BUSINESS
01/26/2015 04:51 pm ET Updated Jan 27, 2015

Here's Why Uber Is Tripling Prices During A State Of Emergency

Uber announced Monday that it won't charge riders more than about three times its normal fare during "Winter Storm Juno," the blizzard hitting the Northeast.

In an email to customers, the car service said that it would cap its surge pricing at 2.8 times its usual rate. Currently, this rate applies only to New York City and is subject to change as the storm moves.

How did Uber, which increases prices during times of high demand, arrive at that precise limit?

The answer is an agreement the company reached with New York Attorney General Eric Schneiderman in July. It allows surge pricing once a state of emergency has been declared, but limits how high fares can go. Uber has agreed to limit pricing to "the normal range of prices it charged in the preceding sixty days."

In addition to capping surge pricing, Uber agreed to donate the company's proceeds from rides -- which is 20 percent of the fare, plus $1 -- to the Red Cross. The company confirmed Monday that it would adhere to this pledge during the blizzard.

In response to a request for comment on the price surge during the storm, Uber directed The Huffington Post to a July statement explaining how it sets prices during a state of emergency. The statement said "the state of emergency price will be set after excluding the 3 highest-priced, non-emergency days of the preceding 2 months." So to set fares for the blizzard, the company took surge prices from the last two months, arranged them from highest to lowest, and set a price somewhere below the highest three.

Uber has been criticized for drastically raising prices during emergencies such as Hurricane Sandy and the recent terrorist attacks in Sydney. The company has long defended its surge pricing, saying that it helps increase the number of drivers on the road when demand is highest.

But even if some Uber drivers are ready to take to the road to get higher fares during the storm, they're still subject to travel bans in place in several northeastern cities. New York Gov. Andrew Cuomo declared a state of emergency Monday at 1:30 p.m. New York City Mayor Bill de Blasio said at a press conference Monday that no non-emergency vehicles would be allowed on the streets Monday night. Connecticut has issued a state-wide travel ban beginning at 9 p.m. Monday.

New York City taxis will not charge additional fares while they are allowed to be on the road. They're also offering free rides to emergency responders, as well as any elderly New Yorkers or people with disabilities who are in an emergency situation.

Lyft, a competing service, said in an email Monday that it would cap surge pricing at two times the normal rate, the company's standard policy.

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