Summit Natural Gas of Maine is spending millions of dollars on advertising to convince Maine homeowners that its product is safe, reliable and competitively priced, and it wants customers to pick up the cost of that campaign.

The Colorado-based company says it didn’t anticipate how little Mainers knew about natural gas when it arrived here in 2012, pledging to spend $350 million to connect 15,000 homes in the Kennebec Valley and $73 million to serve 80 percent of the homes in Cumberland, Falmouth and Yarmouth.

Now, Summit is trying to convince state utility regulators that it’s in the best interest of customers to have them pay for what the company calls an “education” campaign of advertising and related expenses aimed at meeting those aggressive goals.

The proposal is facing criticism from the Maine Office of Public Advocate, which questions whether Summit is asking ratepayers to shoulder risks that ought to be borne by the company and its shareholders.

Maine Public Utilities Commission rules typically don’t allow a utility to recover the costs of advertising or promotion, but Summit says that if its connection goals fall short, fewer customers will bear a greater share of the capital expenses of building the pipeline system.

This is an unusual argument and not one that utilities such as Central Maine Power or FairPoint Communications could make. That’s because they have an established customer base and network, whereas Summit started from zero.

Summit won’t make public how much it’s spending on the education campaign except to say the total runs in the millions. Under PUC rules, such information is considered proprietary and therefore not a matter of public record. But during a meeting last month at the PUC, a Summit executive called it “an extraordinary expense” that’s eating up 24 percent of the company’s operating expenses. Those expenses include administration, but not construction.

Summit is seeking an agreement with the PUC on its spending request, as well as some other costs related to attracting customers. Whatever the agency decides, the outcome won’t be noticed by customers for several years. That’s because Summit’s rates are subject to a 10-year plan already negotiated with the PUC. But as the construction season gets under way, the requests highlight yet another challenge for Summit.

Oil prices are low now, but years of volatile price swings have many Mainers searching for alternatives. Summit offers a plentiful, cleaner-burning fuel at a relatively low price. But the company stumbled when it tried to hook up too many people with too few resources. That led to frustrated customers, as well as safety violations and fines from the PUC.

Some problems remain. In April, Summit began replacing underground pipe connectors in the Waterville area after it found more than half of those inspected were improperly installed by a subcontractor.

Summit is trying to set things right and mend its image. It has a new president and a more focused strategy of reaching fewer customers and making sure work is done right and on schedule.

Summit came to Maine after expanding rapidly in Colorado and Missouri, where residents are more familiar with natural gas. Things were different in Maine’s Kennebec Valley, where Summit began building its network.

Last spring, Summit conducted a survey of 400 homes in the Augusta-Waterville area. The survey found “little awareness” of natural gas, according to a document filed by Summit at the PUC.

“Moreover,” the document stated, “residents reported a great deal of uncertainty about and fear of natural gas, and high costs of conversion, as major obstacles to considering switching to natural gas.”

To overcome the lack of knowledge about gas, Summit has developed a multimedia campaign that includes print, radio, TV and digital sources. It also reaches out at community events, such as sponsorships at the Yarmouth Clam Festival and a July 4th parade in Winslow.

Summit wants the PUC to let it recover “all educational marketing costs” until it hooks up half of all eligible customers in the service areas. The company says it’s not asking to recover the costs of image or brand advertising about Summit, only expenses associated with making people familiar with natural gas and its benefits.

For example, one ad shows what looks like an oil-delivery truck in front of a house, but the side reads, “Electricity Delivery” and the truck has a big wall plug. The copy reads: “Imagine if electricity were as inconvenient as heating oil.”

Another ad shows a black-and-white photo of a circa 1940s ice truck making a delivery to a home. It reads: “Are you still getting heat the way you used to get cold?”

Mike Tanchuk, Summit’s president, said these ads reinforce the message that natural gas is convenient and reliable. With oil prices bumping up again, Tanchuk said upcoming messages will focus on the stable cost of natural gas compared to heating oil.

“The number one issue is fuel costs,” Tanchuk said.

But Summit’s request is meeting with resistance.

At a proceeding last month with parties to the case, Bill Black, general counsel at the Maine Office of Public Advocate, sought to clarify why Summit should be allowed to recover the ad money. He asked Tim Johnston, Summit’s executive vice president, whether it’s fair to say that shareholders and managers assume the risks of doing business under the alternative rate plan — not ratepayers.

Johnston said that was true to a certain extent.

“Okay,” Black said. “And would the cost of education of the populace — giving them religion about gas between Gardiner and Fairfield — would not that be one of the risks undertaken by the company?”

Johnston replied, “It certainly was not one of the risks that was contemplated.”

Black asked why not.

“As I said,” Johnston replied, “we just didn’t expect that was going to be much of an issue, because it had not been an issue in the other areas we had served in the past.”

Tim Schneider, Maine’s Public Advocate, said his office is reviewing how the request shifts the allocation of risk between the company and its customers. Schneider said his concern is that Summit’s campaign fails to achieve its goals, and customers could be stuck paying higher bills anyway.

Tux Turkel — 791-6462

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[email protected]

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