BILL ANALYSIS Ó
AB 1360
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Date of Hearing: May 5, 2015
ASSEMBLY COMMITTEE ON PRIVACY AND CONSUMER PROTECTION
Mike Gatto, Chair
AB 1360
(Ting) - As Amended April 29, 2015
SUBJECT: Charter-party carriers of passengers: individual fare
exemption
SUMMARY: Authorizes transportation network companies (TNCs) to
charge split fares between multiple occupants for up to seven
passengers, provided that the individual fare for each passenger
is less than the fare that would be charged for the same ride if
a single passenger traveled alone. Specifically, this bill:
1)Exempts a ridesharing program operated by a TNC from the
current law prohibition fare-splitting, which applies to
charter party carriers regulated by the California Public
Utilities Commission (CPUC).
2)Specifies that the exemption applies provided that:
a)The vehicle seats no more than seven persons, including the
driver,
b)The driver is a participating driver, as defined, and
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c) The individual fare for each passenger is less than the
fare that would be charged for the same ride to a single
passenger traveling alone.
3)Specifies that TNCs may not use vehicles to provide transit
service or to carry passengers over a fixed route, provide
school pupil transportation services, or provide public
paratransit services.
EXISTING LAW:
1)Authorizes the CPUC to regulate various transportation
services, including charter-party carriers (CPCs) of
passengers, defined as persons engaged in the transportation
of others by motor vehicle for compensation on a prearranged
basis over any public highway, but not including taxicabs
regulated by local agencies. (Public Utilities (PU) Code
Sections 5360 and 5360.5)
2)Establishes the TNC as a new category of CPCs subject to its
jurisdiction and defines a TNC as an organization operating in
California that provides prearranged transportation services
for compensation using an online-enabled application or
platform to connect passengers with drivers using their
personal vehicles (PU 5431 and CPUC Decision 13-09-045)
3)Generally requires charges for transportation to be offered or
afforded by CPCs to be computed and assessed on a vehicle
mileage or time of use basis, or a combination thereof.
Charges may vary in accordance with the passenger capacity of
the vehicle or the size of the group to be transported. (PU
5401)
4)Directs the CPUC to issue permits or certificates to CPCs,
investigate complaints against carriers, and cancel, revoke,
or suspend permits and certificates for specific violations.
(PU 5387)
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5)Defines CPCs as every person engaged in the transportation of
persons by motor vehicle for compensation, whether in common
or contract carriage, over any public highway in the state.
(PU 5360)
6)Defines a "transportation network company" to mean an
organization, including, but not limited to, a corporation,
limited liability company, partnership, sole proprietor, or
any entity operating in California that provides prearranged
transportation services for compensation using an app or
platform to connect passengers with drivers using a personal
vehicle. (PU 5431)
7)Prohibits CPCs from charging individual fares (i.e.,
fare-splitting) when more than one passenger is being
transported at one time. (PU 5401)
8)Makes two exceptions to the prohibition on fare-splitting: 1)
Schoolbus contractors who are paid by parents of children
attending public, private, or parochial schools; and 2)
Round-trip sightseeing tour services conducted with an
authorized certificate or permit. (PU 5401)
9)Authorizes cities and counties to regulate taxicabs with
seating capacity for up to eight passengers that are operating
in their jurisdictions, including setting maximum fare rates
and permitting fare-splitting. (Government Code Section
53075.5)
FISCAL EFFECT: None. This bill has been keyed non-fiscal by
the Legislative Counsel.
COMMENTS:
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1)Purpose of this bill . This bill is intended to reduce the
fares consumers pay to TNCs by permitting TNCs to offer
individual fares, i.e., fare-splitting, to TNC carpool
customers. This bill is sponsored by the Internet Association
and TechNet.
2)Author's statement. "Lyft has found that every day, 90% of
Lyft rides in San Francisco have someone else taking the same
trip within five minutes. An MIT study has also found that
95% of cab rides could be shared. By sharing rides, we
contribute to a greener economy by taking more cars off the
road and decreasing emissions."
"The primary cause of traffic congestion originates from
nearly 80% of commuters traveling to work alone. Traffic
results in 5.5 billion hours of productivity at a cost of $818
to the average commuter, with increased congestion generating
nearly 4 billion gallons of excess fuel wasted and 56 billion
pounds of greenhouse gasses. This contributes to California's
transportation sector functioning as the greatest source of
pollution, accounting for 40% of the state's greenhouse gas
emissions.
