13. Service Guarantee Program
In D.04-07-022, the Commission adopted the service guarantee program for SCE, which addresses certain areas of customer satisfaction performance by providing compensation to certain customers who have been inconvenienced by SCE. Under the service guarantee program, four situations require SCE to pay rebates to customers: 1) failure to meet agreed-upon appointment times; 2) failure to provide service restoration within 24 hours; 3) failure to provide planned interruption notification; and 4) failure to timely and accurately report the first bill. SCE is required to report program results (number of claims made, claims paid, and amounts of money paid) to the Commission on a semi-annual basis. The service guarantees program was implemented on November 8, 2004.
SCE states that these service guarantees will result in ongoing expenses of $802,000 (including credits) and the service guarantee program is unnecessary to the delivery of customer service. SCE notes that the Commission authorized the program in SCE's 2003 GRC decision stating: "Although we believe that SCE is currently providing satisfactory customer service overall, we feel that customer service is a core element of utility service and thus wish to ensure there is no degradation to SCE's current level of customer service."40 SCE argues that it shown that, since that decision, there has been no degradation in its key performance measures and customer satisfaction levels, the primary concern of the Commission in adopting the service guarantee program has been shown to be a non-issue, and the service guarantee program should be eliminated.
ORA recommends that SCE retain the service guarantees adopted in the last GRC. ORA states that it was only one month after implementation of the service guarantee program and before any data was reported as a part of the program, that SCE asked, as part of its GRC application filing, that the service guarantee program be discontinued.41 ORA argues that SCE has no empirical data on whether or not service has degraded or improved as a result of the service guarantee program because the initial data would be available only when the first report is filed in June 2005.
ORA also states that overall customer service is not the primary purpose for the service guarantee program. The Commission has stated that service guarantees are an opportunity for individuals to be repaid when certain commitments are not met:
[F]or a customer who has had to miss work (often at an hourly wage) only to have the utility employee not appear within a reasonable window of time, the service guarantee is at least a partial compensation and better than nothing. While the goal may be to improve overall customer service, when individual customers are harmed, as with missed appointments, it is fully appropriate to have the compensation go to the individual.)42
It is ORA's position that, while overall customer service is a necessary goal for SCE, individual customers have a right to be compensated in certain situations where SCE has failed to meet a service guarantee commitment.
In the event that the service guarantee program is continued, SCE argues it should be ratepayer funded. Included in SCE's cost estimate of $802,000 is a $349,000 baseline amount to fund ratepayers credits. ORA accepts that ratepayers should fund $453,000 for labor and non-labor costs associated with the service guarantee program. However, ORA objects to ratepayer funding of the remaining $349,000 for customer credits indicating it is inappropriate to have ratepayers fund such credits paid to ratepayers. SCE argues that cost recovery of customer credits, in addition to labor and non-labor costs, is reasonable because all three categories represent the true cost of the mandatory program. In SCE's opinion, it would be punitive to shareholders to require that costs related to the credits be a direct reduction to earnings. SCE also states that its proposal for a baseline of credits is consistent with how companies manage costs associated with service commitments.
13.1 Discussion
The service guarantee program supplements SCE's customer satisfaction efforts by addressing the impact on individual customers when SCE fails to meet its commitments related to four important elements of customer service. We believe this is an important and effective tool for SCE to demonstrate to its customers that it is serious about its commitments and that the program has a positive effect in maintaining or improving SCE's current level of customer service. SCE should continue the program as adopted in D.04-07-022.
In D.04-07-022, the Commission adopted the service guarantee program but did not provide incremental funding for implementation and administration of the program. For test year 2006, SCE forecasts the ongoing costs to be $802,000. It is reasonable that the forecasted ongoing labor and non-labor costs (excluding payments to affected customers) be reflected in rates. Regarding the payments to customers, these are payments that result from the company not meeting its commitments to individual customers. If the company is unable to meet its commitments, the shareholders and not the ratepayers should be responsible for reimbursing the inconvenienced customer.
The incentive for the company to meet these service commitments can be framed in two different ways. One way is to set a baseline and, to the extent SCE was able to reduce missed commitments below the baseline amount, shareholders would gain. The other way is to set the entire liability on shareholders. To the extent SCE was able to reduce the number of missed commitments, the negative effect on shareholders, in the form of payments to affected customers, would be lessened. Setting a baseline is difficult. It should be set at a level that sets a reasonable stretch target for the company to meet. The record in this proceeding, however, is insufficient to develop such a target. Also, the amount of money at stake is small. SCE estimates it to be $349,000 in the test year. For these reasons, we prefer to set the incentive by assigning the liability for missed commitments to shareholders.
40 D.04-07-022, mimeo, pages 163 - 164.
41 SCE filed the application for this General Rate Case (A.04-12-014) in December 2004.
42 D.05-03-023, mimeo, p. 53. This Decision adopted service guarantees for SoCalGas, and continued guarantees for SDG&E. The Commission adopted service guarantees for PG&E in D.00-02-046.
