The state Public Utilities Commission has approved a power purchase agreement between Hawaiian Electric Co. and the developer of a Kahuku wind farm project, described as the largest of its kind on O'ahu.

The facility, which could begin operating in early 2011, would generate enough electricity to power 7,700 homes, developer Kahuku Wind Power said.

The agreement between HECO and Kahuku Wind Power, a subsidiary of Massachusetts-based First Wind, calls for HECO to purchase 30 megawatts that will be produced by 12 wind turbines in Kahuku. HECO will pay 19.9 cents per kilowatt hour as part of a 20-year agreement with First Wind, said Darren Pai, HECO spokesman.

The PUC approved the deal on Wednesday.

Pai said the price is set and won't be tied to the ever-fluctuating price of oil.

"Oil is the single largest component of your electric bill and it goes up and down, but historically it keeps continuing to go up," Pai said.

A typical residential bill on O'ahu this month is $158.20 based on 600 kilowatt hours of usage, Pai said. He said the Kahuku project itself won't necessarily reduce a customer's bill, but it is part of an ongoing effort to reduce the state's dependency on fossil fuels.

"It's going to be one piece of the puzzle because we're going to need a lot of different types of renewable energy resources to meet our clean energy goals," Pai said.

The state has set a goal of getting 40 percent of its electricity from renewable sources by 2030.

Kekoa Kaluhiwa, First Wind spokesman, said Kahuku Wind Power expects to complete an environmental assessment for the project by the end of this month.

If all goes as planned, he said, construction on the $117 million-plus project could begin in July and be generating power by the end of this year or early 2011, Kaluhiwa said.

"We should be able to go online immediately," he said.

The wind farm would feature 12 turbines on 575 acres on the hillside west of Kahuku near Charlie Road. The towers will stand 260 feet and the turbine blades will reach 460 feet.

HECO said the project should reduce oil consumption by about 153,000 barrels a year and also reduce carbon dioxide emissions.

First Wind also owns and operates the 30-megawatt Kaheawa wind energy project above Mā'alaea on Maui. The wind farm provides up to 9 percent of the electricity distributed by Maui Electric Co., according to First Wind.