Date of Hearing:

Counsel: David Billingsley

ASSEMBLY COMMITTEE ON PUBLIC SAFETY

Reginald Byron Jones-Sawyer, Sr., Chair

ABPCA Bill Id:AB 1936

Author:(Rodriguez) – As Amended Ver:March 5, 2020

As Proposed to be Amended in Committee

SUMMARY:

  Includes Public Safety Power Shut Offs as an emergency for which price gouging is prohibited if a state of emergency has been declared by specified governing bodies or government officials. Specifically, this bill:

1. States that upon the proclamation of a state of emergency declared by the President of the United States or the Governor, or upon the declaration of a local emergency by an official, board, or other governing body vested with authority to make that declaration in any county, city, or city and county, because of a public safety power shutoff or because of an announcement that a public safety power shutoff will occur; and for that period of time until 72 hours after the conclusion of the public safety power shutoff, it is unlawful for a person, contractor, business, or other entity to sell or offer to sell and consumer food items or goods, goods or services used for emergency cleanup, emergency supplies, medical supplies, home heating oil, building materials, housing, transportation, freight, and storage services, or gasoline or other motor fuels for a price of more than 10 percent greater than the price charged by that person for those goods or services immediately prior to the proclamation or declaration of emergency.
   
2. Specifies that if a declaration of emergency is made because of an announcement that a public safety power shutoff will occur, and that shutoff does not occur, the provisions of this bill prohibiting price gouging will only apply for 72 hours following the declaration.
   
3. Allows a price increase greater than 10% if the person can prove that the increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services during the state of emergency or locale emergency, and the price is no more than 10 percent greater than the total cost to the seller plus the markup customarily applied by the seller for that good or service in the usual course of business immediately prior to the onset of the state of emergency or local emergency.
   
4. States that specified provisions in the existing price gouging law regarding residential rental property, motels or hotels, and contractors, do not apply to a declaration of emergency made because of a public safety power shutoff or because of an announcement that a public safety power shutoff will occur.
   
5. State that the provisions in the existing price gouging law which allow extension in 30 day periods of the prohibition on price gouging do not apply to a declaration of emergency made because of a public safety power shutoff or because of an announcement that public safety power shutoff will occur.
   
   

EXISTING LAW:

1. Finds that during emergencies and major disasters, including, but not limited to, earthquakes, fires, floods, or civil disturbances, some merchants have taken unfair advantage of consumers by greatly increasing prices for essential consumer goods and services. (Pen. Code, § 396, subd. (a).)
   
2. States that it is the intent of the Legislature to protect citizens from excessive and unjustified increases in the prices charged during or shortly after a declared state of emergency for goods and services that are vital and necessary for the health, safety, and welfare of consumers. (Pen. Code, § 396, subd. (a).)
   
3. Provides that upon the declaration of a state of emergency resulting from an earthquake, flood, fire, riot, storm, or natural or manmade disaster declared by the President of the United States or the Governor, or upon the declaration of a local emergency resulting from an earthquake, flood, fire, riot, storm, or natural or manmade disaster by the executive officer of any county, city, or city and county, and for a period of 30 days following that declaration, it is unlawful for a person, contractor, business, or other entity to sell or offer to sell any consumer food items or goods, goods or services used for emergency cleanup, emergency supplies, medical supplies, home heating oil, building materials, housing, transportation, freight, and storage services, or gasoline or other motor fuels for a price of more than 10 percent above the price charged by that person for those goods or services immediately prior to the proclamation of emergency. (Pen. Code, § 396, subd. (b).)
   
4. States that upon the declaration of a state of emergency, as specified, and for a period of 180 days following that declaration, it is unlawful for a contractor to sell or offer to sell any repair or reconstruction services or any services used in emergency cleanup for a price of more than 10 percent above the price charged by that person for those services immediately prior to the proclamation or declaration of emergency. (Pen. Code, § 396, subd. (c).)
   
5. Provides that a greater price increase is not unlawful if that person can prove that the increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, provided that in those situations where the increase in price is attributable to the additional costs imposed by the contractor’s supplier or additional costs of providing the service during the state of emergency or local  emergency, the price represents no more than 10 percent above the total of the cost to the contractor plus the markup customarily applied by the contractor for that good or service in the usual course of business immediately prior to the onset of the state of emergency or local  emergency. (Pen. Code, § 396, subd. (c).)
   
