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California LDCs Selling Ad Space on Bills

California LDCs Selling Ad Space on Bills

Retail energy service providers and marketers in California have a new way of reaching California's massive collection of residential and small business customers. They can buy space on utility billing envelopes.

Under new state regulatory rules, investor-owned energy utilities (IOUs) are opening access to their ubiquitous bills that are mailed regularly to millions of customers. Southern California Gas in July will be the first of California's monopoly utilities to sell space for promoting energy-related products and services.

Messing with utility billing historically has been a contentious issue. A utility dispute with consumer groups in the 1980s over the billing space went all the way to the U.S. Supreme Court with the utilities prevailing.

State regulators earlier this year gave the okay for this new use of the regulated utility billing process, but SoCalGas is the first of the major investor-owned utilities to implement a program. SoCalGas is offering these direct mail opportunities on a competitive bid basis to its unregulated energy companies, following an agreement with the California Public Utilities Commission. Eligible bidders will include qualified energy services companies, home safety product companies, home appliance manufacturers/retailers, commercial/industrial suppliers and competing utilities.

"There is supposed to be a process of offering (the space) on a nondiscriminatory basis," said a California Public Utilities Commission staff analyst familiar with the issue, noting he wasn't surprised the first bid winner was a SoCal affiliate. "It doesn't surprise me that SoCal is the first utility to follow through with this because this was one of their pet issues. They believe the envelope space belongs to shareholders, and they basically lost on that issue, but they are jumping on the competitive process. Eventually, the utility will have to make a report (to the CPUC) on what they are doing."

The CPUC staff member said it is likely the other IOUs will offer the same service under competitive bidding, too.

The first nonutility to submit a winning bid was SoCalGas' affiliate Sempra Energy Solutions, a certified energy service provider, which outbid two other unaffiliated rivals, according to SoCalGas officials. The two competitors were both advertising agencies representing clients whose products were not appropriate for the program, said SoCalGas' Rick Hobbs, consumer markets manager.

Bids can be rejected because of either their dollar amount or because the type of product or services (the bidders) provide do not meet "the minimum standards" of the gas utility's CPUC-approved program, said Hobbs, adding that the utility has received "more than 100 inquiries so far" about possible bidding in the program.

"We expect even more interest as businesses become aware of our program and can include this opportunity in their future advertising plans."

Bidding is conducted three months in advance, so in June, the gas utility was accepting bids for the September billing envelope space. SoCalGas currently plans to allocate space for at least one outside advertiser insert in each of its monthly billings, and it is prepared to offer additional space if it becomes available, depending on utility needs.

In the line-item billing program, commercial businesses-including SoCalGas affiliates-selling energy-related or home safety-related products or services can bill SoCalGas customers directly with a separate line item on the gas utility bill. The bidding process for this service began earlier this spring, and the first line-item billing is expected to begin late this summer. SoCalGas has committed to only one bid winner each year in this program, although there could be more at a later time, Hobbs said.

Only companies already holding billing accounts with SoCalGas customers are eligible and the billing charge must be a fixed amount due either on a one-time or monthly basis. SoCalGas will not include charges that vary from month-to-month except for a final settlement. Along with the line item, SoCalGas also will process customer payments, telephone calls regarding the line item charge and remit the funds collected to the business.

"Customers will have the convenience of handling several charges with one payment and will only write one check," Hobbs said. "If a customer's payment does not cover the entire amount due, any partial payment will go first to all gas utility charges, with any balance prorated on an equal basis between the outside businesses, including the utility affiliates."

Richard Nemec, Los Angeles

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