Hawaiian Electric Co. is taking a smart approach to beefing up its power grid that will save consumers nearly $18 million while eliminating the need for underground construction that can tie up traffic for weeks.

Using a $5.3 million federal stimulus grant, HECO said it plans to install "smart-grid technology" at a major substation serving the population-dense Waikīkī, Kāhala, Maunawili Heights, Kaimukī and Mānoa areas to help avoid future outages.

"It will improve reliability, reduce costs by taking advantage of federal funding, and it uses new technology that will allow us to make improvements without causing huge traffic disruptions," said company spokesman Darren Pai.

The project is part of the second phase of the local utility's massive East O'ahu Transmission project, which aims to boost its reliability in Honolulu's urban core.

This second phase covers some 13,600 residential and business customers, including the University of Hawai'i-Mānoa.

HECO originally planned to spend about $28 million to dig up much of King Street between Cooke and McCully streets and lay 1.9 miles of new copper and aluminum cables.

The cables were to provide an alternative transmission route for HECO's Pūkele substation, which is the most heavily used station in HECO's system.

The new proposal calls for the installation of sophisticated sensors and switches at the substation that could allow HECO to recognize outage situations and where they occur on the transmission lines.

The technology would allow the company to isolate the outages, or faults, and plan alternative routes to deliver power to customers.

The smart-grid plan will lower HECO's costs to $15.4 million but consumers will only pay about $10.1 million thanks to the $5.3 million stimulus grant, said Colton Ching, manager for corporate planning at HECO.

Ching noted that the new approach will also shave off several months from the construction schedule. The original project was supposed to be completed in August 2013. Plans now call for a 2012 completion date, he said.

Some 40,000 customers could have benefited from such technology on March 3, 2004, when a fault occurred on one of the two 138-kV transmission lines connected to the Pūkele substation.

The East O'ahu Transmission line and the new smart technology would have provided alternative routes to deliver power to the customers, who went without electricity for 45 minutes.