Recent changes in Residential Electric Bills Christopher J. Gorman November 5, 2009

Overview  How are Residential Bills priced?  What is the Delivery Charge Adjustment (DCA)?  Why does it seem that National Grid’s delivery charges have increased substantially?  Are any choices available?  Questions

Residential Commodity Pricing When the electric supply in NYS was opened to competition, our regulators were concerned about subjecting residential customers to full marking prices. Therefore, customers were given a choice: Standard Rate Option:  This provides a hedge mechanism to customers - it helps stabilize the cost of electric commodity. This was the default selection and the vast majority of customers are billing under the.Standard Rate Option’. Market Rate Option:  Customers pay the market price and are subject to wide fluctuations in cost. Note: This selection is separate and independent from the customer’s ability to purchase electric supply from an alternate supplier.

Delivery Charge Adjustment (DCA) This line item, located under the ‘Delivery’ section of a National Grid bill, contains the hedge mechanism. When market prices are high, the DCA lowers the commodity price paid by the customer. When market prices are low, the DCA brings the price back to a defined price band.  During the summer of 2008, electric commodity prices were very high. This resulted in a low and sometimes negative (credit) DCA line item.  Now that commodity prices are relatively low, the DCA has increased.

2008 vs Comparison July 2008  Market Price: $0.1163/kWh  DCA: -$0.2489/kWh  Delivery Section of the bill: $27.84  Supply Section of the Bill: $58.73  Overall Bill: $86.57 A Residential customer using 500 kW July 2009  Market Price: $ /kWh  DCA: $ /kWh  Delivery Section of the bill: $57.15  Supply Section of the Bill: $23.41  Overall Bill: $80.56

Trends

Available Options Residential customers can select the Market Rate Option.  This will remove the hedge mechanism from the DCA line item on the bill. At this time, it appears this would lower customers’ bills.  This is a 12-month commitment. Anytime after 12 months a customer can return to Standard Rate Option.  Since these options first became available, customers under the Standard Rate Option have paid lower overall bills – about $200.

Questions?