National Grid, the only provider of natural gas in the state, has begun a new program that encourages customers to use the fuel more efficiently by providing rebates on energy-saving appliances and other incentives.

The program, which began July 1, is similar to one already in place for electricity users. Customers who participate can obtain rebates, ranging from $25 to $800, on the purchase of furnaces, water-heating systems, thermostats and insulation, according to the company’s plan. The program will also offer free home energy audits.

An energy law passed last year required natural-gas utility companies to design an energy-efficiency program. National Grid, following its acquisition of the Rhode Island operations of New England Gas last August, provides service to 245,000 customers in the state.

National Grid submitted a rough draft of the program to the Public Utilities Commission in December. In April, the company and several other groups submitted a more detailed plan that spelled out exactly how the program would work. The PUC approved it, with some minor changes.

Energy-efficiency initiatives have gained support over the past several years as energy prices have spiked. Supporters say investing money in using energy more efficiently is more cost-effective than building power plants or the associated infrastructure needed to deliver more natural gas.

They also point out that using less energy means lower emissions, which can help stem global warming.

National Grid said that its energy-efficiency program for electricity customers, which has been operating for more than 20 years, has cut costs for Rhode Islanders by more than $53 million annually and reduced greenhouse-gas emissions by more than 250,500 tons.

The new gas-efficiency program has a total budget of $7.5 million for 2007 through 2008. About 55 percent of the budget, or about $4.1 million, will go toward residential incentives and reimbursements, with the remaining 45 percent, or $3.4 million, going toward commercial and industrial programs.

Incentives for residential customers include an $800 rebate for Energy Star-labeled boilers with a 90-percent efficiency rating, a $300 rebate for Energy Star natural-gas forced hot-water boiler and tankless/on-demand water heaters, and $25 for a programmable thermostat. Participants may also get back as much as 20 percent of the cost of installing weatherization measures, such as insulation, up to $750 per gas-heating account. The work must be performed by an approved contractor; do-it-yourself work is not eligible.

Customers who take full advantage of gas energy-efficiency programs in other states have been able to trim their monthly gas bills by up to 30 percent, National Grid said.

The money to pay for the program comes from a monthly fee on customers’ bills, based on the amount of gas used. In January, National Grid began charging a fee of 6.3 cents per decatherm – a measurement of heat – which amounted to an additional 54 cents a month for a typical heating customer who uses 1,035 therms a year, according to National Grid.

In May, the PUC allowed National Grid to increase that surcharge to 11 cents per decatherm as of July 1. That brought the total cost for a typical heating customer to about $1 month.

That’s still below what’s allowed by law. The Comprehensive Energy Conservation, Efficiency and Affordability Act of 2006 allowed for a surcharge of up to 15 cents per decatherm to pay for the program.

National Grid said that as demand for the program grows, the company expects to seek a higher surcharge. The maximum allowed by the law would increase a typical customer’s bill by about $15.53 a year, or $1.29 a month, the company says.

National Grid says the efficiency program will more than pay for itself, since every $1 invested will bring about benefits totaling $3.43 over a 15-year period.

If the program is successful, it will actually cut into company revenue, National Grid said. It estimates that the program will reduce consumption by about 199,000 decatherms, which will decrease annual revenue by about $508,000 a year.

The groups and agencies that worked with National Grid to design the plan were the Rhode Island Division of Public Utilities and Carriers, the state agency that represents ratepayers in utility issues; the Energy Council of Rhode Island, a nonprofit group that represents large, commercial energy customers; the Rhode Island Office of Energy Resources, the state agency that advises Governor Carcieri on energy policy and distributes heating assistance; People’s Power and Light, a nonprofit energy company; and Environment Rhode Island, a nonprofit group that advocates for environmental causes.

tbarmann@projo.com