Progress Energy customers will likely see an 11.5 percent rate increase starting Dec. 1, under a proposal filed Friday with the N.C. Utilities Commission.

The Raleigh-based electric utility had sought a larger rate increase but agreed to spread out the increase over three years. Progress reached an agreement with the state's consumer protection agency, known as the Public Staff, as well as with industrial customers.

The proposed increase is subject to the commission's approval. A hearing has been set for Sept. 16 in Raleigh. The commission usually approves such settlements.

Under the proposed settlement, Progress would raise the monthly bill from about $97 to about $108 for a residential customer who uses 1,000 kilowatt hours of electricity, the typical monthly usage. The company had earlier proposed a 16.2 percent increase, which would have raised rates to about $113 a month.

Rates are almost certain to go up again in December 2009, in part because Progress is deferring fuel costs that are rising dramatically.

The proposed 11.5 percent increase is much more than regulators would normally tolerate, but they didn't want Progress to keep falling behind in recovering fuel expenses.

"There was no way to avoid that without getting into a bigger hole," said James McLawhorn, director of the Public Staff's electric division.

Progress had asked for $411 million in fuel costs. Of the fuel request, nearly half -- $203 million -- represented expenses from previous years that the company has not collected from customers.

The company is also recovering about $54 million for renewable resources and energy efficiency programs required by a new state law.

Electric utilities are allowed by state law to charge customers for the cost of fuel. The primary fuels used by Progress to generate electricity are coal and uranium. The market price of coal has increased 160 percent in the past year, said Progress spokesman Mike Hughes.

Get $150+ in coupons in every Sunday N&O. Click here for convenient home delivery.