flicker of] a nanosecond can. It's a different kind of investment today. The equipment needs to do more than it used to. And we're going to see more and more of that," he said.

The burden of making those improvements under the old distribution rate has become so great, said Gerwatowski, "our return on equity was 1.18 percent. Clearly that's not a sustainable level for any utility company to maintain safe and reliable service."

He said a more reasonable return would be 11.6 percent.

After 10 years and two distribution rate freezes, "it's unfortunate that the timing our rate plan is ending when the economy is not in good shape," Gerwatowski said. "But we have to remain financially healthy or our costs will be even higher in the future [as it tries to borrow money to meet expenses]. You have to have a healthy utility to move Rhode Island forward."

gemery@projo.com / (401) 277-7442