Hawaiian Electric Co. has scaled back its request for a rate increase, in a deal where consumers could wind up paying $24 million less a year.

In a filing with the Securities and Exchange Commission yesterday, HECO said it has lowered its request for a rate hike from 7.1 percent to 5.3 percent for its 293,000 O'ahu customers.

The rate increase, which requires the approval of the state Public Utilities Commission, would generate $75.5 million in annual revenues instead of the $99.6 million previously sought by the local utility. The increase could take effect anytime between now and early November.

"This is going to save consumers about $24 million a year," said state consumer advocate Catherine Awakuni, whose office helped negotiate the lower rate request.

HECO agreed to lower the rates because of changes in its cost estimates.

Hawai'i residents already pay the highest electricity rates in the nation. And those rates have risen steadily during the past year as fuel costs have soared.

The typical bill for a HECO residential customer in September was $134.19, which is up from $111.05 in December due mostly to a fuel surcharge. HECO originally filed for the 7.1 percent rate hike in December.

Downtown resident Courtney Brown said the higher rates will add to the cost of doing business.

Some businesses will be able to pass on the costs to consumers, thereby adding to the cost of living. Others can't and wind up swallowing the costs, said Brown.

Brown, a technology consultant, said he owns several rental properties and many have leases that don't allow him to pass on higher electricity rates to tenants.

"In the end, we end up eating it," said Brown.

HECO said the rate increase is necessary to pay for maintenance and for improving reliability.

Money raised by the increase would be used to help pay for projects such as a new system operations dispatch center and energy management system that monitors O'ahu's entire grid.

Other funds would be used for an outage management system to help find outages faster, for distributed generation units that provide power during times of high demand, for new substations and for replacement of underground lines in Waikiki.

In its filing with the SEC, HECO said the reduced rate increase is the product of an agreement with the state consumer advocate and the Department of Defense, which is HECO's largest customer.

The PUC has until the end of October to issue an interim decision on the rate request — and is free to accept or reject the agreement in full or in part, HECO said.

HECO spokeswoman Lynne Unemori said the company, the military and the state and their consultants agreed to the new rate request after months of detailed review of HECO's finances, including negotiations over cost assumptions that served as a basis for the rate request.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.