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
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|Version: June 6, 2016 |Policy Vote: E., U., & C. 11 - |
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|Urgency: No |Mandate: No |
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|Hearing Date: June 27, 2016 |Consultant: Narisha Bonakdar |
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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
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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
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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
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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.
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