# Why are public utilities allowed to advertise? **URL:** \ **Category:** Factual Questions\ **Created:** [January 29, 2008, 5:59am UTC](https://boards.straightdope.com/t/why-are-public-utilities-allowed-to-advertise/435430 "2008-01-29T05:59:10Z")\ **Posts on this page:** 11\ **Page:** 1
**Author:** ![brownsfan](https://avatars.discourse-cdn.com/v4/letter/b/ad7895/32.png) [@brownsfan](https://boards.straightdope.com/u/brownsfan)\ **Post date:** [January 29, 2008, 5:59am UTC](https://boards.straightdope.com/t/why-are-public-utilities-allowed-to-advertise/435430/1 "2008-01-29T05:59:10Z")
I tried a search and got nothing. Unless I’m way out of the loop, it’s my understanding that Ohio Edison (I think that’s who provides me with power; my wife is in charge of paying the bills, so I’m unsure) has a highly-regulated monopoly. I can’t go shopping around for the best electricity rates; I’m stuck with buying from them. Why are they allowed to pass along their advertising costs to me? I mean, just stop the fucking ads and lower my bill. Or am I missing something in my dotage? Thanks in advance, my friends. ---
**Author:** ![T\_SQUARE](https://avatars.discourse-cdn.com/v4/letter/t/9de053/32.png) [@T\_SQUARE](https://boards.straightdope.com/u/T_SQUARE)\ **Post date:** [January 29, 2008, 6:15am UTC](https://boards.straightdope.com/t/why-are-public-utilities-allowed-to-advertise/435430/2 "2008-01-29T06:15:47Z")
I don’t know about the case you mention, but, in general, “gold plating” can be problem in regulated monopolies, as they can pass the costs on, usually earning a fixed rate of return on fixed costs. I would guess advertising is counted as a fixed cost. ---
**Author:** ![brownsfan](https://avatars.discourse-cdn.com/v4/letter/b/ad7895/32.png) [@brownsfan](https://boards.straightdope.com/u/brownsfan)\ **Post date:** [January 29, 2008, 6:30am UTC](https://boards.straightdope.com/t/why-are-public-utilities-allowed-to-advertise/435430/3 "2008-01-29T06:30:35Z")
[QUOTE=T\_SQUARE] I don’t know about the case you mention, but, in general, “gold plating” can be problem in regulated monopolies, as they can pass the costs on, usually earning a fixed rate of return on fixed costs. I would guess advertising is counted as a fixed cost. [/QUOTE] Why are they allowed to force me to pay for their ads, and then profit? Sounds like rape, since you mentioned “earning”. I can’t say I understand your post, though. My question is , why are they given a monopoly, then allowed to buy ads? Shouldn’t that money be in my pocket, rather than spent on TV? ---
**Author:** ![Aioua](https://avatars.discourse-cdn.com/v4/letter/a/87869e/32.png) [@Aioua](https://boards.straightdope.com/u/Aioua)\ **Post date:** [January 29, 2008, 6:52am UTC](https://boards.straightdope.com/t/why-are-public-utilities-allowed-to-advertise/435430/4 "2008-01-29T06:52:19Z")
Aren’t the monopolies controlled? The state tells them how much they can charge, right? So if they can afford to advertise, why shouldn’t they? If you want the prices lowered, vote in people who are going to lower them. Ah democracy… at least it all looks good on paper 😃 ---
**Author:** ![brownsfan](https://avatars.discourse-cdn.com/v4/letter/b/ad7895/32.png) [@brownsfan](https://boards.straightdope.com/u/brownsfan)\ **Post date:** [January 29, 2008, 7:15am UTC](https://boards.straightdope.com/t/why-are-public-utilities-allowed-to-advertise/435430/5 "2008-01-29T07:15:48Z")
[QUOTE=Aioua] Aren’t the monopolies controlled? The state tells them how much they can charge, right? So if they can afford to advertise, why shouldn’t they? If you want the prices lowered, vote in people who are going to lower them. Ah democracy… at least it all looks good on paper 😃 [/QUOTE] If they have a monopoly, why advertise? It seems to be a waste of my money, and a ripoff, since I have no choice. I _have_ to buy my power from them, so why do they advertise? I can’t think of a simpler way to ask this question. They advertise themselves as a “friendly” or "eco-friendly’ company or whatever, but since they have zero competion, who the hell are they spouting this shit to? After all of this spouting, I still have to pay the bill, to them. It’s not like I have a choice in the matter. Why can’t they shut the hell up, and lower my bill? I just don’t understand why they can be regulated so highly, and be a monopoly, and be allowed to waste my money advertising. ---
