BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
                              Senator Ben Hueso, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 1360           Hearing Date:    6/27/2016
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          |Author:    |Ting                                                 |
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          |Version:   |7/2/2015    As Amended                               |
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          |Urgency:   |No                     |Fiscal:      |No              |
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          |Consultant:|Nidia Bautista                                       |
          |           |                                                     |
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          SUBJECT: Charter-party carriers of passengers:  individual fare  
          exemption

            DIGEST:    This bill allows charter-party carriers of  
          passengers, including transportation network companies, to  
          charge individual fares, rather than a single group fare when  
          providing carpool services.

          ANALYSIS:
          
          Existing law:
          
          1)The Passenger Charter-Party Carriers' Act generally requires  
            charges for the transportation to be offered or afforded by a  
            charter-party carrier (CPC) to be computed and assessed on a  
            vehicle mileage or time of use basis or on a combination  
            thereof.  These charges may vary in accordance with the  
            passenger capacity of the vehicle, or the size of the group to  
            be transported. However, no CPC of passengers shall, directly  
            or through an agent or otherwise, nor shall any broker,  
            contract, agree, or arrange to charge, or demand or receive  
            compensation, for the transportation offered or afforded that  
            shall be computed, charged, or assessed on an individual-fare  
            basis, except school bus contractors who are compensated by  
            parents of children attending public, private, or parochial  
            schools and except operators of round-trip sightseeing tour  
            services conducted under a certificate subject to Section  
            5371.1, or a permit issued pursuant to subdivision (c) of  
            Section 5364.  (Public Utilities Code 5401)

          2)Directs the California Public Utilities Commission (CPUC) to  







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            issue permits or certificates to CPCs, investigate complaints  
            against carriers, and cancel, revoke, or suspend permits and  
            certificates for specific violations.  (Public Utilities Code  
            5387)

          3)Defines "charter-party carrier of passengers" 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.  (Public Utilities Code 5360)

          4)Defines a "transportation network company (TNC)" 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  
            online-enabled application or platform to connect passengers  
            with drivers using a personal vehicle.  (Public Utilities Code  
            5431)

          5)Restricts CPCs from offering the transportation computed,  
            charged or assessed on an individual-fare basis.  (Public  
            Utilities Code 5401)

          6)Exempts contractors from the prohibition to assess individual  
            fares who are compensated by parents of children attending  
            public, private, or parochial schools and except operators.   
            (Public Utilities Code 5401)

          7)Exempts a round-trip sightseeing tour service conducted with  
            an authorized certificate or permit from the prohibition to  
            assess individual fares.  (Public Utilities Code 5401)

          This bill:

          1)Exempts CPCs, including TNCs, that prearranges a ride among  
            multiple passengers who share the ride in whole or in part,   
            from the prohibition to charge individual fares, provided that  
            all the requirement are met: 

               a)     The vehicle seats no more than seven passengers,  
                 excluding the driver.
               b)     The driver is a participating driver of a TNC.
               c)     The vehicle is not used to provide public transit  
                 services or to carry passengers over a fixed route.
               d)     The vehicle is not used to provide pupil  








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                 transportation services.
               e)     The individual fare is less than the fare that would  
                 be charged for the same ride to a traveling alone. 

          2)States that this subdivision does not change the insurance  
            requirements established for a TNC and any participating  
            driver. 

          Background

          Passenger carriers.  California law has disparate regulations  
          for different modes of passenger transportation for  
          compensation, including taxi services, which are regulated by  
          cities and counties, and CPC and passenger stage companies (PSC)  
          which are regulated by the CPUC.  The CPUC regulates most, but  
          not all, passenger carriers.  Passenger carriers include  
          services, such as passenger stage corporations and CPC.  PSCs  
          are services that provide transportation to the general public  
          on an individual fare basis, such as scheduled bus operators,  
          which are buses that operate on a fixed route and scheduled  
          services, or airport shuttles, which operate on an on-call  
          door-to-door share the ride service.  CPCs are services that  
          allow a vehicle and driver to be chartered, on a prearranged  
          basis, for the exclusive use of an individual or group.  Charges  
          are based on the mileage or time of use, or a combination of  
          both.  The CPUC does not regulate the rates for CPCs, but it is  
          authorized to do so.  Types of CPCs include limousines, tour  
          buses, sightseeing services, and charter and party buses.  The  
          CPUC requires CPC to meet a number of requirements before an  
          operating permit or certificate is issued.  For example, the  
          CPUC requires sufficient proof of financial responsibility, a  
          preventative maintenance program for all vehicles, a safety  
          education and training program, and regular checks of the  
          driving records of all persons operating vehicles used in  
          transportation for compensation. 

