FORM 425
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 425
(LOGO) NATIONAL GRID GROUP, PLC
(Exact name of registrant as specified in charter)
UNITED KINGDOM
(State or other jurisdiction of
incorporation or organization)
15 Marylebone Road, London NWI 5JD, England
(Address of principal executive offices)
Registrant's telephone number, including area code
(011 44 207 312 5600)
<PAGE>
Filed by National Grid Group plc
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 of the
Securities Exchange Act of 1934
Commission File No.: 001-02987
Subject Company: Niagara Mohawk Holdings, Inc.
THE FOLLOWING ARE THE SLIDE PRESENTATIONS MADE BY NIAGARA MOHAWK
IN CONNECTION WITH ANNOUNCEMENT OF ITS NEW YORK REGULATORY FILING
<PAGE>
[LOGO] National Grid
National Grid/Niagara Mohawk Merger
New York Rate Plan Proposal - Overview
January 17, 2001
<PAGE>
Outline
Discussion of overall objectives and approach
Overview of proposal
Schedule and issues
<PAGE>
Objectives and Approach
Objectives
Lower and more stable energy delivery rates for customers
Continued development of competitive supply and demand
market with protections for small customers
Resolve outstanding issues before the PSC
Improve Niagara Mohawk's financial capability
Approach
Rate Settlement included with merger approval filing
Compare stand-alone Niagara Mohawk case and provisions of
Power Choice
Rely on balanced incentive mechanisms to achieve agreed
policy objectives
<PAGE>
Prospects looking forward
Higher prices driven by commodity increases
- gas costs; ISO costs; expiration of contracts
Commodity costs alone are likely to cause average total price
increases on the order of 8-12% from today for customers on fixed
price service
Rate plan designed to reduce delivery prices through managing
controllable costs, and to stabilize commodity costs
<PAGE>
Key Elements of Proposal
Reduction in electricity delivery charges
10 year "freeze" of reduced electricity delivery charges
Power supply costs stabilized for small customers
1 year extension of current Gas Settlement Agreement
Incentive mechanisms to encourage
- Cost reductions; service quality; transmission
congestion management
<PAGE>
Reduction in Delivery Prices
$132 million annual reduction* in delivery charges (T,D+CTC)
related to the merger ($280 million reduction from today's
delivery prices)
CTC recovery reduced and extended to reduce and flatten
delivery rates
NY share of estimated $90M per year of synergy savings
included in proposal
* Relative to prices that would otherwise become effective
9/1/01 under Power Choice.
10 year "freeze" in reduced electric delivery charges
After initial reduction, delivery rates then fixed for 10
years, subject to specified extraordinary events
e.g. tax, law, regulatory and accounting changes; high
inflation; transmission revenue adjustments
Roughly $970 million NPV in savings over 10 years compared
to NiMo stand-alone revenue requirements*
* Includes a 1% increase in T,D,CTC in years 4&5 of Power
Choice and a return on the MRA regulatory asset post Power
Choice.
<PAGE>
Anticipated Average Price Impacts Differ by Customer Group -
Residential
Average for SC1 customers on Standard Offer Service
Delivery rates reduced by 7.8%
- Rate plan moderates projected total increases from
12.4% to 6.1%
* Prices include all surcharges. Prices without the merger
include a 1% increase for T,D,CTC.
Projected Residential Price Impacts
(SC-1 on Standard Offer Service - c/kWh)
<TABLE>
<CAPTION>
2002
Today's without 2002 with
rates merger merger
------- ------- ----------
<S> <C> <C> <C>
Commodity 3.5 5.5 5.3
Delivery 8.6 8.1 7.5
Total 12.1 13.6 12.8
</TABLE>
All prices are forecast and presented in cents per kWh.
Commodity costs in 2002 include all ancillary services charges.
Anticipated Average Price
Impacts -Small Commercial
Average for SC 2D customers on Standard Offer Service
Delivery rates reduced by 3.8%
- Rate plan moderates projected total increases from
11.0% to 7.9%*
* Prices include all surcharges. Prices without the merger
include a 1% increase for T, D and CTC.
Projected Small Commercial Price Impacts
(SC-2D on Standard Offer Service - c/kWh)
<TABLE>
<CAPTION>
2002
Today's without 2002 with
rates merger merger
------- ------- ----------
<S> <C> <C> <C>
Commodity 3.4 5.3 5.3
Delivery 7.9 7.2 7.0
Total 11.3 12.6 12.2
</TABLE>
All prices are forecast and presented in cents per kWh; commodity
costs in 2002 include all ancillary services charges.
