· No charges for remote disconnection or remote reconnection. TURN would limit such a ban on charges to disconnection for nonpayment.

We affirm the general approach to remote disconnections that we adopted in D.10-07-048, i.e., we continue to believe that it is reasonable to take advantage of the significant cost savings that modern metering technology can provide while providing enhanced protection to consumers whose health and safety might be jeopardized by a remote disconnection program. Where customer health and safety concerns are not implicated, we find insufficient reason to forego the savings. Accordingly, we do not adopt a universal requirement for an in-person visit by a utility representative prior to disconnection. However, based on the Phase II comments, we find it necessary to and will continue to require on-site visits by a utility representative to protect vulnerable or sensitive customers. Such visits should take place within 48 hours, or at the time, of disconnection. We clarify that we do not require the representative who makes the in-person visit to physically disconnect service. The actual disconnection may be performed remotely.

We expand the definition of vulnerable customers to include not only medical baseline and life support customers but also customers who certify that they have a serious illness or condition that could become life threatening if service is disconnected. We do not require the customer to produce a physician's statement in support of the certification; i.e., customers may self-certify as to the illness or condition. While we recognize SCE's argument that its criteria for medical baseline eligibility include customers "being treated for life-threatening illnesses" and that this includes both temporary and permanent illnesses, we remain concerned that the medical baseline designation alone may not be adequate to protect at-risk customers. As CforAT points out, there are many households containing disabled individuals who are not enrolled in programs such as medical baseline because they are unaware of them or because their disability does not cause them to use above-average levels of energy. "The fact that they are not enrolled in these programs ... does not mean that they would not be subject to severe harm if they were disconnected."17

We decline to more broadly expand the definition of sensitive customers requiring site visits to include all seniors and all customers with young children. Those categories may be too broad to be sufficiently targeted to customers whose health or safety may be jeopardized by disconnection. However, we emphasize that we are adopting minimum standards for in-person visits. The utilities should continue to evaluate whether it would be cost-effective or otherwise appropriate to broaden the protection beyond what we require here. We note that at one point in this proceeding SCE proposed including elderly customers among those eligible for in-person visits, and that SCE had used that criterion for several years.18

We also decline to establish a one-year transition period during which there would be a moratorium on remote disconnections. As discussed above, the protections we adopt today are adequate to protect sensitive customers. With respect to non-sensitive customers, the notification procedures followed by PG&E and SCE are the same irrespective of the method of disconnection. Further, we do not require zero charges for remote disconnection and reconnection. While remote switching technology enables substantial cost savings, the costs of these services are not reduced to zero. These charges are appropriately addressed in the utilities' respective rate proceedings. Finally, we confirm that gas service should not be remotely disconnected or reconnected.

For SCE, D.10-07-048 provided that the disconnection practices ordered by the OIR and that decision would remain in effect until the effective date of its GRC, which it anticipated would be January 1, 2012. D.10-07-048 provided alternative treatment for PG&E since the effective date of its next GRC was expected to be January 2014. The decision ordered continuation of the interim practices for PG&E until January 1, 2012 unless otherwise ordered, and it identified the sunset date for PG&E's interim disconnection practices as a Phase II issue. Subsequently, the ALJ asked parties to comment on whether the sunset date for both PG&E's and SCE's interim practices should be extended to December 31, 2013, the date that the Phase II settlement applicable to SDG&E and SoCalGas expires. As noted earlier, D.11-12-028 temporarily extended the interim practices until issuance of this Phase II decision.

CforAT, DRA, and Greenlining, joined by TURN in its reply comments, support continuation of the interim practices beyond their originally scheduled expiration date. CforAT supports their continuation until December 31, 2013 to match the expiration date applicable to SDG&E and SoCalGas. CforAT also proposes that provision be made for further extensions for practices that are found to be useful.

In support of extending the interim practices, the consumer groups point to ongoing economic conditions that may impact disconnections. CforAT and DRA note that low income Californians are particularly affected. DRA and Greenlining also point to California's continuing high unemployment rate. For example, in 35 of 40 counties where PG&E provides service, unemployment exceeded the statewide average of 12.3% in March 2011. Unemployment exceeded 20% in six of those counties that same month. Unpaid bills of two months or older totaled $55 million among low-income customers, double what was owed a year earlier, according to a March 2011 DRA report. DRA also points to forecasts that it will take until 2015 - 2020 for unemployment to drop to 8% in California as well as projections of a decline in the total CARE subsidy to PG&E customers in 2012.

