CASE 17-E-0238 - Proceeding on Motion of the Commission as to the Rates, Charges, Rules and

Regulations of Niagara Mohawk Power Corporation d/b/a National Grid for Electric
Service.

CASE 17-G-0239 - Proceeding on Motion of the Commission as to the Rates, Charges, Rules and
Regulations of Niagara Mohawk Power Corporation d/b/a National Grid for Gas
Service.

CASE 14-M-0042 - Petition of Niagara Mohawk Power Corporation d/b/a National Grid for Authorization
to Defer an Actuarial Experience Pension Settlement Loss for Fiscal Year 2014.

CASE 12-G-0202 - Proceeding on Motion of the Commission as to the Rates, Charges, Rules and
Regulations of Niagara Mohawk Power Corporation d/b/a National Grid for Gas
Service.

Summary of Joint Proposal

The Joint Proposal proposes a three-year rate plan for Niagara Mohawk Power Corporation d/b/a National
Grid’s (NMPC or the Company) electric and gas business for the term beginning April 1, 2018 and ending
March 31, 2021. Rate Year (RY) 1 is April 1, 2018 through March 31, 2019; RY 2 is April 1, 2019
through March 31, 2020; and RY 3 is April 1, 2020 through March 31, 2021.

Revenue Requirements: The Joint Proposal sets forth overall annual revenue requirement increases,
offset by applying deferred credits. The net annual revenue increases in each of the three Rate Years are
as follows:

RY1 RY2 RY3

% Total % Total % Total
(millions $) (millions $) (millions $)
Revenues Revenues Revenues
Electric $43.058 1.7% $88.635 3.4% $89.636 3.4%
Gas $13.209 2.4% $20.735 3.5% $21.531 3.5%

Revenue Allocation/Rate Design:

 Electric: The Joint Proposal recommends no increases to the customer charge for many service
classes, including residential service classes. Customer charge increases to more closely reflect the
cost of service are proposed for SC3-Large General Service (Secondary, Sub-transmission, and
Transmission) and SC3A- Large General Service (Secondary, Primary, Sub-transmission, and
Transmission). The service class allocated revenue requirements are proposed to be recovered
through energy (kWh) charges for energy billed service classes and demand (kW) charges for
demand billed classes. The Joint Proposal does not propose to change reactive energy charges.
The Joint Proposal recommends shifting the collection of revenues for the Company’s energy
efficiency program from the System Benefits Charge (SBC) surcharge to base rates. The SBC
surcharge has been reduced to reflect this shift.
 Gas: For most service classes, including residential heating customers, the Joint Proposal
recommends no increase to the minimum monthly charge. For two service classes serving large
customers, the Joint Proposal recommends increasing the minimum charges to more closely reflect
the cost of service. The Joint Proposal recommends allocating the remaining revenue requirement
in generally equal percentage increases to blocks within each class. The Joint Proposal
recommends shifting the collection of revenues for the Company’s energy efficiency program from
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the SBC surcharge to base rates. The SBC surcharge has been reduced to reflect this shift.

Customer Service:
 Low Income Discount Program: The Joint Proposal recommends funding an energy
affordability program providing discounts to qualifying customers in accordance with the
Commission’s Order in Case 14-M-0565.
 Service Quality Assurance Program: The Joint Proposal continues and updates customer service
metrics based on recent performance and brings the Company in line with metrics for other
investor owned utilities. The items measured are the PSC Complaint Rate, the residential and
commercial and industrial Customer Satisfaction Survey, and telephone answer response within 30
seconds. The Service Quality Assurance Program also includes two measures of electric
reliability, the system average interruption frequency index and the customer average interruption
duration index, along with an Estimating and an Inspection and Maintenance metric.
 Terminations and Uncollectibles Incentive: The Joint Proposal recommends implementing a
symmetrical mechanism to incent the Company to reduce both the number of terminations and the
aggregate amount of uncollectibles attributable to residential customer accounts.
 Collections Agreements: The Joint Proposal recommends refinements to the Company’s
collections practices, including: providing for electronic deferred payment agreements (DPAs);
enhanced customer service messaging to ensure that customers know their options if they are
behind on their utility bills; updated training materials; and ensuring customers are offered written
confirmation of any non-DPA collection arrangements.
 Walk-in Payment Transaction Fees: The Joint Proposal recommends that customers not be
charged for any transaction fees if they pay their NMPC bill at an authorized third-party payment
center, such as participating supermarkets.

Street Lighting: The Joint Proposal contains a number of provisions that will facilitate the upgrading of
street lights throughout NMPC’s service territory to energy efficient light emitting diodes (LEDs),
specifically:
 LED-Only Replacement Luminaire Program: For municipalities that opt into the program,
NMPC will replace Company-owned failed roadway luminaires with LED luminaires.
 LED Conversion Program: The Joint Proposal recommends that NMPC, as part of its energy
efficiency efforts, support municipalities seeking to convert either Company or municipality owned
street lights to LEDs, through rebates on the new luminaires.
 Street Light Asset Sales: The Joint Proposal commits NMPC to sell its street lighting assets to
municipalities who wish to purchase them at the net book value of the assets. By selling these
assets at net book value, NMPC will provide the lowest sales price for municipalities without
creating a need for a subsidy from other customers. Municipalities who purchase the street lighting
assets within their boundaries can then upgrade the facilities to LEDs to achieve energy savings.

