REBUTTAL TESTIMONY ON BILLING CALCULATION SERVICES

Document Sample
REBUTTAL TESTIMONY ON BILLING CALCULATION SERVICES Powered By Docstoc
					Application No.:     04-12-014
Exhibit No.:         SCE-28
Witnesses:           G. Higashi
                     G. Vail




                   Southern California Edison Rebuttal
                   Testimony on Bill Calculation Services For
                   Submetered Mobile Home Parks




                   Before the

                   Public Utilities Commission of the State of California




                                                          Rosemead, California
                                                              August 29, 2005
                                              Table Of Contents
                                         Section                                                    Page        Witness


I.     INTRODUCTION ............................................................................... 1        G. Higashi

II.    SCE'S RESPONSE TO TURN'S RECOMMENDATIONS ................ 3

       A.       Retention Of Three Years Of Billing Records For
                MHP Owners Subscribing To SCE’s Services ......................... 3

       B.       Update Proposed Fees For Expected Cost
                Escalation From 2004 Dollars Into 2006 Dollars .................... 4

       C.       Bundling of the MHP Refund and Credit
                Calculation Time & Material Costs with the MHP
                Monthly Customer Charge or Bill Calculation
                Transaction Fee ........................................................................ 5

       D.       Distribution Of Bill Inserts For CARE, FERA, and
                Medical Baseline Programs To Tenants .................................. 6

       E.       Demonstration of Consistency of Costs For Bill
                Calculation Service With The Relevant Cost
                Embedded In The DMS-2 Submetering Discount ................... 7                             G. Vail

III.   CONCLUSION .................................................................................... 9     G. Higashi

Appendix A: Witness Qualifications and Prepared Testimony of Glenn G. Vail




                                                              -i-
 1                                                  I.

 2                                        INTRODUCTION

 3          In accordance with the schedule adopted by ALJ Fukutome at the May 6,

 4   2005 prehearing conference, Southern California Edison (SCE) served its initial

 5   testimony on July 15, 2005 regarding mobile home park (MHP) bill calculation

 6   services. On August 15, 2005, The Utility Reform Network (TURN) served

 7   testimony in response to SCE’s proposal. The Western Manufactured Housing

 8   Community Association (WMA), which represents MHP owners, did not submit

 9   testimony.

10          TURN recommends that the Commission adopt SCE’s proposal with the
11   following four modifications for MHP owners who choose to subscribe to SCE’s bill

12   calculation service:1

13                 SCE should retain three years, instead of one year, of submetered

14                  tenant billing records.

15                 The proposed bill calculation service fees should be updated from 2004

16                  dollars to 2006 dollars.

17                 MHP owners should be required to pay for SCE to calculate any

18                  applicable tenant refunds or credits as part of the bill calculation

19                  service, instead of purchasing that service on an optional time and

20                  materials cost basis.

21                 MHP owners should be required to distribute to tenants SCE’s bill

22                  inserts pertaining to enrollment in utility programs such as California

23                  Alternate Rate Program (CARE), the Family Electric Rate Assistance

24                  (FERA) program, and the Medical Baseline Program.



     1   TURN Testimony on Southern California Edison’s Proposed Bill Calculation Services for
         Submetered Mobile home Parks, pp. 1 - 2.




                                                         -1-
1         In addition, TURN questioned whether SCE’s bill calculation service fees

2   were comparable with the portion of the discount provided to all MHP owers served

3   on Schedule DMS-2 for the services SCE avoids when MHP owners bill their

4   submetered tenants, positing that this should be checked to ensure that there would

5   be no ratepayer subsidy. The following testimony responds to TURN’s

6   recommendations.




                                               -2-
 1                                                II.

