National Grid power failure
Jul 22, 2012 (Menafn - Times Union - McClatchy-Tribune Information Services via COMTEX) --It's been a tough couple of weeks for National Grid.
First, Steven Holliday, the London-based utility's CEO, was accused of ruining the career of a subordinate with whom he was allegedly having an affair.
British regulators then decided, on Monday, that National Grid's proposed eight-year, 46 billion rate hike for its United Kingdom customers was too rich -- and shaved off 12 billion in a counter-proposal that National Grid said does not "adequately reflect" the massive infrastructure investments it has to make.
That decision by Britain's Office of Gas and Electricity Markets set off speculation in Britain's notoriously knee-jerk press corps that the company might put its U.S. assets in New York and New England up for sale -- a conclusion the company vehemently denies.
And perhaps the biggest blow came on Wednesday when New York state acting Inspector General Catherine Leahy Scott said that an investigation by her office found that state regulators at the Public Service Commission had accepted more than 7,000 in gifts from employees at the utilities that they monitored over a 10-year period.
The most egregious of the allegations involved two PSC safety engineers responsible for ensuring the safety of National Grid's natural gas system in the New York City area. They accepted nearly 3,000 in free meals and golf outings.
Admitting that mistakes were made, National Grid has agreed to pay a 1.67 million settlement that will keep the PSC from suing the utility in state supreme court. The company took information about the improper gifts to the PSC in the summer of 2010. That information later became the start of a case that was eventually referred to the IG's office in early 2011.
Tom King, head of National Grid's U.S. business, once again had egg on his face. King, who is based near Boston, had to apologize to regulators and customers -- a scene reminiscent of his mea culpa following the company's embarrassing accounting snafu in 2010 that led to a separate and ongoing PSC investigation.
In an email obtained by the Times Union that was sent to U.S. employees in the wake of the IG's report, King wrote "it is clear we all can and need to do a better job" of understanding proper business practices.
"This incident is an unfortunate and strong reminder about how we can never be careful enough when it comes to making everyday decisions -- decisions that will have long-lasting consequences to our reputation," King wrote.
This all comes at the worst time for National Grid, which has been widely praised for its response to the widespread devastation of tropical storms Irene and Lee last summer.
National Grid has asked the PSC to reset its rates. The company is seeking to bring in 171 million more in additional annual revenue to provide healthier returns for its shareholders and ensure the safety and reliability of its gas and electric systems.
But many questions remain about the size and scope of the gift scandal. The IG's report covers the period between 2001 and 2010. But National Grid says its settlement with the PSC covers just a three-year period, between 2009 and 2012. Neither the IG's office nor the PSC will explain the discrepancy.
National Grid spokeswoman Jackie Barry said Friday that more details will have to wait until the PSC's five-member board meets on Aug. 14 to discuss the case and presumably votes to accept the penalty.
"There will be more discussion about this at the hearing that they're having," Barry said, referring to the PSC meeting next month. "We take this very seriously, and we moved to disclose this to the PSC as soon as we found out about it."
The IG's office also made clear in its report that other utilities were involved in providing gifts to safety staff at the PSC on more than 200 occasions. But since that investigation dates back to 2001, some of those gifts may have been technically OK.
According to the IG report, the state Public Officers Law limited state employees from receiving gifts valued at 75 or more. But the Public Ethics Reform Act of 2007 changed to rule to any gift "having more than a nominal value."
The case has also been forwarded to the New York State Joint Commission on Public Ethics for consideration. A spokesman for that board declined comment, saying it does not disclose details of investigations, but the ethics commission oversees both ethics of state employees and lobbying activities.
lrulison@timesunion.com --518-454-5504 --@larryrulison
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