KeySpan Corp. and National Grid have proposed a merger to provide customer savings and allow them to operate more efficiently, manage energy supply costs and expand programs to help reduce energy use. The proposal, filed on July 20, calls for National Grid resources and expertise to complement KeySpan's strengths.

During the 10-year proposal, permanent customer savings of more than US$500 million are anticipated, possible through the cost reductions generated from combining the companies:

• $131 million in savings to Long Island energy gas customers comprised of $64 million in business operations efficiency and $67 million in gas-supply management savings. Additional savings will be available to the 1.1 million electric customers of the Long Island Power Authority (LIPA), in the event that LIPA approves the transfer of its existing contractual arrangements from KeySpan to National Grid.

• $218 million to National Grid customers in upstate New York, including more than $14 million in gas-supply management savings.

• $173 million to KeySpan customers in New York City, including $109 million in business operations efficiency and $64 million in gas-supply management savings

Instead of the potential for an immediate 10% rate increase, KeySpan's proposed merger with National Grid provides for no delivery rate increases for 18 months, followed by modest increases — 1% to 1.5% annually — spread out over the 10-year rate plan.

Additional benefits coming to KeySpan customers include low-income and supplier choice programs, and accelerated infrastructure improvements. National Grid also will expand its proven menu of energy-efficiency programs to KeySpan customers to help them cope with energy costs.

Although some job consolidations are necessary to achieve cost savings, National Grid and KeySpan expect to achieve any staff reductions through attrition and voluntary programs. No layoffs are expected.