NYPSC Votes to Approve New O&R Gas Rate Plan; Infrastructure Improvements to System Key

PEARL RIVER, NY October 21, 2009 — The New York State Public Service Commission (NYPSC) today voted to approve a plan proposed by Orange and Rockland Utilities, Inc. (O&R) that would spread an increase in the Company's gas delivery rates over a three-year period to fund substantial infrastructure improvements in large portions of O&R's natural gas delivery system.

These infrastructure projects, in concert with environmental protection initiatives, workforce development programs and sustained efforts designed to fortify the company's financial strength, are all essential in order to provide safe and reliable service to Orange and Rockland's nearly 130,000 gas customers. The new rates are to take effect November 1, 2009.

The plan calls for O&R to receive increases phased in over three years starting in November of each year. The increases in the settlement for each year are: 1.3 percent, 2.7 percent and 2.3 percent. The Return on Equity (ROE) in this settlement is 10.4 percent.

That means the monthly bill for a typical residential customer using 112ccf of gas would rise from the current $221.11 to $223.94 or $2.83 (1.3 percent) on an annualized basis during the first year of the agreement. In the second year, the monthly bill would increase another $6.15 (2.7 percent) to $230.09. And, in the third year, the monthly bill would go up $5.25 (2.3 percent) to $235.34.

Based on its most recent forecasts, O&R predicts that this winter's residential natural gas bills will be substantially lower than last winter's.

Those forecasts are based on lower costs for the natural gas commodity. The lower costs are the result of lower demand because of the recession and last summer's abnormally cool temperatures.

O&R estimates that the typical O&R customer who uses natural gas for home heating will see winter bills drop 17.3 percent from $290.77 per month to $240.35 per month this winter. That estimate is based on the average usage of 159 ccf per month.

The delivery service, which is the portion of the bill this plan addresses, represents about 30 percent of the bill. The balance of the bill — 70 percent — is the price of the gas commodity itself. If O&R supplies that gas to customers, the customers pay what O&R pays for the gas. It is a pass-through and O&R does not mark it up for profit. About a third of O&R customers get their gas from alternative providers with which they make individual purchase contracts for the gas they use.

Natural gas offers an environmental benefit by providing clean-burning fuel that is 90 percent efficient, emitting 30 percent less carbon dioxide than oil.

Natural gas is also a steady and reliable supply and is an economical choice for heating, hot water and manufacturing processes.

And, natural gas for home heating compares very favorably with oil. Based on current prices, a typical residential customer heating with natural gas will pay 43 percent less than a comparable oil heating customer this winter, and that natural gas supply will last longer because of its added burning efficiency.

O&R operates a gas delivery network of about 1,824 miles along with 110,347 gas services. These mains and services are composed of materials that range from cast iron, installed in the early 1900s, to modern high-tech plastics.