DPUC investigating Interstate

For its fast ferry testimony
Thu, 03/14/2019 - 6:45pm

The Rhode Island Division of Public Utilities and Carriers is investigating Interstate Navigation due to the timing, intent, and contradictory nature of its testimony concerning its application to borrow $8.5 million to build a bigger, 500-passenger high-speed vessel to service Block Island. The Division opened the investigation on Friday, March 8 to examine Interstate’s “need and appropriateness” for seeking loan approval to build the new vessel, which would replace the Athena, its 250-passenger fast ferry.

Interstate’s attorney Michael McElroy told The Times that, “Interstate has appealed the Division Order that, among other things, instructed the Clerk to open an investigation.”

Interstate and the town, backed by support of the Town Council, have been waging a legal battle opposing RIFF’s license since the Division granted it on Sept. 22, 2016.

The town is opposing RIFF’s service due to congestion, infrastructure and safety concerns at Old Harbor.

In its findings, written by Hearing Officer John Spirito, the Division said Interstate raised “concerns” by stating there is no public need for additional fast ferry services to Block Island regarding its competitor, Rhode Island Fast Ferry’s proposal, but adding a bigger fast ferry to its own fleet was aimed at satisfying a “tremendous public need.” On Dec. 27, Interstate testified that there was a public need for additional fast ferry service when it requested to incur the loan to build a new high-speed vessel. The Division denied Interstate’s loan request on Jan. 4.

Spirito noted in the Division’s conclusion that: “The record in this docket suggests that Interstate is again attempting to dominate the high-speed ferry market and thwart the Division’s regulatory objectives. Predicated on this assessment, the Division will instruct the Clerk to open an investigatory docket to further examine the reasonableness of the timing and potential impact that Interstate’s proposal will have on RIFF’s approved Quonset Point to Block Island high-speed ferry service operations.”

After RIFF was granted its Certificate of Public Convenience and Necessity license, the Town of New Shoreham and Interstate opposed it, which has led to the filing of numerous motions and appeals in Superior Court over the past few years.

During its investigation, the Division said it will examine Interstate’s testimony regarding fast ferry service to the island, and why the company did not include the transport of freight and vehicles in its debt request application, as is a requirement of its CPCN license.

At the Dec. 27 hearing, the Division questioned why Interstate’s proposal omitted plans for transporting freight or vehicles. In response, Interstate’s witness, accountant David Bebyn, testified that there was greater economic value in transporting passengers, while Interstate’s Vice-President Joshua P. Linda said the company has “ample freight capacity on the traditional ferries.”

The Division said that Linda testified that Interstate’s decision to build a bigger ferry was based on “an increase in fast ferry ridership during the summers of 2015 and 2016,” and “had nothing to do with the 2016 approval of” RIFF’s proposed service. Bebyn testified that the vessel would “carry an additional 21,885 passengers during the summer,” and revenue generated from the high-speed ferry service would benefit the traditional year-round lifeline service, “holding down rates” for that service.

The Division noted that New Shoreham Town Solicitor Katherine Merolla expressed support for Interstate’s debt request at the hearing, and assurances were given to her that any profits generated by the new, larger vessel would be “passed through to the traditional service” to hold down ferry rates for freight and passengers.

In its findings, the Division stated that the timing of Interstate’s application “to add a 500-passenger fast-ferry to its operations in 2020 raises concerns, vis à vis Interstate’s actions regarding RIFF. In opposing RIFF’s application to provide fast-ferry services to Old Harbor, Interstate has insisted that there is no need for additional high-speed capacity to Block Island. Nevertheless, Interstate now insists it must double its capacity to carry passengers aboard a new Pt. Judith to Block Island fast ferry to satisfy some tremendous public need. At the same time, Interstate is appealing the Division’s decision granting RIFF a CPCN, based in part, on the excess capacity assertions Interstate espoused in RIFF’s application docket.”

“The Division has seen this business strategy employed by Interstate before” when it appealed the license for Island-Hi-Speed Ferry, which is owned by Charles Donadio, Jr., who also owns RIFF.

“Mr. Donadio stated that Interstate used this tactic after IHSF was granted a license by the Division to operate a fast-boat ferry service between Pt. Judith and New Harbor back in 1998. He related that after “we received our Rhode Island DPUC license to operate, they filed numerous appeals to the Superior Court while in the background they were planning to operate their own new fast ferry. This is exactly what they are doing right now, exactly.”

Donadio testified that Interstate’s interest in building a high-speed ferry “is a complete reversal to what they have been arguing since my company applied to operate a new fast ferry” from Quonset Point to Block Island. “Interstate said there was no demand for additional fast ferry service.”

RIFF is seeking a docking solution at Old Harbor to satisfy a condition of its license, which the Division has twice extended for a one-year period.