Young Brothers Ltd., the state's largest interisland barge company, is seeking a rate increase, saying it needs to recoup costs for new barges and equipment it's putting into service.

The company also is asking the Public Utilities Commission if it can institute a fuel surcharge that will be adjusted when the price of a gallon of diesel fuel rises or falls 15 cents.

Young Brothers said the average size of the rate increase would be 10.7 percent, but added that the rate would vary from customer to customer depending on the type of cargo being shipped. Standard containers and roll-on/roll-off cargo would not be affected, the company said.

The rate increase would result in higher prices for some goods on the Neighbor Islands and mean higher costs for farmers shipping refrigerated produce to Honolulu. Young Brothers, which stops at all major islands, increased rates 5.5 percent in September after a similar increase in July 2005. If approved, the current rate request could go into effect in July at the earliest.

"We would have to adjust our pricing," said Barry Taniguchi, president of KTA Super Stores, a grocery chain that has six locations on the Big Island. He said transportation costs aren't the major component of items he sells in stores, so it is incorrect to assume prices will rise 10.7 percent on everything. For example, if transportation costs were 10 cents of a $1 product, the price would only rise by about 1 cent to $1.01.

But he said the added expense most likely would be passed along to consumers so that he could recover his own costs.

The overall 10.7 percent increase is an average of a 5.6 percent increase for refrigerated containers, platform loads and automobiles and a 24 percent jump for less-than-container loads and minimum charges for shipments. Young Brothers said the latter rate increase will only cover its costs for providing the service.

Roy Catalani, Young Brothers vice president, said the majority of shippers will see either no increase or the 5.6 percent rise.

The company also wants to implement a fuel surcharge. Young Brothers, unlike Matson Navigation Co. and Horizon Lines, the No. 1 and No. 2 shippers of Mainland cargo to the state, does not automatically pass along fuel price hikes to its customers. Rising fuel costs cut into the company's profit when diesel prices rose this year, said Catalani.

"It has been a major expense issue," he said.

Catalani said the increased cargo rates are needed to recoup investments Young Brothers is making with new barges and other equipment. The company said it has invested about $40 million this year in improved equipment and facilities and plans to make an almost equal amount of expenditures next year.

"It's basically all the things that we're going to be putting online to have the capacity to deliver the increasing amounts of cargo we are receiving," Catalani said.

This includes a new roll-on/roll-off barge that will be introduced to service in the next three months and a new flat-deck barge that is expected here next fall. Young Brothers is also upgrading its telephone system and cargo-handling equipment and installing a new computer system.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.