BANGOR – Bangor Hydro-Electric Co. is preparing to cut costs by 20 percent, eliminate some jobs and freeze its rates in response to criticism from the Maine Public Utilities Commission that the company has sought too many rate increases in recent years.

Bangor Hydro President Carroll Lee said the utility has proposed cutting $6.4 million from its budget and freezing its electricity distribution rates for up to six years.

Last fall, the company asked the PUC to allow it to increase its rates by $6.4 million, or 11.4 percent. Last month, the PUC said it was considering conducting a management audit of Bangor Hydro after receiving numerous complaints from customers about rate increases.

The utility has been granted five rate increases in as many years. The PUC agreed to put the audit on hold for 90 days to allow Bangor Hydro to come up with its own plan.

“We are looking for ways to cut costs to avoid the need for a rate increase,” Lee said Friday.

He said the company was looking at “everything,” and that a decrease in staffing was expected. Details on how many and what jobs would be cut have yet to be worked out, Lee said. The utility now employs 420 people.

In an internal memo to company employees, Lee wrote that operating expenses must be cut by 20 percent. “Obviously, this will have a significant impact on employment levels and will require a major restructuring of our company,” said the memo, distributed Thursday.

“In reducing employment levels we will try to identify other employment opportunities within the Emera family, explore the feasibility of voluntary early retirement packages and examine appropriate severance packages,” the memo continued.

Bangor Hydro was purchased by Nova Scotia-based Emera Inc. in October. Emera is also a part owner of the Maritimes and Northeast Pipeline that carries natural gas across the state.

To stave off a PUC audit, Bangor Hydro proposed freezing its rates at current levels until 2007. There would be provisions to allow the company to make up for extraordinary circumstances like an ice storm, Lee said.

Bangor Hydro has not presented official cost-cutting plans to the PUC because it has 90 days from late January to do so, he said. The plan has to be approved by the PUC.

The company was forced to look for cost savings, Lee said, because it has been hard hit by the loss of some of its largest customers of late.

Its largest customer, HoltraChem Manufacturing Co., closed its doors in 2000. Since then mills owned by International Paper in Costigan and Passadumkeag and Gates Formed-Fibre Products Inc. in Eastport have been shut down. Another large customer, Eastern Pulp and Paper, which owns mills in Brewer and Lincoln, is currently in bankruptcy.

While the amount of electricity Bangor Hydro has sold has decreased, its fixed costs have not, Lee said.

“It’s pretty clear we need to reduce our costs,” he said.

In addition to cutting staff, the company will explore opportunities to work more closely with Emera to cut costs, and it may reduce the amount of money it spends on capital projects.

The fiscal restraints will not affect the utility’s plans to build a new transmission line across eastern Maine, Lee said. That project is now before the Board of Environmental Protection.

The PUC has yet to receive the company’s plan, but commission officials were briefed on its contents at a meeting Thursday.

“To not do a rate case and look for internal savings, that’s a good thing,” said Phil Lindley, a spokesman for the PUC.

He said the Bangor Hydro plan included a provision to share earnings with ratepayers if the amount of money the company makes is above target levels that have yet to be set.

The commission’s only concern, he said, is that the company’s service quality does not decline.