 2                   SCE'S RESPONSE TO TURN'S RECOMMENDATIONS

 3          SCE agrees with TURN’s recommendation to retain tenant bill calculation records

 4   for a three-year period and to update the proposed customer charge and bill calculation

 5   transaction fees from 2004 dollars to 2006 dollars. SCE also agrees to modify its proposal

 6   to include any applicable tenant refund or credit calculations as a mandatory part of the

 7   proposed bill calculation service. However, because the cost of that service will vary with

 8   the type and frequency of refunds ordered by the Commission, SCE proposes to price that

 9   service based on SCE’s actual time and materials cost and add the cost when it occurs to

10   the fees charged to MHP owners subscribing to the bill calculation service. Because SCE

11   already provides application and renewal forms and certificates for CARE and FERA to

12   MHP owners in June of each year, TURN’s recommendation that SCE provide bill inserts

13   for programs such as CARE and FERA to MHP owners for distribution to their

14   submetered tenants with the SCE-calculated submetered tenant bills is unnecessary and

15   would result in additional costs. Finally, while the bill calculation service fees were

16   calculated on an entirely different basis than the estimation of the portion of the discount

17   provided to DMS-2 customers for billing and customer service, in this instance, using

18   SCE’s assumptions, the two results are comparable.

19   A.     Retention Of Three Years Of Billing Records For MHP Owners Subscribing
20          To SCE’s Services

21          SCE agrees with TURN’s recommendation to retain three years of tenant billing

22   records for MHP owners subscribing to its bill calculation services instead of one year as

23   SCE initially proposed. The estimated additional cost of retaining three years of MHP bill

24   calculation service records is $8,000 per year. As indicated in Table II-1, below,

25   implementation of this recommendation would increase the transaction fee by $0.012 per

26   bill calculation.




                                                   -3-
                                              Table II-1
                                    MHP Bill Calculation Services
                                    Cost Per Transaction to Retain
                              Bill Calculation Records For Three Years

               Line                                                                                  Amount/
                No.                           Description                                            Quantity
               1.   Additional cost for retention of 3 Years of Bill Calculation                      $8,000
                         Records
               2.   Estimated Number of MHP Bill Calculations                                          660,000
                    (55,000 tenants x 12 months)
               3.   Amount per calculation transaction (line 1. divided by line 2.)                     $0.012

 1

 2   B.      Update Proposed Fees For Expected Cost Escalation From 2004 Dollars

 3           Into 2006 Dollars

 4           TURN’s recommendation to update the proposed bill calculation service fees from

 5   2004 dollars to 2006 dollars is acceptable to SCE. In principle, the fees should be set at a

 6   level that will recover expenditures SCE will incur in 2006. The escalated customer

 7   charge and bill calculation transaction fee are shown in Table II-2, below, based on labor

 8   and non-labor escalators SCE presented in this proceeding.2 The bill calculation

 9   transaction fee shown in Table II-2 also reflects the costs for retaining three years of data.

10




     2    Labor escalation factor based on 2005 and 2006 rates from Exhibit 77, SCE-8, Vol-1, p. 66, line 18. Non-
          labor escalation factor based on 2005 and 2006 rates from Exhibit 77, SCE-8, Vol-1, p. 68, line 14.




                                                           -4-
 1
                                            Table II-2
                                  MHP Bill Calculation Services
                                  Estimated Fees in 2006 Dollars
 2
                  Description                     Basis                          Amount
              Customer Charge        Per MHP customer                          $2.40/month
              Bill Calculation       Per number of bill calculation              $0.15/bill
              Transaction Fee        transactions                               calculation

              Bill Calculation       Per number of bill calculation            $0.012/bill
              Record Retention       transactions                              calculation
              (three years)
              Bill Presentation      Per method and occurrence
                 CD                                                               $6.10
                 Printed
                                     1 Tenant                              $       0.52
                                     2 - 3 Tenants                         $       0.31
                                     4 - 64 Tenants                        $       0.16
                                     64 - 100 Tenants                      $       0.14
                                     101+ Tenants                          $       0.14

                E-mail                                                           $0.00
              Special Service Fee    Per occurrence (e.g., per refund or    Actual labor and
                                     credit calculation)                     materials cost

