Dowd Testimony Final - RIPUC · 6/1/2009 · Witness: Dowd Page 4 of 19 S:\RADATA1\2009 neco\General Rate Case\Comp & Benefits (Dowd)\Testimony\Dowd Testimony (Final).doc 1 companies

$Page 1: Dowd Testimony Final - RIPUC · 6/1/2009 · Witness: Dowd Page 4 of 19 S:\RADATA1\2009 neco\General Rate Case\Comp & Benefits (Dowd)\Testimony\Dowd Testimony (Final).doc 1 companies$
National Grid The Narragansett Electric Company

INVESTIGATION AS TO THE PROPRIETY OF PROPOSED TARIFF CHANGES

Testimony and Schedules of:

William F. Dowd Kimbugwe A. Kateregga

Book 4 of 9 June 1, 2009 Submitted to: Rhode Island Public Utilities Commission Docket No. R.I.P.U.C. ____ Submitted by:

Testim

ony of

William

F. Dow

d

THE NARRAGANSETT ELECTRIC COMPANY d/b/a NATIONAL GRID

Docket No. R.I.P.U.C. ____ Witness: Dowd

PRE-FILED DIRECT TESTIMONY

OF

WILLIAM F. DOWD

1



Table of Contents

I. Introduction and Qualifications .....................................................................................1 II. Purpose of Testimony ....................................................................................................2 III. Overview of National Grid’s Approach to Wages and Benefits....................................2 IV. Non Union Wages..........................................................................................................9 V. Union Wages................................................................................................................12 VI. Benefit Plans ................................................................................................................14 VII. Conclusion ...................................................................................................................19

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S:\RADATA1\2009 neco\General Rate Case\Comp & Benefits (Dowd)\Testimony\Dowd Testimony (Final).doc

I. Introduction and Qualifications 1

Q. Mr. Dowd, please state your name and business address. 2

A. My name is William F. Dowd. My business address is 52 Second Avenue, Waltham, 3

Massachusetts 02451. 4

5

Q. By whom are you employed and in what capacity? 6

A. I am employed by National Grid USA Service Company, Inc., a subsidiary of National 7

Grid USA, and currently hold the position of Senior Vice President of Labor Relations. 8

My responsibilities include overseeing labor relations for National Grid, including 9

Narragansett Electric Company. Throughout this testimony, I will refer to National Grid 10

USA and its subsidiaries as “National Grid.” For purposes of clarity, where I intend to 11

refer to Narragansett Electric Company, I will refer to it as the “Company.” 12

13

Prior to being appointed to my current position in August 2007, I was the Vice President 14

of Compensation and Benefits for National Grid. In that capacity, I developed and 15

implemented human resource strategy, policies and procedures relating to employee 16

compensation and benefits for both union and non-union personnel in the United States, 17

which included National Grid’s New England and Upstate New York utility operations. 18

19

Q. Please describe your educational background and business experience. 20

A. I received a BA degree from Bridgewater State College in Bridgewater, MA and a 21

Masters Degree in Public Administration from Suffolk University in Boston, MA. I 22

joined National Grid’s predecessor, the former New England Electric System, in 23

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December 1984 and have held a variety of professional and managerial positions in 1

Human Resources since then, primarily focused on employee benefits, compensation and 2

labor relations. 3

4

Q. Have you previously testified before the Public Utilities Commission 5

(“Commission”) or any other regulatory commissions? 6

A. I have not previously testified before the Commission. However, I have testified before 7

both the New York Public Service Commission and the Massachusetts Department of 8

Public Utilities. 9

10

II. Purpose of Testimony 11

Q. What is the purpose of your testimony? 12

A. The purpose of my testimony is to support the Company’s revenue requirement as it 13

relates to employee compensation, including wages and benefits, and to discuss National 14

Grid’s efforts to manage and control the costs of these programs. Specifically, my 15

testimony discusses the Company’s policies regarding employee wages and benefits and 16

the costs associated with them for the Test Year ending December 31, 2008 and the Rate 17

Year ending December 31, 2010 18

19

III. Overview of National Grid’s Approach to Wages and Benefits 20

Q. Please describe National Grid’s philosophy relating to employee wages and benefits 21

and how it manages those costs. 22

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A. National Grid has developed a policy that it calls its Total Rewards Program to provide 1

employees with an overall package of wages and benefits that is market competitive, 2

offers flexibility and choice and supports a high performance culture by directly linking 3

performance to rewards. By maintaining a comprehensive and competitive approach to 4

compensation that establishes appropriate levels of pay and benefits, National Grid can 5

attract and retain a high quality workforce and motivate employees to improve their 6

performance. At the same time, such an approach is cost-effective because it provides 7

compensation that is no greater than that paid by comparable employers, but structures 8

the compensation so that it is tied to achievement of goals that are consistent with 9

corporate objectives. 10

11

Q. Please describe National Grid’s efforts to manage or control the cost of the wages 12

and benefits it offers. 13

A. As part of its efforts to control the cost of our overall compensation structure, National 14

Grid monitors the marketplace to ensure that its benefit programs are both cost-effective 15

and sufficient to enable it to attract and retain the highly skilled workforce needed to 16

deliver excellent customer service and achieve the financial success required by the 17

capital markets. 18

19

The most recent changes to National Grid’s pay and benefits structure were implemented 20

as a result of the merger process associated with the acquisition of KeySpan Corporation 21

(“KeySpan”). As part of the integration process related to that merger, National Grid 22

commissioned a market analysis of its wages and benefits to help align the two 23

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companies. While the overall value of the compensation programs at the two companies 1

was roughly equivalent prior to the merger, the relationship between pay and benefits 2

differed, with legacy National Grid providing more value to employees through benefit 3

plans and less value through variable pay1. The market analysis showed that the legacy 4

KeySpan approach of providing less costly benefit plans but a greater level of variable 5

pay was more in line with what other employers in the market were providing. National 6

Grid believed that changing its approach to be more in line with the prior KeySpan 7

approach would be beneficial, not only because it would better position the merged 8

company to be competitive with the compensation structure offered by other similar 9

employers, but also because it would better align the compensation structure with 10

National Grid’s efforts to achieve its corporate goals. As a result, National Grid 11

undertook to modify the benefits it offers by reducing the fixed cost components of those 12

programs while at the same time increasing the variable component of pay. 13

14

Q. What specific changes did National Grid make to its benefit plans to reduce the level 15

of fixed costs as it shifted more compensation to the variable pay component? 16

A. During fiscal 2009 (the twelve months ended March 31, 2009), National Grid made a 17

number of changes in its medical, dental, and life insurance programs to reduce costs. 18

Among other things, National Grid made the following changes: 19

• Co-pays for office visits and prescription drugs under the health care 20 program were increased, and a deductible/coinsurance arrangement was 21 implemented for in-patient hospital care. 22 23

1 Base pay levels were relatively similar.

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• The prescription drug program was carved out of each medical plan and 1 was replaced in its entirety with CVS Caremark after undertaking a 2 competitive bidding process. This approach made it possible for National 3 Grid to generate savings by leveraging a volume discount. 4

5 • In the dental program, employee premium sharing was increased from 6

20% to 35%, benefits in the major restorative category were reduced to 7 50% from 60%, and adult orthodontia was eliminated. 8

9 • In the life insurance program, the coverage level was reduced from two 10

times annual base bay to one times annual base pay. 11 12 13 Q. Please explain National Grid’s approach to managing employee wage levels since it 14

acquired KeySpan. 15

A. As I indicated earlier and will discuss in more detail later in my testimony, National 16

Grid’s compensation program includes two major wage components—base pay and 17

variable pay (sometimes called incentive pay). Both components are critical to meeting 18

National Grid’s overall goals for the compensation program and must be considered 19

when comparing National Grid’s compensation levels to market data. 20

21

Q. Please explain why National Grid includes a variable pay component as a significant 22

part of total compensation for its employees. 23

A. As I noted earlier, by strengthening the link between compensation and the achievement 24

of personal and corporate objectives, National Grid is seeking to drive employee 25

performance in a manner that enhances its ability to meet its customer service and overall 26

corporate objectives. Such an approach is common today, and in fact, at companies the 27

size of National Grid, nearly 100% of surveyed companies had variable pay plans, and 28

over 90% of employees at those companies participated in those plans. 29

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Q. There has been significant public discussion in recent months regarding the role of 1

incentive compensation and the payment of bonuses. How do those issues relate to 2

the compensation structure that National Grid has implemented? 3

A. I am aware of the recent negative press coverage surrounding bonus compensation paid at 4

some financial companies, and the fact that this has caused some people to regard 5

incentive compensation programs as synonymous with over compensation. Contrary to 6

the concerns that have been raised for some of those compensation programs, however, 7

National Grid’s approach to variable pay is designed to ensure that (1) employees’ total 8

compensation is reasonable after considering base and variable pay on an aggregate 9

basis, (2) variable pay is based on both the overall performance of the company and the 10

performance of the individual, and (3) individual performance goals reflect objectives 11

that create benefits for customers and shareholders. If National Grid were to compensate 12

its employees only with the level of base pay provided for under the current 13

compensation program, it would not be competitive with others in the market and over 14

time customers would be harmed because National Grid would be unable to attract and 15

retain the type of qualified employees needed to provide safe, reliable and efficient 16

service. 17

18

Unlike the compensation programs that have gotten so much national attention, National 19

Grid’s compensation program is carefully designed to use variable pay in a manner that 20

gives employees a stake in the company’s success in achieving its objectives and 21

provides a tangible reward to employees for performing their jobs at the highest possible 22

level. The variable pay component of the compensation structure is designed to provide a 23

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direct and specific incentive to employees to achieve or exceed specified financial, safety, 1

and other operating performance goals. The financial objectives relate to earnings per 2

share, net operating profit and cash flow. Individual objectives relate to safety, reliability 3

and customer satisfaction targets that are aligned with National Grid’s service quality 4

standards and vary depending on the part of the business in which an employee works. 5

Individual objectives also often include the successful completion of specific projects or 6

improvement initiatives. Attached as Schedules NG-WFD-1, NG-WFD-2, NG-WFD-3, 7

NG-WFD-4, and NG-WFD-5 are the variable pay plan guides that are provided to non-8

union employees. These guides explain the performance elements of the plan and the 9

potential value to participants for achieving them. The Company’s revenue requirement 10

in this case does not include the variable pay component for National Grid’s Band A 11

executives (National Grid’s most senior executives), so I am including only the employee 12

guides for our Band B through F employees. 13

14

Using this approach, an employee’s pay is aligned with both the financial performance 15

and health of the company and the achievement of established performance standards that 16

directly benefit customers. For example, field operations employees have goals related to 17

safety and reliability, while customer service employees have goals related to customer 18

satisfaction. Structuring compensation in this manner is fundamentally more cost-19

effective than the traditional approach of using bonuses on top of base compensation that 20

is already at a competitive level on its own because it directly links performance and 21

compensation. 22

23

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Q. Does compensation for union employees also include a variable pay component? 1

A. Yes. The same theory that applies to non-union employees applies to union employees, 2

which is that variable pay gives employees a stake in the Company’s performance and 3

provides direct incentives for employees to strive to meet or exceed metrics tied to safe, 4

reliable, and efficient performance, which, in turn, results in better service and lower 5

costs for customers. As with the non-union program, the variable compensation 6

component is part of, not in addition to, the overall payroll expense that is reasonable and 7

necessary to hire and retain quality employees. Because this philosophy toward 8

compensation is an important part of National Grid’s effort to deliver value to 9

shareholders and maintain and improve customer service, including a component of 10

variable pay as a component of compensation even for union employees has been one of 11

National Grid’s priorities in labor negotiations. 12

13

Q. Why should incentive pay be included in the cost of service in this case? 14

A. As I noted earlier, it is critical that incentive (or variable) compensation be taken into 15

account because it is a central part of National Grid’s compensation philosophy, and the 16

market data National Grid has provided demonstrates that compensation levels are 17

reasonable based on consideration of the total pay package for its workforce. Equally 18

important, the compensation plans are designed to encourage good employee 19

performance, with 40% to 50% of the incentive pay being linked to individual objectives 20

that are directly tied to established service quality measures such as safety, reliability and 21

customer satisfaction. The remaining portion of the incentive pay is tied to company 22

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financial performance, forming the critical link between compensation and the overall 1

financial success of the business. 2

3

IV. Non-Union Wages 4

Q. Please describe how National Grid’s compensation program is applied to non-union 5

employees. 6

A. A non-union employee’s base pay generally grows over time as a result of annual merit 7

increases, which are awarded based on individual employee performance and a 8

comparison to the 50th percentile of market. An employee’s base pay (and the potential 9

for variable pay) may also increase to account for promotions, increased job 10

responsibilities, or increased skills and competencies. Annual base pay changes, if any, 11

go into effect on July 1 of each year. 12

13

Variable pay is determined following the close of each fiscal year, but is based on award 14

levels that are set at the beginning of the year and are tied to various corporate and 15

personal objectives that are also set at the beginning of the year. Results are calculated in 16

April and May, with variable pay payments made in early June. Both the merit increase 17

in base pay and variable pay are linked to performance results through a performance 18

appraisal and measurement process, with the results affecting the actual level of payout of 19

variable pay for the year just concluded and the level of base pay for the ensuing year. 20

21

Q. What amounts are included in the revenue requirement for non-union wages? 22

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A. The Company’s Rate Year payroll included in operating expense for non-union 1

employees is $22,657,396, of which $17,200,340 has been allocated from National Grid 2

USA Service Company and $855,032 has been allocated from former KeySpan service 3

companies. This reflects an increase of $960,779 from the Test Year expense of 4

$21,696,617 to reflect annual overall wage increases of 1.5% for the twelve months 5

beginning July 1, 2009. In addition, the Company has included a 3% increase for the six 6

months beginning July 1, 2010, which I will discuss in more detail below. 7

8

Q. How does National Grid determine the pay levels for the various levels of non-union 9

employees? 10

A. National Grid seeks to set pay at approximately the median level for comparable 11

companies in the northeast United States. To determine the median pay level for non-12

union employees, National Grid benchmarks certain positions within each salary 13

band/level and compares overall pay for these benchmark jobs to the 50th percentile of 14

overall pay for comparable jobs in similar size companies in the northeast industrial 15

sector, based on market surveys. For this purpose, National Grid participates in an 16

annual study done by Towers Perrin, a national consulting firm. A copy of the study for 17

2008 is attached as Schedule NG-WFD-6. In addition, National Grid reviews other 18

publicly available data, such as the Salary.com survey/database called “Comp Analyst,” 19

which is a composite of several surveys. 20

21

Q. Has the Company performed a pay comparison specific to Rhode Island for its non-22

union employees? 23

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A. Yes. Salary.com, one of the sources the Company uses for competitive pay information, 1

analyzed the 50th percentile pay rates for the Company’s benchmark positions. Schedule 2

NG-WFD-7 shows the result of that analysis. Some positions are paid less in Rhode 3

Island than in Eastern Massachusetts, and some are paid more. On balance, the 4

differences are not significant enough to adopt a separate base pay structure for Rhode 5

Island employees. Given the large size and wide geographic dispersion of National 6

Grid’s workforce, internal equity and consistency militate in favor of valuing positions 7

and paying individuals using broad geographic measurements, unless the regional 8

disparity is shown to be material. For example, National Grid does maintain a higher 9

base pay structure for positions located in New York City and Long Island, based on 10

market data showing an approximate 6.4% variation. 11

12

Q. Why should the non-union base wage increases in this filing be included in the 13

Company’s cost of service? 14

A. In this proceeding, rates are being set based on a cost of service for the twelve months 15

ended December 31, 2010. In order to properly reflect the calendar year 2010 cost of 16

service, wage increases implemented during 2009 and 2010 must be incorporated to 17

arrive at the proper level of wage expense for 2010. Also, as shown in Schedule NG-18

WFD-6, the Towers Perrin study, a comparison of National Grid’s non-union pay rates to 19

the relevant market demonstrates that they are competitive and, therefore, reasonable. 20

(See page 3 of the Towers Perrin study for the referenced comparison.) 21

22

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Q. What level of non-union base wage increases is included in the Company’s 2010 cost 1

of service? 2

A. The cost of service for 2010 reflects the 2009 non-union base wage increases of 1.5 %, 3

which has already been announced and will become effective July 1, 2009, as well as a 4

3% increase, which will become effective July 1, 2010. 5

6

Q. Why has the Company included a non-union salary adjustment that will be effective 7

as of July 1, 2010? 8

A. The Company’s practice is to adjust non-union wages annually. Although the current 9

economic conditions have led National Grid to implement a very conservative non-union 10

merit increase (1.5%) beginning July 1, 2009, the Company plans to implement a 3% 11

increase effective July 1, 2010, which is consistent with historical levels. Therefore, the 12

cost of service for 2010 has been adjusted accordingly. 13

14

V. Union Wages 15

Q. Does National Grid follow a similar compensation philosophy with regard to its 16

union employees? 17

A. Yes. As I noted earlier, wages for union employees at National Grid generally include a 18

variable pay component as well. Under their collective bargaining agreements, the 19

following unions participate in a variable pay plan that pays out if certain financial, 20

safety, and other operating performance goals are achieved. The International 21

Brotherhood of Electrical Workers (“IBEW”) Locals 486 and 1345 and the Utility 22

Workers Union of America (“UWUA”) Locals 310 and 369 participate in a variable pay 23

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plan with a target payment of 3.5% of all pay. IBEW Local 3, the Transport Workers 1

Union (“TWU”) Local 101, UWUA Locals 318 and 350, and the United Steelworkers 2

Union Locals 12102-03, 12012-04, 13507 and 12003 participate in variable pay plans 3

with target payments of 1.5% to 2.0 % of base pay. 4

5

Q. What is the payroll expense that is included in the Company’s revenue requirement 6

in this case for union employees? 7

A. The total union payroll expense for the Rate Year is $23,714,167, of which $4,274,121 8

has been allocated from National Grid USA Service Company and $38,901 has been 9

allocated from former KeySpan service companies. This reflects increased wages 10

through June 30, 2010 that have already been agreed to through the unions’ collective 11

bargaining contracts. Specifically, the Company (or National Grid USA Service 12

Company, as the case may be) and IBEW Locals 486 and 1345 negotiated a four year 13

labor agreement in May 2007 pursuant to which these union workers will receive base 14

wage increases of 3% on May 11, 2009 and May 11, 2010. The Company (or the service 15

company, as the case may be) and UWUA Locals 310 and 369 have agreed upon the 16

same level of increase as part of a four year labor agreement. IBEW Local 1049 has an 17

existing labor agreement which provides a 3.25% base rate increase on February 13, 2009 18

and a 3.5% increase on February 13, 2010. TWU Local 101 has an existing labor 19

agreement which provides for a 3.5% base rate increase on October 15, 2009. United 20

Steelworkers Union Local 13507 has an existing labor agreement that provides for a 21

3.0% base rate increase on February 19, 2009. United Steelworkers Union Local 12003 22

has an existing labor agreement that provides for a 2.5% base rate increase on March 9, 23

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2009 and March 8, 2010. IBEW Local 3, United Steelworkers Union Locals 12012-03, 1

12012-04, and UWUA Locals 318 and 350 all have contracts which expire in 2009 and 2

may result in base rate increases as well. 3

4

Q. What steps does National Grid take to ensure that the union wages it pays are 5

reasonable? 6

A. For union employees, National Grid obtains information regarding hourly pay rates from 7

surrounding utilities to measure the competitiveness of union pay levels. Schedule NG-8

WFD-8 shows the most recent comparison of pay levels for key union jobs among a 9

number of New England utilities. As the schedule shows, National Grid’s wage rates are 10

within the range of these other utilities. In reviewing this data, it’s important to bear in 11

mind that there are a variety of other factors that are difficult or impossible to measure 12

that have a significant impact on total pay under each company’s union contracts. These 13

include matters such as premiums, overtime rules, progression times and work rules. 14

15

VI. Benefit Plans 16

Q. Please describe the benefit package that is offered to employees of National Grid, 17

including those of the Company. 18

A. National Grid provides a variety of employee health and welfare and pension and post-19

retirement benefit (“OPEB”) plans to its union, non-union and executive employees. 20

Benefit plans are offered for medical coverage, dental coverage, life insurance coverage 21

and long-term disability coverage. There are also paid vacations and holidays. In 22

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addition, employees are offered a defined benefit pension plan, a defined contribution or 1

401(k) plan and post-retirement benefits. 2

3

Q. How does National Grid ensure that its benefit programs are reasonable and 4

competitive? 5

A. Periodically, National Grid commissions a study by outside consultants for this purpose. 6

The consultants (Towers Perrin) collect benefit plan provisions from hundreds of 7

employers in all sectors of the economy and use their proprietary software to measure the 8

value of these programs. National Grid selects twelve to fifteen comparable companies – 9

mostly utilities – to determine the relative value of its benefit programs. Schedules NG-10

WFD-9 and NG-WFD-10 are the most recent studies for both union and non-union 11

benefits, respectively. The analysis is conducted for each benefit separately as well as on 12

an entire-program basis. It is not unusual for results to vary benefit by benefit due to 13

unique factors associated with each company’s history and priorities. The entire-program 14

analysis combines all values and allows for a comparison between companies’ benefit 15

programs. I should note that a condition of participation is that the link between the 16

participating company and the value of the benefits it provides not be disclosed. The 17

studies I am including with this testimony, therefore, mask which companies correlate 18

with which data, other than for National Grid. However, the names of the participants are 19

provided in the reports, so the Commission will be aware of the companies to which 20

National Grid’s data was compared. As you can see from both sets of charts, National 21

Grid benefit plans for both non-union and union employees are very close to the median. 22

23

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Q. What efforts has National Grid undertaken to control costs associated with its 1

benefit programs? 2

A. The Company has taken many steps to control benefit costs. Earlier, I discussed some of 3

the changes resulting from the review undertaken as part of the acquisition of KeySpan. 4

In addition, National Grid participates in both industry groups and benefit councils to 5

learn best practices and stay abreast of market developments. National Grid also seeks 6

new ideas and suggestions from its vendors. The data provided from the Towers Perrin 7

studies demonstrate the success of National Grid’s efforts. In addition, all of National 8

Grid’s health and welfare benefit plans are self-insured, which affords it a greater ability 9

to control costs than it would have under third party insurance programs. Because these 10

plans are self-insured, the costs for the programs are directly linked to the utilization of 11

benefits. National Grid’s medical plans also provide extensive health and wellness 12

programs designed to reduce health risks and reduce the occurrence of costly diseases. 13

This, combined with coverage for preventive check-ups and screenings, provides a 14

benefit structure that, over time, should help to mitigate costs and improve employee 15

wellness. 16

17

Another area of cost control is in National Grid’s disability benefit program, which 18

protects employees from the loss of income as a result of sickness or disability. To 19

ensure that these benefits are paid only to legitimately sick and/or disabled employees, 20

National Grid teams up its internal nurse practitioners with a third party – Matrix – to 21

monitor employee care, verify with treating physicians, find alternative light duty work 22

where it is feasible and ensure as rapid a return to regular duty as reasonably possible. 23

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Q. Were similar efforts made to control the cost of union benefit plans? 1

A. The benefit plan changes described above occurred after the negotiations for a new 2

agreement in May 2007. Therefore, these changes have not yet been addressed with 3

them. However, National Grid self-insures the union benefit plans as well as the non-4

union plans, and has implemented the sick/disability utilization controls with its unions as 5

well. 6

7

Q. Please describe any adjustments to Test Year expense for employee benefit plans 8

that the Company is including in its proposed revenue requirement. 9

A. National Grid is projecting increases of 8% in the costs associated with medical benefits 10

for the Rate Year ending December 31, 2010, which is consistent with its actual 11

experience and with the projections of experts and information from Towers Perrin. For 12

dental benefits, National Grid is projecting a 3% increase in cost which is also consistent 13

with its experience and the advice of experts at Towers Perrin. For all other benefits, the 14

Company has applied the payroll escalation rate to derive the Rate Year costs. 15

16

Q. What has the Company done to control its pension expense? 17

A. National Grid has implemented a common cash balance pension plan design for all non-18

union employees, effective with new hires on and after July 15, 2002. This cash balance 19

pension plan is significantly less costly than the prior final average pay type plan because 20

of its smaller annual benefit accruals and flatter cost curve over the working life of an 21

employee. Both of these attributes result in lower ultimate pension costs for the 22

Company. National Grid has combined this approach with an aggressive participation 23

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and investment management campaign in its defined contribution (401k) plan, so that 1

employees can both save more and invest more wisely and still end up with sufficient 2

retirement income security. 3

4

Q. Has National Grid implemented a cash balance plan for union employees? 5

A. National Grid has not implemented a cash balance plan for union employees of the 6

Company or National Grid USA Service Company, Inc. However, IBEW Local 3 and 7

TWU Local 101 have adopted a cash balance pension for new hires on and after October 8

16, 2001. 9

10

Q. Please describe National Grid’s efforts to contain the costs of OPEB expenses. 11

A. National Grid has taken a number of steps to control OPEB expense. At one time, 12

employees could retire and receive post retirement medical benefits without contribution. 13

They also received a reimbursement for the Medicare Part B premium. Over time, 14

National Grid has made a number of changes so that now non-union employees pay for 15

pre-age 65 post retirement medical insurance at the same rates as active employees. They 16

pay a service-based contribution for post-age 65 coverage that has a maximum company 17

contribution of 50%, and reimbursement of the Medicare Part B premium has been 18

eliminated. Union employees likewise pay for pre-age 65 medical at the same rate as 19

active employees, while post-age 65 employees receive an employer contribution toward 20

coverage equal to $4.50 per month per year of service ($9.00 if married). In addition, 21

reimbursement of the Medicare Part B premium has been eliminated. In the life 22

insurance program, at one time, employees retired and their life insurance reduced 23

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gradually to about 25% of their final base pay. Non-union employees’ life insurance now 1

drops immediately at retirement to $20,000 and union employees to $11,500. 2

3

VII. Conclusion 4

Q. Does this conclude your direct testimony? 5

A. Yes. 6

21

Schedules of

W

illiam F. D

owd



Schedules

Schedule NG-WFD-1 US Employee Guide (Band B) Schedule NG-WFD-2 US Employee Guide (Band C) Schedule NG-WFD-3 US Employee Guide (Band D) Schedule NG-WFD-4 US Employee Guide (Band E) Schedule NG-WFD-5 US Employee Guide (Band F) Schedule NG-WFD-6 Competitive Assessment of Non-Union Compensation (Towers

Perrin, 11/13/08) Schedule NG-WFD-7 Comparison of Rhode Island Wages to New England Wages Schedule NG-WFD-8 National Grid USA Union Wage Comparison Schedule NG-WFD-9 BENVAL Analysis for Union Benefits (Tower Perrin, 10/9/08) Schedule NG-WFD-10 BENVAL Analysis for Non-Union Benefits (Towers Perrin,

9/7/06)

22

Schedule

N

G-W

FD-1



Schedule NG-WFD-1

US Employee Guide (Band B)

23

EMPLOYEE GUIDE TO

THE

ANNUAL BONUS PLAN 2007/08

US – Band B

Narragansett Electric Company d/b/a National Grid Docket No. R.I.P.U.C. ____ Schedule NG-WFD-1 Page 1 of 7

24

1 Introduction

This guide summarises the main provisions of the National Grid Annual Bonus Plan 2007/08 (the “Plan”) and highlights the general operation of the plan.

