Kim Folks, Tampa Electric Amanda Johnson, Utility Payment Conference

1. Utility Payment Conference Payments 101 Terms and Acronyms October 19, 2010 Kim Folks, Tampa Electric Amanda Johnson, Utility Payment Conference

2. Payment Organizations and Associations Payment Regulations Payment Tenders, Terms and Acronyms Miscellaneous Payment Information Agenda

3. Organizations & Associations Federal Reserve NACHA

4. Federal Reserve • Central Bank system • Created in 1913 • Private bank system: • Board of Governors appointed by the President • Federal Open Market Committee • 12 regional Banks • Member banks • Advisory councils

5. NACHA-The Electronic Payments Association (formerly known as the National Automated Clearing House) NACHA • Not-for-profit association • Represents more than 11,000 financial institutions through direct memberships • Network of regional payments associations, and 650 organizations through its industry councils • Develops operating rules and business practices for: • ACH - Automated Clearing House Network • EBPP - Electronic Bill Presentment and Payments • EIPP - Electronic Bill and Invoice Presentment and Payment • EDI - Electronic Data Interchange Payments • EBS - Electronic Benefits Services

6. Payment Regulations Red Flag Regulation E

7. Regulation E Electronic Funds Transfer Act • Issued by the Board of Governors of the Federal Reserve System • Implemented in 1978 • Governs electronic fund transfers from a consumer’s account • Protects consumers’ rights and sets limits on consumer liability for unauthorized payments • Imposes specific obligations to billers for recurring payments

8. Indicators • Alerts, notifications or warnings from consumer reporting agent • Suspicious documents • Unusual use of or suspicious activity related to a covered account • Suspicious personal identifying information “Red Flag” What is it? A pattern, practice, or specific activity that indicates the possible existence of identify theft

9. Your program must be reasonable Red Flag Identification 2. DETECT Red flags that have been incorporated into the program 3. RESPOND Appropriately to any RED FLAG(s) detected 1. IDENTIFY Relevant patterns, practices and specific forms of identifying possible red flags 4. UPDATE Program periodically to capture lessons learned and changes in risks For additional information go to: www.ftc.gov/redflagsrule

10. ACH Network Automated Clearing House • The ACH network is a highly reliable and efficient nationwide batch-oriented electronic funds transfer system • Governed by the NACHA operating rules • Provides for the inter-bank clearing of electronic payments for participating depository financial institutions • The ACH network can be used to send either debits (payments) or credits (refunds) • A credit sends funds to a Receiver’s account • A debit takes funds from a Receiver’s account

11. Originator: Company /individual initiating an ACH transaction according to Receiver agreement Originating Depository Financial Institution (ODFI): Financial institution transmitting ACH files for the Originator into the ACH Network ACH Operator: Central clearing facility operated by a private organization or Federal Reserve Bank for participating financial institutions, to or from which financial institutions transmit or receive ACH entries. Receiver: A person or organization that has authorized the Originator to initiate an ACH entry (debit or credit) to the Receiver's account with the RDFI. Receiving Depository Financial Institution (RDFI): Financial institution that receives ACH entries from the ACH Operator and posts the entries to the accounts of the depositors (Receivers). Third-Party Processors: Processors that participate between any relationship within the ACH processing flow (i.e., correspondents, sending-point processors or payroll processors). ACH Participants & Definitions

12. How ACH Works

13. Each type/method of payment in the ACH “world” has its own rules and guidelines. These are determined by the SEC (Standard Entry Code) used in the payment file. Commonly used SEC codes ACH Rules and Guidelines

14. PPD TEL ACK ATX DNE WEB RCK ARC MTE COR TRX CIE CBR ENR BOC PBR MTE POS DNE CCD SHR TRC XCK CTX AAAAAHHHHHHH ! ! ! !

15. ARC – Accounts Receivable Conversion (mail) BOC – Back Office Conversion POP – Includes check serial number TEL – Phone WEB – Internet PPD – Pre-authorized Payment and Deposit (auto draft) RCK – Return Check RDFI – Receiving Depository Financial Institution ODFI – Originating Depository Financial Institution ACH Transaction Terms

16. ARC – Mail-in payments Ck21 – Mail in payments POP – Walk-up Retail Locations TEL – IVR (Credit card/Check) Payments WEB – E-Lock box (Consolidators) PPD and CCD – EFT – Auto Pay CTX – EDI 820’s Payment Channels

17. ARC • Accounts Receivable Conversion • Through electronic Accounts Receivable Check (ARC) Conversion; lock box or drop box received eligible consumer checks can be converted into electronic debits and processed through the ACH network. • Checks drawn on consumer accounts payable in U.S. dollars are eligible for ARC conversion. • Checks are machine read to capture the Magnetic Ink Character Recognition (MICR) information routing number, account number and check serial number along the bottom of the check. • The data elements, along with the check amount, are used to create an ACH record. Typically, the billers bank account is credited the next business day. • http://www.federalreserve.gov/pubs/checkconv/#what

