P.U.C. APPROVES YOUNG BROTHERS RATE INCREASE

The Public Utilities Commission approved a rate increase for regulated inter-island cargo services aboard the Young Brothers shipping company vessels.  The average overall increase will be 13.46 percent, and goes into effect on August 1, 2009.

Photo Courtesy: Young Brothers Ltd.

The newly approved rates include a 9.66 percent increase for containerized cargo, a 9.22 percent increase for automobiles and “roll-on/roll-off” cargo, and a 21.26 percent increase for LCL or less-than-container-load cargo (except for Molokai and Lanai, for which the LCL increase is 12 percent).

Young Brothers originally submitted a rate increase request to the PUC in December 2008.  The 17.9 percent increase request included a 15 percent increase for containerized cargo, a 10 percent increase for automobiles and “roll-on/roll-off” cargo, and a 25 percent increase for LCL or less-than-container-load cargo.

In June 2009, Young Brothers and the Consumer Advocate entered into a settlement agreement, that called for an average over-all increase of 14.61 percent.  The PUC further reduced these percentages in its July 28, 2009 decision as noted above.

“We recognize that our Neighbor Island customers depend upon reliable and frequent service, and we have taken the steps to ensure such service,” said Young Brothers President Glenn Hong.  “We also recognize that customers share the same burdens with the economic recession. To respond to current economic conditions, we have taken measures to control and reduce costs, with all of the savings being passed on to our customers,” Hong said.

“The revenue from this rate case is needed to finance new investments in vessels and other cargo equipment and to pay for costs associated with maintaining reliability of service and the same number of sailings despite falling cargo volumes,” added Roy Catalani, Young Brothers’ Vice President of Strategic Planning and Government Affairs.

Young Brothers has been replacing older vessels “to meet both current and long-term needs for reliable and frequent Neighbor Island cargo, putting into place its next generation of water transportation equipment and infrastructure, and developing a more efficient system to meet future demand,” Catalani continued.  He said that since 2006, Young Brothers made capital expenditures of over $95 million to deliver four new, large flat-deck barges (with the fourth and last new barge arriving in 2009), a roll-on/roll-off barge, new cargo-handling equipment, a new computer system, and a statewide telephone system.

With respect to cargo volumes, Young Brothers experienced a 9.6 percent decrease in inter-island cargo volumes in 2008 and projects an additional 11 percent decrease in 2009.  In order to meet its customers’ demand for frequent service, Young Brothers has maintained twelve regularly scheduled weekly sailings to the Neighbor Islands.

In an effort to control and reduce costs, Young Brothers obtained community input on and PUC approval of certain Maui County sailing schedule changes earlier this year. The company was reportedly able to reduce its intrastate costs by over $900,000, with all of the savings passed on to its customers in three ways:

-Reduce the rate increase for all categories.

-Limit the LCL rate increase for Molokai and Lanai to 12 percent.  These islands do not have well-developed consolidation or on-island distribution systems and have cargo requirements on a smaller scale, making containerization difficult;

-Increase the “island product” discount for local agricultural products from 30 percent to 35 percent for containerized cargo (not for LCL).  For farmers and ranchers, these savings allow Young Brothers to increase the discount it currently provides on cargo rates for containerized local agricultural products.  Young Brothers has for many years provided and currently provides farmers and ranchers a 30 percent discount on cargo rates for all local agricultural products and will increase this discount to 35 percent for such products that are containerized.

Young Brothers also considered the design and size of its new barges, as well as upgrades to its tugs, in an effort to allow the delivery of cargo more efficiently in fewer barge sailings.

Company officials say increased fuel efficiency, along with decreased average fuel costs over the March 2009 to April 2009 period, allowed Young Brothers to provide its customers 1.01 percent fuel price adjustment (FPA) credit on freight charges in June and July.

The 21.26 percent increase in LCL rates will add about 8 to 9 cents to the cost of shipping a 24-package case of saimin (shipped on a pallet of 90 cases) or a case of 24 cans of juice or soda (shipped on a pallet of 110 cases). For Molokai and Lanai, the increases will be about half of these amounts.  Alternatively, shipments made in a 20-foot container load (9.66 percent rate increase) would add about 2 cents per case.

Young Brothers, Limited provides inter-island cargo service throughout the State of Hawaii with ports in Honolulu, Maui, Molokai, Lanai, Hilo, Kawaihae and Nawiliwili.

More information and a complete list of rates, can be found at the Young Brothers website at www.youngbrothershawaii.com.

(Posted by Wendy Osher; Information provided by Young Brothers Ltd.)