BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 746|
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THIRD READING
Bill No: AB 746
Author: Blakeslee (R)
Amended: 7/5/05 in Senate
Vote: 21
SENATE ENERGY, UTILITIES & COMMUNIC. COMM. : 7-1, 6/21/05
AYES: Escutia, Morrow, Alarcon, Campbell, Cox, Dunn,
Murray
NOES: Bowen
NO VOTE RECORDED: Battin, Kehoe, Simitian
ASSEMBLY FLOOR : 65-4, 4/28/05 - See last page for vote
SUBJECT : Public utilities: payment of billings
SOURCE : Southern California Edison
DIGEST : This bill deletes the prohibition on energy
utilities accepting credit and debit cards and imposing a
surcharge on the user.
ANALYSIS : Current law bars retailers from imposing
credit card surcharges, with specified exemptions.
This bill exempts payments to electric, gas, or water
utilities from the prohibition on credit card surcharges.
This bill states legislative intent that an electric, gas,
or water utility that allows customers to pay by credit or
debit card may recover their reasonable costs from those
CONTINUED
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customers who pay by credit or debit card. The bill states
intent that no portion of the expense is to be shifted to
customers that do not choose these payment options, unless
and until the Public Utilities Commission (PUC) determines
that the benefits to ratepayers exceeds the net cost of
accepting those cards.
This bill requires the PUC to determine the reasonableness
of credit or debit card transaction costs 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 two percent credit card
processing fee is applied, all of which goes 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 myriad 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
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credit card user. The PUC will determine whether the
surcharge, or convenience fee, is reasonable. Therefore,
this bill provides customers with a payment option they do
not 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 Pacific
Gas and Electric (PG&E) customers paid by credit card and
PG&E paid a two percent 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
judgment that the PUC can make.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 7/5/05)
Southern California Edison (source)
California Senior Advocates League
Congress of California Seniors
Pacific Gas and Electric Company
Public Utilities Commission
Sempra Energy
ASSEMBLY FLOOR :
AYES: Aghazarian, Arambula, Baca, Bass, Benoit, Berg,
Bermudez, Blakeslee, Bogh, Calderon, Canciamilla, Chavez,
Chu, Cogdill, Cohn, Coto, Daucher, De La Torre, DeVore,
Dymally, Emmerson, Evans, Frommer, Garcia, Harman,
Haynes, Jerome Horton, Shirley Horton, Houston, Jones,
Keene, Koretz, La Malfa, Laird, Leno, Levine, Liu,
Matthews, McCarthy, Mountjoy, Mullin, Nakanishi, Nation,
Negrete McLeod, Niello, Parra, Pavley, Plescia, Richman,
Ridley-Thomas, Sharon Runner, Ruskin, Salinas, Spitzer,
Strickland, Torrico, Tran, Umberg, Vargas, Villines,
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Walters, Wolk, Wyland, Yee, Nunez
NOES: Klehs, Maze, Montanez, Saldana
NO VOTE RECORDED: Chan, Goldberg, Gordon, Hancock, Huff,
Karnette, La Suer, Leslie, Lieber, Nava, Oropeza
NC:mel 7/5/05 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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