Heat Pump Water Heater vs. Gas on PG&E: What It Costs to Run (2026 Rates)

On PG&E's 2026 rates, a heat pump water heater usually costs less to run than a gas tank, and far less than a standard electric tank. In our example, the same hot water costs about $460 a year with a typical gas tank, about $320 with a heat pump water heater on E-TOU-C, and about $255 on PG&E's E-ELEC plan. A plain electric-resistance tank would cost more than $1,300. That's unlike cooking, where gas still beats induction per meal, because a heat pump moves heat instead of making it and gets several times more hot water out of each kilowatt-hour.

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Key facts

• Heat pump efficiency: ENERGY STAR lists the Rheem ProTerra 50-gallon model PROPH50 T2 RH375-30 at a Uniform Energy Factor (UEF) of 3.88 and 846 kWh a year under the federal test's medium-usage pattern (ENERGY STAR certified product record). UEF is the federal efficiency rating for water heaters; higher is better.
• Gas tank efficiency: A typical 50-gallon atmospheric gas tank, such as the A.O. Smith G6N-T5040NVR, is rated at a UEF of 0.62 (A.O. Smith product page). Rheem's own comparison puts a standard electric tank at 0.93 UEF and a standard gas tank at 0.61 (Rheem hybrid brochure).
• 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.
• PG&E E-TOU-C, bundled rates effective June 1, 2026: off-peak is $0.36757/kWh in winter (October-May) and $0.39940 in summer (June-September). Peak (4-9 p.m.) is $0.39757 in winter and $0.52240 in summer. Baseline usage gets an $0.08140/kWh credit (Schedule E-TOU-C).
• PG&E E-ELEC: off-peak is $0.28468/kWh in winter and $0.33358 in summer; peak is $0.32063 winter and $0.55214 summer. Peak is 4-9 p.m., part-peak is 3-4 p.m. and 9 p.m. to midnight, and every other hour is off-peak, every day (Schedule E-ELEC). A heat pump that's your primary water heater qualifies you.
• Energy units: 1 therm = 100,000 Btu and 1 kWh = 3,412 Btu, so a therm holds about 29.3 kWh of energy (U.S. EIA).

How we did the math

To compare fairly, we hold the hot water constant. The Rheem unit's rating means it delivers about 3,282 kWh of heat to the water a year (846 kWh × 3.88). That's about 112 therms' worth of heat.

• Gas tank at 0.62 UEF: 112 ÷ 0.62 ≈ 181 therms a year of gas to deliver the same hot water.
• Heat pump at 3.88 UEF: 846 kWh a year, per ENERGY STAR.
• Electric-resistance tank at 0.93 UEF: 3,282 ÷ 0.93 ≈ 3,530 kWh a year.

This is an illustration based on federal test ratings, not a measurement of your home. Bigger households use more hot water, and every option scales up together. Real-world heat pump efficiency also drops in a cold space (more on that below).

Yearly running cost on PG&E rates

Electric rows assume the water heater runs outside the 4-9 p.m. peak, and use 8 winter months and 4 summer months. Seasonal averages are weighted by month.

Against a gas tank, the heat pump comes out roughly $90 to $300 a year ahead in this example, depending on your gas baseline and electric plan. Against an old electric-resistance tank, it saves about $1,000 a year, which is why that swap pays back fastest.

Two caveats. First, gas procurement prices change monthly, and so does the gap. Second, if you keep a gas furnace or stove, you still pay PG&E's gas delivery charges, so dropping the water heater doesn't end your gas bill. If it's your last gas appliance, closing the account also ends the G-1 minimum transportation charge of $0.13151 a day, about $48 a year (Schedule G-1).

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.

E-ELEC is the bigger lever

A heat pump water heater can unlock E-ELEC for your whole house, not just the water heater. PG&E's tariff makes E-ELEC available to customers who use an electric heat pump as their primary means of water heating, and your home doesn't need to be all-electric (PG&E Electric Home plan). In winter, every E-ELEC rate is below E-TOU-C's: off-peak is $0.28468 vs. $0.36757, and peak is $0.32063 vs. $0.39757.

Summer cuts the other way. E-ELEC's summer peak is $0.55214/kWh, higher than E-TOU-C's $0.52240, and E-ELEC has no baseline credit. If you run a lot of air conditioning from 4 to 9 p.m., E-ELEC can cost more in summer. Both plans carry the same Base Services Charge, $0.79343 a day for most customers. Compare the plans side by side in PG&E Rate Plans Compared, or let the free audit below run your actual usage through each one.

