The $74.2 million generated by the rate increase request, the company's first in 10 years, is needed to meet growing electricity demands across O'ahu, HECO said.

Much of the new revenue, $44 million, would be used to pay for new and existing programs that encourage the conservation of energy, said Robert Alm, senior vice president for Hawaiian Electric.

"Power use has surged in the last few years beyond our expectations," Alm said. "We're going to need another 200 or 250 megawatts in new power generation or savings by the end of this decade just to meet the growing peak demand."

In addition to energy conservation and efficiency programs, HECO plans to build a new 100-megawatt "peak hour" power plant at Campbell Industrial Park, develop alternative energy resources, including wind power and methane gas recovery from O'ahu landfills, and encourage the use of small power plants in buildings like hotels and hospitals.

None of that will offset the need for more conservation, Alm said.

"Energy efficiency and conservation are the big deal," he said. "That's the biggest single thing O'ahu can do for the rest of this decade to help."

The company said it would file its rate increase request with the Public Utilities Commission this week; rates would not go up before the end of next year.

HECO's formal request will be for a 9.9 percent base rate increase, but that amount includes the transfer of an existing surcharge for conservation programs to the base rate. The net increase on electric bills would be 7.3 percent, HECO said.

Critics immediately said the request seemed excessive.

"We haven't seen the details, but it definitely should be lowered significantly," said Henry Curtis, executive director of the environmental group Life of the Land.

Jeff Mikulina, Sierra Club director in Honolulu, said he was encouraged by HECO's increased emphasis of conservation and renewable energy, but opposed building a new fossil fuel power plant at Campbell Industrial Park.

"They're moving in the right direction, but there's still a lot more they can do," Mikulina said. "We definitely don't think the new power plant is the way to go."

Alm said the rate increase proposal was put together to meet an expected power crunch by 2010. That's being caused by a booming economy and, in large part, customers who have dramatically increased their individual energy use, he said.

"The No. 1 issue is air conditioning," he said. "Most of the new housing and development is occurring in the hottest parts of O'ahu and people in those areas are running their air conditioning 24 hours a day. It's a very significant factor."

The remainder of the requested money will pay for past investments in improving the electric grid's reliability, including new transmission lines, cable replacements, and the costs to buy an additional 29 megawatts of power, pending PUC approval, recently contracted from an independent power producer, Kalaeloa Partners.

Under an existing PUC agreement that expires at the end of this year, HECO customers now pay the costs of the company's energy conservation programs, such as those that encourage solar water heating sales and more efficient lighting, through a surcharge on their monthly bills.

The new rate proposals calls for those programs — and several new ones — to be paid as part of the regular bill, with the surcharge eliminated.

"Without the new rate increase, we'd have to end all of those programs," said Alm, adding that Hawai'i already has the most aggressive program of demand-side electricity management in the country.

However, Curtis said the company should consider contracting out all of its energy conservation programs, a move he said would reduce the need for a rate increase.

"We've always been very concerned about the size of the overhead HECO uses," he said. "They have some very inefficient programs for dealing with energy efficiency. There are other companies that can do it far more efficiently."

Alm said using the new and existing conservation programs will allow many consumers to lower or offset the proposed increase in their electric bills.

"If you choose to do nothing, you will pay more. However, if you involve yourself in these new programs, it can make your bill less," he said.

"The higher rates alone should be an incentive to reduce their use of electricity."

John and Mary Ventura live in a one-bedroom apartment in Kalihi and they aren't sure what they pay for electricity because it is included in their monthly rent. But John Ventura figured that any increase in the electricity costs will be reflected in their rent.

He characterized the 7.3 percent increase as "kind of huge" and said he doesn't believe it'll encourage too many people to conserve.

"That doesn't make sense because if you need electricity, you're going to have to use it," Ventura said. "We have no air conditioning and we cannot cut back any more than what we're cutting back already."

Honolulu users already pay one of the highest electric rates in the county, about 14.4 cents per kilowatt-hour.

The average customer nationwide pays about 8 cents per kilowatt hour, according to the U.S. Department of Energy.

Advertiser staff writer Curtis Lum contributed to this report. Reach Mike Leidemann at 525-5460 or mleidemann@honoluluadvertiser.com Reach Curtis Lum at 525-8025 or clum@honoluluadvertiser.com.