National Grid wins compensation but loses New York Contract

Investors in National Grid, the international electricity and gas company, will be scratching their heads this morning as the firm announced $240m in deferred charges and storm compensation is coming their way. Unfortunately the firm has also revealed that it has lost the contract to operate the Long Island Electricity system.

The deferred charges are to be paid by the state of New York after a verbal decision from the New York Public Service Commission (to be confirmed in writing) relating to "pensions, environmental costs, capital expenditure and other activities." The total will be $211m whereas the company wanted $236m.

The storm compensation is a result of Hurricane Irene and amounts to a total of $25m.

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"National Grid is very pleased with the outcome of the deferral filing", said Ken Daly, President of the New York division. He added: "It will allow us to pass significant bill reductions onto our Upstate New York electric customers, while at the same time recovering expenses previously incurred in operating our electric system."

The positive cash flow from this money, however, will need to be set against the loss of the Long Island electricity system contract which has been managed by National Grid for 13 years. The company says the contribution to earnings of the contract was "less than one percent of Group operating profit".

Nartional Grid has gained 11% this year but is down 18% over the last five years.

BS