The state Public Utilities Commission has denied Hawaiian Electric Co.'s request to approve a biodiesel supply contract because of the higher costs it would have passed on to consumers.

HECO sought approval for a contract with Seattle-based Imperium Services LLC. It is now seeking new bids from biofuel suppliers.

According to the contract terms, Imperium was to build a local refinery with a pipeline to supply biodiesel for HECO's newly completed, $142.3 million, 110-megawatt plant at Campbell Industrial Park.

When the contract was later amended to have Imperium import biodiesel from a West Coast refinery, HECO also sought a terminaling and trucking agreement with Aloha Petroleum to transport the imported biodiesel to its generating plant. That additional contract would have incurred additional costs that HECO would have passed on to its customers.

The PUC also determined that the contract with Aloha Petroleum without a corresponding biodiesel supply contract was unnecessary.

“;While we're disappointed in the ruling from the PUC, we understand their concerns about cost to ratepayers,”; said Imperium CEO John Plaza. “;We put together the best proposal we could based on HECO's contractual requirements to source sustainable palm oil.”;

Plaza said Imperium's facility in Washington state produces the highest-quality biodiesel from a variety of other sustainable feedstocks as well, including soy, canola and camelina, for lower costs.

“;We are confident we could rebid at significantly reduced costs, but that would require HECO to change the requirements,”; he said. “;We will continue to work with HECO and PUC to bring sustainable, renewable energy to the island.”;

The PUC concluded that the supply contract placed too much of the additional risks and costs on HECO, which would have passed those costs on to its electricity customers.

Recently the commission authorized an interim rate increase of 4.7 percent for Oahu customers, resulting in an additional monthly bill of $6.48 for a typical residential customer (using 600 kilowatt-hours a month).

PUC Chairman Carlito Caliboso said it remains “;strongly supportive”; of biofuels and other renewable energy resources—and, in fact, required the use of biofuels for the new generating unit.