BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: AB 828 Hearing Date: 6/21/2016
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|Author: |Low |
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|Version: |7/14/2015 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Nidia Bautista |
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SUBJECT: Vehicles: transportation services
DIGEST: This bill excludes motor vehicles operating in
connection with a transportation network company (TNC) from the
requirement to register as a commercial vehicle, if certain
conditions are met. This bill also requires the California
Public Utilities Commission (CPUC) to conduct an investigation
to consider whether existing rules related to transportation
services serve the public interest, encourage innovation, and
create a fair and competitive transportation market between
companies that provide regulated transportation services.
ANALYSIS:
Existing law:
1)Defines a "commercial vehicle" as a motor vehicle used or
maintained for the transportation of persons for hire,
compensation, or profit or designed, used, or maintained
primarily for the transportation of property. (Vehicle Code
§260)
2)Establishes the Department of Motor Vehicles (DMV) within the
State Transportation Agency and charged with the
responsibility to issue vehicle registration and driver's
licenses. (Vehicle Code §1500, et seq.)
3)Establishes the "Passenger Charter-Party Carriers Act", which
directs the CPUC to regulate, require license or permit to
operate, require insurance and workers compensation, takes
appropriate enforcement action and other provisions related to
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transportation charter-party carriers (CPCs). (Public
Utilities Code §5351 et seq.)
4)Defines transportation network company (TNC) as a type of
charter-party carrier that is an organization, including, but
not limited to, a corporation, limited liability company,
partnership, sole proprietor, or any other 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)Requires specified liability insurance requirements for TNCs.
(Public Utilities Code §§5433 and 5434)
This bill:
1)Excludes from the definition of "commercial vehicle," until
January 1, 2018, unless a new statute is enacted, those motor
vehicles operated in connection with a TNC provided that the
vehicle is:
a) operated for passenger service only and is limited
to seven passengers excluding the driver;
b) operated exclusively by the person to whom the
vehicle is registered or insured;
c) not a paratransit vehicle;
d) not operated for public transit services; and
e) not operated for school bus services.
2)Requires that changes to the definition of commercial vehicle
per this bill does not change the insurance requirements
established for TNCs under Public Utilities Code §5433 and
5434.
3)Requires the CPUC to conduct an investigation, in consultation
with the DMV and relevant local agencies, and report to the
legislature by January 1, 2017, to consider whether existing
statutes and regulations relating to transportation services
serve the public interest, encourage innovation, and create a
fair and competitive transportation market between companies
that provide regulated transportations services.
Background
Role of the DMV. The DMV is charged with ensuring proper
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vehicle registration for all vehicles and licensing of all
drivers on California roads, per the requirements in the Vehicle
Code and related regulations. The purpose of a vehicle
registration is to establish ownership and collect related fees
from motorists in exchange for the costs of maintaining public
streets and roads.
Role of the CPUC. While the DMV is tasked with vehicle
registration and individual driver licensing, other state and
local entities issue separate permits to authorize companies,
including their drivers and vehicles, to transport passengers
for compensation. Within the state, the CPUC regulates most,
but not all, of these transportation for-hire activities,
including those of CPCs. The CPUC determines whether a CPC
meets the various requirements prior to issuing a license that
would allow a given CPC to operate on a for-hire basis to carry
passengers, these include limousines, buses (not school or
transit), and TNCs. In the case of taxicab services, local
cities and counties issue permits to operate under those
activities. Whether transportation for-hire licenses are issued
by the CPUC or a city/county, vehicle registration is maintained
as the exclusive purview of the DMV and required of all vehicles
on the roads, with some exceptions.
Enter TNCs. TNCs have grown dramatically, with a reported
120,000 drivers across the state for one company, according to
their testimony to this committee<1>. 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. While most closely related
to a taxicab, TNCs prearrange transportation services via an
online application on a smartphone or computer. Patrons request
a ride to a predetermined location, and the application connects
them with a TNC driver. Payment is processed through the
application so that no physical financial transaction occurs
between the patron and driver and the TNC takes a commission on
each trip. 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
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<1> Uber testimony. Joint Hearing of the Senate Energy,
Utilities and Communications and Transportation and Housing
Committees. Leveling the Playing Field: Ride-hailing disruption.
