BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 2570 (Quirk) - Telecommunications: universal service: reimbursement claims ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: June 30, 2016 |Policy Vote: E., U., & C. 9 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 1, 2016 |Consultant: Narisha Bonakdar | | | | ----------------------------------------------------------------- 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 ? 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 ? 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 AB 2570 (Quirk) Page 3 of ? 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. -- END --