Young Brothers urges approval of rate reset to secure future of interisland shipping

The Hawai‘i Public Utilities Commission is holding evidentiary hearings from Sept. 29 through Oct. 3 on Young Brothers’ proposals to reset customer rates and establish a new mechanism for annual rate adjustments based on inflation. The proposal is aimed at achieving financial stability.

“These hearings are about securing the future of Hawai‘i’s supply chain and Young Brothers’ vital role in it. They will show the concrete steps we must take to sustain the reliable service our island communities depend on,” said Frank Almaraz, Interim President of Young Brothers, LLC.

Young Brothers reports it is facing an urgent financial crisis. The company has not been profitable since August 2024, reporting total losses of $14 million in 2024.

The company is forecasting losses of over $25 million in 2025, even after the recent approval of temporary customer rates for the remainder of the year. 

The less-than-container-load service line operates at an estimated $25 million annual shortfall, according to Young Brothers. The company reports that the Hilo route runs at a $7 million loss, and the Moloka‘i and Lāna‘i routes run at a $7 million loss. 

“Young Brothers has been caught in a dangerous loop of financial distress that threatens its ability to continue serving its vital role in Hawai‘i’s supply chain,” according to a news release update.

Delayed regulatory approval to recover rising costs and investments in service reliability — the state’s core promise to utilities in return for providing reliable service at reasonable rates — has resulted in a cycle of financial distress, with less frequent but significant rate increases, according to the company.

Young Brothers has presented plans to break that cycle and sustain service into the future: continue optimizing operations, set new customer rates, and approve an annual rate adjustment based on inflation. ​ 

“Our goal is smaller, more predictable rate increases that everyone agrees will be better for our customers, communities, and the company,” said Almaraz.

As a state-regulated utility, Young Brothers must regularly file rate cases to request approval of updated customer rates based on changes in cargo volume, costs, and investments since the last time rates were updated. 

“Without timely and adequate rate relief, our ability to continue providing safe, frequent, and reliable service to all islands is in jeopardy. To remain viable, customer rates must be reset to reflect reality: that there has been less cargo volume, significantly higher costs and $120 million invested to keep our statewide service reliable since our last rate adjustment over five years ago,” said Almaraz.

Below are highlights provided by Young Brothers on the latest request:

• Request: Better align rates with the cost to provide the service, such as the required cargo handling and the distance to the destination. If approved by the PUC, rates for the majority of the cargo moved between the islands will increase by an average of approximately 20%, which is equivalent to an approximately 3.7% average annual increase since the last rate case in 2020, slightly lower than overall inflation during that same period. 
• Partial agreement: The Hawai‘i Division of Consumer Advocacy agrees that Young Brothers has justified an overall rate increase of at least 19.44%. The hearings will provide additional evidence to address the outstanding issues and will show that YB’s entire request (including a 25.75% overall rate increase) is well supported by the facts. 
• Inflation in shipping: Young Brothers operates in a capital-intensive industry where costs have consistently risen faster than general inflation over the last 25 years.
• Cost floor constraints: Many of Young Brothers’ costs have a cost floor that persists even during periods of lower volume.
  • Costs are fixed, meaning they are based on the required sailing schedule, and are the same whether a barge is loaded with one or 100 containers.
  • Skilled labor is the company’s single largest cost driver, representing approximately 57% of total operating expenses. The majority of these costs are set by Collective Bargaining Agreements.
  • Young Brothers submitted evidence that it is more efficient in shoreside labor costs (measured by hours and wages per ton) than comparable industry peers from the Pacific Maritime Association.

Read more here: Rate Case Fact Sheet

Water-Carrier Inflationary Cost Index (WICI)

• Request: Create a mechanism for annual rate adjustment up to 5% based on inflation metrics.
• Intent: Smaller, more gradual rate increases that make future costs more predictable and allow businesses to better plan and adapt; thereby avoiding sudden, large rate increases and ending the cycle of emergency rate requests. ​ 
• Origin: Top recommendation from the State Water Carrier Working Group, made up of legislators, representatives from business, labor, and government agencies, including the Consumer Advocate.
• Objection: Despite participating in years of dialogue on WICI, the Consumer Advocate says further studies should be done. 

“We appreciate the Consumer Advocate’s desire to continue the years-long discussion about WICI, but we cannot afford to delay solutions for more studies on a measure that has been thoroughly vetted and is so clearly necessary. If it had been implemented years ago, it’s likely that forthcoming customer rates would be changing by single digits. Predictability will help people plan — and that’s exactly what our customers said in testimony supporting WICI,” said Almaraz.