HAWAII PUBLIC UTILITIES COMMISSION
MISSION STATEMENT
The Commission's mission is to provide effective, proactive, and informed oversight of all regulated entities to ensure that they operate at a high level of performance so as to serve the public fairly, efficiently, safely, and reliably, while addressing the goals and future needs of the State in the most economically, operationally, and environmentally sound manner, and affording the opportunity for regulated entities to achieve and maintain commercial viability.
Hawaii Public Utilities Commission - Young Brothers - PUC Docket No. 2017-0363 - Public Comment - Testimony - By Clifton M. Hasegawa
1. June 28, 2018
HAWAII PUBLIC UTILITIES COMMISSION
The Honorable Randall Y. Iwase, Chairman
The Honorable Lorraine H. Akiba, Commissioner
The Honorable James P. Griffin, Commissioner
Re: Public Comment. PUC Docket No. 2017-0363
Dear Chairman Iwase, Commissioner Akiba, Commissioner Griffen:
Submitted for your consideration is my testimony on Young Brothers, Ltd. (YB)
application for a 11.0 percent rate hike, PUC Docket No. 2017-0363 The four (4)
attachments are provided in support of my written testimony.
On May 4, 2017 the Commission approved a General Rate Increase and Tariff
Change to Local Freight Tariff 5-A in Docket No. 2016-0014, Decision and Order No.
34535. The Commission's decision was rendered thirteen (13) months after YB filed
its on April 12, 2016. This reflected a $88,000, or 0.12%, increase over YB's intrastate
revenue requirement of $72,042,526.
YB had applied for an across-the-board general rate increase of 4.36%, for an
increase in revenues of $3,135,000. YB stated that the increase is based on an
intrastate rate of return of 10.25% and an intrastate revenue requirement of
$75,019,721.
Matson provides intrastate barge service and carriage of container cargo
(refrigerated and unrefrigerated) from the port of Honolulu, inter-island to ports on the
islands of Kauai, Maui and Hawaii. Matson does so on a regularly scheduled basis
utilizing on a rotation barges Waialeale, a roll-on roll-off barge, and Haleakala, a lift-on
lift-off barge equipped with a crane. This offer of proof is confirmed by reference to the
daily sailings and archived data available via the State of Hawaii Department of
Transportation, Harbors Division website.
Matson is not encumbered by a lengthy ratemaking process. Matson can
publish tariff changes without investigation and presentation of evidence which are
integral to a ratemaking process. Matson is under the jurisdiction of the Surface
Transportation Board (STB). Rates in the noncontiguous domestic trade are governed
by the Zone of Reasonableness. Please refer to attachments, Matson Zone of
Reasonableness 1996 to 2013 and Matson Zone of Reasonableness 2014 to 2017.
2. By the Zone of Reasonableness a rate is presumed reasonable and will not be
subject to investigation if the aggregate of increases and decreases is not more than
7.5 percent above, or more than 10 percent below, the rate in effect one year before
the effective date of the proposed rate, subject to increase or decrease by the
percentage change in the U.S. Producer Price Index.
Former Commission Chairwoman Hermina Morita stated that the Zone of
Reasonableness is contrary to public policy and against the public interest. I agree in
part with Chairwoman Morita. Without in-depth oversight, the ability to investigate and
the ability to convene ratemaking proceedings a Zone of Reasonableness is contrary
to public policy and against the public interest.
The Zone of Reasonableness was established by the Interstate Commerce
Commission Termination Act of 1995 (ICCATA), Public Law 104–88, December
29,1995. 109 Stat. 804 Its provisions took effect in January 1996. By the ICCTA the
STB retained certain functions and provisions and other functions and provisions were
eliminated. Specifically,
STB RETAINED FUNCTIONS AND PROVISIONS
Regulation of Domestic Water Carriage: Tariff filing and Rate Reasonableness
for Noncontiguous Domestic Trade. (STB).
[The Zone of Reasonableness. Clarification Supplied]
STB ELIMINATED FUNCTIONS AND PROVISIONS
Regulation of Domestic Water Carriage: All regulation, except for
noncontiguous domestic trade. Residual jurisdiction retained for preemption
purposes; Tariff filing. Rate investigation and suspension process.
[Reason for the Zone of Reasonableness
“presumed reasonable rate not subject to investigation”.]
