- Bill ÷ kWh gives an average that mixes fixed charges and every season — not the price of the next kWh a heat pump adds or a new AC removes.
- Three structures set the real price: tiers (use more, the next kWh costs more), time-of-use (afternoon peak vs. overnight off-peak), and seasons (summer vs. winter schedules).
- Cooling load runs on summer afternoons — usually peak hours. Heating runs overnight and mornings — usually off-peak. Same house, different prices.
- Many utilities offer a discounted heat-pump / electric-home rate plan; switching typically improves the economics beyond a standard-rate estimate.
The number on your bill is an average, not a price
Divide last month’s bill by last month’s kilowatt-hours and you get a real number — but it’s the average of everything on the bill: fixed monthly charges that don’t change with usage, every tier you passed through, peak and off-peak hours blended together, plus riders and fees. A new heat pump doesn’t pay that average. It pays for the specific kilowatt-hours it adds, at whatever those particular kWh cost under your tariff. A more efficient AC saves the specific kWh it removes — which, usefully, are the most expensive ones you buy.
Tiered rates: the next kWh costs more than the average
Most utilities price residential electricity in tiers (sometimes called blocks or a baseline allowance): the first few hundred kWh each month at one price, the next block higher, and so on. The design is intentional — conservation pricing — but it has a consequence for any decision that changes your usage: added usage lands in your top tier or pushes you into a new one, and saved usage comes off the top tier first.
A worked example: suppose tier 1 is 20¢/kWh for the first 400 kWh and tier 2 is 32¢ after that, and you use 700 kWh a month. Your bill’s average is about 25¢ — but a heat pump that adds 300 kWh pays 32¢ for every one of them, and a better AC that trims 200 kWh saves 32¢ on every one. Using the 25¢ average understates both the cost of adding load and the value of removing it by nearly a third. On steeply tiered plans (California’s investor-owned utilities are the classic case), the gap is even wider.
Time-of-use: when your equipment runs decides what it pays
Time-of-use (TOU) plans price electricity by the hour: a peak window (commonly 4–9 pm on weekdays) at a high rate, and off-peak hours — nights, mornings, weekends — at a lower one. Many utilities have made TOU the default for new customers. What matters for HVAC is that heating and cooling don’t run at random hours:
| Load | When it actually runs | Typical TOU position |
|---|---|---|
| Air conditioning | Hottest part of the day — late afternoon into evening | Squarely on peak. Cooling kWh are usually the most expensive kWh a household buys. |
| Heat-pump heating | Coldest hours — overnight, early morning, evenings | Mostly off-peak, with some evening-peak overlap. |
Two practical consequences. First, on a TOU plan, the effective rate for cooling and the effective rate for heating are different numbers — sometimes very different — even though it’s one house on one plan. Second, the direction usually favors heat pumps: their heaviest load falls in the cheap hours, while efficient cooling saves mostly expensive peak-hour kWh. Both effects are invisible if you price everything at the bill average.
Seasons: summer and winter are different price lists
Many tariffs also change with the calendar — higher summer rates where the grid strains on air conditioning, or a cheaper winter block where utilities encourage electric heating. Layered on tiers and TOU, this means the honest answer to “what’s my rate?” is: for which kWh, in which hour, in which month? That sounds unmanageable for a consumer — which is exactly why most cost estimators give up and use a state average. The problem is that the state average can miss your real marginal price by 30–50% in either direction, and the payback math inherits every point of that error.
What the calculators on this site do about it
Rather than a state average, the heating and cooling calculators resolve your actual utility from your ZIP code — assignments verified against the federal HIFLD service-territory boundaries — and, where the Department of Energy’s utility rate database carries your utility’s default tariff, compute a seasonal marginal rate: the tariff’s tiers are walked upward from a typical household baseline, and time-of-use windows are weighted by when the load actually runs. The heating calculator prices at the winter marginal (overnight-and-morning weighted) and the cooling calculator at the summer marginal (afternoon-peak weighted). On a flat rate the two coincide; on a TOU plan they correctly split apart. Every figure is recomputed monthly, sanity-checked against an independently derived average, and labeled on screen with its basis — and the field stays editable, because a number computed from your own bill beats every model. The full pipeline is documented on the methodology page.