          Taxicab and other transportation services.  Taxicabs are  
          excluded from the definition of CPCs and are regulated by cities  
          or counties.  And additional key distinction between CPCs  
          services and taxicab services is that CPCs services must be  
          prearranged, while taxicabs are allowed to pick up passengers  
          via street hails, including at curbsides.  In addition to  
          taxicabs and PSCs, other transportation services that are not  
          considered CPCs include:  transportation services licensed and  
          operating wholly within the limits of a single city or city and  








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          county, transportation services contracted to transport school  
          students, publicly owned transit systems, passenger vehicles  
          carrying passengers on a noncommercial enterprise basis,  
          vehicles used exclusively to provide medical transportation, and  
          others.

          Enter TNCs.  In 2010, a new model of transportation services was  
          introduced in San Francisco.  Now known as TNCs, these original  
          companies, including UberCab, allowed patrons to prearrange  
          transportation services through an online application on their  
          smartphone or computer.  Patrons would request a ride to a  
          predetermined location and the application would connect them  
          with a TNC driver.  Payment is processed through the application  
          so that no physical financial transaction occurs during the trip  
          itself between the patron and the driver.  The TNC takes a  
          commission on each trip.  TNCs have grown dramatically, with a  
          reported 120,000 drivers across the state for one company,  
          according to their testimony to this committee.  The entrance of  
          TNCs into the transportation for-hire market has disrupted the  
          sector.  TNCs are successfully competing with taxi cabs,  
          limousines, and other regulated transit operators.  TNCs enjoy  
          differing regulations as compared to taxicabs, including the  
          ability to set their own fares, flexibility to increase supply,  
          and, generally less stringent requirements - including those  
          related to vehicle inspections, driver background checks,  
          insurance coverage, driver training and others.  Whereas  
          taxicabs are regulated by locals, TNCs are regulated at the  
          state level by the CPUC.  

          Cease and desist orders ignored.  Back in June 2010,  
          then-UberCab was utilizing its application platform to help  
          prearrange rides for patrons of CPUC licensed charter-party  
          carriers, particularly limousines and towncars.   However, as a  
          new service that didn't fit very well within the existing  
          regulatory framework - not a taxi not a CPC - the CPUC and San  
          Francisco Metropolitan Transportation Authority issued a  
          "cease-and-desist" order against Uber.  The order directed Uber  
          to stop advertising and cease its operations until it had  
          acquired a valid permit to operate from the CPUC.  However, even  
          under threat of penalties (at $1,000 per day) and potential  
          prison time, UberCab continued to operate.  In 2012, Sidecar and  
          Lyft were launched as new app based prearranged transportation  
          services, except that these companies used individuals who  
          weren't licensed with the CPUC, drove their personal vehicles,  
          and operated on a donations basis.  About a month after Lyft was  








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          launched, on September 2012, the CPUC issued "cease-and-desist"  
          orders against Sidecar and Lyft.  Once again, the companies  
          remained on the road operating their services.  In the spring of  
          2013, Uber transformed its business model to compete against  
          Lyft and SideCar.  In the face of protest from its existing Uber  
          Black drivers who drove CPUC-licensed vehicles, Uber expanded to  
          Uber-X, allowing non-CPUC licensed individuals to drive their  
          personal vehicles to transport passengers using the Uber  
          platform.  In late 2012, both Lyft and SideCar would abandon the  
          donations-based fees and move to a minimum fee approach.

          CPUC takes a different tack.  In December 2012, after its "cease  
          and desist" orders had largely been ignored by the TNCs, the  
          CPUC announced it would open a formal proceeding to evaluate  
          services like Lyft, SideCar and Uber.  By January 2013, about  
          one month later, the CPUC announced it had reached an agreement  
          with Uber whereby Uber would continue to operate as the CPUC  
          underwent its proceeding.  The CPUC would also drop its $20,000  
          penalty against Uber.  In September 2013, the CPUC formally  
          announced it would recognize these app-based transportations  
          services as a new category of CPCs and TNCs.  The CPUC required  
          each TNC (not each driver) to register with the CPUC, require  
          criminal background checks of all its drivers, and specified  
          insurance requirements.  The CPUC also acknowledged it would  
          open a second phase to consider effects on limousines and other  
          CPCs and the need to update transportation rules, including any  
          direction from the legislature. 

