MONTPELIER -- Vermont has officially expanded its energy efficiency program to offer subsidies for cold-climate heat pumps.

Gov. Peter Shumlin on Wednesday signed into law an expansion of the state's energy efficiency program that allows Efficiency Vermont to offer rebates on air source heat pumps.

Modern air source heat pumps use electricity to heat homes during the winter months. When temperatures fall below single digits, the heat pumps can supplement traditional home-heating fuels - such as oil or gas - and reduce heating costs.

About 2,400 air source heat pumps were sold last year in Vermont, according to Efficiency Vermont, the state's energy efficiency utility. State regulators will now consider allowing the utility to subsidize heat pumps using money raised through an existing fee placed on electric customers' utility bills.

The law is intended to offer rebates for heat pumps only in homes already making efficiency improvements. The utility will work with state regulators on managing electricity demand issues associated with the new technology.

"When installed correctly, this technology can offer savings on heating bills and reduce environmental impact by displacing the use of fossil fuels with relatively clean electricity. Heat pumps make incredibly efficient use of electricity to heat buildings for about half the cost of oil or propane," Efficiency Vermont Director Jim Merriam said in a statement Wednesday.