Heat Pump vs. Gas Furnace on PG&E: Which Costs Less to Heat Your Home? (2026 Rates)

On PG&E's current rates, a gas furnace often still costs less per unit of heat than a heat pump at standard efficiency. In our comparison, delivering 100,000 Btu of heat (one therm's worth) costs about $3.18 with an 80% furnace on baseline gas, versus about $3.65 with an ENERGY STAR-minimum heat pump on PG&E's E-ELEC plan and about $4.71 on E-TOU-C. The heat pump comes out ahead when your furnace burns gas above baseline, when you choose a more efficient model, or when you're replacing electric-resistance heat. That last case isn't close.

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Key facts

• PG&E gas (Schedule G-1), effective October 1, 2026: $2.42480 per therm within baseline and $2.92792 above it, plus a residential Public Purpose Program surcharge of $0.12103 per therm (non-CARE). All-in, that's $2.54583 and $3.04895 per therm (Schedule G-1, Schedule G-PPPS). The procurement part changes monthly, so expect a new number on November 1.
• PG&E E-TOU-C, winter (October-May), bundled rates effective June 1, 2026: $0.36757/kWh off-peak and $0.39757 at peak (4-9 p.m. every day). Usage within baseline gets a $0.08140/kWh credit (Schedule E-TOU-C).
• PG&E E-ELEC, winter: $0.28468/kWh off-peak, $0.29854 part-peak (3-4 p.m. and 9 p.m.-midnight) and $0.32063 peak (4-9 p.m.). Summer peak jumps to $0.55214 (Schedule E-ELEC). Using a heat pump as your primary means of space heating or cooling qualifies you.
• PG&E E-1 (tiered): $0.32561/kWh up to baseline and $0.40702 above it (Schedule E-1). All three electric plans carry a Base Services Charge of $0.79343 a day for most customers (lower for income-qualified Tiers 1 and 2), so it doesn't change the comparison.
• Heat pump efficiency: ENERGY STAR's minimum for split-system heat pumps is 7.8 HSPF2; cold-climate models must reach 8.1 (ducted) or 8.5 (ductless) (ENERGY STAR key product criteria). HSPF2 is seasonal heat delivered, in Btu, per watt-hour of electricity, measured for a standard DOE climate region.
• Furnace efficiency: DOE set 80% AFUE as the minimum for non-weatherized gas furnaces made since November 19, 2015 (Federal Register, Dec. 18, 2023). ENERGY STAR requires 95% AFUE or better for furnaces sold in California (ENERGY STAR furnace criteria).
• Units: 1 therm = 100,000 Btu and 1 kWh = 3,412 Btu (U.S. EIA).

How we did the math

We priced the same amount of heat delivered into the house, 100,000 Btu, through each system:

• Gas furnace: 100,000 Btu ÷ AFUE. An 80% furnace burns 1.25 therms; a 95% furnace burns about 1.05 therms.
• Heat pump at 7.8 HSPF2: 100,000 ÷ 7.8 ≈ 12.8 kWh. That's a seasonal efficiency of about 2.3 units of heat for every unit of electricity (7.8 ÷ 3.412).
• Electric resistance (baseboard, wall heaters, an electric furnace, or a heat pump's backup strips): 1 kWh in, 3,412 Btu out, so 29.3 kWh.

Ratings are a starting point, not a measurement of your home. Real results depend on your weather, ductwork, installation, and thermostat settings. Furnace blower electricity and duct losses aren't included for either side.

Cost per 100,000 Btu of heat on PG&E winter rates

Three takeaways:

1. Against gas within baseline, a standard heat pump loses. It would need about 8.9 HSPF2 on E-ELEC off-peak just to match an 80% furnace at $3.18. On E-TOU-C above baseline, it would need about 11.5.
2. Against gas above baseline, it can win. An 80% furnace burning excess-tier gas costs $3.81; a 7.8 HSPF2 heat pump on E-ELEC off-peak costs $3.65, and a cold-climate ductless unit at 8.5 HSPF2 drops to about $3.35.
3. Against electric resistance, a heat pump cuts heating cost by more than half. Every rating at or above 7.8 HSPF2 does, because resistance heat delivers 3,412 Btu per kWh and the heat pump delivers about 2.3 times that.

