BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 1180 (Cristina Garcia) - Rates and charges for water service: payment transaction fees ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: June 6, 2016 |Policy Vote: E., U., & C. 11 - | | | 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: June 27, 2016 |Consultant: Narisha Bonakdar | | | | ----------------------------------------------------------------- This bill does not meet the criteria for referral to the Suspense File. Bill Summary: SB 1180 allows, until January 1, 2022, specified water corporations to establish pilot programs that evaluate customer interest in transaction card and debit card payment option that do not require the customer to pay transaction fees. The bill also allows a water corporation to recover the reasonable expenses incurred in providing its customers with these bill payment options. Fiscal Impact: Increased costs of approximately $131,000 per year (Public Utilities Commission Utilities Reimbursement Account) for the California Public Utilities Commission (CPUC) to monitor the rate case, collect and analyze data, and coordinate with the Low Income Oversight Board. AB 1180 (Cristina Garcia) Page 1 of ? Background: CPUC's regulation of water utilities. The CPUC has jurisdiction over 113 privately owned water utilities: nine Class A water utilities (10,000 or more connection points); five Class B water utilities (2,000 or more connection points); 25 Class C water utilities (500 or more connection points); and 74 Class D water utilities (less than 500 connection points). Combined, these utilities deliver water service to roughly 16 percent of the state's population (about six million residents). The CPUC regulates all aspects of the privately owned utilities' service provision, including assessing their rates to ensure they are reasonable, while providing a reasonable rate of return to continue to provide customers service and satisfy shareholders. Credit cards and utilities. Currently, the CPUC requires electric, natural gas, and water companies it regulates to secure approval before offering a credit/debit card bill payment option. Most unregulated retail and service providers recover transaction costs from various methods such as increasing the price of the good or service sold or using company revenue. However, regulated utilities may only recover reasonable transactions cost from customers who choose to use those payment options. As a result, some utilities assess a separate fee on top of the monthly bill, when a credit card is used to pay the bill. According to the CPUC, water corporation fees generally range between $1 and $3. Processing fees are not assessed on other forms of payment, such as cash or check, though these also generate some processing cost for the utility. Unlike credit or debit card fees, all the other payment transaction fees are spread across the entire customer base and recovered in rates. Pilot programs already underway. In August 2014, the CPUC approved a settlement of a 2012 General Rate Case application by the California Water Service Company (CalWater) which includes, among other things, a pilot program to track costs and savings with processing credit and debit cards. As part of the settlement, CalWater agreed that any costs that exceed the savings would be absorbed by CalWater, instead of ratepayers. CalWater would have the option of pursuing a fee-based credit AB 1180 (Cristina Garcia) Page 2 of ? card or debit card payment offering. Proposed Law: This bill: 1)Authorizes, until January 1, 2022, a water corporation with more than 2,000 service connections to seek CPUC approval through its general rate case to operate a pilot program designed to evaluate customer interest in, and utilization of, bill payment options, including, but not limited to, credit card, debit card and prepaid card bill payment options, and to assess the cost-effectiveness of, and customer interests served by, customer access to those bill payment options. 2)Limits the pilot program to the duration of the water corporation's rate case cycle, but allows the CPUC to extend the program at the request of the water corporation in its subsequent rate case application. 3)Requires the CPUC to allow a water corporation to recover the reasonable expenses incurred by the water corporation in providing its customers with these bill payment options, and to allow water corporations to not impose a transaction fee on its customers for using these bill payment options. 4)Prohibits the costs of a pilot program from being recovered of low-income customers who participate in specified programs, and would require a water corporation that is operating a pilot program to provide certain notifications to its customers. 5)Provides that the section shall remain in effect until January 1, 2022 and is repealed unless another statute is enacted. 6)Requires the CPUC, in consultation with the Low-Income Oversight Board, by July 1, 2020, to submit a report to the relevant legislative committees regarding the pilot programs AB 1180 (Cristina Garcia) Page 3 of ? operated by water corporations under this bill that includes an assessment of the use of credit cards by low-income customers to avoid service disconnections, an assessment of the impact of use of credit cards for customer bills on household debt burden, and an assessment of data considered on an aggregate basis regarding customer utilization and the cost-effectiveness of the bill payment options. 7)Requires the report, based on these assessments and an assessment of the customer interests served by providing these bill payment options, to evaluate the usefulness of an individual customer transaction fee and include a recommendation regarding individual customer transaction fees for credit card, debit card and prepaid card payments accepted by water corporations. 8)Provides that the section shall remain in effect until January 1, 2024 and is repealed unless another statute is enacted. -- END --