The Plan is intended to motivate employees to achieve the highest possible financial and individual performance, whilst ensuring that at all times, all safety, health and environment requirements are adhered to, all standards of service are achieved and shareholder expectations reached. In short, all our stakeholders should benefit from the Plan.

Stretching financial targets and individual objectives will be set, as soon as practicable, after the start of the Plan year (April each year).

2 Plan Summary

60% of the maximum bonus opportunity will be based on financial targets and 40% will be based on individual objectives.

2.1 Financial Targets Within the 60% for financial targets, 30% will be based on Group Earnings per Share (Group EPS) and the remaining amount for the financial element of the bonus will be based on appropriate business unit targets e.g. operating profit or any other appropriate targets set by the relevant Executive Director.

2.2 Individual objectives Four or five key individual objectives will be set. They should be stretching, measurable and achievable

When assessing achievement of the individual objectives, equal importance will be attributed to performance against the Leadership Qualities (see attached Appendix 1).

The performance assessment will result in a rating using the National Grid Rating Scale of 1 to 5 (See Appendix 2).

3 Performance Reviews

Your manager will discuss performance against targets and objectives with you on a regular basis throughout the year. An interim review will be undertaken part way through the year to formally assess progress and a year end review will be undertaken to assess final performance. It is both your responsibility and your Manager’s to ensure these discussions take place, they are effective by clearly articulating progress and expectations; and they provide an opportunity for constructive two way dialogue.

4 Worked Example

The attached example shows how the assessment process works. The example is based on an employee who has a maximum bonus opportunity of 70% of salary. 60% of the bonus is based on financial targets and 40% on individual objectives.


25

On this basis, 42% of salary is based on financial targets and 28% of salary is based on individual objectives. See Appendices 3 and 4 and read in conjunction with the following notes.

4.1 Notes to Example

The Company achieves stretch performance (21%) for Group EPS and target (6.3%) for Business Unit Operating Profit. Business Unit Cashflow is based on achieving between Threshold and Target (1.93%). See Appendix 3.

21% - Group EPS +

6.3% - Business Unit Operational Profit +

1.93% - Business Unit Cashflow

29.23% - Total

In this example, the manager determines the employee frequently exceeds expectations with regard to performance objectives and strongly demonstrates the Leadership Qualities. The manager therefore determines the employee will be in a 2/1 position overall (i.e. Performance Objectives “v” Leadership Qualities) with an overall rating of 2 (Frequently Exceeds Expectations) and that 80% of the maximum available for individual performance will be paid. See Appendix 4.

As such 80% x 28% = 22.4%. This is then added to the total for financial targets (29.23%). Consequently, the bonus achieved is 52% (rounded) out of a bonus maximum of 70%. Therefore, the employee will receive 52% of their salary as a bonus.

Note: There is discretion to reduce payments to take account of significant safety or service standard incidents.

5 Payment of the Bonus

Your bonus is payable in June and is subject to tax withholdings.

6 Ceasing to be employed

If you cease to be an employee during the Plan year, a discretional cash payment may be paid to you, but this will depend on the circumstances of your leaving.

7 Limitations of the Plan

The Company may amend, suspend or terminate all or any part of the Plan at any time.

Participation in, and the operation of, the Plan will not form part of or affect your contract of employment or your employment relationship, nor will they give you the right to continued employment. Participation in one year of the Plan does not indicate that you will participate, or be considered for participation, in any years. You are not entitled to any compensation or other benefit in respect of the Plan.


26

APPENDIX 1

Leadership Qualities

♦ Lives the National Grid values

♦ Creates the future

♦ Consistently delivers great performance

♦ Builds relationships

♦ Develops self and others

Full details of the Leadership Qualities are included in the Performance For Growth Guidelines.


27

APPENDIX 2

National Grid Rating Scale Definitions

Creates Exceptional Value (1) — to achieve an overall rating in this category means the employee creates exceptional value in most, if not all, business objectives and leadership qualities, frequently exceeding expectations, and achieving maximum measures of success. Employees in this category:

Drive optimal results while demonstrating extraordinary leadership. Demonstrate role model behaviour in capabilities appropriate to role.

Frequently Exceeds Expectations (2) — to achieve an overall rating in this category means the employee frequently exceeds expectations in most, if not all, business objectives and leadership qualities, achieving above target measures of success. Employees in this category:

Excel at contributing to achievement of targeted goals within their job role and frequently achieve above target levels.

Deliver strong results while demonstrating strong leadership. Demonstrate great strengths in qualities appropriate to role.

Consistently Meets Expectations (3) — to achieve an overall rating in this category means the employee consistently meets expectations and has exceeded in a few business objectives and leadership qualities. Employees in this category:

Consistently contribute to achievement of the success of the business unit by meeting all goals and exceeding some.

Are reliable and dependable in the performance of day-to-day and stretch objectives. Consistently demonstrate leadership qualities.

Meets Most Expectations (4) — to achieve an overall rating in this category means the employee meets most expectations in business objectives and leadership qualities, achieving some target measures of success. Employees in this category:

Contribute to achievement of goals and success of the immediate business area. Have one or more business objectives that have not been fully realised. Demonstrate most of the leadership qualities.

More Is Expected (5) — to receive an overall rating in this category means that more is expected of the employee in order to achieve target measures of success and/or to improve a significant shortcoming in one or more business objectives and/or leadership qualities. Employees in this category:

Meet minimum requirements of the job; and have required job skills. Deliver results asked for, but do not demonstrate strong initiative to contribute to the

success of the team or the work without direction. Deliver limited added value to the business area. Employees in this category need to work closely with their immediate manager and HR

to take actions that will improve and sustain performance at target levels.


28

O

vera

ll bo

nus

plan

str

uctu

re

C

ompa

ny

Bus

ines

s U

nit

Indi

vidu

al

M

axim

um

bonu

s po

tent

ial

(% o

f sal

ary)

of

bonu

s of

sa

lary

O

f bo

nus

of

sala

ry

of

bonu

s of

sa

lary

Tota

l 70

%

30%

21

%

30%

21

%

40%

28

%

Com

pany

Fin

anci

al m

easu

res

Th

resh

old

(10%

) of B

onus

Ta

rget

(45%

) of B

onus

St

retc

h (1

00%

) of

Bon

us

Act

ual

R

equi

red

resu

lt %

sal

ary

Req

uire

d re

sult

% s

alar

y R

equi

red

resu

lt %

sal

ary

Res

ult

achi

eved

%

of

sala

ry

EPS

G

1 2.

1 G

2 9.

45

G3

21

G3

21

Bus

ines

s U

nit F

inan

cial

mea

sure

s –

(Wei

ghtin

g - 2

/3rd

s O

pera

ting

Prof

it or

Gro

ss C

osts

etc

and

1/3

rd b

ased

on

targ

ets

appl

icab

le to

th

e G

loba

l lin

e of

bus

ines

s/bu

sine

ss u

nit)

Thre

shol

d (1

0%) o

f Bon

usTa

rget

(45%

) of B

onus

St

retc

h (1

00%

) of

Bon

us

Act

ual

R

equi

red

resu

lt %

sal

ary

Req

uire

d re

sult

% s

alar

y R

equi

red

resu

lt %

sal

ary

Res

ult

achi

eved

%

of

sala

ry

Ope

ratin

g P

rofit

X

1 1.

4 X

2 6.

3 X

3 14

X2

6.

3 C

ash

Flow

Y

1 0.

7 Y

2 3.

15

Y3

7 B

etw

een

Y1

& Y

2 1.

93

App

endi

x 1

Ann

ual B

onus

Tar

gets

for 2

007/

08

A

ppen

dix

3


29

Grid

Rat

ing

– In

divi

dual

Obj

ectiv

es &

Lea

ders

hip

Qua

litie

s A

sses

smen

t Onl

y

App

endi

x 4

1

35%

- 49

%

50%

- 74

%

50%

- 74

%

75%

- 89

%

90%

- 10

0%

Lead

ersh

ip

Q

ualit

ies

2

35%

- 49

%

35%

- 49

%

50%

- 74

%

50%

- 74

%

75%

- 89

%

3

0%-3

4%

35%

- 49

%

35%

- 49

%

50%

- 74

%

50%

- 74

%

Key

Perf

orm

ance

Obj

ectiv

es:

1 =

Cre

ates

Exc

eptio

nal V

alue

2

= Fr

eque

ntly

Exc

eeds

Exp

ecta

tions

3

= C

onsi

sten

tly M

eets

Exp

ecta

tions

4

= M

eets

Mos

t Exp

ecta

tions

5 =

Mor

e is

Exp

ecte

d

Lead

ersh

ip Q

ualit

ies:

1 =

Stro

ngly

Dem

onst

rate

d

2 =

Dem

onst

rate

d

3 =

Not

Dem

onst

rate

d C

onsi

sten

tly

5 4

3

Perf

orm

ance

O

bjec

tives

2

1

Ove

rall

Rat

ing

1 =

Cre

ates

Exc

eptio

nal V

alue

2

= Fr

eque

ntly

Exc

eeds

Exp

ecta

tions

3

= C

onsi

sten

tly M

eets

Exp

ecta

tions

4

= M

eets

Mos

t Exp

ecta

tions

5 =

Mor

e is

Exp

ecte

d

Not

e:

%ag

es s

how

n re

late

to th

e %

age

achi

eved

as

a %

age

of m

axim

um fo

r In

divi

dual

Obj

ectiv

es p

art o

f the

bon

us

only

.


30

Schedule

N

G-W

FD-2



Schedule NG-WFD-2

US Employee Guide (Band C)

31

EMPLOYEE GUIDE TO

THE

ANNUAL BONUS PLAN

US – Band C

2008/2009


32

Dear colleague

During 2007, we made significant changes to our Company including the merger with KeySpan (which has doubled the size of our US operations) and the reorganisation of our activities around Global Lines of Business.

In order to realise our potential, we need to improve performance across the business on a financial basis, but also in everything we do. We have started this work by identifying ways to fully integrate our operations and deploy best practice and common processes across the organisation.

This performance philosophy flows through to our annual bonus plan, which after having operated Performance For Growth in 2007/08 for Bands A and B, will be cascaded down in 2008/09 to Band D (UK) and Band F (US).

This guide provides information about how the annual bonus plan will operate and your Manager will discuss this further with you over the next few weeks.

Steve Holliday Chief Executive

1 Introduction

This guide summarises the main provisions of the National Grid Annual Bonus Plan 2008/09 (the “Plan”) and highlights the general operation of the plan. The Plan has been approved by the Executive Directors and they have absolute discretion over the operation and design of the Plan (see section 7 for further detail).



2 Plan Summary

50% of the maximum bonus opportunity is based on financial targets and 50% is based on individual objectives.

2.1 Financial Targets Within the 50% for financial targets, 20% is based on Group Earnings per Share (Group EPS) and the remaining amount for the financial element of the bonus will be based on appropriate Line of Business/Shared Services/IS (“LOB”) targets e.g. operating profit or any other appropriate targets set by the relevant Executive Director.


33

2.2 Individual objectives Four or five key individual objectives are set. They should be stretching, measurable and achievable.

When assessing achievement of the individual objectives, equal importance is attributed to performance against the Leadership Qualities (see attached Appendix 1).



Your manager will discuss performance against targets and objectives with you on a regular basis throughout the year. An interim review will be undertaken part way through the year to formally assess progress and a year end review will be undertaken to assess final performance. It is both your responsibility and your Manager’s to ensure these discussions take place. They can be effective only by clearly articulating progress and expectations; and by providing an opportunity for constructive two way dialogue. Assessment of performance against individual objectives is based on the what and how ratings as shown below.

4 Worked Example




34


The Company achieves stretch performance (8%) for Group EPS and target (5.4%) for LOB Operating Profit. See Appendix 3.

8.00% - Group EPS +

5.40% - LOB Operational Profit

13.40% - Total

In this example, the manager determines the employee frequently exceeds expectations with regard to performance objectives and demonstrated the Leadership Qualities. The manager therefore determines the employee will be in a 2/2 position overall (i.e. Performance “v” Leadership Qualities) and that 80% of the maximum available for individual performance will be paid. See Appendix 4.

As such 80% x 20% = 16%. This is then added to the total for financial targets (13.4%). Consequently, the bonus achieved is 29.4% out of a bonus maximum of 40%. Therefore, the employee will receive 29.4% of their salary as a bonus.

Note: There is discretion to reduce payments to take account of significant safety, service standard incidents and environmental issues.







Participation in, and the operation of, the Plan will not form part of or affect your contract of employment or your employment relationship, nor will they give you the right to continued employment. Participation in one year of the Plan does not indicate that you will participate, or be considered for participation, in any future years. You are not entitled to any compensation or other benefit in respect of the Plan.


35

APPENDIX 1

Leadership Qualities (the “how”)








36

APPENDIX 2

Performance Rating Definitions (the “what”)

Creates Exceptional Value (1) — to achieve a rating in this category means the employee creates exceptional value in most, if not all, business objectives, frequently exceeding expectations, and achieving maximum measures of success. Employees in this category:

Frequently achieve stretch levels of performance Drive optimal results

Frequently Exceeds Expectations (2) — to achieve a rating in this category means the employee frequently exceeds expectations in most, if not all, business objectives, achieving above target measures of success. Employees in this category:


Deliver strong results.

Consistently Meets Expectations (3) — to achieve a rating in this category means the employee consistently meets expectations and has exceeded in a few business objectives. Employees in this category:


Are reliable and dependable in the performance of day-to-day and stretch objectives.

Meets Most Expectations (4) — to achieve a rating in this category means the employee meets most expectations in business objectives, achieving some target measures of success. Employees in this category:

Contribute to achievement of goals and success of the immediate business area.

Have one or more business objectives that have not been fully realised.

More Is Expected (5) — to receive a rating in this category means that more is expected of the employee in order to achieve target measures of success and/or to improve a significant shortcoming in one or more business objectives. Employees in this category:

Meet minimum requirements of the job; and have required job skills. Deliver results asked for, but do not demonstrate strong initiative to contribute

to the success of the team or the work without direction. Deliver limited added value to the business area.


37

O

vera

ll bo

nus

plan

str

uctu

re

C

ompa

ny

LOB

In

divi

dual

Max

imum

bo

nus

pote

ntia

l (%

of s

alar

y)

of

bonu

s of

sa

lary

O

f bo

nus

of

sala

ry

of

bonu

s of

sa

lary

Tota

l 40

%

20%

8%

30

%

12%

50

%

20%

Com

pany

Fin

anci

al m

easu

res

Th

resh

old

(10%

) of B

onus

Ta

rget

(45%

) of B

onus

St

retc

h (1

00%

) of

Bon

us

Act

ual

R

equi

red

resu

lt %

sal

ary

Req

uire

d re

sult

% s

alar

y R

equi

red

resu

lt %

sal

ary

Res

ult

achi

eved

%

of

sala

ry

EPS

G

1 0.

8 G

2 3.

60

G3

8 G

3 8

LOB

Fin

anci

al m

easu

res

Th

resh

old

(10%

) of B

onus

Targ

et (4

5%) o

f Bon

us

Stre

tch

(100

%) o

f B

onus

A

ctua

l

R

equi

red

resu

lt %

sal

ary

Req

uire

d re

sult

% s

alar

y R

equi

red

resu

lt %

sal

ary

Res

ult

achi

eved

%

of

sala

ry

Ope

ratin

g P

rofit

X

1 1.

2 X

2 5.

4 X

3 12

X2

5.

4

App

endi

x 1

Ann

ual B

onus

Tar

gets

for 2

008/

09

A

ppen

dix

3


38

A

ppen

dix

4

Bon

us R

atin

g M

atrix

Lead

ersh

ip

Qua

litie

s (H

ow)

Perf

orm

ance

Obj

ectiv

es

(W

hat)

Not

e:

%

ages

sho

wn

rela

te to

th

e %

age

achi

eved

as

a

%

age

of m

axim

um fo

r the

Indi

vidu

al O

bjec

tives

par

t

of th

e bo

nus

only

.

Stro

ngly

D

emon

stra

ted

1 35

% -

49%

50

% -

74%

75

% -

84%

85

% -

94%

95

% -

100%

Dem

onst

rate

d 2

21%

- 34

%

35%

- 49

%

50%

- 74

%

75%

- 84

%

85%

- 94

%

Not

D

emon

stra

ted

Con

sist

ently

3 0%

- 20

%

21%

- 34

%

35%

- 49

%

50%

- 74

%

75%

- 84

%

5

Mor

e is

Exp

ecte

d

4

Mee

ts M

ost

Exp

ecta

tions

3

Con

sist

ently

Mee

ts

Exp

ecta

tions

2

Freq

uent

ly

Exc

eeds

E

xpec

tatio

ns

1

Cre

ates

E

xcep

tiona

l Val

ue

Prop

osed

Dis

trib

utio

n G

uide

lines

0%

- 20

%

5%

21%

- 34

%

10%

35

% -

49%

20

%

50%

- 74

%

30%

75

% -

84%

20

%

85%

- 94

%

10%

95

% -

100%

5%


39

Schedule

N

G-W

FD-3



Schedule NG-WFD-3

US Employee Guide (Band D)

40

EMPLOYEE GUIDE TO

THE

ANNUAL BONUS PLAN

US – Band D

2008/2009


41

Dear colleague






1 Introduction




2 Plan Summary

50% of the maximum bonus opportunity is based on financial targets and 50% is based on individual objectives.

2.1 Financial Targets Within the 50% for financial targets, 20% will be based on Group Earnings per Share (Group EPS) and the remaining amount for the financial element of the bonus will be based on appropriate Line of Business/Shared Services/IS (“LOB”) targets e.g. operating profit or any other appropriate targets set by the relevant Executive Director.


42






4 Worked Example




43


The Company achieves stretch performance (6%) for Group EPS and target (4.05%) for Business Unit Operating Profit. See Appendix 3.

6.00% - Group EPS +


10.05% - Total












44

APPENDIX 1









45

APPENDIX 2

















46

O

vera

ll bo

nus

plan

str

uctu

re

C

ompa

ny

LOB

In

divi

dual

Max

imum

bo

nus

pote

ntia

l (%

of s

alar

y)

of

bonu

s of

sa

lary

of

bo

nus

of

sala

ry

of

bonu

s of

sa

lary

Tota

l 30

%

20%

6%

30

%

9%

50%

15

%

Com

pany

Fin

anci

al m

easu

res

Th

resh

old

(10%

) of B

onus

Ta

rget

(45%

) of B

onus

St

retc

h (1

00%

) of

Bon

us

Act

ual

R

equi

red

resu

lt %

sal

ary

Req

uire

d re

sult

% s

alar

y R

equi

red

resu

lt %

sal

ary

Res

ult

achi

eved

%

of

sala

ry

EPS

G

1 0.

6 G

2 2.

7 G

3 6

G3

6

LOB

Fin

anci

al m

easu

res

Thre

shol

d (1

0%) o

f Bon

usTa

rget

(45%

) of B

onus

St

retc

h (1

00%

) of

Bon

us

Act

ual

R

equi

red

resu

lt %

sal

ary

Req

uire

d re

sult

% s

alar

y R

equi

red

resu

lt %

sal

ary

Res

ult

achi

eved

%

of

sala

ry

Ope

ratin

g P

rofit

X

1 0.

9 X

2 4.

05

X3

9 X2

4.

05

App

endi

x 1

Ann

ual B

onus

Tar

gets

for 2

008/

09

A

ppen

dix

3


47

App

endi

x 4

Bon

us R

atin

g M

atrix

Lead

ersh

ip

Qua

litie

s (H

ow)

Pe

rfor

man

ce O

bjec

tives

(Wha

t)

N

ote:

%ag

es s

how

n re

late

to

the

%ag

e ac

hiev

ed a

s a

%ag

e of

max

imum

for t

he

In

divi

dual

Obj

ectiv

es p

art

of

the

bonu

s on

ly.

Stro

ngly

D

emon

stra

ted

1 35

% -

49%

50

% -

74%

75

% -

84%

85

% -

94%

95

% -

100%

Dem

onst

rate

d 2

21%

- 34

%

35%

- 49

%

50%

- 74

%

75%

- 84

%

85%

- 94

%

Not

D

emon

stra

ted

Con

sist

ently

3 0%

- 20

%

21%

- 34

%

35%

- 49

%

50%

- 74

%

75%

- 84

%

5

Mor

e is

Exp

ecte

d

4

Mee

ts M

ost

Exp

ecta

tions

3

Con

sist

ently

Mee

ts

Exp

ecta

tions

2

Freq

uent

ly

Exc

eeds

E

xpec

tatio

ns

1

Cre

ates

E

xcep

tiona

l Val

ue

Prop

osed

Dis

trib

utio

n G

uide

lines

0%

- 20

%

5%

21%

- 34

%

10%

35

% -

49%

20

%

50%

- 74

%

30%

75

% -

84%

20

%

85%

- 94

%

10%

95

% -

100%

5%


48

Schedule

N

G-W

FD-4



Schedule NG-WFD-4

US Employee Guide (Band E)

49

EMPLOYEE GUIDE TO

THE

ANNUAL BONUS PLAN

US – Band E

2008/2009


50

Dear colleague






1 Introduction




2 Plan Summary

50% of the maximum bonus opportunity is based on financial targets and 50% will be based on individual objectives.

2.1 Financial Targets Within the 50% for financial targets, 20% will be based on Group Earnings per Share (Group EPS) and the remaining amount for the financial element of the bonus will be based on appropriate business unit targets e.g. operating profit or any other appropriate targets set by the relevant Executive Director.



51





4 Worked Example




52



4.00% - Group EPS +

2.70% - LOB Operational Profit +

6.70% - Total












53

APPENDIX 1









54

APPENDIX 2

















55

O

vera

ll bo

nus

plan

str

uctu

re

C

ompa

ny

LOB

In

divi

dual

Max

imum

bo

nus

pote

ntia

l (%

of s

alar

y)

of

bonu

s of

sa

lary

of

bo

nus

of

sala

ry

of

bonu

s of

sa

lary

Tota

l 20

%

20%

4%

30

%

6%

50%

10

%

Com

pany

Fin

anci

al m

easu

res

Th

resh

old

(10%

) of B

onus

Ta

rget

(45%

) of B

onus

St

retc

h (1

00%

) of

Bon

us

Act

ual

R

equi

red

resu

lt %

sal

ary

Req

uire

d re

sult

% s

alar

y R

equi

red

resu

lt %

sal

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57

Schedule

N

G-W

FD-5



Schedule NG-WFD-5

US Employee Guide (Band F)

58

EMPLOYEE GUIDE TO

THE

ANNUAL BONUS PLAN

US – Band F

2008/2009


59

Dear colleague






1 Introduction




2 Plan Summary

50% of the maximum bonus opportunity will be based on financial targets and 50% will be based on individual objectives.

2.1 Financial Targets Within the 50% for financial targets, 20% is based on Group Earnings per Share (Group EPS) and the remaining amount for the financial element of the bonus is based on appropriate Line of Business/Shared Services/IS (“LOB”) targets e.g. operating profit or any other appropriate targets set by the relevant Executive Director.



60





4 Worked Example




61



2.00% - Group EPS +


3.35% - Total












62

APPENDIX 1









63

APPENDIX 2

















64

O

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66

Schedule

N

G-W

FD-6



Schedule NG-WFD-6

Competitive Assessment of Non-Union Compensation (Towers Perrin, 11/13/08)

67

National Grid USA

Competitive Assessment of Non-Union Compensation

Outline Prepared by Towers Perrin Michael J. Carter Richard Meischied

November 13, 2008


68

November 13, 2008

Table of Contents

COMPETITIVE ASSESSMENT OF NON-UNION COMPENSATION....................................1

Introduction .............................................................................................................................1

Approach to Assessing Pay Competitiveness and Determining the Prevalence of Incentive Compensation.........................................................................................................................1

Findings – Competitiveness of Pay.........................................................................................3

Findings – Prevalence of Incentive Compensation.................................................................4

Observations...........................................................................................................................6

APPENDIX I: DESCRIPTION OF TOWERS PERRIN ..........................................................7

APPENDIX II: BIOGRAPHIES: MICHAEL CARTER AND RICHARD MEISCHEID ..........8

APPENDIX III: 2008 TOWERS PERRIN MIDDLE MANAGEMENT AND PROFESSIONAL SURVEY – ALL PARTICIPATING COMPANIES AND PARTICIPANTS WITH REVENUES GREATER THAN $6 BILLION ...................9 – 10

APPENDIX IV: 2007 TOWERS PERRIN MIDDLE MANAGEMENT AND PROFESSIONAL SURVEY – ALL PARTICIPATING COMPANIES AND PARTICIPANTS WITH REVENUES GREATER THAN $10 BILLION ...............11 – 12

APPENDIX V: 2008 TOWERS PERRIN MIDDLE MANAGEMENT AND PROFESSIONAL SURVEY – ALL PARTICIPATING COMPANIES AND PARTICIPANTS WITH REVENUES GREATER THAN $10 BILLION ...............13 – 14


69

National Grid USA 1

November 13, 2008

COMPETITIVE ASSESSMENT OF NON-UNION COMPENSATION

Introduction

National Grid asked Towers Perrin to conduct a competitive assessment of the Company’s

compensation relative to the energy services marketplace. The analysis was focused on the

exempt non-union workforce with salary levels ranging from $40,000 to approximately

$190,000. The research addressed the competitiveness of base salary and base salary plus

incentive compensation relative to the marketplace.

In addition to reviewing the competitiveness of National Grid pay, we were also asked to

research the prevalence of incentive compensation in energy services companies for

employees at these levels. Thus, the second section of this outline addresses the prevalence

of incentive compensation in the marketplace.