 3   C.     Bundling of the MHP Refund and Credit Calculation Time & Material

 4          Costs with the MHP Monthly Customer Charge or Bill Calculation

 5          Transaction Fee
 6        SCE agrees with TURN’s recommendation that MHP customers who subscribe to the

 7   bill calculation service should also be required to pay for refund or credit calculation

 8   services on a mandatory basis, and that subscribers should be charged on a per

 9   transaction, as-needed basis. Thus, SCE proposes to modify the service agreement with

10   the MHP owner to include language requiring SCE to calculate any tenant refund or

11   credit as part of the overall bill calculation services. Due to the variance in the frequency

12   and complexity of refunds, the cost for this service must be calculated manually and
13   cannot be determined in advance as a fixed fee. SCE proposes to charge MHP owners a



                                                   -5-
 1   per transaction fee based on the actual time and material cost incurred for each instance

 2   where a refund or credit calculation is required. This fee will be in addition to the

 3   otherwise applicable monthly charge and per transaction bill calculation fee.

 4   D.      Distribution Of Bill Inserts For CARE, FERA, and Medical Baseline

 5           Programs To Tenants

 6           Based on an assumption that tenants of submetered MHPs are not receiving notice

 7   or are receiving inadequate notice of utility programs such as CARE, FERA, and medical

 8   baseline, TURN recommends imposing a requirement that MHP owners who subscribe to

 9   the bill calculation service must agree to distribute utility bill inserts related to these

10   programs to their tenants. Currently, SCE distributes CARE/FERA applications and

11   recertifications to its residential customers once a year in June as a bill insert. At that

12   time, SCE provides all MHP owners with twenty-five CARE/FERA applications for their

13   tenants. MHP owners who need more than twenty-five application forms can photocopy

14   applications or call SCE and request additional copies. SCE includes instructions to the

15   MHP owners regarding distribution of the materials to their tenants, and instructions to

16   tenants on how to renew or apply for the CARE/FERA discount rates. Under the

17   provisions of California Civil Code Section 798.43.1, owners of master-metered MHPs are

18   required to provide written notice to residents of the electric rate discount programs that

19   are available to low-income residents.
20           In addition, SCE communicates with approximately 120 non-profit and social

21   service agencies throughout the year regarding the CARE/FERA and Medical Baseline

22   programs.3 SCE provides quarterly mailings to home health care agencies. In 2006 and

23   2007, SCE plans to target communications at hard-to-reach rural areas, seniors, and

24   multilingual communities in order to enroll non-participating, but eligible customers.


     3    This number is considerably larger when the thousands of organizations that conduct outreach for these
          non-profit and social service agencies is realized (e.g., faith-based organizations, senior centers, etc.).




                                                            -6-
 1   SCE plans to use radio, newspapers, journals, and other publications for these

 2   communications.

 3           TURN’s proposal would require SCE to provide additional bill inserts to MHP

 4   owners subscribing to the bill calculation service and SCE would incur additional costs.

 5   Moreover, given that the basic concern TURN raises relates to an action already required

 6   to be undertaken by all DMS-2 customers, SCE believes there is no reason to add this

 7   requirement and the incremental cost to the proposed bill calculation service.

 8   E.      Demonstration of Consistency of Costs For Bill Calculation Service With

 9           The Relevant Cost Embedded In The DMS-2 Submetering Discount

10           TURN raises a concern that a portion of the credit SCE provides to DMS-2

11   customers for billing services should be comparable to the fees SCE proposes to charge for

12   its bill calculation services.4 While TURN recognizes that SCE used different methods to

13   determine the DMS-2 credit and the billing service fees, TURN posits each should be in

14   the same range because if the portion of the DMS-2 credit exceeds the fees SCE charges

15   for the bill calculation service, then other ratepayers will be subsidizing the subscribers to

16   SCE’s bill calculation services.

17           The applicable portion of the DMS-2 submetering discount related to bill processing

18   and bill calculation is based on a weighted average, marginal-cost method. The DMS-2

19   submetering discount utilizes the weighted-average marginal cost to provide Billing and
20   Customer Services to SCE’s 3.9 million residential customers. The DMS-2 submetering

21   discount currently includes $0.14 per month (in 2001 dollars) per tenant for bill

22   calculation, billing exceptions, and bill presentation (excluding postage expense).

