20180510Comments.pdf

SEAN COSTELLO
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
PO BOX 83720
BOISE, IDAHO 83720-0074
[phone]
IDAHO BAR NO. 8743
Street Address for Express Mail
472W. WASHINGTON
BOISE, IDAHO 83702-5918
Attorney for the Commission Staff
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
RT C E IVED
;- ',1_iD i:ltBLlc'- ti l=," :,-f c0iitllssl0N
IN THE MATTER OF THE APPLICATION OF
INTERMOUNTAIN GAS COMPANY FOR AN
ACCOUNTING ORDER REGARDING THE
TREATMENT OF COST ASSOCIATED WITH
CUSTOMER PAYMENT TRANSACTIONS
HANDLED BY WESTERN UNION
CASE NO. INT-G.I8.OT
COMMENTS OF THE
COMMISSION STAFF
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COMES NOW the Staff of the Idaho Public Utilities Commission, by and through its
attorney of record, Sean Costello, Deputy Attorney General, and in response to the Notice of
Modifred Procedure issued in Order No. 34029 on April 11, 2018, in Case No. INT-G-I8-01,
submits the following comments.
BACKGROUND
On June 30,2017, the Commission issued Order No. 33805 which directed Intermountain
Gas Company ("lntermountain" or "Company") to "meet with Commission Staff to discuss
alternatives to convenience fees." See Case No. INT-G-17-02; Order No. 33805 at 4. As a
result, and after discussions with Staff, Intermountain agreed to eliminate the $ 1.00 convenience
fee charged to its customers whenever they made a payment at an authorized Western Union pay
STAFF COMMENTS MAY 10,2018I
station.r As of February 1,2018, the $ I .00 fee passed through to Company customers utilizing
pay stations was eliminated. See Application at3-4.
As a result, on February 22,2}l9,Intermountain Gas Company ("lntermountain" or
'oCompany") applied for authority to create a regulatory asset to capture the costs associated with
the elimination of the pay station fee, estimated to total between $75,000 and $125,000 annually.
In its Application, the Company states it will "pay, and defer, the cost associated with customer
payment transactions handled by Western fJnion."2 See id at3-4. Customers using an in-person
Western Union Pay Station are no longer charged Western Union's convenience fee. However,
customers using Western Union Speedpay service(s) to make payments by phone or on-line
using a credit/debit card or electronic check will still pay a convenience fee.3
The Company asks that it be authorized to: (1) recover the regulatory asset in the
Company's Purchased Gas Cost Adjustment (PGA) beginning in 2019; and (2) defer costs into
the regulatory asset until the earlier of February 1,2021, or when the Company files a general
rate case. See id. at 4.
The Commission issued a Notice of Application and set a deadline for petitions to
intervene. See Order No. 34009. No petitions to intervene were received.
STAFF REVIEW
Staff has reviewed the Application and supports the Company's request to create a
regulatory asset to capture the costs associated with customer payment transactions handled by
Western Union at authorized pay stations and to defer the processing costs for later recovery in
the Company's annual hling of its PGA. The specifics of this support are detailed below.
' A puy station is an entity that collects bill payments from utility customers and remits those payments to the utiliry.
A pay station that is under contract with the utility to accept payment on behalf of the utility is considered an
"authorized" pay station.
2 Through informal discussion and discovery, Staff confirmed that the Company proposes that only fees for Western
Union pay stations be eliminated, not all customer payments handled by Western Union. See id. at 3-4 and
lntermountain Response to Stafls Production Request No. I (attached hereto as Attachment A).
3 "Convenience fees" are charges assessed by a third-party vendor on payment transactions. Western Union
currently collects $ I .99 from Intermountain Gas customers who pay online or by phone with a credit/debit card or
an electronic check. Until recently, customers who paid at an authorized Western Union pay station also paid a
convenience fee.
STAFF COMMENTS MAY 10,20182
Impact of Convenience Fees on Customers and the Benefits of Eliminating Fees
Convenience fees often have the greatest impact upon society's most vulnerable
population, including low income individuals who struggle to meet the basic necessities of daily
living. Many low income people are unbanked or underbanked. "Unbanked" people lack a
savings or checking account and do not have a financial relationship with a bank or credit union.