These are PG&E bundled rates. If MCE, EBCE, SVCE, or another community choice aggregator supplies your power, your per-kWh total will differ a little; see Community Choice Aggregation Explained.

What it looks like on a winter bill

Take a home whose furnace burns 50 therms in a winter month. At 80% AFUE, that's 4 million Btu of heat in the house. A 7.8 HSPF2 heat pump would use about 513 kWh to deliver the same heat:

• Gas furnace: about $127 if all 50 therms are within baseline, $152 if they're above it.
• Heat pump on E-ELEC off-peak: about $146.
• Heat pump on E-TOU-C off-peak, above baseline: about $188.

Your own number is on your bill: look at winter therms on your gas page, and remember the furnace is only part of them if you also have a gas water heater, stove, or dryer.

The bigger lever: your whole rate plan

The per-unit comparison leaves out three things that can swing the decision.

E-ELEC lowers the price of every kWh in winter, not just the heat pump's. E-ELEC's winter off-peak is $0.28468 vs. E-TOU-C's $0.36757, and its winter peak is $0.32063 vs. $0.39757. Running a heat pump as your primary heating or cooling qualifies the whole house (PG&E Electric Home plan). The catch is summer: E-ELEC has no baseline credit and a $0.55214 summer peak, so heavy 4-9 p.m. air conditioning can cost more. Compare the plans in PG&E Rate Plans Compared.

Electric heat raises your baseline on E-TOU-C and E-1. PG&E sets a separate, larger baseline for "all-electric" customers with permanently installed electric space heat (PG&E baseline allowance). More of your winter kWh then gets the lower baseline price. See PG&E Baseline Allowance Explained, and call PG&E to confirm your account is coded correctly after the install.

A heat pump is also your air conditioner. If you're replacing an aging central AC and furnace at the same time, one heat pump replaces both. If your gas furnace is the last gas appliance in the house, closing the gas account also ends the G-1 minimum transportation charge of $0.13151 a day, about $48 a year (Schedule G-1). Our heat pump water heater guide covers the other big gas appliance.

Keep the heat pump out of the 4-9 p.m. peak

A heat pump on a time-of-use plan rewards a thermostat that plans ahead: warm the house before 4 p.m., let it coast a degree or two through the peak, and recover after 9 p.m. On E-ELEC, the gap between winter off-peak and peak is about $0.46 per 100,000 Btu at 7.8 HSPF2; in summer, cooling during the $0.55214 peak is where the real money is.

The other trap is backup resistance heat. Many ducted heat pumps have electric strips for cold mornings and defrost. At $8.34 to $10.77 per 100,000 Btu in our table, heat from the strips costs more than twice as much as heat from the heat pump itself. A thermostat that understands heat pumps lets you limit them. On ecobee thermostats, for example, the "Aux Heat Max Outdoor Temperature" threshold blocks auxiliary heat above an outdoor temperature you choose (ecobee support). Ask your installer what setting suits your equipment.

• ecobee Smart Thermostat Premium. Its Amazon listing says it works with most 24-volt systems, including heat pumps, and includes a SmartSensor for a second room. Use ecobee's compatibility checker before you buy.
• Google Nest Learning Thermostat (4th gen) with temperature sensor. Its Amazon listing names heat pumps among the 24-volt systems it works with; check Google's compatibility checker first.
• Emporia Vue 3 home energy monitor with 16 circuit sensors. Clamped on the heat pump's circuits, it logs usage by the hour, so you can see how much runs at peak and whether the backup strips are kicking on. Emporia's listing says a professional electrician is highly recommended for installation.

Our smart thermostat guide covers TOU scheduling, and the home energy monitor guide covers setup.

