Interstate seeks $1.3M revenue increase, ticket price changesAsks to end commuter cards, lower car rates
Interstate Navigation filed with the Rhode Island Public Utilities Commission on November 27 for permission to make an additional $1.3 million in revenue, money that would come from changes to the ticket pricing structure for its traditional ferry that would do away with discounts for year-round island residents and encourage more vehicle traffic to and from the island.
The PUC will meet on December 27 to set the time frame for hearing the application. The New Shoreham Town Council has indicated it will weigh in to protest some of the proposals, which are in sharp contrast to the direction town officials have asked the ferry company to go in during past rate cases. The town has traditionally asked that vehicle traffic be kept down, and that year-round residents who rely on the service and use it most frequently be given a discount.
Interstate has asked to slightly raise ticket prices on its traditional ferry, and to end the popular commuter discounts currently used by about 900 year-round island residents. The company has also asked to significantly lower the price it charges to carry vehicles on its "slow boat," in an effort to offset a reduction in vehicle traffic that followed the last price increase for cars. No changes are proposed for the company's high-speed ferry.
The commuter card that the company now issues to island residents saves $12 from the cost of a round-trip passenger ticket and saves $45.60 for a round-trip vehicle trip.
"From a cost allocation rate setting point of view, islanders should not get this discount," said Interstate's regulatory accountant Walter Edge in his testimony to the PUC. "It costs no more or less to sell islanders a ticket and carry them on the vessel than it costs for any other passenger."
Edge testified that originally, passengers were given only a $3 discount for tickets and $2.95 for vehicles. The discount has risen as rates increased but commuter rates remained untouched.
"Moreover, the U.S. Census Bureau shows the per capita income for New Shoreham in 2012 was $48,212, the second highest in the state and approximately $20,000 higher than the $28,707 state average," testified Edge.
The new rate redesign is a product of a cost of service study, which determines if each item is properly bearing the cost it requires the ferry company to provide it, explained Interstate's attorney Michael McElroy. The company last completed a cost of service study in the 1980s, according the PUC filing.
Interstate also has not filed a rate increase in six years — it instituted a five-year rate plan in 2006, and extended it for another year in 2011. But there have been increases in costs for the company, said McElroy, on everything from payroll to supplies to repairs.
"All we're trying to do is match the cost of providing the service," said McElroy. "We're saying you should simply pay what it costs."
Under the rate case, one-way fares would see a slight leap, up 95 cents to $12.20.
The ticket prices do not include the fuel charge, subject to change based on the price of fuel, that Interstate tacks onto ticket prices. However, McElroy said that the increase in base ticket price will actually reduce the offseason fuel surcharge significantly and will not result in increased profit to Interstate.
“Fuel costs continue to rise and increase the cost of providing service to our ratepayers,” said Vice President Josh Linda in his testimony to the PUC. “A more reasonable base price for fuel costs should be included in our base rates so that rate classes will pay their fair share of the fuel costs throughout the year.”
Same-day round-trip fares, now at a discount, would be the same cost as purchasing two one-way tickets. The company's reasoning behind nixing the round-trip discount echoes its reasoning for commuter discounts: it costs the company the same amount of money for a round-trip ticket as two one-way tickets.
"Interstate has reviewed ferry rates around the country and determined that many of the larger ferry companies do not provide same-day round-trip tickets at a discount compared to the cost of two one-way tickets," said Edge in the PUC testimony.
Prices for shipping freight, too, will increase — McElroy explained that the cost of service study also looked at how much space items take up on the deck, how difficult items are to handle (for instance if they need a forklift to move them,) and how easily items break.
Interstate Navigation proposes to lower car costs by $17.10, bringing prices to $32.70 per one-way trip. In addition, Interstate would offer weekday discounts of up to 25 percent to transport vehicles during the weekdays of May through September.
"Vehicles went up in the last rate case," said McElroy. "The division made a recommendation that we put all or a majority of our rate increase on vehicles. That turned out to be in retrospect a mistake. There has been a significant decline in the number of vehicles and revenues."
Interstate's goal is not to increase the number of cars on Block Island, he said, but to bring the cars back up to the numbers they were in years past. This year saw 5,282 fewer cars travelling on the ferry between July and September than in 2011, based on numbers provided by McElroy.
The PUC will on December 27 act on the application date — its only course of action at that point will be to set the time frame it has to review the application, which could be up to eight months, said McElroy.
The next steps would be a pre-hearing conference between parties, input from municipalities, rebuttal and public hearings. The town intends on intervening with the PUC's application, said First Warden Kim Gaffett during Tuesday's council meeting.
The rate filing is designed to increase Interstate’s yearly revenues by $1,302,177, said the PUC filing.
McElroy says that the extra revenue is mostly for "general purposes." However, the extra revenues will, in part, help to pay for the new hi-speed ferry service, aboard the MV Islander, which will transport passengers between Newport and Block Island next summer. Linda estimates in his PUC testimony that Interstate would make "a small profit by the third year of operation." Costs for a one-way trip aboard the Islander are proposed at $25.
McElroy also noted that Interstate has plans to move its corporate headquarters from Connecticut to Point Judith.
The full PUC rate filing is available at http://www.ripuc.org/eventsactions/docket/4373-InterstateNavigation-RateApplication(11-28-12).pdf.