Avalon, Catalina Island

Open Competition = Improved Freight Services


Major Victory for Open Competition: CPUC Issues Proposed Decisions

  • CPUC Judge states Curtin Maritime’s “innovative business model” can result in lower rates and improved freight services for local residents.
  • Curtin Maritime would like to thank all of the citizens who wrote letters, came to City Council meetings and spoke out at the PUC public hearing.

This past Friday afternoon the fight to create open competition for freight service to Avalon took a major step toward resolution as California Public Utilities Commission (CPUC) Administrative Law Judge (ALJ) Darwin Farrar released his proposed decision to grant Curtin Maritime a Certificate of Public Convenience and Necessity (CPCN) to operate a freight line to Catalina. In his review of the application, he wrote, Curtin Maritime “offers the potential to provide freight service in unique and largely unexplored ways.”

ALJ Farrar spent nearly a year presiding over the case- holding evidentiary hearings, traveling to Avalon for a public participation hearing, and visiting Catalina’s freight terminal. Prior to the decision being final it must be ratified by the five members of the Public Utilities Commission.

In addition, ALJ Farrar also addressed the request of Avalon Freight Service (AFS) to receive a CPCN. Farrar denied AFS’ request for a CPCN because its non-transparent “structure allows inside dealing and compromise regulatory review and oversight.” He continued, “granting a CPCN to an organization whose structure and affiliate relationships preclude a determination of whether the costs for goods and services received or provided is reasonable is contrary to the public interest and an improper delegation of Commission authority.”

Lastly, Farrar also requested the current freight provider, Catalina Freight Lines, to appear before the Commission to have their CPCN reviewed.

Per Public Utility Commission rules, a Commissioner assigned to the case can also release an opinion on the applications. Commissioner Liane Randolph’s decision largely echoes ALJ Farrar’s decision by recommending granting Curtin Maritime a CPCN. Commissioner Randolph states that Curtin Maritime’s application satisfies “the Commission’s standards for a CPCN and is consistent with Commission policy favoring competition.” Conversely Randolph raises concerns about AFS’ ability “to game the Commission’s rate review process”, but ultimately does divert from ALJ Farrar’s decision by recommending AFS receive a CPCN, “subject to the condition that AFS submit a full and detailed explanation of its affiliate transactions whenever it seeks a rate increase, including an explanation of SCICo’s and AFS’s other affiliates’ finances as they relate to transactions with AFS...”

The five members of the Public Utilities Commission will review both proposed decisions for thirty days before issuing a binding vote.

We again thank the people of Avalon for their continued support through the next step of this process.

Proposed Decision of ALJ Farrar (.pdf file)
Alternate Proposed Decision of Commissioner Randolph (.pdf file)

On freight-dependent Catalina, an uproar over a new exclusive contract

Los Angeles Times reporter Chris Kirkham reported about the battle brewing over who will control Catalina’s crucial commercial pipeline. In his September 5 article on the front page of the paper’s Business section, Kirkham wrote that the planned concentration of control in the island's transportation system has left many in Catalina wary of rising freight costs on an island where the delivery of goods from the mainland is built into the price of everything. He interviewed residents, business owners as well as Mayor Ann Marshall about the long-held concerns about the power wielded by the Santa Catalina Island Co., which was purchased by chewing gum magnate William Wrigley Jr. in 1919.

The Island Co. owns essentially all of the island’s developable land, owns and leases many restaurants and hotels, and owns the dock space where the bulk of the island's goods come ashore. As owner of the barge landing, the private company had the ability to choose who would control a vital public utility.

Though the dock sits on private land, it's a public necessity for those living in the city of Avalon, falling under the jurisdiction of the California Public Utilities Commission. The commission regulates rates and grants licenses to carriers — or revokes them.

The Island Co. put out a request for proposals in 2012 for a new freight operator, reviewed proposals from eight operators and chose a newly formed venture run in part by the owner of the island’s primary passenger line. That decision came to light only last year after the company named the new operator in a press release printed in the local newspaper, prompting locals to question how such an important decision could be reached without a public hearing.

"It just kind of had the feeling of a foregone conclusion," said Pam Albers, a former Avalon city attorney who owns the Cafe Metropole. "If you're just somebody who lives here, you're scratching your head."

Curtin Maritime and the incumbent, Catalina Freight Lines, have argued to state authorities that the Island Co.'s bidding process was "a sham with a predetermined outcome.” Curtin said he became suspicious when he received an email from an Island Co. consultant four months before the company formally asked for proposals to run freight.

The email, from Van Holland of consulting firm Hardesty, said the Island Co. was in negotiations with the Port of Los Angeles to set up a freight depot to Catalina — at the same berth where the Catalina Express passenger line operated.

"This is a city; this isn't a monarchy," Curtin said. "You can't just do whatever you want and expect for there not to be blowback."

To read the full article, click here: http://www.latimes.com/business/la-fi-catalina-freight-20150905-story.html