"TNC's such as Lyft, Uber, and Sidecar have been extremely
innovative in creating models that empower consumers and allow
more ease and access to transportation alternatives. They
have recently started services that allow riders with similar
pick up locations and destinations to share a driver and
carpool for a decreased fare. Shared rides such as carpooling
decrease traffic and congestion, and ultimately cut
pollution."
3)What are TNCs ? A new model of transportation service has
sprung up in cities across the United States, including
California. Patrons can prearrange transportation services
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utilizing an app on their smart phone device. In doing so,
small start-up companies such as Lyft, SideCar, and Uber,
among others, have begun competing with traditional CPCs and
taxicab services in select cities in California. TNCs
generally send drivers in either luxury vehicles or personal
vehicles to pick up passengers whose credit cards are
automatically charged flat fees or fares calculated by GPS.
Fares for are calculated based on distance or by the amount a
consumer wishes to pay.
4)How does the state regulate TNCs ? Prior to 2013, California
law recognized and regulated three modes of passenger
transportation for compensation: 1) taxi services, regulated
by cities and/or counties; 2) CPCs, i.e., limousines,
regulated by the CPUC; and 3) passenger stage companies, i.e.,
charter busses and shuttles, which are also regulated by the
CPUC. Before 2013, TNCs operated without regulatory oversight
in California.
However, in December 2012 the CPUC initiated a rulemaking to
determine whether and how services arranged through apps might
affect public safety. The CPUC sought comment on issues
including: how the CPUC's existing jurisdiction should be
applied to businesses such as Uber, SideCar, and Lyft; the
consumer protection and safety implications of these new
methods for arranging transportation services; whether and how
the new transportation business models differ from
longstanding forms of ridesharing; and the new transportation
business models' potential effect on insurance and
transportation access.
In a September 2013 Decision, the CPUC established a new
transportation business model called TNCs and required those
companies to:
Register with the CPUC;
Meet safety requirements, including insurance,
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background checks, vehicle inspections;
Meet CPUC regulatory requirements;
Only operate at airports with permission granted by
the airport;
Submit a report on addressing services to the
disabled community; and
Submit an annual report to the CPUC.
TNCs currently permitted by the CPUC are Lyft, Uber-X (aka
Rasier), Wingz (formerly Tickengo), and Summon (formerly
InstantCab). The 2013 CPUC Decision empowers the CPUC to
exercise its safety and enforcement authority against TNCs
that violate any regulatory or safety requirements.
1)Vehicle requirements for TNCs. The CPUC only allows TNCs to
use street legal coupes, sedans, or light-duty vehicles,
including vans, minivans, SUVs, pickup trucks, as well as
hatchbacks and convertibles. TNC vehicles must not be
significantly modified from factory specifications. TNCs are
allowed to operate vehicles with a seating capacity of up to
seven passengers, including the driver, if they have a $1
million commercial liability insurance on file. They are
allowed to operate a vehicle with a seating capacity of up to
ten passengers, including the driver, if they carry a $1.5
million commercial liability insurance on file. TNCs are not
allowed to operate vehicles with a seating capacity of more
than 10 passengers, including the driver, which is legally
defined as a bus.
2)CPUC letter to TNCs regarding individual fares for carpools:
Current law prohibits CPCs from charging individual fares to
passengers with two exceptions: 1) school buses compensated by
parents of children attending public, private or parochial
schools, and 2) certified operators of roundtrip sightseeing
tour services.
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In September 2014, the CPUC sent letters to the three major
TNCs, Uber, Lyft, and Sidecar, regarding their intent to add
carpooling service to their transportation service. The CPUC
stated that this model is in violation of existing law that
prohibits CPCs from calculating charges on an individual-fare
basis. The CPUC found that CPCs "cannot change an individual
fare when carrying multiple persons in a vehicle, and
therefore, a person chartering a [CPC] vehicle must have
exclusive use of the vehicle."
This bill would permit a rideshare program operated by a TNC to
charge individual fares, provided that the individual fare for
each passenger is less than the fare that would be charged for
the same ride to a single passenger traveling alone.
