Pennsylvania Gov. Ed Rendell in February proposed a new fee on the sale of electricity in Pennsylvania to help finance a wide-ranging plan to promote alternative energy sources, increase conservation and blunt expected increases in utility bills in the coming years.

Money generated by the fee would be used to pay off a bond issue Rendell wants to use to create an $850 million Energy Independence Fund that is the core of his energy initiative, administration officials said. The bond issue would require legislative and voter approval.

The per-kilowatt-hour fee would amount to about $5 a year for an average residential customer, and Rendell said that same customer would save $73 a year as the result of other parts of his proposal. The average industrial customer would pay nearly $900 a year but save more than $10,000, he said.

The fund would finance grants to reimburse homeowners and small businesses for half of the cost of installing solar panels. It would also fund $100 rebates on residential purchases of energy-efficient air conditioners and refrigerators.

The largest share of the money—$500 million—would be invested in clean-energy projects that include solar manufacturing, advanced coal technologies and biofuels. More than $100 million is earmarked for venture capital loans and grants to help state energy entrepreneurs attract investors and expand their businesses.

“This plan will cut Pennsylvanians’ utility bills by $10 billion over the next 10 years,” Rendell said. “It will give us the ability to produce enough homegrown fuel to replace every gallon Pennsylvania currently imports from the Persian Gulf.”

A major focus of Rendell’s proposal is the scheduled expiration of rate caps imposed on Pennsylvania utilities in the late 1990s, when the state deregulated the electric industry, temporarily shielding consumers from rate increases that might otherwise have occurred.

To protect consumers from being hit with unaffordable electric bills when the caps expire around 2010, Rendell said he will propose changes in the deregulation law to give customers the option of stretching out the increase over three years and require utilities to provide incentives for customers to save money by limiting their heaviest electricity use to non-peak periods.

Other changes would let manufacturers and other large electricity users negotiate longer-term contracts to ensure stable energy prices, and require power generators and distributors to invest in conservation before building new power plants or more costly options.