National Grid’s Proposed Settlement with NYPSC on NiMo Rate Case

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National Grid Submits Joint Settlement Proposal

National Grid (LON:NG) has recently submitted a joint proposed settlement agreement with the New York Public Service Commission (NYPSC) regarding the NiMo electric and gas rate case. This agreement outlines a slightly reduced Return on Equity (ROE), capital expenditure (capex), and review period compared to the original request, although these figures are marginally higher than previously estimated.

Awaiting Final Decision

A final decision from the NYPSC is anticipated to be announced later in 2025. This joint proposal, arising from a rate review conducted in May 2024, signifies a consensus between National Grid and the NYPSC. Despite the agreement, it remains subject to a final decision expected in the forthcoming months. National Grid’s stock experienced a 0.4 percent increase in Monday morning trading.

Details of the Agreement

The agreement terms are less demanding than typical. The three-year rate plan is scheduled to commence in May 2025 and conclude in March 2028, which is a year shorter than the original proposal that extended to March 2029. The plan stipulates an ROE of 9.5 percent, lower than the initially requested 10 percent. It also includes capital investment financing for NiMo in the initial rate year, amounting to $1.43 billion for electricity and $351 million for gas. These figures are lower than the requested $1.7 billion for electricity but slightly higher than the requested $338 million for gas.

Market Predictions and Focus Areas

Despite the figures being lower than requested, the proposed plan’s returns exceed expectations. Barclays (LON:BARC) had predicted an allowed ROE of 9.0 percent, with an actual ROE ranging between 8.5 and 8.9 percent. Each 50 basis points difference in ROE is estimated to impact the share value by around 4p by 2030 and approximately 20p per share at the continuity valuation. The proposed rate plan aims to prioritize customer affordability, efficiency improvements, and bill assistance programs throughout its duration. Barclays also projected a capex of $1.6 billion in NiMo electricity and $350 million in NiMo gas by March 2026.