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.  







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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  








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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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