"Underbanked" people may have a checking or savings account. Both unbanked and
underbanked households rely on non-bank financial services for an array ofproducts such as
check cashing services and payday loans, all of which charge high interest rates. They may also
use credit and prepaid debit cards to pay their bills. Unbanked households have limited options
to avoid paying a convenience fee since most fee-free payment options require payment from a
checking or savings account.
According to the 2015 FDIC National Survey of Unbanked and Underbanked
households ,4 26.9yo of U. S. households were either unbanked or underbanked. In Idaho, 3 .60/o of
households were unbanked, and 23.1% were underbanked, for a combined total of 26.7o/o or
159,160 households. Nationally, about half of people between the age of 18 and 24 are
unbanked or underbanked due to lack of established credit.5
Customers use in-person pay stations for a number of reasons, including the need to pay
bills in cash. For example, Intermountain does not accept cash payments at its offices. In fact,
Company offices are closed to the public. Customers are discouraged from placing cash
payments in the Company's drop boxes or sending cash by mail; therefore, some customers
utilize apay station to pay their bills. Customers who wait until the last minute to make a
payment also use pay stations to avoid the risk of having service disconnected. In addition, the
Company does not permit customers to make payments by check who have four returned checks
as a result of nonsufficient funds during a 12-month period. This restriction remains in place for
12 months following the fourth returned check. As a result, residential and commercial
customers who are placed on restriction and choose to pay in cash must use a pay station and pay
the $ I .00 convenience fee, as discussed above. Customers who have a credit or debit card have
aSee 2015 FDIC National Survey of Unbanked and Underbanked Households available at
https ://www. fdic. gov,/householdsurvey 120 I 5 I 20 I 5r eport.pdf.
s See 6 Reasons to be Unbanked or Underbanked available at https:l/www.bankrate.comibanking/6-reasons-to-be-
unbanked-or-underbanked.
STAFF COMMENTS MAY 10,2018J
the option of using it to pay on line or by phone, but must pay a convenience fee of $ I .99 for
each transaction. The Company's payment options are detailed in Table l.
Table I
No cost options Western Union Speedpay Fees ($1.99)
Auto Withdrawal Checking Phone Debit/Credit
One-time Online Checking Phone Checking/Saving Account
Mailed Checks Online Credit/Debit
Company Office Dropbox Online Checking/Savings
Pay Station (cash/check/money order)
By removing the $1.00 convenience fee that customers had to pay when making payment
at an authorized Western Union pay station, Intermountain has taken a good first step to bringing
the Company's payment practices in line with those of other Idaho utilities. Furthermore, it will
help lessen the financial burden on customers who are struggling to meet financial obligations,
add an additional free payment option for customers, and help to improve customer satisfaction.
Avista and Idaho Power customers are not charged a convenience fee for payments made
at authorized Western Union pay stations because both companies pay Western Union for
transactions made by their customers. Avista currently pays $0.76 per transaction and Idaho
Power pays $0.78. At $0.85, Intermountain Gas's cost is slightly higher. Staff encourages the
Company to seek to lower transaction costs in order to further benefit customers. The Company
also expressed the desire to review additional data with respect to Avista's Fee-Free Payment
Program.6 Avista provides quarterly reports regarding the deferral balance and participation
rates of customers taking advantage of fee-free transactions. Intermountain has committed to
"review the credit/debit card fee issue in July 201 8 and once another year of Avista data is
available for analysis. The Company plans to assess the data and make a determination on
whether to proceed in implementing a 'fee-free' program for credit and debit card payments."
See Company response to Staff Production Request No. 14 (attached hereto as Attachment B).
6 Avista was authorized to defer the costs associated with its Free-Fee Payment Program in Case Nos. AVU-E-16-011
AVU-G-16-01. Avista's residential customers are not charged a transaction fee regardless of the payment method.
