Heat Pumps vs. Gas Furnaces: Which Is Actually Better for Your Utility Bill?
The cheaper system is the one that delivers a unit of useful heat at the lower local cost. A heat pump usually wins where electricity is reasonably priced and its seasonal coefficient of performance (COP) remains high. A high-efficiency gas furnace can cost less to operate where gas is inexpensive, electricity is costly, or winter temperatures push the heat pump into frequent backup-heater operation.
That means the honest answer is not “heat pumps always win” or “gas is always cheaper.” You need four inputs: your delivered electricity rate, your delivered gas rate, the furnace AFUE, and the heat pump’s real performance across your winter temperatures.
Start with the Correct Comparison
A gas furnace burns fuel to create heat. A heat pump uses electricity to move heat from outdoors into the building. Because it moves heat instead of producing all of it from electrical resistance, an air-source heat pump can deliver multiple units of heat for each unit of electricity consumed. ENERGY STAR’s air-source heat-pump guidance notes that qualifying systems can deliver up to three times as much heat energy as the electricity they use.
However, efficiency is not the same as operating cost. A heat pump with a COP of 3.0 is not automatically cheaper than a 95% AFUE furnace because a kilowatt-hour of electricity and a kilowatt-hour-equivalent of gas may have very different prices.
Planning the load, airflow and duct system before selecting equipment helps prevent oversizing and poor room comfort. The Nexora HVAC Load and Duct Sizing Professional turns related HVAC load and duct-sizing work into a repeatable engineering workflow.
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How Each System Uses Purchased Energy
Heat pump
In heating mode, the outdoor coil absorbs heat from the outdoor air. The refrigerant circuit raises that heat to a useful temperature, and the indoor coil transfers it to recirculated indoor air. Outdoor air is not normally ducted into the home by the heat pump.
The key point-in-time efficiency metric is COP:
COP = useful heat delivered ÷ electrical energy consumed
A COP of 3.0 means that 1 kWh of electricity produces 3 kWh of useful heat at the stated operating condition. COP normally decreases as the outdoor temperature falls, and defrost cycles, cycling losses and electric auxiliary heat can reduce seasonal performance.
HSPF2 is a seasonal rating produced under a standardized test procedure. It is useful for comparing products, but it is not a substitute for checking capacity and COP at the project’s design temperature.
Gas furnace
A gas furnace burns natural gas in a heat exchanger and supplies heated air through the duct system. Its seasonal conversion efficiency is expressed as AFUE:
AFUE = annual useful heat output ÷ annual fuel energy input
A 95% AFUE furnace delivers approximately 95 units of heat for every 100 units of fuel energy under the rating method. AFUE does not include every building-side loss; duct leakage, poor insulation, fan energy and installation defects can still increase the bill.
Heat Pump vs. Gas Furnace at a Glance
Decision factor | Air-source heat pump | Gas furnace |
Primary energy bill | Electricity | Natural gas plus electricity for fan/controls |
Efficiency metric | COP and HSPF2 | AFUE |
Typical energy conversion | Moves more heat than its electrical input | Converts less useful heat than fuel input |
Cold-weather behavior | Capacity and COP generally fall; defrost/backup may operate | Heating output is less sensitive to outdoor temperature |
Cooling | Provides heating and cooling | Requires a separate cooling system |
Fixed utility charge | Usually no new charge if electric service already exists | Gas customer charge may continue even at low usage |
Best cost case | Mild/moderate climate, strong low-temperature COP, favorable electric tariff | Low gas price, high electric price, severe winter, existing gas service |
Main design risk | Incorrect low-temperature capacity or excessive auxiliary heat | Oversizing, combustion/venting defects, continued gas-service cost |
The capital-cost comparison also needs equal scope. Compare a heat pump with a furnace-plus-air-conditioner system when both heating and cooling are required—not with a furnace alone.
Calculate the Cost of Useful Heat
Use the variable energy charges from your bill, including applicable delivery and fuel-adjustment charges. Taxes can be included if they scale with consumption. Treat fixed monthly charges separately.
Heat-pump cost
Heat-pump cost per useful kWh = electricity rate ÷ seasonal COP
Where:
Electricity rate is in currency/kWh.
Seasonal COP is the estimated delivered heat divided by electrical input over the heating season.
Gas-furnace cost
One therm contains approximately 29.3 kWh of fuel energy.
