Under the plan, which Heco is calling "America's largest solar water heating program," homeowners who put in solar panel water heaters can get $800 of the bill paid by Heco. Those who buy Heco-approved heat pumps, can get a rebate of $130 to $300.

The state Public Utilities Commission approved the program last month.

Similar programs are planned by Heco's fellow Hawaiian Electric Industries Inc. subsidiaries, Hawaii Electric Light Co. of the Big Island and Maui Electric Co., but have not yet received approval from the PUC. If approved, the three companies would promote installation of 26,000 solar water heating systems.

Heco is encouraging energy efficiency in order to reduce demand for electricity and delay construction of expensive new power plants.

"Solar water heating offers the greatest opportunity for saving energy for most Hawaiian families," said Jay Mulki, manager of Heco's energy services department.

"In Hawaii, we have 12 months of sunny weather, we have limited natural resources so energy costs are high, and we currently have a 35 percent state tax credit for solar water heating. Mainly because of these factors, nearly 20 percent of the single family homes in Hawaii already have solar water heating systems."

Mulki said Heco designed its program to meet three main issues identified in consumer focus groups. They are:

• Cost of the system. Most customers did not know that these systems cost between $3,000 and $5,000. To help overcome this sticker shock, Heco is providing the $800 rebate, which combined with the state tax credit, will pay about 50 percent of the bill.

• The amount of savings. In Hawaii, a family of four can save up to $600 a year on their electric bill by installing a solar system.

• The performance and life of the solar system. The Heco-approved contractor must use Heco-approved equipment and it must be installed to meet certain standards. Heco, which will inspect all installations, said these rigid specifications will ensure that the systems provide 90 percent of the household's water heating needs for 15 to 20 years.

Here's how the program works: the customer calls Heco and gets a list of contractors; then the customer calls the contractor, who has the list of approved solar components; the contractor installs the system; Heco inspects the system; Heco gives the rebate to the contractor, who deducts that amount from the bill sent to the customer.

Both the solar panels and heat pumps will save enough energy costs to pay for the systems in about four years, Mulki said.

For example, if the solar panel system costs $4,000, and Heco pays $800, the cost to the customer is $3,200. Then the 35 percent state tax credit (about $1,100) is applied and the final cost is $2,100.

For a heat pump, a typical initial cost is $1,500 and Heco provides $300 for this new system. The state provides a tax credit of 20 percent ($240) so the final cost to the customer is about $960.

Mulki also said Heco will provide $40 to $70 for those customers who install high efficiency water heaters. "This is mostly for apartments where there isn't room to put in a solar panel system," he said.

A typical four or five person family will have a monthly electric bill of about $100, Mulki said. Water heating is about 40 percent of that bill, or about $40. The savings using a heat pump is 60 percent of that, or about $24. The savings using a solar panel system is 90 percent of water heating portion of the bill, or about $36 a month.

Heco is also providing $12 million program in incentives for developers who put in solar systems or take efficiency measures.

Heco has a total of 265,000 customers (commercial and residential), so the rebate program will not be enough to take care everyone. Rebates will be made on a first-come, first-served basis.

Here is the breakdown of what will be installed with the residential program in the five years:

Existing homes and condominiums will get a total of 16,000 solar panel water heaters; 8,000 heat pumps; 2,500 high efficiency electric water heaters; and 38,000 low-flow shower heads given out free by Heco. New homes and condominiums will get a total of 3,800 solar water heaters; 2,800 heat pumps; 1,000 high efficiency water heaters; and 900 of the 80-gallon water heaters with timers.