3)Consumers benefit from fare-splitting . This bill would give
consumers more ridesharing options and allow consumers to save
money by choosing to carpool, and therefore pay a reduced
fare, when they use a TNC to travel. Some consumers may
prefer to carpool and save money rather than travel as a
single passenger in a TNC vehicle. As ridesharing becomes
more convenient and inexpensive, more consumers will likely
turn to ridesharing instead of purchasing and owning vehicles.
Falling demand for new and used vehicles would then place
downward pressure on vehicle prices - another consumer
benefit.
TNC carpooling also benefits consumers, because carpooling
theoretically reduces the overall the number of vehicles on
the road, which in turn reduces traffic, overall travel times,
and air pollution. However, a recent study conducted by the
University of California, Berkeley, found that the actual
impact of TNCs on overall vehicle miles traveled is ambiguous.
According to the study, of the consumers who participated in
the survey, 92% said they still would have made the trip even
if TNC services were not available, and of that number "39%
said they would have used a taxi, while 33% said bus or rail,
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and 6% drive." ("App-Based, On-Demand Ride Services:
Comparing Taxi and Ridesourcing Trips and User Characteristics
in San Francisco," UC Berkeley, UC Transportation Center,
August 2014.) If consumers choose a TNC over bus or rail in
significant numbers, and if TNC vehicles circulate on city
streets while waiting for customers, then consumers may not
ultimately see an overall reduction in traffic, travel times,
or air pollution under this bill.
4)The effect of "surge pricing" on TNC fares . While this bill
would reduce TNC fares for consumers who choose to carpool
when they use TNC services, there is a critical difference
between fare-splitting in the taxicab service industry and
fare-splitting in the TNC service industry. Unlike TNCs,
taxicab companies are regulated by cities and counties, which
impose requirements such as workers' compensation insurance,
training, vehicle inspection, and vehicle safety rules, such
as requiring security cameras on taxicabs for the protection
of consumers. Cities and counties also regulate taxicab
fares. In San Francisco, for example, the City and County of
San Francisco have established maximum taxicab fares.
By contrast, TNCs are not regulated by local governments, and
are therefore not subject to the local maximum fare
restrictions placed on taxis. The CPUC does not set maximum
fares on CPCs, and only requires passenger stage companies to
submit their tariffs to the CPUC. As a result, some TNCs
charge consumers significantly higher fares at peak times and
locations, known as "surge pricing." Surge pricing may
quickly erase any savings a consumer would achieve by
carpooling with a TNC, as compared to a taxicab fare.
According to a San Francisco Examiner news report, "Uber sent a
mass email warning riders that New Year's Eve would see a
spike in passenger demand, potentially skyrocketing prices to
over $100 for a ride after midnight. " ("Uber drivers say
rideshare surge pricing backfired on New year's Eve," The
Examiner, January 2, 2015.)
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This bill allows TNCs to use fare-splitting so that consumers
who carpool with a TNC pay a lower fare than the fare they
would pay if they rode alone in a TNC car. However, neither
the Legislature nor local governments have imposed any
restrictions on TNCs that would limit the overall fares TNCs
charge consumers.
5)Recent amendments address labor union and insurance industry
concerns . The author recently accepted amendments to address
insurance industry concerns that the bill might inadvertently
change TNC insurance requirements established in current law.
As amended, the bill now clarifies that the bill does not
change TNC insurance requirements.
Amendments accepted in the prior committee addressed concerns
expressed by labor organizations that the bill could
ultimately reduce ridership on public transit. The amended
version of the bill now clarifies that TNCs may not use
vehicles to provide transit service or to carry passengers
over a fixed route, to provide school pupil transportation
services, or to provide public paratransit services.
6)Arguments in support. Uber Technologies, Inc. states in
support that "AB 1360 clarifies that TNC's may offer less
expensive ridesharing services to customers with similar
pick-up locations and destinations?Uber's carpooling service
"UberPOOL" which is currently available in San Francisco and
Los Angeles allows passengers?to share a ride and save money.
Because Uber does not involve any in-person payment, cash or
otherwise, passengers are billed through Uber's online
platform based on their individual share of the ride. This
leads to cheaper rides and increased carpooling while
retaining the convenience and flexibility of ridesharing."
According to the Internet Association, "this measure is squarely
in line with well-established California public policy that
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broadly encourages carpooling to reduce traffic congestion and
air pollution. AB 1360 also furthers California's commitment
to the environment on other fronts, such as by enhancing our
State's greenhouse gas reduction efforts. Consumers also
benefit from greater transportation options. Multiple
passenger ride sharing services provide greater affordability
and flexibility for consumers."
