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NU's Unit Files for Low Natgas Rate

NU NI

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Northeast Utilities’ (NU - Analyst Report) unit NSTAR plans to provide natural gas in cheapest rate to its customers. The company has already filed its new supply rate request to the Massachusetts Department of Public Utilities. If approved by the concerned authority, the consumers will be paying lowest natural gas price since 2002 and the revised rate will be applicable from November 1, 2012.

Per the rate revision appeal, the natural gas rate will decrease by 18% year over year to 57.32 cents per therm from 70 cents per therm. Apart from normal heating purposes, the people of the region use natural gas for cooking and water-heating. NSTAR customers normally use an average of 131 therms of gas per month between November and May.

This new rate is expected to save over $15.00 per heating customer a month compared with last year. The customers will pay a monthly natural gas bill of $145.60 compared with $161.25 a year ago.

Northeast always tries to provide uninterrupted utility services to its customers with much lower prices than its peers. In May this year, the company had filed for reducing electricity supply rates for its residential customers to their lowest levels in 8 years.

Per the filing, the new rate would be 16% less than the current rate of 7.928 cents per kilowatt-hour, resulting in a rate of 6.699 cents per kilowatt-hour. If approved, these new rates would be applicable from December 2012.

We believe this natural gas rate revision strategy is a good move for the company to tap more industrial as well as residential customers. We expect natural gas to gradually replace other natural resources like coal, oil and renewable energy for power generation purposes in the future. This rate revision will enable Northeast to expand its industrial client coverage, mainly the electricity generation companies.

The lower natural gas pricing is expected to attract higher number of clients, which will subsequently enable the company to balance its overall revenue numbers. We appreciate Northeast’s this “less pricing, more customers” strategy.

Hartford, Connecticut-based Northeast Utilities is a public utility holding company, which provides energy delivery services to residential, commercial and industrial customers in Connecticut, New Hampshire, as well as Massachusetts. The company engages in the purchase, delivery, and sale of electricity. The company’s closest peer is Indiana-based NiSource Inc. (NI - Analyst Report). Northeast Utilities currently retains a Zacks #3 Rank (short-term Hold rating).

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