The Public Utilities Commission on Monday approved Young Brothers’ emergency request to increase rates by 46% — or $27 million — to keep the company afloat amid the ongoing COVID-19 pandemic.
As a result, Young Brothers will resume its “pre-COVID” sailing schedule by Sept. 1, which will restore the twice-a-week sailing from Hilo to Honolulu. Exporters had been relying on once-a-week service since May.
Sen. Lorraine Inouye, a North Hawaii Democrat who chairs the Committee on Transportation, said Monday evening “it’s done,” and that while the news of the resumption of the second Hilo sailing was good, the large percentage increase in the rate may negatively affect some isle exporters.
“On the bittersweet side, I’m not sure if our exporters can afford the additional increase,” said Inouye, who is also a member of a working group recently created by the Legislature to recommend mid- and long-term solutions for ensuring water carrier service in Hawaii.
Young Brothers President Jay Ana said the emergency rate increase does not include profit of any kind, adding that the company sought out the rate increase only after cutting costs and pursuing “every other avenue of assistance.”
“We appreciate the PUC’s assistance in helping us chart a new and more sustainable future for Young Brothers. While we are still reviewing the details of the order, we are confident that Young Brothers will be able to continue its legacy of service to our island communities,” Ana said late Monday.
The approval, which followed an hours-long evidentiary hearing held Friday during which Young Brothers informed commissioners they’d need relief no later than Monday, didn’t come without strings attached.
Among the conditions are a 12-month “stay-out” period during which Young Brothers cannot seek additional general rate increases. The company in its request for emergency rate relief had asked 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.
The company must also provide at least six months advanced notice if it is going to discontinue regulated interisland service, and develop and implement a comprehensive customer service plan.
Further, Young Brothers will undergo a financial and management audit by an independent party selected by the commission.
“In initiating this audit, the Commission takes note that Young Brothers was experiencing operating losses prior to the COVID-19 emergency and still does not appear to be aggressively exploring all options to manage its operating costs and raise revenues despite the drastic decline in cargo volume (and revenue) associated with the COVID emergency,” the order reads. “Without urgency and commitment to address these structural factors affecting Young Brothers’ business, the Commission remains concerned that Young Brothers will return to request additional rate increases from its customers, possibly before the end of the calendar year.”
Young Brothers sought out on July 7 the emergency or temporary rate increase to sustain interisland cargo services through year’s end after the state declined to provide a financial lifeline. The company had sought nearly 47% — or $30.4 million.
The move came after the state Legislature adjourned for the year without providing financial assistance to the nearly 120-year-old company. Young Brothers’ had requested $25 million in federal coronavirus relief funds in a May 26 letter notifying the state the company’s financial situation was “extremely dire.”
“At least there’s a settlement on that part, but come the next legislative session we’ll see how things are going because we can’t have another disruption like we did with this incidence and this notices from YB and their hardships,” Inouye said, adding that the working group on ensuring water carrier service will be meeting next month.