The Clean Coalition states in support of this bill that "new
technologies offer enormous promise to meet our energy needs
while addressing global and regional environmental problems
and creating new economic opportunities across California -
all at costs that continue to drop as these technologies are
brought to scale."
7)Arguments in opposition . According to the San Francisco Taxi
Workers Alliance, "AB 1360 (Ting) would allow transportation
network companies (TNCs) to charge passengers on an individual
(split-fare) basis, while other charter-party carriers are
prohibited from doing the same. This special favored
treatment is founded on the false premise that these
operations - which are currently conducted in open defiance of
the law - bring environmental benefits. Quite the opposite is
true. A year ago Uber stated that it has some 16,000 vehicles
operating in San Francisco alone?According to GPS developer
TomTom, in the two years that TNCs have been allowed to
operate, San Francisco has become the second most congested
city in the U.S. (after Los Angeles)."
"AB 1360 would promote an unjustified expansion of TNC services
that will draw even more passengers away from public
transportation?The same holds true for their effects on the
taxi industry and taxi drivers. San Francisco has the greenest
taxi fleet in the country. Nearly all SF cabs must be hybrids
or other low-emissions vehicles. In contrast, CPUC rules allow
all sorts of vehicles to perform TNC services, including
non-hybrid vans, minivans, SUVs and pick up trucks.
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"[The fare-split provision] is meaningless in light of the
practice of 'surge pricing,' where the fare at peak times may
be as much as eight times the normal charge. Cities strictly
regulate maximum taxi charges to keep them non-discriminatory
and affordable, but for TNCs the sky's the limit, with no
oversight at all."
8)Technical amendment . Committee staff recommend the following
technical amendment to the bill to clean up a drafting error
in the bill:
On Page 3, line 10, after "Section 5434" add: or the
requirements set forth in Section 5435
9)Related legislation . AB 24 (Nazarian) would require drivers
hired or initially retained by either a charter-party carrier
of passengers or a TNC to be subject to background checks and
mandatory drug and alcohol testing prior to employment or
retention. The bill would also require a TNC to register any
vehicle used in the transportation of passengers for
compensation with the commission and display the identifying
decal issued by the commission on the vehicle. AB 24 is
currently pending in the Assembly Appropriations Committee.
AB 828 (Low) would exempt a motor vehicle operated in
connection with a TNC, as defined in Section 5431 of the
Public Utilities Code, from the definition "commercial
vehicle." AB 828 is currently pending in on the Assembly
Floor.
AB 886 (Chau) would establish new privacy protections for
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passengers of TNCs and taxicabs. AB 886 failed passage in the
Assembly Utilities and Commerce Committee on a 4-6 vote.
AB 1422 (Cooper) would authorize a TNC to participate in the
Department of Motor Vehicles pull-notice system to regularly
check the driving records of a participating driver regardless
of whether the participating driver is an employee or an
independent contractor of the TNC. AB 1422 is currently
pending in the Assembly Appropriations Committee.
10)Prior legislation.
AB 612 (Nazarian) of 2014 would have required charter party
carriers to participate in the Department of Motor Vehicles
Employer Pull Notice system and to submit all drivers to a
Department of Justice criminal background check . AB 612 was
held in the Assembly Transportation Committee.
AB 2293 (Bonilla), Chapter 389, Statutes of 2014, established
guidelines for insurance coverage for TNCs to ensure personal
and financial safety of consumers.
11)Double referral. This bill was double-referred to the
Assembly Utilities and Commerce Committee, where it was heard
on April 20, 2015, and passed on a 14-0 vote.
REGISTERED SUPPORT / OPPOSITION:
Support
Internet Association (Co-sponsor)
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TechNet (Co-sponsor)
Bay Area Council
City of Los Angeles
Clean Coalition
Coalition for Clean Air
Environment California
Environmental Defense Fund
Los Angeles Area Chamber of Commerce
Lyft, Inc.
Natural Resources Defense Council
Orange County Business Council
Planning and Conservation League
San Francisco African American Chamber of Commerce
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Sidecar
SPUR
TransForm
Uber Technologies, Inc.
Valley Industry & Commerce Association
Opposition
San Francisco Taxi Workers Alliance
Greater Livery Association
Analysis Prepared by:Jennie Bretschneider / P. & C.P. / (916)
319-2200
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