On Why a City-Owned Monopoly Advertises...

Feb. 1, 2006

Perhaps you’ve seen Traverse City Light and Power’s TV commercial that showcases the beauty of Traverse City. Or heard its ads on the radio? Or have seen its four-color brochures or print ads in local publications?
For the first six months of the current fiscal year, Traverse City Light and Power spent $125,976 on marketing, advertising, website, community and customer relations, according to figures provided by Jim Cooper, key accounts and marketing manager for the utility.
“What I want to know is, why do they spend so much money advertising when it’s a monopoly?”asked Jim Carruthers, a close observer of city activities.
If people can’t choose their utility company, why bother trying to convince them how great you are, he asked. Would the money be better spent, one might ask, by Hickory Hills, the faltering city-owned ski resort that really must compete with area ski hills and doesn’t have so much as a directional sign?
The answer is that in 2008, TCL will lose its status as a monopoly and have to compete for customers. Before that happens, the utility wants to establish an allegiance with its customers as a hometown utility that provides excellent service to its customers. Much of the marketing effort involves telling residents about the utility’s special programs, such as its wind power and bio-mass projects, a free analysis of home heating bills, and how to save money on electric bills, Cooper said.
Right now TCL charges one of the lowest, if not the lowest, rate in the area for electricity. But if those rates go up slightly in a few years, the utility will need the allegiance of its customer base, he said.
“When people have the choice of which utility to choose and it comes down to $5 a month, we want them to consider whether they want to pay someone in Texas or stay with us. We want them to be aware that if they stay with us, the city keeps the revenue and we put it back into our community.”
That’s one reason why TCL spends a portion of its revenue to help sponsor a wide array of community projects, such as science contests in the Traverse City public schools, the disposal of Christmas trees, donations to the Traverse City Opera House, J. Smith Walkway, Cherry Festival, and the Heritage Center. The utility puts revenues back into the community in other ways, too. It employs about 40 employees and the marketing and ad revenue go to a local advertising agency and many local media, including Northern Express.
The utility also wants to communicate changes that it is making in a “positive light,” such as demolishing the Bayfront plant and its decision to decommission hydroelectric power at three dam. In the near future, the utility will spend money communicating to taxpayers about an upcoming vote that will allow the utility to rent its overhead electric lines. That would garner the utility up to $1 million in additional annual revenues. Unfortunately, Cooper said the extra money would not mean lower bills for TCL customers, but it may soften future rate increases.
Traverse City Commissioner Ralph Soffredine, who sits on the TCL board, doesn’t believe the spending is excessive when compared to what other utilities spend such as Consumers Power and Cherryland Electric. He added that it’s just a small fraction of the utility’s annual gross revenues of $23 million. By statute, the utility must give the city 5 percent of its revenues. The utility wouldn’t give the city any more money even if it did cut costs.
“In 2008, people will be able to choose their utility. We’re getting ready for that choice. It is getting ready for de-regulation,” he said. “People need to know we’re a professional company. It doesn’t bother me because it isn’t a whole lot of cash. We do send out flyers on the programs that the public needs to know about, including the wind power project and our trip to Europe to research getting power from bio-mass.”
Yet during these times of high gas and natural gas prices, newly elected City Commissioner Deni Scrudato wonders if there’s a way to build the town’s allegiance without spending so much money. Perhaps publish one-color brochures, for example, instead of the glossy four-color fare. And the television commercial seemed “a little silly.” The utility’s costs are ultimately passed onto the 7,000 residents, who would appreciate the savings, even if they are small, she said.