By The Business Review (Albany)

National Grid will eliminate 1,200 management positions in the U.S. as it seeks to cut operating costs by $200 million in the next year.

The company also is reorganizing its operations, appointing five regional presidents including one for New York.

The announcement comes less than two weeks after the state Public Service Commission approved a $112.7 million National Grid rate increase, that the company says will not enable it to cover operating costs.

That increase, which takes effect this week, wonâ¿¿t impact commercial or residential customers in 2011 because National Grid will not be able to recover fees for major storm restoration and post employment benefits until next year.

Tom King, president of National Grid U.S., said the company is losing money in upstate New York. And the current restructuring proposal would have been less severe if the PSC had approved a large rate increase. The company sought more than $390 million.

King said the company is committed to the U.S. and will ensure that upstate services remain reliable.

But he said National Grid will be ⿿very cautious⿝ about future capital improvements in the upstate electrical and natural gas infrastructure until the company has a clearer picture about how future PSC decisions will impact the company.

National Grid is reorganizing its management structure, focusing more on geographic areas instead of specific divisions of the company.

Upstate New York accounts for about 55 percent to 60 percent of the companyâ¿¿s overall business, which is why the company appointed a regional president to oversee the area, King said.

Kenneth Daly, who had been National Gridâ¿¿s global finance controller, was appointed regional president of New York.

He will manage upstate natural gas and electricity businesses as well as natural gas operations in Brooklyn, Staten Island, Queens and Long Island.

National Grid has 1.6 million electricity customers in upstate New York and 2.3 million natural gas customers from Long Island to Niagara Falls.

⿿We are fundamentally changing the way we run our U.S. business to better serve our customers, meet our regulatory obligations and improve our financial performance,⿝ King said.

Creating a more efficient, locally focused company will help accomplish those goals, he said.

New regional presidents also have been appointed for Massachusetts and the Rhode Island and New Hampshire area. A new president also was named to manage the companyâ¿¿s relationships with the Federal Energy Regulatory Commission and the Long Island Power Authority.

National Grid oversees electricity transmission and distribution on behalf of LIPA.

King said the decision to eliminate jobs was a difficult, but necessary step.

The total number of U.S. employees is about 18,000, including 6,000 in management.

Union employees will not be impacted by the job cuts, King said.

⿿Right now, we are using more resources than our revenues can support, and that is simply no longer sustainable,⿝ King added.

National Gridâ¿¿s U.S. operations previously had been broken into core business areas such as electric and natural gas transmission instead of being managed geographically.

Other regional presidents are: Marcy Reed, Massachusetts; Timothy Horan, Rhode Island and New Hampshire; John Bruckner, Long Island; and Peter Flynn, FERC Regulated Businesses.

The new organization takes effect in April. Staff reductions will be completed this summer. Severance packages will be offered to laid off workers.

It was unclear early Monday which positions will be targeted.

Copyright 2011 American City Business Journals

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