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Perspective

Fortnightly Magazine - November 1 1997

card will not bring in a torrent of new customers.

Also, credit card fraud is a growing crime. In a telephone sale using credit cards, the entire liability for fraud is on the merchant. Besides, some of these credit card disputes can take months to resolve. Public utilities that have tried to accept credit cards have modified or retracted their programs because of the menace of fraud.

Finding a Solution

Since the expense of discount fees may not be considered a "reasonable and necessary" expense by regulatory commissions, some utilities resort to the two-transaction concept by which the discount fees and the charge are passed to the customer. In other words, a few utilities will accept a credit card transaction if the consumer pays the discount fee. But even this approach has obstacles.

Many states have passed laws to protect consumers who use the credit card for payment. For example, Texas Annotated Civil Statutes Article.5069-1.12 states:

Surcharge for use of credit card:

•  In a sales transaction for goods or services involving the use of a credit card for extension of credit, the seller may not impose a surcharge on the buyer because the buyer uses a credit card instead of cash, a check, or similar means of payment.

•  This article does not apply to a state agency, county, local governmental entity, or other governmental entity that accepts credit cards for the payment of fees, taxes, or other charges.

Caught between the rules of the regulatory commissions and consumer laws, public utilities that feel pressured to accept credit card transactions resort to third-party solutions. A third-party solution is where the utility outsources the credit card transaction to a service provider who processes transactions through a telephone response unit.

The service provider will accept all kinds of credit and debit cards from customers of utilities, process the payment for a fee ranging from $1 to $10 for credit cards and debit cards and forward the transactions to the respective utilities. The telephone response unit offers many card choices to customers. But since this solution is expensive for the customer, the volume of transactions is usually low (see Figure 2).

If customer demand dictates, then public utilities eventually will pick up the tab on discount fees. For example, AT&T, which was deregulated in the early 1980s, finally began accepting credit cards in 1996. When the credit card is made available to customers, the expense of providing it will be reclassified as a competitive marketing expense, similar to advertising. As utility deregulation continues and discount fees decline, the marvelous convenience of the plastic card likely will be available to all customers. t

Durairaj Asaithambi is a project consultant at Houston Lighting & Power Co.

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