The same day that local electric rates increased by 21.7 percent, National Grid, the state’s main supplier of electricity, confirmed that it plans to double the amount of money it spends each year helping residential and commercial customers use less energy.

By 2011, the utility plans to spend $32 million annually in rebates, energy audits and other programs to help its Rhode Island ratepayers use less electricity for their lighting, washing and heating.

“The way things are going with fuel costs, I can’t say this means our customers will pay less,” said Janet Gail Besser, the utility’s vice president for regulatory affairs. “But if they conserve, they will spend less than they would have otherwise.”

Sam Krasnow, of Environment Northeast, a policy group that is recommending conservation programs to National Grid, said yesterday he sees the utility’s plan as a significant step toward developing more quality programs for Rhode Island.

But it doesn’t go as far as recommended in a report scheduled to be released today by a panel appointed by Governor Carcieri. The commission recommended that National Grid spend up to $80 million annually for conservation that would save ratepayers more than $1 billion over the next 10 years.

Krasnow, a member of the panel, said yesterday, “This is really the only good news we have on the energy front these days.”

The new conservation efforts are not related to the rate hikes, said Besser. She said the rate increases were made in response to rising prices for the oil and gas used to generate the electricity National Grid buys from other companies and then sells to local customers.

The increased conservation was mandated in foresighted legislation passed by the General Assembly two years ago. The Comprehensive Energy Conservation, Efficiency and Affordability Act of 2006 was created with input from the governor’s office. It was considered the most significant change in state energy policies in 10 years.

The legislation merged bills that provided heating assistance for the poor and discounted rates for low income customers. It required utilities to pay for cost-effective efficiency measures before buying more traditional power supplies. And it created an 11-member Rhode Island Energy Efficiency and Resources Management Council and gave it the authority to review energy efficiency opportunities in Rhode Island and to act as a watchdog over the process by which the utility purchases energy.

The commission transmitted its report yesterday to National Grid, the General Assembly, the Rhode Island Public Utilities Commission and the state Office of Energy Resources. It planned to make the report public today.

The report notes that in the last eight years, the cost of purchasing electric power in New England has more than tripled, from 3.5 cents per kilowatt hour to 12.5 cents per kilowatt hour. At the same time, the report found an abundance of conservation efforts that can save energy at a cost of just 3 cents a kilowatt hour.

So while $1 billion will be spent this year to buy the electric power to supply Rhode Islanders, the report said only $21 million is being spent on conservation efforts that cost less than one third as much per unit of electricity. (National Grid says the figure is $16 million.)

“If we spent $80 million a year, it would save nearly $250 million a year in the costs of electricity,” said Krasnow.

If National Grid eventually embraces the report’s recommendations, Krasnow said that would put Rhode Island in a leadership position nationally.

National Grid is expected to complete its three-year conservation plan by November, and Krasnow said that allows plenty of time for more discussions over details and scope. It is important, he said, that the conservation programs be well done and made available to all classes of customers.

Why would a utility spend money to essentially lower its sales?

“We see increasing energy prices and increasing concerns about climate change,” said Besser. “One way to address both issues is to improve efficiency.”

Also important, she said, are plans to change the format for electric rates, to “decouple” rates from sales.

Now, the utility figures out its costs, and then recovers those costs by charging customers based on the quantities of electricity they use. The utility makes more money by selling more electricity and there is no financial incentive for it to promote conservation.

Among a variety of alternative rate-setting methods, the utility could lose the ability to make more by selling more, and it could be given financial incentives for spending more on conservation.

The report and National Grid’s response are extremely important to Rhode Island’s economy, according to John Farley, a member of the energy council and director of an industry group.

Conservation efforts would not only save money for many companies, Farley said, they would provide business for some local companies that are pioneering in developing low-energy lighting and heating and air conditioning equipment.

“At the same time we’re helping people save energy, we’re helping people compete,” Farley said. “If we do this right, it could add jobs and we could show other states how to do it.”

For more information on existing conservation programs offered by National Grid, go to:

https:// www.nationalgridus.com/narragansett/

To read the new energy report, go to: http://www.env-ne.org/resources/open/p/id/645

plord@projo.com