N.Y. warns of National Grid rate hikes after snafu

Utility vows customers won't bear cost

020913NEMOfn11A nearly $1 billion software disaster at National Grid could spark further rate hikes in New York, state regulators there have warned — but a Grid spokesman and Massachusetts' own oversight agency are insisting the companywide computer snafu won't show up on bills in the Bay State or elsewhere.

"The Department is aware of ongoing challenges with National Grid's software and has been in contact with the company as they work to resolve this issue," said Amy Mahler, spokeswoman for the Massachusetts Department of Public Utilities. "Costs 
related to repairing the company's software would not be approved for recovery through rate increases."

A New York Public Service Commission audit released earlier this month revealed the stunning over-budget tech overhaul of the SAP software and states: "These costs are significant, and careful documentation and review will be required to assure they are not passed on to ratepayers."

The audit found the cost of the software — which impacts finance, accounting and payroll — was originally budgeted at $383.9 million, but after "extensive manual workarounds," will now cost Grid a total of $945.1 million. Some 120 full-time employees will also be permanently hired, according to the audit.

"The SAP system has been stabilized," said National Grid spokesman Jake Navarro. "We are monitoring and measuring its performance, and no stabilization costs will be borne by customers. The majority of the total costs of SAP were associated with stabilizing the system."

The software woes left hundreds of Bay State Grid workers unpaid while responding to the aftermath of Hurricane Sandy. Grid subsequently agreed to pay $2 million in penalties and damages for its response to the storm — and was prohibited from passing those costs onto ratepayers — under a settlement reached with Attorney General Martha Coakley.

National Grid, citing rising supply costs, already announced earlier this month that electric rates will be 37 percent higher than last year, beginning Nov. 1.

Grid announced last week that President and 
Executive Director Tom King will step down on March 31 and that Dean Seavers, a former General Electric and United Technologies executive, will 
replace him as part of a "long-planned succession effort."

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