Industry seeing red in Grid plan

A hike in electricity distribution costs proposed by National Grid has commercial customers like Polytop Corp. concerned about the impact on their bottom line. At left, Polytop processor Ricky Ogunwomoju at work in the company’s North Smithfield facility. More

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Industry seeing red in Grid plan

ENERGY CONCERNS: Polytop Corp. processor Ricky Ogunwomoju operates a machine that uses a significant amount of electricity. The company fears a proposed change in energy rate setting will hurt its bottom line.
Posted 9/14/09

Toray Plastics of America in North Kingstown is the kind of business that state leaders salivate over. The company employs just shy of 600 people, pays $73 million in wages and vendor purchases, creates millions in economic impact and anchors the Quonset Business Park. But a hike in electricity distribution costs proposed by National Grid would cost the company $586,735 more a year and quash any future expansion or job creation.

“We need to bite the bullet to survive, but we’re losing competitiveness,” said Shigeru Osada, Toray’s senior vice president for engineering and maintenance.

This fall the R.I. Public Utilities Commission (PUC) will mull National Grid’s proposal to increase its rates and change the formula that sets them. For most small commercial customers the company says, monthly rates will increase 7.1 percent, with larger companies seeing increases ranging from .8 percent to 4.4 percent. The very largest industrial companies, National Grid says, will see a rate decrease of 1 percent.

Osada doesn’t buy it. National Grid’s figures do not incorporate proposed increases for other charges that Toray and many other companies pay. And the widely circulated sheet assumes that the PUC accepts National Grid’s proposals in its entirety.

“The public doesn’t know this,” he said sitting in a conference room at the plant that manufactures film with uses that range from snack food packages to holograms on credit cards to digital prints at CVS/pharmacy.

Osada estimates Toray’s bill from National Gird would rise 23 percent to $3.18 million a year if the PUC adopts the proposal. That price includes only the delivery of the electricity and not the actual energy, which Toray purchases directly from suppliers. The half-million dollar increase would come on top of a $548,995 annual increase the Tokyo-based company saw earlier this year after National Grid raised its transmission charges.

Osada said much attention has been paid to National Grid’s proposal to increase most residential rates by 11.2 percent and rates for low-income residents by 20.5 percent, but that fails to tell the entire story.

In essence, National Grid has asked the PUC to approve a guaranteed rate of return of 8.98 percent that would provide its shareholders up to an 11.6 percent return on equity while covering the costs to maintain and upgrade its infrastructure, support its pension obligations and meet all its other obligations. Right now it is allowed a 10.5 percent return on equity, but its actual return last year was 1.18 percent because of the underlying rate structure, said National Grid spokesman David Graves.

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