National Grid’s Rate Plan: A Balancing Act Between Investment and Affordability in Upstate New York

National Grid has submitted a pivotal three-year rate plan to the New York Public Service Commission (PSC), proposing a delicate equilibrium between infrastructure modernization, climate compliance, and customer affordability. The plan, covering May 2025 through March 2028, seeks to raise $1.78 billion annually for grid upgrades while addressing rising operational costs and aging infrastructure. The outcome of this filing could significantly impact investor returns and customer costs in New York’s upstate region.

Rate Increases and Affordability Measures

The plan’s most immediate effect is a phased increase in customer bills. Residential electricity users, averaging 625 kWh/month, would see monthly bills rise by $14.32 in the first year, tapering to $4.34 by the third year. Natural gas customers using 78 therms/month face steeper hikes: $7.66 in year one, $8.08 in year two, and $9.18 in year three. These adjustments reflect the costs of critical investments, including retiring 112 miles of leak-prone gas pipelines and expanding renewable energy infrastructure.

To mitigate affordability concerns, National Grid proposes $290 million in bill discounts for vulnerable households, including $72 million in the first year. A $3 million shareholder-funded program will also provide weatherization assistance for low-income families. Additionally, the plan includes cold-weather protections, outreach to underserved communities, and a dedicated liaison for Indigenous groups.

Infrastructure and Climate Commitments

The plan emphasizes alignment with New York’s Climate Leadership and Community Protection Act (CLCPA), allocating $800 million for Phase 1 programs (renewables and grid modernization) and $2.1 billion for Phase 2 transmission projects. These investments aim to support the state’s goal of 70% renewable energy by 2030 and net-zero emissions by 2045.

The company also highlights job creation, projecting over 480 new positions in grid operations, modernization, and customer programs. This underscores the plan’s dual focus on economic development and climate resilience.

Regulatory and Stakeholder Dynamics

The proposal was developed with input from the PSC staff, labor unions (including IBEW Local 97), and environmental groups. This collaborative approach reflects the PSC’s emphasis on balancing affordability, grid reliability, and emissions targets. The PSC’s final decision, expected within months, will hinge on whether the 9.5% requested return on equity (ROE) aligns with regulatory benchmarks.

Historically, U.S. utilities have averaged ROE approvals between 8.5% and 10%, suggesting National Grid’s request is within a reasonable range. However, investor returns depend on whether the PSC fully approves the ROE and infrastructure costs.

Risks and Opportunities for Investors

The plan’s success hinges on regulatory approval and execution risks. Delays in infrastructure projects or pushback on rate hikes could pressure earnings. Conversely, approval of the 9.5% ROE and CLCPA-aligned investments would bolster National Grid’s financial stability and position it as a leader in decarbonization.

The deferred non-essential programs and efficiency measures aim to limit customer burden while preserving critical investments. This cautious approach may reduce short-term volatility but could also slow innovation if deferred projects lack funding later.

Conclusion

National Grid’s rate plan represents a strategic pivot to modernize New York’s grid while addressing climate imperatives and equity concerns. With $1.78 billion annually earmarked for infrastructure and affordability programs, the plan’s approval could deliver a 9.5% ROE—key for investor returns—while mitigating bill impacts through discounts and weatherization aid.

However, the PSC’s decision will be pivotal. If approved, National Grid positions itself as a resilient utility capable of balancing growth, affordability, and sustainability. If scaled back, the company may face pressure to restructure costs or delay projects. For investors, National Grid’s stock—already up 12% year-to-date—could gain further momentum if the PSC endorses its ROE and infrastructure roadmap.

In a sector increasingly scrutinized for climate action and equity, National Grid’s plan offers a blueprint for utilities navigating similar challenges. The stakes are high: upstate New York’s 2.3 million customers stand to benefit from a safer, greener grid, while investors weigh the promise of regulated returns against the risks of regulatory pushback. The outcome will shape both National Grid’s trajectory and the broader energy transition in the Northeast.