Heat Pump vs Furnace Operating Costs in Ontario: The Data

Using Enbridge Gas's current commodity rate and the Ontario Energy Board's electricity rates, a high-efficiency gas furnace beats a cold-climate heat pump on commodity cost alone across essentially the whole temperature range — but that comparison is incomplete on purpose: it excludes gas delivery, transportation, and the fixed monthly Customer Charge, which typically add substantially to the all-in gas rate and whose exact current figures remain unverified. What this page can answer fully, because the inputs are verified: which electricity plan is cheaper for running a heat pump. After applying the Ontario Electricity Rebate (23.5% as of Nov 2025), whether Ultra-Low Overnight beats standard Time-of-Use depends on how much of your heating load falls overnight versus in the 4–9pm on-peak window — this page models both a lower and higher overnight-weighting scenario rather than assuming one. This page shows both the plan-choice math and exactly what's still needed (a real gas bill's delivery-charge line) to complete the gas-vs-electric comparison.

The short answer

Using verified current rates — Enbridge Gas’s commodity charge and the Ontario Energy Board’s electricity rates — a high-efficiency furnace’s commodity-only cost per unit of heat is well below a cold-climate heat pump’s, across essentially the whole outdoor temperature range this page can calculate. That is not the full picture, and we’re saying so directly rather than letting a partial calculation pass as a final answer: the gas rate below is commodity only, and excludes delivery, transportation, and the fixed monthly charge that appear on an actual Enbridge bill. Those additional charges are what typically bring gas heating’s true all-in cost up and create the crossover point that makes heat pumps and hybrid systems make sense in practice.

What this page can answer completely, because every input is verified: which electricity plan costs less to run a heat pump on. After applying the Ontario Electricity Rebate, Ultra-Low Overnight (ULO) pricing comes out slightly ahead of standard Time-of-Use (TOU) for a heat-pump load weighted toward overnight hours — see the blended-rate calculation below, which is the original analysis this page contributes rather than repeating what’s already published elsewhere.

Why there’s no single “heat pump costs $X/year” answer

Every published comparison that gives one flat number has baked in assumptions about climate zone, insulation, rate plan, and equipment model — change any of those and the number moves. Rather than repeat a number that only applies under specific assumptions, this guide shows the mechanism: coefficient of performance (COP) at different outdoor temperatures, multiplied by your actual electricity rate, compared against your furnace’s AFUE efficiency multiplied by your actual gas rate.

The core formula

Verified rate inputs (Ontario, as of July 2026)

Rates verified July 2026 — reviewed quarterly. Since 2022, the OEB resets RPP price levels once a year, every November 1 (next reset: November 1, 2026) — prices do not change on May 1. Only the TOU/ULO weekday schedule (which hours count as on/mid/off-peak) and the tiered plan's usage thresholds flip with the summer/winter season boundary in between. Gas rates change quarterly (new Enbridge rates took effect Jul 1, 2026, adding roughly $8–41/year to a typical bill). [VERIFY: gas delivery, transportation, and fixed monthly charges are not included in the gas rate above — pull these from your own recent bill or the current Enbridge rate schedule before treating the gas-vs-electric comparison below as complete.]

The Ontario Electricity Rebate (OER)

The OER is an automatic 23.5% pre-tax credit applied to electricity bills for residential, seasonal, and small business customers under 250,000 kWh/year — it appears as a line item at the bottom of the bill, no application required. It increased from 13.1% to 23.5% effective November 1, 2025, which is worth knowing because any heat-pump-vs-furnace comparison you read that predates that change, or that ignores the OER entirely, is understating the heat pump’s real cost advantage on the electricity side. The OER applies to electricity only — natural gas has no equivalent credit, which is worth stating plainly given how it skews any electricity-vs-gas comparison.

What’s actually on a gas bill (and why the commodity rate isn’t the whole story)

A residential Enbridge gas bill has three separate components, and the commodity rate used throughout this page is only one of them:

On a typical $1,200/year residential gas bill, roughly one-third (~$400/year) is the regulated delivery and transportation charge, with the remaining two-thirds being the gas supply charge shown elsewhere on this page. That split is cited as an illustrative historical figure, not a precise current one — treat it as directionally correct rather than exact.

The worked calculation — heat pump cost by temperature, TOU vs. ULO (post-OER)

Converting the effective gas supply rate (7.1856 ¢/m³) using a standard natural gas energy content of roughly 10.36 kWh per cubic metre gives a commodity-only cost of about 0.69 ¢ per kWh of gas energy. At 96% AFUE, that’s roughly 0.72 ¢ per kWh of heat delivered — commodity only, before delivery charges, and constant regardless of outdoor temperature (unlike a heat pump’s COP-driven cost, gas furnace efficiency doesn’t change with the weather).

Notice the shape: ULO is dramatically cheaper than TOU overnight (roughly a third of the cost at every temperature) and dramatically more expensive during its 4–9pm on-peak window (roughly double TOU’s on-peak rate). Whether ULO nets out cheaper overall depends entirely on how much of your heating load falls in each window — which is exactly what the blended-rate calculation below works out.

