Hawaiian Electric Co. has agreed to scale back its request for a rate increase, in a deal that could save consumers at least $10 million a year.

In a filing with the Securities and Exchange Commission yesterday, HECO said it has reached a settlement with the state Consumer Advocate and the Department of Defense for a 6.2 percent rate increase for its 295,000 customers on O'ahu.

The increase compares with a 7.5 percent rate hike previously sought by HECO.

"The settlement agreement represents a negotiated compromise of the parties' respective positions and is approximately 18 percent lower than HECO's original request," the company said.

The deal requires the approval of the state Public Utilities Commission and will raise about $79.8 million in revenues instead of the $97 million previously sought by the company.

The settlement does not cover an additional $7 million in rate increases that are still being sought by the company.

If the 6.2 percent increase is approved, the typical monthly bill will go up by about $7 to $124.45, said HECO spokeswoman Lynne Unemori.

The company said the rate hike will help pay for its new $164 million biodiesel power plant at Campbell Industrial Park and other enhancements to its system. The Campbell unit, which will generate about 110-mega-watts, is expected to be in service by August.

The case schedule calls for the PUC to issue an interim decision in July. The PUC is free to accept or reject the agreement in full or in part, HECO said.

Shares of HECO's parent, Hawaiian Electric Industries Inc., dropped 24 cents yesterday to close at $16.48 on the New York Stock Exchange.