BILL ANALYSIS Ó
AB 1180
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB
1180 (Cristina Garcia)
As Amended August 8, 2016
Majority vote
--------------------------------------------------------------------
|ASSEMBLY: | 71-3 | (January 25, |SENATE: | 38-0 |(August 15, |
| | |2016) | | |2016) |
| | | | | | |
| | | | | | |
--------------------------------------------------------------------
Original Committee Reference: U. & C.
SUMMARY: Specifically, this bill:
1)Authorizes, until January 1, 2022, a water corporation with
more than 10,000 service connections to seek California Public
Utilities Commission (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.
AB 1180
Page 2
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
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)Sunsets the provisions authorizing the pilot programs on
January 1, 2022, and sunsets the provisions to prepare a
report on the use of credit cards by low-income customers on
January 1, 2024.
AB 1180
Page 3
The Senate amendments:
1)Codify a previously uncodified section of the bill that
requires an assessment of the use of credit cards by
low-income customers and sunset this section on January 1,
2024.
2)Make minor non-substantive changes
FISCAL EFFECT: 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.
COMMENTS:
1)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% 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.
2)Credit Cards and Utilities: Currently, the CPUC requires
AB 1180
Page 4
electric, natural gas, and water companies it regulates to get
approval from the CPUC to offer a credit/debit card bill
payment 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.
Others might absorb the cost of the credit card as a company
expense. According to the CPUC, in the case of water
corporations, the fee generally ranges between $1 and $3.
According to the sponsor, California Water Association, this
transaction fee assessed for paying a water bill using a
credit card 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.
3)Impact on Ratepayers: Currently, water corporations that
offer payment by credit card and the water corporation either
absorb these costs or charge a transaction fee. By allowing
water corporations to forgo the individual transaction fee in
lieu of recovering the expenses in the general rate case,
ratepayers may experience an increase in rates to cover the
costs. 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. However, that customer who uses their credit card
to avoid shut off may add to household debt if they don't have
the funds to pay the new credit card debt.
AB 1180
Page 5
4)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 California Alternate Rates for Energy
(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 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.
5)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 the 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.
6)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.
AB 1180
Page 6
7)Prior Legislation: AB 746 (Blakeslee), Chapter 426, 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.
Analysis Prepared by:
Sue Kateley / U. & C. / (916) 319-2083 FN:
0004239