Towers Perrin’s research was conducted by Michael Carter and Richard Meischeid, both

Principals of the firm. A description of Towers Perrin and biographies for Michael Carter

and Richard Meischeid are contained in the Appendix I and II, respectively.

Approach to Assessing Pay Competitiveness and Determining the Prevalence of Incentive Compensation

Market pay information was gathered from Towers Perrin’s 2008 Energy Services Middle

Management and Professional Compensation Database. This survey is the most

comprehensive middle management and professional compensation database for the U.S.

electric and gas industry. Selected descriptive information about the database follows below:

2008

Participating companies 123

Number of incumbents reported 116,000


70

National Grid USA 2

November 14, 2008

For this specific analysis, market pay data, including base salary and annual incentives, was

gathered for a cross-section of over 400 National Grid positions covering over 5000

incumbents. National Grid compensation was compared with surveyed levels among:

• All 2008 survey participants nationally (123 energy services companies)

• Energy Services Companies with Revenues Over $6 billion plus selected large

regional utilities (38 participants).

The comparison against all survey participants provides a snapshot of National Grid

competitiveness against a broad sample of companies. The comparison with larger utilities

provides a snapshot of Company competitiveness against companies of similar size. Lists of

participating companies included in both survey samples are included in Appendix III.

We assessed the overall competitiveness of pay for all National Grid positions combined, but

also arrayed our findings by salary level to illustrate competitiveness at relevant

organizational levels within National Grid.

Market data reflects survey participants’ salaries in effect as of April, 2008 and incentives

largely reflect 2008 payouts for the 2007 fiscal year performance. National Grid data reflect

salaries in effect as of November, 2008 and incentives reflect June 15, 2008 awards paid for

fiscal year 2007 performance (April 2007 through March 2008).

Incentive compensation market prevalence information was gathered from Towers Perrin’s

2007 and 2008 Energy Services Middle Management and Professional Compensation

Database.

Two years’ data (2007-2008) on bonus practices was gathered to not only capture practices

in 2008, but to also detail trends in bonus practices over the last two years. We have arrayed

bonus prevalence information for all survey participants as well as for energy services

companies with revenues over $10 billion. Names of participating companies in the 2007

and 2008 surveys are provided in Appendix IV and Appendix V.


71

National Grid USA 3

November 14, 2008

Findings – Competitiveness of Pay

The analysis shows that National Grid actual salaries and salaries plus 2008 actual incentive

payouts are competitive with the broad (all participants) sample of companies and somewhat

below similarly sized energy services companies.

National Grid Compensation as a Percent of Market

All Participants Similar-Size Companies Base Salary 102% 99%

Base Salary Plus Incentives 99 94

National Grid’s competitiveness, when viewed by salary level, generally follows the trend of the consolidated findings illustrated above.

National Grid Compensation as a Percent of Market

All Participants Similar-Size Companies

Market Salary Bands Salary Salary Plus Incentive Salary

Salary Plus Incentive

$ 40,000 − $ 60,000 111% 107% 110% 104%

$ 60,000 − $ 80,000 102 99 100 95

$ 80,000 − $100,000 102 100 99 95

$100,000 − $120,000 101 98 98 93

$120,000 − $140,000 99 95 100 95

$140,000 − $160,000 94 86 95 87

>$160,000 83 77 81 74

Average 102% 99% 99 94

The data also indicates that, on average, larger energy services companies in the marketplace

have higher levels of compensation. Given that National Grid is among the largest energy

services companies, we believe the more appropriate comparison is with companies of

similar size (in terms of revenue).


72

National Grid USA 4

November 14, 2008

Findings – Prevalence of Incentive Compensation

The data in Towers Perrin’s Energy Services surveys clearly demonstrate that incentive plans

are prevalent in U.S. energy services companies and have become a standard component of

the compensation package provided to employees. The results from both the 2007 and 2008

surveys indicate that over 95% of the participants have incentive compensation programs and

offer incentive pay to their employees.

The two charts below capture the prevalence of incentive compensation eligibility at

different pay levels among all participating energy services organizations and in energy

services companies with revenue greater than $10 billion, respectively. The charts detail the

number of incumbents reported by participants, the percentage of these incumbents eligible

at different salary levels as well as the percentage of incumbents actually receiving awards.

The first chart indicates that when we examine the results for all participating organizations,

over 90% of the incumbents are eligible and receive incentive compensation.

Percentage of Incumbents Eligible For and Receiving Incentive Awards:

Total Sample of Energy Services Participants

Base Salary Range# Incumbents

Reported % Eligible%

Receiving# Incumbents


Receiving

$40,000 to $45,000 1,082 91% 89% 935 88% 87%$45,000 to $50,000 1,795 90% 87% 1,507 91% 90%$50,000 to $55,000 2,605 89% 83% 2,702 88% 85%$55,000 to $60,000 3,922 88% 82% 3,683 92% 89%$60,000 to $65,000 5,163 92% 88% 4,476 94% 92%$65,000 to $70,000 6,126 94% 90% 6,048 94% 93%$70,000 to $75,000 7,840 94% 91% 7,813 95% 94%$75,000 to $80,000 9,442 95% 92% 8,819 96% 94%$80,000 to $85,000 10,367 95% 92% 10,142 96% 95%$85,000 to $90,000 11,049 95% 93% 9,653 96% 95%$90,000 to $95,000 10,133 95% 93% 8,790 96% 94%$95,000 to $100,000 8,679 94% 93% 7,031 95% 94%$100,000 to $110,000 12,343 95% 94% 9,231 97% 96%$110,000 to $120,000 6,731 96% 95% 4,798 96% 95%$120,000 to $130,000 3,895 96% 95% 2,502 97% 97%$130,000 to $140,000 2,158 96% 95% 1,383 98% 97%$140,000 to $150,000 1,258 97% 96% 734 97% 96%$150,000 to $160,000 774 95% 94% 468 99% 98%$160,000 to $170,000 478 96% 95% 249 99% 99%$170,000 to $180,000 271 96% 96% 170 99% 98%$180,000 to $190,000 150 90% 90% 87 99% 99%Greater Than $190,000 125 89% 89% 97 100% 99%

2008 2007


73

National Grid USA 5

November 14, 2008

The prevalence of incentive eligibility and payment of awards is even higher in larger energy

services companies (defined as organizations with revenues greater than $10 billion).

Percentage of Incumbents Eligible For and Receiving Incentive Awards:

Energy Services Companies with Revenues over $10 billion

Base Salary Range# Incumbents


Receiving# Incumbents


Receiving

$40,000 to $45,000 573 97% 95% 384 99% 98%$45,000 to $50,000 955 96% 93% 581 100% 98%$50,000 to $55,000 1,284 97% 90% 1,112 99% 96%$55,000 to $60,000 1,874 98% 92% 1,600 100% 98%$60,000 to $65,000 2,615 99% 96% 1,914 100% 99%$65,000 to $70,000 3,018 98% 97% 2,801 100% 99%$70,000 to $75,000 3,969 99% 98% 3,698 100% 99%$75,000 to $80,000 5,017 99% 98% 4,346 100% 99%$80,000 to $85,000 5,475 98% 98% 5,097 100% 99%$85,000 to $90,000 6,181 98% 97% 4,941 100% 99%$90,000 to $95,000 5,894 99% 98% 4,777 100% 99%$95,000 to $100,000 5,163 99% 99% 3,905 100% 100%$100,000 to $110,000 7,406 99% 99% 5,222 100% 99%$110,000 to $120,000 4,171 99% 99% 2,792 100% 99%$120,000 to $130,000 2,442 99% 99% 1,413 100% 100%$130,000 to $140,000 1,377 99% 99% 762 100% 100%$140,000 to $150,000 807 99% 99% 380 100% 100%$150,000 to $160,000 502 99% 99% 256 100% 100%$160,000 to $170,000 311 99% 98% 138 100% 100%$170,000 to $180,000 178 98% 97% 97 100% 100%$180,000 to $190,000 113 99% 99% 43 100% 100%Greater Than $190,000 92 100% 100% 58 100% 100%

2008 2007


74

National Grid USA 6

November 14, 2008

Observations

Based on the analysis of the market data we conclude that National Grid compensation (both

salaries and incentive levels) are competitively aligned with national market levels, but

slightly below energy services companies of similar size. The data also shows that

incentives are prevalent at the pay levels we examined and are almost universal. Today,

nearly all utilities use annual incentives as a component of their total cash compensation

program.

To attract and retain talented employees in today’s highly competitive market; companies

must offer a competitive total rewards program, including compensation, retirement

program, health and welfare benefits, and learning and development opportunities. Annual

incentives are used widely in the utility industry and have become a standard component of

the compensation package provided to employees. The increased use of incentives reflects a

shift in the overall mix in compensation in the industry to emphasize pay for performance.

Thus, incentive compensation is not “additional” or “optional” compensation that employers

provide to employees, but a required element in the compensation program and a necessary

cost of doing business. Moreover, incentive compensation offers businesses a vehicle to

maintain a portion of compensation in variable form, that is paid only if results are delivered,

rather than increasing fixed costs by delivering all elements of cash compensation in the

form of salary.


75

National Grid USA Appendix I 7

November 13, 2008

DESCRIPTION OF TOWERS PERRIN

Towers Perrin is a global professional services firm that helps organizations around the world optimize performance through effective people, risk and financial management.

Our Human Capital Group provides global human resource consulting and related services that help our clients effectively manage their investment in people. Our areas of focus include:

Workforce Effectiveness: Defining the people and skills you need — and when and where you need them — and the culture and environment required to sustain high performance

Total Rewards Effectiveness: Identifying the optimal investment in, and mix of, pay, benefits and other rewards to attract, retain and engage employees, and designing programs that deliver value for cost

MANAGING CHANGEChange strategy, leadership support and culture managementTalent management, including succession planning and employee engagementHR and reward communicationEmployee and organization researchCulture and program assessmentsPerformance linkage analysisWorkforce analysis and planningM&A support

MANAGING BENEFITSRETIREMENT

Benefit strategy and program designRetirement financial managementActuarial servicesCompliance Asset consultingAsset/liability forecasts

HEALTH AND WELFAREHealth care strategy Program governance, measurement and monitoringDesign and pricingCare/disease managementPharmacy benefit consultingDisability managementDental and life insurance consulting

MANAGING PAYExecutive compensation strategy and program designDirector compensation and plan designBroad-based reward strategy and program design Total rewards optimizationPerformance managementJob evaluationSales compensation and measurement Compensation administration

BUILDING AN EFFECTIVEHR ORGANIZATION

HR function strategy HR function designHR sourcing strategyHR service delivery strategy

Web portal design and application development

Employee/manager self-serviceHR technology

Systems consultingERP (HRMS) implementation,

including Oracle/PeopleSoft and SAPAdministration

Open enrollmentBenefit statementsOnline SPDs

USING DATA FOR DECISIONSUPPORT

Comp Online™Benefits Online™Executive Compensation Resources (ECR)™Industry, region and custom surveys

OUTSOURCING THROUGHEXCELLERATEHRO™

Benefit administrationCompensation managementPayrollRecruiting and staffingWorkforce developmentWorkforce administration

Visit us at www.towersperrin.com

Human Resource Function Effectiveness: Understanding the role, structure and capability of the HR function in delivering the right environment and rewards, and the delivery mechanisms best suited for the company and its needs

Operational and Financial Effectiveness: Creating an efficient and cost-effective financial, governance and administrative infrastructure for people programs.

We approach all our work from a single perspective: Does it help deliver measurable business results to your organization?

Establishing a link from HR programs, to employee behavior, to business results guides everything we do. Our services are focused on helping companies manage people costs and risk, enhancing employee and organizational performance, delivering HR services more efficiently, and managing small-and large-scale change, particularly in a merger, acquisition or divestiture.


76

National Grid USA Appendix II 8

November 13, 2008

BIOGRAPHIES: MICHAEL CARTER AND RICHARD MEISCHEID

MICHAEL CARTER

Mike Carter is a Principal of Towers Perrin and Head of the New England Executive Compensation practice. His field of specialization is in the design and installation of key executive short- and long-term incentives, total reward systems, field sales programs and performance management programs.

In his 29 years with Towers Perrin, Mike has worked on numerous compensation assignments for a variety of industrial, energy, service and financial services companies including: BIC Corporation, BJ’s Wholesale Club, CEMEX, DENTSPLY International, Eastern Bank, Grupo Modelo, IDEXX Pharmaceuticals, Iron Mountain, Massachusetts Medical Society, National Grid and TD Banknorth. Prior to coming to Boston in 1981, Mike worked at Towers Perrin's Caracas and New York consulting offices. Mr. Carter received his Bachelors and Masters degrees from the University of Miami.

RICHARD MEISCHEID

Mr. Meischeid is a Managing Principal with responsibility for directing Towers Perrin’s compensation consulting practice in the east region. He joined Towers Perrin in 1978 and was elected a Principal of the firm in 1983.

Richard has over twenty-five years experience in working with Boards of Directors and management on executive compensation issues. He has long-term relationships with several clients where he serves as the compensation consultant to the board and management including:

American Electric Power, Circuit City, Equitable Resources, Exelon, Hercules, Nicor, PPL Corporation, Sierra Pacific, Southern Company, Sunoco, PSEG, The VF Corporation, TXU, UGI and Unisys.

Richard is a frequent presenter at compensation and industry meetings on a wide range of topics including annual and long-term incentive plan design, board of director compensation and governance.

Before joining Towers Perrin, Richard was associated with The Wharton School of the University of Pennsylvania, where he served as a graduate teaching assistant. He was a founding member of The Wharton Entrepreneurial Center. Richard graduated from St. Francis College in 1970 and earned an M.B.A. from The Wharton School in 1978.


77

National Grid USA Appendix III 9

November 14, 2008

2008 U.S. CDB Energy Services Middle Management and Professional DatabaseParticipant Listing – November 2008 Company AGL Resources Allegheny Energy Allete Alliance Pipeline Alliant Energy Ameren American Electric Power Areva NP Ashmore Energy International ATC Management Avista Bechtel Bettis BG US Services California Independent System Operator Calpine CenterPoint Energy Central Vermont Public Service CH Energy Group City Public Service Cleco CMS Energy Colorado Springs Utilities Consolidated Edison Constellation Energy Covanta Energy Crosstex Energy Dominion Resources DPL DTE Energy Duke Energy Duquesne Light Dynegy East Kentucky Power Cooperative Edison International Electric Energy Electric Power Research Institute El Paso Corporation El Paso Electric Enbridge Energy Energy Future Holdings Energy Northwest Entergy E.ON U.S. EPCO Epcor Equitable Resources Eugene Water & Electric Board Exelon FirstEnergy Fluor FPL Group Garland Power & Light

Company Great Plains Energy Great River Energy Hawaiian Electric IDACORP Idaho National Laboratory Integrys Energy Group JEA KAPL Knight Lower Colorado River Authority McDermott MGE Energy Mirant Nebraska Public Power District New York Independent System Operator New York Power Authority Nicor NiSource Northeast Utilities Northrop Grumman Newport News NorthWestern Energy NOVA Chemicals NRG Energy NSTAR NW Natural OGE Energy Oglethorpe Power Old Dominion Electric Omaha Public Power ONEOK Otter Tail Pacific Gas & Electric PacifiCorp Pepco Holdings Pinnacle West Capital PNM Resources Portland General Electric PPL Progress Energy Public Service Enterprise Group Puget Energy Questar Reliant Energy Salt River Project SCANA Seminole Energy Services Sempra Energy Sierra Pacific Resources Southern Company Services Southern Union Company Spectra Energy STP Nuclear Operating SUEZ Energy North America

Company Targa Resources TECO Energy Tennessee Valley Authority TransAlta TransCanada UIL Holdings UniSource Energy Unitil USEC Vectren Westar Energy Westinghouse Electric Williams Companies Wisconsin Energy Wolf Creek Nuclear Xcel Energy


78

National Grid USA Appendix III 10

November 14, 2008

2008 U.S. CDB Energy Services Middle Management and Professional DatabaseParticipant Listing -- November 2008Companies with Revenues Greater than $6 Billion Plus Selected Regional Energy Services Companies

Company CompanyAllegheny Energy FluorAmeren FPL GroupAmerican Electric Power Integrys Energy GroupCalpine NiSourceCenterPoint Energy Northeast UtilitiesCMS Energy NOVA ChemicalsConsolidated Edison NRG EnergyConstellation Energy NSTARDCP Midstream ONEOKDominion Resources Pacific Gas & ElectricDTE Energy Pepco HoldingsDuke Energy PPLEdison International Progress EnergyEnbridge Energy Public Service Enterprise GroupEnergy Future Holdings Reliant EnergyEntergy Sempra EnergyEPCO Southern Company ServicesExelon Williams CompaniesFirstEnergy Xcel Energy


79

National Grid USA Appendix IV 11

November 14, 2008

2007 CDB Energy Services Middle Management and Professional DatabaseParticipant Listing – November 2008 Company AES Southland AGL Resources Allegheny Energy Allete Alliance Pipeline Alliant Energy Alyeska Pipeline Service Ameren American Electric Power Areva NP Ashmore Energy International ATC Management Atmos Energy Avista Black Hills Power and Light California Independent System Operator Calpine CenterPoint Energy Central Vermont Public Service CH Energy Group Cheniere Energy City of Austin City Public Service Cleco CMS Energy Colorado Springs Utilities Consolidated Edison Constellation Energy Crosstex Energy Dominion Resources DPL DTE Energy Duke Energy Duquesne Light Dynegy East Kentucky Power Cooperative Edison International Electric Energy Electric Power Research Institute El Paso Corporation El Paso Electric Enbridge Energy Energy Future Holdings Energy Northwest Enron Entergy E.ON U.S. EPCO Equitable Resources Eugene Water & Electric Board Exelon

Company FirstEnergy FPL Group Great Plains Energy Hawaiian Electric IDACORP Idaho National Laboratory ITC Holdings JEA KAPL KeySpan Lower Colorado River Authority McDermott MGE Energy Mirant Nebraska Public Power District New York Independent System Operator New York Power Authority Nicor Northeast Utilities Northrop Grumman Newport News NorthWestern Energy NRG Energy NSTAR Nuclear Management NW Natural OGE Energy Oglethorpe Power Old Dominion Electric Omaha Public Power ONEOK Otter Tail Pacific Gas & Electric PacifiCorp Pepco Holdings Pinnacle West Capital PNM Resources Portland General Electric PPL Progress Energy Public Service Enterprise Group Puget Energy Questar Reliant Energy Salt River Project Santee Cooper SCANA Seminole Energy Services Sempra Energy Sierra Pacific Resources Southern Company Services Southern Union Company

Company Spectra Energy STP Nuclear Operating SUEZ Energy North America Targa Resources TECO Energy Tennessee Valley Authority TransAlta TransCanada UIL Holdings UniSource Energy Unitil USEC Vectren Westar Energy Westinghouse Electric − Energy Division Williams Companies Wisconsin Energy Wolf Creek Nuclear Xcel Energy


80

National Grid USA Appendix IV 12

November 14, 2008

2007 CDB Energy Services Middle Management and Professional Database Participant Listing – November 2008 – Companies with Revenues Greater Than $10 Billion Company American Electric Power Consolidated Edison Constellation Energy Dominion Resources Duke Energy Edison International Energy Future Holdings Entergy EPCO Exelon FirstEnergy FPL Group ONEOK Pacific Gas & Electric Public Service Enterprise Group Reliant Energy Sempra Energy Southern Company Services Williams Companies


81

National Grid USA Appendix V 13

November 14, 2008

2008 U.S. CDB Energy Services Middle Management and Professional DatabaseParticipant Listing – November 2008 Company AGL Resources Allegheny Energy Allete Alliance Pipeline Alliant Energy Ameren American Electric Power Areva NP Ashmore Energy International ATC Management Avista Bechtel Bettis BG US Services California Independent System Operator Calpine CenterPoint Energy Central Vermont Public Service CH Energy Group City Public Service Cleco CMS Energy Colorado Springs Utilities Consolidated Edison Constellation Energy Covanta Energy Crosstex Energy Dominion Resources DPL DTE Energy Duke Energy Duquesne Light Dynegy East Kentucky Power Cooperative Edison International Electric Energy Electric Power Research Institute El Paso Corporation El Paso Electric Enbridge Energy Energy Future Holdings Energy Northwest Entergy E.ON U.S. EPCO Epcor Equitable Resources Eugene Water & Electric Board Exelon FirstEnergy Fluor FPL Group Garland Power & Light

Company Great Plains Energy Great River Energy Hawaiian Electric IDACORP Idaho National Laboratory Integrys Energy Group JEA KAPL Knight Lower Colorado River Authority McDermott MGE Energy Mirant Nebraska Public Power District New York Independent System Operator New York Power Authority Nicor NiSource Northeast Utilities Northrop Grumman Newport News NorthWestern Energy NOVA Chemicals NRG Energy NSTAR NW Natural OGE Energy Oglethorpe Power Old Dominion Electric Omaha Public Power ONEOK Otter Tail Pacific Gas & Electric PacifiCorp Pepco Holdings Pinnacle West Capital PNM Resources Portland General Electric PPL Progress Energy Public Service Enterprise Group Puget Energy Questar Reliant Energy Salt River Project SCANA Seminole Energy Services Sempra Energy Sierra Pacific Resources Southern Company Services Southern Union Company Spectra Energy STP Nuclear Operating SUEZ Energy North America

Company Targa Resources TECO Energy Tennessee Valley Authority TransAlta TransCanada UIL Holdings UniSource Energy Unitil USEC Vectren Westar Energy Westinghouse Electric Williams Companies Wisconsin Energy Wolf Creek Nuclear Xcel Energy


82

National Grid USA Appendix V 14

November 14, 2008

2008 U.S. CDB Energy Services Middle Management and Professional Database Participant Listing – November 2008 – Companies with Revenues Greater Than $10 Billion Company American Electric Power Consolidated Edison Constellation Energy Dominion Resources Duke Energy Edison International Entergy EPCO Exelon FirstEnergy Fluor FPL Group Integrys Energy Group ONEOK Pacific Gas & Electric Public Service Enterprise Group Reliant Energy Sempra Energy Southern Company Services Williams Companies Xcel Energy


83

Schedule

N

G-W

FD-7



Schedule NG-WFD-7

Comparison of Rhode Island Wages to New England Wages

84

S:\RADATA1\2009 neco\General Rate Case\Comp & Benefits (Dowd)\Schedules\[Schedule NG-WFD-7.xls]MRPs Narragansett Electric Companyd/b/a National GridDocket No. R.I.P.U.C. ____Schedule NG-WFD-7Page 1 of 1

Narragansett Electric Company2009 Regional Pay Scales

Job Code Job Title Salary Band2009 NE MRP

(000's)2009 Prov.

MRP (000's) Diff %1400 Administrative Assistant F1 $48.00 $45.10 -6.0%3000 Analyst (Budget) E1 $66.74 $65.20 -2.3%2000 Asc Analyst (Budget) F2 $54.05 $52.80 -2.3%2000 Asc Analyst (Benefit) F2 $54.10 $52.40 -3.1%2500 Asc Engineer F2 $60.00 $63.60 6.0%3500 Engineer E1 $72.00 $79.30 10.1%3600 Envrmtl Engineer E2 $92.00 $88.90 -3.4%3101 HRIS Analyst E1 $66.74 $68.10 2.0%3100 Human Resources Rep E1 $66.74 $65.20 -2.3%2003 Lead Analyst (Budget) D1 $97.76 $98.10 0.3%2003 Lead Analyst (Benefit) D1 $97.76 $93.80 -4.1%2003 Lead Analyst (HRIS) D1 $97.76 $97.90 0.1%8101 Lead LR Rep D1 $97.76 $102.10 4.4%3041 Lead Sr Engineer D1 $104.00 $108.10 3.9%4605 Lead Sr Env Engineer D1 $104.00 $104.00 0.0%8623 Mgr HR Systems D1 $97.76 $119.20 21.9%5500 Prin Engineer D2 $113.00 $126.40 11.9%4601 Prin Evrmtl Engr D1 $104.00 $112.40 8.1%8507 Project Manager D1 $97.76 $111.50 14.1%4560 Sr Acctg Analyst E2 $80.84 $79.30 -1.9%4500 Sr Engineer E2 $92.00 $92.30 0.3%4101 Sr HRIS Analyst E2 $80.84 $85.20 5.4%4100 Sr Human Resources Rep E2 $80.84 $78.40 -3.0%8745 Superintendent D1 $97.76 $102.90 5.3%7465 Supervisor E1 $66.74 $65.50 -1.9%7410 Svr Accts Payable E2 $80.84 $77.20 -4.5%8622 Svr T & D E2 $90.00 $88.10 -2.1%

85

Schedule

N

G-W

FD-8



Schedule NG-WFD-8

National Grid USA Companies Union Wage Comparison

86

S:\RADATA1\2009 neco\General Rate Case\Comp & Benefits (Dowd)\Schedules\[Schedule NG-WFD-8.xls]Wage Comparison Summary Narragansett Electric Companyd/b/a National Grid

Docket No. R.I.P.U.C. ____Schedule NG-WFD-8

Page 1 of 1

NATIONAL GRID USA COMPANIES

UNION WAGE COMPARISONS

TROUBLE CREW 1/C LINE LEAD 1/C O&M METER SR. CUSTCOMPANY SHOOTER LEADER WORKER SPLICER SPLICER WORKER WORKER SERV REP

N-STAR $38.84 $38.36 $36.44 $35.04 $34.81 $36.41 $35.09 $31.84

CONN. LIGHT & POWER 36.93 37.04 36.06 35.80 35.00 35.00 33.09

WESTERN MA ELEC 35.23 36.29 35.27 35.40 34.65 34.99 32.93

UNITED ILLIMUNATING $35.46 $37.19 $35.46 None $32.74 $35.46 $35.46 $29.20

PEABODY (Muni) None None $36.24 None None None $31.17 $23.69

TAUNTON (Muni) None None $42.59 None None None $35.39 $25.81

UNITIL $34.12 $36.46 $33.45 $36.56 $33.17 $31.08 $30.35 Non Union

PSNH None Non-Union $32.30 None None $30.46 $29.84 Non Union

CENTRAL MAINE POWER

NATIONAL GRID - NY $39.87 $39.87 $36.00 $36.52 $33.21 $31.92 $31.92 $16.58

NATIONAL GRID - NE* $39.41 $39.41 $36.00 $37.70 $34.30 $35.05 $31.38 $22.76

Median Rate $36.93 $37.19 $36.00 $36.16 $34.30 $35.00 $32.43 $24.75

Average Rate $37.12 $37.80 $35.98 $36.17 $33.98 $33.80 $32.66 $24.98

Maximum Rate $39.87 $39.87 $42.59 $37.70 $35.00 $36.41 $35.46 $31.84

04/08/2009

87

Schedule

N

G-W

FD-9



Schedule NG-WFD-9

BENVAL Analysis for Union Benefits (Tower Perrin, 10/9/08)

88

Oct

ober

9, 2

008

©20

08 T

ower

s Pe

rrin

BEN

VAL

Ana

lysi

s fo

r Uni

on B

enef

its

Nat

iona

l Gri

d

Con

fiden

tial -

For

Dis

cuss

ion

Pur

pose

s O

nly

.

