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PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

I.D. # 8343

ENERGY DIVISION RESOLUTION G-3427

RESOLUTION

Resolution G-3427 Southern California Edison (SCE) requests approval to establish its Credit/Debit Card Bill Payment Option and discontinue its Pay-by-Phone payment option. SCE's request to accept credit/debit cards in payment of customers' bills is approved. SCE's proposal to discontinue its free Pay-by-Phone option is denied.

By Advice Letters 152-G/2269-E and 67-W filed on September 22, 2008.

__________________________________________________________

SUMMARY

This Resolution approves SCE's request in Advice Letters (AL) 152-G/2269-E and 67-W to allow customers to pay their SCE bills with a credit or debit card and incur a $3.50 transaction fee when such payments are made. SCE `s proposal to discontinue the free Pay-by-Phone option is rejected. Main elements of this resolution are summarized as follows:

The Division of Ratepayer's Advocates (DRA) protest to continue the Pay-by-Phone option is granted.

BACKGROUND

The purpose of ALs 152-G/2269-E and 67-W is to request approval of SCE's Credit/Debit Card Bill Payment Option pursuant to Public Utilities (PU) Code Section 755. Additionally, SCE proposes to discontinue its Pay-by-Phone Option. SCE states that discontinuance of the free pay by phone option is necessary to comply with Visa contract requirements.

PU Code Section 755 allows electric, gas, and water utilities to charge a convenience fee for credit and debit card payments that recover the transaction costs from those customers who choose to pay their utility service bill by credit or debit card. PU code 755 requires that only those customers choosing to use the credit or debit card payment option shall incur the convenience fee, unless the Commission determines that the credit card payment option results in savings to ratepayers that exceed the net cost of accepting those cards. SCE proposes a convenience fee applicable to participating customers based on its agreement with the vendor who will process these credit card payments.

There is no significant difference between AL's 152-G/2269-E and 67-W.

SCE proposes to file, upon approval of these advice letters, a supplemental compliance advice letter revising numerous energy statements, deposit notices, and collection/disconnection notices and a withdrawal of one filed form as a result of this credit/debit card bill option.

Description of SCE's Proposed Credit/Debit Card Payment Option

SCE seeks authority to assess a convenience fee of $3.50 per transaction to those residential customers who choose the option to pay their monthly bill and/or pay their deposit for electric, gas, and water service (utility service) through use of a credit or debit card. Under this payment option, SCE will outsource the acceptance of Visa and MasterCard credit and debit cards and pinless debit cards (ATM cards) for payments using JP Morgan Chase (JPMC) as the vendor. This payment option will be available to customers taking utility service under SCE's residential rate schedules and is available to residential customers including those scheduled for disconnection or who have already been disconnected for nonpayment of their bills. Once a credit/debit card payment has been made, SCE will receive immediate notification from JPMC and a memo will be posted to the customer's account regarding receipt of his/her payment.

SCE's credit and debit card payment option will be available to the approximately 74 percent of SCE's residential customers who have either a Visa or MasterCard.1 SCE stated that those utilities which accept multiple credit cards (including Visa) charge convenience fees ranging from $3.50 to $5.95 placing SCE's convenience fee at the lower end of the range. Customers using the credit/debit card option will pay the convenience fee directly to JPMC. SCE will not receive any portion of the convenience fee revenue.

Description of Credit Card Payment Option Process

Customers choosing to pay their utility service bills with a credit/debit card will call the vendor's Voice Response Unit (VRU) to make a credit/debit card or Automatic Teller Machine (ATM) debit card payment. Customers will be informed of the transaction fee as one of the initial steps in the payment process. At any time during the call, the customer can request the assistance of a JPMC English or Spanish-speaking customer service representative. JPMC would assess the $3.50 convenience fee for each transaction (each time a credit or debit card is used to make a payment). If a residential customer has more than one customer account and desires to pay by credit or debit card, the customer must make a separate card transaction for each account. A separate convenience fee will be assessed for each transaction. The vendor will accept the customer's account information, validate data/customer eligibility, and provide customers with their current SCE account balances including any past due amounts. Upon completion of each payment transaction, the vendor will provide a confirmation number to the customer. Successful customers' payments will then be immediately noted on the customers' accounts and posted nightly (except for weekends and Federal holidays) to the customers' account(s) in SCE's Customer Service System.

SCE said in a data response that it would update costs of its payment options in each general rate case. SCE would also regularly monitor the performance of the credit card payment option to determine its effectiveness and to what extent the program should be enhanced to improve customer service.