PG&E and SCE maintain that the disconnection practice requirements should be discontinued. PG&E asserts that the reduction in its disconnections from 2009 to 2010, as well as an increase in payment plans and enrollment in assistance programs, demonstrate its ability to adapt to the needs of its customers. SCE notes (in its May 2011) comments that it has recorded $400,000 in incremental costs attributable to the practices in this proceeding, and that that number was expected to grow. SCE believes that allowing the sunset date to stand would provide an opportunity to analyze the impact of the practices to determine whether any of them have been effective in reducing disconnections or helping manage arrearages without causing high-cost write-offs borne by all ratepayers.

As we discussed in Section 3.1, the latest available disconnection data for PG&E and SCE point to a somewhat encouraging scenario of reduced disconnection levels, but cause for concern about the number of disconnections and the hardship imposed on customers remains at this time. As Greenlining points out, the reduction in PG&E's disconnections from 2009 to 2010 should be viewed in the context that disconnections were at a high level in 2009. While we are mindful that additional costs are being imposed on the general body of ratepayers by continuing the interim practices in effect, we must balance this concern against the hardship faced by customers at risk for disconnection. It is too early to declare the interim measures as an unqualified success, but we conclude it is also too early to terminate them, even on a "time-out" basis as suggested by SCE. We therefore order their continuation as follows. We tie the continuation of the interim practices to the benchmarking program that we adopt in Section 3.9 of this decision. The required practices shall remain in effect until December 31, 2013, provided, however, that in the event that the utility's disconnection rate does not exceed the benchmark, the practices may be terminated earlier. We address additional details of this provision in Section 3.9.

Finding that a mismatch between a customer's income cycle and a utility's billing cycle can be an obstacle to timely bill payment, the consumer representatives support allowing customers to select their own billing date. To the extent that it is not feasible for utilities to offer the option to all customers, CforAT recommends such a policy apply at a minimum to CARE and FERA customers and customers that have experienced difficulty paying their bills. DRA notes that CARE customers have more problems with the timing of bills as evidenced by their higher reconnect rates. Greenlining finds that even a few days' flexibility for a payment date that aligns with a paycheck can make a critical difference to a low-income person's bill management. To the extent that utilities' bill generation capacity would be overwhelmed by accommodating billing date requests generally, Greenlining believes it would be possible to offer the benefit to customers chronically at risk of disconnection. NCLC notes that other state regulatory agencies and utilities support the practice, and suggests a pilot program to evaluate how such an option would impact customers' payment histories. Referring to PG&E focus groups and its own experience working with customers, as well as a 1998 study published by the American Water Works Association Research Foundation and an Indiana study, TURN finds that accommodating requests for different billing cycles could reduce late payments and associated revenue lags to the benefit of all ratepayers. TURN's primary recommendation is to require that the utilities allow all residential customers to select a personal billing date. To the extent that the Commission prefers to limit the option to a pilot program, TURN supports allowing CARE and FERA customers and those with a history of late payment to select their billing date.

PG&E's current practice is to accommodate customer requests for specific meter read or billing dates provided that there are no operational obstacles or limitations to prevent such selections. However, PG&E would not be able to accommodate a large number of customer requests for a specific billing date. In any event, PG&E maintains that it has a generous timeline for collection. Its collection process does not begin until 42 days after the bill is issued, providing ample time for customers to pay their bill on a day of their choosing during the following month once they receive their paycheck. In addition, PG&E does not assess late payment fees to its customers. Accordingly, PG&E does not support the expenditure of additional funds to enable billing date choice for all customers.

SCE also does not support a requirement to allow billing date choice. SCE analyzed the practices of other utilities that were cited by consumer groups as examples of programs to allow billing date selection. In general, SCE finds that such programs have important restrictions and have not been shown to be successful in reducing arrearages. In fact, SCE finds the referenced programs to be more restrictive than the methods of assistance that it provides. Because SCE does not assess late payment charges to CARE customers, those customers already have flexibility to pay their bill after its due date. SCE customers can pay their bills within 52 days of receipt of the bill before becoming eligible for disconnection. SCE states that implementing a system where customers are able to select their own billing date would require costly system changes.

