Xcel ad campaign shows it's hard to serve two masters

Face The State Staff Opinion

Xcel Energy has proposed raising energy rates on consumers while at the same time spending an undisclosed sum of money on a self-serving ad campaign. The “Responsible By Nature” ads seen online, in print and on the air encourage consumers to save money by decreasing consumption and take advantage of the company’s rebates. To encourage saving money by reducing consumption while at the same time raising rates at the meter has us scratching our heads.

The utility's poorly timed $180 million rate hike proposal was the target of public criticism last week during a hearing before the Public Utilities Commission. Xcel says it needs the increased revenue to pay for its new $1.3 billion Comanche 3 coal plant in Pueblo. We'd be more sympathetic to that argument if the plant weren't nearing completion within the year, and if it weren't for solid second-quarter profits that could help to pay down the Comanche investment without a rate hike.

Xcel's stake in Comanche 3 clearly dwarfs its PR budget, but it is still appropriate to question any regulated monopoly's need to advertise. According to Xcel spokesman Joe Fuentes, it's exactly that regulation that has the company buying ads on buses, in magazines and even on coffee cup insulators.

“It is demand side management,” Fuentes said. “We’ve been asked to educate our consumers about these programs. It is part of the Governor’s new energy economy.”

Half a dozen ads are part of the campaign, and include one with a man sticking his head in his freezer. “Looking for your cool?” it asks. Consumers are directed to ResponsibleByNature.com/CoolRebates where they can learn how to save up to $500 for installing a high-efficiency central air conditioner or cooling system. The campaign is part of a national buy, and Xcel could not provide the cost of running this campaign in Colorado before press time.

On the surface, the effort is a win-win for Gov. Bill Ritter and Xcel. Ritter gets warm fuzzies for "educating" the masses and the company runs a feel-good corporate awareness campaign. But the timing is tricky as the company reports hefty earnings while at the same time filing for a rate increase.

Xcel is under the gun to lift the share of electricity production from "renewable resources" to 20 percent by 2020. The utility released this week a plan to add another 980 megawatts of "green" energy to the grid starting next year, and the price tag for such a move will certainly be hefty. As free-market advocates, we are generally opposed to government mandates that micromanage private-sector companies' operations; Xcel would naturally move toward "green" energy over time as resources become more scarce and shift in price. Today's solar and wind projects are brought online largely because of mandates and government subsidy, the costs for which are passed on to consumers.

Mandates include friendly requests from the Governor, too. Xcel is in many ways stuck between a rock and a hard place, seeking to generate profits for its shareholders while at the same time staying in the good graces of sometimes-unfriendly regulators. Ask the climate-change-skeptical leadership at Intermountain REA how politically challenging life becomes when you take on conventional wisdom at the PUC.

Still, regulated monopolies must rightly make their case to the state before imposing rate hikes, and Xcel has yet to make a convincing argument for its proposal. Its ad campaign gives the impression there's cash on hand, if only because it's made to do so by meddling bureaucrats including Colorado's energy-obsessed executive.

The PUC must now strike a balance on rate hikes and mandates. We suggest less of both. Consumers in Xcel's service area — who have little to no choice about where they get their power - foot the bill for our schizophrenic energy policy. It's enough to make us stick our head in the freezer for a bit to cool off.