Anticipated Average Price Impacts for Large Commercial and Small
Industrial Customers
Average for SC 3 customers on Standard Offer Service
Delivery rates reduced by 6.4%
- Rate plan moderates projected total increases from
9.9% to 5.7%*
* Prices include all surcharges. Prices without the merger
include a 1% increase for T, D and CTC.
Projected Large Commercial and Small Industrial Price Impacts
(SC-3 on Standard Offer Service - c/kWh)
<TABLE>
<CAPTION>
2002
Today's without 2002 with
rates merger merger
------- ------- ----------
<S> <C> <C> <C>
Commodity 3.3 5.0 4.9
Delivery 7.3 6.6 6.2
Total 10.5 11.6 11.1
</TABLE>
All prices are forecast and presented in cents per kWh; commodity
costs in 2002 include all ancillary services charges.
Anticipated Average Price Impacts for Large Commercial and
Industrial Customers
Average for SC 3a customers on Market Priced Service
Delivery rates reduced by 13.4%
- Rate plan provides even larger projected bill
reductions (14.5% vs. 9.9% reductions without the
merger)*
- Contract customers given option to move back to
tariff pricing for delivery charges
* Prices include all surcharges. Prices without the merger
include a 1% increase for T,D and CTC.
Projected Large Commercial and Industrial Price Impacts
(SC-3A on Market-Priced Service)
<TABLE>
<CAPTION>
2002
Today's without 2002 with
rates merger merger
------- ------- ----------
<S> <C> <C> <C>
Commodity 5.1 4.7 4.7
Delivery 3.4 2.9 2.5
Total 8.4 7.6 7.2
</TABLE>
All prices are forecast and presented in cents per kWh; commodity
costs in 2002 include all ancillary services charges.
Electric Commodity Issues
Niagara Mohawk's existing portfolio provides a valuable
hedge for customers
Initially, a majority of energy supplies needed for
Standard Offer Service are hedged
Propose to levelize costs over first 4 years
Costs in all years adjusted thru a commodity adjustment
clause
One time offer to small customers to move back to
Standard Offer Service
Largest customers will be moved to spot market pricing
as existing hedged contracts expire
Niagara Mohawk is also exploring other commodity options
Electric Commodity Issues
Standard Offer v. Market Price
[Graph]
Delivery Rate Path Proposal
T & D prices will be combined with the CTC to create bundled
delivery prices
A T & D guideline rate is created which will escalate at
1.7%/year. The guideline is used to determine:
certain exogenous factor adjustments during the rate
plan
T&D rates after the rate plan period
synergy savings achieved during the rate plan period
Remaining "headroom" under the bundled delivery rate path
allows for CTC recovery
Efficiency gains beyond guideline shared 50/50 after rate
plan period thru an adjusted rate of return
provides a reasonable opportunity to recover merger
costs only if savings are really achieved
Rate Path Proposal
NiMo Conceptual Delivery Rate Path Proposal
[Graph]
Other Major Provisions
Service Quality Incentives
$22 million potential incentive/penalty per year
Congestion Management Incentive
Share of savings generated for customers
Extension of current low-income program (LICAP)
Modifications to corporate structure and affiliate rules
Establishment of storm and environmental response funds
Extension of Current Gas Settlement Agreement
Current gas delivery rates frozen through August 2003
Propose to extend current agreement by one year,
maintaining:
Delivery rate freeze
Safety incentives
Programs to facilitate competitive market
Schedule and Issues
Schedule
Issues
[LOGO] National Grid
National Grid/Niagara Mohawk Merger
New York Rate Plan Proposal - Specific Rate Items]
January 17, 2001
Outline
Commodity Services
Kill one and add three more acronyms: SOS, MPS, CAC
Other Rate Issues
Rate design reductions, contracts,
NYPA programs
Outdoor Lighting
Summary of Commodity Issues
DCA is Eliminated
Pre-merger, small customers have a hedge through the
Delivery Charge Adjustment ("DCA"). Example (cents/kWh)
<TABLE>
<CAPTION>
Design Actual Bill
------ -----------
<S> <C> <C>
Delivery 8 8
Backout 3
Commodity 5
DCA -2
Total 11 11
</TABLE>
Standard Offer Service ("SOS")
Definition:
- a quasi-fixed price hedged commodity service
- subject to limited adjustment through the Commodity
Adjustment Clause ("CAC")
CAC will adjust for:
- variances in supply contract costs,
- ISO charges including ancillary services,
- limited quantities of unhedged purchases or sales for
those periods when hedged supplies do not equal demands,
etc.