This

doc

umen

t is

inte

nded

for

disc

uss

ion

purp

oses

onl

y. I

t sho

uld

not

be d

istr

ibut

ed t

o an

y th

ird

part

y, o

r pu

blis

hed

in w

hole

or

in p

art

in a

ny fo

rm, w

ithou

t pr

ior

wri

tten

con

sent

of T

ower

s P

erri

n.


89

1©

2008

Tow

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inP

ropr

ieta

ry a

nd C

onfid

entia

lN

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r use

or d

iscl

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e To

wer

s P

errin

and

its

clie

nts

Tab

le o

f C

onte

nts

Ove

rvie

w o

f Com

petit

ive

Ass

essm

ent

Ent

ire B

enef

it P

rogr

am

Ret

irem

ent B

enef

its

Act

ive

Ben

efits

Sum

mar

y


90

2©

2008

Tow

ers

Perr

inP

ropr

ieta

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nd C

onfid

entia

lN

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or d

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wer

s P

errin

and

its

clie

nts

Ove

rvie

w o

f C

ompe

titi

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sses

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Tow

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Per

rin c

ondu

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a b

enef

it pr

ogra

m b

ench

mar

king

ana

lysi

s co

mpa

ring

bene

fit le

vels

for

both

lega

cy N

atio

nal G

rid u

nion

s -N

ew E

ngla

nd (N

GG

-U) a

nd N

ew Y

ork

(NG

GN

-U) -

rela

tive

to

the

unio

n be

nefit

pro

gram

s fo

r 14

peer

org

aniz

atio

ns. T

his

anal

ysis

was

bas

ed o

n 20

08 b

enef

it pr

ogra

ms

for t

he N

atio

nal G

rid U

nion

s as

wel

l as

the

com

para

tor g

roup

s

Incl

uded

thro

ugho

ut th

is d

ocum

ent,

we

have

incl

uded

pla

n su

mm

ary

char

ts fo

r eac

h be

nefit

In th

e R

etire

men

t sec

tion,

we

prov

ide

plan

sum

mar

ies

for e

ach

bene

fit p

rogr

am fo

r eac

h N

atio

nal G

rid U

nion

In th

e A

ctiv

e se

ctio

n, w

e pr

ovid

e pl

an s

umm

arie

s fo

r eac

h be

nefit

pro

gram

and

eac

h N

atio

nal G

rid U

nion

, as

wel

l as

rang

es (t

he lo

wes

t to

high

est v

alue

for t

he g

roup

of v

alue

s),

aver

ages

(the

mea

n of

a g

roup

of v

alue

s), a

nd m

odes

(the

mos

t fre

quen

t val

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a g

roup

of

valu

es),

whe

re p

ossi

ble

for t

he c

ompe

titor

gro

up; w

here

ave

rage

sco

uld

not b

e ca

lcul

ated

, w

e ca

lcul

ated

a ra

nge

and

mod

e on

ly


91

3©

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and

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ompe

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sses

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The

anal

ysis

was

bas

ed o

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divi

dual

em

ploy

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lan

prov

isio

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spr

ovid

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y ea

ch

orga

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appl

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usi

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nom

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ass

umpt

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reby

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alue

”of t

he p

lan,

not

th

e ac

tual

cos

t of t

he p

lan

BEN

VAL®

dete

rmin

es a

val

ue fo

r the

se b

enef

its b

y ap

plyi

ng a

sta

ndar

d m

etho

dolo

gy to

a s

tand

ard

empl

oyee

pop

ulat

ion

Pla

n pr

ovis

ions

val

ued

are

thos

e th

at a

pply

to n

ewly

hire

d em

ploy

ees

Ben

efit

prog

ram

s ar

e:C

ompa

red

on a

rela

tive

valu

e ba

sis

betw

een

empl

oyer

s --

a sc

ore

of 1

00

repr

esen

ts th

e av

erag

e va

lue

for t

he c

ompa

rato

r gro

upS

core

s ar

e de

term

ined

on

a do

llar v

alue

bas

is re

lativ

e to

the

aver

age

valu

e

Thro

ugho

ut th

is d

ocum

ent,

“Tot

al V

alue

”ref

ers

to th

e po

sitio

ning

of t

he b

enef

it pr

ogra

ms

incl

udin

g th

e va

lue

of e

mpl

oyee

con

tribu

tions

, whe

reas

“Em

ploy

er V

alue

”re

fers

to th

e va

lue

afte

r em

ploy

ee c

ontri

butio

ns h

ave

been

ded

ucte

d

The

tota

l ben

efit

valu

es a

re p

rimar

ily d

riven

by

the

valu

e of

the

retir

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t pla

ns,

activ

e an

d po

st-r

etire

men

t med

ical

pla

ns, a

nd v

acat

ion

and

holid

ay p

rogr

ams,

w

hich

com

pris

e th

e va

st m

ajor

ity o

f the

pro

gram

val

ues


92

4©

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s P

errin

and

its

clie

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ire

Ben

efit

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gram

Nat

iona

l Grid

’s N

ew Y

ork

Uni

on E

mpl

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Val

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dica

tes

that

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pack

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xclu

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the

valu

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ore

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rous

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val

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is re

duce

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101

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or ju

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bout

ave

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, whe

n al

so c

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of e

mpl

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con

tribu

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light

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atio

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pee

r org

aniz

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artly

of

fset

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ave

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retir

emen

t (de

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ben

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Nat

iona

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’s N

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ngla

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nion

Em

ploy

er V

alue

of 9

6.6

indi

cate

s th

at th

e pa

ckag

e of

ben

efits

, exc

ludi

ng th

e va

lue

of e

mpl

oyee

con

tribu

tions

, is

slig

htly

less

gen

erou

s th

an th

e av

erag

e pr

ogra

m v

alue

; the

tota

l val

ue is

in

crea

sed

to 9

8.5

whe

n al

so c

onsi

derin

g th

e va

lue

of e

mpl

oyee

con

tribu

tions

to th

e va

rious

pro

gram

sTh

is re

sult

is th

e ne

t of a

low

er th

an a

vera

ge a

ctiv

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d re

tiree

med

ical

pro

gram

val

ue a

nd a

hig

her t

han

aver

age

retir

emen

t (de

fined

ben

efit/

defin

ed c

ontri

butio

n) v

alue

Entir

e Be

nefit

Pro

gram

Sco

re a

nd R

ank Sc

ore

Rank

/16

Empl

oyer

Val

ue

Nat

iona

l Grid

New

Yor

k U

nion

107.

95

Nat

iona

l Grid

New

Eng

land

Uni

on96

.610

Tota

l Val

ue

Nat

iona

l Grid

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k U

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101.

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land

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on98

.510


93

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and

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Ent

ire

Ben

efit

Pro

gram

The

follo

win

g ba

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rt fu

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illu

stra

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how

N

atio

nal G

rid’s

Uni

on p

lans

co

mpa

re to

thei

r pee

rs b

oth

in te

rms

of g

ross

ben

efit

valu

e of

thei

r ent

ire b

enef

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m, a

s w

ell a

s em

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ribut

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)

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EL

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94

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and

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Pro

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Com

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by E

mpl

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Val

ue -

New

Yor

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The

pie

char

ts a

bove

repr

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t the

per

cent

age

that

eac

h be

nefit

com

pone

nt c

ompr

ises

of t

he

tota

l ben

efit

prog

ram

for t

he N

ew Y

ork

Uni

on, a

s co

mpa

red

to a

n av

erag

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mpa

nyTh

e N

ew Y

ork

Uni

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med

ical

pro

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is m

ore

valu

able

at 5

4.5%

of t

he to

tal b

enef

itpr

ogra

m,

as c

ompa

red

to th

e av

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mpa

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med

ical

pro

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, whi

ch c

ompr

ises

onl

y 46

.8%

of t

he

tota

l ben

efit

prog

ram

Thei

r ret

irem

ent p

rogr

am (D

efin

ed B

enef

it +

Def

ined

Con

tribu

tion)

, how

ever

, mak

es u

p a

smal

ler p

erce

ntag

e at

12.

4% o

f the

tota

l ben

efit

prog

ram

, tha

n th

e av

erag

e co

mpa

ny’s

re

tirem

ent p

rogr

am, w

hich

com

pris

es 1

8.3%

of t

he to

tal p

rogr

am


95

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s P

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and

its

clie

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Com

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nts

by E

mpl

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Val

ue -

New

Eng

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Uni

on

The

pie

char

ts a

bove

repr

esen

t the

per

cent

age

that

eac

h co

mpo

nent

com

pris

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f the

tota

l be

nefit

pro

gram

for t

he N

ew E

ngla

nd U

nion

, as

com

pare

d to

an

aver

age

com

pany

The

New

Eng

land

Uni

on’s

ben

efit

prog

ram

mor

e cl

osel

y m

irror

s an

ave

rage

com

pany

’s b

enef

it pr

ogra

m th

an th

e N

ew Y

ork

Uni

onTh

eir m

edic

al p

rogr

am, a

t 43.

2% o

f the

tota

l ben

efit

prog

ram

, is

slig

htly

less

val

uabl

e th

an th

e av

erag

e co

mpa

ny’s

med

ical

pro

gram

, whi

ch c

ompr

ises

46.

8% o

f the

tota

l ben

efit

prog

ram

Thei

r ret

irem

ent p

rogr

am (D

efin

ed B

enef

it +

Def

ined

Con

tribu

tion)

, how

ever

, is

slig

htly

rich

er a

t 21

.5%

of t

he to

tal b

enef

it pr

ogra

m, t

han

the

aver

age

com

pany

’s re

tirem

ent p

rogr

am, w

hich

co

mpr

ises

18.

3% o

f the

tota

l pro

gram


96

Ret

irem

ent

Ben

efit

s


97

9©

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errin

and

its

clie

nts

Def

ined

Ben

efit

and

Def

ined

Con

trib

utio

n S

core

and

Ran

k

The

follo

win

g ta

ble

illust

rate

s N

atio

nal G

rid’s

New

Eng

land

and

New

Yor

k U

nion

s’co

mpe

titiv

e po

sitio

ning

rela

tive

to th

eir p

eer g

roup

in te

rms

ofco

mbi

ned

defin

ed

bene

fit a

nd d

efin

ed c

ontri

butio

n pr

ogra

ms

Defin

ed B

enef

it an

d Co

ntri

butio

n S

core

and

Ran

k

Scor

eRa

nk/1

6Em

ploy

er V

alue

Nat

iona

l Grid

New

Yor

k U

nion

73.1

15

Nat

iona

l Grid

New

Eng

land

Uni

on11

3.6

5

Tota

l Val

ue

Nat

iona

l Grid

New

Yor

k U

nion

74.9

16

Nat

iona

l Grid

New

Eng

land

Uni

on10

2.9

6


98

10©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Def

ined

Ben

efit

and

Def

ined

Con

trib

utio

n C

ompa

riso

n

The

follo

win

g ta

ble

com

pare

s N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

pla

n de

sign

s

Key

Pla

n D

esig

n Fe

atur

es -

Defin

ed B

enef

it an

d De

fined

Con

tribu

tion

Plan

s

Nat

iona

l Grid

New

Yor

k Un

ion

Nat

iona

l Grid

New

Eng

land

Un

ion

Def

ined

Ben

efit

Plan

Bas

ic F

orm

ula

4%-8

% p

ay c

redi

ts b

ased

on

serv

ice

1.9%

FA

E-5

less

1.3

3% P

IAP

lan

Type

Cas

h B

alan

ceFi

nal P

ayE

arly

Ret

irem

ent S

ubsi

dyN

AU

nred

uced

at 6

2, E

RF

varie

sLu

mp

Sum

Yes

, at a

ny a

geN

o O

ther

30-y

ear T

inte

rest

N/A

Def

ined

Con

tribu

tion

Plan

Em

ploy

er M

atch

50%

on

up to

6%

100%

on

first

2%

, 50%

on

next

4%

Pro

fit S

harin

gN

AN

/A

Oth

er6%

aut

o en

roll,

100

% im

med

iate

ve

stin

g6%

aut

o en

roll,

100

% v

estin

g at

on

e ye

arS

PP

No

No


99

11©

2008

Tow

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Perr

inP

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nd C

onfid

entia

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ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Def

ined

Ben

efit

■A

ll bu

t one

com

petit

or u

nion

pro

vide

s a

defin

ed b

enef

it pl

an a

s pa

rt of

its

retir

emen

t pr

ogra

m; n

one

of th

e pl

ans

requ

ire a

ny

empl

oyee

con

tribu

tion

■Th

e pl

ans

vary

in d

esig

n –

abou

t hal

f offe

r a

tradi

tiona

l fin

al p

ay o

r car

eer p

ay p

lan

and

half

offe

r a h

ybrid

acc

ount

-bas

ed d

esig

n (c

ash

bala

nce

or p

ensi

on e

quity

); on

ly o

ne u

nion

pr

ovid

es a

flat

dol

lar (

non-

pay

rela

ted)

des

ign

■N

atio

nal G

rid’s

New

Yor

k U

nion

pla

n is

rank

ed

belo

w th

e co

mpe

titor

gro

up a

vera

ge.

It is

ra

nked

alo

ng-s

ide

the

othe

r cas

h ba

lanc

e an

d pe

nsio

n eq

uity

des

igns

, whi

ch ty

pica

lly d

o no

t in

clud

e si

gnifi

cant

ear

ly re

tirem

ent s

ubsi

dies

. M

ost o

f the

se p

lans

do

offe

r a fu

ll lu

mp

sum

be

nefit

upo

n te

rmin

atio

n.

■N

atio

nal G

rid’s

New

Eng

land

Uni

on p

lan

is

rank

ed a

bove

the

com

petit

or g

roup

ave

rage

. It

is ra

nked

alo

ng-s

ide

the

othe

r tra

ditio

nal f

inal

pa

y an

d/or

car

eer p

ay ty

pe d

esig

ns, w

hich

ty

pica

lly in

clud

e ge

nero

us e

arly

retir

emen

t pr

ovis

ions

and

/or a

n au

tom

atic

CO

LAs

prov

isio

n

NGG

-U

NGG

NUNG

G-U

NGG

NUF

BL

DH

GK

JA

IM

CE

N

FB

LD

HG

KJ

AI

MC

EN


100

12©

2008

Tow

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Perr

inP

ropr

ieta

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nd C

onfid

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lN

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errin

and

its

clie

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Def

ined

Con

trib

utio

n

■A

ll of

the

com

petit

or re

tirem

ent p

rogr

ams

incl

ude

a de

fined

con

tribu

tion

com

pone

nt;

mos

t typ

ical

ly it

incl

udes

onl

y an

em

ploy

er

savi

ngs

plan

mat

chin

g co

ntrib

utio

n, b

ut a

fe

w c

ompe

titor

s al

so p

rovi

de a

com

pany

au

tom

atic

or p

rofit

sha

ring

elem

ent i

n th

e sa

ving

s pl

an

■A

bout

hal

f of t

he c

ompe

titor

pro

gram

s al

so

incl

ude

a se

para

te s

tock

pur

chas

e pl

an w

ith

a sm

all p

urch

ase

disc

ount

■N

atio

nal G

rid’s

New

Yor

k U

nion

pla

n pr

ovid

es a

low

er e

mpl

oyer

mat

chin

g co

ntrib

utio

n (5

0% o

n 6%

or m

ax. o

f 3%

em

ploy

er) w

hich

pla

ces

it be

low

the

com

petit

or g

roup

ave

rage

■N

atio

nal G

rid’s

New

Eng

land

Uni

on p

lan

prov

ides

an

empl

oyer

mat

chin

g co

ntrib

utio

n (1

00%

on

first

2%

, 50%

on

next

4%

or m

ax.

of 4

% e

mpl

oyer

), w

hich

pla

ces

it at

abo

ut

the

com

petit

or g

roup

ave

rage

■Li

ke N

atio

nal G

rid’s

sav

ings

pla

ns, t

he

maj

ority

of c

ompa

nies

pro

vide

for i

mm

edia

te

vest

ing

of e

mpl

oyer

con

tribu

tions

; sev

eral

pr

ovid

e fo

r aut

o-en

rollm

ent

NGG- U

NGG

NU

NGG- U

NGG

NU

BF

CD

GL

KJ

MA

EI

NH

BF

CD

MG

EI

KJ

LA

NH


101

13©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Def

ined

Ben

efit

+ D

efin

ed C

ontr

ibut

ion

■A

ll bu

t one

of t

he c

ompe

titor

uni

on

retir

emen

t pro

gram

s in

clud

e bo

th a

def

ined

be

nefit

and

def

ined

con

tribu

tion

com

pone

nt, s

imila

r to

the

desi

gn o

f N

atio

nal G

rid’s

uni

on p

rogr

ams

■S

imila

r to

Nat

iona

l Grid

’s p

rogr

ams,

the

maj

ority

of t

he e

mpl

oyer

-pro

vide

d re

tirem

ent v

alue

is p

rovi

ded

thro

ugh

the

defin

ed b

enef

it pl

an

■N

atio

nal G

rid’s

New

Eng

land

uni

on

prog

ram

is ra

nked

abo

ve th

e co

mpe

titor

gr

oup

aver

age,

con

sist

ent w

ith th

e ab

ove

aver

age

rank

ing

for i

ts d

efin

ed b

enef

it pl

an

(com

bine

d w

ith it

s ab

out a

vera

ge ra

nkin

g fo

r its

def

ined

con

tribu

tion

plan

)

■N

atio

nal G

rid’s

New

Yor

k U

nion

pro

gram

is

rank

ed s

igni

fican

tly b

elow

the

com

petit

or

grou

p av

erag

e, c

onsi

sten

t with

the

belo

w

com

petit

or g

roup

ave

rage

rank

ing

for b

oth

its d

efin

ed b

enef

it an

d de

fined

con

tribu

tion

com

pone

nts

NGGN U

NGG- U

NGG- U

NGGN U

FE

GL

BK

JN

CH

AM

DI

AE

CG

FM

LK

JB

NI

DH


102

14©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Pos

t-re

tire

men

t M

edic

al S

core

and

Ran

k

The

follo

win

g ta

ble

illust

rate

s N

atio

nal G

rid’s

New

Eng

land

and

New

Yor

k U

nion

s’co

mpe

titiv

e po

sitio

ning

rela

tive

to th

eir p

eer g

roup

in te

rms

ofpo

st-re

tirem

ent m

edic

al

Post

-retir

emen

t Med

ical

Sco

re a

nd R

ank Sc

ore

Rank

/16

Empl

oyer

Val

ue

Nat

iona

l Grid

New

Yor

k U

nion

268.

61

Nat

iona

l Grid

New

Eng

land

Uni

on37

.814

Tota

l Val

ue

Nat

iona

l Grid

New

Yor

k U

nion

176.

61

Nat

iona

l Grid

New

Eng

land

Uni

on60

.913


103

15©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Pos

t-re

tire

men

t M

edic

al C

ompa

riso

n

The

follo

win

g ta

ble

com

pare

s N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

pla

n de

sign

s

Key

Pla

n De

sign

Fea

ture

s - P

ost-r

etir

emen

t Med

ical

Nat

iona

l Grid

New

Yor

k Un

ion

Nat

iona

l Grid

New

Eng

land

Uni

on

Pre

-65

Type

of P

lan

PO

SP

OS

Pla

n D

esig

nS

ame

as a

ctive

Sam

e as

act

iveP

artic

ipat

ion

Req

uire

men

tsA

ge 5

5 &

10

YO

S a

fter a

ge 4

5A

ge 6

1 &

10

YO

S o

r Age

60

and

&

Age

+Ser

vice

= 85

Def

ined

Dol

lar B

enef

itN

one

Non

e

Pos

t-65

Type

of P

lan

PO

SM

edic

are

Sup

plem

ent

Par

ticip

atio

n R

equi

rem

ents

10 y

ears

of s

ervic

e af

ter a

ge 4

5A

ge+s

ervic

e =

85 o

r 10

YO

SP

lan

Des

ign

Sam

e as

act

iveD

educ

tible

Per

son:

$10

0; F

amily

Max

: non

eO

ut-o

f-poc

ket m

axim

umP

erso

n: n

one;

Fam

ily M

ax: n

one

Pre

scrip

tion

Dru

gs (r

etai

l)G

ener

ic10

0%B

rand

80%

Coo

rdin

atio

n w

ith M

edic

are

Ben

efit

redu

ced

by M

edic

are

bene

fitM

edic

are

Par

t 'A

'N

/A10

0% o

f Par

t 'A

' ded

uctib

le, 1

00%

of P

art

'A' c

o-pa

y be

fore

ded

uctib

leM

edic

are

Par

t 'B

'N

/A10

0% o

f Par

t 'B

' ded

uctib

le, 1

00%

of P

art

'B' c

oins

uran

ce b

efor

e de

duct

ible

Med

icar

e P

art '

B' P

rem

ium

Non

eN

one

Def

ined

dol

lar B

enef

itN

one

Ret

iree:

$54

x s

ervic

e; R

etire

e +

Spo

use:

$1

08 x

ser

vice


104

16©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

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r use

or d

iscl

osur

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tsid

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wer

s P

errin

and

its

clie

nts

Pos

t-re

tire

men

t M

edic

al

■Th

e N

atio

nal G

rid N

ew Y

ork

Uni

on p

ost-

retir

emen

t med

ical

pla

n is

rank

ed a

t the

ver

y to

p of

the

peer

gro

up, w

ith a

pla

n va

lue

sign

ifica

ntly

ab

ove

the

peer

gro

up a

vera

ge.

This

is th

e re

sult

of:

■R

elat

ivel

y lo

w re

tiree

con

tribu

tions

,

■U

ncap

ped

empl

oyer

con

tribu

tions

,

■C

ompr

ehen

sive

PO

S pl

an d

esig

n,

■E

ligib

ility

for l

ifetim

e co

vera

ge a

t age

55

and

10 y

ears

of s

ervi

ce

■Th

e N

atio

nal G

rid N

ew E

ngla

nd U

nion

pos

t-re

tirem

ent m

edic

al p

lan

is ra

nked

sig

nific

antly

be

low

the

peer

gro

up a

vera

ge a

s a

resu

lt of

:

■C

aps

on th

e em

ploy

er c

ontri

butio

n

■Pr

e-M

edic

are

elig

ibilit

y lim

ited

to re

tiree

s ag

e 60

■M

edic

are

supp

lem

ent d

esig

n fo

r pos

t-65

cove

rage

NGGN

UNG

G-U

NGGN

UNG

G-U

AE

BC

KJ

IH

DL

MN

GF

HE

MB

DL

FI

CK

JN

GA


105

17©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Pos

t-re

tire

men

t D

eath

Sco

re a

nd R

ank

The

follo

win

g ta

ble

illust

rate

s N

atio

nal G

rid’s

New

Eng

land

and

New

Yor

k U

nion

s’co

mpe

titiv

e po

sitio

ning

rela

tive

to th

eir p

eer g

roup

in te

rms

ofpo

st-re

tirem

ent d

eath

Pos

t-ret

irem

ent D

eath

Sco

re a

nd R

ank Sc

ore

Rank

/16

Empl

oyer

Val

ue

Nat

iona

l Grid

New

Yor

k U

nion

0.0

tied

for l

ast w

/ 5

othe

r com

pani

es

Nat

iona

l Grid

New

Eng

land

Uni

on43

.39

Tota

l Val

ue

Nat

iona

l Grid

New

Yor

k U

nion

0.0

tied

for l

ast w

/ 4

othe

r com

pani

es

Nat

iona

l Grid

New

Eng

land

Uni

on38

.711


106

18©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Pos

t-re

tire

men

t D

eath

Com

pari

son

The

follo

win

g ta

ble

com

pare

s N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

pla

n de

sign

s

Post

-retir

emen

t Dea

th B

enef

it

Nat

iona

l Gri

d N

ew Y

ork

Uni

on

Nat

iona

l Gri

d N

ew E

ngla

nd U

nion

Ty

pe o

f cov

erag

eN

o po

st-re

tirem

ent c

over

age

Bas

ic L

ifeP

artic

ipat

ion

Req

uire

men

tsN

/AA

ge 6

1 &

10

YO

S o

r Age

60

&

age+

serv

ice

= 65

Mon

thly

Con

tribu

tions

N/A

Non

eE

arly

Ret

irem

ent C

over

age

N/A

Sam

e as

Nor

mal

Ret

irem

ent

Nor

mal

Ret

irem

ent C

over

age

N/A

Red

uced

imm

edia

tely

to $

12,5

00 fo

r life


107

19©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Pos

t-re

tire

men

t D

eath

■N

atio

nal G

rid’s

uni

on p

ost-r

etire

men

t dea

th p

lans

ar

e ra

nked

sig

nific

antly

bel

ow th

e co

mpe

titor

gro

up

aver

age

■Th

e N

ew Y

ork

unio

n do

es n

ot h

ave

a po

st-

retir

emen

t dea

th b

enef

it an

d th

e N

ew E

ngla

nd

unio

n ha

s a

low

er th

an a

vera

ge b

enef

it le

vel

■Fo

ur p

eer c

ompa

nies

(D, I

, M, a

nd N

) alo

ng w

ith

Nat

iona

l Grid

’s N

ew Y

ork

Uni

on, d

o no

t offe

r any

po

st-re

tirem

ent d

eath

ben

efit

■L

and

G, w

hich

are

rank

ed fi

rst a

nd s

econ

d re

spec

tivel

y, o

ffer a

dea

th b

enef

it th

at o

nly

grad

ually

redu

ces

afte

r ret

irem

ent,

until

the

bene

fit

reac

hes

a m

axim

um o

f 25%

of t

he p

re-re

tirem

ent

deat

h be

nefit

■N

atio

nal G

rid’s

New

Eng

land

Uni

on p

lan

redu

ces

the

bene

fit im

med

iate

ly u

pon

retir

emen

t to

$12,

500

for l

ife

NGG-

UNG

GNU

NGG-

UNG

GNU

MG

AB

KJ

CF

HD

EI

LN

MG

AB

HF

KJ

CE

DI

LN


108

20©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Ret

irem

ent

Eve

nt S

core

and

Ran

k

The

follo

win

g ta

ble

illust

rate

s N

atio

nal G

rid’s

New

Eng

land

and

New

Yor

k U

nion

s’co

mpe

titiv

e po

sitio

ning

rela

tive

to th

eir p

eer g

roup

in te

rms

ofto

tal r

etire

men

t eve

nts

Retir

emen

t Eve

nt S

core

and

Ran

k

Scor

eR

ank/

16Em

ploy

er V

alue

Nat

iona

l Grid

New

Yor

k U

nion

123.