          CPUC warns against fare-splitting.  In 2014, Uber, Lyft and  
          SideCar were advertising new services known as "UberPool," "Lyft  
          Line," and "Shared Rides," respectively.  These services allow a  
          rider the option to select a discounted ride where they are  
          matched with another rider travelling to a similar destination  
          or a destination along a similar route.  When the ride is over,  
          the ride-hailing company's software electronically collects the  
          fare on behalf of the driver.  In response to reports and  
          advertisement of these new services which charge individual  
          fares for a shared ride, in September of 2014, the CPUC sent  
          letters to the TNCs, including Uber, Lyft, and SideCar, warning  
          against the companies' advertisement of new services that allow  
          for fare-splitting between riders.  The CPUC warned that such  
          activity isn't allowed under the CPC legal framework and would  
          require a different type of permit under a different model.  The  
          CPUC stated that such a business plan is prohibited under  
          California law, citing Public Utilities Code 5401, which  








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          "prohibits a charter party carrier from charging passengers on  
          an 'individual-fare basis'" - the section of the statutes TNCs  
          are looking to change in AB 1360.  According the companies,  
          these fare-splitting services represent a majority of the rides  
          they provide in some metropolitan areas, including San  
          Francisco. 

          Recent CPUC decision.  After the warnings were issued, the TNCs  
          responded by asserting that Public Utilities 5401 was not  
          written to prevent the types of carpooling service offered by  
          "uber POOL," "Lyft Line," and "Shared Rides."  In contrast to  
          their earlier warning, in March, the CPUC voted, 4-1, to allow  
          TNCs to conduct fare-splitting activities under the CPCs  
          license.  Specifically, the proposed decision states: "We  
          acknowledge that this evolution in the passenger carrier  
          industry is a new means of offering passengers a way to split  
          fares while still paying for the time and distance traveled that  
          was not possible when Public Utilities Code 5401 was enacted,  
          and on that basis, the statute lacks clarity and would benefit  
          from modernization."  Moreover, the proposed decision asserts  
          that based on the record the CPUC does not find any public  
          policy or safety objectives that would be impaired by allowing  
          TNCs to engage in fare-splitting services. However, the CPUC  
          also required additional reporting requirements of the TNCs in  
          exchange for authorization to offer the fare-splitting services.  
           Specifically, the CPUC is requiring TNCs offering a  
          fare-splitting service to report on complaints, incidents, the  
          cause of each incident, and the amount paid for compensation to  
          any party in each incident via a certified, under penalty of  
          perjury, submission to the CPUC.  The CPUC requires the TNC to  
          submit their waybills that document that the fares for the  
          fare-splitting services are calculated on either a vehicle  
          mileage or a time of use basis, or a combination thereof.

          Environmental benefits and traffic congestion relief?  The TNCs  
          claim that the fare-splitting services help to reduce traffic  
          congestion, and the associated air pollution and fossil fuel  
          usage that would otherwise materialize without the  
          fare-splitting services.  On cursory review, it would seem  
          possible that there may be some potential traffic-relief and air  
          quality benefits to fare-splitting services. However, as was  
          relayed by testimony from academic experts at our joint  
          committee oversight hearing on the Ride-hailing Disruption in  
          February, there are many variables that affect whether TNC  
          fare-splitting services provide congestion relief and associated  








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          environmental benefits.  These variables include: the pollution  
          from the vehicle used as compared to the vehicle that would have  
          been used, whether the TNC driver drove more miles to get a  
          matched ride(s), whether public transit trips were forgone,  
          whether the option for the fare-splitting rides induced more  
          trips than would have been made, whether these rides are  
          replacing bicycling or walking, and others.  In its proposed the  
          decision, the CPUC also stated that they lacked sufficient data  
          and evidence to corroborate the TNC claims.  Testimony from Dr.  
          Susan Shaheen, co-director, Transportation Sustainability  
          Research Center, University of California Berkeley, at our joint  
          oversight committee hearing in February suggests these variables  
          may play out differently based on a given locality and existing  
          land use and public transit patterns.  Dr. Shaheen is conducting  
          a study of TNCs related to potential environmental and traffic  
          impacts whose findings are expected to be released as early as  
          late this year.  

