BILL ANALYSIS Ó SENATE COMMITTEE ON TRANSPORTATION AND HOUSING Senator Jim Beall, Chair 2015 - 2016 Regular Bill No: SB 1035 Hearing Date: April 19, 2016 ----------------------------------------------------------------- |Author: |Hueso | |----------+------------------------------------------------------| |Version: |3/29/2016 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Randy Chinn | |: | | ----------------------------------------------------------------- SUBJECT: Transportation network companies DIGEST: This bill reiterates the California Public Utilities Commission's (CPUC) general authority over Transportation Network Companies (TNCs), requires the CPUC to study insurance and accessibility issues, requires the CPUC to study background check protocols and adopt regulations, allows peace officers to impound TNC vehicles under specified circumstances, and facilitates enforcement of CPUC rules on TNCs. ANALYSIS: Charter-party carriers are companies which transport people for compensation. These include limousines, charter buses and TNCs, such as Lyft and Uber. Taxis and municipal buses are excluded. Charter-party carriers are included in the definition of public utilities. The California Constitution 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." The California Constitution also provides that the CPUC "may fix rates, establish rules, examine records, issue subpoenas, (and) administer oaths" for all public utilities. SB 1035 (Hueso) PageB of? Existing law authorizes peace officers to impound a bus or limousine of a charter-party carrier under specified conditions, such as operating without a permit or valid driver's license. This bill: 1)Authorizes the CPUC to fix rates, establish rules, prohibit discrimination, and award reparation for unreasonable, excessive, or discriminatory charges by TNCs, such as Lyft and Uber. 2)Requires, as part of an already required study, the consideration of insurance products available, level of subscription, and the number of claims. 3)Requires the CPUC to study accessibility issues for the disabled with regard to TNCs, and to report its findings to the Legislature no later than December 31, 2017. 4)Requires the CPUC to study several driver background check protocols, including the United States Department of Justice background check, and to adopt any that would enhance public safety by capturing records of any criminal offense. 5)Removes the limitation on impoundment of only busses and limousines of charter party carriers to include all vehicles, including vehicles commonly used by TNCs such as Lyft and Uber. 6)Authorizes the CPUC to collect any necessary data from a TNC. 7)Requires the CPUC to adopt a General Order containing its TNC rules to facilitate enforcement, and allows peace offers to enforce the CPUC's rules on TNCs. COMMENTS: 1) Purpose. The recent growth and popularity of technology-enabled transportation ride-hailing services from companies like Lyft and Uber have disrupted the existing transportation-for-hire market and raised questions about whether these services are adequately regulated. While the SB 1035 (Hueso) PageC of? growth of these new technology-enabled services is proving wildly popular among consumers, there are a number of areas that merit further regulatory review to ensure adequate safety and consumer protections. Additionally, the current limited regulations of ride-hailing services raises questions about whether the companies that provide these services are unfairly advantaged over others that provide similar services, including taxis, livery, and airport shuttles. 2) An unlevel playing field. The different types of transportation companies (e.g., TNCs, limousines, Super Shuttles, taxis) are all regulated differently. Rates, routes, service areas, insurance requirements, vehicle inspections, and driver requirements vary. State law has begun to address the biggest differences between TNCs and other transportation companies, but there's little dispute that big differences remain. In an ideal world, companies would compete based on the differences in their business models and competence, not on the differences in how they are regulated. 3) Creating a level playing field slowly. The laws and regulations governing the provision of transportation services are many decades old. These laws and regulations have evolved slowly, as evidenced by the arcane and complicated carrier classifications. Over the last several decades, the few new laws have focused on safety issues. The rapid growth of TNCs has disrupted this relatively quiet corner of our economy, changing the economics of transportation and challenging the economic models of the traditional transportation providers. This has upended the lives of many people in the transportation industry, while at the same time providing many benefits to transportation consumers. Regulators are struggling to keep up with the rapidly evolving transportation industry, a bit hamstrung by laws which never anticipated the different ways that TNCs operate. In September 2013, the CPUC, which has regulatory authority over much, though not all, of the passenger transportation industry, issued its first set of rules,<1> intended to foster the growth of TNCs without compromising public safety. These rules started the process of ------------------------- <1> D.13-09-045; issued September 23, 2013. SB 1035 (Hueso) PageD of? establishing a level playing field so that all transportation companies would have similar regulatory obligations, allowing them to compete based on their business models. Among the rules were requirements for obtaining an operating permit from the CPUC, requiring criminal background checks for drivers, establishing driver training programs, implementing zero-tolerance policies on drugs and alcohol, and establishing minimum insurance requirements. The CPUC has initiated a second phase of its investigation to look more closely at the regulation of TNCs and the traditional transportation companies, known as charter-party carriers<2>. As the state's regulatory agency overseeing for-hire transportation companies, the CPUC is in the best position to consider whether its current regulations provide for a fair and competitive market. It can recommend specific changes to law and, in some cases, can implement changes to its own regulations to achieve the goal of a level playing field. However, the CPUC generally does not have authority over taxis, which are regulated at the local level. This accounts for much of the regulatory differences. For the last several years, state and local laws and regulations have struggled to deal with the changes in the for-hire transportation market brought about by TNCs such as Lyft and Uber. While TNCs have brought great benefits to consumers and drivers, there have been many concerns about fair competition which the legislature and regulators have tried to address. In the February 2016 joint informational hearing of the Senate Energy, Utilities and Communications Committee and this committee (joint informational hearing), a committee of the Transportation Research Board of the National Academies of Science, Engineering and Medicine presented their current research on competition between taxis and TNCs. Their research noted large growth in revenues for the taxi and limousine industry in the aggregate, but large declines in trips and revenues for taxis. This was at least partially attributed to unequal regulation. Among the recommendations ------------------------- <2> Assigned Commissioner and Administrative Law Judge's Ruling Amending the Scoping Memo and Ruling for Phase II of Proceeding; Rulemaking 12-12-011; April 28, 2015. SB 1035 (Hueso) PageE of? of the committee were: a) A reassessment of regulations for all for-hire vehicles is probably necessary b) Public safety requirements should be consistent for all for-hire services and should be gauged to risks c) A systematic evaluation of safety requirements is needed d) Accessibility to all travelers should be prioritized e) Basic service information for planning and regulation should be required f) Employment classifications should be carefully assessed 1) Some provisions of the bill reflect the CPUC's current authority. The California Constitution and the Public Utilities Code give the CPUC broad authority over public utilities, such as TNCs, generally, and over the transportation of passengers more specifically. The authority to set rates, establish rules, prohibit discrimination, and award reparation is echoed, but not supplemented, in Section 3 of the bill. The CPUC has considered the rate-setting issue with TNCs and determined that rate regulation is unnecessary. The CPUC does not regulate rates for other charter-party carriers either. Some have raised concerns about "surge" pricing, where prices increase when demand is highest. Surge pricing is fundamental to the TNC business model, as it serves both as a mechanism to shift users to less expensive times and to increase the supply of drivers. Taxis are not permitted to surge price, though some cities have begun allowing taxis to discount their fares. Regarding the collection of data, the CPUC has constitutional authority to examine records. Moreover, existing statutes give the CPUC and its employees the authority to inspect the accounts, books, papers, and documents of TNCs and all charter-party carriers. Companies may request that the provided information be kept confidential, pursuant to existing statute. This bill does not address the sharing of trip information with local transportation agencies, which was suggested during the informational hearing as necessary for local transportation planning purposes. SB 1035 (Hueso) PageF of? 2) Improving enforcement. Much of the bill focusses on improving enforcement, a weakness raised in the recent joint informational hearing and in a 2014 report by the State Auditor. This bill strengthens enforcement by requiring the CPUC to translate its decisions into General Orders and by specifically authorizing law enforcement officers to enforce the CPUC's rules. 3) Accessibility a concern. Concerns about equal accessibility to TNCs have at least two parts. The first is that TNCs can only be accessed by those having a smartphone and a credit card. This leaves out a substantial part of society: 36% of Americans do not have smart phones.