Rebates for PG&E customers in 2026

• TECH Clean California: single-family heat pump HVAC incentives have been fully reserved statewide since January 17, 2025 (TECH Clean California).
• HEEHRA (federally funded, state-run): single-family rebates have been fully reserved statewide since February 24, 2026, with new requests waitlisted (TECH Clean California).
• Federal tax credit: the IRS says the 25C credit, worth up to $2,000 a year for qualifying heat pumps, covers improvements made through December 31, 2025. A heat pump installed in 2026 doesn't qualify (IRS).
• Your CCA, city, or air district may run its own program. TECH points to The Switch Is On's incentive finder for a ZIP-code search. Check before you sign, since most rebates aren't retroactive.

When a heat pump makes sense on PG&E

1. You heat with electric resistance today. Baseboards, wall heaters, or an old electric furnace: a heat pump cuts heating cost by more than half at any ENERGY STAR rating.
2. Your AC and furnace are both near the end of their lives. One system replaces two, and you can move to E-ELEC.
3. Your winter gas regularly runs above baseline. That's where a heat pump on E-ELEC off-peak gets competitive per unit of heat.
4. You can heat ahead of the 4-9 p.m. peak and keep backup strips locked out on mild days.
5. You have solar. Midday production can preheat the house. What it's worth depends on your net metering version; see NEM 3.0 vs NEM 2.0.

If you have a working, efficient gas furnace, mostly within-baseline gas use, and no AC to replace, today's PG&E rates don't make an early swap pay off on running costs alone.

Check your own numbers

Whether a heat pump saves you money depends on your rate plan, your gas baseline, and how much of your usage lands at peak. Upload your PG&E bill to My Big Bill for a free audit. It reads your actual plan, baseline, and peak share, and it won't invent savings your bill doesn't support. With a Green Button file, the PG&E usage analyzer reprices your hourly usage on each plan, including E-ELEC. Also see How Much Does a Space Heater Cost to Run on PG&E? and PG&E Time-of-Use Rates Explained.

Frequently asked questions

Is a heat pump cheaper than a gas furnace in California?

On PG&E's 2026 rates, not always. Per 100,000 Btu of heat, an 80% gas furnace costs about $3.18 on baseline gas and $3.81 above baseline. A 7.8 HSPF2 heat pump costs about $3.65 on E-ELEC off-peak and $4.71 on E-TOU-C off-peak above baseline. A heat pump usually wins against excess-tier gas on E-ELEC, and always against electric-resistance heat.

What PG&E rate plan is best for a heat pump?

Often E-ELEC, which a heat pump used as your primary heating or cooling qualifies you for. Its winter rates are lower than E-TOU-C's at every hour. Its summer peak is higher and it has no baseline credit, so compare a full year of your usage before switching.

How much does a heat pump cost to run per month in winter on PG&E?

It depends on how much heat your home needs. As a rule of thumb, a 7.8 HSPF2 heat pump uses about 10.3 kWh for every therm your 80% furnace burns now. For a home whose furnace burns 50 therms a month, that's about 513 kWh, or about $146 on E-ELEC off-peak.

Do heat pumps work in California winters?

ENERGY STAR certifies "cold climate" heat pumps that must keep at least 70% of their heating capacity at 5°F (ENERGY STAR). In colder Sierra or foothill homes, ask your installer about cold-climate models and how often backup heat would run.

Are there heat pump rebates for PG&E customers in 2026?

The big statewide programs are tapped out: TECH Clean California single-family HVAC incentives and single-family HEEHRA rebates are fully reserved, and the federal 25C tax credit ended for installs after 2025. Check your CCA, city, and air district for local programs.

Should I keep my gas furnace as backup?

A "dual fuel" setup pairs a heat pump with a gas furnace and switches to gas when it's cheaper or colder. On PG&E's current rates, gas within baseline is cheaper per unit of heat than a standard heat pump, so it can make sense, but you keep paying gas delivery charges and you won't qualify for E-ELEC unless the heat pump is your primary heating or cooling.