[Clarification Supplied]
Source: STB. https://www.stb.gov/stb/public/resources_icc.html
Regulation by the STB for domestic water carriage in the noncontiguous
domestic trade was eliminated by the Interstate Commission Termination Act of 1995.
Rate investigation and suspension process for domestic water carriage in the
noncontiguous domestic trade was eliminated.
3. YB's outbound agricultural shipments from the port of Kahului, Maui between
2016 and 2017 declined by 65.1%. The closure of the Maui Farmers' Cooperative is
given as the reason for the marked decline. This came after a 26.8% increase in
outbound agricultural shipments between 2015 and 2016. Between 2013 and 2014
there was a 8.9% decline in outbound agricultural shipments, between 2012 and 2013
a 0.1% increase.
YB's total inbound shipments to Kahului Harbor, Maui from 2012 to 2017
remained relatively stable.
Closing notes on PUC Docket No. 2013-0032. PUC Docket No. is referenced in
PUC Docket No. 2017-0362. 04/17/2018 Letter from: J. Boivin To: Commission Re:
Docket No. 2017-0363 – Young /brothers' Application for Approval of a General Rate
Increase and Certain Tariff Changes: Ready for Decision Making.
Therein stated, “Young Brothers has been unable to obtain significant cost
recovery since 2014, when a 2.21% rate increase went into effect. 6
Footnote 6: “See Transmittal No. 14-0005, Notice of Young Brothers for an
Annual Freight Rate Adjustment Pursuant to Decision and Order No. 31493 and Rule
No. 12 of Young Brothers Local Freight Tariff No. 5-A, filed on October 15, 2014, in
Docket No. 2013-0032”. [Emphasis Supplied]
Cost of Service Reports by YB in PUC Docket No. 2013-0032 separately list
--- Intrastate Operating Revenues and Operating Expenses
--- Interstate Operating Revenues and Operating Expenses
The Interstate Operating Revenues and Operating Expenses are premised on
the long-held, widely-accepted interpretation of the term transshipment.
This long-held and widely-accepted interpretation is inconsistent with the clear
and unambiguous language of HAR §19-41-2.
HAR §19-41-2 separately defines the terms “cargo”, “container cargo”,
“transshipment cargo”.
Specifically and particularly,
"Transshipment cargo means cargo arriving and unloaded at a wharf in
this State for further shipment to its ultimate destination on, and by terms
of, a through bill of lading”.
4. “Cargo means the load, freight, or burden of a vessel exclusive of the
vessel's stores, passengers, fuel, and ballast”.
“Container cargo means any and all cargo carried and contained in a
shipping device”.
[Emphasis Supplied]
Source: HIDOT. http://hidot.hawaii.gov/harbors/library/admin-
rules/chapter-41-rules-relating-to-general-provision/
U.S. DEPARTMENT OF TRANSPORTATION
GLOSSARY OF SHIPPING TERMS
https://www.marad.dot/uploads.pdf
Wharf – A structure built on the shore of a harbor extending into deep water so
that vessels may lie alongside.
Container Terminal – An area designed for the storage of cargoes in
container, usually accessible by truck, railroad and marine transportation. Here
containers are picked up, dropped off, maintained and housed.
Container Load – A load sufficient in size to fill a container by either cubic
measurement or by weight.
Containerizable Cargo – Cargo that will fit into a container for transport in
various modes.
Transshipment Port – Place where cargo is transferred to another vessel.
[Emphasis Supplied]
FEDERAL MARITIME COMMISSION
TRANSSHIPMENT 46 CFR 520.2
https://www.law.cornell.edu/cfr/text/46/520.2
Transshipment means the physical transfer of cargo from a vessel of one
carrier to a vessel of another in the course of all-water or through
transportation, where at least one of the exchanging carriers is an ocean
common carrier subject to the Commission's jurisdiction.
5. Common carrier means a person holding itself out to the general public to to
provide transportation by water of cargo between the United States and a
foreign country for compensation. [Emphasis Supplied]
Through transportation means continuous transportation between points of
origin and destination, either or both of which lie beyond port areas, for which a
through rate is assessed and which is offered or performed by one or more
carriers, at least one of which is a common carrier, between a United States
point or port and a foreign point or port.
Port means a place at which a common carrier originates or terminates (by
transshipment or otherwise) its actual ocean carriage of cargo or passengers
as to any particular transportation movement.