While customer choice of billing date could be beneficial for some customers at risk for disconnection, we are not persuaded that requiring the utilities to provide the option would be cost-effective. Such programs have been implemented elsewhere, but it has not been demonstrated that they have been effective or would be for PG&E and SCE. In making this determination, we are mindful that both PG&E and SCE offer considerable flexibility in bill payment. They do not impose late fees (for CARE customers in SCE's case). PG&E customers have 42 days after a bill is issued and SCE customers have 52 days after a bill is received before the disconnection process begins. We are also mindful that there could be significant costs if we required the option to be widely available. On balance, we do not find a mandated billing date option to be cost-effective. Nevertheless, we urge the utilities to allow such choice to the extent their billing systems allow, as PG&E does now, without the need for significant new expenditures.

We share CforAT's concern that PG&E and SCE customers may not be aware of the degree of flexibility they now enjoy in aligning their bill payment date with their income cycle, notwithstanding the due date notated on the bill. PG&E and SCE should ensure that customers who are at risk for disconnection are made aware of how they can take advantage of this option.

The OIR authorized the utilities to file Tier 1 advice letters to establish memorandum accounts to track any significant costs associated with complying with the new practices initiated with this proceeding, including any operations and maintenance charges associated with implementation of the practices as well as any uncollectible amounts in excess of those projected in the utility's last GRC. While the OIR provided that this proceeding would consider the categories and amounts of costs in the memorandum account that should be considered reasonable for recovery, D.10-07-048 confirmed that memorandum account cost recovery would be determined in the next GRC for each utility. The second Phase II ruling directed the utilities to provide in their second round Phase II comments a breakdown of compliance costs tracked in their memorandum accounts as of March 31, 2011. PG&E reported that it had recorded $4.8 million costs since the inception of this proceeding. SCE reported that it had recorded $35,223 in technology costs and $417,719 in write-off expenses due to waived deposits and extended payment plans. As of October 31, 2011, PG&E had recorded approximately $6.6 million in its memorandum account. In May 2011, PG&E began to record amounts for "write off impacts." The total for the 6-month period is approximately $2.6 million.

The disconnection practices resulting from this proceeding are ongoing, and the incremental compliance costs have not yet been adequately reviewed. We reaffirm our intention to review the reasonableness of costs tracked in the memorandum costs by the utilities in their respective GRCs. We do not address the reasonableness of costs incurred to date except to note that PG&E's recorded expenses exceed those of SCE by a factor of approximately 10. We look forward to an in-depth review of the costs.

The OIR's preliminary scoping memo asked parties to comment on whether the Commission should set a benchmark for the number of disconnections experienced and what the benchmark should be. DRA and the utilities responded to this request in their Phase I opening comments. DRA proposed a 3% disconnection benchmark and a separate delinquency benchmark to reduce the total dollar amount owed by customers. DRA portrayed its proposal as a tool to encourage the utilities to commit to lowering their disconnections, not as a disconnection moratorium. TURN supported DRA's proposal but also noted that it would accept a benchmark that functions as an expectation rather than an absolute standard that the utility would have to meet to avoid a penalty. The utilities objected to a benchmark that would effectively impose a moratorium on disconnections because that would lead to an increase in bad debt expense that would be passed on to all ratepayers. PG&E also noted that a benchmark that limited disconnections could lead to some customers being unable to pay service restoration charges.

D.10-07-048, the Phase I decision in this proceeding, did not address DRA's benchmarking proposal. Subsequently, SDG&E and SoCalGas entered into a settlement with consumer groups that was approved by D.10-12-051. Among other things, the settlement provided for separate disconnection benchmarks for all-residential customers (2.08% and 3.36% for SDG&E and SoCalGas, respectively) and for CARE customers (3.44% and 4.32% for SDG&E and SoCalGas, respectively). In summary, if the utility does not exceed the benchmark, it retains the discretion to manage its disconnection program. If the benchmark is exceeded, mandatory measures are imposed, including a requirement that the utility offer minimum three month payment plans and limits on reestablishment of credit deposits.