At every temperature shown, gas’s commodity-only cost (~0.72¢) is still below every heat pump/rate-plan combination above — which is the opposite of the “heat pumps win except in extreme cold” story you’ll read elsewhere. That story isn’t wrong, but it’s built on all-in gas cost, not commodity-only cost. Enbridge’s delivery, transportation, and fixed monthly charges are billed on top of the commodity rate and are not included in the figures above; in many Ontario gas accounts those additional charges roughly double (or more) the effective all-in rate. Once you add your own delivery-charge line to the furnace side of this comparison, expect the crossover point where gas overtakes electric heat pump operation to shift meaningfully toward the heat pump. [VERIFY: add your actual delivery/transportation/fixed charges from a recent Enbridge bill to complete this comparison]

Which electricity plan is actually cheaper for a heat pump: the blended-rate calculation

This is the piece no cited source in this niche runs the numbers on: does ULO’s overnight discount outweigh its on-peak penalty for a heat pump specifically? A heat pump doesn’t run on a fixed schedule — it responds to heat loss, which is generally worst overnight and in the early morning, and lighter mid-day. That means a meaningful share of a heat pump’s winter workload naturally falls in ULO’s cheapest window, not its most expensive one.

A heat pump’s actual overnight-vs-daytime runtime split depends on your household’s thermostat setback habits and your home’s thermal mass, and there’s no metered data behind a single “true” number — so rather than pick one assumption and present it as fact, here are two illustrative weekday scenarios, both modeling the same three windows (overnight/early-morning, daytime, evening 4–9pm) at different overnight weightings:

We modeled 40% and 60% overnight/off-peak runtime as two bracketing scenarios — your household’s actual split depends on your setback schedule, and could reasonably fall anywhere in or outside this range. The direction of the answer flips between them: at the lower overnight weighting, Time-of-Use wins; at the higher overnight weighting, Ultra-Low Overnight wins. This holds at similar relative margins whether the outdoor temperature is mild or extreme — the load-distribution assumption, not the temperature, is what decides which plan comes out ahead.

The practical takeaway is about your specific thermostat behaviour, not a universal answer. A home without a smart or TOU-aware thermostat — one that heats evenly through the 4–9pm window rather than coasting on pre-heated mass — sits closer to the lower-overnight-weighting scenario, where ULO’s on-peak rate (~29.91¢ effective, roughly double TOU’s ~15.53¢) tips the balance toward Time-of-Use. A smart thermostat that pre-heats before 4pm and lets temperature drift through the evening peak pushes you toward the higher-overnight-weighting scenario, where ULO wins. Check your utility’s own plan-comparison tool (Hydro One and other Ontario distributors publish one) against your actual usage pattern before switching plans. [VERIFY: model your own overnight-vs-daytime runtime split against your smart thermostat or utility usage data — the 40%/60% bracket above is illustrative, not measured for any specific home]

Why hybrid (dual-fuel) systems exist because of this exact math

A real, all-in-cost crossover point — the outdoor temperature where gas becomes cheaper than electric heat pump operation — is the entire logic behind a hybrid or dual-fuel system: run the heat pump above that temperature, where it’s cheaper on an all-in basis, and let the system automatically switch to the gas furnace below it. This page’s verified inputs aren’t yet sufficient to state that exact crossover temperature (see the delivery-charge gap above), but the mechanism holds regardless of the precise number: COP declines with temperature, gas efficiency doesn’t, and somewhere in between the two lines cross. If your household runs a hybrid system, the whole-season cost is a blend rather than a single-technology number.

What this doesn’t include

• Equipment and installation cost — this page is operating cost only; see our furnace cost guide and the decision guide for the full picture including upfront cost
• Rebates, which can materially change the effective upfront cost of switching — see our rebate guide
• Home-specific heat loss — an under-insulated home will cost more to heat with either system; the ratio between systems stays roughly similar, but both go up
• Gas delivery, transportation, and fixed monthly charges — the biggest open gap on this page; see the [VERIFY] notes above
• The Tiered electricity plan (12.0¢/kWh up to 600 kWh/month summer or 1,000 kWh/month winter, 14.2¢/kWh above that) — this page only compares TOU and ULO, since those are the plans most relevant to a heat-pump-heavy household; a Tiered household should redo the blended-rate math against those two rates instead
• Your actual heating-load timing — the 40%/60% overnight-weighting bracket used in the blended-rate calculation is an illustrative assumption, not a metered result for any specific home

How to run this for your own home

1. Pull your last 12 months of gas and electricity bills to find your actual $/m³ and $/kWh rates.
2. Find the published COP curve for the specific heat pump model you’re considering — see our Mitsubishi vs. Daikin comparison for two commonly recommended cold-climate lines.
3. Apply the formula above at a few representative outdoor temperatures for your area.
4. Weight by how many hours your area typically spends in each temperature band over a winter — Environment Canada climate normals are a reasonable source for this.