Heat-pump and electric-home rate plans: the discount most people never claim
Here is the part that surprises people: many utilities offer a cheaper rate schedule specifically for homes with heat pumps or electric heat, under names like electric-home rate, heat-pump rate, all-electric rate, or electrification rate. The usual shape: a lower per-kWh price — often with the biggest discount in winter, when an electrically heated home uses the most — in exchange for a time-of-use structure or a modestly different fixed charge. Utilities offer these because electrified homes are large, steady, mostly off-peak customers they actively want.
The catch, and it’s a fair one: the plan applies to your whole house, not just the heat pump’s kWh. Whether switching wins depends on your full usage pattern — a home that can shift a little load away from the peak window almost always comes out ahead; one with heavy, immovable 4–9 pm usage should run the numbers first. Our rate pipeline detects these tariffs across U.S. utilities and prices them separately, but the calculators deliberately do not assume you’ll switch — the default estimate uses the standard tariff, so a heat-pump rate plan is upside beyond the number on screen, not a hidden assumption inside it. If you’re considering a heat pump, one call to your utility — “do you offer an electric-home or heat-pump rate?” — is among the highest-value five minutes in the whole project.
Getting your own number right
Three steps, in order of effort:
1. Let the ZIP lookup do it. Enter your ZIP in either calculator; the resolved utility appears next to the climate-zone chip, and the prefilled rate is the seasonal marginal for that utility’s default tariff — already the right kind of number for the decision.
2. Check your bill’s rate schedule. Your bill names your exact plan (e.g. “Schedule TOU-D-4-9”). If you’re on a non-default plan — solar, EV, or an electric-home rate already — the prefill may not match, and the per-kWh prices printed in the tariff’s detail (your utility’s website has the full schedule) are the better source. Type the relevant one into the rate field.
3. For the gas comparison, use delivered price. On the heating side, divide the gas bill’s total by the therms used — that captures delivery charges the commodity price hides. The heat pump vs. furnace guide walks the full $/therm-vs-¢/kWh comparison.
Frequently asked questions
What electricity rate should I use to calculate heat pump running costs?
Use the marginal rate — the price of the additional kWh the heat pump adds — not the average ¢/kWh from a past bill. On tiered plans the added usage lands in the top tiers; on time-of-use plans it depends on when heating runs (mostly overnight and mornings in winter). The calculators prefill exactly this number for your ZIP’s utility; a figure from your own bill’s rate schedule is an equally good substitute.
Do heat pumps increase your electric bill?
Yes — and that’s the wrong scoreboard. A heat pump moves heating from the gas bill onto the electric bill, so the electric bill rises while the gas bill falls toward its fixed charges. What matters is the total: electricity plus gas, before versus after. In many climates the total drops; where power is expensive relative to gas, it may not — which is precisely the comparison the heating calculator runs for your ZIP’s actual prices.
Is a time-of-use plan good or bad for a heat pump?
Usually mildly good for heating, mildly bad for cooling. Winter heat-pump load is heaviest overnight and in the morning — off-peak on most TOU plans — while air conditioning peaks in late afternoon, inside most peak windows. The size of the effect depends on your utility’s peak hours and the peak/off-peak price spread, which is why the calculators weight the two seasons’ loads separately.
What is a heat-pump or electric-home rate plan?
A discounted rate schedule many utilities offer to homes with heat pumps, electric heating, or all-electric appliances — typically a lower per-kWh price (deepest in winter) in exchange for time-of-use structure. It applies to the whole house, so run your full usage pattern before switching; for most electrified homes it improves the economics beyond what a standard-rate estimate shows.
Why is the rate in the calculator different from my bill?
The calculator prices the specific kWh your decision adds or removes — a seasonal marginal rate from your utility’s default tariff — while bill ÷ kWh is an all-in average that mixes fixed charges and every season. Both are real; they answer different questions. The field stays editable, and the basis of every prefilled rate is labeled on screen.