Terms for NiMo merger limits delivery  rates Deal would cut bills, which  recently rose 8 percent, by an average of 5 percent. Friday, October 12, 2001               The Post Standard  By Tim Knauss Niagara Mohawk and National Grid have reached a tentative deal with New York regulators that would allow the utilities to proceed with their merger. In return, Niagara Mohawk would cut its electric delivery rates by 8 percent and  keep them stable for a decade. Details of the settlement are expected to be announced today, according to sources familiar with the talks. The reductions in Niagara Mohawk's delivery charges would lower a typical  residential customer's bill by nearly 5 percent from what it is today. That  would ease, but not quite erase, the 8 percent bill increase most customers got  in September as a result of higher wholesale costs. Thanks to deregulation, Niagara Mohawk no longer generates most of its power,  but buys it and passes it to customers at the wholesale cost. Delivery rates, which cover the cost of maintaining and servicing the  utility's system of wires, are regulated by the state and do not include wholesale energy costs. National Grid Group of Great Britain plans to buy Niagara Mohawk for about $3  billion and merge Niagara Mohawk's operations with National Grid USA, which runs electric utilities in New England. The companies petitioned the PSC in January for permission to merge. At the time, they offered to reduce delivery rates by 7 percent. The settlement to be announced today is the result of negotiations among the utilities, staff representatives of the Public Service Commission and interest groups representing business, environmental and consumer interests. It's not  clear how many interest groups signed the deal. The settlement must undergo public hearings, then a final review by the PSC -  which could modify the agreement, approve it or reject it. The merger also requires approval from the U.S. Securities and Exchange  Commission. But of the regulatory agencies reviewing aspects of the transaction, the PSC is expected to be the most exacting. Among the parties that gave formal support to the settlement is the Public Utility Law Project, an Albany organization that represents low-income consumers. Ben Wiles, an attorney with the group, said the agreement includes a new monthly discount of $5 for low-income customers. The discount will be available to 15,000 customers the first year, with  eligibility expanding to as many as 60,000 customers by the fourth year, Wiles said. "It's a big first for Niagara Mohawk," Wiles said. He noted that National Grid provides low-income discounts in New England. Other highlights of the long-term agreement include: An extension of the freeze on Niagara Mohawk's natural gas delivery rates by 16 months, until Dec. 31, 2004. An additional $12.5 million per year to provide discounted economic  development rates to certain businesses. Financial incentives and penalties that reward good service. Niagara Mohawk officials declined to comment Thursday