Energy Efficiency: The Joint Proposal recommends increasing the targets for NMPC’s energy efficiency
program by 40%. This is done while increasing funding for energy efficiency by only 20%, reflecting the
cost-effective nature of NMPC’s energy efficiency programs.

Earnings Adjustment Mechanisms (EAMs): The Joint Proposal recommends adopting a number of
EAMs that incent the Company to deliver beneficial outcomes, including: (1) increasing electric system
efficiency through peak reduction and distributed energy resource utilization; (2) increasing achieved
electric and gas energy efficiency; (3) increasing LED street lighting conversions; (4) decreasing
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residential energy intensity; (5) decreasing commercial energy intensity; (6) increasing environmentally
beneficial electrification through the adoption of electric vehicles and electric heat pumps that displace
fossil fuel technologies; and (7) increasing the effectiveness of its electric interconnection process.

Gas Safety:
 Gas Safety Performance Metrics: The Joint Proposal continues and updates existing metrics
based on recent performance, in line with metrics for other investor owned utilities in New York
State. The areas of performance measured are leak-prone pipe (LPP) removal; leak management;
damage prevention; emergency response; and gas safety regulations performance. The Joint
Proposal recommends cumulative potential negative revenue adjustments of up to 150 basis points
for the Company. The Joint Proposal recommends creating positive incentives for LPP removal,
leak management, damage prevention, and emergency response to encourage NMPC to improve its
performance.
 Gas Safety Enhancements: The Joint Proposal recommends using shareholder funds to enhance
gas safety through six programs that include the distribution of residential methane detectors,
initiatives aimed at pipeline damage prevention, and enhanced first responder training programs.

Advanced Metering Infrastructure (AMI): The Joint Proposal recommends a collaborative process
through which the Company will refine its business plan for deploying AMI in its service territory. This
process will result in a report to be filed with the Secretary for the proposed implementation of AMI. The
Commission would then consider whether and how NMPC should proceed with AMI implementation.

Capital Investment:
 Electric: The Joint Proposal recommends capital budgets to allow NMPC to reinforce and
modernize its electric transmission and distribution system. Additionally, the Joint Proposal
recommends that the Company seek out non-wires alternatives that allow it to provide safe and
reliable service at a lower cost than traditional infrastructure investments.
 Gas: The Joint Proposal recommends capital budgets that allow NMPC to reinforce and
modernize its gas distribution system, including funding for: the Albany Loop project, which will
enhance reliability in the Company’s eastern service territory; and the removal 150 miles of LPP
over the three Rate Years. Furthermore, NMPC agreed to work with the Environmental Defense
Fund (EDF) on methane leak pilots at no cost to ratepayers. Results will be reported in the
Company’s next gas rate filing. Additionally, the Joint Proposal recommends an incentive to
encourage NMPC to lower the unit cost of removing LPP. The Joint Proposal includes a Gas
Safety and Reliability Surcharge that allows cost recovery of incremental LPP removal and leak
repairs beyond the costs reflected in rates. The Joint Proposal also recommends that the Company
seek out non-pipeline alternatives to address infrastructure needs at lower costs and without
installing additional gas main or enlarging existing gas mains.
 Information Technology: The Joint Proposal recommends funding allowing NMPC to invest in
modernizing its information technology, including: the Gas Business Enablement Program, which
will enhance the Company’s gas operations on a number of levels, such as enhanced customer
information and appointment scheduling, workforce management, gas safety compliance and
system planning; and Call Center upgrades, which will allow NMPC to more effectively manage
customer calls to its multiple in-state call centers. Additionally, the Joint Proposal recommends an
incentive to encourage NMPC to lower the cost of its information technology investments.

Return on Equity: The Joint Proposal recommends a 9.0% return on equity. The rate plan includes an
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earning sharing mechanism in which customers will share earnings in excess of 9.5%.

Federal Income Tax Changes: The Joint Proposal recommends reflecting the impact of changes to the
federal corporate tax rate and bonus depreciation prospectively, with a net RY1 benefit for customers of
$61.149 million (electric) and $14.562 million (gas). These benefits are reflected in, and moderate, the
proposed revenue requirement increases. The Joint Proposal ensures that all impacts of the changes to the
federal tax code are accounted for through these or another Commission proceeding.

Reconciliations: The Joint Proposal includes a number of reconciliations, such as Property Tax expenses
and Net-plant and depreciation expenses.

Lost and unaccounted for gas (LAUF): The Joint Proposal includes an adjustment that would be
applied to NMPC’s LAUF calculations to reflect usage associated with accounts that have been inactive
for more than 90 days.

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