National Grid's Gas Rate of Return on Common Equity for the Rate Year Ended December 31, 2014

Strategic Insights -

National Grid, as KeySpan Gas East Corporation d/b/a National Grid, has submitted a computation of its gas rate of return on common equity for the rate year ended December 31, 2014, in accordance with Section X.E of the Merger and Gas Revenue Requirement Joint Proposal dated July 6, 2007. The company's earned return on equity for the rate year ended December 31, 2014, was 5.16%, which is below the 10.5% threshold above which earnings are to be shared between National Grid and its customers. As a result, National Grid did not generate any earnings that are subject to sharing with customers under the JP-2.

Key Takeaways:

  • National Grid's earned return on equity for the rate year ended December 31, 2014, was 5.16%, which is below the 10.5% threshold for sharing earnings with customers.
  • The company's actual operating income before income taxes was $146,392, and its rate base was $2,087,925.
  • National Grid's return on rate base was 5.50%, and its earned return on common equity was 5.16%.
  • The excess return on common equity was -5.34%, indicating that National Grid did not generate any earnings that are subject to sharing with customers.
  • The calculation of income tax actual results for the twelve months ended December 31, 2014, shows that the company's federal income tax was $24,913, and its state income tax was $6,723.
  • The rate base summary for the gas actual results for the twelve months ended December 31, 2014, shows that the company's accumulated deferred income tax was ($648,098), and its unamortized costs were (66,369).
  • The capitalization matrix calculation of gas equity earnings cap revenue adjustment for the twelve months ended December 31, 2014, shows that the company's equity earnings cap revenue adjustment was $0.

Statistics:

  • Earned return on equity: 5.16%
  • Actual operating income before income taxes: $146,392
  • Rate base: $2,087,925
  • Return on rate base: 5.50%
  • Earned return on common equity: 5.16%
  • Excess return on common equity: -5.34%
  • Federal income tax: $24,913
  • State income tax: $6,723
  • Accumulated deferred income tax: ($648,098)
  • Unamortized costs: (66,369)
  • Equity earnings cap revenue adjustment: $0

Sources:

  • Section X.E of the Merger and Gas Revenue Requirement Joint Proposal dated July 6, 2007
  • Order Authorizing Acquisition Subject To Conditions And Making Some Revenue Requirement Determinations For KeySpan Energy Delivery New York and KeySpan Energy Delivery Long Island, issued and effective September 17, 2007, in Case 06-M-0078
  • National Grid's computation of gas rate of return on common equity for the rate year ended December 31, 2014.