Market Priced Service ("MPS")
Definition:
- commodity electricity service priced at market prices,
i.e.,
- energy NYISO day-ahead price of energy,
- installed capacity,
- all ancillary service charges, and
- New York Power Authority Transmission Adjustment
Charge
- adjusted for all losses
- Similar to market priced under the current NMPC Rule 46
except that:
- all NYISO ancillary service charges and NTAC shall
be included; including energy imbalance
credit/charges.
SOS Eligibility
Existing small customers on PSC 207
Residential (SC-1, SC-1B, SC-1C)
Commercial (SC-2ND, SC-2D)
Medium commercial and industrial (SC-3, small SC-4 (less
than 2 MW), SC-5)
Outdoor lighting (all PSC 214 service classifications who
are currently taking commodity service from NMPC)
New customers on PSC 207
Residential (SC-1, SC-1C)
Commercial (SC-2ND, SC-2D)
Outdoor lighting (all PSC 214 service classification
customers)
All new customers must commit to a minimum term that is the
lessor of one year or until termination of service
Existing Customers in eligible classes who are currently
on market price service or
are taking service from an ESCo
will have a one-time opportunity to elect SOS commodity
by notifying the Company within 90 days from the
effective date (subject to availability)
Customers who are not eligible for SOS
Customers may leave SOS at any time (except for new customer
restriction)
to take service from an alternate supplier or Market
Priced Service
Customers who leave SOS are not allowed to return to SOS
They will be served under MPS if they want to buy the
commodity from Niagara Mohawk
Customers Transferred to MPS
Existing customers on PSC 207 SC-3A, SC-4 (greater than 2
MW), SC-11 and SC-12
New Customers on SC-4 and SC-3
New small customers that do not provide a 12-month commodity
term agreement
As supply contracts expire, customers will be transferred to
MPS from SOS based upon class and size
Anticipated that all SC-3 will be migrated to MPS by
2005
Projected Supply
[GRAPH]
Rate Issues
The volumetric portion of delivery rates is reduced
SC-11/12 contract customers shall have an option to
effectuate a new contract at the applicable standard rates
subject to a demand ratchet from previous 24 month peak
T&D and CTC will be bundled in tariffs
A transmission adjustment clause ("TAC")
shall be implemented to collect or reimburse variation
in wholesale transmission revenues
An economic development fund of $12.5 million per year
is established to reduce rates to qualifying customers
through SC-12 for new growth and contestable customers
Delivery rates for existing NYPA programs are frozen
any new hydro allocations shall be assessed the
applicable distribution charge
Outdoor Lighting
Delivery Charges are frozen for 10 years (subject to
exogenous factors & TAC)
Outdoor lighting contribution to CTC is currently
negligible
CTC will be set to zero rather than become negative
- a negative CTC would be charging less than embedded
T&D costs and result in rate shock when CTC is
eliminated in the long term
Other classes will see delivery price reductions associated
with resetting the CTC
CTCs are already zero for this class
Projected increases in overall prices are driven by
projected commodity price increases and are larger because
there are no offsetting delivery price reductions
Summary of Commodity Issues
Quasi-fixed SOS instead of DCA as hedged mechanism
Simpler
Consistent with other National Grid USA regulated
subsidiaries
SOS "rules" to prevent gaming
Transfer SC-3 to market and retain hedge for smallest
customers
Price responsiveness from larger customers recent PSC
order for more demand response
Larger customers tend to be more sophisticated
Provides more hedge and transition for smaller customers
The definitive proxy statement/prospectus filed with the
Securities and Exchange Commission (the "SEC") by National Grid
and Niagara Mohawk in connection with the transaction contains
important information regarding the transaction and we urge you
to read it and any other relevant documents when they become
available. A free copy of the proxy statement/prospectus and
other documents filed by the two parties with the SEC is
available at the SEC's web site at http://www.sec.gov.
