January 2012 Capital Investment - National Grid

Exhibit ___ (EIOP-19)Page 112 of 684Department of Energy (DOE) Smart Grid Investment Grant ProgramThe Company is participating in the New York State Capacitor and Phasor MeasurementProject which originated through a NYISO funding application to the US DoE's SmartGrid Investment Grant ("SGIG") program. The SGIG program is supported by theAmerican Recovery and Reinvestment Act of 2009 ("ARRA") which has a stated goal ofimproving the economy by investing funds as soon as possible in worthwhile Smart Gridresearch projects or pilots.On August 6, 2009, the NYISO submitted a proposal to the DOE in response to its SmartGrid Investment Grant Program. The Smart Grid Proposal provides that the NYISO, asthe awardee and the recipient of funds, and the Transmission Owners, as sub-awardeesand sub-recipients, will (i) install a system of phasor measurement units and relateddevices and (ii) implement a statewide capacitor program, as specified in detail in theSmart Grid Proposal.Effective July 1, 2010, the Company entered into an agreement with NYISO to deploy286MVAr of capacitor banks and phasor measurement units (“PMU”) at twelve (12)substations. The agreement provides for a 50% reimbursement of the Company’s $19Minvestment by DOE with the remaining 50% to be recovered through traditional means.Internally, the project comprises two parts, the distribution and sub-transmission systemcapacitor bank deployments and the transmission system phasor measurement unitdeployments. The transmission system portion of project is addressed in Chapter II. Thecapacitor portion of the project is also discussed in Chapter III.Capacitor InstallationsThe current scope of the capacitor project is to install 286MVAr of reactive support ineastern New York as close as possible to study-based locations identified by the NYISOto minimize transmission line losses associated with cross state transfers. Conceptualengineering has been completed, identifying 322 distribution and sub-transmissionsystem capacitor locations, including 278 on distribution lines and five on distributionsubstation equipment.Design engineering and procurement are near complete. Installation of the capacitorbanks will primarily take place throughout 2012.Drivers:The primary drivers of this project are regulatory in nature and can be separated into twogroups: 1) current federal investment and smart grid policies and 2) current staterenewable energies policy.Investment and Smart Grid Policy - Federal policy centers on an investment policy(ARRA) with a directed smart grid program. Formally termed the Electricity Delivery andEnergy Reliability ("EDER") Program, it is funded at $4.5 billion and primarily intended tocreate jobs while accelerating smart grid investment to advance the energyindependence goals of EISA. Attachment A lists detailed goals of the ARRA, EDER, andEISA programs.Renewable Energy Policy - NYISO's application specifically points to needs based onthe current New York State Renewable Portfolio Standard as approved by the PublicIV-36 36113