Indiana American Water’s 1.3 million residential customers can expect to pay about an extra $2.41 per month if the state approves a rate increase. But that’s less than half as much as the utility originally requested.

Indiana American Water announced Tuesday it reached an agreement with local governments, industrial companies, and activists to lower the amount in its rate increase.

The utility says it needs the money to pay for infrastructure upgrades and to comply with new water quality regulations. That includes replacing about 7,000 lead pipes and almost 36 miles of aging water mains — as well as a new treatment plant in Noblesville.

“We feel like the agreement we’ve come up with here is reasonable for our customers and for everybody,” says Joe Loughmiller, spokesman for Indiana American Water.

At first, the state’s utility watchdog, the Office of Utility Consumer Counselor, said Indiana American should actually lower its rates. Spokesman Anthony Swinger says, since then, the utility proved the increase was necessary and all parties were able to reach a compromise.

“Certainly when you’re able to provide half of the increase as opposed to what had been requested —under the circumstances, that is a good outcome,” he says.

The water company also plans to pass along its savings from the Tax Cuts and Jobs Act, giving typical customers a refund of about $19.

The Indiana Utility Regulatory Commission still has to approve the rate increase. It would go into effect in two phases, starting this summer.

Indiana Environmental reporting is supported by the Environmental Resilience Institute, an Indiana University Grand Challenge project developing Indiana-specific projections and informed responses to problems of environmental change.