BILL ANALYSIS                                                                                                                                                                                                    

                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 541 (Hill) - Public Utilities Commission: for-hire  
          transportation carriers: enforcement.
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          |Version: May 5, 2015            |Policy Vote: E., U., & C. 10 -  |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: May 26, 2015      |Consultant: Marie Liu           |
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          This bill meets the criteria for referral to the Suspense File. 

          Summary:  SB 541 would make a number of changes to the  
          California Public Utilities (CPUC) oversight and enforcement of  
          for-hire transportation carriers. 

           One-time contract costs of $750,000 (special*) to develop an  
            electronic permit program, a human resources plan, an  
            enforcement strategy, and a monitoring protocol.
           Annual costs of $207,000 (special*) to the CPUC for two years  
            followed by $100,000 annually to manage the contract work and  
            oversee the IT system.
           Unknown ongoing costs, expected in the millions of dollars,  
            (special*) for a significant increase in positions for  
            additional enforcement and permitting.


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          * Public Utilities Transportation Reimbursement Account.

          Background:  Existing law grants the CPUC the authority to regulate and  
          license or permit passenger state corporations and  
          transportation charter-party carriers. The commission is divided  
          into several divisions, including the Safety and Enforcement  
          Division which has the Transportation Enforcement Branch (TEB).  
          The TEB has authority over non-rail passenger carriers and  
          household goods movers (i.e. moving companies and vans). The  
          term "passenger carriers" is encompassing of several types of  
          carrier including passenger stage corporations, charter-party  
          carriers, and vessel common carriers. A passenger stage  
          corporation provides transportation services on a fixed route,  
          scheduled service or an on-call, door-to-door shuttle-type  
          services like airport shuttles. A transportation charter-party  
          carrier operates under the direction and control of their  
          chartering party and includes services such as tour buses and  
          limousines. Charter-party carriers also include transportation  
          network companies like Uber, Lyft, and Sidecar.  And vessel  
          common carriers include commute and tourist ferry service such  
          as in the San Francisco Bay and service to Catalina Island.  
          According to the CPUC's January 2015 zero-based budget, there  
          are nearly 12,000 carriers under the CPUC's jurisdiction.

          Carriers are required to pay a license fee to the CPUC, which  
          are deposited into the Public Utilities Transportation  
          Reimbursement Account, which funds CPUC's related regulatory  

          In June 2014, the California State Auditor released a report on  
          the CPUC's oversight of passenger carriers. Overall, the audit  
          concluded that, "The Transportation Enforcement Branch (branch)  
          of the California Public Utilities Commission (commission) does  
          not provide sufficient oversight of charter-party carriers and  
          passenger stage corporations (passenger carriers) to ensure  
          customer safety?the branch does not adequately ensure that such  
          passenger carriers comply with state law." The auditor cited 17  
          areas within the TEB's efforts that are lacking and merit  
          improvement including:


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           A lack of procedures for processing complaints.
           Failure to complete investigations and issue corresponding  
            citations in a timely manner.
           Failure to conduct adequate investigations.
           Inconsistency regarding collecting money from passenger  
            carriers for citations.
           Not adequately overseeing accounting related to the branch.
           Lack of managerial oversight, which led to incorrect funding  
            of transportation enforcement positions.
           Incorrectly funded and used positions authorized in the state  
            budget for enforcement of passenger carriers at airports.
           Limited efforts to implement an airport enforcement program at  
            other major airports.
           Failure to ensure staff receive adequate training.

          Proposed Law:  
            This bill would make a number of changes to the CPUC's  
          oversight of transportation carriers. Specifically, this bill  
           Require the CPUC, in consultation with the Department of Human  
            Resources, to develop a comprehensive human resources plan for  
            the TEB of the CPUC's Safety and Enforcement Division. The  
            plan shall focus on staff development, management practices,  
            and leadership, including policies to adequately train and  
            retain employees.

           Require the CPUC to implement a program to monitor the  
            performance of the TEB, including tracking the timeliness in  
            resolving applications for permits and certificates and  
            ensuring appropriate enforcement actions. 

           Require the CPUC to develop a comprehensive strategy to  
            detect, deter, and take enforcement actions against  
            charter-party carriers of passengers, passenger stage  
            corporations, and household goods carriers that are operating  
            illegally. The strategy would be required to include  
            strike-force enforcement actions, a formal process to respond  
            to consumer complaints, and enforcement actions against  
            illegally operating passenger carriers.

           Require the CPUC to develop and implement a plan to improve  
            technology capabilities to enhance customer service at the TEB  
            that facilitate complete online application and renewal,  


          SB 541 (Hill)                                          Page 3 of  
            vehicle registration, vehicle insurance compliance and  
            consumer complaints. This bill would direct the CPUC to  
            streamline the way carriers submit information, reports, and  
            applications. The CPUC would be required to ensure that the  
            staff of TEB are available by phone during normal business  
            hours to respond to questions.

