Hawaiian Electric Co. is lowering its 10-month-old rate-increase request to 4.3 percent after reaching a settlement with the state Consumer Advocate and the U.S. Department of Defense.

The settlement, which is not binding, has been filed with the state Public Utilities Commission. The agency will conduct its own study before issuing an interim decision scheduled for July. The Consumer Advocate represents the interest of consumers, while the Department of Defense, which had applied for intervenor status, is a major customer.

HECO said the negotiated compromise will generate $79.8 million in annual revenue, an 18 percent decrease from its original request of $97 million which was based on a 5.2 percent rate-increase request filed on July 3, 2008. A separate filing yesterday with the U.S. Securities and Exchange Commission stated that the revised increase was 6.2 percent. But Hawaiian Electric spokeswoman Lynne Unemori said the comparable percentage increase to last year's filing would be only 4.3 percent, since the amount that HECO is collecting now for fuel has gone down since last summer.

“;We know that there's never a good time for a rate increase,”; Unemori said. “;It's important to note that the PUC is not bound by this agreement, but we believe the request is justified.

“;Times are tough right now, but having reliable electric service is critical for our economy, and this request will help pay for a major renewable energy resource (a new biodiesel plant in Campbell industrial Park) that will not only help maintain reliability, but reduce our dependence on fossil fuels.”;

In addition to the plant, the requested increase will help cover more than $375 million in new projects to be completed by the end of next year, including new air-quality monitoring stations, costs related to a new 218-kilowatt photovoltaic system at the company's Archer Lane substation and the replacement of fiber-optic cables on Leeward transmission lines.

HECO's most recent rate request was its second in less than two years after applying in December 2006 for a 4.96 percent increase that would go into effect in 2007 and produce $70 million in revenue. The PUC revised the request upward to 5.6 percent and $77.9 million in revenue in an interim decision on Oct. 22, 2007, due to a change in the rate accounting method tied to a 2005 rate case. The PUC has not issued a final decision yet on that 2007 rate case.

Interim rulings allow HECO to adjust its rates to what is approved by the PUC pending a final judgment that could be higher or lower. If the rate increase is later reduced, then HECO would be required to issue customers refund credits with interest.