National Grid, which serves energy to millions of customers on US East Coast is fighting desperately to raise its profit margins in the US after being slammed by regulators for its poor performance and lavish executive pay and perks. National Grid CEO Steve Holliday is apparently trying to save his own job by firing and reshuffling those around him. Of the 25 most senior executives in the US, six will go by April.
The British power company is laying off a further 1200 staff in what may be its final throw of the dice before exiting the US market. Citigroup says its rate of return is still dismal and warns that regulators are unlikely to let it keep the full value of the savings it is making. The company has been heavily criticized for poor customer service and it is highly doubtful it can prove that the latest cost-cutting exercise will help raise the quality of energy supply to the end user.
Citigroup’s utilities team said: “National Grid has been heavily criticised by some of its US regulators over its standard of performance and customer service.
“It may prove a hard sell to its US regulators that these headcount reductions can be made whilst improving operational performance and service levels.”
Last year, actions by National Grid in cutting off a home led to the death of a sick woman in New Hampshire, threatened the company with criminal prosecutions that were not in the end carried out. However the company was cited in November 2010 for alleged serious violations of trenching safety standards that led to an employee being injured following the June collapse of a natural gas line trench in Boston. The Department of Labor’s Occupational Safety and Health Administration issues serious citations when death or serious physical harm is likely to result from hazards about which the employer knew or should have known.
National Grid is the largest distributor of natural gas in the Northeast, serving 3.4 million customers in Massachusetts, New Hampshire, New York and Rhode Island. It also delivers electricity to about 3.3 million customers in the same states.
The restructuring will lift the company’s return on invested capital in the US by only 0.5 per cent to a “poor” 4.4 per cent, added Citigroup.
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