California ALJs Reject Utility Proposal for Pre-Pay Electric Meters with Remote Shutoff, Illustrating Important Role of Utility Consumer Advocates

On November 22, 2013, Administrative Law Judges (ALJs) for the California Public Utilities Commission (CAPUC) issued a Proposed Decision in a San Diego Gas & Electric (SDG&E) case rejecting the utility’s proposal to install pre-pay meters as a “pilot” project.

Utility service is typically provided as a credit transaction, in that customer pays after the service is provided.  From time to time proposals are made to reverse that and make poorer customers pay in advance, and pay more.  See Rethinking Pre Paid Utility Service: Customers at Risk.  SDG&E’s proposal, couched in benign terms that made it sound like a benefit to customers, would have allowed customers to “choose” to have a pre-pay meter after a shutoff or under threat of denial of essential service for nonpayment of old bills.   Once in the program, a customer’s electric service would simply be remotely shut off if the pre-paid money balance ran out.  The utility claimed this was good for consumers because by pre-paying, they: (1) could avoid paying a security deposit; (2) did not have to pay off debt owed for prior service to obtain service or reconnect after a shutoff; and (3) hypothetical energy savings due to assumed closer monitoring of usage as the prepaid amount is used up.  The ALJs in their Proposed Decision at page 51 described how customers would lose service under the utility proposal:

Operationally, as proposed by SDG&E, a participating customer would be disconnected if his or her Prepay account balance drops below zero, and if at least one of the following conditions is met: 1) the customer’s balance has been below zero for four consecutive days; or 2) the customer’s balance is at or below -$20.00. If at least one of the above conditions is met, a remote disconnection would be scheduled for the next business day during normal business hours.

The National Consumer Law Center (NCLC), The Utility Reform Network (TURN), the Center for Accessible Technology and the Greenlining Institute intervened in the case and jointly opposed the “pilot” project.   They argued the “pilot” would be illegal under California law because pre-pay customers would not receive the 15-day advance notice of a termination required by California statute; that service could be shut off during an investigation of a complaint disputing the amount of charges for the pre-paid service; that customers may not receive proper notice of available low-income discount rate programs prior to termination; and that customers might not knowingly waive these rights.

On that last point, we note that under New York law some “voluntary agreements” utility customers are required to make a condition of avoiding shutoff or obtaining utility service may be voidable even if they are “knowingly” made because they are not truly voluntary due to economic duress.  See Fourth Department Finds Payment Agreement Signed Under Duress After Water Service was Shut Off.

Customers with money to obtain regular service would be quite unlikely to sign up for the prepaid service. The ALJs noted an intervenor comment that the SDG&E’s proposed “‘prepay program’ is not designed for any customer who is not poor or cash-strapped.”

The California ALJs’ Proposed Decision noted that the proposed remote termination process, involving short internet and phone notice to the customer rather than mailed notice, was not tailored to provide adequate notice prior to shutoff:

We also take note of Consumer Groups’ logical inference that, depending on the communications means chosen (e.g., text message, automated phone message, or e-mail), customers on the proposed Prepay Program might receive no advance notice of termination at all since customers who are behind on their electric bills may also behind on their internet or phone bills. We find that such an outcome is unacceptable.

The ALJs also faulted SDG&E because it had “not consulted with likely affected customers as it developed its proposal.” In conclusion they flatly rejected the company’s proposal for prepaid service with remote shutoffs: “We do not find SDG&E’s proposed Prepay Program . . . in the public interest.”

The ALJs’ Proposed Decision in CPUC docket 11-10-002 is scheduled to be voted on by the full California Public Utilities Commission on December 19, 2013.

Consumer groups who intervened in the California proceeding and submitted testimony and written arguments against the utility’s proposal deserve accolades for bringing to bear the facts and arguments that nipped the program in the bud.  It is a reality, however, that full participation in regulatory proceedings takes money, and that without vigorous consumer input, the decisonal process and resolution of issues in “stakeholder” negotiations becomes skewed toward the utilities and business groups who can afford to participate.

To address the need for diverse public participation, California has an Intervenor Compensation program which provides funding to enable non profit groups to intervene in Public Utilities Commission proceedings.  This enables them to hire experts to testify and develop more fully the record upon which regulatory decisions are made.  Current California PUC intervenor compensation rates for attorneys are based in part on what utilities pay their counsel, and range, depending on experience, from $160 per hour to $555 per hour, and for experts, from $135 per hour to $410 per hour.

In contrast, New York, with some of the highest utility rates in the country, which has inadequate low income rate structures, and whose utilities shut service off to approximately 300,000 customers a year who cannot afford it, does not have a functioning system to support sustained independent utility consumer advocacy.

  • Though independent, the Utility Project lacks sustained, sufficient funding.  Unless extended, the Project’s funding expires March 31, 2014.
  • The legacy NY CPB utility intervention unit now lodged at the Department of State lacks the requisite jurisdiction, independence and budget.
  • A bill to make the UIU more independent passed the Assembly in 2013 but was not passed by the Senate. See Assembly Passes Bill to Protect Overburdened Residential Utility Consumers
  • UIU is not utilizing a million dollar a year appropriation of federal disgorgement funds, approved in October 2012, to advocate for consumers in matters affecting wholesale electric rates.
  • A bill to create a New York utility intervenor funding program passed the state Senate in 2010 but was not acted on by the Assembly prior to adjournment.

A 2013 Siena College poll conducted for AARP found strong support for strengthening utility consumer advocacy in New York.  See also, AARP Press ReleaseConsumer Groups ask NY Leaders for Better Utility Oversight, Stronger Consumer Protections, and More Resources for Independent Utility Consumer Advocacy  

The June 2013 Final Report of the Governor’s Moreland Commission on utilities recommends shoring up the system for ensuring utility consumer advocacy by independent groups at the Publid Service Commission.  See Moreland Commission Recommends Stronger Utility Consumer Advocacy.

Gerald A. Norlander


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