WALTHAM – National Grid plans to cut 1,200 management jobs in the United States as it seeks to wring out $200 million in annual costs.
The London-based electricity and natural gas provider also said it will restructure in the United States, and it began by cutting six of its 20 top managers and naming five presidents to oversee operations.
About 20 percent of National Grid’s 6,000 U.S. managers will be impacted by the job cuts, according to Tom King, president of National Grid U.S. Workers covered by union contracts, including those in the field, are not included in the cuts. National Grid has about 18,000 U.S. employees.
After working with regulators in recent years to set rates charged to customers, the company determined it was using more resources than its revenues could support, Mr. King said yesterday during a conference call with reporters.
“The right thing for us to do is adjust our cost base,” he said. “We know the cost base needs to come down.”
In Massachusetts, National Grid employs about 5,000 people. About 2,200 of those workers are managers. Job cuts are expected to continue into the summer.
The head of the state’s largest utility workers union released a statement yesterday calling the decision to eliminate managers damaging to their families and “not good news” for the region’s economy.
“We can’t help but wonder how much of these proposed cuts are a direct result of National Grid being pressured to purchase wind power, and that they were not given the rate increase they sought,” said David Leonardi, president of the Utility Workers Union of America Local 369, referring to National Grid’s controversial agreement last year to buy half the power generated by the wind farm proposed for Cape Cod.
The announcement follows a decision Jan. 20 by regulators in New York state that gave National Grid a fraction of the rate increase it was seeking for its electric subsidiary, Niagara Mohawk Power Corp. of Syracuse, N.Y.
National Grid sought a three-year, $369 million increase in transmission and distribution revenue for Niagara Mohawk. New York regulators approved $112.7 million in additional revenue but offset it by extending the period to collect other costs so that customers would not pay more this year.
Mr. King said the ruling played a role in National Grid deciding to “go fairly deep” in cost cuts.
“It is definitely a revenue reduction, and we are fundamentally not recovering our costs with Niagara Mohawk,” Mr. King said.
The company had also sought a $104 million hike in natural gas rates last year in Massachusetts. Regulators approved a $41 million increase, although that has been challenged as unwarranted by state Attorney General Martha Coakley.
Meantime, Massachusetts regulators are investigating National Grid’s response to a Dec. 26 storm that left about 20,000 customers south of Boston without electricity. Ms. Coakley sought the investigation, alleging that National Grid failed to fully implement an emergency response plan. The state’s Department of Public Utilities can fine National Grid if it determines the company violated standards for restoring power.
Mr. King said repeatedly that job cuts and management changes at National Grid will not harm service to customers.
“We will be leaner, quicker, more efficient and responsive as a company,” he said.
National Grid sells electricity to about 3.3 million customers in Massachusetts, New Hampshire, New York and Rhode Island, and it provides natural gas to about 3.4 million customers in those states. The company has nearly 1.3 million electricity customers and about 835,000 natural gas customers in Massachusetts.
Marcy Reed, National Grid’s senior vice president of public affairs in the United States, was named president of the Massachusetts region.
In a press release issued from London, parent company National Grid plc reported it will incur costs of about $100 million from the U.S. restructuring.
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