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PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

ENERGY DIVISION RESOLUTION G-3310

RESOLUTION

Resolution G-3310. Southern California Gas Company (SoCalGas) proposes a credit or debit card billing option. Approved as modified.

By Advice Letter 2965-G Filed on October 10, 2000.

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SUMMARY

This Resolution approves with modifications SoCalGas' request for authority to implement its Credit/Debit card payment option for 12 months. At the end of 12 months SoCalGas may file for approval to continue the credit/debit card payment option and submit a report presenting any problems or complaints resulting from its credit/debit card payment option, the number of billing disputes, the amount of time required to resolve each dispute, the percentage of losses due to chargebacks, and the percentage of losses due to fraud.

BACKGROUND

SoCalGas proposes to implement a one-year pilot program to give core customers the option of paying their gas bills by telephone using a credit or debit card. SoCalGas believes payment by credit/debit cards provides a particularly useful tool for customers to manage winter bills.

SoCalGas maintains that this proposal complies with Tariff Rule No. 12, A. Payment of Bills, which states: "Payment shall be made at the office of the Utility or, at the Utility's option, to duly authorized collectors of the Utility."

An authorized, independent service provider, BillMatrix, will make credit/debit card payments available to core customers. BillMatrix will charge a transaction fee in addition to the utility bill amount.

In attachment C to Advice Letter 2965-G SoCalGas explains that it selected BillMatrix, on a competitive basis, considering the best balance of experience, low transaction fee, financial strength, ease of implementation, customer satisfaction, and consumer protection measures.

SoCalGas offered to provide the Commission with a report assessing the value and effectiveness of these payment options, about ten months after the start of the pilot program for credit/debit card payment. SoCalGas also offered to file another advice letter seeking approval to make these payments options available to customers on a permanent basis.

SoCalGas will mail the customer's bill and bill inserts as it has traditionally. The customer can then make Credit/Debit card payments in any given month on a one-time basis or in any month of the customer's choosing. The customer will initiate the transaction by calling BillMatrix's toll-free telephone number. BillMatrix will then disclose all relevant terms of service to potential customers, including: 1) informing customers that BillMatrix is an independent service provider, authorized by SoCalGas to accept gas bill payments by credit/debit cards. 2) disclosing the convenience fee and allow the customer to terminate or continue the transaction. 3) BillMatrix will give the customer a second advisory regarding the convenience fee, and again, the customer can choose to terminate or authorize payment.

Agreement with BillMatrix

SoCalGas listed from its agreement with BillMatrix the following protections:

_ BillMatrix is not permitted to place any charges on SoCalGas' bills. Charges will appear on the customer's credit/debit card or bank statements as two distinct line items, one with SoCalGas' charges and one with BillMatrix's name and the agreed upon transaction fee for making a card payment. BillMatrix is only able to charge an agreed upon transaction fee.

_ The gas customer pays only the utility bill amount plus the transaction fee per transaction. The utility bill amount is clearly shown on the bank or credit card statement.

_ The transaction fee is fixed and is quoted to the customer three times prior to any customer card payment. Since the transaction charge, currently $3.50 for credit card charges and $1.95 for debit card charged, is quoted to the customer, any variation from that charge would be readily identified. The consumer can also verify the amount of any quoted processing charge with SoCalGas.

_ The ease of identifying variations from the $3.50 level would provide little incentive to commit fraud. If erroneous charges are not corrected, SoCalGas can discontinue the service.

_ If the customer believes a charge is erroneous, BillMatrix will be required to research the transaction with the Credit Card Company or bank and provide details to the customer. If the details do not seem familiar and the customer still disputes the bill, the dispute becomes a chargeback and the customer's card will be credited for that amount. By agreement SoCalGas guarantees any payments made by BillMatrix and any excessive chargeback fees1 imposed by BillMatrix based on SoCalGas' percentage of transactions and number of chargeback claims.

_ The current transaction fees can be changed on 30 days notice to SoCalGas. However, if SoCalGas objects to a proposed increase, either the fee remains the same, or BillMatrix can terminate the agreement. SoCalGas would notify participants in the program of any approved increases in transaction fees.

_ SoCalGas would investigate any allegation of excessive charges.