6. Specifies that upon the proclamation of a state of emergency, as specified, and for a period of 30 days following that proclamation or declaration, it is unlawful for an owner or operator of a hotel or motel to increase the hotel or motel’s regular rates, as advertised immediately prior to the proclamation or declaration of emergency, by more than 10 percent. However, a greater price increase is not unlawful if the owner or operator can prove that the increase in price is directly attributable to additional costs imposed on it for goods or labor used in its business, to seasonal adjustments in rates that are regularly scheduled, or to previously contracted rates. (Pen. Code, § 396, subd. (d).)
   
7. Specifies that, a greater price increase for the goods and services, mentioned above, is not unlawful if that person can prove that the increase in price was directly attributable to additional costs imposed by specified circumstances. (Pen. Code, § 396, subd. (a)-(c).)
   
8. States that up the proclamation of a state of emergency and for a period of 30 days following that proclamation or declaration, or any period the proclamation or declaration is extended by the applicable authority, it is unlawful for any person, business, or other entity, to increase the rental price, as defined, advertised, offered, or charged for housing, to an existing or prospective tenant, by more than 10 percent. (Pen. Code, § 396, subd. (e).)
   
9. Specifies that it is unlawful for a person, business, or other entity to evict any residential tenant of residential housing after the proclamation of a state of emergency and for a period of 30 days following that proclamation or declaration, or any period that the proclamation or declaration is extended by the applicable authority and rent or offer to rent to another person at a rental price greater than the evicted tenant could be charged under this section. (Pen. Code, § 396, subd. (f).)
   
10. Provides that time frame prohibiting specified price increases may be extended for additional 30-day periods by a local legislative body or the California Legislature, if deemed necessary to protect the lives, property, or welfare of the citizens. (Pen. Code, § 396, subd. (g).)
    
11. States that the conduct described above is a misdemeanor punishable by imprisonment in a county jail for a period not exceeding one year, or by a fine of not more than ten thousand dollars ($10,000), or by both that fine and imprisonment. (Pen. Code, § 396 subd. (h).)
    
12. Specifies that the conduct described above shall constitute an unlawful business practice and an act of unfair competition. (Pen. Code, § 396 subd. (i).)
13. Defines "State of emergency" as “a natural or manmade emergency resulting from an earthquake, flood, fire, riot, storm, drought, plant or animal infestation or disease, or other natural or manmade disaster for which a state of emergency has been declared by the President of the United States or the Governor of California.” (Pen. Code, § 396, subd. (j)(1).)
    
14. Defines "Local emergency" as “a natural or manmade emergency resulting from an earthquake, flood, fire, riot, storm, drought, plant or animal infestation or disease, or other natural or manmade disaster for which a local emergency has been declared by  an official, board, or other governing body vested with authority to make such a declaration in any county, city, or city and  county in California..” (Pen. Code, § 396, subd. (j)(2).)
    
15. Defines "Housing" as “any rental housing with an initial lease term of no longer than one year, including, but not limited to, a space rented in a mobilehome park or campground” for purposes of criminal price gouging. (Pen. Code, § 396, subd. (j)(11).)
    

FISCAL EFFECT:

Unknown

COMMENTS:

1. Author's Statement: According to the author, "“Like wildfires, Public Safety Power Shutoffs are becoming the new normal. Last year, millions of Californians were affected by Public Safety Power Shutoffs and were only given a few days’ notice, prompting them to hastily go out and purchase necessary goods needed to endure the event. This causes a surge in demand for essential goods in the few days before a scheduled shutoff, creating an opportunity for sellers to take advantage of consumers by price gouging the cost of goods such as generators, gasoline, and medical supplies. Price gouging on essential goods before an anticipated Public Safety Power Shutoff can be as life-threatening as price gouging during a natural disaster or emergency – especially for elderly, disabled, and low-income Californians.”
   
2. Utility Power Shutoffs and to Mitigate Wildfire Risk: In October 2019, Pacific Gas & Electric shut power to about 800,000 customers across Northern California in an attempt to avoid wildfires caused by winds damaging power equipment. The blackouts impacted 34 counties throughout northern and central California. Malfunctions on the part of utilities have been tied to some of the state’s most destructive fires, including the Camp fire, which devastated Paradise, Calif., and the 2017 wine country blazes. (https://www.latimes.com/california/story/2019-10-08/pge-power-shutdown-winds-critical-fire-danger)
   
   Michael Wara, director of Stanford University’s climate and energy policy program, said, “Power shut-offs in the face of really widespread dangerous fire weather, which is what we’re confronting, may be the best thing we can do for the time being,” Wara went on to say, “In the long run, PG&E needs to fix its grid. And so does Edison ... so they can use power shut-offs as a more limited tool like a scalpel rather than the blunt instrument they have now.” (Id.)
   