SCE said it would make its residential customers aware of the new credit card and debit card payment option through the following means: bill statement, the SCE.com website, printed materials describing payment options, and through SCE's Call Centers.

Discontinuance of SCE's Pay-By-Phone Option

SCE established its Pay-By-Phone option in 1995. This option allows customers to pay their bills from their checking account using a touch tone telephone. Customers call an 800 number which dials into a Voice Response Unit (VRU) where the transaction is ultimately handled by a third-party vendor. SCE does not assess a convenience fee for this payment option. SCE reports 11,000 customers enrolled and active in the Pay-By-Phone program and SCE processes approximately 8,200 transactions per month, representing about 0.2 percent of the residential bills SCE renders each month. SCE said that at least 50 percent of the customers currently enrolled in Pay-By-Phone use other payment options at least once or more each year.

According to SCE, if Pay-By-Phone option were to be retained, JPMC the vendor who currently processes the free Pay-By-Phone payment option will need a new platform which would require a new contract and six to nine months to test and develop bill presentation. JPMC provided SCE notification of a change in the IT system platform used to handle Pay-By-Phone calls estimated to cost $1 million plus $1,200 per month for maintenance.2 SCE stated in a data response that JPMC, the payment processing vendor, will retire the existing platform on February 28, 2009 and SCE is unable to get an extension for the current system.

SCE explained that the JPMC Visa and MasterCard contracts require that the convenience fee for other payment options in the same payment channel (such as phone and Internet) should be no lower than the fee charged Visa and MasterCard users. To comply with these contract terms, SCE would have to either: 1) decommission Pay-By-Phone altogether, or 2) charge a convenience fee of $3.50 or more for Pay-By-Phone transactions which are currently free.

In a data response Edison cited its Quickcheck payment option as an alternative to Pay-by-Phone which would allow the customer to pay via the telephone from their checking account. However, the Quickcheck payment option is not free. The charge for Quickcheck is $5.00 per transaction.

To comply with the Visa and MasterCard contract requirement, SCE has elected to discontinue enrollment in the Pay-By-Phone program and plans to decommission the Pay-By-Phone program contingent upon the Commission's approval of the credit and debit card payment option. SCE said it will work with the existing Pay-By-Phone customers to make them aware of alternative payment options.

Tariff Changes

SCE proposes to revise electric Rule 9, gas Rule 9 and water Rule 9 Rendering and Payment of Bills, to include credit/debit and "pinless" card transactions as an accepted method of payment. SCE also proposes to add a new section entitled Credit/Debit Card Payment Option which provides the terms and conditions of use and the $3.50 per transaction fee. SCE's Energy Statements and Deposit and Collection/Disconnection Notices will be modified in a subsequent compliance filing to include JPMC's toll-free telephone number on the second page of the customers' bills/notices under the heading "Options for Paying Your Bill."

NOTICE

Notice of AL 152-G/2269-E and AL 67-W was made by publication in the Commission's Daily Calendar. SCE states that copies of these Advice Letters were mailed and distributed in accordance with Section 3.14 of General Order 96-B.

PROTESTS

DRA's Protest

The Division of Ratepayer Advocates protested AL 153-G/2269-E for the following reasons:

DRA stated that residential customers should not have their payment options limited; severe credit crises and economic recession may make it more difficult for some SCE customers to qualify for credit cards; and this is not the time to disband economical payment methods.

DRA proposes to keep the pay-by-phone option intact, without any fees, and walk-in payments free of charges.

SCE's Response to DRA's Protest

SCE explained that the credit/debit card option will be available to customers taking service under SCE residential rate schedules and is available to all residential customers including those scheduled for disconnection or who have already been disconnected for nonpayment of electric service. SCE stated that its market research demonstrated that credit card acceptance as a form of payment is becoming a common practice in most service industries, including the utility industry. Most residential customers have come to expect that such a bill payment option will be available for their SCE utility service.

In response to DRA's request that SCE clarify the payment channel in the context of this new bill payment service SCE explained that customers can pay their electric bills through five payment channels (mail, in-person, phone, web and recurring3) using various payment methods (i.e. cash, check, and money order). The free Pay By Phone channel is the only payment channel that will be affected and eliminated. The JPMC Visa and MasterCard contracts require SCE to not charge a lower amount for payment methods in the same channel as their credit/debit card option. This requirement affects only SCE's phone payment channel, and specifically affects Pay-by-Phone (currently a free service and therefore less than the $3.50 charged for credit/debit card payment). No other channels are affected by the $3.50 charge.

SCE explained that it must comply with credit card companies' rules and standards that require other payment options in the same payment channel to not be free or have a lower fee than the $3.50 fee that will be charged credit card customers.

