The Public Service Commission has refused to alter a rule prohibiting natural gas and electric utilities from including the cost of political and promotional advertising in customer rates.
Mountain Fuel Supply Co. asked the commission to alter a proposed rule and allow rate structures to include the cost of advertising promoting the use of natural gas. Such an action could lead to rate increases for customers.Commission Chairman Ted Stewart said the rule will allow gas and electric companies to seek PSC approval for specific ads, but, he said, the companies will have to prove to commissioners in advance that the ad would be in the public's interest and directly benefit customers.
"I don't think this should be read as a weakening of our position," Stewart said. "The public should recognize that the ads they are seeing are not being paid for by the ratepayers."
Stewart said the matter surfaced because of a state law requiring the PSC to convert its operating orders into rules and regulations that will be included in the state policy guidelines. The advertising order was in the process of that conversion when Mountain Fuel made its recommendation. Because of the potential for controversy, the PSC held Tuesday's hearing to get further comment, Stewart said. Following that hearing, the rule was adopted as proposed.
The ban on political and promotional advertising was adopted by the PSC in 1982 following public concern over the energy crisis and as part of a campaign to encourage conservation of natural resources. Stewart said the PSC still believes conservation is in the long-term interest of the general public and therefore, the rule was not changed.
Mountain Fuel representatives argued that times have changed and the company is finding itself in a more competitive marketplace. They said this requires advertising, the cost of which should be split between shareholders and ratepayers. That argument was rejected by the commissioners.
Tim Funk of the Committee of Consumer Services, a group representing small businesses and residential utility customers before the PSC, said his agency is still concerned. He said the inclusion of language allowing utilities to seek prior approval for advertising reimbursement in rate structures is indeed a weakening by the PSC.
Mountain Fuel spent about $700,000 on advertising last year. This is a small amount compared with the company's nearly $400 million in gross revenues, but Funk believes the ruling has set a dangerous precedent. "The committee believes this could be detrimental for ratepayers. We just don't think they should have to pay for something they do not need."
Funk said Mountain Fuel and Utah Power & Light Co. are essentially monopolies and have a captive customer base. He said it doesn't make sense for ratepayers to be subsidizing advertising when they have little or no choice in selecting gas and electric suppliers.