Hawaiian Electric Co. has received the go-ahead for a $64 million East O'ahu transmission project, one day after the utility obtained regulatory approval for a 4.96 percent residential rate increase.

HECO said yesterday that the state Public Utilities Commission granted its request to begin construction of the East O'ahu project, which will add alternative transmission routes to an area that ranges from Downtown to Hawai'i Kai and from Kahuku to Makapu'u. That area covers about 56 percent of HECO's demand.

HECO's East O'ahu project replaces a controversial $35 million plan to build transmission lines along Wa'ahila Ridge, which was rejected in 2002 by the state Board of Land and Natural Resources.

The new project involves the installation and replacement of underground lines and upgrades at nine substations in the Downtown and Ala Moana areas.

If it obtains the necessary construction permits, the project could start in the first quarter of next year, the company said.

The $64 million construction tab will not be included in existing electricity bills. Those costs won't be passed on to consumers until the project is completed and only after the PUC approves a new rate increase, the company said.

On Monday, the PUC approved HECO's request for a 4.96 percent rate hike, in a deal that will generate nearly $70 million in annual revenues for the utility. The rate increase will raise the monthly bill for a typical O'ahu customer by about $6.61.

According to HECO, construction in the East O'ahu project will be conducted in two phases.

The first segment involves the replacement of existing overhead and underground transmission lines in the Ala Moana and McCully areas, with new underground lines in the Mo'ili'ili and Kapahulu areas.

The second phase involves the installation of underground lines along King Street, between McCully and Cooke streets.

Reach Rick Daysog at rdaysog@honoluluadvertiser.com.