          This bill was incorrectly amended by the Senate Committee on  
          Transportation and Housing.  Per the Senate Committee on  
          Transportation and Housing: the author and committee may wish to  
          consider striking line 26 (B) on page 2, otherwise the exemption  
          will only apply to TNC charter-party carriers, not charter-party  
          carriers more broadly.  

          Prior/Related Legislation
          
          AB 828 (Low, 2015) exempts vehicles operating in conjunction  
          with TNCs from the definition of commercial vehicle and requires  
          an investigation and report by the CPUC, in consultation with  
          the DMV, on the transportation for-hire services.  The bill is  
          waiting to be considered in Senate Committee on Appropriations.

          AB 612 (Nazarian, 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.  The bill was  
          held in the Assembly Committee on Transportation.

          AB 1422 (Cooper, Chapter 791, Statutes of 2015) required  
          transportation network companies to participate in the DMV  
          employer pull-notice system to regularly check the driving  
          records of a participating driver.

          AB 1610 (Committee on Budget, 2016) would among other items,  








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          increase the annual vehicle registration fee by $10 per  
          registration to fund state highway and local road construction,  
          maintenance and mitigation and associated administrative costs.   
          The bill is in the Assembly awaiting a concurrence vote.

            AB 2673 (Gatto, 2016) would define a personal vehicle as a  
          vehicle that is used by a participating driver to provide  
          prearranged transportation services for compensation, is owned,  
          leased, rented, or otherwise authorized for use for any period  
          of time by the participating driver, meets all inspection and  
          other safety requirements imposed by the California Public  
          Utilities Commission (CPUC), and is not a taxicab or a  
          limousine. The bill is scheduled to be heard by this committee.

          AB 2293 (Bonilla, Chapter 389, Statutes of 2014) established  
          guidelines for insurance coverage for TNCs to ensure personal  
          and financial safety of consumers. 

          SB 1035 (Hueso, 2016) would have instituted a number of public  
          safety and consumer protection requirements on TNCs.  The bill  
          failed passage in the Senate Committee on Transportation.

          FISCAL EFFECT:                 Appropriation:  No    Fiscal  
          Com.:             No           Local:          No


            SUPPORT:  

          The Internet Association (Source)
          TechNet (Source)
          Bay Area Council
          Brea Chamber of Commerce
          California League of Conservation Voters
          Caltrain
          City of Los Angeles
          Clean Coalition
          Circulate San Diego
          Climate Resolve
          Coalition for Clean Air
          County of Orange Supervisor, 2nd District
          Environment California
          Environmental Defense Fund
          Greenbelt Alliance
          Lyft, Inc.
          Los Angeles Area Chamber of Commerce








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          Metropolitan Transportation Commission
          Natural Resources Defense Council
          Orange County Business Council
          Planning and Conservation League
          San Francisco African American Chamber of Commerce
          San Francisco Chamber of Commerce
          San Francisco Transit Riders
          Sidecar
          Silicon Valley Leadership Group
          Southern California Association of Governments
          SPUR
          TransForm
          Travelers United
          Uber Technologies, Inc.
          Valley Industry & Commerce Association

          OPPOSITION:

          Greater California Livery Association
          San Francisco Taxi Workers Alliance

          ARGUMENTS IN SUPPORT:    The author's office states: "currently,  
          laws governing charter party services such as TNC's prevent them  
          from charging passengers individual fares for split rides.  This  
          statute was written in 1961 with the intent to protect consumers  
          from being forced to share limousine and taxi services with  
          other individuals.  It has not been updated since 1994, before  
          the advent of the technology utilized by TNC's, which can now  
          allow consumers to choose whether they want to share a ride for  
          a reduced cost.  With the advancement of the sharing economy,  
          this outdated statute needs to be updated in order to allow  
          flexibility for opt-in carpooling services that TNCs want to  
          provide and consumers want to utilize."
          
          ARGUMENTS IN OPPOSITION:   The San Francisco Taxi Workers  
          Alliance (SFTWA) AFL-CIO opposes this bill stating that "AB 1360  
          allows TNCs to encroach upon public transit, school buses, taxis  
          and other forms of transit that serve the public as a whole.  It  
          would extend and perpetuate TNCs failure to provide adequate  
          service to the disabled community.  Fare-splitting is currently  
          illegal in California, but Uber and Lyft show no concern about  
          that.  Passage of AB 1360 would once more sanction and reward  
          their unlawful behavior, and encourage more of the same."

          








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