Referring to the SDG&E/SoCalGas settlement and its benchmarking provisions, the ALJ's second Phase II Ruling invited parties to comment on alternative mechanisms or practices that might be useful for reducing PG&E's and SCE's residential customer disconnections. In response, parties offered proposals for benchmarking as well as suggestions that are addressed elsewhere in this decision.

DRA proposes a modification to its earlier benchmarking proposal that focuses on CARE customers. DRA proposes CARE disconnection benchmarks that would limit disconnections to 5% annually for PG&E and 6% annually for SCE. As before, DRA does not support a disconnection moratorium. Instead, it sees a disconnection benchmark as a tool that would leave the utility with discretion for how to accomplish a regulatory goal at least cost. Referring to historical disconnection data, DRA finds that its proposal would essentially require PG&E to maintain the progress it made in 2010 to reduce CARE customer disconnections. DRA finds SCE's CARE customer disconnection rates, consistently over 8% each month from April 2010 to March 2011, to be unacceptably high. DRA believes that its proposal would encourage SCE to make changes in its treatment of CARE customers regarding disconnections.

Greenlining supports DRA's benchmarking proposal. PG&E and SCE do not support benchmarking. SCE reiterates its earlier opposition to any cap on disconnections, as it could have a negative impact on write-off expenses.

We concur with the utilities' concern that a moratorium or a cap on the number of disconnections could potentially lead to an excessive increase in write-offs of bad debt, thereby imposing unreasonably high costs on all ratepayers. However, a benchmark approach does not necessarily require a cap on disconnections. As TURN suggested earlier in this proceeding, a benchmark that functions as a target, rather than an absolute standard that the utility would have to meet to avoid a penalty, may have value in encouraging utilities to reduce disconnections.

We find that certain aspects of the overall benchmark framework adopted for SDG&E and SoCalGas have merit and applicability here. To the extent that the utilities are able to manage their operations to keep disconnections at or below the benchmark, they should continue to do so without further regulatory oversight such as mandatory disconnection practices. However, to the extent that disconnections exceed the benchmark, that would indicate a need for further review or oversight to address the disconnection problem. With these basic principles in mind, we adopt the benchmarking approach described below.

We adopt DRA's proposed annual CARE customer disconnection thresholds of 5% for PG&E and 6% for SCE. If the utility's annual CARE customer disconnection rate for 2012 exceeds this benchmark rate, the disconnection practice requirements adopted in this decision shall continue in effect for that utility for 2013, as discussed in Section 3.6 of this decision. If the utility does not exceed the CARE disconnection benchmark for 2012, it may file a Tier 2 advice letter requesting authority to discontinue the practices prior to December 31, 2013. If the utility exceeds the benchmark for 2012 but, for any month during 2013, the utility's CARE disconnection rate for the previous 12 consecutive months is less than the threshold, the utility may file a Tier 2 advice letter requesting authority to discontinue the practices prior to December 31, 2013. In both cases, the Tier 2 advice letter, if filed, shall become effective no earlier than 30 days after the date filed pursuant to General Order 96-B. In the advice letter filings, PG&E and SCE are directed to include an addendum that comprehensively reports (on a month to month basis) the IOUs' internal criteria and processes for determining how customers are identified as eligible for disconnection and the elapsed time before they are disconnected.19

After reviewing the consumer group comments on the proposed decision, we are persuaded to adopt two exceptions to the benchmark plan's sunset provision. First, we provide that the requirement for a pre-disconnection site visit by a field representative for vulnerable customers will remain permanent. Second, the requirement that utilities ensure that CSRs offer the option of live enrollment in the CARE program will remain in effect permanently.

We provide for the December 31, 2013 sunset date for the required disconnection practices, as well as the possibility of an earlier sunset date in 2013 if the utility's benchmark is not exceeded in 2012, with the understanding and expectation that the utilities can and will manage their customer service operations to achieve significant, durable reductions in the number of disconnections, particularly for low-income customers. If, however, one or more of the utilities continue to report high disconnection rates through 2013, whether measured against the benchmarks we adopt today or comparable industry-wide disconnection data, then we intend to revisit the disconnection issue in a new rulemaking. We anticipate that such rulemaking would address not only the types of disconnection practices that we have considered and adopted in this proceeding, but also the broader issue of affordability for customers generally and low-income customers in particular.

