UberX and Lyft have agreed to pay a lot to get the nation’s first bill regulating “transportation network companies” (TNCs) passed by the Colorado legislature.
However, that may end up working to their advantage — though not necessarily the public’s — by keeping competition away.
For instance, the two TNCs agreed to pay a great deal more than the taxi companies do to get annual permits from the Public Utilities Commission. What’s more, they’re going to have to pay higher insurance rates than the taxis.
The four big companies — Metro, Yellow, Freedom and Union — pay a mere $5 per cab per year for a permit to cover inspections. Since they have, at last count, 1,262 permits among them, that comes to a total of just $6,310 annually.
Under Senate Bill 125, UberX and Lyft each have to pay $111,250 a year for permits, regardless of how many cars they have on the street. It’s not known how many drivers they contract with, but whatever it is, that’s a remarkably high multiple.
It’s not that taxis cost so much less to inspect; the cab companies benefit from a federal subsidy.
PUC spokesman Terry Bote explained that most of the state’s motor carrier inspection fund is paid for by a federal program called Unified Carrier Registration. The money is collected from interstate truckers but the law says states can use the proceeds to subsidize intrastate carrier safety regulation.
The law does not authorize the funds to be used for TNCs, said Bote. Besides, there’s not enough money in the account to cover them.
“The PUC staff agrees that the taxi and limo industry do not pay anywhere near the cost to regulate them, which is why we would like to see the law changed so those costs are more equitable,” said Bote.
Chances of getting the law changed? Not good. What legislator wants to carry a bill that would make Colorado cabs pay their own way instead of sticking it to interstate truckers?
An earlier version of the UberX-Lyft bill would have had the two companies paying a total of $215,000 a year for permits. But it also specified that that would be the total for the entire TNC industry. If a third or fourth company got in the business, they’d pay their proportionate share and some money would be returned to UberX and Lyft.
In the final days of the session the two companies decided that the rebate scheme was “too complicated,” said UberX attorney Greg Sopkin. It would be difficult to apportion refunds to various companies based on their number and the time of year they got in the business.
They told the sponsors they’d prefer to pay $111,1250 apiece. That’s the figure in the bill, which is now on Gov. John Hickenlooper’s desk awaiting his almost certain signature.
UberX and Lyft connect people driving their own vehicles with prospective paying passengers through a smartphone app. No cash is exchanged; all business is done though credit cards. The company gets 20 percent of the fare, the driver 80 percent. To date the system has worked without PUC supervision.
“If it was up to me we wouldn’t have regulated them at all,” Sen. Ted Harvey, R-Highlands Ranch, a prime sponsor. “I’d have just said that the PUC has no authority. But that wasn’t going to fly.”
Threats by PUC director Doug Dean forced the bill. “If legislation is not passed, we will have no choice but to kick them out of Colorado,” he said early in the session. He was under pressure from the taxi companies to get rid of them, since they generally cost less than taxis.
“UberX and Lyft will definitely make it work,” said Harvey. “That’s not my concern. My concern is for future companies who want to enter the market.”
Harvey, who’s term-limited at year’s end, has worked consistently to deregulate access to the taxi market. For many decades a taxi applicant had to prove a “need” for new business in advance to the PUC. Even under today’s somewhat more liberal laws, incumbents are allowed to challenge an application as “damaging” to the industry.
Senate Bill 125 doesn’t force a new TNC applicant to prove a need for its business, nor does it give existing companies a right to protest. That’s good. But the high licensing fees and the high insurance requirements might well discourage new applicants from getting into what would otherwise be a relatively inexpensive business to capitalize.
Sopkin said the PUC will determine the actual regulatory expenses after a year or so. The bill says it “may” adjust the annual permit fee by rule to cover its costs. Or, said Sopkin, Lyft and UberX might seek to lower the licensing fee by statute next year.
The bill also specifies that UberX and Lyft must carry at least $1 million in accident insurance. Dean had insisted that it be $1.5 million because that’s what the taxis have to buy. He was very eager not to see the taxi business hurt by TNCs.
But during the closing days of the session, the three PUC commissioners, responding to the complaints of the taxi companies, quietly cut their insurance minimums by two-thirds, to $500,000. Their insurance is set administratively.
“I was stunned to find, before the ink was even dry on the bill paper,” that the taxi insurance had been lowered to half of what TNCs must pay, said Sen. Cheri Jahn, D-Wheat Ridge, Harvey’s co-sponsor.
But it was too late to change the bill, and the TNCs are obligated to carry $1 million policies.
The PUC’s Bote said late in the session Dean had urged the House to put on an amendment letting the PUC determine TNC insurance rates as well as the taxis’.
But sponsors, aware of Dean’s earlier hostility to the TNCs, decided to put the $1 million minimum into law.
At least TNC businesses have been legally established in Colorado. The two existing companies may be paying too much for the regulation that comes with the right, but perhaps they won’t mind if it keeps down their future competition.
Longtime Rocky Mountain News political columnist Peter Blake now writes Thursdays for CompleteColorado.com. Contact him at firstname.lastname@example.org You may re-publish his work at no charge and without further permission; please give full credit to Peter Blake and www.CompleteColorado.com.