BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1180|
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THIRD READING
Bill No: AB 1180
Author: Cristina Garcia (D)
Amended: 8/8/16 in Senate
Vote: 21
SENATE ENERGY, U. & C. COMMITTEE: 11-0, 6/13/16
AYES: Hueso, Morrell, Cannella, Gaines, Hertzberg, Hill, Lara,
Leyva, McGuire, Pavley, Wolk
SENATE APPROPRIATIONS COMMITTEE: 5-0, 6/27/16
AYES: Beall, Hill, McGuire, Mendoza, Nielsen
NO VOTE RECORDED: Lara, Bates
ASSEMBLY FLOOR: 71-3, 1/25/16 - See last page for vote
SUBJECT: Rates and charges for water service: payment
transaction fees
SOURCE: California Water Association
DIGEST: This bill allows, until January 1, 2022, specified
water corporations to establish pilot programs, once approved by
the California Public Utilities Commission (CPUC), that evaluate
customer interest in using credit cards, debit cards and prepaid
cards to pay utility bills, without requiring an individual
payment transaction fee and allows these utilities to recover
the reasonable expenses incurred in providing its customers with
these bill payment options.
Senate Floor Amendments of 8/8/16 narrow eligibility for the
credit card pilot program to only large water companies,
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specifically those with over 10,000 service connections (known
as Class A), by removing reference to water companies with more
than 2,000 service connections (which encompass both Class B and
Class A). The amendments also remove this bill's proposal to
provide the CPUC the discretion to extend the pilot program
beyond the time period approved in a utility's general rate
case.
ANALYSIS:
Existing law:
1)Establishes the CPUC to regulate privately owned public
utilities in California. (Article XII of the California
Constitution)
2)Requires the CPUC to establish the California Alternate Rates
for Energy (CARE) program of assistance to low-income electric
and gas customers with an annual household income not greater
than 200 percent of the federal poverty guideline levels.
(Public Utilities Code §739.1)
3)Requires the CPUC to consider programs to provide rate relief
for low-income ratepayers of water corporations. (Public
Utilities Code §739.8)
4)Authorizes an electrical, gas, or water corporation to offer
credit card and debit card bill payment options, if approved
by the CPUC, and, upon approval, authorizes an electrical,
gas, or water corporation to recover, through an individual
customer transaction fee, reasonable transaction costs
incurred by the electrical, gas, or water corporations from
those customers that choose those methods of payment. (Public
Utilities Code §755)
5)Establishes the Low-Income Oversight Board to advise the CPUC
on low-income electric, gas, and water customer issues and
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serve as a liaison for the CPUC to low-income ratepayers and
representatives. (Public Utilities Code §382.1)
6)Exempts from the existing prohibition upon retailers to impose
a surcharge on a cardholder who elects to use a credit card in
lieu of payment by cash, check or similar means the
transaction fee charges of an electrical, gas, or water
corporation, and approved by the CPUC, on customer bill
payments made by credit card or debit, and related penalties
and cause of action. (Civil Code §1748.1)
This bill:
1)Authorizes, until January 1, 2022, a water corporation with
more than 10,000 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 general rate case cycle.
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 requires a water corporation that is operating a pilot
program to provide certain notifications to its customers.
5)Requires the CPUC, in consultation with the Low-Income
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Oversight Board, by July 1, 2020, to submit a report to the
relevant legislative committees regarding the pilot programs
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.
6)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.
7)Provides that this bill shall remain in effect until January
1, 2024, and is repealed unless another statute is enacted.
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 get
approval from the CPUC to offer a credit/debit card bill payment
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option. As more and more customers turn to credit or debit
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 cost by increasing the price of the good or service
sold or absorbing the costs. In the case of a regulated
utility, current law allows investor owned utilities to recover
reasonable transactions cost, but only from those customers that
choose to pay by those card 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,
in the case of water corporations, the fee generally ranges
between $1 to $3. According to the sponsor, California Water
Association, this transaction fee frustrates customers. While
other forms of payment such as check processing or cash payments
also generate some cost to the utility in order to process the
payments, those transactions are not assessed on an individual
fee to the user. Instead, the non-card payment transaction fees
are spread across the entire customer base and recovered in
utility rates.
