The developer of a proposed biofuel production facility on Hawaii island said today it will proceed with its plans despite being told by regulators that Hawaii Electric Light Co. will not be allowed to buy the company’s fuel for power generation.

The state Public Utilities Commission on Monday for the second time in two years rejected a plan by HELCO to buy 16 million gallons of locally produced biofuel a year from Aina Koa Pono, saying the cost of the alternative fuel was too high when compared with the fossil fuel that it would replace.

HELCO and its parent Hawaiian Electric Co. had proposed recovering the higher cost of the biofuel through a surcharge that would have added 90 cents a month to a typical residential  on Hawaii island and $1.08 a month for a typical residential bill on Oahu.

The PUC’s three commissioners in a unanimous decision said their ruling was supported by several conclusions, including "the contract price for the AKP-produced biofuel is excessive and not cost-effective at present and for the foreseeable future, and thus, is unreasonable and inconsistent with the public interest."

The commissioners wrote that the biofuel contract with Aina Koa Pono would have potentially displaced "more economical, existing renewable energy resources or restrict the addition of other new low-cost, fixed price renewable energy projects." The  commissioners did not mention specific projects, but Hawaii island is home to a major geothermal energy plant, and HELCO is close to awarding additional contracts for more geothermal development.

Kenton Eldridge, co-founder and chairman of AKP, said the company will press ahead with the planned biofuel facility without a contract with HELCO.

"AKP is very disappointed with the PUC’s decision but will continue to pursue our plan to produce both biofuels as well biochar. AKP still has an active contract with Mansfield Oil to produce up to 24 million gallons of biofuel to be used as transportation fuel," Eldridge said in an email.