Young Brothers seeks 47% rate hike

  • ANA

  • LAURA RUMINSKI/West Hawaii Today file photo A Young Brothers barge is offloaded June 30 at Kawaihae Harbor.

Without a financial lifeline from the state, Young Brothers requested regulators approve an emergency or temporary rate increase of nearly 47% — or $30.4 million — to sustain interisland cargo services through the end of the year.

The filing with the Public Utilities Commission on Tuesday along with the interisland shipper’s July 2 request to continue its reduced sailing schedule to Hilo and Maui County, among other cost-saving measures, are the latest steps taken as the company works to stem losses it projects will top $25 million by Dec. 31.

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The move also came as the state Legislature appears ready to adjourn for the year without providing financial assistance to the nearly 120-year-old company following Young Brothers’ request for $25 million in federal coronavirus relief funds and other relief to stay afloat.

“If approved, this temporary rate increase will provide critical revenue we need to maintain current levels of service and continue operations, and we will only be able to recover part of the $30 million we are projecting to lose this year,” said Young Brothers President Jay Ana in a prepared statement. “I want to be clear that this proposed rate increase would only allow the company to break even in 2020 if the rates were in place for a full year — we are not seeking an allowed rate of return or any sort of profit as part of this request.”

However, the company is also asking the commission to “accelerate the process” of approving a September 2019 general rate increase request seeking a $27 million — or 34% overall — increase in revenue to cover operating expenses and modernization.

“We know our customers and small businesses across Hawaii are struggling to cope with the unprecedented challenges brought on by COVID-19,” Ana said. “That’s why we pursued all available avenues of relief before making the difficult decision to accelerate our request for higher rates, but this request is vital for Young Brothers to stay in business and continue connecting our island economies.”

Young Brothers on May 26 notified the state that the company’s financial situation was “extremely dire” and it needed the $25 million bailout from the state Legislature to maintain operations. Without assistance, Ana said the company would have to maintain the reduced sailing schedule implemented May 5, make additional cuts and seek emergency or temporary rate relief.

The PUC subsequently opened an emergency investigative proceeding into the matter and has yet to issue a report on the request after grilling Young Brothers executive leadership on June 10.

Lawmakers reconvened June 22, taking up two bills on the matter during the past couple of weeks. However, both measures appear to have stalled. The 2020 state legislative session is set to adjourn today.

Senate Bill 1427, which would have authorized the Department of Transportation to loan up to $20 million, was deferred by the House Committee on Finance on Tuesday.

House Bill 2475, which would have provided subsidies to offset costs incurred by providing services to neighbor island ports and allowed the PUC to authorize new carriers to enter service in Hawaii, did not secure a hearing before the Senate Committee on Ways and Means.

Members of the Senate Committee on Transportation, led by Sen. Lorraine Inouye, D-North Hawaii, did pass a nonbinding resolution; however, Young Brothers said Thursday that “it does not provide the immediate infusion of emergency funding needed to support operations and current service levels.”

The resolution, which does not have the force or effect of law, urges the DOT to provide $50 million in funding to water carriers and establish a working group to “recommend mid- and long-term solutions to ensuring continuous water carrier services throughout the state.”

“Young Brothers appreciates the state Senate’s resolution and recognition of our financial challenges, and while those conversations are ongoing, we must pursue emergency rate relief so that we can continue providing the service our island communities depend on,” Ana said.

Inouye, reached Thursday evening, said she opposes any rate increase request until the results from the PUC’s emergency investigative proceeding are rendered and received by the working group created via SR 125.

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“It doesn’t set with me personally and that’s not going to be very helpful to our shippers, our ag people and all the users of Young Brothers,” she said. “It’s not the right time — absolutely not the right time.”

Email Chelsea Jensen at cjensen@westhawaiitoday.com.

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