**Author:** ![RealityChuck](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/realitychuck/32/195_2.png) [@RealityChuck](https://boards.straightdope.com/u/RealityChuck)\ **Post date:** [January 29, 2008, 1:33pm UTC](https://boards.straightdope.com/t/why-are-public-utilities-allowed-to-advertise/435430/6 "2008-01-29T13:33:01Z")
Nowadays, they’re beginning to get competition from independent power companies. I get mailings from them from time to time; in New York, you can buy power from any utility that’s willing to provide it. Usually this means small hydroelectric companies that try to sell on being more ecological (their price isn’t any better than the local power company). The big companies want to make sure they have a positive image in case a real competitor shows up. In the old days, electric companies advertised in order to get people to use more electricity, which increases their income. That’s less common nowadays, but they probably still continue advertising because they always have. ---
**Author:** ![suranyi](https://avatars.discourse-cdn.com/v4/letter/s/e36b37/32.png) [@suranyi](https://boards.straightdope.com/u/suranyi)\ **Post date:** [January 29, 2008, 8:55pm UTC](https://boards.straightdope.com/t/why-are-public-utilities-allowed-to-advertise/435430/7 "2008-01-29T20:55:25Z")
In California, activist groups occasionally try to force the big power companies such as PG&E to be split up, or to give up its monopoly over some cities so that they can switch to city-owned power. (San Francisco especially.) The commercials PG&E runs may be an indirect way of defending against that. Ed ---
**Author:** ![Exapno\_Mapcase](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/exapno_mapcase/32/1051_2.png) [@Exapno\_Mapcase](https://boards.straightdope.com/u/Exapno_Mapcase)\ **Post date:** [January 29, 2008, 9:45pm UTC](https://boards.straightdope.com/t/why-are-public-utilities-allowed-to-advertise/435430/8 "2008-01-29T21:45:56Z")
Most states have, over the past decade or so, deregulated their utilities. Deregulation is an industry term that does emphatically not mean that no regulation is given them. They are still closely regulated by their state’s Public Utility Commission (PUC) or its local variant and cannot earn more than a fixed percentage of income. Deregulation means that for-profit companies can come into their markets and compete with the existing utilities in a variety of ways, usually the delivery of electricity and natural gas, although sometimes also the generation or the distribution of the power. Most utilities in most states are no longer monopolies, therefore. Ohio has been deregulated since 2000. I don’t know if \*\*brownsfan \*\* lives in an area that has active competition. It’s not an easy business and not every area has firms that are able to compete. Many of the early ones are now out of business. Easy enough to check, though. Here several companies compete to sell me electricity (and natural gas) with either variable or fixed rate plans for the coming year. They send me packages of info in the mail. You might want to ask your wife is she’s seen these. Or just call up Ohio Edison (or whoever) and ask about competition in your area. You most likely can go shopping around for the best electric rate. You may even find that Ohio Edison still gives the best rate. Or you can change every single year. Even if you don’t have active competition in your area, it implies nothing about whether you’re being charged in your bills for unneeded advertising. Each state operates under different rules, and I don’t know Ohio’s, but basically utilities are required to keep two separate accounts of expenses. One set can be charged to the rate-payers and “recovered” in their bills. The other set has to be charged to the stockholders (assuming that it is not a municipal utility.) The PUC decides which advertising expenses can legally be charged to the ratepayers and which can’t. I believe that in all states, political advertising and the like is forbidden, and only some promotional advertising is allowed. Here’s an example from [Kentucky](http://www.lrc.ky.gov/kar/807/005/016.htm) > [@](#): > > Section 1. General. The purpose of this administrative regulation is to insure that no direct or indirect expenditures may be includable in a gas or electric utility’s cost of service for rate-making purposes which are for promotional advertising, political advertising or institutional advertising. It is also the purpose of the administrative regulation to insure that no direct or indirect expenditures may be includable in a telephone, water, or sewage utility’s cost of service for rate-making purposes which are for political advertising or institutional advertising. “Advertising” means the commercial use of any media, including newspaper, printed matter, radio and television, in order to transmit a message to a substantial number of members of the public or to utility consumers. > > ``` > Section 2. Advertising Allowed. (1) No advertising expenditure of a utility shall be