For decades, the rule of thumb was simple: if you want cheap heat, you burn fuel. Space heating dominates most home energy budgets, while hot water is usually a smaller slice. That logic made sense when electricity was “too pricey” and gas systems were efficient and straightforward.

But the math is changing — not because gas got “bad,” but because heat pumps don’t make heat the way a furnace does. They move heat. And that difference is huge.

Why gas can’t beat 100% (and heat pumps can look like 300%)

A gas furnace is limited by combustion physics. Its efficiency is measured as AFUE — the percent of fuel energy that becomes usable heat. A 95% AFUE furnace produces about 95 units of heat from 100 units of fuel.

A heat pump is different. When properly installed, an air-source heat pump can deliver 2–4 times more heat energy than the electrical energy it consumes.

Efficiency can be 3x better, but your wallet still depends on local energy prices (and fees).

The hidden cost on gas bills: the flat monthly charge

Most gas utilities bill you in two parts:

Usage (therms)
Fixed charges (often called a customer charge)

That fixed charge doesn’t care if you use 5 therms or 500 — it’s the price of keeping the meter/account active. For example, a National Grid MA residential heating customer charge can be $12 per 30 days.

So if you fully remove gas service (heat and hot water — and maybe cooking/dryer), you can stop paying that flat fee. While small, they can still can “transferred” to pay for another service.

Our Massachusetts example home (1,500 sq ft)

To keep this practical, we’ll model a “typical” Massachusetts heating home and show the method, so you can swap in your own numbers from your bills.

Assumptions (easy to adjust)

Home size: 1,500 sq ft
Annual gas use (heat + hot water): 830 therms

Space heat: 650 therms/year
Hot water: 180 therms/year

Equipment efficiencies

Gas furnace: 95% AFUE
Gas water heater: assumed ~60% “useful heat” efficiency (typical older tank performance; your mileage varies)
Cold-climate heat pump: COP = 3.0 (≈ “300%”)
Heat pump water heater: COP = 2.5 (we’ll treat it as ~2–3x better than resistance; DOE also notes heat pump-based water heating can be multiple times more efficient than standard electric resistance. )

Energy conversions

1 therm = 100,000 BTU
1 kWh = 3,412 BTU

Utility rates used for the example (Massachusetts – National Grid illustration)

Gas supply (“gas adjustment factor”): $0.9564/therm
Gas delivery + distribution adjustment: $0.9544 + $0.5572 = $1.5116/therm
So total variable gas cost used here:
$0.9564 + $1.5116 = $2.468/therm

Gas customer charge: $12 per 30 days (≈ $144/year)

Scenario 1: Gas heat + gas hot water

Step 1 — Annual gas cost (usage)

Total therms: 830
Variable cost: 830 × $2.468 = $2,048/year

Step 2 — Add the flat monthly charge

Customer charge: $12 × 12 = $144/year

✅ Estimated annual total (heat + hot water on gas): $2,192/year

What’s driving the bill?

Space heating ≈ $1,604 (about 73%)
Hot water ≈ $444 (about 20%)
Fixed gas charge ≈ $144 (about 7%)

Scenario 2: Fully electric (heat pump + heat pump water heater) and cancel gas service

Now we convert the useful heat your home needs into electricity.

Step 1 — Useful heat from the gas system (so we compare apples to apples)

Space heat delivered:
650 therms × 0.95 × 100,000 BTU ≈ 61.75 MMBtu

Hot water delivered (assumed):
180 therms × 0.60 × 100,000 BTU ≈ 10.8 MMBtu

Step 2 — Electricity required with heat pumps

Heat pump space heating (COP 3):
61.75 MMBtu ÷ (COP × 3,412 BTU/kWh) ≈ 6,033 kWh/year

Heat pump water heater (COP 2.5):
10.8 MMBtu ÷ (COP × 3,412 BTU/kWh) ≈ 1,266 kWh/year

✅ Total electric for heat + hot water: ~7,299 kWh/year

Step 3 — What does that cost?

This is where Massachusetts gets tricky: your all-in electric rate depends on supply (Basic Service, Cape Light Compact/community aggregation, or a supplier) plus delivery charges.

To show how sensitive the outcome is, here are three realistic “all-in” electricity scenarios:

$0.26/kWh: Heat pump total ≈ $1,898/year → saves ~$295/year vs gas
$0.30/kWh: Heat pump total ≈ $2,190/year → basically break-even vs gas
$0.38/kWh: Heat pump total ≈ $2,774/year → costs ~$581/year more than gas

Notice what’s included in the comparison: in the fully electric case, you avoid the ~$144/year gas customer charge because you cancel service.

The “one-line” break-even test (the fastest way to know if heat pumps will win)

For space heating only, the break-even electricity price is approximately:

Break-even ($/kWh) ≈ Gas($/therm) × COP × 0.03412 ÷ AFUE

Using our example gas price ($2.468/therm), COP 3.0, AFUE 0.95:

Break-even ≈ $0.266/kWh

So if your all-in electric rate is below ~27¢/kWh, heat pump heating usually beats a 95% gas furnace on pure operating cost. (If gas prices rise, or your furnace is older than 95%, heat pumps win at higher electric rates.)

How homeowners tilt the math in favor of heat pumps

If you’re close to break-even, these moves often decide it:

Enroll in heat pump rates if available. National Grid notes that the Base Distribution Charge can be reduced in winter for customers on a Heat Pump Rate.
Air-seal + insulation first. Cutting heat loss reduces your biggest cost center (space heat).
Go all the way off gas. If you keep gas for cooking or a dryer, you may still pay the monthly customer charge.
Use a heat pump water heater, not resistance. It keeps electrification from getting expensive year-round.
Right-size and commission the system. Real-world COP depends heavily on design, install quality, and controls.

Bottom line

Heat pumps really can deliver “300% efficiency” because they move heat instead of making it. In a Massachusetts 1,500-sq-ft home, the operating-cost outcome depends on your exact rates — but the strategy is clear:

Heat pump + heat pump water heater
Capture rebates (Mass Save)
Optimize the envelope
Cancel gas service to drop the flat monthly fee

If you’re ready to make your home more efficient and comfortable, contact our HVAC experts today to choose the right heat pump for your needs.