PG&E's comments on the proposed decision suggest that PG&E may not understand the benchmark plan that we are adopting. We therefore emphasize that the plan does not limit the number or percentage of CARE disconnections. Thus, PG&E's suggestion at page 2 of its opening comments that "establishing a fixed disconnection level will cause [customers who develop large delinquencies] to be treated differently based on the number of customers already in the delinquency queue" is without merit. PG&E should manage disconnections fairly and prudently irrespective of its actual CARE disconnection rate.

The OIR raised a concern that an anomaly can occur in the billing/accounting departments of the utilities when a customer owes both for an arrearage and a current bill, citing the following example:

[A]ssume a customer owes an arrearage of $150, is on a 3-month re-payment plan whereby the customer pays $50 towards the arrearage, and the customer has a current monthly bill of $100. If the customer makes a payment of $150, representing the $50 arrearage payment and the $100 current bill payment, how does the utility ensure that the proper monies are credited to the appropriate accounts? If all $150 is applied to the arrearage, the customer is delinquent on the current bill, whereas if all $150 is applied to the current bill the customer has a credit, but is in default on the arrearage re-payment arrangement. (OIR at 7.)

The OIR directed that the utilities propose a uniform billing/accounting methodology that ensures that the customer receives proper credit for monies paid. D.10-07-048 identified this as a Phase II issue, and the utilities (PG&E, SCE, SDG&E, and SoCalGas) addressed this request in their October 1, 2010 joint filing.

The utilities' joint response demonstrates that each utility has safeguards in place to help prevent inappropriate crediting of payments. We are persuaded that any benefits of having a uniform methodology across utilities are outweighed by the expenditures and resources that would be required to implement uniform practices.

D.10-07-048 identified the question of whether particular uniform disconnection notice practices should be adopted for all utilities as a Phase II issue. PG&E, SCE, SDG&E, and SoCalGas addressed this issue in their October 1, 2010 joint filing.

Reporting that they have slightly different time frames and similar but not identical language on disconnection notices, the utilities offer a proposal for more uniform language that they believe will benefit customers who move from one service territory to another and make it easier for consumer groups and representatives at the Commission to respond to customer questions about disconnection. First, they would create uniform language that would be included in customer notices related to late payment and disconnection and uniform language on the notice of pending disconnection, as described below.

The utilities will include, at a minimum, the following language on the initial late payment notice. They may include additional information that varies among them.

Your bill includes a past due balance. To avoid disconnection of your [gas/electric/utility] service, please pay the past due amount on or before XX/XX/XXXX. For assistance or to make a payment, please call Customer Service at 1-800-XXX-XXXX.

The utilities will include, at a minimum, the following language on the notice of pending disconnection. They may include additional information that varies among them.

Our records indicate that your account has an overdue balance. To avoid disconnection of your [gas/electric/utility] service, please pay the past due amount of $[amount] on or before XX/XX/XXXX. For assistance or to make a payment, please contact Customer Service at 1-800-XXX-XXXX. We are available to help you. You may also be eligible for financial assistance and income-qualified energy assistance programs.

PLEASE NOTE: If your utility service is disconnected for non-payment, there will be additional service charges and you will be required to pay all past due amounts before service is restored. In addition, a deposit may be required to re-establish your credit, whether or not your service is terminated.

Second, the utilities propose to create uniform timeframes for customer notices.

Day 0

Day 19

Day 27-33

Day 40-48

Bill Issued

Bill Due

Subsequent Monthly Bill Issued-Provides Notification of Delinquency

Notification of Pending Service Disconnection

Each of the utilities anticipated it would be able to implement this notice procedure during 2011 at no significant cost. Since uniform disconnection notice procedures may help consumers who move from one service territory to another, as well as consumer organizations and our own staff representatives who assist customers facing disconnection, we approve these proposals. PG&E and SCE should implement them to the extent they have not already done so.

We note that the adopted time frames are minimum standards, and that the utilities may adopt actual practices that are more generous to customers.