February 2016.
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and others. Whereas taxicabs are regulated by locals, TNCs are
regulated at the state level by the CPUC.
Commercial vehicle registration. The Vehicle Code provides that
certain vehicles must be registered as commercial vehicles, with
specified plates and fees. This includes vehicles used to
transport people or property for compensation. However,
commercial registration is also required of all pick-up trucks
regardless of whether they are used for commercial activity.
Vehicles registered as commercial are required to pay an
additional fee based on the weight of the vehicle which is
generally assessed based on the gross vehicle weight and number
of axles. Overall, the weight fee is designed to offset the
additional wear and tear that a commercial vehicle causes on the
state's roads and highways. As such a commercial license plate
is more costly than a non-commercial plate. For cars weighing
less than 3,000 pounds (e.g. Ford Focus), the additional cost is
$8/year; for cars weighing between 3,000 and 4,000 pounds (e.g.
Honda Accord), the additional costs is $24/year; and for cars
weighing between 4,000 and 5,000 pounds the additional cost is
$80/year. Commercial plates are also easily distinguishable
from regular license plates by law enforcement. Commercial
license plates use a digit sequence of NANNNNN and regular
plates use a sequence of NAAANNN, where N=number and A=letter.
This distinction can be beneficial to law enforcement in an
investigation of an accident or incident or as they patrol
vehicles on the roads.
Not so fast. On January 5, 2015, the DMV issued an advisory
memo due to a number of dealers and customers seeking
clarification on how to register a vehicle that would be used to
provide TNC services. These inquiries were derived from
purchasers buying new vehicles through financing programs
offered by TNCs. The memo stated that "any passenger vehicle
used or maintained for the transportation of persons for hire,
compensation, or profit is a commercial vehicle. Even occasional
use of a vehicle in this manner requires the vehicle to be
registered commercially." Within about a week, after backlash
from the TNCs, the DMV retracted the advisory memo clarifying
that further analysis is warranted.
Personal vehicle and commercial vehicle are not exclusive. A
personal vehicle can have a commercial registration. The
question of what defines a personal vehicle as it relates to
TNCs is not directly related to the question of commercial
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vehicle registration requirements. For purposes of defining a
personal vehicle, the CPUC's Phase II decision is attempting to
define whether a leased or rented vehicle can be used for TNC
services and under what conditions. However, the question of
vehicle registration is one that is the exclusive purview of the
DMV and that would not be directly related to the decision on
personal vehicle. In fact, a separate bill has been introduced
to address the definition of personal vehicle as it relates to
the CPUC's proposed decision to place conditions on the use by
TNCs of leased and rented vehicles. Whether or not the DMV
requires commercial vehicle registration is not hinged on the
definition of personal vehicle, which as noted above, other
personal vehicles are already required to have commercial
vehicle registration (e.g. pick-up trucks used for
non-commercial activity).
Transportation deficit. As the state grapples with a
transportation budget deficit to maintain roads and highways,
the administration and legislature explore various options to
reduce costs and increase revenues to support transportation
infrastructure. Just last week, the Senate approved a budget
bill that would increase the vehicle registration fee $10
annually for every registered vehicle, and peg the increase to
the consumer price index. Yet, the administration has chosen to
forgo the revenues that would be derived from requiring vehicles
operating TNCs from commercial registration. Assuming close to
200,000 TNCs on California's roads, the state is forgoing
upwards of $5 million dollars annually. While not officially
confirmed, there are rumors that the Administration may be
exploring a settlement price with each of the TNC individual
companies, in lieu of requiring individual commercial plates on
each vehicle. It would seem that such an arrangement could be
unprecedented, and would lack the benefits of individual
commercial plates that could be easily identifiable by law
enforcement and accurately assessed an annual fee. However, if
such an arrangement is being pursued by the Administration, the
language in this bill that would exempt TNCs from the
requirement of commercial vehicle registration could directly
undermine those efforts. Currently, the Governor has the
ability to enforce the law and require commercial registration
of TNCs should the companies not negotiate in good faith.
