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
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|Author: |Hueso |
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|Version: |3/29/2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Randy Chinn |
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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.
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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
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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
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<1> D.13-09-045; issued September 23, 2013.
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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
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<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.
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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.
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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
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<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.
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(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.
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<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.
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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
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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
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