National Grid seeks rate hike

National Grid, the Bay State's largest electric utility with 1.2 million customers, wants to increase rates and use the projected $111 million in additional revenue to upgrade its electrical distribution system and pay other expenses, such as a large amount of unpaid customers' bills. The higher rate would increase bills by about $5 a month for a typical household that uses around 600 kilowatt hours of electricity a month.

"It's never a good time to raise rates," said Tom King, president of National Grid's US business. But "it's critical that we continue to have the ability to upgrade the aging infrastructure in the state of Massachusetts."

In its filing to state regulators, the company asked to increase its distribution and other delivery charges, a key component of electric bills, by more than 16 percent starting Jan. 1. It also asked regulators for permission to add a surcharge to the fee it charges for the raw cost of electricity.

Attorney General Martha Coakley, who represents electricity ratepayers in utility cases, slammed National Grid's attempt to raise rates in the midst of a recession.

"It is unfortunate that National Grid has chosen to propose significant electricity rate increases that could further harm ratepayers who are already struggling to pay their monthly expenses in these tough economic times," Coakley said in a written statement.

But even with the price increase, National Grid's distribution rates will still be less than what Massachusetts' other big utility, NStar, charges: 4.915 cents per kilowatt hour versus 5.643 cents per kilowatt hour for NStar.

NStar hasn't raised its distribution costs since 1993. And the rate hike sought by National Grid is the first significant one in 14 years.

Under energy deregulation adopted in Massachusetts a decade ago, utilities such as National Grid and NStar own and operate the wires that deliver electricity to customers. Electricity generating plants, meanwhile, are now owned by separate power companies that sell their juice to utilities, which in turn pass that cost on to consumers.

Both companies, as well as other utilities in Massachusetts, have recently said they expect to lower the power costs they pass along to ratepayers, by far the most expensive component of customers' electric bills.

Based on lower power costs, National Grid recently said it would cut that portion of the bill by 23 percent, while NStar recently slashed that portion of its rates by 27 percent.

Starting next year, National Grid also wants to tack on a fee of 0.161 cents per kilowatt hour - equal to about 2 percent of its current commodity charges - to recoup electricity costs that it hasn't been able to collect from some delinquent customers.

National Grid's parent company, National Grid PLC, in London reported this week that operating profits in its US electricity distribution and generating arm fell 20 percent, to $403 million, last fiscal year, largely due to fixing damage and outages created by storms such as the severe ice storm that swept New England last December. The company doesn't break out earnings for its Massachusetts unit.

In addition to the requested rate hike, National Grid said it is also trying to cut costs in Massachusetts by consolidating facilities and taking other steps to become more efficient.

"However, all of these efforts have been dwarfed by the sheer volume of capital that has been and will continue to be required to maintain a safe and reliable system," the company said in a written statement.

Todd Wallack can be reached at twallack@globe.com.