Young Brothers Ltd., the state's largest interisland barge company, is proposing a rate increase of 5.5 percent to cover the cost of placing two new barges into service this year, as well as rising labor expenses.

If the state Public Utilities Commission approves the request submitted by the company, the increase would be effective on Aug. 1 and cover all cargo categories, Young Brothers said.

The 5.5 percent hike falls within a "zone of reasonableness" rate increase range approved by the PUC in 2001. Rate increase proposals that do not exceed 5.5 percent go through an abbreviated 45-day review period, as opposed to a general rate request review that could last months.

Young Brothers is allowed to seek "zone of reasonableness" hikes annually and the proposals are separate from the fuel surcharge, which can be adjusted quarterly as the cost of fuel rises or falls. Last year, the PUC approved a 7.51 percent general rate hike for Young Brothers and 5.5 percent increases in 2005 and 2006.

Roy Catalani, vice president of strategic planning and government affairs, said the proposed increase will help pay for Young Brothers' 10-year, $186 million capital reinvestment plan. Young Brothers estimates it will spend $19.5 million this year as part of the plan.

The rate increase money will help to recoup the cost of two new barges that will begin service this year, as well as pay for equipment such as containers, cargo handling equipment and information systems. Young Brothers also will bring another barge into service in 2009.

"It's really a necessity for our customers in our requirements to provide transportation service throughout the state," Catalani said. "We certainly don't want to fall behind on critical infrastructure investments, because although it's costly now, if you delay these kinds of investments it's much more costly later."

If approved, the rate increase would mean higher prices for some goods on the Neighbor Islands and higher costs for farmers shipping refrigerated produce to Honolulu.

With a 5.5 percent increase, the cost to ship 2,000 pounds of locally grown cabbage will rise to $63, Young Brothers said. Also, 2,000 pounds of frozen chicken will cost about $90 to ship, 1,920 cans of soup will cost $31, and a 60-cubic-foot pallet of beverages (about 495 six-packs) will cost $41.