Furnace cost per useful kWh = gas rate per therm ÷ (29.3 × AFUE)
Where:
Gas rate is in currency/therm.
29.3 is the approximate kWh-equivalent in one therm.
AFUE is entered as a decimal, such as 0.95 for 95%.
Where gas is billed directly in kWh, use:
Furnace cost per useful kWh = gas tariff per kWh ÷ AFUE
If the bill uses cubic feet or cubic metres, use the utility’s stated heat-content or therm conversion. Gas volume alone is not an exact energy value because calorific value varies.
Break-even heat-pump COP
The heat pump is cheaper on energy use when its seasonal COP is higher than the break-even COP:
Break-even COP = electricity rate × 29.3 × AFUE ÷ gas rate per therm
This simple equation is one of the fastest ways to test a quotation. If the required break-even COP is higher than the proposed heat pump can realistically sustain in your climate, the furnace is likely to have the lower variable heating cost.
Worked Utility-Bill Example
Assume the home requires 10,000 kWh of useful space heat during the season. This simplified educational example excludes small blower/control differences and is not a national price forecast.
Input | Assumption |
Annual useful heating load | 10,000 kWh |
Electricity rate | $0.18/kWh |
Gas rate | $1.50/therm |
Furnace AFUE | 95% |
Heat-pump seasonal COP | 3.0 |
Heat-pump result
Electricity use = 10,000 ÷ 3.0 = 3,333 kWh
Annual heating energy cost = 3,333 × $0.18 = $600
Furnace result
Gas use = 10,000 ÷ (29.3 × 0.95) = 359 therms
Annual heating energy cost = 359 × $1.50 = approximately $539
At these assumptions, the furnace costs about $61 less for the season before fixed charges and fan-energy differences. The break-even heat-pump COP is:
Break-even COP = $0.18 × 29.3 × 0.95 ÷ $1.50 = 3.34
If the heat pump achieves a seasonal COP of 3.5, its calculated heating cost falls to about $514, making it slightly cheaper than gas on variable energy cost.
Now consider a $20 monthly gas customer charge. If replacing the furnace allows the gas account to be closed completely, avoiding $240 per year can make the heat pump cheaper overall. If gas remains connected for water heating, cooking or another appliance, that fixed charge is not avoided and should not be credited to the heat pump.
Equipment efficiency cannot rescue a poor load or duct design. Use the Nexora HVAC Load and Duct Sizing Professional to structure related room-load, airflow and duct-sizing calculations and reduce repetitive spreadsheet work.
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Why the Answer Changes by Location
Energy prices vary sharply by region. The U.S. Energy Information Administration’s June 2026 residential electricity data, for example, ranged from 13.11 cents/kWh in Nevada to 52.72 cents/kWh in Hawaii. EIA’s residential natural-gas data reports a 2025 national average of $15.34 per thousand cubic feet, but state and seasonal prices also varied substantially.
These averages are useful context, but your bill is the correct input. Tariff structures may include seasonal pricing, time-of-use periods, fuel adjustments, tiered rates and demand charges. A single headline “price per kWh” from a comparison website may omit costs that change with consumption.
Climate matters just as much as tariff. In mild winter weather, a variable-speed heat pump may operate at a high COP for many hours. In a colder climate, the same unit may spend more time at lower COP, run defrost cycles and rely on electric resistance backup unless it has adequate low-temperature capacity.
When a Heat Pump Usually Lowers the Bill
A heat pump is more likely to have the lower annual utility cost when:
The local electricity-to-gas price ratio is favorable.
Most heating hours occur in mild or moderate outdoor conditions.
Published low-temperature capacity meets the building load.
Auxiliary resistance heat is limited by correct sizing and controls.
The existing furnace and air conditioner both need replacement.
Removing the furnace allows the gas account and its fixed charge to be closed.
The building has onsite solar or a tariff that benefits electric heating.
Cooling savings can strengthen the case. A modern heat pump replaces the air conditioner as well as providing heat, so a fair annual comparison includes both heating and cooling energy.
When a Gas Furnace May Cost Less
A gas furnace can remain the lower-bill option when:
Delivered gas is inexpensive relative to electricity.
The home is in a severe winter climate and the proposed heat pump has weak low-temperature performance.
Electric resistance backup would supply a large share of the seasonal load.
The electrical service requires an expensive upgrade.
Gas service must remain active for other appliances.
The existing cooling system is efficient and does not need replacement.
