Wednesday, January 19, 2000
Ads waste $33 million, critics say
Campaign to show options for electricity
BY SPENCER HUNT
Enquirer Columbus Bureau
COLUMBUS Ohio is preparing to spend millions to teach people how to shop for electricity next year. But critics warn the effort could be a waste of money, and consumers may end up paying for it.
Forty-two Ohio advertising agencies filed bids last week to run a $33 million, two-year ad campaign planned by the Public Utilities Commission of Ohio. A series of television, radio and print ads is expected to show consumers how they can save on their electric bills when power companies start competing for their business in 2001.
The program, part of a complex electricity restructuring bill the General Assembly passed last year, is modeled after similar ad campaigns that ran in California and Pennsylvania.
A Washington-based consumers' group, Public Citizen, said neither state got much for its money. After California spent nearly $90 million on ads, only 2 percent of that state's electricity customers switched power companies.
We feel a lot of this money is being thrown down a drain, said Charlie Higley, a Public Citizen analyst.
Now California and Pennsylvania residents are gradually paying off the cost of the campaigns through their monthly electric bills. The same thing could happen in Ohio.
Cincinnati Gas & Electric, for instance, plans to bill its customers for the $4.6 million it will put toward the Ohio ads. Spokesman Steven Brash said CG&E will ask the state to let it start charging customers in 2007, after a rate freeze ends.
Mr. Brash said it is fair for utilities to recover their costs. Ohio Consumers' Counsel Robert Tongren disagrees. He contends the restructuring law doesn't give utilities the right to ask for their money back.
If the Legislature wanted the power companies to recover that money, it would have said so, he said.
Despite that concern, Mr. Tongren is joining utility officials and state regulators in supporting the upcoming ad campaign. All say it is needed to tell consumers they will soon have a choice among power companies, and to teach them how to choose wisely.
The state's challenge is to design an effective campaign, Mr. Tongren said.
We certainly don't want to be a California, he said.
From 1997 to 1998, California's utilities spent millions on ads, one of which featured a traffic cop ignoring speeders because he was thinking about his electricity choices. Though 2 percent of the state's 10 million customers switched power suppliers, the state Public Utilities Commission dubbed it a success.
Valerie Beck, California PUC's campaign manager, said the state's mission was simply to let electricity consumers know they had a choice.
A post-ad campaign survey showed we had 94 percent awareness among consumers, Ms. Beck said.
Pennsylvania's $26 million advertising effort apparently was more effective.
One television ad featured a supposed mob informant who was about to get a new identity and a safe place to live under the federal witness protection program. When the informant asks to choose his power suppli er, federal agents laugh and say Yo, Joey! Where do you think you are Pennsylvania?
That kind of humor led 10 percent of the state's 4.5 million electricity customers to switch power companies, said Pennsylvania PUC spokesman Kevin Caddin.
The fact that Pennsylvania had more customers switch than California may have more to do with the rates those states' power companies were charging than the ads, Mr. Higley said.
The reason there was no shopping in California was that rates there were already low enough that no outside company could come in and compete, Mr. Higley said. Pennsylvania had some switching because it had some utilities PECO Energy and Duquesne Light that had relatively high rates.
Will there be competition in Ohio? Mr. Higley said power companies are more likely to compete for customers in the northern part of the state than in Cincinnati or southeast Ohio.
That's because utilities like Cleveland Electric Illuminating and Dayton Power & Light charge higher rates. Statistics provided by the PUCO show homeowners pay Cleveland Electric an average $87.79 a month while DP&L customers pay an average $71.89 a month.
By comparison, CG&E charges its customers an average $61.35 a month. Ohio Power charges $53.75 a month. A homeowner can pay much more or less than this average, however, depending upon the size of his home, how efficient it is and the number of people using power in it.
Ohio has low-cost utilities in the south and high-cost utilities in the north, so there may be some switching there Mr. Higley said. Whether or not that happens is hard to predict.
Mr. Brash also was unable to say if CG&E expects to keep its customers or lose some of them to competitors next year.
There is always the option for someone to switch, he said.
In the meantime, officials from the PUCO and the Ohio Consumers' Counsel are examining bids from the 45 ad agencies. The state hopes to announce a finalist group of bidders by February.
If all goes as planned, the first of Ohio's electricity restructuring ads would hit airwaves and printed pages in July.
Our No. 1 goal is to let customers know they will have the option to shop, said Lee Veroski, PUCO's education program administrator. People may make the decision not to shop, and that is still a choice.
Ohio consumers already have the choice under a 3-year-old state pilot program that lets them shop for cheaper natural gas. A recent report shows that 12 percent of CG&E's customers have signed up, while Columbia Gas, which serves 64 of Ohio's 88 counties, has a much higher 38 percent participation rate.
The PUCO ran a six-week publicity campaign to market the pilot program. Though the agency was unable to say how much it spent on the that campaign, CG&E spent $1.3 million in 1997 and 1998 marketing its pilot gas program to Cincinnati-area consumers.
One Cincinnati-area resident, Nick Salzano, isn't exactly thrilled with the state's new plan, or the idea of someday paying for the ads. He said he ended up spending more money for natural gas service to his home under a cost-cutting offer for which he recently signed up.
Despite a promise of fixed gas rates, Mr. Salzano said he was shocked when Cinergy Resources presented him with a $183 bill for December and January. He said he expects similar bad results when electric companies start competing in January.
People should get the right info about this, yes, Mr. Salzano said. I don't think they should spend that much money.
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