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State regulators lower fees for Uber, Lyft as ride-hail business booms

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The California Public Utilities Commission has decreased the amount of revenue required from Uber, Lyft and other transportation companies in the state. (Jessica Christian/S.F. Examiner)

State regulators who oversee Uber and Lyft in California voted Wednesday to drastically lower the fees they charge the companies to fund oversight despite harsh critiques from San Francisco officials that current ride-hail safety enforcement is understaffed, underfunded and ineffective.

The California Public Utilities Commission voted to decrease the amount of revenue required from Uber, Lyft and other transportation companies in California, with little discussion, after hearing from representatives across San Francisco who demanded transparency and stronger regulation of the ride-hail industry.

The CPUC defended the decision, however, and said the total amounts of revenue garnered from Uber and Lyft have increased, giving the regulators more than enough to work with.

SEE RELATED: SF agency may sue California to disclose how it spent millions in Uber, Lyft revenue

The regulator formerly required Uber and Lyft to pay .33 percent of their California revenue to the CPUC to cover the cost of regulating the companies. Now, that amount has dropped to 0.0025 percent of annual revenue.

Ride-hail funding contributed to a CPUC funding account that brought in $20 million over the 2016-17 fiscal year, although the agency will not say how much of that comes from Uber and Lyft and how much from sources such as limousine services. It is also unclear how far that funding will drop after the CPUC’s vote to reduce fees Wednesday.

City transportation agencies have urged the CPUC to open its books to the public.

At Wednesday’s meeting, Jeff Hobson, deputy director for planning at the San Francisco County Transportation Authority, told commissioners that his agency requested information on how funding from Uber and Lyft was spent at the CPUC, only to be rebuffed.

The drop in fees collected from ride-hail companies is concerning, he said, given CPUC’s well-known “inadequate resources.”

Kate Toran, head of taxi services at the San Francisco Municipal Transportation Agency, asked commissioners during public comment Wednesday to postpone their vote and suggested that the funding could aid the CPUC’s lackluster enforcement efforts.

“An independent audit of the oversight branch shows there is minimal enforcement and challenges in understaffing,” Toran told the commission. “It’s hard to understand the public policy rationale when there’s difficulty with enforcement.”

Yet, CPUC commissioner Martha Guzman Aceves said the regulators will still see substantial levels of funding to enforce ride-hail regulations.

“Our level of service is not being decreased, and we will have a healthy reserve to increase opportunities,” she said. “We are not stepping back in any way … We have exceedingly large reserves.”

Rasier, an Uber subsidiary, “supports the decrease in fees,” according to a CPUC staff report.

The CPUC has netted $67 million from ride-hail companies and limo companies since 2013, documents previously obtained by the San Francisco Examiner reveal. A report from the San Francisco County Transportation Authority estimates the CPUC nets more than $10 million annually in Uber and Lyft revenue “from San Francisco alone.”

The drop in funding from Uber and Lyft comes at a challenging time for CPUC’s regulatory oversight.

The agency primarily oversees utilities like electricity and gas, and an independent audit conducted by Crowe Horwath LLP in 2017 revealed significant changes — including increased funding — are needed to improve the CPUC’s transportation enforcement branch.

The audit found the CPUC “has not prioritized” its transportation program, leading to its “decline in terms of its visibility, importance, and effectiveness.” The “neglect” of the branch led to “inadequate resources and low morale and has hindered its ability to ensure public safety.”

The transportation enforcement branch also was found to suffer “chronic understaffing.” For 50 authorized full time positions, only 37 were filled at the time of the report. That’s also resulted in high turnover, leading to “a loss of institutional knowledge, regulatory expertise, and an environment of contstant instability.”

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