Kansas City, Mo. ? Kansas regulators have rejected a request from Aquila Inc. to let the company use its utility assets as collateral for a loan.

Using the utility assets as collateral would allow Aquila to receive a lower interest rate on a $430 million loan the firm obtained last year. About $250 million of the loan is for Aquila’s regulated utilities, and the rest is for unregulated operations.

Aquila provides electricity and natural gas to customers in Colorado, Iowa, Minnesota, Missouri, Nebraska, Michigan and Kansas. Colorado and Iowa already have OK’d Aquila’s request to use utility assets in those states as collateral, and the firm does not need approval from Michigan and Nebraska.

The company has said the assets in those four states give Aquila adequate collateral to get the lower interest rate.

The Kansas Corporation Commission said Tuesday that it wasn’t in the public interest to approve the request, in part because the company was seeking to have its utility customers accept the risks created by the company’s failures in unregulated businesses such as energy trading.

“If approved, it could set a dangerous precedent suggesting to other public utility companies that they need not be concerned about the consequences of their financial missteps because the commission will ultimately shift the risk to customers by requiring them to subsidize the utilities’ financial recovery,” the commission’s order said.

Minnesota also recently rejected Aquila’s request to use utility assets in that state as collateral.