BILL ANALYSIS Ó
SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS
Senator Ben Hueso, Chair
2015 - 2016 Regular
Bill No: SB 1035 Hearing Date: 4/5/2016
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|Author: |Hueso |
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|Version: |3/29/2016 As Amended |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Nidia Bautista |
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SUBJECT: Transportation network companies
DIGEST: This bill requires a suite of reforms related to
regulating technology-enabled ride-hailing services, including
requiring the California Public Utilities Commission (CPUC) to
assess areas related to criminal background checks,
accessibility for disabled populations, data access for local
transportation and environmental planning. This bill would also
extend enforcement authority related to CPUC transportation
network companies (TNCs) licensing activities to local peace
officers.
ANALYSIS:
Existing law:
1.Establishes the CPUC with five members appointed by the
governor and confirmed by the Senate and empowers it to
regulate privately owned public utilities and common carriers
in California. Specifies that the Legislature may prescribe
that additional classes of private corporations or other
persons are public utilities. (Article XII of the California
Constitution; Public Utilities Code §301 et seq.)
2.Provides that the CPUC may fix rates and establish rules for
the transportation of passengers and property by
transportation companies, prohibit discrimination, and award
reparation for the exaction of unreasonable, excessive, or
discriminatory charges. (Article XII, §4 of the California
Constitution)
SB 1035 (Hueso) Page 2 of ?
3.Establishes the CPUC's authority to regulate, require license
or permit to operate, require insurance and workers
compensation, take appropriate enforcement action and other
provisions related to passenger stage corporations. (Public
Utilities Code §1031 et seq.) and transportation charter-party
carriers (Public Utilities Code §5351).
4.Directs the CPUC to issue permits or certificates to
charter-party carriers, investigate complaints against
carriers, and cancel, revoke, or suspend permits and
certificates for specific violations. (Public Utilities Code
§5387)
5.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)
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
online-enabled application or platform to connect passengers
with drivers using a personal vehicle. (Public Utilities Code
§5431)
This bill:
1.Provides that peace officers, as defined, may additionally
enforce and assist in the enforcement of the rules for TNCs
adopted by the CPUC.
2.Restates CPUC's existing constitutional authority to fix rates
and establish rules for transportation of passengers and
property by transportation companies.
3.Requires additional data to be included in the required study
of CPUC and Department of Insurance related to insurance
coverage.
4.Requires the CPUC to study accessibility issues for disabled
populations with regard to TNCs and report the findings of the
study to the Legislature.
SB 1035 (Hueso) Page 3 of ?
5.Requires the CPUC, in consultation with the Department of
California Highway Patrol, the Department of Justice, and
local law enforcement, to study the background check measures
and determine whether the background checks would enhance
public safety.
6.Provides that the CPUC may collect any necessary data from a
TNC.
7.Requires the CPUC open a proceeding to determine how data
collected can be best shared with local planning agencies.
8.Requires the CPUC to adopt a general order containing rules
for TNCs.
9.Removes provisions in statute that prohibit law enforcement
from impounding privately owned personal vehicles used in by
TNCs.
10.Authorizes a peace officer to impound any vehicle of a
charter-party carrier of passengers for failing to operate the
charter-party carrier with proper permit and license.
Background
California law regulates different modes of passenger
transportation for compensation, including taxi services, which
are regulated by cities and counties, and charter-party carriers
and passenger stage companies which are regulated by the CPUC.
Beginning as early as 2009, a new model of transportation
services began springing up in cities across the United States.
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 driver and vehicle.
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.
The development of the TNCs has made the ability for passengers
seeking transportation for compensation more readily available
to the general public. While these services have grown in
popularity in the last few years, this new service has not fit
neatly into the existing laws and regulations governing
transportation services.
SB 1035 (Hueso) Page 4 of ?
Passenger carriers. The CPUC is in charge of regulating
passenger carriers. Passenger carriers include services, such as
passenger stage corporations and charter-party carriers.