24

Nat

iona

l Grid

New

Eng

land

Uni

on93

.310

Tota

l Val

ue

Nat

iona

l Grid

New

Yor

k U

nion

99.5

8

Nat

iona

l Grid

New

Eng

land

Uni

on92

.110


109

21©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Ret

irem

ent

Eve

nt

■Th

e R

etire

men

t Eve

nt c

ompa

rison

pro

vide

s an

ass

essm

ent o

f all

of th

e be

nefit

s av

aila

ble

upon

retir

emen

t (de

fined

ben

efit/

defin

ed

cont

ribut

ion

bene

fits

and

post

-retir

emen

t m

edic

al/d

eath

ben

efits

)

■Ba

sed

on th

e em

ploy

er-p

rovi

ded

valu

e, th

e N

atio

nal G

rid N

ew Y

ork

Uni

on p

rogr

am is

si

gnifi

cant

ly a

bove

the

com

petit

or g

roup

av

erag

e, p

rimar

ily d

ue to

the

rich

post

-re

tirem

ent m

edic

al b

enef

its a

vaila

ble

to

retir

ees

■Ba

sed

on th

e em

ploy

er-p

rovi

ded

valu

e, th

e N

atio

nal G

rid N

ew E

ngla

nd U

nion

pro

gram

is

just

slig

htly

bel

ow a

vera

ge, d

ue to

a h

ighe

r th

an a

vera

ge re

tirem

ent (

defin

ed

bene

fit/d

efin

ed c

ontri

butio

n) v

alue

offs

et b

y lo

wer

than

ave

rage

pos

t-ret

irem

ent m

edic

al

and

deat

h pl

an v

alue

s

NGGN

UNG

G-U

NGGN

UNG

G-U

AE

BK

JD

CL

NH

MI

GF

HD

GM

BL

FC

KJ

IN

EA


110

Act

ive

Ben

efit

s


111

23©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Act

ive

Med

ical

Pla

n D

eliv

ery

Mod

els

All

com

pani

es, e

xcep

t A, D

, and

F o

ffer t

heir

empl

oyee

s a

choi

ceof

pla

n ty

pe

Mos

t com

pani

es th

at o

ffer p

lans

with

an

in-n

etw

ork

and

out-o

f-net

wor

k fe

atur

e of

fer

a P

PO

rath

er th

an a

PO

S p

lan

Eig

ht c

ompa

nies

hav

e a

PP

O p

lan

as th

eir h

ighe

st e

nrol

led

plan

—

One

com

petit

or c

ompa

ny h

as a

PO

S p

lan

as th

eir h

ighe

st e

nrol

led

plan

, alo

ng

with

bot

h N

atio

nal G

rid U

nion

pla

ns—

Five

com

petit

or c

ompa

nies

hav

e an

HM

O p

lan

as th

e hi

ghes

t enr

olle

d pl

an

J an

d K

are

the

only

com

pani

es to

offe

r the

ir em

ploy

ees

a co

nsum

er d

riven

hea

lth

plan

For p

urpo

ses

of th

e B

EN

VA

L, w

e ev

alua

ted

only

the

optio

n w

ith h

ighe

st e

nrol

lmen

t


112

24©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Act

ive

Med

ical

Ben

efit

Sco

re a

nd R

ank

The

follo

win

g ta

ble

illust

rate

s N

atio

nal G

rid’s

New

Eng

land

and

New

Yor

k U

nion

s’co

mpe

titiv

e po

sitio

ning

rela

tive

to th

eir p

eer g

roup

in te

rms

of a

ctiv

e m

edic

al p

rogr

ams

Nat

iona

l Grid

’s N

ew Y

ork

Uni

on is

rank

ed 6

thin

term

s of

tota

l val

ue, a

nd th

eir N

ew E

ngla

nd

Uni

on is

rank

ed 8

thin

term

s of

tota

l val

ueTh

e N

ew Y

ork

Uni

on ra

nkin

g m

oves

up

slig

htly

to 5

thin

term

s of

Em

ploy

er V

alue

bec

ause

th

eir e

mpl

oyee

and

em

ploy

ee+1

con

tribu

tions

are

bel

ow th

e av

erag

e (a

lthou

gh th

eir f

amily

co

ntrib

utio

n is

abo

ve th

e av

erag

e) fo

r the

com

petit

or g

roup

, and

the

New

Eng

land

Uni

on

rank

ing

mov

es d

own

slig

htly

to 9

thbe

caus

e th

eir c

ontri

butio

ns a

re a

bove

the

aver

age

for t

he

com

petit

or g

roup

810

2.1

Nat

iona

l Grid

New

Eng

land

Uni

on

610

4.2

Nat

iona

l Grid

New

Yor

k U

nion

Tota

l Val

ue

996

.9N

atio

nal G

rid N

ew E

ngla

nd U

nion

510

4.0

Nat

iona

l Grid

New

Yor

k U

nion

Empl

oyer

Val

ue

Ran

k/16

Sc

ore

Act

ive

Med

ical

Sco

re a

nd R

ank


113

25©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Act

ive

Med

ical

Ben

efit

s C

ompa

riso

n

The

follo

win

g ta

ble

com

pare

s N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

pl

an d

esig

ns re

lativ

e to

thei

r pee

r gro

up p

lan

desi

gns

Key

Pla

n D

esig

n Fe

atur

es -

Med

ical

Nat

iona

l Gri

d N

ew Y

ork

Uni

on

Nat

iona

l Gri

d N

ew E

ngla

nd U

nion

R

ange

Ave

rage

Mod

eIn

-net

wor

kD

educ

tible

Per

Em

ploy

ee: $

0, F

amily

Max

: $0

Per

Em

ploy

ee: $

0, F

amily

Max

: $0

Per

Em

ploy

ee: $

0-$3

00,

Fam

ily M

ax: $

0-$6

00P

er E

mpl

oyee

: $71

.43,

Fa

mily

Max

: $14

2.86

Per

Em

ploy

ee: $

0,

Fam

ily M

ax: $

0C

oins

uran

ce10

0%10

0%80

% --

100

%98

%10

0%O

ut-o

f-poc

ket m

axim

umP

er E

mpl

oyee

: $0,

Fam

ily M

ax: $

0P

er E

mpl

oyee

: $0,

Fam

ily M

ax: $

0P

er E

mpl

oyee

: $0-

$150

0,

Fam

ily M

ax: $

0-$3

000

Per

son:

$93

0, F

amily

Max

: $2

250

(am

ong

plan

s th

at

have

an

OO

P m

ax)

Per

Em

ploy

ee: $

0,

Fam

ily M

ax: $

0

Inpa

tient

hos

pita

l10

0%10

0%80

% --

100

%N

/A10

0%E

mer

genc

y ro

om10

0%, $

35 c

o-pa

y/vis

it (w

aive

d if

adm

itted

) 10

0%90

% --

100

%99

%, $

35 c

o-pa

y10

0%, $

50 c

o-pa

y/vis

it (w

aive

d if

adm

itted

)O

ffice

vis

itsP

rimar

y: 1

00%

, $10

co-

pay;

Spe

cial

ist:

100%

, $15

co-

pay

100%

, $10

co-

pay

100%

, $20

co-

pay

-- 10

0%

$10

co-p

ay/v

isit

100%

, $15

co-

pay

100%

, $20

co-

pay

Pre

scrip

tion

drug

s (R

etai

l)G

ener

ic80

%, $

5 m

in, $

15 m

ax10

0%, $

10 c

o-pa

y80

%, $

5 m

in, $

25 m

ax c

o-pa

y --

100%

, $5

co-p

ay95

%, $

7.11

co-

pay

100%

, $5

co-p

ay

Bra

nd80

%, $

5 m

in, $

15 m

axFo

rm: 1

00%

, $10

co-

pay;

Non

-form

: 10

0%, $

30 c

o-pa

yFo

rm: 7

5%, $

15 m

in, $

25

max

co-

pay;

Non

For

m:

55%

, $35

min

, $60

max

$ c

o-pa

y --

100

%, $

10 c

o-pa

y

Form

: 88%

, $16

co-

pay;

N

on-F

orm

: 79

%, $

27 c

o-pa

y

Form

: 100

%, $

20 c

o-pa

y; N

on-F

orm

: 100

%,

$35

co-p

ay

Out

patie

nt m

enta

l hea

lth10

0% fi

rst 1

0 vis

its/y

ear,

90%

nex

t 10

visits

/yea

r, th

en 8

0%10

0%, $

5 co

-pay

/vis

it, 2

4 vis

its/y

ear

50%

, 20

visits

/yea

r -- 1

00%

, $2

0 co

-pay

/vis

it (n

o lim

it)85

%, $

12 c

o-pa

y/vis

it, 3

6 vis

its/y

ear

50%

, 20

visits

/yea

r

Out

-of-n

etw

ork

Ded

uctib

leP

erso

n: $

250,

Fam

ily M

ax: $

500

Per

son:

$20

0, F

amily

Max

: $40

0N

o O

ON

cov

erag

e --

Per

son:

$1

50, F

amily

Max

: $30

0P

erso

n: $

392,

Fam

ily M

ax:

$925

No

OO

N c

over

age

(am

ong

all p

lans

)C

oins

uran

ce80

%70

%N

o O

ON

cov

erag

e --

80%

77%

(am

ong

plan

s w

ith a

n O

ON

opt

ion)

80%

Out

-of-p

ocke

t max

imum

Per

son:

$1,

250,

Fam

ily M

ax: $

2,50

0 (in

clud

es d

educ

tible

)P

erso

n: $

1,30

0, F

amily

Max

: $1,

900

(incl

udes

ded

uctib

le)

No

OO

N c

over

age

-- P

erso

n:

$125

0, F

amily

Max

: $25

00

(incl

udes

ded

uctib

le)

Per

son:

$23

00, F

amily

M

ax: $

4900

No

OO

N c

over

age

Mon

thly

Em

ploy

ee C

ontr

ibut

ions

Em

ploy

ee o

nly

$78.

17

$99.

91

$25

-- $1

45.1

3$7

8.86

N

/AFa

mily

$222

.77

$284

.74

$25

-- $4

06.3

6$2

04.2

0 N

/A

Com

pari

tor

Gro

up


114

26©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Act

ive

Med

ical

Ben

efit

s

Whi

le b

oth

Nat

iona

l Grid

Uni

ons

fall

in li

ne w

ith th

e co

mpe

titor

grou

p fo

r pro

visi

ons

such

as

dedu

ctib

les

(non

e), c

oins

uran

ce (1

00%

), O

OP

(non

e), a

nd in

patie

nt h

ospi

tal (

100%

), th

ere

are

diffe

renc

es w

hen

it co

mes

to th

e ot

her b

enef

its

The

New

Yor

k U

nion

is ra

nked

slig

htly

hig

her t

han

othe

r com

petit

or c

ompa

nies

bec

ause

thei

r of

fice

visi

t cop

ay o

f $10

($15

spe

cial

ist)

is lo

wer

than

the

aver

age

of $

15, a

nd m

ode

of $

20 fo

r th

e co

mpe

titor

gro

upA

dditi

onal

ly, t

heir

pres

crip

tion

drug

ben

efit

is 8

0% w

ith a

min

imum

of $

5 an

d m

axim

um o

f $1

5 re

gard

less

of d

rug

tier,

whi

ch is

abo

ut a

vera

ge a

s co

mpa

red

to th

e co

mpe

titor

gro

up fo

r ge

neric

dru

gs, b

ut is

rich

er th

an th

e co

mpe

titor

mod

e of

a $

20 c

opay

for b

rand

form

ular

y dr

ugs,

and

a $

35 c

opay

for b

rand

non

-form

ular

y dr

ugs

The

outp

atie

nt m

enta

l hea

lth b

enef

it is

als

o m

uch

riche

r tha

n th

e co

mpe

titor

gro

up’s

ou

tpat

ient

men

tal h

ealth

ben

efit-

100%

for t

he fi

rst 1

0 vi

sits

, 90%

for t

he n

ext 1

0 vi

sits

, the

n 80

% fo

r the

follo

win

g vi

sits

with

no

num

ber o

f vis

it lim

itatio

ns, a

s co

mpa

red

to th

e co

mpe

titor

s’av

erag

e be

nefit

of 8

5% c

over

age

with

a $

12 c

opay

for a

max

imum

of 3

6 vi

sits

pe

r yea

r, an

d a

com

petit

or g

roup

mod

e of

50%

cov

erag

e w

ith 2

0 vi

sits

per

yea

r—

Alth

ough

the

New

Yor

k U

nion

’s la

ck o

f vis

it lim

its fo

r men

tal h

ealth

ben

efits

is g

ener

ous,

w

e ex

pect

it to

be

in li

ne w

ith th

e av

erag

e as

oth

er u

nion

pla

nsm

ove

to c

ompl

y w

ith th

e re

cent

ly p

asse

d M

enta

l Hea

lth P

arity

law

effe

ctiv

e in

201

0O

f the

com

petit

or c

ompa

nies

that

offe

r an

out-o

f-net

wor

k be

nefit

, the

New

Yor

k U

nion

pla

n is

co

mpa

rativ

ely

riche

r in

term

s of

ded

uctib

les

and

out-o

f-poc

ket m

axim

ums


115

27©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Act

ive

Med

ical

Ben

efit

s

The

New

Eng

land

Uni

on is

rank

ed in

the

mid

dle

of th

e pa

ck re

lativ

e to

the

com

petit

or g

roup

(a

lthou

gh s

light

ly lo

wer

than

the

New

Yor

k U

nion

)Th

e N

ew E

ngla

nd U

nion

pre

scrip

tion

drug

ben

efit

of a

$10

cop

ay fo

r gen

eric

s is

slig

htly

hi

gher

than

the

com

petit

or g

roup

’s m

ode

of a

$5

copa

y fo

r gen

eric

s, b

ut is

mor

e ge

nero

us in

te

rms

of b

rand

dru

gs—

Form

ular

y dr

ugs

have

a c

opay

of $

10 a

nd n

on-fo

rmul

ary

drug

s ha

ve a

cop

ay o

f $30

, as

com

pare

d to

the

com

petit

or g

roup

’s m

ode

of a

$20

cop

ay fo

r for

mul

ary

drug

s, a

nd a

$35

co

pay

for n

on-fo

rmul

ary

drug

sTh

e N

ew E

ngla

nd U

nion

out

patie

nt m

enta

l hea

lth b

enef

it is

als

o m

uch

riche

r tha

n th

e co

mpe

titor

gro

ups’

outp

atie

nt m

enta

l hea

lth b

enef

it-$5

cop

ay p

er v

isit,

com

pare

d to

the

com

petit

or g

roup

’s a

vera

ge b

enef

it of

85%

cov

erag

e w

ith a

$12

cop

ay p

er v

isit,

and

a

com

petit

or g

roup

mod

e of

50%

cov

erag

e pe

r vis

it—

Thei

r vis

it lim

it of

24

visi

ts p

er y

ear i

s le

ss th

an th

e co

mpe

titor

gro

up a

vera

ge o

f 36

visi

ts

per y

ear,

but s

light

ly m

ore

than

the

com

petit

or g

roup

mod

e of

20

visi

ts p

er y

ear

Of t

he c

ompe

titor

com

pani

es th

at o

ffer a

n ou

t-of-n

etw

ork

bene

fit, t

he N

ew E

ngla

nd U

nion

pl

an is

com

para

tivel

y ric

her i

n te

rms

of d

educ

tible

s an

d ou

t-of-p

ocke

t max

imum

s, b

ut s

light

ly

low

er in

term

s of

coi

nsur

ance

(70%

ver

sus

an a

vera

ge/m

ode

of 8

0%fo

r com

petit

or

com

pani

es)

The

offic

e vi

sit c

opay

of $

10 is

the

one

prov

isio

n w

here

the

New

Eng

land

Uni

on is

not

onl

y ric

her t

han

the

com

petit

or g

roup

’s a

vera

ge a

nd m

ode,

but

als

o ric

her t

han

the

New

Yor

k U

nion

ben

efit

(see

pre

viou

s pa

ge)


116

28©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Act

ive

Med

ical

Ben

efit

s

The

follo

win

g ba

r ch

art f

urth

er

illust

rate

s ho

w

Nat

iona

l Grid

’s N

ew

Yor

k an

d N

ew

Engl

and

Uni

on p

lans

co

mpa

re to

thei

r pe

ers

both

in te

rms

of g

ross

ben

efit

valu

e of

med

ical

pl

ans,

as

wel

l as

empl

oyer

-pro

vide

d va

lue

(i.e.

, net

of

empl

oyee

co

ntrib

utio

ns)

CG

IB

NK

EJ

HF

DA

LM

HG

KJ

BA

EI

ND

MF

LC


117

29©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Den

tal B

enef

it S

core

and

Ran

k

The

follo

win

g ta

ble

illust

rate

s N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

’s

com

petit

ive

posi

tioni

ng re

lativ

e to

thei

r pee

r gro

up in

term

s of

activ

e de

ntal

pr

ogra

ms

In te

rms

of b

oth

Em

ploy

er V

alue

and

Tot

al V

alue

, the

New

Yor

k U

nion

is s

light

ly

abov

e av

erag

e, w

hile

the

New

Eng

land

Uni

on is

bel

ow a

vera

ge

1385

.2N

atio

nal G

rid N

ew E

ngla

nd U

nion

610

3.7

Nat

iona

l Grid

New

Yor

k U

nion

Tota

l Val

ue

1379

.0N

atio

nal G

rid N

ew E

ngla

nd U

nion

610

2.4

Nat

iona

l Grid

New

Yor

k U

nion

Empl

oyer

Val

ueR

ank/

16

Scor

e D

enta

l Sco

re a

nd R

ank


118

30©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Den

tal B

enef

its

Com

pari

son

The

follo

win

g ta

ble

com

pare

s N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

pl

an d

esig

ns re

lativ

e to

thei

r pee

r gro

up p

lan

desi

gns

Den

tal B

enef

it

Nat

iona

l Gri

d N

ew Y

ork

Uni

on

Nat

iona

l Grid

New

Eng

land

Un

ion

Rang

eAv

erag

eM

ode

Ann

ual D

educ

tible

*P

erso

n: $

50, F

amily

Max

: Non

eP

erso

n: $

50, F

amily

Max

: $15

0P

erso

n: $

0-$5

0; F

amily

Max

: N

one-

$150

Per

son:

$39

.29;

Fa

mily

Max

: $1

01.7

9

Per

son:

$50

; Fa

mily

Max

: $1

50A

nnua

l Max

imum

Pre

vent

ive &

Bas

ic: $

1500

/per

son,

M

ajor

: $20

00/p

erso

n (e

xclu

des

orth

odon

tia)

$100

0/pe

rson

(exc

lude

s or

thod

ontia

)$1

000/

pers

on --

$250

0/pe

rson

(e

xclu

des

orth

odon

tia)

$165

7 (e

xclu

des

orth

odon

tia)

$150

0 (e

xclu

des

orth

odon

tia)

Cle

anin

g10

0%, 2

cle

anin

gs/y

ear

100%

, 2 c

lean

ings

/yea

r75

% --

100

% (2

cl

eani

ngs/

year

)98

%, 2

cl

eani

ngs/

year

100%

, 2

clea

ning

s/ye

arN

on-G

old

Filli

ng80

%80

%60

% -

80%

,incr

easi

ng b

y 10

%/y

ear t

o 10

0%78

%80

%

Cro

wns

60%

50%

, eve

ry 5

yea

rs50

% e

very

8 y

ears

-- 7

0%58

%, e

very

3.6

ye

ars

50%

, eve

ry 5

ye

ars

Orth

odon

tia C

over

age

100%

50%

Not

cov

ered

-- 1

00%

63%

(am

ong

plan

s th

at

incl

ude

orth

o.

cove

rage

)

50%

Orth

odon

tia M

axim

um$1

,800

per

life

time

$1,5

00 p

er li

fetim

e$0

-- $

3000

$1,9

67

$2,0

00

Orth

odon

tia E

ligib

ility

Adu

lt or

thod

ontia

Chi

ldre

n to

age

19

Not

cov

ered

-- a

dult

orth

odon

tiaN

/AC

hild

ren

to a

ge

19M

onth

ly E

mpl

oyee

Con

tribu

tions

Em

ploy

ee$7

.35

$7.6

1 $0

-- $

17.3

3$6

.73

N/A

Fam

ily$2

0.94

$2

1.70

$0

-- $

49.8

9$1

8.19

N/A

Out

of N

etw

ork

Ded

uctib

leN

/AN

/AP

erso

n: $

175,

Fam

ily M

ax:

none

-- P

erso

n: $

25, F

amily

M

ax: $

50

Per

son:

$80

, Fa

mily

Max

: $2

30

No

OO

N

cove

rage

Ann

ual M

axim

umN

/AN

/A$1

000

-- $2

000

(exc

lude

s or

thod

ontia

)$1

,600

$1

,500

* Fo

r pur

pose

s of

cal

cula

ting

aver

ages

, we

assu

med

3X

for f

amily

max

imum

if th

ere

is n

o lim

it

Com

parit

or G

roup


119

31©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Den

tal B

enef

its

The

com

petit

ive

posi

tioni

ng fo

r New

Yor

k U

nion

’s d

enta

l pla

n as

com

pare

d to

the

com

petit

or g

roup

is la

rgel

y dr

iven

by

thei

r ave

rage

to b

ette

r-th

an-a

vera

ge, p

lan

prov

isio

ns

The

New

Yor

k U

nion

pla

n of

fers

a s

epar

ate

annu

al m

axim

um o

f $2,

000

for m

ajor

se

rvic

es, a

nd $

1,50

0 fo

r pre

vent

ive

and

basi

c se

rvic

es, w

hich

no

othe

r com

pany

of

fers

; all

othe

r uni

on b

enef

it pr

ogra

ms

have

a s

ingl

e ca

lend

ar y

ear m

axim

um fo

r al

l ser

vice

s (e

xclu

ding

orth

odon

tia)

Add

ition

ally

, the

New

Yor

k U

nion

pla

n co

vers

maj

or s

ervi

ces

at 6

0%, w

hile

the

maj

ority

of c

ompe

titor

com

pani

es c

over

thes

e se

rvic

es a

t 50%

The

New

Yor

k U

nion

den

tal p

lan

falls

in li

ne w

ith th

e co

mpe

titor

grou

p’s

aver

age

and

mea

n fo

r pro

visi

ons

such

as

the

$50

empl

oyee

ded

uctib

le, 1

00%

pre

vent

ive

cove

rage

, and

80%

bas

ic s

ervi

ces

cove

rage

The

plan

cov

ers

orth

odon

tia a

t 100

%, a

nd o

nly

thre

e ot

her c

ompe

titor

com

pani

es

(J, K

, and

I) a

lso

cove

r orth

odon

tia a

t 100

%; t

he m

ajor

ity o

f com

pani

es th

at c

over

or

thod

ontia

, cov

er th

e be

nefit

at 5

0%—

Alth

ough

the

100%

orth

odon

tia b

enef

it ap

pear

s m

ore

gene

rous

, the

lifet

ime

orth

odon

tia m

axim

um d

rives

val

ue s

ince

alm

ost a

ll m

embe

rs re

ceiv

ing

orth

odon

tia s

ervi

ces

will

reac

h th

e m

axim

um; t

he N

ew Y

ork

Uni

on’s

or

thod

ontia

max

imum

is $

1,80

0, a

s co

mpa

red

to th

e co

mpe

titor

gro

up’s

av

erag

e/m

ode

of $

2,00

0


120

32©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Den

tal B

enef

its

—A

noth

er im

porta

nt d

river

of o

rthod

ontia

ben

efits

is e

ligib

ility

;the

New

Yor

k U

nion

co

vers

adu

lt or

thod

ontia

, whi

ch is

a m

uch

riche

r ben

efit

than

onl

y co

verin

g ch

ildre

n up

to a

ge 1

9, w

hich

is w

hat t

he m

ajor

ity o

f the

com

petit

or c

ompa

nies

offe

r if t

hey

cove

r orth

odon

tiaTh

e N

ew Y

ork

Uni

on d

enta

l pla

n is

slig

htly

less

rich

than

thei

r com

petit

or g

roup

in

term

s of

thei

r hig

her t

han

aver

age

empl

oyee

con

tribu

tions

The

New

Eng

land

Uni

on d

enta

l pla

n is

val

ued

muc

h lo

wer

than

the

aver

age

plan

be

caus

e w

hile

thei

r pre

vent

ive,

bas

ic, a

nd o

rthod

ontia

cov

erag

e le

vels

fall

with

in th

e av

erag

e an

d m

ode

of th

e co

mpe

titor

gro

up, t

heir

annu

al m

axim

um is

$1,

000

as

com

pare

d to

the

aver

age

of $

1,65

7 an

d m

ode

of $

1,50

0 fo

r the

com

petit

or g

roup

, and

th

eir c

ontri

butio

ns a

re m

ore

than

10%

hig

her t

han

the

com

petit

orgr

oup

aver

age

Add

ition

ally

, the

New

Eng

land

Uni

on o

rthod

ontia

max

imum

of $

1,50

0 is

low

er th

an th

e co

mpe

titor

gro

up a

vera

ge/m

ode

of $

2,00

0


121

33©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Den

tal B

enef

its

The

follo

win

g ba

r cha

rt fu

rther

illu

stra

tes

how

N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

pl

ans

com

pare

to th

eir

peer

s bo

th in

term

s of

gr

oss

bene

fit v

alue

of

dent

al p

lans

, as

wel

l as

empl

oyer

-pro

vide

d va

lue

(i.e.

