Public Services Commission delays acceptance of ferry rate increase

Well, here’s a sticky situation. After a year of work and spending money to hire a consultant, the findings of a year long rate investigation on ferry ticket prices was presented to the Public Services Commission. The panel of four regulators split their vote when it came time to okay the findings. What now?
Photo by Judi Shimel.

ST. THOMAS — Regulators working with the Virgin Islands Public Services Commission could not decide whether to approve a proposed hike in ticket prices for two franchised ferry companies. The deadlock occurred at the scheduled meeting of the PSC held March 21 at Barbel Plaza.

Indecision time came as the appointed hearing examiner presented the findings of a year long rate investigation for Transportation Services of St. John and Varlack Ventures, Inc. At the time the companies were asking for permission to raise ticket prices for non-residential passengers from $7 to $8.50 on a one way trip between Red Hook and Cruz Bay.

Commissioners David Hughes and Raymond Williams said no to the rate increase. PSC Chairman Andrew Rutnik and Commissioner Johann Clendinen said yes.

The difference came down to the details. Hughes wanted to see, in writing, aspects of the rate investigation that weren’t part of the hearing examiner’s report. Williams wanted a definitive answer to questions about how the companies determine who is a resident and who is not. PSC Executive Director Donald Cole told the panel he was ready to act on William’s request for clarification.

Hearing examiner Jennifer Jones said she found the request within reason. The companies said the cost of repairing two new ferry boats leased to them by the VI government was driving down their guaranteed rate of return under the franchise agreement. They believed the best way to recover the costs was to seek an increase in the non-residential fare, anticipating those revenues would produce a nine percent hike.

Lawmakers with the VI Legislature passed a measure in recent years, granting the ferry companies a guaranteed rate of return of between eight and 10 percent.

“The parties agreed to use 2015 as a model year to do the financial analysis and set a rate of return of nine percent,” Jones said. At the time both of the new ferries were out of service, in need of repair.

The new vessels had, at the time, been in operation for a little more than a year.

A nine percent rate of return, Jones said, would allow the companies to build a financial buffer against future repairs.

The condition of the new vessels and their apparent state of disrepair so soon after being put in service have raised questions about the quality of the vessels at time of purchase by the Department of Public Works.

Each company was allowed to lease one government acquired ferry boat as a means of receiving a public transportation subsidy. Attorney Maria Tankenson Hodge, representing both TSSJ and Varlack Ventures, said at one point both vessels developed an identical series of mechanical problems as the same time.

TSSJ General Manager Kenrick Agustus described the problems at the March 21 meeting.

His comments prompted Williams to ask, “So you mean we bought a lemon?”

But the commissioner from St. Croix also asked how the companies would determine who was subject to the higher rate and who could pay the residential ticket price of $6.

Hodge said those presenting a government issued photo identification card could qualify.

But Williams pressed further. “What are the specific documents? What are those pieces of identification?”

Rutnik said as a St. John resident he was aware of instances where ticket agents rejected certain forms of photo id as proof. PSC Legal Counsel Boyd Sprehn said the commission passed along a list of acceptable documents some time ago, but it seems the ticket agents were ignoring the list.

“The question of the ID is a serious problem and before I approve any rate increase, that should be resolved,” Rutnik said.

Cole agreed. “The issue has come up over and over again,” he said.

Hughes said he wanted to see a better breakdown of how company costs were measured before he would approve a rate hike. He also asked why the cost of company owned boats that operate on the franchise schedule are factored into the proposed increase when they had been factored into previous increases.

And while regulators could not agree about granting the companies’ request, they did agree that Jones had completed her duties as hearing examiner. They also agreed to continue the discussion at future PSC meetings before reaching a conclusion.

PSC Public Relations Director Lorna Nichols said the public could expect more consideration on the matter. “The decision regarding a price increase for non-resident ferry passengers was tabled until the next PSC meeting after a vote to increase was deadlocked in a 2-2 tie vote. PSC Executive Director Donald Cole noted the commission’s right to question and ask for more information before handing down any decision. Commissioner David Hughes and Vice Chairman Raymond Williams asked the ferry companies for information, regarding company payroll records, before they make any decisions to accept, modify or reject the report,” Nichols said.