BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 2570 (Quirk) - Telecommunications: universal service:
reimbursement claims
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|Version: June 30, 2016 |Policy Vote: E., U., & C. 9 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: August 1, 2016 |Consultant: Narisha Bonakdar |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 2570 makes changes to the state's LifeLine
universal telephone service program specific to procedures for
reimbursements related to wireless telephone service provided to
eligible low-income households.
Fiscal
Impact:
Unknown, likely significant, costs (Utilities Reimbursement
Account) to the California Public Utilities Commission (CPUC).
(See staff comments)
Background: LifeLine program. The Moore Universal Service Telephone Act
of 1987 establishes the goal of offering basic telephone service
at affordable rates to the greatest number of California
residents. To help achieve this goal, state law directs CPUC to
develop the California LifeLine Program to provide basic
telephone service at a discounted cost to low-income households.
AB 2570 (Quirk) Page 1 of
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The Act requires the CPUC to annually designate a class of
LifeLine service necessary to meet minimum residential
communications needs, develop eligibility criteria, and set
rates for the LifeLine services, which are required to be not
more than 50 percent of the rate for basic telephone service.
Households at or below 150 percent of the federal poverty level
(about $36,000 annually for a family of four) are eligible to
participate in the program. The current maximum subsidy is about
$22 per month (a state subsidy of $12.65 per month and a federal
discount of about $9.25 per month). Additionally, the CPUC
provides (1) a per enrollee monthly payment to cover carriers'
administrative costs, (2) a one-time connection subsidy for new
enrollees or enrollees that switch plans, and (3) a subsidy to
cover other telephone taxes and surcharges for LifeLine
enrollees. The revenues to fund the program are collected from a
surcharge on non-LifeLine customers, which the CPUC adjusts
based on projections of the amount of revenue needed to cover
the costs of the program.
General Order 153. Currently, per General Order 153, the CPUC
must pay on 120-day payment cycle-60 days for carriers to submit
claims and 60 days for PUC to review, correct errors and process
claims. Of the 60 days allocated to the CPUC, 30 days are
allocated for State Controller Office to process claims
reimbursements, prepare checks, and time for delivery by USPS.
Proposed Law:
This bill:
1)Prohibits the CPUC from reimbursing a telephone corporation
for providing wireless lifeline service to a new subscriber if
the subscriber has enrolled in wireless lifeline service with
another telephone corporation within the previous 60 days.
2)Provides that a subscriber may terminate wireless LifeLine
service within 14 days of service activation without incurring
any charges, including an early termination, as authorized
pursuant to Rulemaking 11-03-113.
3)Requires the CPUC to reimburse a telephone corporation
providing wireless lifeline service within 90 days of the date
AB 2570 (Quirk) Page 2 of
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the telephone corporation submits a reimbursement claim or pay
interest to the telephone company.
Staff
Comments:
Increased Interest Expense. The CPUC interprets the bill
language as requiring payment of all claims within 90 days (or
interest due) unless exempted by Section 9.9.2 of General Order
153. Section 9.9.2 exempts interest payments for claims filed
late that lack sufficient documentation, for failure to remit
surcharges, and other factors. However, this section does not
address treatment of claims that are erroneous and/or
inaccurate. As such, this bill could be interpreted to eliminate
the CPUC's ability to deny claims, or address inaccuracies
without penalty. If a carrier does not correct errors in a
timely basis, the CPUC will not be able to meet its 30-day
timeframe to submit to SCO, or may have to pay additional fees
for SCO to expedite claims payments.
The author and the committee may wish to consider adding
language to clarify that the timeline does not begin until a
complete and accurate claim is submitted to prevent erroneous
claim and/or interest payments.
Impact on Customers. The CPUC notes that it is currently
contemplating a reduction in the ratepayer surcharge; this bill
may affect this reduction.
The CPUC also notes that, if this bill is enacted, low income
consumers will likely be harmed if they wish to transfer their
LifeLine service to another provider within 60 days of purchase.
If consumers find that their new service is not satisfactory
and they wish to move to a new provider, this bill may require
an effective "early termination penalty", require consumers to
maintain unsatisfactory service for 60 days, or lose coverage
for 60 days.
Language in D.14-01-036 allows wireless LifeLine providers to
offer LifeLine contracts with early termination fees.
Currently, none of the 14 authorized wireless providers offering
LifeLine service offer plans with contracts and early
termination fees. If providers are encouraged to change their
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business strategy as a result of this bill, consumers could face
both an inability to change providers for 60 days and early
termination fees. It is expected that consumers will be unhappy
and/or confused resulting in additional costs to the CPUC to
communicate with those who contact the CPUC.
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