From the Blog

Why is My Utility Spending Money on TV Commercials and Then Increasing My Rates?

8
FEBRUARY, 2017

I attend a lot of local public hearings. These are held to provide the public an opportunity to voice their opinions on possible utility rate increases or new transmission line placements. People tend to be unhappy to hear that their electric, water, or gas rates might be going up, and they want to know why. The three most common questions/statements that are posed by the public at these hearings are:

 
  1. Why are the utilities spending money on radio and TV advertisements when they are a monopoly? And why should the rate payers be charged for this expense?
  2. Why does my utility have so many paid lobbyists at the capital trying to get legislation passed that will benefit them? And why should I have to pay for it?
  3. Why are they raising my rates when the CEO is making millions? Can they use some of his/her pay and not raise my rates?

When I am at a local public hearing, I am not allowed to answer questions, as it could be viewed as me pre-judging a case before all the evidence is submitted and reviewed. Therefore, I would like to take this opportunity explain these three issues.

  1. Advertising by utilities is an expense that most commissions look at closely for potential reimbursement from rate payers. If the advertisements are for the benefit of the consumer, such as educational or safety issues (if you smell natural gas call us, or if you see a downed power line to stay away and call us) they are looked upon more favorably. If the advertisements do not meet this threshold, or are to solely promote the company’s interests, (call your legislator and tell them to vote this way, or we are a great company and here is why) then historically they are excluded from rates.
  2. Lobbyist expenditures are expenses that are not considered for reimbursement from rate payers. They are paid for by shareholders of the company.
  3. This issue is a bit more complicated than a simple answer. Many investor-owned utilities have leadership that is highly compensated for their time/talents. Most of the compensation packages are structured in base pay, short term incentives, long term incentives, and benefits (health care/retirement). Many times, in utility rate cases, the only amount of reimbursable expenses allowed by utility commissions are base pay, benefits, and any incentives that benefit the consumer, such as safety issues. Any incentives that benefit the shareholders or primarily the company are disallowed by commissions and that portion of the compensation package is born by the shareholders of the company.For more information about local public hearings, visit the Missouri Public Service Commission website

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