Social Media for Utilities – Pocket Part #2 – Rate Recovery

by Carolyn Elefant on September 8, 2011

in Pocket Parts, Social Media in Regulated Utilities

Rate Recovery (32 Energy LG at 34-35) – My social media article discussed general ratemaking principles which prohibit recovery of costs used for marketing initiatives that enhance the utility’s brand since these benefits inure to shareholders rather than ratepayers. Although the article gave examples of disallowed costs for traditional marketing, at the time, there were no rate cases that included requests for recovery of costs related to social media.

Concerns over potential use of social media to enhance corporate image on the ratepayers’ dime arose in a recent case, Application of PG&E for a Two Year Extension of ClimateSmart. There, PG&E sought a two year extension of its ClimateSmart Demonstration Program, which allows consumers to pay a premium to offset greenhouse gas emissions associated with energy use. PG&E requested the extension because enrollment in the program had been disappointing.

As part of its extension request, PG&E proposed modifications to its existing marketing strategy, including incorporation of social media. In response, two ratepayer advocate groups expressed concern that:

PG&E might use its Facebook page to “promote its desired public relations messaging on an unrelated aspect of its operation. Given the spate of negative publicity in 2010 around Smart Meters, Prop 16 and the San Bruno explosion, [it is urged that] the Commission not allow PG&E to use ratepayer funds to launch public campaigns to promote a positive corporate image in the midst of widespread public criticism associated with PG&E. PG&E must limit use of ClimateSmart Demonstration program funds to the marketing and administration of the ClimateSmart program

The California Commission did not respond directly, but in its Findings of Fact determined that the advertising and marketing efforts in support of Climate Smart contribute to customer education, the dangers of global warnings and options customers can take to mitigate their carbon footprint. Presumably, if PG&E were to spend funds earmarked for ClimateSmart on branding or other non-educational purposes, this action would be considered outside the scope of the program’s educational purposes and would be paid for by shareholders.

In addition, the California Commission also directed PG&E to hire a consultant to evaluate the effectiveness of its initial program.

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