Neighbor Island businesses and consumers will probably be paying a little more for many goods from beverages to building materials if the state's only interisland ocean cargo transporter wins approval for a planned fuel surcharge.

Young Bros. Ltd. is seeking permission from the state Public Utilities Commission to levy a 2.26 percent fuel surcharge starting Dec. 1 because recent fuel cost spikes are undermining a 5.5 percent base-rate increase that took effect in July.

Jeff Egusa, president and manager of Moloka'i's Friendly Market Center, said the back-to-back shipping cost hikes aren't surprising, given the volatility of fuel prices.

"I figured it's gonna come up," he said. "Everybody's raising their prices because of higher oil prices."

Egusa said his Kaunakakai grocery store is hit with fuel surcharges from air-freight companies, wholesalers and other businesses affected by the cost of oil. Although the nearly 8 percent increase in shipping costs isn't going to make him reprice everything on his shelves immediately, Egusa said, in the long run, his prices could end up rising about a half percent.

"Consumers," Egusa said, "they get a half percent from me, a percent from here, a percent from there. ... The consumer is really the one paying the price."

Neighbor Island residents already pay some of the highest prices in the state and country for gas and electricity, and typically pay more for goods shipped from O'ahu.

Young Bros., which calls itself the lifeline of the Hawaiian Islands, hauls about half of all goods between O'ahu and the Neighbor Islands.

According to its rate schedule, the fuel surcharge would add $3 to the $139 cost of shipping a mid-weight automobile from Honolulu to most of the Neighbor Islands. The surcharge would add 3 cents to ship 100 pounds of plywood and $15 for a 40-foot container of refrigerated cargo.

Young Bros. filed its fuel surcharge request yesterday with the Public Utilities Commission, which can approve, modify or reject the increase.

In its filing, Young Bros. said its cost for diesel fuel (which is not regulated by the state's wholesale gasoline-price cap) has been much higher than projected. The shipping company had assumed diesel would average $1.74 a gallon this year, but the actual price soared to $2.03 in September and $2.20 in October. The higher fuel costs are eroding income the company said it needs to replace its fleet of aging tugs and barges.

"Although YB continues to work and apply new technology to make its operations more fuel efficient, YB can no longer delay seeking PUC authority to impose a fuel price adjustment," Glenn Hong, Young Bros. president, said in a statement.

In its filing, the company also said it has faced "drastically" increased competition over the last several years, primarily from interstate carriers such as Matson Navigation Co., Horizon Lines and Seattle-based Aloha Cargo Transport, which aren't regulated by the PUC.

All three competitors are imposing fuel surcharges (13 percent for Matson and Horizon, and 16.5 percent for Aloha), and can adjust fuel surcharges up or down quarterly,depending on the price of fuel.

Young Bros. is seeking approval from the PUC to raise or lower its requested fuel surcharge quarterly, based on its fuel cost average for the preceding three months. If approved, the regular fuel surcharge adjustments would not require PUC approval but would be subject to review by the agency.

Young Bros. said it needs the fuel surcharge to achieve a reasonable return. The PUC allows the company to earn an 11 percent rate of return. Young Bros. said its July rate increase was projected to help achieve a 9.2 percent rate of return, which actually is running at about 5.7 percent because of higher fuel prices.

"Young Bros. must currently absorb the rising fuel costs and the impact to its rate of return," the company said.

The company is prohibited from obtaining an additional base rate increase until next year because PUC rules limit it to a maximum 5.5 percent rate increase in a 12-month period. Young Bros. said the rate limit didn't anticipate rapid fuel price increases, and that a fuel surcharge is fair to customers because it can rise and fall with fuel costs.

Karl Wissmann, president and chief operating officer of Star Markets Ltd., said increased costs associated with oil are an everyday part of business and life. "Everybody's just dealing with increased fuel costs all around," he said. "I think everybody's struggling to offset these types of costs."

Wissmann said Star, which has four supermarkets on the Neighbor Islands, has a meeting scheduled this morning to discuss the Young Bros. fuel surcharge, and that he couldn't say what effect, if any, it would have on supermarket consumers.

He said July's 5.5 percent rate increase from Young Bros. was relatively small for Star. "That was not overly burdensome," he said. "We were fine with that one."

Before July, the last rate increase for Young Bros. was about 4 percent in 1997, when the company was owned by Hawaiian Electric Industries. Seattle-based SaltChuk Resources Inc. bought Young Bros. in 1999.

Young Bros. provides interisland freight operations between Honolulu and the ports of Nawiliwili on Kaua'i, Kahului on Maui, Kaunakakai on Moloka'i, Kaumalapau on Lana'i, and Hilo and Kawaihae on the Big Island.

Reach Andrew Gomes at agomes@honoluluadvertiser.com.