2. Background
The present system of regulation of hourly and distance rates in the used household goods moving industry under a maximum rate framework was first established in 1990 as part of Investigation (I.) 89-11-003. At that time, the Commission shifted from a system of minimum rate regulation to one of maximum rate regulation that better reflected contemporary market conditions and consumer protection requirements. The final rates and rules embodied in MAX 4, which is a comprehensive regulation that contains many consumer protection requirements such as contract forms, notice requirements, and rules regarding billing, carriage and collection of charges in addition to rate caps and floors, were adopted in Decision (D). 92-05-028 in I.89-11-003, (1992) 44 CPUC2d 211.
In general terms, there are two types of rates in MAX 4: hourly rates, which are rates charged by the hour that apply to moves of 100 or fewer constructive miles,5 and distance rates, which are based upon shipment weight and length of haul. Hourly rates apply to what are generally called "local" moves, and distance rates primarily apply to moves of more than 100 constructive miles, or on shorter moves where the use of distance rates result in lower charges than those under hourly rates.6
MAX 4 defines three hourly-rate territories, which are identified as A, B and C. Territory A is the highest-rate territory, and C is the lowest. These territories were established on the basis of carrier costs at the county level. Under MAX 4 Items 210 and 230, Territory A comprises eight San Francisco Bay Area counties, plus Monterey County; Territory B comprises eight Southern California counties; and Territory C encompasses the remaining 41 counties.
There are two distance-rate regions under MAX 4 Items 220 and 240, which are defined as Regions 1 and 2. Region 1 is the coastal region from San Francisco Bay to Sacramento, thence south, including Fresno, Bakersfield, Los Angeles, the city of San Bernardino, and San Diego. Region 2 encompasses the remaining parts of the state, namely the area north of the Bay Area and Sacramento, the Sierra Nevada, and the southern desert areas. Region 1 rates are slightly lower than Region 2 rates. The regions were established on the basis of carrier operating costs, additionally considering population, traffic patterns, and volume of moving activity. Higher volumes and load factors in the coastal area, especially between the San Francisco Bay Area and the Los Angeles metropolitan area, produced lower costs, and thus lower rates, in Region 1.7
The maximum rate regions and territories were initially created in minimum-rate tariffs before the advent of MAX 4, and with the exception of moving Sonoma County into Territory A in 1983, the Commission has not redefined the geographical boundaries of these areas for 40 years.8
Since 1996, section 5191 of the Public Utilities Code has required MAX 4 rate levels to be adjusted annually, using an indexing method that the Commission relied upon to establish the initial MAX 4 rates. Under Resolution TL-19093, the rates are adjusted for inflation by formula, but the increases are offset by a "reasonable percentage" to encourage higher productivity and promote efficiency and economy of operation by household goods carriers. Thus, if inflation is determined by formula to be X percent in a given year, rates are offset by a productivity factor that reduces the upward revision to a percentage lower than X. In practice, this has resulted in compression of operating costs against the ceiling rates in certain geographical areas where the cost of living has risen substantially since 1992.
5 Constructive miles are highway engineered, i.e, constructed, to account for road conditions such as terrain, altitude and traffic congestion. Constructive miles are generally greater than actual highway miles.
6 Historically, the Commission has found that local moves account for 80 to 85 percent of moves within the state.
7 MAX 4 Items 300 and 310 set forth the maximum rates for distance moves from one residence or business location to another. Items 380 and 390 contain the maximum rates for distance moves to or from places of storage. Items 300 and 380 are for Region 1, and Items 310 and 390 are for Region 2.
8 In addition to local and long distance moves, MAX 4 contains maximum rates for accessorial services, some of which are charged by the hour and are consequently included in the proposal to revise the tariff. Accessorial services in the tariff include packing and unpacking of goods, appliance servicing (preparation for transport) and disassembly and reassembly of large or complicated items.