High AFUE alone does not guarantee a low bill. A furnace that is oversized, connected to leaky ducts or poorly commissioned can still waste energy and deliver uneven comfort.
Is a Dual-Fuel System the Best Compromise?
A dual-fuel system combines a heat pump with a gas furnace. The heat pump operates when its cost and capacity are favorable, and the furnace takes over below an economic or capacity balance point.
The changeover temperature should not be guessed. It can be calculated from the local rates and the heat pump’s COP curve, then checked against the temperature at which heat-pump capacity equals the building load. Controls should avoid unnecessary overlap and rapid switching.
Dual fuel can reduce operating cost and electrical backup demand in cold climates, but it retains combustion equipment, flue maintenance and the gas service charge. It also adds control complexity, so commissioning matters.
A Better Seven-Step Selection Process
Obtain at least 12 months of electric and gas bills and separate fixed from variable charges.
Estimate the building’s design heating load instead of using the old equipment nameplate.
Determine the local outdoor design temperature and the distribution-air requirements.
Review manufacturer capacity and COP data at several winter temperatures, not only the nominal rating point.
Estimate defrost and auxiliary-heat energy using temperature-bin hours or an approved simulation method.
Compare annual heating and cooling cost, fixed utility charges, maintenance and replacement scope.
Verify electrical capacity, gas venting, condensate drainage, refrigerant requirements, noise and local code compliance before purchase.
For existing homes, utility bills can help calibrate the model. Remove estimated domestic hot-water and cooking gas before converting historic gas use into a space-heating load.
Common Cost-Comparison Mistakes
Comparing heat-pump COP with furnace AFUE as if the energy prices were identical.
Using the heat pump’s best mild-weather COP for the entire winter.
Ignoring supplemental resistance heat and defrost energy.
Comparing a heat pump with a furnace alone when a separate air conditioner is also required.
Counting the avoided gas customer charge when gas service will remain active.
Sizing from floor area or the existing unit instead of calculating the load.
Ignoring duct leakage, external static pressure and airflow commissioning.
Using national energy averages instead of the actual local tariff.
Limitations and Professional Checks
The simplified equations estimate energy cost; they do not replace a complete hourly or temperature-bin analysis. Real performance depends on climate, thermostat settings, ventilation, building envelope, duct location, equipment controls, maintenance and occupant behavior.
Final selection should be checked against the project’s local energy code, fuel-gas and mechanical requirements, electrical capacity, approved load-calculation method and manufacturer performance tables. Combustion systems require correct venting, combustion-air provisions and carbon-monoxide protection. Heat pumps require correct refrigerant piping, drainage, airflow and outdoor-unit clearance.
Frequently Asked Questions
Is a heat pump always cheaper than a gas furnace?
No. It is cheaper only when its delivered cost per useful unit of heat is below the furnace cost after local rates, real seasonal COP, auxiliary heat and relevant fixed charges are included.
Do heat pumps work below freezing?
Modern cold-climate models can provide heat below freezing, but capacity and COP vary by model and temperature. Check certified performance data at the design condition rather than relying on a general claim.
What COP makes a heat pump cheaper than gas?
Use the break-even equation in this article. With electricity at $0.18/kWh, gas at $1.50/therm and a 95% AFUE furnace, the heat pump needs a seasonal COP above approximately 3.34 to beat gas on variable energy cost.
Should I compare installation cost too?
Yes. Compare equal functions and life-cycle scope: equipment, electrical or gas upgrades, cooling, maintenance, available incentives and expected service life. Utility cost is only one part of the decision.
Can ductwork change the result?
Yes. Leakage, poor insulation and excessive static pressure increase fan energy and reduce delivered comfort for either system. Proper airflow measurement and duct commissioning are essential.
The Practical Verdict
For many mild and moderate climates, a correctly sized modern heat pump can deliver the lower combined heating-and-cooling bill. Cheap gas, high electricity prices or heavy backup-heat operation can reverse the result. In cold climates, a cold-climate heat pump or a properly controlled dual-fuel system may provide the best balance.
The sound decision is numerical: calculate the cost per useful kWh, test the heat pump across winter conditions, include fixed charges only when they genuinely change, and compare equivalent system scope.
Move from rough equipment guesses to a consistent HVAC calculation workflow with the Nexora HVAC Load and Duct Sizing Professional. It is designed for engineers, estimators, contractors and technical users who want faster, repeatable load, airflow and duct-sizing work.
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