Impact on ratepayers. By allowing water corporations to forgo
the individual transaction fee in lieu of recovering the
reasonable expenses in the general rate case, ratepayers may
experience an increase in rates to cover the costs. However,
it's also likely the increased costs would be fairly minimal and
possibly consistent with costs associated with processing other
payments. When a utility customer is about to have their
service shutoff due to lack of payment, the option to pay with a
credit card, depending on the terms of the credit card, may be
less costly than the fee to have the service shutoff and
restarted.
CPUC low-income assistance for water ratepayers. Of the
privately-owned utilities, the CPUC has authorized the largest
nine water utilities to offer low-income rate assistance
programs similar in concept to those provided to electricity
customers through CARE. Each water utility's program is varied
in terms of the amount of the assistance provided to low-income
customers and the collection of the surcharge from
non-participating ratepayers to cover the cost of the program.
Therefore, the provisions of this bill that prohibit a utility
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from recovering costs of the pilot program from low-income
customers could be implemented fairly easily by the Class A
water companies since they already identify their low-income
customers through these assistance programs.
Pilot programs already underway. The CPUC has already approved
pilot programs to allow some water utilities to provide their
customers the option to pay their utility with a credit or debit
card without an individual transaction fee. However, unlike this
bill, those pilot programs would require the utility to absorb
any net costs in providing the credit card option. These
include pilot programs by California Water Service Company and
Suburban Water Systems which include provisions that any costs
exceeding the savings of processing payments with credit cards
would be absorbed by the companies, instead of ratepayers.
California Water Service Company reports that a growing number
of customers are using credit cards to avoid discontinuing
service for nonpayment, stating that in 2008 there were 8,814
customer transactions that fell into that category and as of
2014, there were 42,295 credit or debit card transactions over
the year to avoid shut-off for nonpayment.
Need to assess credit card usage? This bill attempts to
mitigate and better address ratepayer costs by requiring the
CPUC to assess whether the pilot programs create an increase in
household debt burden, requiring the utility to assess the pilot
program usage, and requiring a report on the cost-effectiveness
of the pilots. While well-intended, the reality is many
consumers have grown accustomed to paying their bills online or
by phone with credit cards, prepaid cards or bank accounts. In
general, consumers in 2016 are likely to appreciate the
convenience of utilizing more payment method options, so long as
cash and check options are preserved. The CPUC may not have
much expertise in assessing household debt burden and be limited
in their ability to access information regarding customer's
perspectives on service disruptions as intended by the
provisions of this bill.
Prior Legislation
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AB 746 (Blakeslee, Chapter 746, Statutes of 2005) permitted an
electrical, gas or water corporation to charge a reasonable
transaction fee when customers pay their utility bills by credit
card and debit card and exempts these fees from an existing
exemption on retailers to impose a surcharge for using a credit
card for payment.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee, increased
costs of approximately $131,000 per year (Public Utilities
Commission Utilities Reimbursement Account) for the CPUC to
monitor the rate case, collect and analyze data, and coordinate
with the Low-Income Oversight Board.
SUPPORT: (Verified8/8/16)
California Water Association (source)
California American Water
California Bankers Association
California Credit Union League
Central Basin Municipal Water District
OPPOSITION: (Verified8/8/16)
None received
ARGUMENTS IN SUPPORT: According to the sponsor of this bill,
California Water Association (CWA): "a 2005 law is discouraging
the payment of utility bills online by credit and debit
cardholders at a time when more consumers are utilizing the
convenience of online bill payment options as their primary
method of paying recurring bills." CWA argues that all forms of
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payment generate some processing costs. Therefore, residents
who choose to use credit or prepaid cards to pay their utility
bills should not be penalized with an individual transaction
fee.
ASSEMBLY FLOOR: 71-3, 1/25/16
AYES: Achadjian, Alejo, Baker, Bigelow, Bloom, Bonilla, Bonta,
Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu,
Chu, Cooley, Cooper, Dahle, Daly, Dodd, Eggman, Frazier,
Gallagher, Cristina Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Hadley, Roger Hernández, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk,
Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth,
Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk,
Williams, Wood, Atkins
NOES: Travis Allen, Brough, Gray
NO VOTE RECORDED: Dababneh, Beth Gaines, Eduardo Garcia, Grove,
Harper
Prepared by:Nidia Bautista / E., U., & C. / (916) 651-4107
8/10/16 15:45:23
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