The requirement in this bill to exempt TNCs from commercial
vehicle registration seems premature at best. The current
statute is not being enforced by the Administration so there's
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no demonstrated need for this bill. Furthermore, the DMV has
not finalized a decision or made a recommendation about
commercial plates on TNCs. On the other hand, the request for
the study by the CPUC, in consultation with DMV and others,
seems timely and appropriate to help inform this issue and
others as it pertains the disparate regulations on similar
transportation services. The author and committee may wish to
amend this bill to remove the provisions related to exempting
TNCs from the commercial vehicle registration requirements.
Technical amendments. The author and committee may also wish to
narrow the requirement that the CPUC, in consultation with DMV
and others, conduct an investigation and report by narrowing the
report to regulations and rules related to transportation
for-hire services
Prior/Related Legislation
AB 1360 (Ting, 2015) would allow charter-party carriers of
passengers, including transportation network companies, to
charge individual fares, rather than a single group fare when
providing carpool services. The bill is scheduled to be heard
by this committee on June 27, 2016.
AB 1422 (Cooper, Chapter 791, Statutes of 2015) required
transportation network companies to participate in the DMV
employer pull-notice (EPN) system to regularly check the driving
records of a participating driver.
AB 1610 (Committee on Budget, 2016) would among other items,
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 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.: Yes Local: No
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SUPPORT:
American Insurance Association
Association of California Insurance Companies
Bay Area Council
Brea Chamber of Commerce
Clean Coalition
County of Orange Supervisor, 2nd District
Los Angeles Area Chamber of Commerce
Lyft
National Association of Mutual Insurance Companies
Orange County Business Council
Pacific Association of Domestic Insurance Companies
Personal Insurance Federation of California
Planning & Conservation League
SPUR
San Francisco Chamber of Commerce
Travelers United
Uber
OPPOSITION:
California Bus Association
California Delivery Association
California Labor Federation
Greater California Livery Association
San Francisco Taxi Workers Alliance
San Francisco Yellow Cab Co-Op
ARGUMENTS IN SUPPORT: According to the author's office: "this
bill will affect users of TNCs by increasing access to a driver
in a timely manner without additional hurdles for the operator
of the TNC to jump through. This bill also helps other
industries that provide similar services by requiring the CPUC
to do a study on how to best serve the public interest. Once
the CPUC has concluded their study, recommendations will be
given to the legislature on how best for all the companies to
serve the users of these services."
Lyft and Uber both assert that requiring TNC drivers to register
their vehicles as commercial vehicles is an onerous requirement
that would likely deter part-time drivers - who represent the
majority of TNC drivers - from participating in the sector.
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These companies argue that the law must be clarified to provide
certainty for the TNC sector.
ARGUMENTS IN OPPOSITION: In opposition to this bill, the
California Delivery Association states: "Our industry is
comprised of small businesses that have been creating jobs,
contributing to our economy and supporting our communities, many
for nearly half a century, in California. While we realize that
every business must work hard to compete in the marketplace, we
oppose "carve-out" exemptions created by government or any other
entity that unfairly gives one segment of our industry the upper
hand and leaves many struggling family businesses at a
competitive disadvantage."
The San Francisco Taxi states "there is no reason to exclude TNC
vehicles from commercial registration while not excluding other
vehicles that are used commercially in the same manner. Many
taxi drivers and small business owners also use their vehicles
for personal purposes and work part-time, yet must register
their vehicles commercially. It is a simple and inexpensive
process: a single visit to a weigh station, which may charge
$25, and payment of an additional registration fee of $8-24 for
a small or medium-sized sedan."
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