Young Brothers is denied larger hike

State regulators approved a 0.12 percent increase in Young Brothers Ltd.’s interisland shipping rates, denying the company’s request for a 4.36 percent increase.

The decision to reduce Young Brothers’ request was driven in part by concerns about the company using additional revenue to support its parent company on the mainland.

In a Thursday order, the state Public Utilities Commission allowed Young Brothers Ltd. to increase the intrastate freight rates it charges customers by 0.12 percent. The order would bump up Young Brothers’ revenue by $88,000, to $72.13 million.

“It is a drastic reduction in what was first requested,” said Randy Iwase, PUC chairman.

Young Brothers applied for a rate increase of 4.36 percent in April 2016, which would have increased revenue by $3.13 million, to $75.02 million.

The approved increase nudges up the price to ship a medium-size automobile from Honolulu to Hilo to $309.14 from $308.77. Young Brothers ships goods between Honolulu and Hilo, Kawaihae, Kahului, Kaumalapau, Kaunakakai and Naawiliwili.

Iwase said the decision was a result of a settlement reached between Young Brothers and the state consumer advocate. The consumer advocate said Young Brothers’ rates should be decreased by $4.15 million, or 5.9 percent.

When applying for the increase, Young Brothers said it needed to cover:

>> Rising labor costs, after the latest bargaining agreement with the employee unions.

>> Higher costs of dry-docking its vessels on the mainland.

>> Shared services provided by Young Brothers’ parent company, Seattle- based Foss Maritime Co.

Young Brothers and Foss Maritime share services including payroll, accounting, information technology and legal work. Those charges became a key sticking point in the rate case.

The commission opened an investigation into the merit of Young Brothers’ application in May because the state consumer advocate said a lack of detail in the April application warranted a suspension of decision about the possible rate increase and an investigation.

The consumer advocate said Young Brothers did not provide a summary of the expenses by island or by month for the necessary periods. The consumer advocate also said Young Brothers did not provide the necessary information regarding the distribution of money among the carrier’s affiliated companies.

“We were not comfortable that the numbers were something we could accept at this point, given the lack of information that was provided,” Iwase said.

In the order, the PUC said Young Brothers’ request to increase rates to cover shared expenses should be thoroughly reviewed because increased charges from affiliate companies could improperly increase costs to consumers.

“We wanted to make sure that the information that comes in is complete so that we can look at it,” Iwase said.

In the settlement with the consumer advocate, Young Brothers agreed to prepare a detailed cost filing to support future rate increase applications.

Young Brothers Vice President Roy Catalani said in an email, “We are pleased that the Public Utilities Commission has approved the agreement between Young Brothers and the Consumer Advocate. We appreciate the work of the Commission, the Consumer Advocate and their respective staffs so we can continue to provide the state with frequent, affordable, and reliable interisland shipping services.”