Young Brothers seeks 47% rate hike
PUC request is latest attempt by shipping company to curb losses
Embattled Young Brothers asked the state Public Utilities Commission this week for an emergency rate increase of about $30 million — a 47 percent general rate hike — to buoy interisland cargo transport for the rest of the year.
The request from the state’s sole regulated interisland ocean cargo transportation company is the latest in a string of measures, including a reduced sailing schedule to Hilo and Maui County, aimed to stem more than $25 million in projected losses for the year.
Despite struggling financially for some time, Young Brothers has said its current losses are being exacerbated by the pandemic and its Seattle-based parent company’s decision to stop covering operating shortfalls after May 31.
State Rep. Lynn DeCoite, though, said she has yet to see tax filings that show a rate increase is warranted.
“I would like to see what the tax filings look like and at least get a call back,” said DeCoite, whose district of East Maui, Molokai and Lanai includes areas more reliant on shipments from the carrier.
Besides reducing its sailing schedule, Young Brothers said in its PUC filing that it has reduced gate hours for nonbarge days in all major ports, instituted a hiring freeze and salary cuts for senior leadership, suspended nonessential travel, eliminated discretionary expenses and deferred nonessential maintenance and related activities.
But the shipper also noted in its filings that labor costs have risen since 2017, not due to an increase in workers, but due to collective bargaining agreements.
“As with the employees covered under collective bargaining contracts covering the state’s governmental services, the union contracts provided for annual raises that were deemed reasonable at the time of the negotiations,” the PUC filing said.
“Certainly, no one could have predicted that in 2020, there would be a severe downturn in the state’s economy due to the COVID-19 pandemic.”
Young Brothers requested in 2019 that the PUC allow it to increase its rates to offset rising operating costs and pre-pandemic estimated losses of about $13 million.
The emergency request, filed Tuesday, would accelerate the process and temporarily authorize an increase in revenue of about $30 million — the amount the company has estimated it needs to break even for the year, according to a news release.
The proposal would equate to a 47 percent general rate hike, Young Brothers told The Maui News on Thursday. However, any approved increase would be capped at 34 percent, and the “rate design is in progress and will vary based on service,” it added.
“We know our customers and small businesses across Hawaii are struggling to cope with the unprecedented challenges brought on by COVID19,” Jay Ana, Young Brothers president, said in the news release. “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.”
The company asked in May for $25 million in CARES Act funds from the state Legislature to sustain operations through 2020. Those funds have not been provided, Young Brothers said in the news release.
Meanwhile, a couple proposals to assist Young Brothers appear to have failed in the Legislature.
However, Senate Resolution 125, approved Wednesday, asks the state Department of Transportation to provide financial help to water carriers for maintaining routes and lines of services. It calls for the DOT and the counties to address, on or before Sept. 30, the impacts of the pandemic and to help offset the cost of interisland service by providing a combined total of at least $15 million in aid to a water carrier.
It also seeks to establish a working group that provides solutions for uninterrupted water carrier service.
Young Brothers said the resolution does not provide the immediate infusion of emergency funding needed to support operations and current service levels.
“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,” the release said.
Kehaulani Cerizo can be reached at firstname.lastname@example.org.