National Grid proposes record rate hikes as two states find fraud and abuse

The utility National Grid blew $100 million on dubious expenses and the company got caught by New York state paying to relocate an executive's wine collection and for another's private-school tuition bills. Coincidentally, the Massachusetts attorney general said, they also want a $104 million rate hike -- something that should be denied, she said, over the wasteful spending.

Attorney General Martha Coakley called for an audit of National Grid's books and accused the utility of "routinely and brazenly" padding its rate increase proposal with employee expenses. If the increase goes through, it would add as much as $175 a year to customers' bills, the steepest hike in Massachusetts history.

In response, National Grid, the second largest energy utility in the U.S., agreed to trim $800,000, but that's a drop of water over the dam, the attorney general says. National Grid is responsible for more than $100 million in dubious charges that must be removed, some timed to coincide with maintenance the company delayed to justify a large rate increase, she said.

"Instead of upgrading and maintaining its pipelines consistent with its obligation to provide safe and reliable gas distribution service, over the past decade National Grid pocketed for its shareholders the revenues that were supposed to have been spent on these upgrades," Coakley said in a statement. Consumers should not bear the burden for upgrades that would continue to disproportionately benefit shareholders, she said.

The attorney general has argued the company should reduce its return to shareholders to 9% from 11.3%, as proposed in the rate hike request, to bring it more in line with comparable investor-owned utilities.

The backlash over the utility's proposed rate increase is not limited to the Bay State. U.S. Sen. Charles Schumer (D-New York) also asked state regulators to reject an even steeper rate hike -- $390 million -- until they investigate possible improper charges.

"National Grid has already pulled a bait and switch on consumers when, a decade ago, they said rates would go down in 2011. And now they are trying to get us to pay for these perks for their executives -- it's outrageous," Schumer said in a statement.

The New York investigation revealed National Grid reimbursed $1,254 for an executive's wine collection to be shipped from Great Britain to the U.S; a repair of another executive's washing machine; and more questionable charges totaling $26 million. Other questionable expenses attributed to the company include sending executives to President Obama's inauguration, and paying for an executive's private school tuition bill for his children.

National Grid, which filed its hike request in April, tried to justify the increase saying it invested $1.2 billion in maintaining its gas delivery system since 2002, and needs money to continue to do so.

"Our job is to safely and reliably deliver energy while keeping pace with the needs of our customers. We made our rate proposal so we can continue to do that job," the utility said in a statement to Consumer Ally. "We already have removed all costs for expatriate and officer expenses from our proposal, and we are hiring an independent firm to conduct a comprehensive review of our practices on these expenses."

A spokesman for the state Department of Public Utilities, which is reviewing the proposed rate increase as well as Coakley's request to deny it, said a decision is likely to be made in early November.

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