Incremental State Assessment Surcharge

(Section 18-a Surcharge)

Fall 2009 Customer Meetings

Background

This surcharge is the result of a law that was enacted on April 7, 2009 as part of the New York State Budget for 2009-2010 and stipulates that the surcharge will remain in effect until March 31, 2014.

National Grid and other utilities in NYS are collecting the surcharge on behalf of New York State. All monies the utilities collect from this surcharge will be transferred to New York State for the state’s General Fund.

The surcharge was effective May 20th for gas customers and July 1st for electric customers.

The Surcharge, in Total

The overall amount to be collected is based on 2% of “Assessable Revenue”:

gross operating revenues of the utility

plus estimated revenues for third-party suppliers to customers

less the General Assessment included in base delivery rates

Electric Assessment, in total, is $83 million

Gas Assessment, in total, is $26 million

The Allocation to Service Class and VDL

The overall amount is allocated back to service class (SC) and (for electric) voltage delivery level (VDL) based on that SC and VDL’s assessable revenue. For instance, since electric SC3A transmission VDL customers contribute 8.6% of assessable revenue, they will be charged 8.6% of the surcharge, or $7,179,076. That amount, divided by estimated billed kW, results in the SC3A transmission VDL surcharge rate of $1.45 per kW, which would apply to the approximately 80 customers in that class and VDL.

The surcharge calculation methodology and allocation to service classes was done in accordance with the PSC Order.

Bill Display

This surcharge is included in the delivery portion of electric and gas bills as a separate line item entitled - “Incr State Assessment”. If a customer purchases electricity or gas supply from an Energy Service Company (ESCO), the assessment applicable to the supplier’s charges is also included in the delivery line item on the bill.

An annual reconciliation will be made each July 1 to true-up actual collections with estimated collections.

NYPA, EZR and Standby Customers

Electric customers with NYPA replacement and expansion power allocations, EDP allocations and/or PFJ allocations will be surcharged for those allocations at rates that are lower than the parent rate class. The rate will be applied to billed kW.

Electric customers with Empire Zone Rider allocations will be surcharged for all billed kW at the rates of the parent service classification.

Electric SC-7 customers will be surcharged based on their standby contract demand.

Typical Bill ImpactsSC-2DCentral

7,200 kWh 2009 Pct Impact25 kW 2009 including ISAS Diff on Total

TOTAL ELECTRIC DELIVERY CHARGE $474.05 $495.26 $21.21 2.0%TOTAL ELECTRIC SUPPLY CHARGE $595.49 $595.49 $0.00 0.0%TOTAL ELECTRIC CHARGE $1,069.54 $1,090.75 $21.21 2.0%

SC-3 PrimaryCentral

216,000 kWh 2009 Pct Impact500 kW 2009 including ISAS Diff on Total

TOTAL ELECTRIC DELIVERY CHARGE $11,672.76 $12,400.03 $727.27 2.6%TOTAL ELECTRIC SUPPLY CHARGE $16,784.73 $16,784.73 $0.00 0.0%TOTAL ELECTRIC CHARGE $28,457.48 $29,184.76 $727.27 2.6%

SC-3A TransmissionCentral

2,304,000 kWh4,000 kW 2009 Pct Impact

40% Peak Hours Use 2009 including ISAS Diff on Total

TOTAL ELECTRIC DELIVERY CHARGE $39,270.34 $45,128.92 $5,858.59 2.9%TOTAL ELECTRIC SUPPLY CHARGE $162,322.62 $162,322.62 $0.00 0.0%TOTAL ELECTRIC CHARGE $201,592.95 $207,451.54 $5,858.59 2.9%