<3> This bill addresses the second accessibility issue, which is the availability of TNCs to the disabled, who may have guide dogs or wheelchairs. TNCs serve the disabled through voluntary programs. For example, UberASSIST is available in certain cities and gives customers the option of selecting drivers with appropriate vehicles who have been trained to assist customers with equipment such as walkers, scooters, and wheelchairs. Uber has been sued for violating the Americans with Disabilities Act over access to rides. This bill requires the CPUC to study accessibility issues for disabled populations and to report its findings to the Legislature by December 31, 2017. However, the CPUC has broad authority to establish reasonable rules and remedy discrimination. Instead of reporting back to the Legislature, the author instead may wish to consider directing the CPUC to establish rules to ensure access for the disabled. The author may also wish to have the CPUC consider how those without smartphones and credit cards can become TNC customers. 4) Background checks. An example of unequal rules for similar competitors is the requirement for background checks. Some local governments, including the City of Los Angeles, require extensive background checks using fingerprints and the United States Department of Justice -------------------------- <3> Susan Shaheen; February 17, 2016 presentation to the joint informational hearing of the Senate Energy, Utilities and Communications Committee and the Senate Transportation and Housing Committee. SB 1035 (Hueso) PageG of? (DOJ) database for taxis.<4> The CPUC requires TNCs to perform criminal background checks on their drivers, but does not require fingerprints or the use of the DOJ database. (The CPUC is currently considering whether to require fingerprints.) And those rules do not require any background checks on other charter-party carriers, such as limousines. This bill requires the CPUC to study whether public safety would be enhanced if it required the use of the DOJ database, biometric data, or searching drivers' names through commercially available databases. If the CPUC finds that any of those measures enhanced public safety, it shall require those measures to participate as a driver of a TNC. The author may wish to consider extending this provision to all drivers of charter-party carriers to help equalize the rules for similar competitors. Fairness would also suggest that these rules apply to taxis. 5) Impounding cars. Current law authorizes the impoundment of buses and limousines of charter party carriers under specified circumstances, but not passenger cars. This bill expands the impoundment authority to include passenger cars. 6) Taxi regulation. In recognition of the competitive threat from TNCs, the taxi industry is considering sponsoring legislation to reform its regulatory structure. This would seem to be an overdue response. 7) Opposition. This bill is opposed by a coalition of technology trade associations and TNCs. They are concerned that the bill imposes new, burdensome, and unnecessary regulations on TNCs. This concern seems mostly misplaced as the most significant provisions of the bill are restatements of existing law. A fairer criticism is that the bill singles out TNCs. Opponents are also specifically concerned that the background check provisions are too rigid, tying the CPUC's hands in rendering a judgement over what background check protocols are in the public interest. 8) Prior Vote. This bill was previously heard in the Senate Energy, Utilities and Communications committee and passed 6-2. -------------------------- <4> The City of Los Angeles has urged the CPUC to conduct a pilot program using fingerprints to cross-check potential drivers against law enforcement databases. The CPUC has declined pending the opening of a new proceeding. SB 1035 (Hueso) PageH of? 9) Technical amendments. The Senate Engrossing and Enrolling unit has suggested the following technical amendments: Page 6, line 39 - after "5414.5," insert "and" Page 7, line 34 - after "number" insert "of" Related Legislation: AB 2293 (Bonilla, Chapter 389, Statutes of 2014) - requires specified levels of insurance coverage for TNCs and their drivers. SB 541 (Hill, Chapter 718, Statutes of 2015) - strengthens the CPUC's enforcement program and expands the enforcement authority of the CHP and other peace officers. AB 1289 (Cooper, 2015) - requires TNCs to perform criminal background checks on drivers that include local, state and federal law enforcement records. This bill is pending in the Senate Energy, Utilities and Communications Committee. AB 1422 (Cooper, Chapter 791, Statutes of 2015) - requires TNCs to participate in the DMV pull-notice program to vet driving records. AB 2603 (Nazarian) - requires the CPUC to accept customer complaints regarding TNCs and other charter-party carriers. This bill is pending in the Assembly Utilities and Commerce Committee. AB 2777 (Nazarian) - requires the California DOJ to provide TNCs with criminal background information on their driving partners upon request. This bill is pending in the Assembly Public Safety Committee. AB 2790 (Nazarian) - establishes a taxi commission within the Department of Consumer Affairs to license and regulate taxis. This bill is pending in the Assembly Transportation Committee. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes SB 1035 (Hueso) PageI of? POSITIONS: (Communicated to the committee before noon on Wednesday, April 13, 2016.) SUPPORT: California Bus Association California Labor Federation Disability Rights California Great California Livery Association OPPOSITION: Application Developers Alliance California Chamber of Commerce Internet Association Lyft NetChoice TechNet Uber -- END --