BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1180


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          ASSEMBLY THIRD READING


          AB  
          1180 (Cristina Garcia)


          As Amended  January 13, 2016


          Majority vote


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Utilities       |14-0 |Gatto, Patterson,     |                    |
          |                |     |Achadjian, Burke,     |                    |
          |                |     |Dahle, Eggman,        |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Cristina Garcia,      |                    |
          |                |     |Hadley,               |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Roger Hernández,      |                    |
          |                |     |Obernolte, Quirk,     |                    |
          |                |     |Santiago, Ting,       |                    |
          |                |     |Williams              |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Appropriations  |17-0 |Gomez, Bigelow,       |                    |
          |                |     |Bloom, Bonilla,       |                    |
          |                |     |Bonta, Calderon,      |                    |
          |                |     |Chang, Daly, Eggman,  |                    |
          |                |     |Gallagher, Eduardo    |                    |








                                                                    AB 1180


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          |                |     |Garcia, Holden,       |                    |
          |                |     |Jones, Quirk, Wagner, |                    |
          |                |     |Weber, Wood           |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
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          SUMMARY:  Authorizes a water corporation to seek California  
          Public Utilities Commission (CPUC) approval through its general  
          rate case application to operate a pilot program to evaluate  
          customer interest in, and utilization of, additional bill  
          payment options.  Specifically, this bill:  


          1)Authorizes a water corporation with more than 10,000 service  
            connections to seek, through its general rate case, CPUC  
            approval to operate a pilot program designed to evaluate  
            customer interest in, and utilization of, bill payment  
            options, including credit card and debit card bill payment  
            options for their water bills, as specified.


          2)Authorizes a water corporation to recover the reasonable  
            expenses incurred by the water corporation in providing to its  
            customers bill payment options and prohibits the CPUC from  
            requiring the water corporation to impose a transaction fee on  
            its customers, as specified.


          3)Prohibits the costs of a pilot program from being collected  
            from low-income customers, as specified.


          4)Requires a water corporation operating a pilot program to  
            provide its customers with certain notifications, as  
            specified. 










                                                                    AB 1180


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          5)Requires the CPUC to ensure that accepting bill payment  
            options neither increases nor decreases the rate of return of  
            the water corporation.


          6)Sunsets the pilot program on January 1, 2022.


          7)Requires the CPUC, in consultation with the Low-Income  
            Oversight Board, by July 1, 2020, to submit to the Assembly  
            Utilities and Commerce Committee and the Senate Energy,  
            Utilities and Communications Committee, a report on the  
            results of the water corporations operating a pilot program,  
            as specified.


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, this bill would have increased costs for the CPUC of  
          approximately $130,000 to monitor the rate case and collect and  
          analyze data for the report. 


          COMMENTS:  


          1)Author's Statement:  "Current law is impeding the payment of  
            utility bills by credit and debit cards at a time when more  
            consumers are utilizing the convenience of credit cards as  
            their primary method of paying recurring bills.  Due to the  
            almost universal use of online commerce sites, from giants  
            like Amazon to small local retailers, customers take it for  
            granted that they can pay online by credit or debit card.   
            They are confused, disgruntled, and often discouraged when  
            they are required to pay an additional fee if they want to pay  
            their utility bill with their credit or debit card.  For  
            example, how many customers end up waiting in line at a  
            customer payment center to pay their bill in cash in order to  
            avoid paying a transaction fee?  AB 1180's pilot program would  
            allow the CPUC to collect critical information on customer  








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            behavior." 


          2)Background:  As more customers turn to credit or debit cards,  
            including reward program cards, as their primary payment  
            method, companies must determine how to pay for the  
            transaction cost of each payment.  For the most part,  
            unregulated retail and service providers recover the  
            transaction costs through various methods such as increasing  
            the price of the good or service sold or using company  
            revenue.  But investor-owned utilities (IOUs), unlike  
            retailers, cannot simply raise utility rates to offset the  
            transaction costs.  IOUs must submit a general rate case  
            typically every three years detailing their revenues,  
            expenses, and investments, including how much they wish to  
            charge ratepayers.  Current law restricts passing the  
            transaction costs on to other utility customers; some  
            utilities assess a separate fee on top of the monthly bill,  
            when a credit card is used to pay the bill.  


           3)Impact on Ratepayers:  The fundamental question is whether  
            utilities should spread the transaction costs across all its  
            customers or should the costs continue to be borne by the  
            individual card user.  Typically, transaction costs vary  
            depending on the payment method being used and are negotiated  
            between the retailer and the banking provider.  According to  
            the sponsor, this transaction fee discourages customers from  
            using credit or debit cards.  The sponsor notes that other  
            forms of payment normally generate some costs to the utility  
            processing it.  Unlike credit or debit card fees, all the  
            other payment transaction fees are spread across the entire  
            customer base and recovered in rates.  By moving the  
            transaction costs into a water corporation's general rate  
            case, individual customers would no longer see the transaction  
            cost as a separate line item, but instead it would be blended  
            into the cost of the utility bills for all customers.  










                                                                    AB 1180


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            This bill authorizes a water corporation with more than 10,000  
            service connections to seek CPUC approval through its general  
            rate case; to create a pilot program designed to evaluate  
            customer interest in and utilization of bill payment options,  
            including credit or debit cards for their water bills; and to  
            assess the effectiveness of such payment options for  
            customers, as specified.  This bill requires the CPUC, in  
            consultation with the Low-Income Oversight Board, by July 1,  
            2020, to submit a report on pilot programs, as specified, to  
            the Assembly Utilities and Commerce Committee and the Senate  
            Energy, Utilities and Communications Committee.  This bill  
            sunsets the pilot program on January 1, 2022. 




           Analysis Prepared by:                                             
                          Edmond Cheung / U. & C. / (916) 319-2083  FN:  
          0002578