SCE cites three reasons for discontinuing the Pay-by-Phone service:

SCE states that currently there are only 11,800 customers enrolled in the Pay-by-Phone program. On a monthly basis, about 25 percent of those enrolled Pay-by-Phone customers choose to pay their bill with a different payment option (e.g. U.S. mail or walk-in). SCE concludes that on average only 8,200 or 0.2 percent of residential customers consistently use the Pay-by-Phone payment option each month. SCE compares this customer usage with the forecast average customer usage of monthly card payments of 696,000 for the first year increasing to 1,331,000 by the third year of the program. SCE said that by offering the new credit and debit card program more customers have another payment option to use to meet their bill needs.

SCE estimates that, of its 4.2 million customers, 3.1 million hold either a Visa, MasterCard, or a debit card and could benefit from SCE's proposed program.

To conform with Visa/MasterCards' rules and standards, SCE said it must either discontinue the Pay-by-Phone option or incur the IT system development costs and assess each Pay-by-Phone transaction a convenience fee of not less than the $3.50 required for a card transaction in order to offer the credit card payment option customers expect.

SCE clarified that walk-in payments at any of its 370 Authorized Payment Agency locations and payments sent by U.S. mail will continue to be free.

DISCUSSION

According to SCE, its proposal would allow about ¾ of its residential customers the option of paying their bills by Visa, MasterCard or pinless debit card. This option will also be available to avoid disconnection or to implement reconnection of service. In addition customers will be able to obtain real time account balance information and to access a JPMC's customer service representative

SCE should not eliminate the currently free Pay-By-Phone option when it offers the credit card payment option to customers.

SCE proposes to eliminate the currently free Pay-By-Phone option because it is in the same phone payment channel as the credit card payment option and the agreement with the credit card companies does not allow SCE to charge less than what the credit card option would cost for payment options in the same payment channel. According to SCE, 11,000 customers are currently enrolled in the Pay-by-Phone option and 8,200 customers regularly use this option. SCE does not currently charge for use of the Pay-by-Phone option. DRA has protested elimination of this free option.

Southern California Gas Company (SoCalGas) and San Diego Gas & Electric Company (SDG&E) both continue to offer the free Pay-by-Phone option in addition to allowing a fee-based credit/debit card option. The level of payments made by credit card, debit card, and e-check to SoCalGas and SDG&E is larger than the number of payments made by Pay-by-Phone. It is unclear as to why SoCalGas and SDG&E were able to offer these options while SCE can't. Pacific Gas and Electric Company (PG&E) has been authorized by the Commission to offer a fee-based credit card payment option, but has not yet implemented the option. PG&E does not offer a offer a free Pay-by-Phone option.

SCE states that JPMC will retire the existing Pay-by Phone platform on February 28, 2009 and SCE will not be able to get an extension. According to SCE, redeployment of the Pay-by-Phone option would cost an estimated $1 million and require 9 months to complete. Selection of a vendor other than JPMC would increase the time required to provide a Pay-by-Phone payment option with a new platform. To continue that option would require a new contract with JPMC or another vendor, some expenditure, and time to develop bill presentation and test the system. The costs potentially incurred by SCE to continue this option do not strike us as significant, and we believe that SCE should continue to offer a free Pay-by-Phone option.

We agree with DRA because the goal of introducing the credit card payment option is to enhance the menu of choices for customers, not to diminish them. Providing customers with reasonably convenient bill payment options is a key part of providing utility service. This element of service should not be compromised simply because credit card companies require that no other options in the same channel should be provided at a cost lower than the credit card option. SCE should upgrade the system if needed and should continue to make the free Pay-By-Phone option available.

SCE confirmed in response to DRA's protest that it does not propose to charge for walk-in or U.S. Postal service payments.

PG&E and SoCalGas/SDG&E provide the credit card option at a fee of $1.45 and $1.50 per transaction, respectively, compared to SCE's proposed fee of $3.50.

SCE's fee is higher because apparently Visa requires a $3.50 per transaction fee as opposed to the $1.45 -$1.50 per transaction fee that PG&E and Sempra negotiated with Master Card (and Discover in PG&E's case). In addition, Visa and possibly other credit card companies require that the utility not charge a lower fee for any other payments made in the same payment channel. SCE states that since substantially more customers have a Visa card compared to a MasterCard or other credit cards, getting Visa on board is necessary to provide the credit card option to the vast majority of customers. Because of Visa's high fees and its insistence that no other option in the same payment channel be provided at a lower rate, PG&E and Sempra apparently decided to go without including Visa in their credit card option. Because they have not included Visa, they are offering the credit card option at the lower rate of $1.45 - $1.50 that MasterCard and Discover agreed to.

