When shipping costs go up, Maui Brewing Co. feels it at every level, from the handcrafted beers it sells in six states and two countries, to the cans it orders from O‘ahu and the barley it buys from the Midwest, Canada and Europe.

The brewery worries its operations will get even more expensive if state lawmakers pass a bill that allows automatic rate increases for the two water carriers regulated by the state: Young Brothers, essentially the only interisland shipping company for local businesses, and Hone Heke, the parent company of the Expeditions ferry that serves as the main transportation between Maui and Lāna‘i.

Both companies have been pushing for automatic rate adjustments for the last five years, saying this will help them adapt more quickly to a changing economy. But others say it will raise costs for residents and hurt local businesses who are already reeling from Young Brothers’ 25 percent rate hike that took effect in January.

“Every increase in rates costs more to make the product, which ends up driving up the price to the customer,” Garrett Marrero, CEO and co-founder of Maui Brewing Co., told the Hawai‘i Journalism Initiative on Tuesday. “Ultimately, there’s just no way around that.”

Two companion bills to create the automatic rate increases — House Bill 2386 and Senate Bill 2694 — are advancing through the State Legislature with roughly two weeks left in the session. The Senate bill is set to go to a conference committee soon where lawmakers will hash out their differences.

Central Maui Rep. Tyson Miyake, one of the lawmakers who introduced the House bill, said the goal of the measures is to make sure interisland transport companies can stay afloat while stabilizing prices for local businesses, who are used to absorbing staggering rate increases.

In August 2020, during the COVID-19 pandemic, the state Public Utilities Commission approved a 46 percent emergency rate hike for Young Brothers. Because the company has “effectively a monopoly” in Hawai‘i, there is no other choice, Marrero said.  

“Imagine if they charged for air and you still needed to breathe, right?” he said.

Young Brothers blames these big rate hikes on the state’s long, costly and “contentious” approval process, said Kris Nakagawa, Young Brothers’ vice president of external and legal affairs, in written testimony to state lawmakers earlier this month.

“Under the current system, costs can build for years before rates are reviewed, often resulting in larger increases all at once,” Nakagawa told the Hawai‘i Journalism Initiative on Tuesday.

In 2021, a report by the Hawai‘i Water Carriers Working Group, which included state and county lawmakers, state department heads, the Public Utilities Commission and representatives of the shipping and labor industries, said regulatory lag was a core challenge for interisland carriers in setting rates. It recommended a “water carrier inflationary cost index” that would allow for more flexible, annual rate adjustments.

Miyake said the report was a driving force behind the bills. Both versions have changed since they were first introduced, and only one can pass. 

The Senate bill requires the state Public Utilities Commission to establish automatic adjustment mechanisms starting July 1, 2026. The adjustment would be applied annually with a cap of 5 percent and would reflect annual increases in wharfage rates. It would end on July 1, 2029. 

The House bill gives the commission the option to create automatic adjustment mechanisms and sets stricter requirements for water carriers, including specific performance metrics on service reliability, on-time delivery and cargo handling efficiency. It also includes a “mandatory two-year cooling-off period” after a rate increase before the automatic increases can apply. The bill would also take effect July 1, 2026 and end July 1, 2032.

Miyake said this will give the state a chance to pilot the new system and reassess in a few years. 

He prefers the Senate bill, saying it aligns more closely with the original intent of creating “smaller, transparent, more predictable increases that give water carriers a better financial foundation.”

Miyake said he understands that it’s a tough time for higher costs given the rising price of gas and groceries, but said the changes would allow local businesses to budget and plan better.

“Many families and businesses are already struggling with that high cost across the board,” Miyake said. “Our community cannot afford those big swings in the shipping rates.”

The commission said in written testimony earlier this month that it prefers the version of the bill that gives it the option to create automatic adjustments. 

In November, the commission approved a 25.75 percent rate increase for Young Brothers but denied their request for automatic adjustments, deciding it was “not reasonable to allow” without commission review. The commission also barred the company from raising its rates again for the next two years. 

Even Nakagawa acknowledged that the increase this year was “imposing.” If lawmakers approved automatic annual adjustments, Nakagawa said “customers will greatly benefit from the ability to plan for smaller, more predictable cadenced rate increases rather than the less frequent, but less predictable and likely much larger rate increases.”

Over the years, Young Brothers has watched costs rise while cargo volumes “have stagnated.” While waiting for approval of its rate increase, the company accumulated losses of about $15 million in 2024 and $24 million in 2025, “primarily driven by the less-than-container-load service and annual losses of $7 million for the Moloka‘i and Lāna‘i routes,” Nakagawa said.

