Homer Electric Association Proposes $20,000 Credit Card Cap to Minimize Processing Costs

Strategic Insights -

The Homer Electric Association has submitted a tariff filing to the Regulatory Commission of Alaska to update its rules and conditions limiting credit card payments. The proposal aims to minimize processing costs by capping credit card transactions to $20,000 within a 30-day period. Currently, approximately 16,500 monthly payments are made by credit card to HEA, with a total of roughly 18,400 members using a credit card for bill payment in 2021.

The proposed cap will primarily affect commercial and industrial members, as they are the ones most likely to be impacted by the $20,000 limit. Residential members are unlikely to be affected unless they are in a situation such as a damage claim or line extension payment is contemplated via credit card. HEA estimates that it can save almost $650,000 in interchange fees if all such payments were switched to ACH drafts.

Key Takeaways:

  • The Homer Electric Association has proposed a $20,000 credit card cap to minimize processing costs.
  • The proposed cap will primarily affect commercial and industrial members.
  • HEA estimates that it can save almost $650,000 in interchange fees if all such payments were switched to ACH drafts.
  • The proposed cap will not increase any rate or charge, result in the termination of an existing service, or conflict with any other schedule or rate.
  • HEA will contact each of the approximately 20 members that will be affected by the proposed change individually to notify them of the filing and to provide at least 30 days advance notice.
  • The new language will be added to Section 8.4(a) of Tariff Sheet 63 to outline the parameters of the proposed credit card ceiling.
  • HEA believes that the best balance of cost, cost recovery, fairness, and convenience is to limit credit card transaction fees and not create a separate charge for credit card use.

Statistics:

  • Approximately 16,500 monthly payments are made by credit card to HEA.
  • A total of roughly 18,400 members used a credit card for bill payment in 2021.
  • HEA paid approximately $650,000 in interchange fees to process credit card payments in 2021.
  • Approximately $216,000 in fees were paid for credit card payments exceeding $20,000.
  • HEA estimates that it can save at least $160,000 annually with a 30-day cap of $20,000.
  • HEA currently has approximately 23,000 members, with roughly 33,300 meters who could potentially be affected by this filing.

Sources:

  • Homer Electric Association, Tariff Advice Letter No. 449-32, Section 8.4(a).
  • Homer Electric Association, Tariff Advice Letter No. 449-32, Page 2 of 4.
  • Homer Electric Association, Tariff Advice Letter No. 449-32, Page 3 of 4.
  • Homer Electric Association, Tariff Advice Letter No. 449-32, Page 4 of 4.