Visa is exercising its market power to insist on high fees and eliminate lower cost credit card payment options.

In a data response to the Energy Division, SCE stated that Visa and MasterCard account for 90% of the U.S. cardholder market share, with 70% for Visa and 20% for MasterCard. SCE decided to include Visa in its credit card program because a larger share of residential customers would have the opportunity to take advantage of the credit card payment option. A credit card program without the Visa card brand would only be accessible to a much smaller percentage of SCE's residential customers

The 70% market share that Visa has in the credit card market gives it the market power to insist on its rules. SCE has only two options: it can either agree to Visa's restrictive rules and high fees or introduce the credit card option without including Visa as an option. SCE has chosen to include Visa whereas SoCalGas/SDG&E and PG&E have gone ahead with their credit/debit card payment option without Visa. We feel that Visa's high fees and restrictive rules reflect an exercise of market power that disadvantages SCE's customers.

We will approve with conditions SCE's request for authority to implement a Credit/Debit card payment option. However, we do not believe that the proposed program is worth the proposed $3.50 per transaction charge, which is more than double the credit card fee charged PG&E and SoCalGas/SDG&E customers, with the additional disadvantage of eliminating the free Pay-by-Phone option. We will approve a credit/debit card option for SCE with a $3.50 transaction fee but SCE should maintain the free Pay-By-Phone option. We understand that Visa and possibly MasterCard may not agree to be included in a credit card payment option unless no other option in the same payment channel is charged a lower fee. In that case, SCE should explore other credit/debit options that will maintain a free Pay-by-Phone option and possibly a lower transaction fee.

In addition, in order to determine if this option is really of some benefit to SCE customers, we will require SCE to provide a report to the Commission of the monthly level of participation in the credit/debit card payment option, including the separate number and amounts of payments using Visa and MasterCard. This report should be submitted within 90 days after the first year of program implementation as a Tier 2 advice letter.

Finally, we will examine any savings to SCE that result from the implementation of the credit/debit card option. SCE shall summarize and discuss any savings of the program in its next General Rate Case application.

If SCE decides to proceed with the credit/debit card option approved in this resolution, SCE shall submit advice letters revising its tariffs, energy statements and notices for gas, electric and water customers within 30 days Of the effective date of this resolution. The credit card option shall not go into effect until the Energy Division or the Commission has approved the tariffs.

COMMENTS

Public Utilities Code section 311(g)(1) provides that this resolution must be served on all parties and subject to at least 30 days public review and comment prior to a vote of the Commission. Section 311(g)(2) provides that this 30-day period may be reduced or waived upon the stipulation of all parties in the proceeding.

The 30-day comment period for the draft of this resolution was neither waived nor reduced. Accordingly, this draft resolution was mailed to parties for comments, and will be placed on the Commission's agenda no earlier than 30 days from today.

FINDINGS

1. SCE filed Advice Letters 152-G/2269-E and 67-W requesting authority to offer its customers a credit/debit card payment option and to discontinue its Pay-by-Phone Payment option.

2. DRA protested AL 152-G/2269-E recommending that the Pay-by-Phone option be left intact.

3. SCE proposes to outsource acceptance of Visa and MasterCard credit and debit cards and ATM debit cards to JP Morgan Chase.

4. The $3.50 fee proposed by SCE is higher than SoCalGas's, SDG&Es, and PG&E's fee because Visa imposes a higher fee and no other payment option in the same payment channel can have a lower transaction fee. SoCalGas SDG&E, and PG&E do not include Visa in their credit card payment options and have lower fees.

5. SCE's states that proposed fee is higher than that charged by SoCalGas, SDG&E and PG&E because unlike those utilities SCE's proposal would accept both Visa and MasterCard credit cards.

6. SCE shall maintain a free Pay-by-Phone bill payment option.

7. A credit/debit card bill payment option should be allowed for SCE customers, with a $3.50 per transaction fee, but not at the expense of eliminating the free Pay-by-Phone option.

8. SCE should provide a report to the Commission of the monthly level of participation in the credit/debit card payment option, including the separate number and amounts of payments using Visa and MasterCard.

9. SCE should summarize and discuss any savings of the program in its next General Rate Case application.

THEREFORE IT IS ORDERED THAT:

1. SCE's proposal to allow credit/debit card bill payments in ALs 152-G/2269-E and 67-W is partly approved, and only under certain conditions.

2. SCE's proposal to discontinue its Pay-by-Phone option is denied. SCE shall continue to offer the Pay-by-Phone option at no charge to its customers.

