Kauai’s electric utility won final approval for a modest rate hike that raises average household bills by about $8 a month.

The Kauai Island Utility Cooperative has been collecting the higher amount since May after receiving interim approval from the state Public Utilities Commission in April to raise rates by 1.98 percent. It is the first rate hike by the KIUC since 1996.

The PUC, in its final ruling issued Thursday, maintained the rate hike at 1.98 percent. That amount is considerably less than the 10.45 percent the utility originally requested when it opened the rate case in June 2009. The 1.98 percent will generate $3.06 million in revenue for KIUC, compared with the $12.99 million under the original request.

The PUC in April cut the amount of the original rate-hike request, saying it did not approve of KIUC’s plan to use part of the revenue generated to cover raises and bonuses for managers.

"As stated in the decision and order, the commission denied recovery from KIUC’s customers, through electric rates, incentive employee compensation and salary increases for managerial and other non-bargaining unit employees, finding that such expenses were unreasonable for rate-making purposes in the current down economy," the PUC said in a news release.

Nonetheless, KIUC officials told the PUC that the utility had already begun paying the salary increases, and would continue to do so using other sources within the utility’s budget.

The KIUC told the PUC that "it would be unfair for its employees to not receive their well-justified increases in salaries."

In its final ruling, the PUC gave KlUC’s board until Oct. 1 to disclose to its customers the total amount of the incentive compensation and salary increases, and explain how customers will be financially affected by the board’s decision to cover expenses disallowed by the commission for rate-making purposes.

The PUC warned that the rate case could be voided and other regulatory action taken if KIUC failed to disclose that and other required information.