7. Assignment of Proceeding
Timothy Alan Simon is the assigned Commissioner and Victor D. Ryerson is the assigned ALJ in this proceeding.
1. Petitioner/applicant CMSA is a trade association of persons, firms, and corporations engaged in the transportation of used household goods in California i.e., household goods movers serving intrastate markets.
2. Intrastate household goods movers in California are subject to regulation by the Commission in accordance with MAX 4, which was initially adopted in I.89-11-003 and revised from time to time thereafter. MAX 4 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.
3. 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, 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.
4. 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.
5. 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.
6. 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.
9. The results of C&O and F/B surveys conducted by CMSA in 2009 with the cooperation and concurrence of DRA demonstrate that material changes have occurred in the demographics of California and the productivity of the intrastate household goods moving industry. DRA and CMSA agree that these survey results provide sufficient information to draw general conclusions about the revisions to MAX 4 proposed in this proceeding, and are a reliable basis for making the findings in this proceeding.
10. Differences in average wage costs between and among current MAX 4 hourly rate territories correspond with the current maximum rates. In other words, average wages for Territory A are higher than those in Territory B, which are higher than those in Territory C. The same is true for maximum rates. However, there are great variations in the ranges of wages paid within territories, and even within counties such as, for example, Santa Barbara and San Luis Obispo Counties, where movers' hourly rates are compressed against the Territory C MAX 4 limits.
11. Territory C carriers' freight bills demonstrate that carriers charging rates of 95 percent to 100 percent of the MAX 4 rates were from Santa Barbara, San Luis Obispo, and Stanislaus Counties. These results strongly indicate the existence of high labor rate pockets in otherwise low labor rate counties, and indicate a need to consider average labor costs in Territory C in combination with wage ranges and market pricing for this territory.
12. For the most part, carriers are generally charging rates appreciably below maximum rates, whether hourly or distance based. The exception is hourly rate Territory C, where carriers are charging at or near the territory's maximum rates to a much greater extent than carriers in the other two territories. Carriers in Territory C typically charge higher rates than carriers in Territory B. Equalizing the maximum rates in these two territories to eliminate this discrepancy would eliminate one set of rates altogether, and leave two hourly rate territories, A and B.
13. The Territory B maximum rates would provide an adequate ceiling for former Territory C carriers, and preserve the consumer protection concept envisioned by the Commission, as only maximum rates, and not market prices, would be affected.
14. The maximum rate differences between Territories A and B range from 4.75 percent for a vehicle plus driver (Van + 1) to 15.9 percent for a helper. For packers, who are a significant factor in many moves, the difference in rates is 13.4 percent. The typical comparison rate is that for a vehicle plus driver and helper (Van + 2); the difference in that rate between Territories A and B is 8.4 percent. The average observed difference between actual market prices for Van + 2 in the two territories is approximately 20 percent.
15. Most carriers charge well below maximum rates in both distance rate regions, although a greater proportion of moves were at or near maximum rates in Region 1 than in Region 2. Eliminating Region 1 would have no appreciable negative economic effect upon consumers.
16. The 1960s boundary line between Regions 1 and 2, which is still in use today, was driven by the demographics of a twelve-county region, reflecting then existing metropolitan areas. Those areas have evolved dramatically in the past 40 years, as urbanized development has expanded, and roads and highways have been altered to respond to the changes. The book of maps accompanying MAX 4 Distance Table 8 is consequently outdated in metropolitan zones.
17. The maximum fixed distance rates of Region 1 (Item 300) are in the range of 91 to 100 percent of those of Region 2 (Item 310).
18. Approximately 80 percent of moves conducted under MAX 4 are hourly rate moves.
19. Although some carriers are assessing charges at or near maximum distance rates, the overwhelming majority are pricing distance moves at discounts of 12 to 50 percent below MAX 4 maximum distance rates for either region.
20. The present formula for increasing maximum rates consists of two parts: First, the average annual change in the Consumer Price Index for All Urban Consumers (CPI-U) in the Los Angeles and San Francisco Bay metropolitan areas; and second, a reasonable percentage reduction (productivity offset factor) to encourage productivity.
21. The productivity offset factor was derived from the average annual trucking productivity data for the period from 1970 through 1989, a period of net productivity gains, adjusted specifically for household goods transportation. The adopted factor is .669, which means that a given increase in CPI-U is reduced by that factor to yield the percentage increase in maximum rates for the year.
22. It has been more than 20 years since the current industry productivity element was calculated for use in indexing rate increases, and it has never been reviewed or updated. Recent data show that the current productivity offset factor is no longer accurate.
23. During the 1987 - 2007 period there was an overall decline in mover productivity, indicating that the MAX 4 productivity assumptions relied upon by the Commission have been exaggerated since 1998.
24. The revisions proposed by CMSA and DRA would correct the deficiencies in the present MAX 4 tariff. These revisions are rationally designed to correct the present framework without making major changes to the entire MAX 4 tariff structure.
25. Adoption of the suggested changes would make MAX 4 more comprehensible to consumers and easier to use.
26. Adoption of simplified distance and hourly rate terms in MAX 4 would make the price caps easier for Commission staff to administer and enforce.
27. Tariff simplification would make it easier to develop tools for the consumer, such as website content enabling consumers to obtain and evaluate estimated moving costs online.
28. Adoption of the proposed changes would eliminate anomalies in the current productivity offset factor, and better promote the efficiency and productivity of moving companies in the state without making any change to the existing incentive mechanism.
1. The changes to MAX 4 proposed by CMSA and DRA will correct current deficiencies in that tariff, but will not harm consumers, because only rate caps will be adjusted. The competitive marketplace will not be materially affected by these changes.
2. The Commission should adopt the changes to MAX 4 that have been proposed jointly by CMSA and DRA, based upon Findings of Fact 7 through 28, and provide for implementation thereof by CPSD.
IT IS ORDERED that:
1. Maximum Rate Tariff 4 Naming Maximum Rates and Rules for the Transportation of Used Property, Namely: Household Goods and Personal Effects over the Public Highways within the State of California by Household Goods Carrier, effective July 23, 1998 (MAX 4), is revised as follows, effective upon issuance of an implementing resolution by the Commission, except as provided in subparagraph c:
a. Hourly rate Territory C is eliminated, and Territory C counties are incorporated into current Territory B, by revising Items 210 and 230 in accordance with the terms of this order, and conforming other Items to these revisions.
b. Distance rate Region 1 is eliminated, and Region 2 rates are applicable to the entire state, by revising Items 220, 240, 300, 310, 380, and 390 in accordance with this order, and conforming other Items to these revisions.
c. The productivity offset factor used in making annual rate adjustments is reset from .667 (the current factor) to .95 for five years, effective January 31, 2010.
d. Commencing with the tariff increase in January 2015, the productivity offset factor must be re-evaluated and reset every two years. If productivity change is positive, the productivity offset factor shall be set at .85; if productivity change is negative, it shall be set at .95.
2. The Commission's Consumer Protection and Safety Division shall, as soon as reasonably practicable, prepare the implementing resolution, and all necessary revised pages and maps incorporating the changes adopted in the preceding paragraph, for adoption by the Commission.
3. Application 08-03-005 is closed.
This order is effective today.
Dated January 21, 2010, at San Francisco, California.
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
JOHN A. BOHN
TIMOTHY ALAN SIMON
Commissioners
