Why does my electric company need to advertise?

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Reader Kevin Kreitner from St. Louis asks:

Why do utilities spend so much money on advertising/marketing? We have no choice! I’d much rather have a lower bill than see their name at a sporting event or even sponsoring a parade.

Utility ads will follow you to basketball games, airports and subways, but we generally can’t pick which company supplies our electricity or water. Most utilities run through regulated monopolies, said David Pomerantz, executive director of the Energy and Policy Institute. 

“Not only do they not have to worry about competition, but electricity and heat are basic needs,” Pomerantz said. “It’s not like buying shoes.” 

Most American households get their power from investor-owned utilities. Shareholders own these companies, Pomerantz said, but they’re regulated by a public commission. (Water utilities are also regulated monopolies, those are “typically publicly owned, almost always, by local governments,” Pomerantz said.) 

Investor-owned utilities spend millions on advertising, using your money to help fund lobbying efforts, trade association dues and commercials to make them look good. But advocacy groups and lawmakers across the country are trying to curb this behavior, and ensure shareholders are the ones who bear these costs. 

Marketplace reached out to 10 energy companies for their insight into why utilities advertise. Only one, Consolidated Edison, a New York-based company, got back to us by publication time. 

A Con Edison spokesperson said that New York wants electricity to produce zero emissions by 2040, and advertising is how the utility tells the public about “the work needed” to reach that goal. For example, the company will advertise programs and incentives customers can use to “improve their energy efficiency and save money.” 

Customers can cover the cost of safety advertisements, but shareholders have to pay for an investor-owned utility’s promotional advertising or lobbying efforts. Consumer groups say these utilities are able to evade this rule by presenting ads as public service announcements.

Some American electricity markets are deregulated, like in Texas, Illinois, Ohio and New York. In those areas, consumers can pick their electric company and may see more ads. But whether or not you pick your utility, it might sell ancillary products and services, like smart meters (which record your energy consumption) and protective coverage for your gas line, said Utpal Dholakia, a marketing professor at Rice University’s Jesse H. Jones Graduate School of Business.

Even utilities in a monopoly might compete with other energy sources. They also have to pay for public service announcements, said Fred Guzek, a professor of applied business at Kansas State University.  These PSAs could educate the public about ways to save energy, like suggesting you turn your thermostat down during the winter when you’re away from home, Guzek said. 

But often, utilities advertise to cultivate a positive image. They hope that any goodwill gained through advertising will come in handy when they’re mired in scandal. 

For example, PG&E has had to fend off bad press for its role in dozens of wildfires since 2017, and a gas pipeline explosion that killed eight people in San Bruno, California, in 2010. 

Pomerantz said he thinks the utility runs ads with a few goals: “Fewer people complaining to their legislators about PG&E rates and safety, fewer people writing letters to the editor that they’re outraged at PG&E.” 

As electricity rates rise, utility spending is under greater scrutiny. In California, PG&E customers can expect to pay about $400 more in bills this year. Across the country, electricity prices rose 5% over the past year, according to the latest Consumer Price Index data from the Bureau of Labor Statistics. 

Late last year, PG&E ran ads about its decision to bury 10,000 miles of power lines underground as a safety measure against wildfires. The company spent up to $6 million on TV ads like these over the past couple of years, The Sacramento Bee reported.

PG&E asked the California Public Utilities Commission for a taxpayer-funded “fire risk mitigation account”  to cover those costs, The Bee reported.

When asked for comment on its advertising practices, a PG&E spokesperson stated that the company advertises to share with its customers what it’s doing “to improve safety and reliability.”

“The California Public Utilities Commission (CPUC) allows the recovery of some costs related to safety communications on television. If not, then the costs are covered by shareholders,” the spokesperson stated. 

Southern California Gas customers paid at least $36 million toward lobbying against clean energy policies, a Sacramento Bee investigation found. In response to the claims in the article, a SoCalGas representative told Marketplace none of the costs mentioned “have been charged to SoCalGas customers through rates.” 

It’s difficult, if not impossible, to determine how much of your money utilities are spending on advertising. 

“Other than to say untold millions, we don’t know because it’s very hard to document it. Utilities don’t want to let us know,” said Mark Toney, executive director of the California consumer advocacy group The Utility Reform Network. 

Investor-owned utilities around the country use ratepayer money on advertising unless they’re explicitly barred from doing so, Pomerantz said. “Sometimes, even if they are prohibited, they’ll do it anyway,” he added. 

On April 22, California lawmakers considered, but ultimately rejected, a bill that would more clearly define “political influence activity.” The Utility Accountability Act would have banned utilities from using ratepayer money on trade group membership dues, and require them to disclose whether ads were paid for by customers or investors.

Despite the bill’s failure, Maine, Connecticut and Colorado have passed legislation that bans investor-owned utilities from charging their customers for lobbying, trade association dues, and public relations costs. 

Other states, such as Ohio, Minnesota and New York, have introduced legislation that would also stop utilities from using customer money on political-related activity.

Pomerantz is optimistic that more utilities will be held accountable. “This suite of policies has clearly touched a nerve and is catching on quite a bit,” Pomerantz said.