Uber used surge pricing during storm last March, state agency rules. It’ll cost them $950,000

Craig F. Walker/Globe Staff/File

Rideshare giant Uber will pay a fine of nearly $1 million to settle allegations that it raised prices during a storm last March in violation of a state of emergency that Governor Charlie Baker declared, officials said.

Katie Gronendyke, a spokeswoman for the state Executive Office of Energy and Environmental Affairs, confirmed the details of the settlement agreement in a statement.

“Following a thorough investigation of Uber’s use of surge pricing during a declared State of Emergency, the Department of Public Utilities is pleased to announce that Uber will pay $950,585, which includes a refund for every overcharged rider,” Gronendyke said.

In a statement, Uber defended its practice of so-called surge pricing, which boosts fares based on the number of riders and drivers on the road, but also welcomed the agreement with state regulators.

“While we believe that surge pricing helps ensure that riders can get a ride when they need one, this resolution allows us to continue to work productively with the DPU,” the company said.

Shortly after Baker declared a state of emergency during the March storm, government officials sent an e-mail to Uber, Lyft, and other ride-hailing firms, warning the companies not to raise prices for riders until the emergency was over.

The investigation, originally reported by the Boston Herald, was the first of a ride-hailing firm by the DPU since state regulations took effect in 2017.

But Uber, which does not deny raising prices during the storm, argued last year that the language of the law does not actually ban surge pricing.

The law says companies “shall not raise base fares” during an emergency. Uber maintained that means it cannot increase its normal rate but is not barred from multiplying the rate during periods with high demand.

“We are confident we complied with the law and our team was in communication with the DPU during the State of Emergency,” Uber spokeswoman Alix Anfang said last May.

The Baker administration says $280,584.74 of the settlement cash will go toward refunds to 50,027 customers who were overcharged during the three-day state of emergency.

The remaining $670,000.26 will go to the state’s General Fund.

Uber’s head of policy research, Jonathan Hall, and a company data scientist, Cory Kendrick, made the case for surge pricing in a December 2015 posting on the website medium.com.

“Surge pricing has two effects: People who can wait for a ride often decide to wait until the price falls; and drivers who are nearby go to that neighborhood to get the higher fares,” they wrote. “As a result, the number of people wanting a ride and the number of available drivers come closer together, bringing wait times back down.”