Newfoundland and Labrador Hydro wants to raise electricity rates substantially in Labrador, while giving customers on the island a Newfoundland a bit of a break.

Power rates in larger Labrador towns are currently cheap.

Newfoundland and Labrador Hydro wants to increase them by more than 25 per cent, to almost five cents per kilowatt hour.

Even at that level, they will still be the cheapest in the country.

Rob Henderson, Hydro’s vice-president, says customers in Labrador can blame the proposed hike on the economic boom, and new customers that need to be hooked up.

"We've made significant investment — about [a] $39 million increase in investment — in the Labrador system, which is to match what the customers need to have reliable power," Henderson said.

Costs will also go up for people on the coast of Labrador. The average bill there will be more than eight cents per kilowatt hour.

Slight drop in most of Newfoundland

But in Newfoundland, 264,000 customers plugged into the main grid will see a decrease.

Rates are set to drop for them to 12 cents per kilowatt hour from the current 12.4 cents per kilowatt hour.

The reduction comes largely thanks to facilities expropriated in central Newfoundland as part of the province's dispute with Abitibi.

"All of that generation now is being used to displace production at Holyrood, so as a result of that, there are significant fuel savings that we are passing on to customers," Henderson said.

About 800 customers living in rural isolated communities in Newfoundland served by diesel generation could see a modest increase in their residential rates — a jump of less than one per cent.

Hydro filed a general rate application Tuesday with the Public Utilities Board.

The application will set electricity rates effective Jan. 1, 2014.

Hydro says it has not applied for new rates since 2006.

The PUB must approve all of the changes.

Hearings are expected to be held this fall.