3. If SCE decides to proceed with a credit/debit card bill payment option under these conditions, SCE shall submit gas, electric and water advice letters within 30 days revising its tariffs, energy statements, deposit notices, and collection/disconnection notices that comply with this resolution. SCE may submit this advice letter as a Tier 2 advice letter, but this advice letter shall not go into effect until the Energy Division or the Commission has issued its approval of the advice letter.

4. SCE shall provide a report to the Commission of the monthly level of customer participation in the credit/debit card payment option, including the separate number and amounts of payments using Visa and MasterCard. This report should be submitted within 90 days after the first year of program implementation as a Tier 2 advice letter.

5. SCE shall summarize and discuss any savings of the program in its next General Rate Case application.

6. DRA's recommendation to continue the free Pay-by-Phone option is granted.

This Resolution is effective today.

I certify that the foregoing resolution was duly introduced, passed and adopted at a conference of the Public Utilities Commission of the State of California held on March 26, 2009 the following Commissioners voting favorably thereon:

STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

Enclosed is draft Resolution Number G-3427 of the Energy Division, issued in response to Southern California Edison (SCE) Advice Letter (AL) 152-G/2269-E and AL 67-W. It will appear on the agenda at the next Commission meeting which is at least 30 days after the date of this letter. The Commission may vote on this Resolution at that time or it may postpone a vote until a later meeting. When the Commission votes on a draft Resolution, it may adopt all or part of it as written, amend, modify or set it aside and prepare a different Resolution. Only when the Commission acts does the Resolution become binding on the parties.

Parties may submit comments on the draft Resolution. All comments on the draft Resolution must be received by the Energy Division by March 16, 2009.

An original and two copies of the comments, along with a certificate of service, shall be sent to:

Honesto Gatchalian
Energy Division
California Public Utilities Commission

505 Van Ness Avenue

San Francisco, CA 94102

Email: jnj@cpuc.ca.gov

FAX: 415-703-2200

A copy of the comments shall be submitted in electronic format to:

Maurice Monson and Richard Myers

Energy Division

California Public Utilities Commission

505 Van Ness Avenue

San Francisco, CA 94102

Email: mdm@cpuc.ca.gov and ram@cpuc.ca.gov

Those submitting comments on the draft Resolution must serve their comments on: 1) the entire service list attached to the draft Resolution, 2) all Commissioners, 3) the Director of the Energy Division, 4) the Chief Administrative Law Judge, and 5) the General Counsel on the same date that the comments are submitted to the Energy Division.

Comments shall be limited to five pages in length and should list the recommended changes to the draft Resolution.

Comments shall focus on factual, legal or technical errors in the proposed draft Resolution. Comments that merely reargue positions taken in the advice letter or protests will be accorded no weight.

Late submitted comments will not be considered. Reply comments will not be accepted.

Sincerely,

Richard Myers, Program and Project Supervisor

Honesto Gatchalian

    Abkar Jazayeri

    Vice President of Regulatory Operations

    Southern California Edison Company

    2244 Walnut Grove Avenue

    Rosemead, California 91770

    FAX: (415) 973-7226

    Email: AdviceTariffManager@sce.com

  

    Bruce Foster

    Senior Vice President of Regulatory Operations

    c/o Kayrn Gansecki

    Southern California Edison Company

    601 Van Ness Avenue, Suite 2040

    San Francisco, California 94102

    FAX: (415) 673-1116

    Email: Karyn.Gansecki@sce.com

  

    Dana S. Appling

    Director, Division of Ratepayer Advocates

    505 Van Ness Avenue

    San Francisco, CA 94102

    FAX: (415) 703-2057

    Email: DSA@cpuc.ca.gov

  
   

1 In its advice letter, SCE implied that about 90% of its customers have either a VisaVisaVisa or MasterCard. In its Reply to DRA's protest, SCE clarified that it estimates about 74% of its residential customers have either a MasterCard or VisaVisaVisa card.

2 In its advice letter, SCE stated that the cost would be $250,000 to $500,000. In a subsequent estimate provided to the Energy Division, SCE indicated that the cost could be as much as $1 Million.

3 The recurring payment option is available to customers who enroll in the Direct Payment program for automatic (recurring) monthly bill payment from their specified checking account. The customer continues to receive a monthly bill which indicates that the automatic monthly payment will be electronically deducted from their specified checking account 10 days after the billing date. Customers who use this payment option do not have to write a check and deliver it by mail or in person.

4 SCE provided an updated estimate of $1 million of capital requirements in a data response.

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