The company said it’s working to make operations more cost-efficient and has filed a business plan with the commission with a three-pronged strategy to stabilize its finances. That includes “immediate initiatives to optimize operational efficiency that are projected to yield up to $6 million in annual savings,” rate reforms “to better align customer charges with factors such as special handling needs and voyage length” and studies on modernizing handling processes and offering more customer choices for small freight.

Bill Caldwell, president of Hone Heke Corporation, doing business as Expeditions, said the company also supports automatic annual rate increases. In 36 years, the company has only had two fare increases, one in 2008 and a second in 2024, Caldwell told the Legislature in written testimony in March.

During the 2023 Lahaina wildfire, Hone Heke lost its home port of Lahaina, the vessel Expeditions Two, its office, maintenance shop and its entire vessel parts inventory, Caldwell said. Starting over at a new facility in Mā‘alaea Harbor also put financial strain on the business.

“As a small business, we are less able to respond quickly to market changes due to our size, resources, and the extremely high expense to go before the PUC,” Caldwell said. “For Expeditions, these bills would be a tremendous help in maintaining their annual inflation and operation costs, as well as aid in their ongoing recovery efforts to continue as the lifeline for the residents of Lanai.”

Caldwell added that the automatic rate increases “would not significantly contribute to a higher cost of living or increased business expenses statewide.”

But Raymond Michaels, board chair of the Construction Industry of Maui, which has over 100 members, said if shipping rates rise, so will the cost of building a home. 

The construction industry relies heavily on interisland shipping, with some contractors needing daily deliveries of lumber, pipe fittings and other materials. Unlike gas stations, which can change prices when the global market fluctuates, contractors have to stick to fixed rates, often from agreements they struck a year or two ago when prices were lower, said Michaels, who is also the president of Maui Plumbing, which employs about 70 people. 

Michaels said he understands the intent of the bill but can’t support it because it doesn’t address the “systemic issue” of the lack of competition. Instead, the state should look at how it can “reduce the barriers to entry into the marketplace,” whether that’s reducing port fees or offering tax incentives.

“Controlling costs isn’t going to happen with a government-regulated monopoly,” Michaels said. “The only thing that’s been able to bring down costs to the marketplace is open competition, and there’s a lack thereof in this marketplace.”

Marrero said just about everyone in Hawai‘i relies on Young Brothers “in some fashion.” Maui Brewing, one of the largest beverage companies in the state, ships about 400 to 500 containers on Young Brothers barges every year.

The brewery is headquartered in Kīhei and counts more than 400 workers at its five locations on Maui and O‘ahu. It sells about 900,000 case equivalents a year (meaning 12-ounce, 24-can cases) of beers, spirits, seltzers and sodas. 

Interisland shipping is “one of the single largest drivers of cost and a major barrier to growth” for local businesses, Marrero told the Legislature earlier this month. It’s especially tough for Neighbor Island producers who struggle to reach Hawai‘i’s main population center on O‘ahu and often have to absorb “duplicative freight costs” because many products are routed through Honolulu first. 

And while Marrero said he understands Young Brothers’ challenges, he worries automatic rate increases “could become very unchecked very quickly” and ultimately “end up hurting manufacturing overall.”

“We’re going to see a decline, if not eradication, of locally made beverages or locally made products,” he said. “Because when manufacturing becomes too expensive … in state, it’s going to revert to being produced elsewhere and simply shipped into the state. And then we lose industries, not just products.”

Pam Tumpap, president of the Maui Chamber of Commerce, said another increase in rates this year would be “hugely problematic,” especially with many local businesses “still recovering from the compounded impacts of COVID-19, the Maui wildfires, inflation and ongoing economic uncertainty.”

“It’s not Young Brothers’ fault that we have these challenges,” Tumpap said earlier this month. “But they just got a huge rate increase. … So we’re saying this is not that time.”

Considering the bills in the State Legislature would impact all consumers, Tumpap is surprised that they’ve flown under the radar this session. The Maui Chamber of Commerce was one of nearly a dozen business and food industry organizations across the state who wrote to the State Legislature asking for a pause to evaluate the long-term impacts on the cost of living and doing business. 

Tumpap said the chamber is opposed to the Senate bill but supportive of the House bill because “we felt that was a balanced and accountable path forward.” She said having commission oversight on rate adjustments allows the public to weigh in and “assures that Young Brothers remains accountable not only financially but operationally.”

“We feel this is a critical safeguard for Hawai‘i’s residents and businesses,” she said.