The Public Utilities Commission will conduct an emergency investigation into Young Brothers’ financial condition after the interisland shipper notified the state it needed millions in funding to survive the COVID-19 pandemic.
The commission opened the “emergency investigative” docket Monday to analyze the nearly 120-year-old company’s “financial condition, contingency plans, and access to financing, and to address identified requests that have been or will be filed in the future,” the commission’s order opening Docket 202-0084 reads.
The move comes after state Consumer Advocate Dean Nishina recommended commissioners open a new proceeding to investigate Young Brothers’ (YB) request for $25 million in federal Coronavirus Aid, Relief, and Economic Security Act funding to sustain operations through December as outlined in a May 26 letter by company president Jay Ana to the commission.
Without a bailout, Ana said the company — with PUC approval — would have to make additional cuts and maintain the sailing schedule approved in early May that reduced weekly sailings between Honolulu and Hilo from two to one.
“The commission opens this docket during a tumultuous period for our state, our country and the world, given the major public health and economic impacts resulting from the COVID-19 pandemic. During this time, the commission cannot stress enough the paramount importance of maintaining affordable, reliable service to the neighbor islands,” the PUC’s 27-page order filed Monday reads.
The order outlines the company’s May 26 request and recent financial history, including three applications for rate hikes over the past four years, two of which were granted and one that remains pending, as well as recommendations from Nishina.
It further notes that the commission may also find it “necessary to explore YB’s and that Consumer Advocate’s position on bringing alternative service provider(s) into the intrastate water carrier market.”
“The need for the this exploration will depend on the outcome of an expedited investigation into the measures that YB has been exploring and evaluating to address its financial condition, YB’s contingency plans, and YB’s ultimate access to funding, (e.g., from the CARES Act, other state of federal funding, or private funding), as well as the realistic possibility of stabilizing YB’s finances, mitigating the effects of its financial positions on customers, and improving YB’s long-term competitive position,” the order reads.
Young Brothers filed with the PUC Friday evening its contingency plan as well as additional financial information requested by Nishina.
“Developing this contingency plan for Young Brothers involved some incredibly difficult decisions. Ultimately, the people of Hawaii should know that our top priority is finding real solutions to ensure uninterrupted service to all of the communities we serve,” Ana said in a prepared statement provided with the filing.
The plan outlines Young Brothers’ continued operations under three scenarios: immediate receipt of funding, delayed receipt of funding and no funding.
Should the company immediately receive $25 million, Young Brothers anticipates it would meet expense obligations through 2020. That reflects the reduced sailing schedule implemented last month remaining in effect and the company securing permanent rate relief, regulatory flexibility, long-term financing, regulatory tracking mechanisms and the phased partial suspension of LCL/mix to certain ports, including Kawaihae and Hilo, to begin June 8, if approved by the PUC.
A delay in the receipt of funding may require Young Brothers to immediately implement the second phase of suspensions to include further reduced sailings to neighbor island ports and the elimination of dry and refrigerated LCL/mix cargo options, among other services to sustain operations until funding arrives. Efforts to secure rate relief and near-term financing would be prioritized, in addition to looking at selling assets and working with vendors.
Without funding, the company stated the second phase of suspensions and service cuts would need to be immediately implemented. Efforts to secure rate relief and near-term financing would be prioritized, in addition to liquidation of assets to generate cash.
“We remain hopeful that our continuing conversations with the state will yield a sustainable path toward a stronger future for our company,” Ana said in a prepared statement.
On Monday, Gov. David Ige said he is working with all four county mayors to “look for various pots of federal money and assistance that we can provide, and state resources if necessary.”
“All of the mayors and all of the elected officials understand that Young Brothers is critical infrastructure that it is needed in our community and we are all committed to ensure that they continue to provide the service in a way that allows our communities to function moving forward,” Ige said during a live-streamed press conference.
Senate President Ron Kouchi, a Democrat who represents Kauai and Niihau, said he looked forward to receiving reports from the PUC and state consumer advocate.
“I think the biggest concern is that the CARES money is good until Dec. 31, but what we really need to be sure of is that we invest money into a plan that ensures that the services are going to be delivered to the neighbor islands well beyond Dec. 31 — and that they will be guaranteed and have service in perpetuity,” he said. “That’s certainly one of the things I am looking for in the review from the PUC and consumer advocate: What is the long-range plan beyond Dec. 31.”
Interested individuals or organizations are invited to file a motion to intervene or participate without intervention in the docket within 20 days. The named parties to Docket 2020-0084 are Young Brothers and the state consumer advocate.
Public comments on Young Brothers’ request can be emailed to email@example.com, 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.