PLUGGING IN CHARITY

Energy utilities embrace business case for philanthropy

In December 2012, when Peoples Natural Gas set out to become Pennsylvania’s largest natural gas utility by acquiring Equitable Gas Co., it was beginning a yearlong tangle with state regulators very familiar to utilities.

Such deals — not to mention all manner of a utility’s business operations, including any changes in rates or location of their distribution systems — are subject to intense state scrutiny.

By the time the transaction finally won approval the following December, Peoples had built a convincing case with support coming from a surprising source: its customers.

In a recent interview, Peoples CEO Morgan O’Brien attributed that support in large part to an extensive program aimed at building community support. From highly visible naming rights, to low-profile volunteer work at soup kitchens, to backing the Downtown holiday market in December, Peoples spends roughly $1.5 million a year of investor money on philanthropy, donations and assistance to low-income customers.

“Our customers came forward and were very supportive” of the Equitable deal, Mr. O’Brien said. “It creates a business case that says, while we’re doing good things, and that in itself is reason to do it, there’s a whole bigger picture here, that the company’s creating value for the business itself.”

Philanthropy as a form of community relations is a smart business move at most corporations. But few sectors are as embedded in a geographic region as energy, with mammoth power plants, snaking transmission lines and the electric and gas utilities that collect monthly bills — all from consumers who have little choice in the matter.

Though they don’t compete

“I'm a firm believer that corporations that deliver a product to the community need to be highly involved in that community.”

for customers, utility executives have become keenly aware of how targeted donations can not only increase their brand visibility but also pay dividends in businesses operations.

“Our pipes are literally in the earth, in the communities,” said Columbia Gas of Pennsylvania President Mark Kempic said. “We’re digging in people’s front yards 2015... and the 2014 current customers don’t understand why 680it’s necessary.”646

Columbia Gas of Pennsylvania, 673 which supplies625 natural gas 664 to 421,000 643 customers across 26 counties, is in its eighth 662 year of a 643 nearly $1 billion effort to expand and replace its distribution pipelines. That means Columbia workers650 are highly626 visible, and disruptions in traffic and other nuisances are unavoidable.

Mr. Kempic said while Columbia Gas receives “requests to fund everything under the sun,” it focuses donations totaling roughly $500,000 a year on communities in which it is doing major projects. In an acknowledgment that its natural gas can be the subject of emergency calls when it leaks, Columbia gives heavily to local first-responders such as volunteer fire departments and the American Red Cross.

“We find the ones that need new uniforms, need new training, need to have the skills and equipment necessary to go into a house and handle natural gas,” Mr. Kempic said.

The satisfaction factor

That a local utility’s relationship with customers includes charitable giving is a growing phenomenon, said John Hazen, senior director of energy practice at J.D. Power and Associates.

In its annual assessment of customer satisfaction released this month, the market research firm found 62 percent of U.S. customers believe

Public Service Enterprise Group

Consolidated Edison

Baltimore Gas and Electric

Central Maine Power

AVERAGE

Pennsylvania utilities are in bold Source: J.D. Power 2015 Electric Utility Residential Customer Satisfaction Study their electric utility is a positive force in the local economy. Moreover, the majority of customers now see their electric utility as a “good corporate citizen."

Seven years ago, when Mr. Hazen first became involved in the survey, “not every utility understood the importance of community giving and customer satisfaction.” Now, he said, “I think they’re realizing that, across the country, they want to be a good citizen, and it’s better for them to tell their story.”

Duquesne Light, which delivers electricity to much of Allegheny and Beaver counties, spends about $2 million a year on charitable giving. Duquesne Light President Rich Riazzi said he defends that amount to his investors because boosting the economy boosts the business of powering that economy.

Perhaps the most visible sponsorship has been to nonprofit KaBoom! for the construction of playgrounds built in the matter of hours and based on blueprints drawn by children.

“I’m a firm believer that corporations that deliver a product to the community need to be highly involved in that community,” Mr. Riazzi said. “Not only do we invest in our electric infrastructure, but giving back helps bolster a vibrant economy, which is good for us as a company.”

For West Penn Power, a subsidiary of Akron, Ohiobased FirstEnergy Corp. that serves rural areas in 26 Western Pennsylvania counties, donations can assuage a sometimes rocky relationship with customers. When FirstEnergy’s generation company closed Hatfield’s Ferry Power Station in Greene County in 2013, resulting in the loss of hundreds of jobs, West Penn helped sponsor a festival called Riverfest in nearby Rices Landing.

“We know it’s not a dollar-for-dollar trade for the plant’s closure, but it is something,” said Todd Meyers, West Penn spokesman. “That’s a way to say thank you to the community, just a way to acknowledge we caused an impact.”

Richard Burkert, president and CEO of the Johnstown Area Heritage Association, said the Peoples Natural Gas Park in Johnstown would not have happened without a $500,000 donation from the utility in 2011.

And having an eponymous venue for concerts and festivals in Cambria County is useful as Peoples — which after the Equitable acquisition delivers natural gas service to about 700,000 homes and businesses — is courting new customers in that area.

In March, the state approved Peoples’ plan to expand natural gas lines to communities, and a patch of Cambria County is expected to be the first. — Rich Riazzi, president of

Duquesne Light, which is one of the sponsors of a KaBoom! playground for children in Coraopolis.

“They really had a strategy for creating a presence in these communities, that’s what I think was so impressive,” Mr. Burkert said, noting that 14,000 vehicles a day pass within sight of the park sign. “They're getting something with their name on it in all these towns in southwestern Pennsylvania.”

Coordination and overlap

Patricia Waldinger, regional CEO at the American Red Cross, said the group’s relationship with Columbia Gas of Pennsylvania began about five years ago when Mr. Kempic spoke of having a mutual interest in community relations.

There’s an operational advantage to coordinating with the local utility, Ms. Waldinger said, because the populations the two organizations serve have some overlap and they can collaborate on public service announcements.

Last February, Columbia donated $7,000 to the Red Cross — a donation for every new “like” or follow on the utility’s social media accounts throughout the month — while sharing tips on emergency preparedness.

“During a kind of emergency situation — whether it's a fire or flood or weather event — we're both focused on that same community,” Ms. Waldinger said. “So when we partner, we can exchange communications, it will actually help both of us.”