23           The MHP customer charge and bill calculation transaction fee are based on SCE’s

24   estimated cost expected to be incurred to perform the MHP bill calculation services, and

25   an assumed customer participation level. The MHP bill calculation transaction fee

     4    TURN Testimony, pp. 8 - 9




                                                   -7-
 1   allocates the cost of a new, separate billing process, including specialized software, to

 2   calculate 55,000 monthly MHP tenant bills (MHP tenants are not SCE customers). The

 3   weighted-average marginal cost method used for the DMS-2 submetering discount

 4   calculation captures the cost SCE would incur if these tenants matriculated into SCE’s bill

 5   calculation and bill presentation systems as typical, additional, domestic customers. The

 6   MHP bill calculation transaction fee cost method also includes assumptions as to the

 7   number of MHP owners and tenants who will use such services. These assumptions are

 8   significant factors in developing the resulting transaction fee. However, SCE’s proposed

 9   MHP bill calculation per transaction fee is estimated to be $0.152 per transaction

10   (excluding delivery costs, i.e., postage or CD). Thus, in this instance, the two calculations

11   yield comparable results.




                                                   -8-
1                                                III.

2                                         CONCLUSION

3         TURN’s recommendations to retain bill calculation records for three years, updating

4   the MHP bill calculation services fees and customer charge from 2004 dollars to 2006

5   dollars, and requiring MHP owners as part of the MHP service agreement to take the

6   calculation of refund or credit tenant allocations on a time and materials basis are

7   acceptable to SCE. SCE believes that additional bill inserts regarding CARE, FERA, or

8   the medical baseline should not be linked to the provision of the bill calculation service.




                                                  -9-
                    Appendix A
Witness Qualifications And Prepared Testimony Of
                   Glenn G. Vail
 1                 SOUTHERN CALIFORNIA EDISON COMPANY

 2               QUALIFICATIONS AND PREPARED TESTIMONY

 3                                 OF GLENN G. VAIL

 4   Q.   Please state your name and business address for the record.

 5   A.   My name is Glenn G. Vail, and my business address is 2244 Walnut Grove

 6        Avenue, Rosemead, California 91770.

 7   Q.   Briefly describe your present responsibilities at the Southern California

 8        Edison Company.

 9   A.   I am a Supervisor, in the Revenues and Tariffs Division of the Regulatory

10        Policy and Affairs Department, with responsibility for billing determinant

11        forecasting and other rate- and revenue-related issues. I perform cost and

12        rate studies and analyses in support of SCE’s positions before regulatory

13        authorities.

14   Q.   Briefly describe your educational and professional background.

15   A.   I received a B.S. degree in Economics from the University of California,

16        Riverside, in 1978. I have a Master of Science degree in Mathematics from

17        California State University at Los Angeles. I have also completed all

18        requirements for a Ph.D. in Economics, except for the dissertation, at the

19        University of Arizona. I was employed by the Arizona Corporation

20        Commission, as a Commissioner’s Aide and later as a member of the public

21        staff for years 1984 and 1985. I joined SCE in October 1985.

22   Q.   What is the purpose of your testimony in this proceeding?

23   A.   The purpose of my testimony in this proceeding is to sponsor Section II.E,

24        entitled Demonstration of Consistency of Costs For Bill Calculation Service

25        With The Relevant Cost Embedded In The DMS-2 Submetering Discount.

26   Q.   Was this material prepared by you or under your supervision?
27   A.   Yes, it was.




                                             A-1
1   Q.   Insofar as this material is factual in nature, do you believe it to be correct?

2   A.   Yes, I do.

3   Q.   Insofar as this material is in the nature of opinion or judgment, does it

4        represent your best judgment?

5   A.   Yes, it does.

6   Q.   Does this conclude your qualifications and prepared testimony?

7   A.   Yes, it does.




                                             A-2