[64 FR 11225, Mar. 8, 1999, as amended at 64 FR 23022, Apr. 29, 1999; 65
FR 26512, May 8, 2000; 67 FR 39860, June 11, 2002]
OCEAN COMMON CARRIER
VESSEL-OPERATING COMMON CARRIER (VOCC)
FMC https://www.2.fmc.gov
Matson Navigation Company Inc. Organization No. 001685
Additional reference: Please refer to discussion of transshipment in attachment
Maritime Shipping – Hawaii – Illusory Practices and Processes – Regulatory – Tariff
Authority Jurisdiction.
Closing note on PUC Docket No. 2017-0363. 04/17/2018 Letter from: J. Boivin
To: Commission Re: Docket No. 2017-0363 – Young /brothers' Application for
Approval of a General Rate Increase and Certain Tariff Changes: Ready for Decision
Making.
Therein stated, “In addition, Young Brothers has experienced a loss of nearly
40% in Matson cargo volume, which equates to a loss of approximately $41.9 million
in annual interstate general freight revenues.”
The PUC has long-held that Matson's carriage of cargo pursuant to Tariff 60-A
retained its interstate character, Tariff 60-A being within the jurisdiction of the Federal
Maritime Commission (FMC).
The FMC position is, “The State of Hawaii has jurisdiction over the services in
Tariff 60-A which is a domestic commodity tariff for interisland freight published by
Matson.”
6. Please refer to attachment Hawaii – Public Utilities Commission – Young
Brothers – Rate Increases – Rate Making. Additionally, these documents are archived
in PUC Docket No. 2016-0017.
YB's 40% loss in Matson cargo volume is Matson transport of cargo and
container cargo from Sand Island Container Terminal, Honolulu, Hawaii to neighbor
island ports. Matson volume in the Hawaii trade lane declined 1.9% year-over-year,
Q1 2018 report. Matson forecasts that cargo and container cargo volume, Eastbound
and Westbound for 2018 to remain relatively “flat” with no marked up turns or down
turns. Please refer to attachment, YB PUC Docket No. 2017-0363.
Although the combined population of the Hawaiian Islands is relatively small
compared to most of the US states at about 1.5 million residents, the number
has grown more than five percent since 2010, and is expected to rise by just
under a percent annually between now and 2040, according to state data.
And with population growth comes expanded focus on infrastructure. Since
more than 80 percent of all goods consumed by Hawaii residents are imported,
it stands to figure that the 10 commercial ports that make up the Aloha State's
harbor system play an important role in sustaining the island's residents and
visitors.
Especially since of the aforementioned 80-plus percent of all imported goods
consumed by Hawaii residents and its visitors, nearly 99 percent flows through
the Port Hawaii commercial harbor system.
The importance of seaports to the state of Hawaii was particularly evident in
mid-December when the Hawaii Department of Transportation kicked off the
initial construction phase of a state harbor modernization plan.
Concurrent with the Hawaii DOT upgrading its seaport facilities, the shippers
that conduct business in and around the ports are growing the business that
they conduct with the ports, including Honolulu-based Pasha Hawaii, a
subsidiary of Northern California-based transport and logistics company The
Pasha Group.
Pasha, which entered the Hawaii business in 2005, has said that it plans to
continue making significant capital investments to support an expanding
customer base and the local business community as a whole.
Like Pasha, another transportation company with a substantial presence in
Hawaii, Matson Inc. is renewing its fleet to serve the Pacific trade.
7. The larger capacity of the Aloha Class and Kanaloa Class vessels will allow
the company to return to a nine-ship fleet deployment in Hawaii, which Matson
says will increase efficiency and lower operating costs, partially because the
new vessels will be more fuel efficient than the ships they replace, and will add
rolling stock carrying capacity while lowering operating, repair and
maintenance, and dry-docking costs.
Unlike Matson and Pasha, Honolulu-based freight forwarder Young Brothers
Ltd. Specializes in intrastate shipping, not interstate. And while the state and
other shipping companies are preparing for projected growth, YBL, which
knows island-level shipping like no other Hawaii company, says that its data
show that shipping between the islands has shown little-to-no growth for years.
Source: Trade with Hawaii. By Mark Edward Nero. Pacific Maritime Magazine.
April 1, 2017, accessed June 29, 2018.
http://www.pacmar.com/story/2017/04/01/features/trade-with-hawaii/505.html
MATSON
April 27, 2017
Matson, Inc. (MATX) Board of Directors Chairman Walter A. Dods today
announced the appointment of company President and CEO Matthew J. Cox to
succeed him as Chairman of the Board.
