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Bring clarity to muddled market

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The complexities of the marketplace become even harder to navigate in a place like Hawaii, where every island needs affordable, reliable shipping services — be it bustling Honolulu or tiny Lanai.

That’s the vexing issue before the state Public Utilities Commission, which decided to test the competitive waters by granting interim approval of new interisland cargo stops by Pasha Hawaii Transport Lines. Now there’s an application for a whopping rate increase by Young Brothers Ltd., the long-established isle company treated as a public utility for the purpose of its regulated interisland shipping service.

The PUC is allowing Pasha, at least for a trial period, to bring its roll-on, roll-off shipping service to Honolulu, Kahului and Hilo every two weeks, and to other points on Oahu and Kauai by request. The company is not compelled to serve the less-lucrative harbors of Lanai and Molokai as Young Brothers does, because the company’s vessels are oversized for those islands’ ports.

For its part, Young Brothers claims that this cherry-picks revenue from its more profitable routes and that the playing field is not level. It’s a reasonable complaint that deserves a fair hearing. But Young Brothers’ position must now be measured against its supersized request for a 24 percent increase in shipping rates. From a purely public relations standpoint, "I think they shot themselves in the foot," observed state Sen. Rosalyn Baker, the otherwise sympathetic Maui lawmaker who chairs the Senate Commerce and Consumer Protection Committee.

Baker is right. Young Brothers officials maintain that an 18 percent rate hike is needed to offset the loss of revenue due to diminished cargo load. Given that the recession undoubtedly cut into sales and shipments, that part of its case might be easier to make. However, the company clearly jumped the gun on claiming 6 percent to offset losses to Pasha for a service that hasn’t even started yet.

Pasha now intends to begin the new service in January, though if Young Brothers takes the ruling to the state Intermediate Court of Appeals, even that timetable could be delayed further.

The Legislature will convene Jan. 19 and in any event seems justifiably intent on revisiting the issue then, having already conducted a legislative briefing to air some of the concerns. There seems little it can do on the Pasha case while the dispute plays out in the courts, but at the very least the procedures of the PUC are open to criticism and refinement going forward.

For example, Baker correctly describes as "arrogant" the commission’s decision not to hold hearings that could be attended by affected neighbor island farmers and other businesses. She said the lack of a neighbor island voice in this case is part of the problem, and her tentative proposal to require at least minimal neighbor-island representation on the PUC deserves consideration.

But here’s the rub: If the bar is going to be raised on the due diligence expected of the PUC, it has to be given the resources and staff needed to meet it. As Hawaii enters an era of critical change in the way power companies and other utilities operate, the PUC is ill-equipped to handle the increasing breadth and complexity of the issues facing the commission and its staff.

In the matter of interisland cargo, policymakers must grapple with both short- and long-range issues. In the near term, the commission does deserve to have some real data from Pasha operations before giving it more permanent status or before deciding how much to raise Young Brothers rates. Certainly it should invite neighbor island testimony.

But looking further into the future, lawmakers and others must confront the reality of a changed landscape. Young Brothers and farmers have a rational concern. If its status as a regulated monopoly serving as a utility is going to change into one as a player in a competitive market, lowered revenue prospects may cause investors to be less willing to put up capital for upgrades to vessels that are badly needed. And if regulation gives way to a profit-driven free market, the farmers are worried that lower-profit routes won’t attract a reliable carrier to bring their goods to Oahu consumers.

The PUC won’t have the last word. The state’s political leaders will have to determine which shipping model — a lone utility, an unfettered free market or some kind of hybrid — brings the best results to all Hawaii’s residents, wherever they live.

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