The Block Island Times
http://block-island.villagesoup.com/p/987136

Featured letter: Don't raise freight rates

Apr 17, 2013

The following statement was made by Bill Penn as president of the Block Island Residents Association to the members of the Public Utilities Commission during a public hearing held at Town Hall on April 4 about the proposed agreement with Interstate Navigation:

The Block Island Residents Association (BIRA) is an organization created in the 1970s with the purpose to serve as a medium for community, cultural, recreational and social activities, to advance the civic interests of Block Island, and to aid the residents in achieving the fullest enjoyment of its unique natural advantages. Our membership includes year-round and seasonal residents. Over the years, we have taken positions on community issues relating to the quality of life and the environment on the island and have supported financially numerous community organizations.

BIRA recognizes the important role played by Interstate Navigation in the life of the island. Ferry service is a vital component of the island’s economy, bringing to the island tourists who are the basis of our economy, as well as providing a crucial connection to the mainland for the island’s population. The ferry transports nearly all of the goods and services necessary to support the island’s economy, from construction materials to food to heating fuel. Without the ferry, our island economy could not function. Therefore, BIRA is fully supportive of an increase in rates for the ferry company and is confident the Public Utilities Commission will ensure that the rate increase is fair and necessary. Therefore, BIRA is supportive of the overall revenue increase of $585,215 recommended in the settlement agreement reached between the R.I. Division of Public Utilities and Carriers and Interstate Navigation.

BIRA is very appreciative that the agreement maintains the commuter rate since the ferry is the lifeline to the mainland for year-round residents. However, BIRA members are deeply concerned with some other components of the increase that will cause harm to the island and its economy.

The settlement proposes to increase freight rates by $272,961, or 34 percent. This increase in rates will be felt throughout the Block Island economy. An increase in costs has a negative effect on our economy where costs are already high, affecting both people who live here year-round as well as seasonal residents and visitors alike. In addition to increasing freight rates, truck and oversize truck rates will also go up by 9 percent, or $96,157. The combined increase is $369,118.

In contrast, the settlement agreement proposes to decrease car and pickup/SUV rates by approximately 20 percent, or by a total of $743,907. (The settlement agreement revenues appear to reflect a lower number of vehicles than the current revenues. In Interstate’s initial filing, the company reports usage of 35,209 cars and 8,668 pickups/SUVs. [Schedule WEE-19]. In the settlement agreement, the car rate is $38.95, producing revenues of $1,187,819, which implies usage of 30,496. Similarly for pickups/SUVs, the implied usage in the settlement is 7,153 [SETT-8]. It is unclear why this would be so, given that the lower rates should increase usage.)

Interstate’s rationale for this decrease is that vehicle usage and revenues have declined; however, it is clear that in the summer months, demand far exceeds supply. A rate change that results in more cars coming to the island runs counter to the town’s stated goal of reducing the number of cars that come to the island, particularly in the summer months.

We feel the overall revenue increase requested by Interstate can be achieved by reducing the amount by which vehicle rates are decreased and leaving freight rates unchanged. Thus, if car rates were reduced by $374,789 (the difference between $743,789, the projected decrease in vehicle revenue and $369,118, the projected increase in freight rates), the overall revenue increase could be achieved without the detrimental effects of increasing the costs of all goods and services to the island — and of increasing the number of cars to the island.

We would suggest that Interstate develop a system of peak and off-peak pricing for vehicles, to increase usage during weekdays when there may be excess capacity, and maintain higher rates during times of excess demand. Such pricing systems are widely used in the transportation industry to maximize usage and revenues.

We respectfully request that the Public Utilities Commission direct the Division and Interstate Navigation to adopt this approach so that Interstate can achieve the overall increase it needs to provide service without causing harm to the island economy.

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