Maui Electric Co. has agreed to scale back its request for a rate increase under a settlement with the state consumer advocate.

According to a filing with the Securities and Exchange Commission yesterday, MECO will lower its request for a rate hike from 5.3 percent to 3.7 percent for its 66,000 customers on Maui, Lana'i and Moloka'i.

MECO estimated that a 3.7 percent rate increase will generate $13.2 million in annual revenues, or $5.8 million less than the $19 million a year originally sought by MECO.

The proposed increase, which requires approval from the state Public Utilities Commission, would be MECO's first since 1999 when it received an 8.2 increase, said MECO spokeswoman Kaui Awai-Dickson.

Dickson said the rate increase will pay for the two generating units at MECO's Ma'alaea power plant and other system improvements.

The first generating unit was put in place in 2000, and the second turbine was installed last year, she said.

Neighbor Island residents pay some of the highest electricity rates in the nation. And those rates have risen steadily during the past year as fuel costs have soared.

MECO officials declined to estimate the impact of the rate increase on individual households.

But under the current rate structure, the typical Maui customer using 600 kilowatt-hours per month will pay $184.36 in December. On Moloka'i, where the typical resident uses about 500 kilowatt-hours per month, the average bill will be $185.36, while Lana'i residents using 500 kilowatt-hours per month will pay $177.27, MECO said.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.