           Require the CPUC to meet annually with the industry  
            associations regulated by TEB to coordinate efforts to improve  
            customer service and enforcement.

           Require the CPUC to develop a budget plan for the TEB to  
            ensure that revenues and expenditures are appropriately  
            aligned, with detailed information regarding categorizing  
            revenues and expenditures by carrier type and enforcement  

           Require the CPUC to report to the Legislature on  
            implementation by January 1, 2017, and by January 1,  

           Allow a peace officer to enforce Public Utilities Code related  
            to carriers, including the ability to arrest violators and  
            impound vehicles lacking proper certificates or permits.  
            "Peace officer" would be defined to include local city or  
            county police officer or sheriff, California Highway Patrol  
            officer, or airport law enforcement officer. 

           Direct the CPUC to coordinate enforcement with those peace  
            officers by providing educational outreach and establishing  
            lines of communication to ensure the CPUC is notified if  
            enforcement actions have commenced. 

           Provide that peace officers, as defined, can assist in  
            enforcement cases related to provisions regarding carriers in  
            Public Utilities Code which are executed by the Attorney  
            General, a district attorney, or city attorney.

          Comments:  Aside from the bill provisions that expand the  
          persons who may enforce the Public Utilities Code, this bill is  
          largely requiring the CPUC to undertake activities that are  
          within its existing powers and authorities. However, as  


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          illustrated by the state auditor's report, these existing powers  
          and authorities are not being utilized effectively. 
          This year, the CPUC released a zero-based budget to the  
          Legislature. In respect to the TEB, the CPUC found that the  
          number of carriers overseen by the CPUC has increased by 224%  
          since 2001 while they have had a 36% decrease in staffing. The  
          average time to process license applications has increased and  
          is currently three months from docketing to issue date with a  
          large variance, partially due to the variable level of  
          application completeness. As part of the formulation of the  
          zero-based budget, the CPUC developed some performance measures  
          and is able to generate simple reports on the number of open  
          applications, license application process times, and other  
          factors. The CPUC also now has the ability to extract  
          performance metrics regarding enforcement as a result of actions  
          taken for the zero-based budget. The CPUC notes that it is  
          working with a 30 year-old information management system. While  
          the zero-based budget indicated that there are more needs in  
          licensing and enforcement in addition to the need for analysts  
          in the TEB, the zero-based budget failed to identify the  
          resources that the CPUC feels is necessary to properly  
          accomplish its mission in this area. 

          This bill, by requiring specific actions of the CPUC, has  
          brought forward budget needs that may be existing. However, as  
          this bill is making certain actions mandatory, these costs, at  
          least in part, are appropriately attributable to this bill,  
          especially the planning and IT activities. Specifically, the  
          CPUC believes it would need a one-time contract to develop the  
          human resources plan, monitoring program, and enforcement  
          strategy required under the bill plus one limited term position  
          to oversee the contract for an annual cost of $107,000, likely  
          for two years. Staff notes that normally such planning and  
          strategy development should be within a department's existing  
          capabilities as it is core to management. However, the CPUC  
          notes that the TEB currently only has one analyst position for  
          the entire branch, severely limiting its planning capabilities.  
          Therefore, the CPUC believes that contracting out this work with  
          a limited-term staff overseeing the contract is the most  
          efficient and effective way of developing the plans and  
          strategies required by this bill.


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          To fulfill the bill's requirement that the CPUC improve its  
          technology capabilities in order to improve customer service and  
          the permit application process, the CPUC anticipates needing a  
          $500,000 information-technology contract that would be overseen  
          by a systems analyst or by a maintenance contractor for an  
          additional $100,000 in ongoing costs. The CPUC notes that it is  
          in the preliminary stages of implementing such an IT upgrade,  
          though no additional budget resources have been allocated for  
          this purpose at this time. This bill would make those IT costs  

          To implement the customer service and enforcement changes  
          prompted by this bill to accomplish requirements including  
          ensuring sufficient staff is available to answer phones during  
          business hours, performing strike-force enforcement actions, and  
          providing a written acknowledgement of all complaints, the CPUC  
          anticipates needing 38 new positions at an annual cost of $3.0  
          million, divided between customer service (8), licensing (5),  
          enforcement (20), and legal and supervisorial needs (5). While  
          the CPUC did not provide specifics on the workload assumptions  
          used to calculate these positions, staff believes it is  
          reasonable to assume that at least some of these positions would  
          be needed to reach the specific requirements of the bill.  
          However, the vast majority of these positions are likely needed  
          to achieve unspecified performance goals of the CPUC that would  
          be prompted by this bill, but are not necessarily required.  
          Therefore it is unclear how many of these positions are a result  
          of the required activities of the bill versus how many positions  
          are needed to make improvements identified by the zero-based  
          budget and audit.

          Staff notes that the Public Utilities Transportation  
          Reimbursement Account currently has a reserve over $10 million.  
          As such, should this bill be passed, an increase in fees to  
          cover the additional costs imposed by this bill would not be  
          needed for several years. 

                                      -- END --


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