_ SoCalGas can initiate an audit of BillMatrix at any time. SoCalGas reserves the right to designate its own representative who shall have the right to audit and examine any cost, payment, settlement, or other supporting documentation resulting from any services performed under the agreement.

Cramming

SoCalGas will inform customers of the credit/debit card options through bill inserts, newsletters, website, and Customer Service Representatives.

To prevent cramming2 SoCalGas will not permit the service provider to place extraneous charges on SoCalGas bills. The provider will only be able to charge customers its stated transaction fee, which will appear on the customer's bank or credit card statement - not the gas bill - as a separate line item next to the vendor's name. Debit card transactions are limited to one line, but will show the convenience fee of $1.95, BillMatrix's toll-free telephone number, and will indicate that the payment was made to SoCalGas.

To prevent unauthorized card use, BillMatrix offers several protections. If BillMatrix's system determines that the card being used was reported lost or stolen, BillMatrix will terminate the transaction immediately. Credit card transactions will not be completed unless the customer inputs at least one of the following: the correct ZIP code associated with the card billing address, the expiration date of the card, and the 3-digit number found only on the back of the card. Similarly, debit card transactions will not be completed unless the customer inputs the correct PIN or 3-digit number found on the back of some debit cards.

Customers using BillMatrix would direct service inquiries relating to card payments, to BillMatrix. SoCalGas will require the provider to maintain adequate customer service resources to handle service inquiries.

If a third party error were brought to SoCalGas' attention, they would investigate and discuss the matter with BillMatrix. If the matter is not resolved, SoCalGas is not obligated to continue to use BillMatrix's services and could, if necessary, take action to recoup any excess charges.

While SoCalGas will undertake commercially reasonable efforts to screen potential service providers, and require stringent contractual obligations from the selected service provider, SoCalGas will not act as guarantor of, or bonding company for, the service provider. The service provider will remain ultimately liable to its customers.

SoCalGas will require that BillMatrix maintain strict confidentiality of customer information and establish and maintain procedures to safeguard that information. SoCalGas said it would not execute an agreement with a provider that does not include these requirements.

BillMatrix has been successfully serving PG&E for over five years. BillMatrix provided electronic payment services since 1994 and serves over 50 of the largest firms in the country. SoCalGas believes that BillMatrix would not risk their reputation by engaging in fraudulent activity. SoCalGas' inquiry into BillMatrix's history showed no litigation or problems with excessive charges.

SoCalGas selected BillMatrix because it has the expertise to handle all aspects of card payments. Credit card companies require individual cardholders to initiate payments either through a merchant or payment processor, such as BillMatrix. Individual cardholders cannot initiate payments by calling a credit card issuing company directly. BillMatrix will accept Visa, American Express, and Discover Credit cards for payment of SoCalGas' bills.

Liability for Excess Charges

SoCalGas pointed to the protection offered by credit card companies, who could reverse fraudulent charges on customer's bills and pursue service providers through law enforcement channels. SoCalGas states that fraud losses for all VISA card products have fallen from 0.15 percent in the early nineties to 0.07 percent today.

In the event of excessive charges to the customer, the customer could contact the credit card issuer.

SoCalGas explains: "Both Visa and Discover will reverse an unauthorized charge. Visa's Zero Liability policy provides that the customer pays nothing for any fraudulent activity or unauthorized card use. Discover has a similar liability policy. While American Express first conducts an investigation of any unauthorized charge, the customer does not have to pay the amount in question during the investigation. Should American Express determine fraudulent card use, the customer would receive a full credit for the disputed amount."

SoCalGas further states: "...any evidence of misconduct would constitute a breach of the Agreement, and if not resolved would likely lead to the termination of the Agreement." SoCalGas notes that it has no obligation to use BillMatrix's services; and, therefore, in the remote possibility that excessive charges could be established, BillMatrix would resolve the matter appropriately to keep the business arrangement, and its reputation, intact.

SoCalGas points to PG&E's five years of experience in taking credit card payments from its customers, without an experience of overcharging, and requests that SoCalGas likewise not be required to assume unwarranted liability for offering a credit card option."