Run it off-peak

A heat pump water heater's tank is a battery for heat. Heat the water before 4 p.m. and coast through the evening peak, and every kWh lands at the off-peak rate. Rheem says its ProTerra units have built-in Wi-Fi and a CTA-2045 port (a standard plug-in module for utility demand-response programs) for time-of-use savings (Rheem ProTerra brochure). Check that the model you're quoted can schedule around 4-9 p.m. before you buy.

To see what your water heater actually uses, and when, a circuit-level monitor works on 240-volt loads that plug-in meters can't reach:

• Emporia Vue 3 home energy monitor with 16 circuit sensors. It clamps onto circuits in your breaker panel and logs each one by the hour, so you can see whether the water heater is running during peak or falling back to its resistance elements. Emporia's listing says a professional electrician is highly recommended for installation. Our home energy monitor guide covers setup.

Where you put it matters

ENERGY STAR says heat pump water heaters work best where the surrounding air stays at or above about 40°F. Below that, they lean on their electric-resistance backup, and efficiency falls (ENERGY STAR). Manufacturers typically require 450 to 700 cubic feet of free air around the unit, about the size of an 8-by-12-foot room, unless it's ducted (ENERGY STAR design guidance). The unit also blows out cool, dry air, so a garage, basement, or laundry room is usually a better spot than a hall closet next to a bedroom.

Most of PG&E's lowland territory has mild garages for most of the year, but a cold Sierra or foothill garage in January will push real-world use above the rating.

Rebates for PG&E customers in 2026

• Golden State Rebates: open for 2026 heat pump water heater purchases when the unit replaces a natural gas storage tank (or, for 240-volt units, an electric tank). You need an active PG&E electric account, the unit must meet the program's efficiency level (UEF 3.30 for 240-volt units, 3.00 for 120-volt plug-in units), and the discount goes through a participating distributor, usually via your plumber. The program doesn't publish amounts; ask the distributor. Funding runs through 2026, first come, first served (Golden State Rebates).
• TECH Clean California: its single-family heat pump water heater incentives have been fully reserved since November 14, 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 Energy Efficient Home Improvement Credit, worth up to $2,000 for a heat pump water heater, covers improvements made through December 31, 2025. A unit installed in 2026 doesn't qualify (IRS).
• Income-qualified households: PG&E's Energy Savings Assistance program lists heat pump water heater upgrades or repairs among its no-cost measures for eligible customers (PG&E ESA).
• Your CCA or city may run its own program. Check before you buy, since most rebates aren't retroactive.

When it makes sense

1. Your electric tank is dying. Roughly $1,000 a year in running-cost savings in our example makes this the clearest win.
2. Your gas tank is near the end of its life. Replacing a working tank early is harder to justify on a $90-$300 yearly gap; replacing a failing one lets the savings and Golden State Rebates offset the higher upfront price.
3. It gets you onto E-ELEC and you use a lot of winter power. The lower winter rates apply to everything in the house.
4. You have solar. Heating water midday on your own production stores it for the evening. How much that's worth depends on your net metering version; see NEM 3.0 vs NEM 2.0.

Check your own numbers

Your result depends on your rate plan, your gas baseline, how much hot water your household uses, and whether E-ELEC beats your current plan across a full year. 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. Also see How to Lower Your PG&E Bill, PG&E Time-of-Use Rates Explained, and PG&E Baseline Allowance Explained.

Frequently asked questions

Is a heat pump water heater cheaper to run than gas in California?

On PG&E's 2026 rates, usually yes. In our example, the same hot water costs about $460-$551 a year with a 0.62 UEF gas tank, versus about $255-$372 with a 3.88 UEF heat pump, depending on your plan and when it runs.

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

About $21 to $31 a month in our example, based on ENERGY STAR's 846 kWh-a-year rating for a 50-gallon Rheem ProTerra. That's about $21 on E-ELEC off-peak and about $27 on E-TOU-C off-peak.

Does a heat pump water heater qualify me for PG&E's E-ELEC rate?

Yes, if it's your primary means of water heating. PG&E's tariff lists an electric heat pump for water heating or climate control as a qualifying technology, and the home doesn't need to be all-electric.

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

Golden State Rebates is accepting 2026 projects that replace a gas tank, through participating distributors, while funds last. TECH Clean California and single-family HEEHRA rebates are fully reserved. Income-qualified customers can apply to PG&E's Energy Savings Assistance program.

Can I still get the federal tax credit for a heat pump water heater?

Not for a 2026 installation. The IRS says the 25C credit covers improvements made through December 31, 2025.

Does a heat pump water heater work in a cold garage?

It works, but less efficiently. ENERGY STAR says they perform best where the air stays at or above about 40°F; below that, they rely more on electric-resistance backup.