The state Public Utility Commission on Thursday approved a 9.4 percent rate increase for customers of Pennsylvania American Water Co., less than the 16.4 percent increase the company initially requested.

The increase, the first in four years for the water utility, will boost the monthly bill of a typical residential customer using 3,630 gallons per month by $5.22, from $55.63 to $60.85. A typical wastewater customer's bill will increase $7.97, or 14 percent, from $56.96 to $64.93. The new rates take effect Jan. 1.

Pennsylvania American has 650,000 customers in 400 communities, including 44,000 in the Philadelphia suburbs.

The company said it needed the rate hike to pay for $1.26 billion in investment to replace and upgrade aging infrastructure. The increase, which will generate $61.85 million in new annual revenue for the company, was the result of a settlement reached between the company, the PUC staff, and various consumer advocates.

Pennsylvania American, which is based in Hershey, is a subsidiary of American Water Works Co. of Voorhees.