Business

Young Bros. Requests Rate Increase

July 9, 2020, 1:54 PM HST
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Young Brothers says routes will be scaled back, but essential supplies will continue to flow into Hawaii in conjunction with demand.

Young Brothers, LLC made an emergency request of the Hawai‘i Public Utilities Commission (PUC) Tuesday asking for a temporary rate increase for the remainder of 2020.

The filing, along with its recent request to continue a reduced sailing schedule to Hilo and Maui County, are the latest steps taken by the company to stem projected losses of more than $25 million amplified by the COVID-19 pandemic, according to a YB press release. The company said the rate increase has to do with the decline in cargo volume it is shipping between islands.

Emergency Rate Relief

In 2019, YB filed a request with the PUC to increase its rates to offset rising operating costs and pre-COVID-19 estimated losses of approximately $13 million, the release said. The emergency request asks the PUC to accelerate the process and temporarily authorize an increase in revenue of approximately $30 million, which represents the amount Young Brothers has forecasted will be required to break-even offering the covered services.

“If approved, this temporary rate increase will provide critical revenue we need to maintain current levels of service and continue operations, and we will only be able to recover part of the $30 million we are projecting to lose this year,” said Jay Ana, President of Young Brothers. “I want to be clear that this proposed rate increase would only allow the company to break even in 2020 if the rates were in place for a full year — we are not seeking an allowed rate of return or any sort of profit as part of this request.”

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YB attributed expected losses to “the decline in the intrastate cargo volumes” and “higher operating expenses due primarily to the increase in labor and labor-related costs.”

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“We know our customers and small businesses across Hawai‘i are struggling to cope with the unprecedented challenges brought on by COVID-19,” Ana continued. “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.”

Cost-Saving Measures

Young Brothers cargo volumes dropped 30% following government stay-at-home orders and a steep decline in tourism, according to the company. In April 2020, YB implemented cost-saving measures to streamline operations and reduce operating costs, including:

  • Temporarily reduced sailing schedules for Maui and Hawai‘i counties
  • Reduced gate hours for non-barge days in all major ports
  • Hiring freeze and salary cuts for YB’s senior leadership
  • Suspending non-essential travel, eliminating discretionary expenses and deferring non-essential maintenance and related activities.
  • Previous Requests for Assistance
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The company requested $25 million in CARES Act funds from the state legislature to sustain operations through 2020. However, such assistance has not been provided. While the state Senate is considering the proposal, it does not provide the immediate infusion of emergency funding needed to support operations and current service levels.

You may download a copy of Young Brothers’ filing here.

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