WARWICK –– Should natural gas customers of National Grid be required to pay for a $1.4-million marketing program designed to encourage more households to switch from heating oil to natural gas?

That is one of several issues before the state Public Utilities Commission, which is now considering several proposals from the state’s dominant gas and electricity utility, some of which would result in higher distribution rates for its gas customers.

Yesterday, the three-member panel heard opening statements from attorneys representing National Grid, as well as lawyers from a half-dozen groups and agencies that have an interest in the case’s outcome.

In the proceeding before state regulators –– known as a “rate case” –– a utility company lays out how much money it says it will need to run its business in coming years. The estimates are limited to the company’s expenses to run the business, such as salaries and capital investments. It does not include the actual cost of the energy delivered to customers. That is handled through different proceedings.

Rate cases usually come up for review every three or four years. They are often complicated, involve thousands of pages of filings, and require several days of testimony. The PUC is charged with scrutinizing the utility’s proposals, and listening to the responses of groups, state agencies and the public, and deciding how much money the utility company really needs. The case will ultimately affect every customer’s monthly charges.

In this case, National Grid said yesterday that it is seeking an extra $18.5 million each year beyond what current distribution rates now bring in. If approved as is, the proposal would raise a typical customer’s bill by about 5 percent, according to National Grid.

The extra money would help pay for an accelerated program to replace old gas lines and mains, would establish a new discount for low-income customers, and would pay for the marketing and rebate program to entice oil customers to use gas for heating.

Among the expenses that were questioned yesterday was that marketing program and whether it makes sense for customers of National Grid to pay for it.

Yesterday, the utility said the program has many benefits.

“The company strongly believes it is important to ramp up marketing to educate and encourage customers to convert to natural gas,” said Ronald Gerwatowski, an attorney for National Grid.

He said that natural gas is a “cleaner fuel” and conversion from oil to gas would lessen air pollution. He also said the program would benefit all customers because having more households using the gas distribution system would spread the fixed costs of operating the network among more ratepayers.

The company suggested that customers need prodding and financial incentives to make the switch.

“You have to go out and get them and help them over that initial hurdle of the cost of getting on the system,” said Cheryl Kimball, another attorney representing National Grid.

One of the biggest impediments to switching, she said, is the initial investment required by the customer to purchase and install a new boiler or furnace. The total cost of the conversion can run into the thousands of dollars. Part of the program would go toward offering equipment rebates to these customers.

But the Division of Public Utilities and Carriers, the state agency that is supposed to represent ratepayers in utility matters, said that a marketing program to attract more gas customers is not needed since the price of heating with gas is now significantly cheaper than heating with oil.

“The economic attractiveness of natural-gas service has never been greater,” said Paul Roberti, an attorney representing the DPUC.

“The notion that National Grid needs more funding of its marketing efforts to compete with heating oil marketers is, at best, questionable,” he said.

Roberti cited a Providence Journal article published last week in which National Grid said it had thousands of calls from customers interested in switching from oil to gas. The Journal reported that between January and June, there were 2,850 residential customers who called National Grid and expressed “serious interest” in converting their heating equipment to gas, according to a company spokesman. During the same period, about 1,000 customers actually made the switch.

(At National Grid’s current rates, heating oil would have to cost $2.43 a gallon to equal an equivalent amount of natural gas, according to calculations by The Journal. The average price of home heating oil in Rhode Island on Monday was $3.949 a gallon.)

Roberti said the DPUC recommends that only $148,000 of ratepayer money –– about one-tenth of the amount requested –– be used to fund a marketing program. That amount matches the amount that National Grid said was being spent on advertising by the Oil Heat Institute of Rhode Island, the trade organization that represents most oil dealers in the state.

Hearings are scheduled to resume at the PUC on Sept. 8.

tbarmann@projo.com