DENVER — Why does Xcel Energy advertise?
It is a question we have received from several viewers and Xcel customers as we've reported extensively on high Xcel Energy bills.
“I sent you an email asking why does Xcel advertise to customers on television and radio when I can’t shop for another energy provider where I live? I can’t hire Black Hills or United Power, I have Xcel,” said Mike Chadwick, an Arvada resident and Xcel customer.
Xcel advertises about “resilient, reliable energy,” and a Carbon-free future.
"I'm sure the millions of dollars they spend in a year would offset quite a few winter bills for people that are less fortunate than myself,” Chadwick said.
Here is the response from Xcel as to why it advertises.
“We understand that at this time, when customers are dealing with the impacts of high natural gas prices and inflation, they may question how our company is working to keep our own costs as low as possible.
Advertising provides the same benefits to our customers and the company as it would for any other business. It is one of the tools we use to communicate with our customers – sharing news on the work we’re doing, explaining our programs and services and sharing safety and reliability information.
Some of the ads you see on television (or hear on the radio or see online or in print publications) are not paid for with customer dollars. The same is true for our naming rights with the Xcel Energy Center in Minnesota, which run through mid-2025.
However, unlike other businesses, we also use advertising to help our customers to find ways to use less of our product to help them save on their energy bills. This is called Demand Side Management and raises awareness about these programs to help customers understand the programs and resources available to help them save energy and money. Promotions to help customers understand and take advantage of energy efficiency programs are included in rates, which averages out to about $3.02 per year for our residential and commercial customers.
While these programs help customers save on their monthly energy bills, they also help all customers long term by helping us avoid building new power plants. Since 1992, Colorado customers have helped us avoid building more than 6 power plants by taking part in our conservation programs. In 2021, Colorado customers saved enough electricity to power 71,000 homes and saved enough natural gas to power about 10,000 homes. For every dollar we spent on electric energy efficiency programs in 2021, customers will see nearly three dollars in long-term utility system cost savings.”
Here’s another ad link.
The response said “[s]ome of the ads you see on television (or hear on the radio or see online or in print publications) are not paid for with customer dollars.”
Then, how much of the residential dollars or customer dollars go toward your advertising program?
Another question from viewers was about the naming rights agreement for the Saint Paul arena where the Minnesota Wild play hockey. Xcel is based in Minneapolis.
“If the cost for advertising and the naming rights for the Xcel Energy Center in Minnesota aren’t paid for by customer dollars, then where does the money come from?” Chadwick asked. “I don’t think they really answer the question of why they advertise.”
“When a company like Xcel advertises, they don’t have any competition, but somebody only really knows Xcel’s name when something goes wrong or when prices go spiking upwards,” CU Boulder advertising instructor Morgan Young said.
Young is also an advertising executive who has produced ads similar to what Xcel has produced.
“I’ve done commercials like this for Mirant Electric. I’ve done it for Pepco in the Washington, D.C. area,” Young said. “A lot of those commercials actually ran as PSAs, Public Service Announcements. That’s probably a more truly honest, altruistic way. Obviously, the problem with PSAs is they might run at 4 o’clock in the morning as opposed to 6 o’clock at night. So here, they are able to control the message.”
He points out that this is Xcel’s way of providing a positive message, when much of the attention might be negative.
“What a company like Xcel is doing at this point is trying to advertise, to create a bit of a name ID, a bit of a good reputation behind the scenes, so that when they have to come to customers for a rate hike or let’s say there’s an outage due to a fire or something like that, people have an understanding of who Xcel is as a core company and hopefully will have a better view of that company,” Young said.
Regarding the Carbon-free ad, Young suspects he knows the motivation.
“That is a classic example of a corporate reputation ad,” Morgan said. “The reason they’re doing a message like this, is again, this is about corporate responsibility and showing that they understand the needs of the customer, that they’re here as an educational role.”
“I think it’s good to have the print media on my bill or the emails that they send me constantly. I read them, but you don’t have to buy airtime on television or radio,” Chadwick said.
Part of the Xcel statement also references Demand Side Management. That is a line item on your bill that you pay Xcel. In return, Xcel offers rebate programs, including one that will give you a credit on your bill if you allow Xcel to manage your energy usage when demand is high. In other words, in the summer, your air conditioning may not turn on if Xcel wants to conserve energy in the heat of the day.
“My average summer bill was about $25 higher than my average winter bill, but now that’s kind of flipping. And then, with the electrical increase that they want coming up, I’m scared to see what’s going to happen this summer,” Chadwick said.
Xcel has filed for an electrical rate increase to take effect in September. That case is in the early stages in front of the Colorado Public Utilities Commission, which regulates Xcel and will have to approve the increase.
“The cost of doing business is built directly into the Xcel bill,” Young said. “To ask them to just cut out the advertising and move those dollars or reduce those dollars from our energy bill, while it sounds wonderful, at the end of the day it is pie in the sky.”
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