Given the time required for utilities to make safety changes to the electrical grid, California can expect that Public Safety Power Shutoffs will continue to be a tool to reduce fire danger for the foreseeable future.

1. Price Gouging: Current law makes it unlawful for retailers and service providers to price gouge during for a 30 day period (180 days for reconstruction services) after a declared state of emergency. “Price gouging” is increasing the price of specified goods and services by more than 10% above the price of those goods and services prior to the declaration of emergency. The provisions of the price gouging statute are triggered when a state of emergency has been declared by the President of the United States, the Governor, or officials at a county or municipal level, as specified.
   

Price gouging applies to the following items: lodging (including permanent or temporary rental housing, hotels, motels, and mobilehomes); food and drink; emergency supplies such as water, flashlights, radios, batteries, candles, blankets, soaps, diapers, temporary shelters, tape, toiletries, plywood, nails, and hammers; and medical supplies such as prescription and nonprescription medications, bandages, gauze, isopropyl alcohol, and antibacterial products. It also applies to other goods and services including: home heating oil; building materials, including lumber, construction tools, and windows; transportation; freight; storage services; gasoline and other motor fuels; and repair and reconstruction services.

Utilities in California have recently used Public Safety Power Shutoff when conditions exist that create a heightened risk of fire. Public Safety Power Shutoffs are imposed by energy utilities in certain geographic areas to mitigate that fire risk. These service outages has caused significant disruptions to Californians’ lives. The power outages have affected California citizens in a similar manner to natural disasters that have resulted in a declared state of emergency. However, there are also some differences between a Public Safety Power Shutoff and natural disasters, such as earthquake or fire. Unlike an earthquake or fire, there is no permanent damage to infrastructure from a Public Safety Power Shutoff. Because there is no damage to infrastructure, the time to recover from the disruption caused by a Public Safety Power Shutoff is much quicker than the time required to recover from an earthquake of wildfire.

This bill applies the price gouging statute to a declared state of emergency based on a Public Safety Power Shutoff. However, the bill limits the time period in which the price gouging statute applies to a period of 72 hours (rather than 30 days from declaration of emergency) after the power has been restored. Because there is no damage to housing stock or other infrastructure, specified provisions of the price gouging statute applying to reconstruction costs, hotels, and rental housing would not apply to a declaration of emergency based on a Public Safety Power Shutoff.

1. Argument in Support: According to the Consumer Attorneys of California, “AB 1936 expands the current prohibition on public emergency price gouging by triggering the prohibition before a public emergency event takes place. Specifically, it would take effect when the governing body of a city or county announces a planned Public Safety Power Shutoff.
   
   “This change would protect consumers in need from price hikes spurred by a sudden increase in the demand of vital goods and services. For low-income Californians, the elderly, and the disabled, AB 1936 will preserve purchasing power in an otherwise life-threatening situation.
   
   “A growing number of Californians have been disrupted by planned utility shutoffs. We must ensure they’re not also taken advantage of by unfair pricing tactics.”
   
2. Prior Legislation:
   
   1. AB 1919 (Wood), Chapter 631, Statutes of 2018, expanded the scope of the crime price gouging by including rental housing that was not on the market at the time of the proclamation or declaration of emergency. Defines and clarifies the “rental price” of housing for purposes of price gouging.
      
   2. AB 2820 (Chiu), Chapter 671, Statutes of 2016, specified that criminal price gouging includes rental of any housing with an initial lease of up to one year for purposes of criminal price gouging.  Included the transportation of persons and towing services in the criminal price gouging during a declared emergency.
      
   3. AB 457 (Nunez), Legislative Session of 2005-2006, would have authorized the Governor to proclaim an abnormal market disruption, as defined. AB 457 died in the Senate.
      
   4. SB 1363 (Ducheny), Chapter 492, Statutes of 2004, prohibits the owner or operator of a hotel or motel from increasing its regular advertised rates by more than 10% for 30 days following a proclamation or declaration of emergency, except as specified.

REGISTERED SUPPORT / OPPOSITION:

Support

California State Sheriffs’ Association

Consumer Attorneys of California
Disability Rights California
Rural County Representatives of California

Opposition

None

Analysis Prepared by:

David Billingsley / PUB. S. / (916) 319-3744