Passenger stage corporations 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.
Charter-party carriers are services that charter a vehicle, 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 level of
charges for charter-party carriers. Types of charter-party
carriers include limousines, tour buses, sightseeing services,
and charter and party buses.
The CPUC requires charter-party carriers 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.
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 charter-party carrier -
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 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
SB 1035 (Hueso) Page 5 of ?
model to compete with the 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 charter-party carriers,
transportation network companies. 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 charter party
carriers and the need to update transportation rules, including
any direction from the legislature.
Locals issue cease and desist orders. 2014 was marked by
growing tensions between local governments, including airports,
and TNCs. First, the City of San Francisco cracked down on
unauthorized entry into airports by TNCs. In June, the City of
Los Angeles Department of Transportation issued cease and desist
orders against Lyft and SideCar. In the fall of 2014, both San
Francisco and Los Angeles County District Attorneys sent letters
to the TNCs, Uber, Lyft and Sidecar, claiming they are operating
illegally and warning them that legal action could follow if
they don't make major changes. The DA's offices had conducted a
joint investigation and found a number of practices that violate
California law. The CPUC also issued letters to the TNCs, based
on the investigations and claims of local airports, which
expressed "personal disappointment" by then- CPUC President
Peevey regarding the violations by TNCs and stipulated the
CPUC's ability to revoke permits.
Legislature adopts new insurance requirements. The Legislature
passed AB 2293 (Bonilla, Chapter 389, Statutes of 2014), which
SB 1035 (Hueso) Page 6 of ?
codified the CPUC's definition of TNCs and imposed certain
liability and other insurance coverage for TNCs and their
participating drivers. The bill defines when personal and
commercial auto insurance requirements come into effect, and at
what levels, when the driver logs onto the application until the
driver accepts a ride request, and for when a ride request is
accepted until the passenger exists the vehicle. The CPUC
subsequently strengthened its insurance requirements in-line
with the requirements of AB 2293. The CPUC established 28 rules
and regulations, including requiring a minimum of $1 million
per-incident, primary commercial insurance coverage, for
incidents involving TNC vehicles and drivers in transit to or
during a TNC trip. The rules also provide for personal auto
insurance requirements when the app is off or open for a match.
CPUC regulation of TNCs. In September 2013, the CPUC adopted
the first phase of a two-phase decision related to TNCs. In the
decision, the CPUC defined TNCs as a new category of CPCs
subject to the CPUC oversight and regulations. The CPUC adopted
rules to require TNCs to obtain a permit to operate from the
CPUC, require TNCs to conduct background check on drivers, check
driver records prior to driving and quarterly, thereafter,
establish a driver training program, implement a zero-tolerance
policy on drugs and alcohol, conduct vehicle inspections, and
obtain authorization from airports before conducting operations
on or into airports property. The Department of Motor Vehicles
(DMV) check criteria is required to provide that a driver have
no more than three points within the preceding three years, no
"major violations" (reckless driving, hit and run, or driving
with a suspended license conviction) within the preceding three
years, and no driving under the influence conviction within the
past seven years). Subsequently, the Legislature passed AB
2293, which codified the CPUC's definition of TNCs and
established liability and insurance requirements for TNCs and
their participating drivers.
More recently, the CPUC has proposed additional requirements on
these ride-hailing services, including a U.S. Department of
Justice fingerprint background check for services exclusively
marketed to transport minors, require annual 19-point vehicle
inspections by certified Bureau of Automotive Repair facility,
allow the services to split fares, in so far as, they adhere to
the CPUC's proposed interpretation of Public Utilities Code
§5401 and requires the companies to provide the required data to
allow the CPUC to assess whether it is complying with the
SB 1035 (Hueso) Page 7 of ?
requirements. The CPUC is scheduled to vote on the proposal this
month.
