National Grid To Lay Off 1,200 In Restructuring

HARTFORD, Conn. (AP) - British electric and natural gas utility National Grid announced Monday a major reorganization of its U.S. operations, cutting 1,200 jobs that it said will save $200 million and improve service.

National Grid's new U.S. structure will transition to a more state-focused management from the current global organization that was established in 2007. The structure will focus on electricity distribution and generation, natural gas distribution and electricity and gas transmission, which National Grid said are its three core businesses.

Tom King, president of National Grid US, will be responsible for all U.S. business segments, while regional presidents will be appointed for Massachusetts, New York and Rhode Island/New Hampshire.

"We've heard from our customers. We've heard from regulators. We've heard from our shareholders," King said in a conference call. "We need a more local focus."

The company is cutting management to speed decision-making and accountability.

The job cuts represent about 7 percent of the company's 18,000 employees and 20 percent of management, he said.

King said it's too early to know where the jobs will be cut, but it will be across the organization in all geographic areas.

King said the structure established four years ago benefited the company and customers, helping to save millions of dollars. National Grid made "significant investments" in natural gas and electricity networks that continue to improve reliability and service, he said.

However, that's changed, King said. The cost to do business is higher than what National Grid can recover, he said.

"We're using more resources than our revenue can support," he said.

David D. Grumhaus Jr., a partner and utilities expert at the Chicago hedge fund Copia Capital, said the U.S. business has "generally been a disappointment" to National Grid.

With regulatory demands different in the United States than in Britain, "a lot of the U.K. investor base does not like the U.S. business," he said.

In particular, National Grid has had trouble winning favorable regulatory decisions and as a result, returns on equity have fallen short, Grumhaus said.

For example, earlier this month, New York state regulators approved a $112.7 million rate hike for National Grid, one-third of what it sought. The state's Public Service Commission sought to shield customers from increased bills, structuring the rate plan by forcing National Grid to defer certain charges it collects from customers such as storm restoration costs.

King said Monday that National Grid is "fundamentally not recovering" its costs in New York.

The reorganized U.S. business is set to take effect in April, with the job cuts to be completed by summer.