, net

of e

mpl

oyee

co

ntrib

utio

ns)

CG

LH

KI

FA

ME

JD

BN

DG

HK

JF

IA

EL

NM

BC


122

34©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Life

Ins

uran

ce/A

D&

D B

enef

it S

core

and

Ran

k

The

follo

win

g ta

ble

illust

rate

s N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

s’co

mpe

titiv

e po

sitio

ning

rela

tive

to th

eir p

eer g

roup

in te

rms

of li

fe in

sura

nce

and

AD

&D

pro

gram

s

Bot

h N

atio

nal G

rid u

nion

life

Insu

ranc

e/A

D&

D p

lans

are

com

petit

ive

as c

ompa

red

to th

eir

peer

s, a

nd b

oth

scor

e w

ell a

bove

the

aver

age

plan

Life

Insu

ranc

e/A

D&D

- Ac

tive

Sco

re a

nd R

ank

Sco

reRa

nk/1

6Em

ploy

er V

alue

Nat

iona

l Grid

New

Yor

k U

nion

164.

43

Nat

iona

l Grid

New

Eng

land

Uni

on14

0.7

6

Tota

l Val

ue

Nat

iona

l Grid

New

Yor

k U

nion

134.

94

Nat

iona

l Grid

New

Eng

land

Uni

on11

9.3

6


123

35©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Life

Ins

uran

ce/A

D&

D C

ompa

riso

n

The

follo

win

g ta

ble

com

pare

s N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

pl

an d

esig

ns re

lativ

e to

thei

r pee

r gro

up p

lan

desi

gns

Life

Insu

ranc

e/A

D&

D B

enef

it

Nat

iona

l Gri

d N

ew Y

ork

Uni

onN

atio

nal G

rid

New

Eng

land

U

nion

R

ange

A

vera

ge

Mod

eB

asic

2.5

x pa

y2

x pa

y$5

,000

--

2 x

pay

; if

age+

serv

ice=

85: 4

x

pay

1 x

pay

1 x

pay

Max

imum

$6

25,0

00

$200

,000

$5

,000

--

No

Max

$441

,000

$1

,000

,000

S

u ppl

emen

tal

Em

ploy

ee o

ptio

n1

to 5

x p

ay in

mul

tiple

s of

1

x pa

y1

to 5

x p

ay in

mul

tiple

s of

1x

pay

Non

e --

$10

,000

to

$2,0

00,0

00 in

m

ultip

les

of $

10,0

00

(Max

: 5 x

pay

)

1 to

5 x

pay

in

mul

tiple

s of

1 x

pa

y

1 to

5 x

pay

in

mul

tiple

s of

1 x

pay

Min

imum

Max

mim

um

$1,0

00,0

00

$1,0

00,0

00

Non

e --

Com

bine

d w

ith B

asic

Life

: $1

,600

,000

Com

bine

d w

ith

Bas

ic L

ife:

$1,5

00,0

00

Com

bine

d w

ith

Bas

ic L

ife:

$1,5

00,0

00D

epen

dent

Spo

use

Non

e --

Em

ploy

ee

Opt

ion:

$10

,000

to

$100

,000

in m

ultip

les

of $

10,0

00

Em

ploy

ee

optio

n, $

25,0

00

or $

50,0

00 o

r $1

00,0

00

Em

ploy

ee o

ptio

n,

$25,

000

or $

50,0

00

or $

100,

000

Opt

ion

I: $2

5,00

0 $2

5,00

0 O

ptio

n II:

$5

0,00

0 $5

0,00

0 O

ptio

n III

: O

ptio

n IV

:C

hild

ren:

Non

e --

Em

ploy

ee

optio

n, $

10,0

00 o

r $1

5,00

0 or

$30

,000

Em

ploy

ee

optio

n, $

5,00

0 or

$1

0,00

0

Em

ploy

ee o

ptio

n,

$5,0

00 o

r $1

0,00

0

Opt

ion

I: $2

,500

$2

,500

O

ptio

n II:

$4,0

00

$4,0

00

Opt

ion

III:

$10,

000

$10,

000

Opt

ion

VII:

Acc

iden

tal D

eath

-Act

ive

Par

ticip

atio

n R

equi

rem

ents

Non

eN

one

6 m

onth

s of

ser

vice

--

Non

eN

one

Non

e

Mon

thly

Em

ploy

ee C

ontr

ibut

ions

Non

eN

one

Non

eN

one

Non

eD

eath

Ben

efit

Am

ount

1 x

pay

+ $5

,000

; Max

: $2

5,00

01

x pa

y +

$5,0

00; M

ax: $

25,0

00N

o pl

an -

- 3

x p

ay,

Max

: $60

0,00

01

x pa

y, M

ax:

$378

,000

1 x

pay

Com

pari

tor

Gro

up


124

36©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Life

Ins

uran

ce/A

D&

D B

enef

its

The

key

fact

or d

rivin

g N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

life

in

sura

nce

and

AD

&D

pro

gram

s to

be

riche

r tha

n so

me

of th

eir c

ompe

titor

s (r

anke

d 3rd

and

6thre

spec

tivel

y) a

re th

eir h

igh

basi

c lif

e am

ount

s: 2

.5x

pay

for t

he N

ew Y

ork

Uni

on, a

nd 2

x pa

y fo

r the

New

Eng

land

Uni

on, a

s co

mpa

red

to th

e av

erag

e/m

ode

of 1

x pa

y fo

r the

com

petit

or g

roup

Onl

y G

, J, K

, and

L o

ffer b

asic

life

at 2

x pa

y, a

nd n

o ot

her c

ompa

ny o

ffers

this

be

nefit

at 2

.5x

pay

The

New

Yor

k U

nion

’s b

enef

it m

axim

um is

$62

5,00

0, w

hich

is g

reat

er th

an th

e co

mpe

titor

gro

up a

vera

ge o

f $44

1,00

0, th

ough

low

er th

an th

e co

mpe

titor

gro

up

mod

e of

$1,

000,

000

The

New

Yor

k U

nion

ben

efit

max

imum

is ri

cher

than

New

Eng

land

Uni

on’s

be

nefit

max

imum

of $

200,

000,

whi

ch is

why

the

New

Yor

k U

nion

is ra

nked

hig

her

than

the

New

Eng

land

Uni

on

Nat

iona

l Grid

’s U

nion

pla

ns c

ompa

re w

ell w

ith th

eir c

ompe

titor

s in

term

s of

su

pple

men

tal l

ife b

enef

its, a

nd o

ffer a

sep

arat

e be

nefit

max

imum

of $

1,00

0,00

0 fo

r th

ese

bene

fits,

whe

reas

the

maj

ority

of t

heir

com

petit

ors

offe

r a c

ombi

ned

basi

c an

d su

pple

men

tal b

enef

it m

axim

um o

f $1,

500,

000


125

37©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Life

Ins

uran

ce/A

D&

D B

enef

its

Bot

h N

atio

nal G

rid U

nion

s of

fer c

ompe

titiv

e de

pend

ent l

ife b

enef

its, a

lthou

gh th

e m

ajor

ity o

f com

petit

or c

ompa

nies

offe

r an

addi

tiona

l spo

use

bene

fit o

ptio

n of

$1

00,0

00, w

here

as th

e N

atio

nal G

rid U

nion

s on

ly o

ffer a

max

imum

$50

,000

ben

efit

optio

nB

oth

Nat

iona

l Grid

Uni

ons

offe

r thr

ee c

hild

life

opt

ions

: $2,

500,

$4,

000,

and

$1

0,00

0, w

here

as th

e m

ajor

ity o

f the

com

petit

or c

ompa

nies

onl

y of

fer a

$5,

000

and

$10,

000

optio

n

The

AD

&D

ben

efit

is w

here

bot

h N

atio

nal G

rid U

nion

s fa

ll sh

ort o

f the

com

petit

or

com

pani

es --

they

onl

y of

fer a

dea

th b

enef

it am

ount

of 1

x pa

y pl

us $

5,00

0 to

a m

axim

um o

f $25

,000

, ver

sus

a co

mpe

titor

gro

up a

vera

ge o

f 1x

pay

to a

max

imum

of

$37

8,00

0


126

38©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Life

Ins

uran

ce a

nd A

D&

D B

enef

it

The

follo

win

g ba

r cha

rt fu

rther

illu

stra

tes

how

N

atio

nal G

rid’s

New

Y

ork

and

New

Eng

land

U

nion

pla

ns c

ompa

re to

th

eir p

eers

bot

h in

term

s of

gro

ss b

enef

it va

lue

of

life

insu

ranc

e an

d AD

&D, a

s w

ell a

s em

ploy

er-p

rovi

ded

valu

e (i.

e., n

et o

f em

ploy

ee c

ontri

butio

ns)

EJ

KG

CI

MN

AB

FD

LH

BJ

KC

GM

AI

NE

HF

LD


127

39©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Sho

rt T

erm

Dis

abili

ty S

core

and

Ran

k

The

follo

win

g ta

ble

illust

rate

s N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

s’co

mpe

titiv

e po

sitio

ning

rela

tive

to th

eir p

eer g

roup

in te

rms

of S

TD p

rogr

ams

In te

rms

of b

oth

Em

ploy

er V

alue

and

Tot

al V

alue

, the

New

Yor

k U

nion

des

ign

is s

light

ly

abov

e av

erag

e, a

nd th

e N

ew E

ngla

nd U

nion

pla

n is

slig

htly

bel

ow a

vera

ge

1498

.6N

atio

nal G

rid N

ew E

ngla

nd U

nion

910

2.6

Nat

iona

l Grid

New

Yor

k U

nion

Tota

l Val

ue

1498

.6N

atio

nal G

rid N

ew E

ngla

nd U

nion

910

2.6

Nat

iona

l Grid

New

Yor

k U

nion

Empl

oyer

Val

ue

Ran

k/16

Sc

ore

Shor

t Ter

m D

isab

ility

Sco

re a

nd R

ank


128

40©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Sho

rt T

erm

Dis

abili

ty B

enef

it

The

New

Yor

k U

nion

’s s

ick

pay

bene

fit is

less

rich

than

thos

e of

the

com

petit

or

grou

p at

ear

lier y

ears

of s

ervi

ce: 1

wee

k ve

rsus

2 w

eeks

at 1

yea

r of s

ervi

ce, a

nd 5

w

eeks

ver

sus

6 w

eeks

at 5

yea

rs o

f ser

vice

. The

ben

efit

catc

hes

up to

the

com

petit

or g

roup

ave

rage

at l

ater

yea

rs, t

houg

h, a

nd s

urpa

sses

the

aver

age

at 2

5 w

eeks

and

bey

ond

The

sala

ry c

ontin

uanc

e be

nefit

is p

rovi

ded

at 6

0% o

f pay

for t

heba

lanc

e of

26

wee

ks a

s co

mbi

ned

with

the

sick

pay

ben

efit,

whi

ch is

less

gen

erou

s th

an m

ost

of th

e ot

her c

ompe

titor

com

pani

es: 8

0% to

100

% o

f pay

for a

rang

e of

wee

ks a

t ye

ars

of s

ervi

ce b

ands

The

New

Eng

land

Uni

on’s

sic

k pa

y be

nefit

is th

e sa

me

as th

e N

ew Y

ork

Uni

on’s

si

ck p

ay b

enef

it, b

ut th

e sa

lary

con

tinua

nce

bene

fit is

pro

vide

dat

60%

of p

ay fo

r th

e ba

lanc

e of

13

wee

ks a

s co

mbi

ned

with

the

sick

pay

ben

efit,

whi

ch is

less

ge

nero

us th

an m

ost o

f the

oth

er c

ompe

titor

com

pani

es: 8

0% to

100

% o

f pay

for a

ra

nge

of w

eeks

at y

ears

of s

ervi

ce b

ands


129

41©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Sho

rt T

erm

Dis

abili

ty C

ompa

riso

n

The

follo

win

g ta

ble

com

pare

s N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

pl

an d

esig

ns re

lativ

e to

thei

r pee

r gro

up p

lan

desi

gns

Sho

rt T

erm

Dis

abili

ty

Nat

iona

l Grid

New

Yor

k Un

ion

Nat

iona

l Gri

d Ne

w

Engl

and

Unio

n Ra

nge

Ave

rage

Mod

eS

ick

Pay

1st D

ay o

f Dis

abili

ty1s

t Day

of D

isab

ility

If ill

ness

, 7th

cal

enda

r day

of

dis

abili

ty; i

f acc

iden

t, 1s

t day

of d

isab

ility

-- 1

st

day

of d

isab

ility

N/A

1st d

ay o

f dis

abili

ty

Sal

ary

Con

tinua

nce

End

of S

ick

Pay

End

of S

ick

Pay

Late

r of 6

th w

orki

ng d

ay o

f di

sabi

lity

or e

nd o

f Sic

k P

ay --

End

of S

ick

Pay

N/A

End

of S

ick

Pay

Ben

efit

Amou

ntS

ick

Pay

Yea

rs o

f Ser

vice

Wee

ks a

t 100

%

Wee

ks a

t 100

%

11

12-

42

25

55

2-10

66

1010

102-

209

1515

1515

2-30

1216

2020

202-

4014

2325

2525

2-50

1726

3030

302-

6021

3035

3535

2-60

2532

Sal

ary

Con

tinua

nce

60%

of p

ay; L

ess

Prim

ary

Soc

ial S

ecur

ity; L

ess

Dep

ende

nt S

ocia

l Sec

urity

; P

ayab

le fo

r bal

ance

of 2

6 w

eeks

per

yea

r

60%

of p

ay; L

ess

Prim

ary

Soc

ial S

ecur

ity; L

ess

Dep

ende

nt S

ocia

l Sec

urity

; P

ayab

le fo

r bal

ance

of 1

3 w

eeks

per

yea

r

No

sala

ry c

ontin

uanc

e --

100%

of p

ay, l

ess

prim

ary

soci

al s

ecur

ity, p

ayab

le fo

r 52

wee

ks p

er d

isab

ility

N/A

YO

S S

ched

ule

(sal

ary

cont

inua

nce

varie

s fro

m fo

r pe

rcen

tage

of p

ay)

Yea

rs o

f Ser

vice

Wee

ks a

t 60%

Wee

ks a

t 60%

125

125

218

1016

315

110

206

025

10

300

035

00

Com

pari

tor G

roup


130

42©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Sho

rt T

erm

Dis

abili

ty

The

follo

win

g ba

r cha

rt fu

rther

illu

stra

tes

how

N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

pl

ans

com

pare

to th

eir

peer

s bo

th in

term

s of

gr

oss

bene

fit v

alue

of

STD

pla

ns, a

s w

ell a

s em

ploy

er-p

rovi

ded

valu

e (i.

e., n

et o

f em

ploy

ee

cont

ribut

ions

)

LM

BK

HG

CI

EA

DN

JF

LM

BK

HG

CI

EA

DN

JF


131

43©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Long

Ter

m D

isab

ility

Ben

efit

Sco

re a

nd R

ank

The

follo

win

g ta

ble

illust

rate

s N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

s’co

mpe

titiv

e po

sitio

ning

rela

tive

to th

eir p

eer g

roup

in te

rms

ofLT

D p

rogr

ams

Long

Ter

m D

isab

ility

Sco

re a

nd R

ank

Scor

eR

ank/

16Em

ploy

er V

alue

Nat

iona

l Grid

New

Yor

k U

nion

0.0

tied

for l

ast w

/ 4 o

ther

co

mpa

nies

Nat

iona

l Grid

New

Eng

land

Uni

on20

.211

Tota

l Val

ue

Nat

iona

l Grid

New

Yor

k U

nion

0.0

tied

for l

ast w

/ 3 o

ther

co

mpa

nies

Nat

iona

l Grid

New

Eng

land

Uni

on18

6.5

2


132

44©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Long

Ter

m D

isab

ility

Ben

efit

The

New

Yor

k U

nion

doe

s no

t offe

r the

ir em

ploy

ees

an L

TD p

lan,

so

they

are

tie

d fo

r las

t pla

ce u

nder

the

Tota

l Val

ue w

ith th

ree

othe

r com

petit

or c

ompa

nies

(D

, F, a

nd H

) tha

t als

o do

not

offe

r LTD

pla

ns

In te

rms

of T

otal

Val

ue, t

he N

ew E

ngla

nd U

nion

LTD

pla

n is

ver

y co

mpe

titiv

e du

e to

the

fact

that

ben

efits

com

men

ce m

uch

mor

e qu

ickl

y -3

.25

mon

ths

inst

ead

of th

e av

erag

e of

6 m

onth

s fo

r the

com

petit

or g

roup

Add

ition

ally

, men

tal h

ealth

/che

mic

al d

epen

denc

y be

nefit

s un

der t

he L

TD

plan

con

tinue

to a

ge 6

5, w

here

as th

e av

erag

e du

ratio

n fo

r the

se b

enef

its fo

r th

e co

mpe

titor

gro

up is

onl

y 24

mon

ths

The

New

Eng

land

Uni

on b

ecom

es m

uch

less

com

petit

ive

rela

tive

to th

eir

com

petit

ors,

how

ever

, in

term

s of

Em

ploy

er V

alue

, due

to h

igh

empl

oyee

co

ntrib

utio

ns re

quire

d fo

r the

pla

n O

nly

thre

e ot

her c

ompa

nies

requ

ire e

mpl

oyee

con

tribu

tions

for t

heir

basi

c LT

D p

lan:

C, A

, and

ETh

e N

ew E

ngla

nd U

nion

pla

n is

the

only

pla

n th

at re

quire

s a

fixed

co

ntrib

utio

n re

gard

less

of b

enef

it le

vel (

i.e.,

if co

ntrib

utio

nsar

e re

quire

d,

empl

oyee

s ar

e ch

arge

d a

perc

ent o

f cov

ered

pay

)


133

45©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Long

Ter

m D

isab

ility

Com

pari

son

The

follo

win

g ta

ble

com

pare

s N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

pl

an d

esig

ns re

lativ

e to

thei

r pee

r gro

up p

lan

desi

gns

Long

Ter

m D

isab

ility

Nat

iona

l Grid

New

Yor

k Un

ion\

N

atio

nal G

rid

New

En

glan

d Un

ion

Ran

geAv

erag

eM

ode

Com

men

cem

ent

Late

r of 1

3 w

eeks

of d

isab

ility

or

exh

aust

ion

of s

hort-

term

di

sabi

lity

bene

fits

No

LTD

Pla

n --

Afte

r ex

haus

tion

of S

TD b

enef

itsA

fter 6

mon

ths

of d

isab

ility

Afte

r 6 m

onth

s of

dis

abili

ty

Dura

tion

Men

tal H

ealth

/Che

mic

al D

epen

denc

yTo

age

65

No

LTD

Pla

n --

to a

ge 6

5Fo

r 24

mon

ths

For 2

4 m

onth

sAm

ount

60%

of p

ay, L

ess

Prim

ary

Soc

ial S

ecur

ity, L

ess

Dep

ende

nt S

ocia

l Sec

urity

Max

imum

Fro

m a

ll S

ourc

esN

o LT

D P

lan

-- $3

0,00

0/m

onth

$977

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onth

$10,

000/

mon

th

Com

pany

doe

s no

t pro

vide

an

LTD

pla

n. D

isab

led

empl

oyee

s w

ho m

eet

elig

ibili

ty re

quire

men

ts re

ceive

be

nefit

s fro

m: C

ompa

ny p

aid

disa

bilit

y re

tirem

ent,

Gro

up

Life

Insu

ranc

e, P

ensi

on P

lan

Com

parit

or G

roup

No

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n --

60%

of P

ay,

Less

Prim

ary

Soc

ial S

ecur

ity56

% o

f pay

, Les

s S

ocia

l Sec

urity

, Les

s P

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on B

enef

its60

% o

f pay

, Le

ss P

rimar

y S

ocia

l Sec

urity


134

46©

2008

Tow

ers

Perr

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nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Long

Ter

m D

isab

ility

Ben

efit

The

follo

win

g ba

r cha

rt fu

rther

illu

stra

tes

how

N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

pl

ans

com

pare

to th

eir

peer

s bo

th in

term

s of

gr

oss

bene

fit v

alue

of

LTD

pla

ns, a

s w

ell a

s em

ploy

er-p

rovi

ded

valu

e (i.

e., n

et o

f em

ploy

ee

cont

ribut

ions

)

FA

KJ

GC

MI

BN

DE

LH

FL

CK

JE

GM

NI

BD

AH


135

47©

2008

Tow

ers

Perr

inP

ropr

ieta

ry a

nd C

onfid

entia

lN

ot fo

r use

or d

iscl

osur

e ou

tsid

e To

wer

s P

errin

and

its

clie

nts

Vac

atio

n an

d H

olid

ay B

enef

it S

core

and

Ran

k

The

follo

win

g ta

ble

illust

rate

s N

atio

nal G

rid’s

New

Yor

k an

d N

ew E

ngla

nd U

nion

pla

ns

com

petit

ive

posi

tioni

ng re

lativ

e to

thei

r pee

r gro

up in

term

s of

vaca

tion

and

holid

ay p

rogr

ams

Vac

atio

n an

d H

olid

ay S

core

and

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k

Sco

reR

ank/

16Em

ploy

er V

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Nat

iona

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103.

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r co

mpa

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Nat

iona

l Grid

New

Eng

land

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on10

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l Val

ue

Nat

iona

l Grid

New

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k U

nion

103.

1

tied

for 4

th w

/ 2

othe

r co

mpa

nies

Nat

iona

l Grid

New

Eng

land

Uni

on10

0.1

11


136

48©

2008

Tow

ers

Perr

inP

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ry a

nd C

onfid

entia

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r use

or d

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s P

errin

and

its

clie

nts

Vac

atio

n an

d H

olid

ay B

enef

it

A m

ajor

ity o

f the

com

petit

or c

ompa

nies

offe

r ver

y si

mila

r vac

atio

n an

d ho

liday

ben

efits

, so

the

rang

e of

sco

res

are

clos

e fo

r all

but a

few

of t

he c

ompa

nies

The

New

Yor

k U

nion

ove

rall

desi

gn is

slig

htly

mor

e ge

nero

us th

anso

me

of th

e ot

her

com

petit

or c

ompa

nies

—W

hile

the

New

Yor

k U

nion

vac

atio

n be

nefit

is le

ss ri

ch th

an th

ose

of th

e co

mpe

titor

gr

oup

at e

arlie

r yea

rs o

f ser

vice

(0 w

eeks

ver

sus

an a

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f 2.5

(mod

e is

0) a

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ss th

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r of s

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ce, u

p to

10

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t 1

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0 w

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ver

sus

an a

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f 13.

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(mod

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15)

at 5

ye

ars

of s

ervi

ce),

the

bene

fit c

atch

es u

p to

the

com

petit

or a

vera

ge a

t lat

er y

ears

, and

su

rpas

ses

the

com

petit

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roup

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e at

30

year

s of

ser

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e N

ew Y

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t the

oth

er

high

ly ra

nked

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rTh

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n an

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ben

efit

scor

ed a

littl

e lo

wer

than

the

New

Y

ork

Uni

on b

enef

it, p

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ily b

ecau

se th

ey o

ffer 1

less

hol

iday

than

the

New

Yor

k U

nion

—W

hile

the

New

Eng

land

Uni

on v

acat

ion

bene

fit a

t les

s th

an 1

yea

rof s

ervi

ce is

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mor

e ge

nero

us (u

p to

5 d

ays

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day

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an th

e N

ew Y

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on b

enef

it fo

r thi

s se

rvic

e ba

nd, a

fter 2

2 ye

ars

of s

ervi

ce a

nd g

reat

er, t

he N

ew E

ngla

nd U

nion

vac

atio

n be

nefit

tops

out

at 2

5 da

ys, w

here

as th

e N

ew Y

ork

Uni

on v

acat

ion

bene

fit in

crea

ses

to 3

0 da

ys a

fter 3

0 or

mor

e ye

ars

of s

ervi

ce


137

49©

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ay B

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its

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pari

son

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follo

win

g ta

ble

com

pare

s N

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rid’s

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an d

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illu

stra

tes

how

N

atio

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Y

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ns c

ompa

re

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eir p

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bot

h in

te

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mpl

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139

Sum

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140

52©

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Sum

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As

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umen

t, ea

ch N

atio

nal G

rid U

nion

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som

e be

nefit

pro

visi

ons

that

are

mor

e ge

nero

us th

an th

e co

mpe

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gro

up, a

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ther

s th

at a

re le

ss g

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than

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com

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ultim

atel

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to th

e ov

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enef

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core

In te

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mpl

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he N

ew Y

ork

Uni

on o

ffers

gen

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tive

and

retir

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edic

al p

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le

ss ri

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tirem

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its, a

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catio

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liday

ben

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ir E

ntire

Ben

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ette

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n th

e av

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larg

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he N

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rs le

ss th

an a

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med

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, gen

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s re

tirem

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vera

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acat

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holid

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com

pris

e th

e la

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w E

ngla

nd

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n


141

53©

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Tow

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tool


142

Schedule

N

G-W

FD-10



Schedule NG-WFD-10

BENVAL Analysis for Non-Union Benefits (Towers Perrin, 9/7/06)

143

Aug

ust 2

5, 2

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VAL

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Pur

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s O

nly.

This

doc

umen

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inte

nded

for

disc

ussi

on p

urpo

ses

only

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shou

ld n

ot b

e di

stri

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d to

any

thi

rd p

arty

, or

publ

ishe

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w

hole

or

in p

art

in a

ny fo

rm, w

ithou

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ior

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sent

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144

©20

06 T

ower

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145

©20

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ower

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Per

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an re

pres

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the

perc

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mem

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cov

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ical

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ense

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at th

e pl

an re

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ffici

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“fin

anci

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aver

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pani

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“rela

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the

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al V

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e po

sitio

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prio

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empl

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afte

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ontri

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146

Ent

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Ben

efit

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147

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Nat

iona

l Grid

's to

tal p

lans

are

low

er th

an th

e av

erag

e w

hen

com

pare

d to

the

peer

gro

up.

One

key

driv

er is

the

Sto

ck P

urch

ase

Pla

n of

fere

d by

Key

span

. With

out t

his

plan

, bot

h N

atio

nal G

rid a

nd K

eysp

an fa

ll in

the

third

qua

rtile

for o

vera

llpl

an d

esig

n, w

ith K

eysp

an

slig

htly

hig

her b

efor

e re

cogn

izin

g co

st s

harin

g w

ith e

mpl

oyee

s.

Key

span

’sTo

tal V

alue

of 1

04.8

indi

cate

s th

at th

e pa

ckag

e of

ben

efits

is m

ore

gene

rous

th

an th

e av

erag

e, h

owev

er th

e E

mpl

oyer

Val

ue d

ecre

asin

g to

87.