CPUC enforcement. The work to license, enforce and ensure safety
of transportation for hire services regulated by the CPUC,
including private passenger and household goods carriers, is
done through the CPUC's Transportation Enforcement Bureau (TEB)
within the Safety and Enforcement Division with approximately 45
authorized staff positions. The CPUC is responsible for issuing
operating permits and certificates (operating authority) to
qualified applicants for authority to operate as passenger stage
corporations, charter-party carriers of passengers, and
household goods carriers, and for denying, suspending and
revoking operating authorities of such carriers that fail to
meet statutory and regulatory requirements. This work is
performed by the Transportation License Section, the
Transportation and Enforcement Section. The 45 authorized staff
positions in TEB are spread evenly between licensing (14 staff),
enforcement section-north (15 staff) and enforcement
section-south (15 staff).
Type of Carrier No. Permitted
Charter-party carriers of passengers8,942
Private carrier of passengers 1,310
Household goods carriers 1,077
Passenger stage corporations 262
Senate conducts joint oversight hearing. On February 17th, this
committee held a joint oversight hearing with Senate Committee
on Transportation and Housing to address the myriad of issues
related to the ride-hailing disruption in the transportation
for-hire sector. A panel of academic and industry experts shared
their perspectives, including the findings from a recent study
by the National Academies Transportation Research Board. The
hearing may have raised more questions than it answered. SB 1035
is an attempt to ensure California proceeds on addressing some
of the lingering questions related to a rigor study of existing
criminal background checks, issues relate to accessibility for
disabled populations, need for more data to facilitate local
transportation and environmental planning, and, most notably,
the need for more enforcement of the CPUC-licensing activities.
Double-referred. Should this bill be approved by this
committee, it will be referred to the Senate Rules Committee for
SB 1035 (Hueso) Page 8 of ?
further referral.
Prior/Related Legislation
AB 1286 (Cooper, 2015) requires TNCs to conduct comprehensive
criminal background checks for each participating driver that
include local, state, and federal law enforcement records.
Prohibits TNCs from hiring a driver that is required by any law
to register as a sex offender or has been convicted of any
violent felony, sexual offense, driving under the influence
offense, non-felony violent crime, act of fraud, act of terror,
or crime involving property damage or theft.
AB 2293 (Bonilla, Chapter 389, Statutes of 2014) established
guidelines for insurance coverage for TNCs to ensure personal
and financial safety of consumers.
AB 1422 (Cooper, Chapter 791, Statutes of 2015) required
transportation network companies to participate in the DMV
pull-notice system to regularly check the driving records of a
participating driver.
SB 541 (Hill, Chapter 718, Statutes of 2015) proposed a suite of
requirements of the CPUC in an effort to strengthen the agency's
overall program and enforcement of for-hire transportation
carriers. The bill also expanded enforcement authority to other
peace officers in addition to the California Highway Patrol for
bus and limousine licensing activities.
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: Yes
SUPPORT:
None received
OPPOSITION:
None received
ARGUMENTS IN SUPPORT: SB 1035 is a sensible bill to address
some of the existing shortcomings of the regulatory oversight of
the technology-enabled transportation services. This bill
requires the CPUC, the agency currently tasked with licensing
SB 1035 (Hueso) Page 9 of ?
ride-hailing services in the state, to assess and determine
additional public safety and consumer protections that may be
necessary for ride-hailing services.
This bill also helps to address a major gap in the current
regulatory scheme - enforcement. Although the CPUC has
historically had over a hundred transportation inspectors, the
majority of that capacity was lost after trucking was federally
de-regulated. Today, the CPUC has 22 staff inspectors for all
the transportation-for-hire services they license, including
livery, tour buses, and others. It's clear that short of a
significant budget augmentation, the CPUC is very unlikely to
have adequate capacity to properly enforce its regulations.
Additionally, much of the ride-hailing activities are occurring
on local streets, yet local law enforcement is limited in their
ability to enforce the CPUC regulations and rules.
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