Hawaii’s consumer advocate is recommending the Public Utilities Commission suspend Young Brothers’ 2019 rate increase request and open a new proceeding to “investigate all relevant facts and measures” surrounding the struggling interisland shipper.
The guidance from Department of Commerce and Consumer Affairs Division of Consumer Advocacy Executive Director Dean Nishina follows Young Brothers earlier this week announced it would need $25 million in CARES (Coronavirus Aid, Relief, and Economic Security) Act funding from the state to keep the company afloat amid the COVID-19 pandemic.
Nishina, in a Wednesday letter to the commission, recommended its members consider two actions: suspending the ongoing rate increase docket dating to 2019 and opening a new proceeding to “investigate all relevant facts and measures” that might be needed to address Young Brothers’ current situation and access to financing.
In calling for suspending the rate docket, Nishina pointed to the ongoing COVID-19 pandemic and its impact on Hawaii’s economy, including Young Brothers. He also noted concern over the “potential impact that YB’s generate rate increase request of approximately $27 million, or 34%, in Docket No. 2019-0117 will have on Hawaii’s economy during the recovery period from the pandemic.”
Nishina also noted the “drastic and evolving economic effects” of the pandemic have likely rendered test year projections for the company’s expenses and cargo volumes moot and no longer useful for determining “just and reasonable rates.” Further, relief from a general rate increase may not address Young Brothers’ situation in a timely fashion.
“Continuing to process the current application without reassessing how YB’s general rate increase request should proceed would be a serious misallocation of the Commission’s and Consumer Advocate’s limited resources,” Nishina wrote.
In recommending the commission open a separate proceeding, Nishina said it would afford the ability to investigate Young Brother’s current financial situation and explore “expedient solutions.”
“The Consumer Advocate is concerned that, beyond the reduction in sailing schedules already implemented, there may be other YB operational changes that may adversely affect the services offered to consumers. Thus, it is important to obtain a better understanding of what measures that YB has been considering in a more comprehensive manner instead of receiving proposed measures in a piecemeal fashion,” Nishina wrote.
The investigation should include, but not be limited to, the facts and circumstances around YB’s access to financing; YB’s most recent financial statement information and an assessment of the impact of any changes in access to financing might have; and a comprehensive identification of the measures that YB has been exploring and evaluating to address its financial condition and the contingency plans that are being developed to address its situation, Nishina advised.
“The Consumer Advocate stresses the need to better understand all of the measures that are being considered as well as those that might not have been considered yet in order to find an appropriate balance between YB’s and its consumers needs, including measures, for example, that look at changes that are necessary to modify the underlying factors affecting the Company’s labor expenses and fixed costs,” Nishina wrote.
Young Brothers’ response came via a letter tendered Thursday from president Jay Ana, stating the company had no objection to the suspension of the ongoing docket and starting a new proceeding. He did request that the commission in 60 days either take up the suspended rate request or continue it again.
Describing the company’s financial situation as “extremely dire,” Ana on Tuesday said the $25 million being sought by the company would sustain operations through December.
Without a bailout, the company stated it will be required — with PUC approval — to make additional cuts and maintain a sailing schedule approved in early May that reduced weekly sailings between Honolulu and Hilo from two to one.
The first phase of changes, if approved, would begin June 8 and include eliminating shipment of dry and refrigerated less-than-container-load/mixed (LCL/Mix) cargo option to and from the ports of Kahului, Kawaihae, Nawiliwili and Hilo and continue the modified sailing schedule.
The second phase, which did not have a tentative start date, would further reduce sailing frequency to all neighbor island ports, modify tug and barge availability and eliminate all dry and refrigerated LCL/Mix cargo options to and from all ports and LCL shipments of livestock.
Young Brothers on Friday was to provide the commission more details regarding its operations beyond Sunday based on three scenarios: immediate receipt of funding, delayed receipt of funding and no funding. West Hawaii Today was unable to obtain a copy of the plan as of press-time Friday.
Public comments on Young Brothers’ request can be emailed to puc@hawaii.gov, and should reference the May 26, 2020, Young Brothers and/or Consumer Advocate letters. Public comments the PUC receives will be posted online unless the commission receives a written request not to post.