BILL ANALYSIS Ó AB 1180 Page 1 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 Page 2 | | |Garcia, Holden, | | | | |Jones, Quirk, Wagner, | | | | |Weber, Wood | | | | | | | | | | | | ------------------------------------------------------------------ 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 Page 3 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 AB 1180 Page 4 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 Page 5 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