BILL ANALYSIS 1
1
SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
MARTHA M. ESCUTIA, CHAIRWOMAN
AB 746 - Blakeslee Hearing Date:
June 21, 2005 A
As Amended: June 2, 2005 Non-FISCAL
B
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DESCRIPTION
Current law bars retailers from imposing credit card surcharges,
with specified exemptions.
This bill exempts payments to electric or gas utilities from the
prohibition on credit card surcharges.
This bill states legislative intent that an electric or gas
utility that allows customers to pay by credit or debit card to
recover their additional reasonable costs only from those
customers who pay by credit or debit card.
This bill requires the California Public Utilities Commission
(CPUC) to determine the reasonableness of any credit or debit
card transaction fees and to determine how any associated costs
or savings shall be recovered.
BACKGROUND
Electric and gas utility billings in California are roughly $25
billion annually. This represents a huge new market for credit
card processors and issuers, as much as $500 million annually if
the usual 2% credit card processing fee is applied, all of which
would go towards increased electric rates. Energy utilities do
not accept credit cards today because of the cost to ratepayers
and the bar on convenience fees.
The proliferation of credit card user rewards programs, such as
frequent flier miles, points, and cash back, has made credit
card use more attractive than ever. Of course the cost of those
programs is paid out of the credit card processing fees. This
trade off becomes clear in the context of credit card usage for
utility bills. While customers would certainly enjoy paying
their utility bills with a credit card and accumulating airline
miles or cash back, those cardholder benefits are paid for out
of higher utility costs, which would not be visible if they are
rolled in with the myraid other utility costs into a single
utility rate.
COMMENTS
Unlike most retail purchases, electric and gas utility service
cannot be paid by credit card. While credit can be misused, it
offers customers convenience and a way to finance their
purchases.
This bill deletes the prohibition on energy utilities accepting
credit cards and imposing a surcharge on the credit card user.
The California Public Utilities Commission would determine
whether the surcharge, or convenience fee, is reasonable.
Therefore, this bill would provide customers with a payment
option they don't have today. It does not restrict any other
form of payment.
The broader question is whether utilities should accept credit
cards and spread the credit card processing cost across all
customers, just as most retailers do. The cost of accepting
credit cards is pretty clear. If all PG&E customers paid by
credit card and PG&E paid a 2% credit card processing fee,
PG&E's rates would need to increase by $200 million annually.
But accepting credit cards may also result in operational
savings for the utilities by reducing the number of checks
handled, allowing quicker access to funds, and lowering
collection costs. Whether the net additional cost is made
acceptable by the added convenience to customers is a judgement
that the CPUC can make. The author and committee may wish to
consider requiring the CPUC to determine whether the utilities
should accept credit cards and spread the cost to all
ratepayers. This could be done during the utilities next rate
case. Unless and until the CPUC finds that this is in the
public interest, the utilities would only be permitted to accept
credit cards if the cost of using the card were born by the user
and the CPUC found that cost to be reasonable.
ASSEMBLY VOTES
Assembly Floor (65-4)
Assembly Utilities and Commerce Committee
(10-0)
POSITIONS
Sponsor:
Southern California Edison
Support:
California Public Utilities Commission
California Senior Advocates League
Congress of California Seniors
Pacific Gas and Electric Company
Sempra Energy
Oppose:
None on file
Randy Chinn
AB 746 Analysis
Hearing Date: June 21, 2005