18. BOC • Back Office Conversion • Eligible checks converted to ACH debits • Controlled environment in the back-office • Authorized signature for conversion not required • Scanning equipment installation not required  • Customer notification of conversion disclosed at the • register and on documents • Checks that contain auxiliary on-us fields or those over • $25,000 are ineligible for BOC • http://www.federalreserve.gov/pubs/checkconv/#what

19. POP • Point of Purchase • Location where payment takes place • Purchaser and seller are both present • Information from the consumer's check is used to create the electronic transaction

20. WEB • Internet Payments • One-time or recurring • Should include Terms & Conditions • Privacy statement • Appropriate authorization language • Receipts / confirmations delivered electronically upon completion of payment

21. IVR/TEL • Internal Voice Response Payments • Can be either PPD or TEL Entry • Requires written authorization if treated as PPD • One-time or recurring for PPD • If no written authorization on file then can complete only per TEL rules. • This requires written receipt or tape recording (actual oral authorization) • TEL = one-time payment • Setting up PPD Payments via IVR is complex, normally IVR should be a TEL entry

22. ACH Authorized Check21 Contracted CTX EBPP Electronic Check Conversion Payment Terms and Acronyms • IRD • EDI • Internet payments • IVR • M-payments • MICR • NOC • Non-contracted • P2P • Unauthorized • E-Lockbox • EBIDS

23. CTX • Corporate Trade Exchange • The CTX payment format combines payment information and a variable length record (called an addendum record) • ACH format which allows for up to 9,999 addenda records with approximately 800,000 characters • Allows multiple payments to creditors or billers in a single transfer of funds

24. IRD Image Replacement Document The legal equivalent of the original check

25. EDI • Electronic Data Interchange • A set of standards for structuring information electronically • Technical conversation between two entities, either internal or external • Information is the same displayed on paper documents • Transmission method is agreed to by the sender and recipient

26. NOC PPD RCK Notice of Change Information sent by an RDFI to notify the ODFI that previously valid information for a receiver has become outdated or that information contained in a pre-notification is erroneous Pre-authorized Payment & Deposit Used to credit or debit a consumer account. (Payroll direct deposits and preauthorized bill payments) Return Check A physical check that was presented but returned because of insufficient funds may be represented as an ACH entry

27. EBPP • Electronic Bill Presentment and Payment • Is the process that enables bills to be created, delivered and paid over the Internet. • The service has applications for many industries, from financial service providers to telecommunications and utilities. • Fast • Secure • Environmentally responsible

28. M-payments or P2P • Mobile payment (M-payment) is a point-of-sale (POS) payment made through a mobile device; cell phone, Smart phone or personal digital assistant (PDA) • Person to person (P2P) can be a wireless or text enabled device which can be used to pay a variety of bills at anytime without interacting with anyone including: • Ability to transfer monies with a mobile phone from person-to-person (P2P) • Account number and personal identification number (PIN) for authorization purposes required

29. Electronic Check Conversion • A process in which your check is used as a source of information for the check number, your account number, and the number that identifies your financial institution. • Transaction types include: • ARC – Accounts Receivable Conversion • BOC – Back Office Conversion • POP – Point of Purchase • Benefits • Privacy • Secure and Protected • Information of descriptive statement • Environmental http://www.federalreserve.gov/pubs/checkconv/#what

30. Check 21 • Passed in Oct 2004 • Produces a digital image by scanning both sides of a paper check • If a paper document is needed, a photo-reduced copy of the original checks is created (“substitute check” or IRD (Image Replacement Document) • Check21 is represented by: • IRD – Image Replacement Document • POP – Point of Purchase • http://www.federalreserve.gov/pubs/checkconv/#what

31. Walk-in Bill Payment • In person payment • Authorized or unauthorized • Utility office location or 3rd party vendor relationship • Receipt issued for payment transaction • Data terminal equipment • Kiosk – customer initiated • Terminal – store or cashier initiated • Potential 'real-time' payment posting

32. Authorized ? Contracted? • An official contract/agreement with a 3rd party payment vendor • The vendor authorize business or retailer to accept payments for the utility • Cash, Check and Money Order tenders accepted • Advertised by utility • No official contract or agreement with 3rd party payment vendor • A business or retailer who accepts biller/utility payments without contract • Typically only accepts cash as tender • Usually 2 - 5 (business) day delay of payment to biller • Consumer funded convenience fee of $1 - $5

33. Service? • Are you currently looking to issue an RFP or RFI? • Are you currently contracted with a vendor that you are unhappy with? • Is your contracted vendor providing exemplary service? • Do you believe it would be more effort to sever relations with your existing vendor and to bring in another vendor?

34. ACH Convenient Customer Payments Channels Methods Mail In Frequency Credit / Debit Card In Person Customer One-Time eCheck Web Scheduled Check Recurring Assisted Phone Cash Touchtone Phone

35. Questions ?

36. Contact Information Kim Folks Tampa Electric Company 813-275-3845 kbfolks@tecoenergy.com Amanda Johnson Utility Payment Conference 309-762-2854 Office (CST) ajohnson@paymentconference.com

37. Visit the Utility Payment Conference Exhibit Hall and learn more about the services available to you from our supporting vendors Service Providers