4STAFF COMMENTS MAY 10,2018
Regulatory Asset and Recovery
A regulatory asset encompasses specific costs a regulated utility may be permitted to
defer to its balance sheet. When accounting for a regulatory asset, a public utility can defer the
recognition of certain costs, bypassing the income statement in the short term, and moving these
costs to the balance sheet. Statement of Financial Accounting Standard (SFAS) 71, titled
Accounting for the Effects of Certain Types of Regulation, currently codified into Financial
Accounting Standards Board (FASB) Accounting Standards Certification (ASC) 980, Regulated
Operations, states that in order for regulated utilities to defer the recognition of certain costs,
there must be an expectation of recovery of those costs through future rates. Generally Staff may
recommend creation and deferral of a regulatory asset for future recovery if: (1) the expenses are
beyond the Company's control; (2) mandated by a regulatory authority; and (3) significant
enough in magnitude as to incur financial hardship for the Company.
In its Application, Intermountain Gas estimates that it will incur costs between $75,000
and $125,000 as a result of the elimination of the $1.00 pay station convenience fee. Based on
the historical number of pay station transactions, the data suggests that the upper end of the
Company's cost estimate may be high, as illustrated below in Table 2
Table 2
Year Number of Transactions
at $0.85 per transaction
Total Cost
2014 94,891 $80,657
2015 94,686 $80,483
2016 76,494 $65,020
20t7 81,408 $69,197
5STAFF COMMENTS MAY 10,2018
While Staff appreciates the Company's openness to pursuing a full fee-free payment
regime, Staff does not believe additional data from Avista's Fee-Free Payment Program is
necessary for Intermountain to implement a fee-free payment program and would encourage the
Company to avoid unnecessary delay. Staff believes Intermountain Gas should implement a fee-
free program that covers all processing fees.
Regardless, Staff does not believe that the Company's payment of transaction fees to
Western Union would cause a significant financial burden to the Company and does not warrant
deferral treatment. However, because Staff continues to work with the Company toward the
elimination of all transaction fees, Staff believes creating a regulatory asset now for later
recovery is a fair compromise. Staff recommends that the Commission allow the Company to set
up a regulatory asset account, into which the foregone pay station transaction costs can be
deferred through January 31,2021 (three years).
The Company requested recovery of deferred transaction costs through its annual PGA
filings starting in2019. Id at 4. While Staff generally prefers to only track costs directly related
to the purchase of gas through the annual PGA, Staff recognizes previously approved recovery of
deferred rate case expenses are included in the PGA. Staff supports the recovery of Western
Union pay station deferred transaction costs in the PGA.
However, because the PGA provides nearly immediate recovery of the regulatory asset,
Staff does not believe a carrying charge is necessary. Absent the regulatory asset, the Company
would be required to expense these costs in the period in which they were incurred and would
not receive recovery until a test year level of expense was included in a general rate case. The
ability to defer these costs and recover them through the PGA mechanism is a sufficient recovery
level and the Company should not be rewarded with a carrying charge. Staff notes that the
prudency of any expense recovered through the PGA will not be determined until the
Commission issues its order for the PGA. Staffwill review the Western Union transaction
expenses for prudency at the time the Company seeks recovery of those expenses. Staff requests
that the Company file quarterly reports with the Commission regarding Western Union pay
station transaction and cost details.
Customer Communication
In March 2018, customers received a bill insert that outlines all available payment
options and applicable transaction fees. The insert explains that no charge is applied to payments
that are made at authorized Western Union pay stations. In addition, the Company's website
includes a list of all available payment options and was recently updated to reflect that payments
at authorized Western Union pay stations are free of charge.
6STAFF COMMENTS MAY 10,2018
Customer Comments
Customers were given until May 10,2018, to file comments. As of May 10,2018, one
customer had submitted a comment opposing the Company's proposal, stating that customers
who choose payment methods with convenience fees should pay the fee.
STAFF RECOMMENDATIONS
Upon thorough review of the Company's proposal, Staff recommends that the
Commission:
1) Approve the creation of a regulatory asset to capture the costs associated with in-
person customer pay station transactions handled by Western Union and authorize
Intermountain to seek recovery of those costs in the Company's PGA beginning in
2019 until February 1,2021, or until the Company files a general rate case, whichever
comes first;
2) Require the Company to file a report with the Commission every three months
detailing fees incurred and the number of transactions at authorized payment stations;
and
3) Direct the Company to continue working with Staff to eliminate all convenience fees
and implement a fee-free program.
&Respectfully submitted this / O day of May 2018.