taken into consideration by the commission for the purpose of establishing rates unless such advertising will produce a material benefit for the ratepayers. > (2) As used in this administrative regulation, advertising expenditures shall include costs of advertising directly incurred by the public utility and those costs of advertising incurred by contribution to third parties, including parent and affiliated companies. > > Section 3. Material Benefit. (1) Advertising expenditures by gas or electric utilities which produce a "material benefit" include, but are not limited to the following: > (a) Advertising limited exclusively to demonstration of means for ratepayers to reduce their bills or conserve energy; > (b) Advertising conveying safety information in the direct use of utility equipment; > (c) Advertising which furnishes factual and objective data programs to educational institutions on the subject of energy technology; > (d) Advertising providing information to the public regarding potential safety hazards associated with construction or a utility's maintenance program; > (e) Legal advertising notices to ratepayers required by statute, rule or order of the commission; > (f) Advertising which explains a utility's proposed or existing rate structure, its energy-related problems and its public programs and activities, provided such reference includes a description of how a consumer benefits from or is affected by same. > > ``` As you can see, there are large numbers of types of advertising that are useful, i.e. “material benefits,” that can be legitimately charged to ratepayers. The idea that utilities are monopolies, that you can’t look for better rates elsewhere, and that they charge customers for worthless promotional advertising are all likely to be wrong. Just call your local utility and check on your local situation. ---
**Author:** ![toadspittle](https://avatars.discourse-cdn.com/v4/letter/t/c0e974/32.png) [@toadspittle](https://boards.straightdope.com/u/toadspittle)\ **Post date:** [January 29, 2008, 10:15pm UTC](https://boards.straightdope.com/t/why-are-public-utilities-allowed-to-advertise/435430/9 "2008-01-29T22:15:41Z")
Brownsfan: I just did some quick Googling. It looks like Ohio is set to be completely deregulated by the end of the year, unless politicians act before them (there appears to be a big push to do so). So Ohio Edison is facing competition. Moreover, they’re facing lawmakers passing legislation that could impact their bottom line. Both are good reasons for a company to advertise. ---
**Author:** ![gotpasswords](https://avatars.discourse-cdn.com/v4/letter/g/c57346/32.png) [@gotpasswords](https://boards.straightdope.com/u/gotpasswords)\ **Post date:** [January 29, 2008, 11:23pm UTC](https://boards.straightdope.com/t/why-are-public-utilities-allowed-to-advertise/435430/10 "2008-01-29T23:23:55Z")
They’re probably courting industrial customers. Around here, it’s tough, if not impossible for a homeowner to decide they want to buy electricity from someone other than PG&E, but industrial customers can readily get power from other sources. One altenate source that pops to mind because they have a plant near my home is Calpine. It’s structured similarly to how you can choose MCI or Sprint instead of AT&T for your long-distance phone service - the service is delivered through the local phone company’s wires, and the local company also handles the billing for the other company. Same for power - you’d be hooked up to PG&E’s wires, and PG&E sends the bill to you, charging some percentage for “transport” then PG&E disburses payment to Calpine. It’s not a new concept - over 20 years ago, my college started buying natural gas from a provider two states away because they got a better price. The weird thing about gas or electricity is that once it’s in the wires or pipes, it’s fungible and impossible to distinguish from another company’s product, as opposed to something like boxes on a truck. The school was not getting the same molecules of gas that the provider pumped into the pipe, and the provider didn’t know moment to moment how much gas to pump in to satisfy the school’s needs - they just shoved gas in, and someone else pulled it out somewhere along the pipeline. ---
**Author:** ![toadspittle](https://avatars.discourse-cdn.com/v4/letter/t/c0e974/32.png) [@toadspittle](https://boards.straightdope.com/u/toadspittle)\ **Post date:** [January 30, 2008, 12:26am UTC](https://boards.straightdope.com/t/why-are-public-utilities-allowed-to-advertise/435430/11 "2008-01-30T00:26:38Z")
Another reason to advertise is to attract investors. (Much like those Sunday-AM commercials for ADM and BASF etc., who make nothing that consumers can directly purchase.)