5 in

dica

tes

that

em

ploy

ees

are

requ

ired

to c

ontri

bute

mor

e he

avily

than

the

com

para

tor g

roup

.

Con

vers

ely,

Nat

iona

l Grid

’s c

ompe

titiv

e po

sitio

ning

impr

oves

whe

n m

ovin

g fro

m T

otal

Val

ue

to E

mpl

oyer

Val

ue, i

ndic

atin

g th

at w

hile

the

over

all v

alue

is b

elow

the

aver

age,

Nat

iona

l G

rid re

quire

s em

ploy

ees

to c

ontri

bute

less

than

the

aver

age.


148

©20

06 T

ower

s Pe

rrin

5

Ent

ire

Ben

efit

Pro

gram

The

follo

win

g ba

r cha

rt fu

rther

illu

stra

tes

how

Nat

iona

l Grid

’s a

nd K

eysp

an

com

pare

to th

eir p

eers

bot

h in

term

s of

gro

ss b

enef

it va

lue

of th

eir e

ntire

be

nefit

pro

gram

, as

wel

l as

empl

oyer

-pro

vide

d va

lue

(i.e.

, net

of e

mpl

oyee

co

ntrib

utio

ns)

IP

GL

DA

JK

FH

BS

EN

RQ

OM

C

IE

PK

OD

AR

JS

HB

GN

QF

ML

C


149

Ret

irem

ent

Ben

efit

s


150

©20

06 T

ower

s Pe

rrin

7

All

Ret

irem

ent

Pla

ns e

xcep

t S

tock

Pur

chas

e P

lan

This

cha

rt re

flect

s to

tal p

lan

desi

gn v

alue

s fo

r ret

irem

ent e

vent

s re

flect

ing

all p

lans

exc

ept t

he s

tock

pu

rcha

se p

lans

Rel

ativ

e ra

nkin

gs fo

r pla

n de

sign

do

not c

hang

e w

hen

the

Sto

ck P

urch

ase

Pla

n is

add

ed in

Val

ues

have

a re

lativ

ely

wid

e di

sper

sion

, with

val

ues

rang

ing

from

50.

8 to

133

.0

Con

side

ring

Em

ploy

er-V

alue

s, K

eysp

an’s

rank

ing

chan

ges

to th

e fo

urth

qua

rtile

(fro

m th

e se

cond

qu

artil

e) fo

r ret

irem

ent-e

vent

s; k

ey d

river

her

e is

the

cost

-sha

ring

arra

ngem

ent f

or re

tiree

med

ical

IE

RG

LO

KQ

HB

SN

PC

MJ

DF

A

NE

OR

LM

JD

SH

IB

PC

KQ

FG

A


151

©20

06 T

ower

s Pe

rrin

8

All

Ret

irem

ent

Eve

nts

exce

pt R

etir

emen

t an

d D

eath

Rel

ativ

e ra

nkin

gs fo

r pla

n de

sign

do

not c

hang

e w

hen

the

Sto

ck P

urch

ase

Pla

n is

add

ed in

The

rang

e of

resu

lts is

muc

h na

rrow

er w

ith v

alue

s ra

ngin

g fro

m 9

4.6

to 1

07.8

CL

QO

AJ

MB

RI

SF

EN

HK

DP

G

CE

GP

BM

QI

HR

SF

LN

JK

AO

D


152

©20

06 T

ower

s Pe

rrin

9

Tot

al r

etir

emen

t be

nefi

ts, e

xclu

ding

med

ical

K

eysp

anan

d N

atio

nal G

rid p

rogr

ams

have

ver

y co

nsis

tent

ben

efit

valu

es w

ith re

spec

t to

empl

oyer

-val

ues

Con

side

ring

plan

des

ign

(i.e.

, with

em

ploy

ee c

ontri

butio

ns a

dded

), th

e K

eysp

anpr

ogra

m im

prov

es

to a

bove

the

med

ian,

whi

le th

e N

atio

nal G

rid p

rogr

am re

mai

ns n

ear t

he b

otto

m

This

diff

eren

tial i

s pr

imar

ily re

late

d to

the

valu

e of

Key

span

’sS

tock

Pur

chas

e P

lan

With

out t

he S

tock

Pur

chas

e P

lan,

Key

span

’sre

tirem

ent p

lan

desi

gn fa

lls to

a ra

nk ju

st b

elow

that

fo

r Nat

iona

l Grid

NG

EM

FP

AH

BJ

SD

RI

LK

OQ

C

NM

RK

EF

OA

HB

JS

GI

QP

DL

C


153

©20

06 T

ower

s Pe

rrin

10

Pos

t re

tire

men

t m

edic

al b

enef

its

A k

ey fa

ctor

in K

eysp

an’s

rank

ing

is th

e re

lativ

ely

low

elig

ibili

ty th

resh

old

for t

he b

enef

it (5

ye

ars

of s

ervi

ce a

t age

55)

How

ever

, em

ploy

er c

osts

for e

ligib

le e

mpl

oyee

s ar

e ca

pped

at t

hecu

rrent

leve

l and

do

not

appe

ar to

be

as h

eavi

ly s

ubsi

dize

d (fo

r the

retir

ee a

nd c

over

ed d

epen

dent

s) a

s in

Nat

iona

l G

rid’s

pro

gram

Whe

n em

ploy

ee c

ontri

butio

ns a

re in

clud

ed, K

eysp

an’s

prog

ram

rank

s 3r

d fro

m th

e to

p,

whi

le N

atio

nal G

rid’s

is b

elow

the

med

ian,

with

Key

span

’spr

ogra

m m

ore

than

twic

e as

va

luab

le a

s N

atio

nal G

rid’s

pro

gram

IE

DA

JG

QR

OB

CH

PN

LM

FK

S

CO

QE

KD

LR

FI

SB

PH

AJ

GM

N


154

Act

ive

Ben

efit

s


155

©20

06 T

ower

s Pe

rrin

12

Act

ive

Med

ical

Pla

n D

eliv

ery

Mod

els

All

com

pani

es, e

xcep

t C, I

, and

R, o

ffer t

he e

mpl

oyee

s a

choi

ce o

f pla

n ty

pe

Mos

t com

pani

es th

at o

ffer p

lans

with

in-n

etw

ork

or o

ut-o

f-net

wor

k fe

atur

es o

ffer a

P

PO

rath

er th

an a

PO

STe

n co

mpa

nies

hav

e th

e P

PO

as

thei

r hig

hest

enr

olle

d pl

an

—Fo

ur c

ompa

nies

hav

e th

e P

OS

as

thei

r hig

hest

enr

olle

d pl

an a

nd tw

o co

mpa

nies

hav

e an

HM

O a

s th

e hi

ghes

t enr

olle

d pl

an—

One

com

pany

eac

h ha

s th

e Tr

iple

Opt

ion,

Com

preh

ensi

ve, a

nd B

asic

/Maj

or

med

ical

pla

n as

thei

r hig

hest

enr

olle

d pl

an, r

espe

ctiv

ely

Thre

e co

mpa

nies

offe

r bot

h a

PP

O a

nd P

OS

(H, N

, and

Q)

A is

the

only

com

pany

to o

ffer t

heir

empl

oyee

s a

cons

umer

driv

enhe

alth

pla

n

For p

urpo

ses

of th

e B

enV

al, w

e ev

alua

ted

only

the

optio

n w

ith h

ighe

st e

nrol

lmen

t


156

©20

06 T

ower

s Pe

rrin

13

Act

ive

Med

ical

Ben

efit

Sco

re a

nd R

ank

The

follo

win

g ta

ble

illust

rate

s N

atio

nal G

rid’s

and

Key

span

’sco

mpe

titiv

e po

sitio

ning

rela

tive

to

thei

r pee

r gro

up in

term

s of

act

ive

med

ical

pro

gram

sIn

term

s of

Tot

al V

alue

, Nat

iona

l Grid

’s o

vera

ll de

sign

s ar

e m

ore

gene

rous

than

the

aver

age,

whe

reas

Key

span

’sde

sign

s ar

e be

low

the

aver

age

Bec

ause

Nat

iona

l Grid

’s c

ontri

butio

ns a

re m

ore

gene

rous

than

the

aver

age,

whe

reas

K

eysp

an’s

are

less

gen

erou

s (e

.g.,

Nat

iona

l Grid

’s E

mpl

oyee

Onl

y co

ntrib

utio

ns a

re

appr

oxim

atel

y $6

4 co

mpa

red

to K

eysp

an’s

of $

95, a

nd th

e av

erag

e co

mpe

titor

com

pany

’s o

f $7

3), N

atio

nal G

rid’s

ove

rall

Em

ploy

er V

alue

com

petit

ive

posi

tioni

ng w

orse

ns

Activ

e M

edic

al S

core

and

Ran

k

Scor

eRa

nk/2

1Em

ploy

er V

alue

Nat

iona

l Grid

104.

19

Key

span

88.6

19

Tota

l Val

ue

Nat

iona

l Grid

105.

27

Key

span

96.9

13


157

©20

06 T

ower

s Pe

rrin

14

Act

ive

Med

ical

Ben

efit

s C

ompa

riso

n

Ke

y P

lan

De

sig

n F

ea

ture

s -

Me

dic

al N

ati

on

al

Gri

dK

eys

pa

nR

an

ge

Ave

rag

eIn

-ne

two

rk

Ded

uctib

leN

one

Per

per

son:

$25

0 F

amily

max

: $5

00$0

-$40

0 (in

d) $

0-$1

200

(fam

)$1

20 (

ind)

$3

00 (

fam

)

Coi

nsur

ance

100%

90%

80%

-100

%90

%

Out

-of-p

ocke

t m

axim

umN

one

Per

per

son:

$1,

000

Fam

ily m

ax:

$2,0

00

(exc

lude

s de

duct

ible

)$0

-$22

50 (

ind)

$0-

$600

0 (fa

m)

$123

0 (in

d)

$276

0 (fa

m)

Inpa

tient

hos

pita

l10

0%90

%85

%,

$150

cop

ay-1

00%

90%

,$15

0 co

pay

Em

erge

ncy

room

100%

90%

$0 c

opay

-85%

,$50

cop

ay$5

0O

ffice

vis

its$1

0$1

5$5

-$25

$20

Pre

scrip

tion

drug

s (R

etai

l)

Gen

eric

$10

$10

$5-$

100

$10

Bra

nd$1

0/$3

0$2

0/$3

5$5

- 50

% fo

rmul

ary

and

40%

no

nfor

mul

ary

80%

(min

20-

max

50)

form

ular

y an

d 80

% (

min

30-

max

100

) no

nfor

mul

ary

Out

patie

nt m

enta

l hea

lth$5

, 24

vis

its50

%,

30 v

isits

per

yea

r$1

0-$3

0$2

0

Ou

t-o

f-n

etw

ork

Ded

uctib

le$2

00P

er p

erso

n $4

00 F

amily

Max

: $8

00$0

-$10

00 (

ind)

$0-

$300

0 (fa

m)

$470

(in

d)

$126

0 (fa

m)

Coi

nsur

ance

70%

70%

60%

-80%

70%

Out

-of-p

ocke

t m

axim

um$1

,300

Per

per

son

$2,4

00 F

amily

Max

: $4

,800

(e

xclu

des

dedu

ctib

le)

$170

0-$5

000

(ind)

$

3400

-$1

3200

(fa

m)

$339

0 (in

d)

$815

0 (fa

m)

Mo

nth

ly E

mp

loye

e C

on

trib

uti

on

s

Em

ploy

ee o

nly

$64.

10$9

5.00

$15.

57-$

359.

67$7

3.04

Fam

ily$1

82.7

0$2

50.0

0$7

5.67

-936

.50

$227

.94

Co

mp

ara

tor

Gro

up

The

follo

win

g ta

ble

com

pare

s N

atio

nal G

rid’s

and

Key

span

’spl

an d

esig

n re

lativ

e to

th

eir p

eer g

roup

pla

n de

sign

s


158

©20

06 T

ower

s Pe

rrin

15

Act

ive

Med

ical

Ben

efit

s

The

aver

age

or m

edia

n fo

r mos

t of t

he b

enef

it fe

atur

es a

cros

s th

e co

mpe

titor

com

pani

es fa

ll so

mew

here

bet

wee

n N

atio

nal G

rid’s

and

Key

span

’sbe

nefit

feat

ures

The

key

fact

or d

rivin

g N

atio

nal G

rid’s

med

ical

pro

gram

s to

be

mor

e ric

h th

an th

eir

com

petit

ors

is th

e fa

ct th

at m

ost i

n-ne

twor

k se

rvic

es a

re c

over

ed a

t 100

% v

ersu

s an

ave

rage

of

90%

for t

heir

peer

s K

eysp

an’s

med

ical

pla

ns a

re c

onsi

dere

d le

ss c

ompe

titiv

e pr

imar

ily b

ecau

se e

mpl

oyee

co

ntrib

utio

ns a

re h

igh,

and

som

e be

nefit

feat

ures

, suc

h as

in-n

etw

ork

dedu

ctib

les,

are

hig

h w

hen

com

pare

d to

thei

r pee

r gro

up

If N

atio

nal G

rid is

inte

rest

ed in

bet

ter a

ligni

ng th

eir p

rogr

ams

with

thei

r com

petit

ors,

Nat

iona

l G

rid c

ould

con

side

r int

rodu

cing

an

in-n

etw

ork

dedu

ctib

le, r

aisi

ng o

ffice

vis

it co

pays

by

$5-$

10,

and

low

erin

g co

insu

ranc

e to

90%

from

100

%

All

of th

ese

mea

sure

s w

ill be

con

side

red

take

-aw

ays

by e

mpl

oyee

s, b

ut in

trodu

cing

one

or

two

of th

ese

cost

sha

ring

feat

ures

, ins

tead

of a

ll th

ree,

may

redu

ce e

mpl

oyee

reac

tion

Oth

er o

bser

vatio

ns:

Nat

iona

l Grid

’s o

utpa

tient

men

tal h

ealth

cop

ay o

f $5

is w

ell o

utsi

de th

e pe

er g

roup

rang

e of

$1

0-$3

0.

—Ty

pica

lly, e

mpl

oyer

s ch

arge

the

sam

e of

fice

visi

t cop

ay fo

r men

tal h

ealth

ser

vice

s as

are

ch

arge

d fo

r all

othe

r offi

ce v

isits

Sin

ce N

atio

nal G

rid a

lread

y ha

s hi

gh in

-net

wor

k ut

ilizat

ion,

adj

ustin

g th

e ou

t-of-n

etw

ork

dedu

ctib

les

and

coin

sura

nce

up to

the

com

petit

or g

roup

ave

rage

wou

ld h

ave

little

impa

ct o

n ov

eral

l cos

ts a

nd m

inim

al re

actio

n fro

m e

mpl

oyee

s


159

©20

06 T

ower

s Pe

rrin

16

Act

ive

Med

ical

Ben

efit

s

Ove

rall,

Key

span

’sco

mpe

titiv

e po

sitio

ning

is la

rgel

y dr

iven

by

thei

r in-

netw

ork

dedu

ctib

le

whi

ch is

wel

l abo

ve th

e av

erag

e of

the

com

para

tor g

roup

Thei

r coi

nsur

ance

leve

l of 9

0% is

on

par w

ith th

e av

erag

e fo

r the

pee

r gro

up, a

nd th

e co

pay

amou

nt o

f $15

is s

light

ly b

ette

r tha

n th

e pe

er g

roup

Key

span

’s in

divi

dual

con

tribu

tion

leve

l, ho

wev

er, i

s 30

% h

ighe

r tha

n th

eav

erag

e in

divi

dual

con

tribu

tion

leve

l of t

he p

eer g

roup

—W

hile

som

e of

the

peer

gro

up c

ompa

nies

may

offe

r les

s ric

h be

nefit

s th

an

Key

span

, the

ir co

ntrib

utio

ns m

ay b

e m

ore

in li

ne w

ith th

eir b

enef

it pr

ogra

m o

fferin

gIf

in-n

etw

ork

utili

zatio

n is

low

, Key

span

cou

ld c

onsi

der a

djus

ting

the

out-o

f-net

wor

k de

duct

ible

s an

d ou

t of p

ocke

t max

imum

s up

to th

e co

mpe

titor

gro

up a

vera

ge


160

©20

06 T

ower

s Pe

rrin

17

Act

ive

Med

ical

Ben

efit

s

The

follo

win

g ba

r cha

rt fu

rther

illu

stra

tes

how

Nat

iona

l Grid

’s a

nd K

eysp

anco

mpa

re to

thei

r pee

rs b

oth

in te

rms

of g

ross

ben

efit

valu

e of

med

ical

pla

ns, a

s w

ell a

s em

ploy

er-p

rovi

ded

valu

e (i.

e., n

et o

f em

ploy

ee c

ontri

butio

ns)

IQ

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MB

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EN

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HR

F

NL

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HS

IM

ER

OQ

AG

F


161

©20

06 T

ower

s Pe

rrin

18

Den

tal B

enef

it S

core

and

Ran

k

The

follo

win

g ta

ble

illust

rate

s N

atio

nal G

rid’s

and

Key

span

’sco

mpe

titiv

e po

sitio

ning

rela

tive

to th

eir p

eer g

roup

in te

rms

of a

ctiv

e de

ntal

pro

gram

sIn

term

s of

Tot

al V

alue

, Nat

iona

l Grid

’s d

esig

ns a

re b

ette

r tha

n th

e av

erag

e,

whe

reas

Key

span

’sde

sign

s ar

e be

low

the

aver

age

Bec

ause

Key

span

’sco

ntrib

utio

ns a

re a

bout

ave

rage

, whe

reas

Nat

iona

l Grid

’s

cont

ribut

ions

are

bel

ow th

e av

erag

e, N

atio

nal G

rid’s

Em

ploy

er V

alue

com

petit

ive

posi

tioni

ng g

ets

muc

h be

tter,

whe

reas

Key

span

’sw

orse

ns

Dent

al S

core

and

Ran

k Scor

eR

ank/

21Em

ploy

er V

alue

Nat

iona

l Grid

125.

37

Key

span

79.5

16

Tota

l Val

ue

Nat

iona

l Grid

101.

59

Key

span

111.

93


162

©20

06 T

ower

s Pe

rrin

19

Den

tal B

enef

its

Com

pari

son

The

follo

win

g ta

ble

com

pare

s N

atio

nal G

rid’s

and

Key

span

’spl

an d

esig

n re

lativ

e to

th

eir p

eer g

roup

pla

n de

sign

s

Key

Pla

n D

esig

n Fe

atur

es -D

enta

l Ben

efit

Nat

iona

l Grid

K

eysp

an

Ran

geAv

erag

eAn

nual

Ded

uctib

leP

er P

erso

n: $

50P

er P

erso

n $5

0 Fa

mily

: $15

0$0

-$75

(Ind

) $

0-$2

25 (F

am)

$40

(Ind)

$10

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am)

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al M

axim

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reve

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ive &

Bas

ic: $

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rson

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xclu

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ajor

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on

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lude

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Ser

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s10

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efor

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ible

, 2 c

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Max

imum

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of N

etw

ork

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/AN

/A$0

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l Max

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oyee

Con

tribu

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.20

$17

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mily

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160

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Com

parit

or G

roup


163

©20

06 T

ower

s Pe

rrin

20

Den

tal B

enef

its

The

key

fact

ors

driv

ing

Nat

iona

l Grid

’s d

enta

l pro

gram

s to

be

slig

htly

rich

er th

an

som

e of

thei

r com

petit

ors

are

thei

r low

em

ploy

ee c

ontri

butio

ns (a

bout

hal

f of t

he

aver

age

cont

ribut

ion

rate

s), a

nd 1

00%

orth

odon

tia c

over

age

The

aver

age

orth

odon

tia c

over

age

is 6

0%; N

atio

nal G

rid c

ould

intro

duce

som

e co

st s

harin

g fo

r orth

odon

tia a

nd s

till r

emai

n co

mpe

titiv

e w

ithin

thei

r pee

r gro

up,

espe

cial

ly s

ince

the

max

imum

is o

n pa

r with

the

aver

age

Key

span

’sde

ntal

pla

ns a

re c

onsi

dere

d le

ss c

ompe

titiv

e pr

imar

ily b

ecau

se m

ajor

re

stor

ativ

e an

d or

thod

ontia

ser

vice

s ar

e co

vere

d at

a lo

wer

per

cent

age

than

the

aver

age

for t

he p

eer g

roup

.Th

e or

thod

ontia

max

imum

, how

ever

, is

gene

rous

rela

tive

to th

e av

erag

eC

ontri

butio

ns a

re in

line

with

the

aver

age,

thou

gh m

uch

high

er th

an N

atio

nal

Grid

’s c

ontri

butio

ns


164

©20

06 T

ower

s Pe

rrin

21

Den

tal B

enef

its

The

follo

win

g ba

r cha

rt fu

rther

illu

stra

tes

how

Nat

iona

l Grid

and

Key

span

com

pare

to th

eir p

eers

bot

h in

term

s of

gro

ss b

enef

it va

lue

of d

enta

l pla

ns, a

s w

ell a

s em

ploy

er-p

rovi

ded

valu

e (i.

e., n

et o

f em

ploy

ee c

ontri

butio

ns)

IG

EO

LH

NC

KF

SJ

PR

QA

MB

D

KP

OQ

AC

SI

MJ

DG

RE

LH

NF

B


165

©20

06 T

ower

s Pe

rrin

22

Life

Ins

uran

ce/A

D&

D B

enef

it S

core

and

Ran

k

The

follo

win

g ta

ble

illust

rate

s N

atio

nal G

rid’s

and

Key

span

’sco

mpe

titiv

e po

sitio

ning

rela

tive

to

thei

r pee

r gro

up in

term

s of

life

insu

ranc

e an

d A

D&

D p

rogr

ams

In te

rms

of T

otal

Val

ue, N

atio

nal G

rid’s

ove

rall

desi

gns

are

mor

e ge

nero

us th

an th

e av

erag

e, w

here

as K

eysp

an’s

desi

gns

are

belo

w th

e av

erag

e (e

.g.,

Nat

iona

l Grid

sup

ports

2x

pay

for b

asic

life

, whe

reas

Key

span

sup

ports

onl

y 1x

pay

)E

mpl

oyer

Val

ues

are

driv

en b

y th

e op

tiona

l ben

efits

(e.g

. opt

iona

l life

, spo

use

and

depe

nden

t life

) and

the

asso

ciat

ed e

mpl

oyee

con

tribu

tion

—N

atio

nal G

rid’s

com

petit

ive

posi

tioni

ng im

prov

es d

ue to

opt

iona

l life

con

tribu

tion

rate

s th

at a

re s

light

ly b

ette

r tha

n th

e av

erag

e, w

here

as K

eysp

an’s

posi

tion

decl

ines

due

to

high

er th

an a

vera

ge o

ptio

nal l

ife ra

tes

Deat

h - A

ctiv

e S

core

and

Ran

k

Scor

eR

ank/

21Em

ploy

er V

alue

Nat

iona

l Grid

137.

96

Key

span

86.5

14

Tota

l Val

ue

Nat

iona

l Grid

117.

45

Key

span

102.

99


166

©20

06 T

ower

s Pe

rrin

23

Act

ive

Life

Ins

uran

ce/A

D&

D C

ompa

riso

n

The

follo

win

g ta

ble

com

pare

s N

atio

nal G

rid’s

and

Key

span

’spl

an d

esig

n re

lativ

e to

th

eir p

eer g

roup

pla

n de

sign

sK

ey P

lan

Des

igns

- D

eath

Ben

efit

Nat

iona

l Gri

dK

eysp

anR

ange

Ave

rage

Bas

ic2

x pa

y1

x pa

y.7

5 x

pay-

2.5

x p

ay1

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axim

um

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00,0

00$5

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00$3

0,00

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nlim

ited

$815

,833

Sup

plem

enta

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mpl

oyee

opt

ion

1 to

5 x

pay

in m

ultip

les

of 1

x p

ay1

to 5

x p

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mul

tiple

s of

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pay

1-2

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to 1

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Min

imum

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$10,

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itipl

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max

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illio

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x pa

y

Com

pari

tor

Gro

up


167

©20

06 T

ower

s Pe

rrin

24

Life

Ins

uran

ce/A

D&

D B

enef

its

The

key

fact

ors

driv

ing

Nat

iona

l Grid

’s li

fe in

sura

nce

and

AD

&D

pro

gram

s to

be

mor

e ric

h th

an s

ome

of th

eir c

ompe

titor

s ar

e th

eir h

igh

basi

c lif

e an

d A

D&

D b

enef

it am

ount

s (e

.g. 2

x pa

y)Th

e av

erag

e ba

sic

life

bene

fit is

one

tim

es p

ay; N

atio

nal G

rid’s

is tw

o tim

es p

ay,

and

the

bene

fit m

axim

um is

alm

ost t

wic

e th

e av

erag

e be

nefit

max

imum

The

aver

age

AD

&D

ben

efit

amou

nt is

one

tim

es p

ay; N

atio

nal G

rid’s

is tw

o tim

es

pay

Nat

iona

l Grid

com

pare

s w

ell w

ith th

eir c

ompe

titor

s in

term

s of

sup

plem

enta

l life

be

nefit

s,

Spo

use

life

bene

fits

are

belo

w c

ompe

titiv

e no

rms

Ove

rall,

Key

span

’sco

mpe

titiv

e po

sitio

ning

is la

rgel

y dr

iven

by

thei

r low

er th

an

aver

age

basi

c lif

e m

axim

um o

f $50

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0 co

mpa

red

to th

e av

erag

e of

the

com

petit

or

com

pani

es o

f app

roxi

mat

ely

$800

,000

Key

span

com

pare

s w

ell w

ith th

eir c

ompe

titor

s in

term

s of

the

basi

c lif

e be

nefit

at

one

times

pay

and

sup

plem

enta

l life

ben

efit

optio

ns a

t one

to fi

ve ti

mes

pay

, and

is

muc

h be

tter t

han

the

aver

age

in te

rms

of th

e A

D&

D b

enef

it am

ount

of $

200,

000


168

©20

06 T

ower

s Pe

rrin

25

Act

ive

Life

Ins

uran

ce a

nd A

D&

D B

enef

it

The

follo

win

g ba

r cha

rt fu

rther

illu

stra

tes

how

Nat

iona

l Grid

and

Key

span

com

pare

to th

eir p

eers

bot

h in

term

s of

gro

ss b

enef

it va

lue

of li

fe in

sura

nce

and

AD

&D

, as

wel

l as

empl

oyer

-pro

vide

d va

lue

(i.e.

