The state Public Utilities Commission has approved an average 13.46 percent increase in Young Brothers Ltd.'s interisland shipping rates.

The rate increase was approved Tuesday and is less than the 17.9 percent hike requested by Young Brothers in December. The new rates take effect Saturday.

The state's largest interisland barge company said the rate increase is needed to pay for $95 million in improvements the firm made over the past three years. Since 2006, Young Brothers has acquired four barges, a roll-on/roll-off barge, new cargo handling equipment, a new computer system and a statewide telephone system.

"The revenue from this rate increase is needed to finance new investments in vessels and other cargo equipment and to pay for costs associated with maintaining reliability of service and the same number of sailings despite falling cargo volumes," said Roy Catalani, the company's vice president of strategic planning and government affairs.

Young Brothers saw a 9.6 percent drop in interisland cargo volumes in 2008 and projects an additional 11 percent decrease this year. However, the company said it has maintained its 12 scheduled weekly sailings to meet customer demand for service.

The rate increase will mean higher prices for some goods on the Neighbor Islands and higher costs for farmers shipping refrigerated produce to Honolulu. A 21.26 percent hike in less-than-container-load cargo, LCL, translates into an increase of about 8 to 9 cents to ship a 24-pack case of saimin or a 24-can case of juice or soda, Young Brothers said.

Although the shipping rates will increase, Young Brothers announced that it will no longer add a fuel surcharge to its costs, effective Saturday. The company said a decrease in fuel costs in addition to fuel savings efforts instituted by Young Brothers allow the company to drop the surcharge.

Last December, Young Brothers asked the PUC for an average 17.9 percent rate increase. In June, the state consumer advocate and Young Brothers reached a settlement that called for an average increase of 14.61 percent.

This week, however, the PUC reduced the rate increase further, to an overall average of 13.46 percent.

The actual shipping cost will vary depending on the type of cargo being shipped. In addition to the LCL increase, the rate for standard containers, refrigerated containers, platforms and flat trucks will increase by 9.66 percent, and there will be a 9.22 percent increase for automobiles and roll-on/roll-off cargo.