The interim rules adopted in the OIR and in D.10-07-048 address circumstances where otherwise applicable customer deposit requirements will be waived. D.10-07-048 posed as a Phase II issue the question of whether there should be exceptions to deposit rules for certain customers demonstrating continued fraud or bad check activities. Parties addressed this question in their first-round Phase II comments.

PG&E believes there should be an exception to deposit waivers for instances of customer fraud, continued delivery of bad checks, or where bankruptcy has occurred. PG&E addresses approximately 9,000 cases of fraud annually costing over $3 million. In 2009, PG&E had approximately 11,000 customers who provided 3 or more bad checks representing $21.5 million, and it processed 3,165 bankruptcies. SCE likewise proposes exceptions to deposit waivers for fraud, returned checks, and bankruptcy, finding that such exceptions would protect all customers.

In general, the consumer groups find the utility proposals overly broad. Greenlining proposes various parameters for identifying customers in "good standing." Greenlining is also concerned about the definition of "fraud" as used by the utilities. NCLC argues that bankruptcy alone should not be a basis for a waiver exception, and that more should be required of a customer who has filed bankruptcy, such as a history of non-payment of bills. TURN does not oppose limiting customers who bounce checks to a cash-only option but recommends against a re-establishment of credit deposit.

We authorize exceptions to our otherwise applicable deposit waivers for customers who have written three or more bad checks in a year and those involved in fraud. At this time there is no indication that the utilities would inappropriately apply the fraud exception and we therefore decline to define the circumstances in which it would apply. However, we concur with NCLC and other consumer groups that customers who have filed bankruptcy should not be placed in the same category as customers who have been involved in fraud or who have repeatedly written bad checks. As NCLC notes, bankruptcy is a legal process to resolve debt, whereas perpetrators of fraud and bad check writers are not engaging in legitimate activities.

Pursuant to Ordering Paragraph 12 of the Order Instituting Rulemaking and Ordering Paragraph 14 of D.10-07-048, the utilities have filed and continue to file monthly reports of specified disconnection data. Since disconnections are an ongoing problem, and it remains important for parties and our staff to monitor utility progress in addressing the problem, such reporting should continue as follows. Existing reporting requirements shall remain in effect through December 2013. Beginning in 2014 and continuing through 2018, the utilities will file semiannual reports. We expect our Energy Division to report annually to the Commission on the status of disconnections and associated utility practices.

PG&E offers a "Balanced Payment" plan and SCE offers a "Level Payment Plan" that remove bill volatility by breaking the estimated annual bill into 12 equal monthly payments. Noting that SCE excludes customers with arrearages from participating in the DRA recommends that these plans be made available to all customers. DRA believes that this would remove one of the causes of delinquent bills and would have a positive impact on customer payment behavior.

SCE notes that it is evaluating a level payment option for CARE customers in arrears, and several of the consumer advocates supports this proposal to explore a level payment plan. We urge SCE to implement the option but decline to order it to do so in the absence of a demonstration that it would be cost-effective.

In comments on the proposed decision, consumer groups propose that the utilities be required to file advice letters within 60 days of the effective date of the decision to explain how they will respond to certain directives of this decision. In particular, the consumer groups seek information from the utilities on (a) how they will notify customers with a serious illness or condition that could become life-threatening if service is disconnected of their option to provide certification to that effect; (b) how they will implement the directive to communicate with customers regarding their option to align their bill payment date with their income cycle notwithstanding the date printed on the bill; and (c) the results of the language option review directed in Section 3.4 above.

While we agree that information sought by the consumer groups will be helpful to parties, we are concerned that the proposed advice letter process could interfere with timely implementation of the measures we adopt today. Accordingly, in lieu of explanatory advice letters, we direct the utilities to file compliance reports within 60 days of the effective date of the decision that address the topics noted above.

17 CforAT First-Round Opening Comments, September 15, 2010, at 1.

18 SCE First Round Opening Comments, September 15, 2010, at 11.

19 Since it is unclear when, during 2013, the Advice Letter will be submitted, the Investor-owned Utilities (IOUs) will provide YTD data up to last full month before the filing. For example, if the Advice Letter is filed June 10, 2013, the IOUs should provide data from the beginning of this initiative until May 31, 2013.

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