“In my nearly 30 years associated with Matson, I've never felt stronger about
its leadership and long-term prospects. Mat, this company and its Board of
Directors are firmly focused on consistently generating income to support
Matson's continued investment in strategic growth and delivering strong
shareholder value over time,” Dods said.
Source: Matson, Inc. Board Appoints Matt Cox Chairman. Yahoo Finance.
CISION PrR Newswire. April 27, 2017, accessed June 29, 2018.
https://www.yahoo.com/amphtml/finance/news/matson-inc-board-appoints-
matt-183500992.html
THE PASHA GROUP – PASHA HAWAII
https://www.pashagroup.com
Serving customers since 1947, The Pasha Group is a family-owned
diversified global logistics and transportation services company. The Pasha
Group's Mission is to be a leader in providing customized, cost-effective and
profitable value-added services to the automotive, maritime, and relocation
industries through the integration of Pasha's network of global logistics
entities and strategic partners.
8. Our continuing investment in our employees, technology, facilities and
equipment enhances our productivity, leading to increased quality and
profitability, for Pasha and our customers, whose satisfaction is fundamental
to our business. Our name stands behind every move.
Pasha Hawaii offers container and roll-on/roll-off service for automobiles,
buses, trucks, and/or other large and oversize rolling stock in the
Mainland/Hawaii trade. The first pure car/truck carrier vessel to be built in
the United States, the M/V Jean Anne began service from her home port in
San Diego, California on March 21, 2005. Jean Anne makes regular bi-
weekly calls to Honolulu, Kahului and Hilo. The Jean Anne is enrolled in the
military's Voluntary Intermodal Sealift Agreement (VISA) and is eligible to
carry Department of Defense sponsored vehicles and rolling stock.
Note, Supplied
PUC Docket No. 2009-0059
M/V Jean Anne operated between the ports of Honolulu and among the ports of
Kahului, Hilo, Nawiliwili, Barbers Point, and Pearl Harbor upon customer request
The Public Trust requires, if not mandates, that the Commission's decision in
Docket No. 2017-0363 be overarching and encompassing to ensure all ocean and
waterborne carriers operating in the State of Hawaii are measured by and under the
same performance standards and metrics established by rhe Commission.
Thank you very much for the opportunity to submit my comments.
Aloha
Respectfully,
Clifton M. Hasegawa
President and CEO
Clifton M. Hasegawa & Associates, LLC
1322 Lower Main Street A5
Wailuku, Hawaii 96793
Telephone: (808) 419-5481
Email: clifhasegawa@gmail.com
LinkedIn: https://www.linkedin.com/in/cliftonhasegawa
9. Attachments
a. Testimony YB 11.0 percent increase – CMH – June 28, 2018
b. Matson Zone of Reasonableness – 2014 to 2017
c. Matson Zone of Reasonableness – 1996 to 2013
d. Maritime Shipping – Illusory Practices – Regulatory and Tariff Authority - Jurisdiction
e. Hawaii Public Utilities Commission – Rate Increases – Rate Making
f. YB PUC Docket No. 2017-0363
_______________________________________________________
Internet Access to Attachments via LinkedIn Slideshare
Testimony YB 11.0 percent increase – CMH – June 28, 2018
https://www.slideshare.net/cliftonmhasegawa/testimony-young-brothers-110-percent-rate-increase-june-28-2018
Matson Zone of Reasonableness – 2014 to 2017
https://www.slideshare.net/cliftonmhasegawa/matson-zone-of-reasonablness-2014-to-2017
Matson Zone of Reasonableness – 1996 to 2013
https://www.slideshare.net/cliftonmhasegawa/matson-zone-of-reasonableness-1996-to-2013
Maritime Shipping - Hawaii - Illusory Practices and Processes
Regulatory - Tariff Authority Jurisdiction
https://www.slideshare.net/cliftonmhasegawa/maritime-shipping-hawaii-illlusory-practices-and-processes-
regulatory-tariff-authority-jurisdiction
Hawaii Public Utilities Commission – Young Brothers - Rate Increases – Rate Making
https://www.slideshare.net/cliftonmhasegawa/hawaii-public-utilities-commission-young-brothers-rate-increases-
rate-making-103800439
YB PUC Docket No. 2017-0363
https://www.slideshare.net/cliftonmhasegawa/yb-puc-docket-no-20170363