AUGUSTA — A proposed settlement that would have allowed Bangor Hydro-Electric Co. to raise rates by as much as $10 million a year has been rejected by state utility regulators.

The agreement between the utility and the Public Utilities Commission staff called for an $8 million increase effective Jan. 1, plus up to $2 million more next summer to cover investments in two hydroelectric projects.

Bangor Hydro, Maine’s second-largest power company, has filed requests for rate increases totaling more than $18 million, and formal hearings on those proposals now will be held. A decision is due by February.

The PUC rejected the settlement Friday, although commission Chairman Thomas L. Welch attributed the decision mainly to the lack of unanimity among the various groups involved in the case.

“It wasn’t necessarily that the numbers were wrong,” he said Monday.

Bangor Hydro attorney Andrew Landry said the company viewed the proposed increase as fair, even if it were “probably a little bit lower” than the utility would otherwise expect.

Opposing the settlement were the state public advocate’s office and groups of industrial and commercial customers.

Public Advocate Stephen Ward, whose office has recommended that Bangor Hydro’s rates be reduced by nearly $60,000 a year, said the company should not be allowed extra money to cover projected losses, and that the level of shareholder profit envisioned in the settlement was too high.