State regulators have denied Hawaiian Electric Co.’s request to impose a surcharge on its Oahu and Maui customers for the extra expense of using biofuel to generate electricity on the Big Island.

The surcharge request is part of HECO’s plan to buy 16 million gallons a year of locally produced biofuel to burn in its Keahole power plant near Kailua-Kona.

HECO signed a contract in January with biodiesel supplier Aina Koa Pono, a new company that plans to build a plant in Kau to convert a variety of existing wild plants as well as cultivated crops into liquid fuel.

HECO did not give a price for the biofuel, but said it would probably be higher than the petroleum-based diesel burned at the Keahole plant. At the time, HECO estimated the biofuel would add about one-third cent per kilowatt-hour, or $1.86 a month, to a 600-kwh bill if the cost were spread across ratepayers on all three islands. The biofuel premium will be higher if it is entirely paid for by Hawaii County customers.

In its decision, the Public Utilities Commission said it would continue to consider HECO’s request to buy biofuel from Aina Koa Pono but that HECO would not be allowed to pass any surcharge along to ratepayers on Oahu or Maui.

HECO Executive Vice President Robbie Alm said the utility is reviewing the decision.

"We still firmly believe that developing local biofuel sources is a critical part of the portfolio of renewable energy sources we need to reduce our state’s dependence on imported oil," Alm said.