Sean Costello
Deputy Attorney General
Technical Staff: Curtis Thaden
Kevin Keyt
Johan Kalala-Kasanda
i : umisc/comments/intg I 8. I sccjkskct comments
7STAFF COMMENTS MAY 10,2018
RESPONSE TO REQUEST NO. 1:
a. i. lVestern Union Pay Station lransactions fees are included in this filing.
ii. Western Union Speed Pay transaction fees ore not included in this Jiling.
b. The company is not seeking recovery for Speed Pay payments which include uedit, debit,
ATM, and ACH payments. Each Speed Pay payment has a conveniencefee of $L99 per transaction
which is assed directly lo the customer.
Record Holder: Mike McGrath20S-377-6000
REQUEST NO.2: Please provide the annual volume per year of all Western Union
transactions for the last three calendar years (201 6,2017 ,2018 YTD) by transaction type. Indicate
which transaction type(s) the Company included in this filing for potential recovery.
RESPONSE TO REQUEST NO. 2:
2016 2A17 2018 YTD (March)
Western Union 76,494 81,408 21,240
Speed Pay 108,773 146,534 43,442
Location:
Sponsor/Preparer
Record Holder:
Location:
Sponsor/Preparer:
555 S Cole Rd. Boise. ID 83707
Mike Kineerv 208-898-7 I 69
Mike McGrath 208-37 7 -6000
555 S Cole Rd, Boise.ID 83707
Mike Kineerv 208-898-7 169
REQUEST NO.3: Please provide the cost Western Union is charging Intermountain Gas
for each customer pay station transaction. Please also provide the cost Western Union charges
customers for other transaction types.
RESPONSE TO Rf,QUEST NO.3:
Western Union charges the Compony a transaction fee of $0.85 per payment made at a
C onve nienc e Pay locat i o n.
Page 2
Attachment A
Case No. INT-G-18-01
Staff Comments
0s/10/l 8
ICC RESPONSE TO FIRST REQUEST FOR PRODUCTION
REQUEST NO. l4: Based on discussions with the Company, Staff understands that the
Company is still considering whether to implement a fee-free debit/credit card payment program.
Does the Company intend to file an Application to implement such a program in July 2018? If not,
please explain what the Company intends to do with respect to implementing a fee-free program.
Why has the Company chosen to eliminate Western Union payment fees now and other
payment processing fees at a later date?
RESPONSE TO REQUEST NO. 14:
The Company was directed in Case No. INT-G-17-02, Order No. 33805 to meet with IPUC
staf.f lo discuss alternatives to convenience .fbes. During 2017, Company personnel met **ith IPUC
sta//'to discttss the i.ssue o.f convenience fees including both the Western Union "walk-in" fees and
the Speed Pay credit and debit cordfees. The Company chose al lhat time to eliminate the Western
Union.fee as a charge to cuslomers based on the general demographics of customers using that
payment program. The Company declined to implement a "fee-free" Speed Pay program due to lhe
signiJicantly higher costs involved and the lack of data available to properly assess the magnitude
of the program. The Compony committed to revie o* the credit/debit card fee issue in July 2018 and,
once another year of dato is available for analysis, will qssess the data and make a determtnation
on whether to proceed in implementing a "fee .free " program Jbr credit and debit card payments.
Record Holder: Mike McGrath209-377-6000
Location:
Sponsor/Preparer
555 S Cole Rd. Boise. ID 83707
Mark Chile s 208-37 7 -6124
Page 8
Attachment B
Case No. INT-G-18-01
Staff Comments
05/10/l 8
IGC RESPONSE TO FIRST REQUEST FOR PRODUCTION
I
I
CERTIFICATE OF SERVICE
I HEREBY CERTIFY THAT I HAVE THIS IOth DAY OF MAY 2078, SERVED
THE FOREGOING COMMENTS OF THE COMMISSION STAFF, IN CASE NO.
INT-G-I8-01, BY MAILING A COPY THEREOF, POSTAGE PREPAID, TO THE
FOLLOWING:
MICHAEL P MoGRATH
DIR _ REGULATORY AFFAIRS
INTERMOUNTAIN GAS CO
PO BOX 7608
BOISE TD 83707
E-MAIL: [e-mail]
SECRET
CERTIFICATE OF SERVICE