BILL ANALYSIS Ó
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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