, net

of e

mpl

oyee

con

tribu

tions

)

KB

FL

IC

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HD

PA

JN

SM

RE

Q

JA

FL

IG

OC

HD

EB

PN

RM

SK

Q


169

©20

06 T

ower

s Pe

rrin

26

Sho

rt T

erm

Dis

abili

ty S

core

and

Ran

k

The

follo

win

g ta

ble

illust

rate

s N

atio

nal G

rid’s

and

Key

span

’sco

mpe

titiv

e po

sitio

ning

rela

tive

to

thei

r pee

r gro

up in

term

s of

STD

pro

gram

sIn

term

s of

Tot

al V

alue

, bot

h N

atio

nal G

rid a

nd K

eysp

an’s

over

all d

esig

ns a

re b

elow

av

erag

e re

lativ

e to

thei

r com

petit

ors

(e.g

., bo

th N

atio

nal G

rid a

nd K

eysp

an p

rovi

de 1

00%

of

pay

for 1

wee

k at

1 y

ear o

f ser

vice

, and

5 w

eeks

at 5

yea

rs o

f ser

vice

, com

pare

d to

the

com

petit

or a

vera

ge o

f 9 a

nd 1

2 w

eeks

at 1

00%

, res

pect

ivel

yB

oth

Nat

iona

l Grid

’s a

nd K

eysp

an’s

Em

ploy

er V

alue

com

petit

ive

posi

tioni

ng im

prov

es

slig

htly

rela

tive

to th

e To

tal V

alue

due

to th

e fa

ct th

at tw

o em

ploy

ers

(O a

nd P

) in

the

com

para

tor g

roup

requ

ire e

mpl

oyee

con

tribu

tions

for t

he s

alar

y co

ntin

uanc

e pl

anS

TD re

sults

on

thei

r ow

n ca

n be

ske

wed

by

the

bene

fit p

erio

d (i.

e., t

he b

enef

it pe

riod

varie

s fro

m 3

mon

ths

to 1

yea

r am

ongs

t the

gro

up),

as a

resu

lt it

is im

porta

nt to

revi

ew S

TD a

nd

LTD

on

a co

mbi

ned

basi

s (re

fer t

o pa

ge 3

3)

Shor

t Ter

m D

isab

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Sco

re a

nd R

ank

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ank/

21Em

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alue

Nat

iona

l Grid

102.

813

Key

span

96.7

17

Tota

l Val

ue

Nat

iona

l Grid

98.3

15

Key

span

92.4

19


170

©20

06 T

ower

s Pe

rrin

27

Sho

rt T

erm

Dis

abili

ty C

ompa

riso

n

The

follo

win

g ta

ble

com

pare

s N

atio

nal G

rid’s

and

Key

span

’spl

an d

esig

n re

lativ

e to

th

eir p

eer g

roup

pla

n de

sign

sSh

ort T

erm

Dis

abili

ty

Nat

iona

l Grid

K

eysp

an

Rang

eAv

erag

eSi

ck P

ay1s

t day

of d

isab

ility

1st d

ay o

f dis

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t day

of d

isab

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Bene

fit A

mou

ntSi

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ayY

ears

of S

ervic

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eeks

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t 100

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%1

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eE

nd o

f Sic

k P

ayE

nd o

f Sic

k P

ayE

nd o

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k pa

y- 6

day

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nd o

f sic

k pa

y

Sala

ry C

ontin

uanc

e Am

ount

70%

of p

ay; p

ayab

le fo

r 52

wee

ks p

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ear

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ks p

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Prim

ary

Soc

ial

Sec

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and

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D

epen

dent

Soc

ial

Sec

urity

100%

for 3

mon

ths

Com

parit

or G

roup


171

©20

06 T

ower

s Pe

rrin

28

Sho

rt T

erm

Dis

abili

ty

The

follo

win

g ba

r cha

rt fu

rther

illu

stra

tes

how

Nat

iona

l Grid

and

Key

span

co

mpa

re to

thei

r pee

rs b

oth

in te

rms

of g

ross

ben

efit

valu

e of

STD

pla

ns, a

s w

ell a

s em

ploy

er-p

rovi

ded

valu

e (i.

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et o

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ploy

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ontri

butio

ns) H

EL

BF

GN

SR

KC

DP

QM

AJ

OI

RE

LB

FG

NP

0I

KD

CQ

MA

JH

S


172

©20

06 T

ower

s Pe

rrin

29

Long

Ter

m D

isab

ility

Ben

efit

Sco

re a

nd R

ank

Long

Ter

m D

isab

ility

Sco

re a

nd R

ank

Sco

reR

ank/

21Em

ploy

er V

alue

Nat

iona

l Grid

113.

57

Key

span

7.3

20

Tota

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Testim

ony of

K. K

ateregga


Docket No. R.I.P.U.C. ____ Witness: Kateregga

PRE-FILED DIRECT TESTIMONY

OF

Dr. Kimbugwe A. Kateregga

180



Table of Contents I. Qualifications.................................................................................................................1 II. Purpose of Testimony ....................................................................................................2 III. Development of Depreciation Rates ..............................................................................2 IV. 2009 Depreciation Rate Study .......................................................................................6 V. Summary ......................................................................................................................11

181



Page 1 of 12

Q. WOULD YOU PLEASE STATE YOUR NAME AND BUSINESS ADDRESS? 1

A. My name is Kimbugwe A. Kateregga. My business address is 17595 S. Tamiami 2

Trail, Suite 212, Fort Myers, Florida 33908. 3

Q. WHAT IS YOUR OCCUPATION? 4

A. I am a Vice President and Consultant of Foster Associates, Inc. 5

I. QUALIFICATIONS 6

Q. WOULD YOU BRIEFLY DESCRIBE YOUR EDUCATIONAL TRAINING 7

AND PROFESSIONAL BACKGROUND? 8

A. I received a B.Sc. (Eng.) degree in Civil Engineering from Makerere University in 9

Uganda and a M.Sc. degree in Management Science from the University of Wales in 10

1982. I also received a Ph.D. degree in Engineering Valuation from Iowa State Uni-11

versity in 1987. The subject of my Masters thesis was forecasting equipment lives 12

and my Doctoral research and dissertation addressed technological forecasting mod-13

els and their applications in capital recovery. I have made presentations to regulators, 14

committees, and conferences on capital recovery issues, published articles in the field 15

of depreciation and technological forecasting and taught college level mathematics 16

and statistics. I am a member of Phi Kappa Phi, the American Association of Cost 17

Engineers and the Society of Depreciation Professionals. 18

Q. WHAT IS YOUR PROFESSIONAL EXPERIENCE? 19

A. I joined the firm of Foster Associates in 1986 as a Staff Consultant and specialist in 20

depreciation. Prior to joining Foster Associates, I was employed as a Research Assis-21

tant at Iowa State University. I served under contract in this capacity between 1983 22

and 1986 to investigate marginal cost pricing issues and the application of techno-23

logical forecasting models in predicting the service life of industrial property. The 24

findings of this research have been implemented in the telecommunications industry. 25

Q. HAVE YOU PREVIOUSLY TESTIFIED BEFORE A REGULATORY BODY? 26

182



Page 2 of 12

A. Yes. I have testified in several proceedings before the Arizona, Arkansas, Montana, 1

New York, New Jersey and Rhode Island public service commissions. 2

II. PURPOSE OF TESTIMONY 3

Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS PROCEEDING? 4

A. Foster Associates was engaged by National Grid to conduct a 2009 depreciation rate 5

study for electric properties owned and operated by The Narragansett Electric Com-6

pany (NEC) d/b/a National Grid. The purpose of my testimony is to sponsor and de-7

scribe the study conducted by Foster Associates. Current depreciation rates were 8

adopted pursuant to a Settlement Agreement in Docket No. 2290. 9

III. DEVELOPMENT OF DEPRECIATION RATES 10

Q. WOULD YOU PLEASE EXPLAIN WHY DEPRECIATION STUDIES ARE 11

NEEDED FOR ACCOUNTING AND RATEMAKING PURPOSES? 12

A. The goal of depreciation accounting is to charge to operations a reasonable estimate 13

of the cost of the service potential of an asset (or group of assets) consumed during an 14

accounting interval. A number of depreciation systems have been developed to 15

achieve this objective, most of which employ time as the apportionment base. 16

Implementation of a time-based (or age-life system) of depreciation accounting 17

requires the estimation of several parameters or statistics related to a plant account. 18

The average service life of a vintage, for example, is a statistic that will not be 19

known with certainty until all units from the original placement have been retired 20

from service. A vintage average service life, therefore, must be estimated initially 21

and periodically revised as indications of the eventual average service life becomes 22

more certain. Future net salvage rates and projection curves, which describe the ex-23

pected distribution of retirements over time, are also estimated parameters of a de-24

preciation system that are subject to future revisions. Depreciation studies should be 25

conducted periodically to assess the continuing reasonableness of parameters and ac-26

crual rates derived from prior estimates. 27

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Page 3 of 12

The need for periodic depreciation studies is also a derivative of the ratemaking 1

process which establishes prices for utility services based on costs. Absent regula-2

tion, deficient or excessive depreciation rates will produce no adverse consequence 3

other than a systematic over or understatement of the accounting measurement of 4

earnings. While a continuance of such practices may not comport with the goals of 5

depreciation accounting, the achievement of capital recovery is not dependent upon 6

either the amount or the timing of depreciation expense for an unregulated firm. In 7

the case of a regulated utility, however, recovery of investor-supplied capital is de-8

pendent upon allowed revenues, which are in turn dependent upon approved levels 9

of depreciation expense. Periodic reviews of depreciation rates are, therefore, essen-10

tial to the achievement of timely capital recovery for a regulated utility. 11

It is also important to recognize that revenue associated with depreciation is a 12

significant source of internally generated funds used to finance plant replacements 13

and new capacity additions. This is not to suggest that internal cash generation 14

should be substituted for the goals of depreciation accounting. However, the poten-15

tial for realizing a reduction in the marginal cost of external financing provides an 16

added incentive for conducting periodic depreciation studies and adopting proper 17

depreciation rates. 18

Q. WHAT ARE THE PRINCIPAL ACTIVITIES INVOLVED IN CONDUCTING 19

A DEPRECIATION STUDY? 20

A. The first step in conducting a depreciation study is the collection of plant accounting 21

data needed to conduct a statistical analysis of past retirement experience. Data are 22

also collected to permit an analysis of the relationship between retirements and real-23

ized gross salvage and removal expense. The data collection phase should include a 24

verification of the accuracy of the plant accounting records and a reconciliation of the 25

assembled data to the official plant records of the company. 26

The next step in a depreciation study is the estimation of service life statistics 27

from an analysis of past retirement experience. The term life analysis is used to de-28

184



Page 4 of 12

scribe the activities undertaken in this step to obtain a mathematical description of 1

the forces of retirement acting upon a plant category. The mathematical expressions 2

used to describe these forces are known as survival functions or survivor curves. 3

Life indications obtained from an analysis of past retirement experience are 4

blended with expectations about the future to obtain an appropriate projection life 5

curve. This step, called life estimation, is concerned with predicting the expected re-6

maining life of property units still exposed to the forces of retirement. The amount of 7

weight given to the analysis of historical data will depend upon the extent to which 8

past retirement experience is considered descriptive of the future. 9

An estimate of the net salvage rate applicable to future retirements is usually 10

obtained from an analysis of the gross salvage and removal expense realized in the 11

past. An analysis of past experience (including an examination of trends over time) 12

provides a baseline for estimating future salvage and cost of removal. Consideration, 13

however, should be given to events that may cause deviations from the net salvage 14

realized in the past. Among the factors which should be considered are the age of 15

plant retirements; the portion of retirements that will be reused; changes in the 16

method of removing plant; the type of plant to be retired in the future; inflation ex-17

pectations; the shape of the projection life curve; and economic conditions that may 18

warrant greater or lesser weight to be given to the net salvage observed in the past. 19

A comprehensive depreciation study will also include an analysis of the ade-20

quacy of the recorded depreciation reserve. The purpose of such an analysis is to 21

compare the current balance in the recorded reserve with the balance required to 22

achieve the goals and objectives of depreciation accounting if the amount and timing 23

of future retirements and net salvage are realized exactly as predicted. The difference 24

between the required (or theoretical) reserve and the recorded reserve provides a 25

measurement of the expected excess or shortfall that will remain in the depreciation 26

reserve if corrective action is not taken to extinguish the reserve imbalance. 27

185



Page 5 of 12

Although reserve records are typically maintained by various account classifi-1

cations, the total reserve for a company is the most important measure of the status 2

of the Company’s depreciation practices and procedures. Differences between the 3

theoretical reserve and the recorded reserve will arise as a normal occurrence when 4

service lives, dispersion patterns and salvage estimates are adjusted in the course of 5

depreciation reviews. Differences will also arise because of plant accounting activity 6

such as transfers and adjustments, which require an identification of reserves at a dif-7

ferent level from that maintained in the accounting system. It is appropriate, there-8

fore, and consistent with group depreciation theory, to periodically redistribute 9

recorded reserves among primary accounts based on the most recent estimates of re-10

tirement dispersion and salvage. A redistribution of the recorded reserve will provide 11

an initial reserve balance for each primary account consistent with the estimates of 12

retirement dispersion selected to describe mortality characteristics of the accounts 13

and establish a baseline against which future comparisons can be made. 14

Finally, parameters estimated from service life and net salvage studies are inte-15

grated into an appropriate formulation of an accrual rate based upon a selected de-16

preciation system. Three elements are needed to describe a depreciation system. The 17

sub-elements most widely used in constructing a depreciation system are shown in 18

Table 1 below. 19

Methods Procedures Techniques

Retirement Total Company Whole-LifeCompound-Interest Broad Group Remaining-LifeSinking-Fund Vintage Group Probable-LifeStraight-Line Equal-Life GroupDeclining Balance Unit SummationSum-of-Years'-Digits ItemExpensingUnit-of-ProductionNet Revenue

Table 1. Elements of a Depreciation System 20

186



Page 6 of 12

These elements (i.e., method, procedure and technique) can be visualized as 1

three dimensions of a cube in which each face describes a variety of sub–elements 2

that can be combined to form a system. A depreciation system is therefore formed by 3

selecting a sub-element from each face such that the system contains one method, 4

one procedure and one technique. 5

IV. 2009 DEPRECIATION RATE STUDY 6

Q. DID NEC PROVIDE FOSTER ASSOCIATES PLANT ACCOUNTING DATA 7

FOR CONDUCTING THE 2009 DEPRECIATION STUDY? 8

A. Yes, they did. The database used in conducting the 2009 study was assembled by ap-9

pending 1995–2008 plant and reserve activity to the data base used in conducting the 10

1995 study. Detailed accounting transactions were extracted from the CPR system 11

and assigned transaction codes that describe the nature of the accounting activity. 12

Transaction codes for plant additions, for example, were used to distinguish normal 13

additions from acquisitions, purchases, reimbursements and adjustments. Similar 14

transaction codes were used to distinguish normal retirements from sales, reimburse-15

ments, abnormal retirements and adjustments. Transaction codes were also assigned 16

to transfers, capital leases, gross salvage, cost of removal and other accounting activ-17

ity considered in a depreciation study. 18

Prior to 1993, Narragansett Electric estimated the ageing of plant activity for 19

distribution mass plant accounts (Accounts 364.00 through 373.00) using an esti-20

mated projection life and curve for each account. Although theoretically sound for 21

accounts in which population parameters are known, in practice this method is 22

somewhat circular. The recorded plant activity is dependent upon the estimated pa-23

rameters which are themselves developed from the plant activity they generate. 24

Foster Associates was engaged by Narragansett Electric in 1993 to develop age 25

distributions for Accounts 364.00 through 373.00 that would be used to initiate a 26

first-in, first-out (FIFO) ageing process. The new age distributions at December 31, 27

187



Page 7 of 12

1992 were used to populate the Company’s CPR system in September 1993. Minor 1

adjustments were recorded for January – September 1993 activity. The data base 2

used in the current study for these accounts contains opening age distributions at De-3

cember 31, 1992, and FIFO plant activity for 1993 through 2008. Plant installed 4

prior to 1966 is classified in a 1966 vintage. 5

The data base used in the 1995 study for all other transmission, distribution, 6

and general plant Accounts 390.00 (Structures and Improvements) and 397.00 7

(Communication Equipment) was constructed from the Company’s CPR system by 8

Company personnel. These plant records provided plant activity over the period 9

1969 through 1994 and age distributions of surviving plant at December 31, 1994. 10

Age distributions of plant exposed to retirement at the beginning of each activity 11

year were obtained by adding (or subtracting) transaction amounts to the coded age 12

distributions of surviving plant at the end of 1994. Coded age distributions of surviv-13

ing plant at the end of 1994 were then removed from the data base. This conversion 14

of the data base from a reverse construction of the historical arrangement to a for-15

ward construction was made to facilitate appending post–1994 transactions to the 16

data without removing or adjusting prior coded transactions. 17

The accuracy of the assembled data base for all accounts-except the FIFO mass 18

accounts-was verified over the period 1969–1994 in the 1995 study by comparing 19

the unadjusted plant history schedules derived in the study with the Company’s 20

ledger reports. The mass accounts were reconciled for post-1993 activity reflecting 21

the FIFO ageing process. 22

The accuracy and completeness of the database used in conducting the 2009 23

study was confirmed by Foster Associates for activity years 1995–2008 by compar-24

ing additions, retirements, transfers, adjustments and ending plant balance to the 25

regulated investments reported by NEC in FERC Form 1 electric plant in service re-26

ports. Age distributions of surviving plant at December 31, 2008 were reconciled to 27

the CPR. 28

188



Page 8 of 12

Q. DID FOSTER ASSOCIATES CONDUCT STATISTICAL LIFE STUDIES FOR 1

NEC PLANT AND EQUIPMENT? 2

A. Yes, we did. As discussed in Schedule NG-KAK-1, all plant accounts were analyzed 3

using a technique in which first, second and third degree polynomials were fitted to a 4

set of observed retirement ratios. The resulting function can be expressed as a survi-5

vorship function, which is numerically integrated to obtain an estimate of the average 6

service life. The smoothed survivorship function is then fitted by a weighted least-7

squares procedure to the Iowa-curve family to obtain a mathematical description or 8

classification of the dispersion characteristics of the data. Service life indications de-9

rived from the statistical analyses were blended with informed judgment and expecta-10

tions about the future to obtain an appropriate projection life curve for each plant 11

category. 12

Q. DID FOSTER ASSOCIATES CONDUCT A NET SALVAGE ANALYSIS FOR 13

NEC PLANT AND EQUIPMENT? 14

A. Yes, we did. A five-year average analysis of the ratio of realized salvage and cost of 15

removal to associated retirements was used in the 2009 study for all depreciable cate-16

gories to: a) estimate realized net salvage rates; b) detect the emergence of historical 17

trends; and c) establish a basis for estimating future net salvage rates. The banding 18

analysis produced inconclusive indications of future net salvage ratios for reasons 19

outlined below. 20

Prior to the 1995 study, depreciation rates used by NEC did not include a net 21

salvage component; a net salvage rate of zero percent was implied for all plant ac-22

counts. While the 1995 study included a consideration of net salvage, accrual rates 23

and reserves were developed at the function level for net salvage and by primary ac-24

count for investment accruals. Upon implementation, NEC combined the function 25

net salvage rates within the investment rate for each primary account and continued 26

to record depreciation accruals and realized net savage in function level reserves. 27

189



Page 9 of 12

In 2004 NEC migrated to a plant accounting system supported by Power Plant. 1

Function reserves were disaggregated in the conversion process to initialize reserves 2

by primary account. Accordingly, the earliest activity year in which realized net sal-3

vage is identifiable by primary account is 2004. This limited history (combined with 4

significant variability in realized net salvage as a percent of retirements) necessitated 5

an examination of how net salvage is charged to work orders and a back–casting of 6

current practices to prior activity years. 7

Starting in 2004 the Company allocates net salvage to retirement work orders 8

by applying appropriate ratios to associated capital additions. Statement E of Sched-9

ule NG-KAK-1 provides a computation of the composite ratio applied to primary 10

distribution account additions over the period 2004–2008. The resulting ratios were 11

applied to the sum of all additions over the period 1969–2008 for actual aged ac-12

counts and over the period 1993–2008 for FIFO aged accounts. The implied net sal-13

vage derived from this computation was expressed as a ratio to the sum of 14

retirements recorded over the corresponding period of additions to obtain a -29.02 15

percent as an estimate of future net salvage rates. A composite future net salvage rate 16

of –30 percent was, therefore, selected as a placeholder for all distribution accounts 17

pending the realization of additional activity years from which net salvage rates 18

among primary accounts may be distinguished.1 19

Q. DID FOSTER ASSOCIATES CONDUCT AN ANALYSIS OF RECORDED 20

DEPRECIATION RESERVES? 21

A. Yes. Statement C of Schedule NG-KAK-1 provides a comparison of NEC recorded, 22

computed and redistributed reserves at December 31, 2008. The recorded reserve was 23

$552,926,186 or 40.6 percent of the depreciable plant investment. The corresponding 24

computed reserve is $529,418,359 or 38.9 percent of the depreciable plant invest-25

1 A similar analysis of transmission accounts yielded unrealistic results as a consequence of insuffi-cient data. The current approved future net salvage of –20 percent was retained for all transmission ac-counts.

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Page 10 of 12

ment. A proportionate amount of the measured reserve imbalance of $23,507,827 will 1

be amortized over the composite weighted-average remaining life of each rate cate-2

gory using the remaining life depreciation rates proposed in this study. 3

Q. IS FOSTER ASSOCIATES RECOMMENDING A REBALANCING OF 4

DEPRECIATION RESERVES FOR NEC? 5

A. Yes, a redistribution of recorded reserves is considered appropriate for NEC at this 6

time. Offsetting reserve imbalances attributable to both the passage of time and pa-7

rameter adjustments recommended in the current study should be realigned among 8

primary accounts to reduce offsetting imbalances and increase depreciation rate sta-9

bility. Recorded reserves should also be realigned to establish reserves for subac-10

counts created subsequent to the adoption of current depreciation rates. 11

Recorded reserves for transmission and distribution plant accounts were rebal-12

anced by multiplying the calculated reserve for each primary account within a func-13

tion by the ratio of the function total recorded reserves to the function total 14

calculated reserve. The sum of the redistributed reserves within a function is, there-15

fore, equal to the function total recorded depreciation reserve before the redistribu-16

tion. Reserves for general amortizable categories were adjusted by replacing 17

recorded reserves with current measured theoretical reserves and distributing any re-18

serve imbalances to depreciable categories within the general plant function. 19

Q. WOULD YOU PLEASE DESCRIBE THE DEPRECIATION SYSTEM CUR-20

RENTLY APPROVED BY THE COMMISSION FOR NEC? 21

A. Current depreciation rates were developed for each primary account using a deprecia-22

tion system composed of the straight–line method, vintage group procedure, remain-23

ing–life technique. 24

The formulation of an account accrual rate using the currently approved depre-25

ciation system is given by: 26

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Page 11 of 12

1.0 Reserve Ratio Future NetSalvage RateAccrual Rate .Remaining Life

− −= 1

A remaining–life rate is equivalent to the sum of a whole-life rate and an amor-2

tization of any reserve imbalance over the estimated remaining life of a rate cate-3

gory. Stated as an equation, a remaining-life accrual rate is equivalent to 4

1.0 Average NetSalvage Computed Reserve Recorded ReserveAccrual RateAverage Life Remaining Life

− −= + 5

where both the computed reserve and the recorded reserve are expressed as ratios to 6

the plant in service. 7

Q. IS FOSTER ASSOCIATES RECOMMENDING A CHANGE IN THE 8

DEPRECIATION SYSTEM FOR NEC? 9

A. No, we are not. It is the opinion of Foster Associates that the currently approved sys-10

tem will remain appropriate for NEC, provided depreciation studies are conducted pe-11

riodically and parameters are routinely adjusted to reflect changing operating 12

conditions. It is also the opinion of Foster Associates that amortization accounting is 13

consistent with the goals and objectives of depreciation accounting and remains ap-14

propriate for the approved amortization categories. 15

V. SUMMARY 16

Q. WOULD YOU PLEASE SUMMARIZE THE DEPRECIATION RATES AND 17

ACCRUALS FOSTER ASSOCIATES IS RECOMMENDING FOR NEC IN 18

THE 2009 STUDY? 19

A. Table 2 below provides a summary of the changes in annual rates and accruals result-20

ing from adoption of the parameters and depreciation system recommended in the 21

2009 depreciation study. 22

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Page 12 of 12

Foster Associates is recommending primary account depreciation rates equiva-1

lent to a composite rate of 3.20 percent. Depreciation expense is currently accrued at 2

rates that composite to 3.34 percent. The recommended change in the composite de-3

preciation rate is, therefore, a reduction of 0.14 percentage points. 4

A continued application of current rates would provide annualized depreciation 5

expense of $45,473,702 compared with an annualized expense of $43,499,404 using 6

the rates developed in this study. The proposed 2009 expense reduction is 7

$1,974,298. The computed change in annualized accruals includes a reduction of 8

$799,031 attributable to an amortization of a $23,507,827 reserve imbalance. The 9

remaining portion of the change is attributable to adjustments in service life and net 10

salvage statistics recommended in the 2009 study. 11

Q. DOES THIS CONCLUDE YOUR DIRECT TESTIMONY? 12

A. Yes, it does. 13

Function Current Proposed Difference Current Proposed DifferenceA B C D=C-B E F G=F-E

Transmission 2.29% 2.20% -0.09% 5,232,396$ 5,038,030$ (194,366)$ Distribution 3.53% 3.35% -0.18% 37,932,216 36,085,736 (1,846,480)General Plant 4.07% 4.19% 0.12% 2,309,090 2,375,638 66,548

Total 3.34% 3.20% -0.14% 45,473,702$ 43,499,404$ (1,974,298)$

Accrual Rate 2009 Annualized Accrual

Table 2. Current and Proposed Rates and Accruals

193

Schedule

N

G-K

AK

-1

The Narragansett Electric Company Schedule NG-KAK-1 Page 1 of 47

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Documents

Dowd Testimony Final - RIPUC · 6/1/2009 · Witness: Dowd Page 4 of 19 S:\RADATA1\2009 neco\General Rate Case\Comp & Benefits (Dowd)\Testimony\Dowd Testimony (Final).doc 1 companies