Impact on Rates

SoCalGas' base rates are set under the Performance Based Ratemaking mechanism and would not be affected directly by current expenses of implementing the card payment offering. To the extent that implementation costs are more than offset by savings in collection costs, rates in 2002 would be lower. A net cost reduction in 2001 would result in higher sharable earnings and the ratepayer portion would be reflected as a rate reduction in 2002. To the extent that collections cost savings are permanent, they would be reflected in lower rates following the next General Rate Case or PBR proceeding.

SoCalGas does not pay a fee to BillMatrix. The customer is responsible for paying BillMatrix's transaction fee.

NOTICE

Notice of Advice Letter 2965-G was made by publication in the Commission's Daily Calendar. SoCalGas states that a copy of the Advice Letter was mailed and distributed in accordance with Section III-G of General Order 96-A.

PROTESTS

No protests were filed.

DISCUSSION

In Decision (D.)00-03-020, R.97-08-001, p 3 we said:

"The Commission's constitutional, statutory, and policy directives all accord consumer protection the highest priority."

In that same decision, p 14, we stated:

"SB 378 requires each person, corporation, or billing agent that charges for a product or service on a telephone bill or separate bill within the telephone envelope to do all of the following: (1) ensure that there is a clear and concise description of the product or service on the telephone bill; (2) include the amount charged for each product or service including taxes and surcharges; (3) explain how to resolve any dispute about the charges including the name, address and telephone number of the party responsible for generating the charge and a description of dispute procedures; (4) provide the telephone number at the Commission where a consumer may register a complaint; (5) establish, maintain, and staff a toll-free telephone number to respond to questions or disputes about the charges billed; (6) provide a means for expeditiously resolving subscriber disputes of charges that were not authorized; and (7) resolve all billing disputes within 30 days of receipt of the dispute."

Although D.00-03-020 and SB 398 relate to telephone utilities, we will hold energy utilities to the same standard where applicable.

We will review, by item, how SoCalGas' proposal for a credit/debit card payment option compares with the requirements placed on telephone utilities by SB 378 (Stats. 1998, Ch. 1041) that adds sections 2889.9 and 2890 to the P.U. Code respectively.

The only service of concern here is gas service that will be billed on the credit card company or bank statement. The credit card or bank statement should clearly identify the service as the SoCalGas bill.

SoCalGas will not permit BillMatrix to place any charges on SoCalGas' bills. The amount of the gas bill will appear on credit/debit card or bank statements as one of two distinct line items, one with SoCalGas' charges and one with BillMatrix's name and fee for making a card payment. BillMatrix is only able to charge an agreed upon transaction fee.

Customers using BillMatrix would direct service inquiries, relating to card payments, to BillMatrix. The customer could contact BillMatrix in three ways: 1) BillMatrix's toll-free customer service number will appear on the customer's credit card statement next to the vendor's name. 2) SoCalGas customer service representatives can provide customers with BillMatrix's toll-free customer service number. 3) Should the customer encounter a problem when making a card payment, the vendor's voice menu will provide the customer with BillMatrix's toll-free customer service phone number. SoCalGas will require BillMatrix to maintain adequate customer service resources to handle service inquiries. When a customer disputes a card payment, SoCalGas will require BillMatrix to research the transaction with the Credit Card Company or bank and provide details to the customer. If the details do not seem familiar, and the customer still wishes to dispute that they made the transaction, the dispute will become a charge-back, and the customer's card will be credited for the disputed bill amount.

The bill that the customer receives in the mail shows SoCalGas' toll-free number. We will require SoCalGas to provide a telephone number at the at the Commission where the consumer may register a complaint.

SoCalGas provides a means for expeditiously resolving subscriber disputes of charges that were not authorized. If the customer believes a charge is erroneous, BillMatrix will be required to research the transaction with the Credit Card Company or bank and provide details to the customer. If the details do not seem familiar and the customer still disputes the bill, the dispute becomes a charge-back and the customer's card will be credited for that amount. Fraudulent charges will be reversed and investigated by the credit card company such as Visa, American Express or Discover.

SoCalGas does not require a 30-day limit on resolving disputes. Since this is a one-year pilot, we will not require SoCalGas to impose such a limit at this time. The report at the end of the 12-month trial period shall include the number of billing disputes and the amount of time required to resolve each dispute. At that time we can consider the need for such a limit.

