In Reisterstown, as a couple builds a 4,000-square-foot cedar and stone contemporary house on three acres, a crater at the site looks as if it might swallow an Olympic-size swimming pool.

Instead, it ingests a healthy helping of copper ground coil, a key element of the home's geothermal heat pump -- a heating and cooling system that builders and utility companies say can save consumers hundreds of dollars a year in utility bills.

Across the country, utilities are testing geothermal units, and some, including ones in New York, New Jersey and Virginia, are now offering rebates to builders and homeowners who install them, according to Ed Barbour, a mechanical engineer for the Bowie research center of the National Association of Home Builders.

Baltimore Gas & Electric Co. does not offer rebates specifically for geothermal heat pumps, though it does offer rebates for energy-efficient systems, which could include geothermal units.

"We're aware of the technology," BGE spokesman Charles Franklin said, "and we're loosely in a study phase now. But we haven't made any commitments."

Pridemark Custom Homes -- which built the house in Reisterstown -- says it is the first builder in the Baltimore area to offer geothermal heating. Pridemark, based in Millersville, expects to build about 50 homes this year, and is now installing its second geothermal unit.

The Long Island Lighting Co., a New York utility, estimates that a family of four can reduce utility bills 30 percent with a geothermal system. It projects that heating and cooling a 2,000-square-foot house would cost $961 a year with a geothermal heat pump. To heat and cool the same house with oil or gas, using conventional air-conditioners in the summer, would cost $1,291 or $1,272, respectively. An air-to-air heat pump, which both cools and heats, would cost $2,149, including supplementary electric heat. electrical heating system, plus air conditioning, would cost $2,218.

USPower Climate Control Inc., the Allentown, Pa.-based manufacturer that built the system for the Reisterstown home, estimates that most homeowners will save about 30 percent on their heating bills -- or about $75 per month.

Another couple, Jay and Charlene Simonds of Reisterstown, installed a geothermal heat pump in their $230,000 new home. Even in the record-setting cold of last winter, the electric bill for the 3,900-square-foot home was about $165 a month, Mr. Simonds said.

At the Simonds home, a 45-by-50-feet hole was dug to bury copper piping. The system cost $16,000.

"It's a good system," Mr. Simonds said. "The temperature of the air is much warmer than a heat pump."

The geothermal system is not without its drawbacks. The initial cost is high -- between $12,000 and $16,000, compared with about $7,000 for a conventional heat pump and about $8,000 for a conventional air conditioning and furnace heating system.

And the system also requires a large area that can be excavated so heating coils can be buried. That's why geothermal is mainly an option for new-home buyers.

"If you were to convert an existing house, you would need an area to bear ground coil: about 50 percent of footprint of your foundation, which, for a 2,500-square-foot house, would be 45 by 45 by 5-feet deep," said Derrick Garland, vice president of Sagamore Heating and Air Conditioning in Finksburg.

"You've got to be a certain distance from property lines, driveway, utilities, water and sanitary lines. You also have to have the right kind of fill." Geothermal systems don't work in sandy soil, he said.

Arkin Homes of Leesburg, Va., has installed geothermal units in its 19 homes at Overlook at Potomac Crossing in Leesburg. The homes cost no more than ones with conventional heating because Arkin and Virginia Electric & Power Co. subsidized the installation to encourage their use.

According to the homebuilders' association, two-thirds of all homes built last year included a furnace for heating, 24 percent used a heat pump, and 10 percent used hot water, steam or other system.

JTC Geothermal heat pumps draw their heat from -- or discharge heat into -- the ground. The heat pumps more commonly installed exchange heat with the air. The geothermal pumps are more efficient than conventional units because the ground temperature is usually about 55 degrees year-round -- below the air in summer, higher in winter.

In winter, the geothermal heat pump works this way:

A coolant is used to transport heat extracted from the ground to the geothermal unit, which is about the size of a conventional gas furnace.

The compressed coolant is allowed to expand, cooling it and allowing it more easily to absorb heat from the ground. The coolant, piped into copper coils buried at least five feet, absorbs heat from the ground, returns to the house and is compressed to about 150 degrees. This heat is then transferred to air circulating in ducts, and fans move the heat through the house.

Like other heat pumps, electricity is used only to circulate the heat or as a backup source of heat if the outside temperature gets too low. Geothermal systems, like all electric systems, also have environmental benefits because they do not produce oil or gas fumes.

In summer, warm air is extracted from the house and transferred through the pipe system into the ground, which cools off the liquid before it is pumped back into the house.

The cost of installing a system includes the cost of digging a well or of laying the pipework. The other advantage of geothermal heat pumps over air-to-air pumps is that the noisy outdoor fan pumps of air-to-air systems are eliminated.

Not only is a geothermal unit more efficient and less expensive to operate, but the heat circulating in the home is hotter -- typically around 100 degrees, as opposed to a standard pump's 85-degree air, which feels cool and drafty to many people, according to B. Ryland Wiggs, chief executive officer of USPower. Air needs to be about 92 degrees to feel warm to the touch.

"One of the biggest complaints I hear all the time about conventional heat pumps is: it's always blowing cool air, even in the heating mode," said Mr. Garland. His company installed 200 heat pumps last year, only one a geothermal system. Sagamore currently is installing a second one in another Baltimore County home now under construction.

"Geothermal heat pumps are not supposed to be high maintenance," said Mr. Barbour, of the NAHB Research Center.

The group installed a $10,000 unit in a 2,500-square-foot experimental house at its center in Bowie about a year and a half ago. "It's needed minimal upkeep," he said. "We haven't had any problems with the equipment."