The state Division of Consumer Advocacy has recommended that interisland shipper Young Brothers receive a fraction of its request for temporary emergency relief from the state Public Utilities Commission.

Division of Consumer Advocacy executive director Michael Angelo said Young Brothers must take control of its cost “more seriously,” noting it received a temporary rate increase in the past and that Young Brothers issued dividends to its parent company in 2023 and 2024.

Angelo recommended Young Brothers receive conditional approval and a temporary increase in revenue of $3.2 million.

Young Brothers has asked for $18.5 million in emergency relief for unanticipated losses in 2025.

The commission’s decision on the temporary rate increase is anticipated in June and the general rate increase in August.

In the division’s submission to the commission, Angelo said the $3.2 million should be enough for Young Brothers to comply with its agreement to meet its debts and provide sufficient funding to continue its current level of service.

Young Brothers, the regulated interisland shipper for Hawaii, has been asking for a 25% temporary rate increase, saying it is facing financial distress and that without the rate increase, it will be in default of a loan agreement.

In its request, Young Brothers official Kris Nakagawa said the current rates carried Young Brothers through the Covid pandemic but operating costs have continued to rise in the past four years.

According to the Consumer Advocacy Division, Young Brothers issued significant dividend payments to its parent company on Oct. 31, 2023, and Jan. 4, 2024, despite being fully aware that it would likely need more capital to finance new barges and other critical items. Young Brothers’ parent company is Foss Maritime, part of the Saltchuk Marine family of companies.

Saltchuk Resources Inc., a privately owned family investment company, bought Young Brothers in 1999 and certain assets of Hawaiian Tug & Barge.

Hawaiian Tug & Barge, a sister company of Young Brothers, was rebranded and incorporated into the Foss Maritime fleet.

The division said by the time the company issued its second and third dividend payments, its profit on the rate base was below zero percent and its net income has declined since the start of 2023.

“If Young Brothers’s management were not as eager to distribute dividends up to Saltchuck whenever possible and to the maximum extent possible, Young Brothers may have the cash reserves to better weather the storms of its cyclical financial distresses,” Angelo said.

“Young Brothers does not seem to take seriously the Commission’s repeated admonitions to control its costs, nor even begin to fathom the long-term risks that its climbing rates may reach a price-elasticity-of-demand tipping point and precipitate a vicious cycle of (even further) falling cargo levels.”

Meanwhile, the division noted that Young Brothers unregulated cargo volumes have consistently outstripped its regulated cargo volumes since the pandemic.

The division renewed its recommendation that the commission use a method of revenue crediting for unregulated business revenue requirements.

Angelo said any long-term search for a way out of Young Brothers’ repeated financial distresses will be incomplete without any examination of Saltchuck’s influence and direction.