Outsourcing

SoCalGas' agreement with BillMatrix, does not permit outsourcing without SoCalGas' prior written consent, except in the case of a merger where the assets of BillMatrix are acquired by another party.

Conclusion

We will hold SoCalGas to the consumer protections advanced in this Resolution. We will approve advice letter 1262-E with the conditions listed above for 12 months. We will allow SoCalGas to file an advice letter at the end of 12 months for approval to continue its credit/debit card option. With that filing SoCalGas should include a report of any problems or customer complaints experienced with the credit/debit card payment option, the number of billing disputes, the amount of time required to resolve each dispute, the percentage of losses due to chargebacks, and the percentage of losses due to fraud.

We changed SoCalGas' proposed procedure to allow 2 additional months to file a report and to clarify the procedure at the end of the 12 month pilot program. SoCalGas was not clear in its advice letter what would happen at the end of the pilot program. If SoCalGas does not file an advice letter within 12 months, the service will terminate at 12 months. If SoCalGas does file an advice letter within 12 months, the service will be allowed to continue until the Commission issues a Resolution, which either continues the service, terminates the service, or modifies the service.

COMMENTS

The proposed resolution of the Energy Division in this matter was mailed to the parties on April 3, 2001 in accordance with PU Code 311(g). Comments were filed by SoCalGas on April 19, 2001. No reply comments were filed.

SoCalGas corrects our information that it will quote to the customer twice prior to any customer card payment. SoCalGas states that it will quote the transaction fee three times prior to payment.

SoCalGas points out that the convenience fee for debit card payment is $1.95 per transaction.

SoCalGas verifies our information that the convenience fee will displayed on the customer's bank or credit card statement as a separate line item. BillMatrix's and SoCalGas' charges will, in fact, appear as two distinct line items.

According to recent information from Billmatrix, debit card transactions are limited to a single line on the bank statement that will indicate that the payment was made to SoCalGas, state the convenience fee amount of $1.95, and provide BillMatrix's phone number. The combined total of the gas bill amount and convenience fee will appear next to this line.

These changes have been incorporated into Resolution G-3310.

FINDINGS

1. SoCalGas filed Advice Letter 2965-G to offer billing payment options by credit or debit card.

2. SoCalGas entered into an agreement with BillMatrix for gas bill payment processing services.

3. BillMatrix's and SoCalGas' charges will appear on the bank or credit card Company's bill as two distinct line items. Debit card charges will show on a single line showing that the payment was made to SoCalGas, BillMatrix's toll-free customer service phone number, and the convenience fee of $1.95.

4. If a customer disputes a bill, BillMatrix will provide details to the customer. If such details are still not familiar to the customer, BillMatrix will credit the customer's account.

5. SoCalGas should require BillMatrix to show a telephone or toll-free number on the credit card company's or bank's bill.

6. SoCalGas provides a means of expeditiously resolving subscriber's disputes of unauthorized charges.

7. It is reasonable to refrain from imposing a 30-day limit on resolving disputes during the one-year pilot.

8. The provider cannot outsource without SoCalGas' prior written consent.

9. If BillMatrix outsourced to another provider, who erred on a customer's bill, SoCalGas would investigate, and if necessary, take action to recoup any excess charges.

10. It is reasonable to hold SoCalGas to the provisions in this resolution for a period of 12 months and to allow SoCalGas to file an advice letter for authority to continue the program.

11. It is reasonable to require SoCalGas to submit a report with its advice letter presenting any problems and complaints with its credit/debit card option.

THEREFORE IT IS ORDERED THAT:

1. SoCalGas Advice Letter 2965-G is approved with modification:

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 May 3, 2001; the following Commissioners voting favorably thereon:

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1 There is no fee to the customer for a charge-back. When a customer makes a charge-back, the gas bill amount and transaction fee are credited to the customer's account. Should charge-backs exceed one percent of all transactions, SoCalGas would, by agreement, have to pay any fees that the credit card issuers may levy against BillMatrix.

2 Cramming is "the submission or inclusion of unauthorized, misleading, or deceptive charges for products or services in End-user Customer's local telephone bills." (D.00-03-020 Attachment A p 2.)

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