Published August 24, 2026 · Facts verified August 24, 2026 · Every rate on this page is re-verified on each Ontario Energy Board change
The heat pump vs furnace running cost question is the one we get most on estimates in Peel Region, and almost every page answering it online skips the arithmetic. This guide does it in the open at current Ontario Energy Board prices. For how the two systems actually differ, start with our heat pump vs furnace guide.
In this guide
What changed on April 1, 2025 · What energy costs right now · How to compare the two fairly · Cost per kWh of heat · The break-even COP · When the heat pump wins · Cold weather performance · Is dual fuel worth it · Upfront cost and rebates · FAQ
Short answer
On the heat pump vs furnace running cost question in Ontario in 2026, a 95 per cent AFUE gas furnace delivers heat for about 2.9 cents per kWh before tax, while a heat pump delivers it for 3.3 cents on off-peak power in mild weather and 5 to 7 cents in deep cold or at peak hours. Gas wins for most gas-heated homes.
That was not true two years ago, and the reason it changed is a single line item that came off your gas bill on April 1, 2025.
Key takeaways
- One change flipped the heat pump vs furnace running cost answer. Removing the federal carbon charge cut gas heating cost by about 34 per cent overnight. Before April 1, 2025 a heat pump on off-peak power beat a gas furnace. After it, gas wins.
- Your electricity rate plan matters more than your equipment. A heat pump needs a COP of 3.34 to match a gas furnace on off-peak Time-of-Use, but only 1.33 on Ultra-Low Overnight.
- Against electric baseboards, oil or propane, a heat pump wins by a wide margin and earns up to $7,500 CAD instead of $2,000 CAD.
- For a gas home, the case for a heat pump is the air conditioner it replaces, the rebate and the comfort. It is not the winter fuel bill.
What changed on April 1, 2025, and why it settled this question
The federal carbon charge on natural gas went to zero on April 1, 2025, and that one line cut the cost of gas heat by about a third. Enbridge states it plainly: the charge was 15.25 cents per cubic metre from April 1, 2024 to March 31, 2025, and "on March 15, 2025, the federal government set the federal carbon charge to $0.00, effective April 1, 2025."
Run that through the arithmetic below and the consequence for heat pump vs furnace running cost is stark. Nothing about heat pumps got worse. Gas simply got cheaper faster than any equipment upgrade could match.
| Cost of delivered heat | Before April 1, 2025 | Today |
|---|---|---|
| Federal carbon charge on gas | 15.25 cents per cubic metre | 0.00 cents |
| Delivered gas price | 44.25 cents per cubic metre | 29.0 cents per cubic metre |
| Gas furnace at 95 per cent AFUE | 4.47 cents per kWh of heat | 2.93 cents per kWh of heat |
| Heat pump, mild weather, off-peak | 3.27 cents per kWh of heat | 3.27 cents per kWh of heat |
| Who was cheaper to run | The heat pump, by 27 per cent | The furnace, by 10 per cent |
This is worth stating plainly because a great deal of Ontario heat pump advice still online was written before that date and has not been restamped. If a page tells you a heat pump is cheaper to run than gas in Ontario and does not name its gas price, check when it was written.
What do electricity and natural gas actually cost in Ontario right now?
Electricity is priced by the Ontario Energy Board under the Regulated Price Plan and has not changed since November 1, 2025; natural gas is priced quarterly and changed most recently on July 1, 2026. Both are the commodity lines only. Your Alectra, Hydro One, Milton Hydro, Halton Hills Hydro or Toronto Hydro bill adds delivery and regulatory charges and subtracts the Ontario Electricity Rebate, and your gas bill adds a fixed $27.69 CAD monthly customer charge.
| Energy price line | Rate |
|---|---|
| Electricity, Time-of-Use off-peak | 9.8 cents per kWh |
| Electricity, Time-of-Use mid-peak | 15.7 cents per kWh |
| Electricity, Time-of-Use on-peak | 20.3 cents per kWh |
| Electricity, Tiered tier 1 then tier 2 | 12.0 then 14.2 cents per kWh. Residential threshold 1,000 kWh a month in winter, 600 kWh in summer |
| Electricity, Ultra-Low Overnight | 3.9 overnight, 9.8 weekend off-peak, 15.7 mid-peak, 39.1 on-peak, cents per kWh |
| Gas, effective supply charge (base 10.3025 less a 1.2527 cost adjustment) | 9.0498 cents per cubic metre |
| Gas, transportation to Enbridge plus its cost adjustment | 5.4267 plus 0.3385 cents per cubic metre |
| Gas, delivery to you, four blocks | 14.3745 first 30 m3, 13.5362 next 55, 12.8798 next 85, 12.3904 over 170 |
| Gas, delivery cost adjustment plus 2023 DSM rate rider | 0.7456 plus 0.3673 cents per cubic metre |
| Gas, facility carbon charge | 0.0145 cents per cubic metre |
| Gas, federal carbon charge | 0.0000, removed April 1, 2025 |
| Gas, all per-cubic-metre lines added | 28.3 to 30.3 cents before HST, plus $27.69 CAD a month |
A cross-check on that gas figure: the Ontario Energy Board's own July 2026 backgrounder puts a typical EGD residential bill at $1,028.62 CAD a year for 2,400 cubic metres, which works out to 42.9 cents per cubic metre all in. The gap between that and our 28.3 to 30.3 cents is the fixed monthly charge, which spreads to about 13.8 cents per cubic metre at that consumption. The per-unit lines are the right ones for comparing heating fuel, because the fixed charge is there whether you heat with gas or not.
Time-of-Use hours flip twice a year, so check which season you are in
The OEB swaps the on-peak and mid-peak blocks every May 1 and November 1, so the same 20.3 cent price lands on different hours depending on the date. This is a recurring seasonal cycle, not news, but it changes the answer for a heating question because winter on-peak covers the morning and evening hours when a house is coldest.
| Season | On-peak, 20.3 cents | Mid-peak, 15.7 cents | Off-peak, 9.8 cents |
|---|---|---|---|
| Winter, Nov 1 to Apr 30 | Weekdays 7 to 11 a.m. and 5 to 7 p.m. | Weekdays 11 a.m. to 5 p.m. | Weekdays 7 p.m. to 7 a.m., weekends and holidays |
| Summer, May 1 to Oct 31 | Weekdays 11 a.m. to 5 p.m. | Weekdays 7 to 11 a.m. and 5 to 7 p.m. | Weekdays 7 p.m. to 7 a.m., weekends and holidays |
How do you compare a heat pump and a furnace fairly?
Put heat pump vs furnace running cost into one unit, cents per kWh of heat actually delivered into the house. Two conversions get you there, and neither is complicated.
First, gas is billed by volume, not energy. Natural Resources Canada states that one cubic metre of natural gas contains approximately 37.5 megajoules, which is 10.42 kWh. A furnace does not capture all of it: its Annual Fuel Utilization Efficiency, or AFUE, is the share it delivers as useful heat. NRCan puts condensing furnaces at 90 to 98 per cent AFUE. So a 95 per cent furnace delivers about 9.90 kWh of heat per cubic metre of gas burned.
Second, a heat pump does not make heat, it moves it, so it delivers more heat than the electricity it consumes. That ratio is the coefficient of performance, or COP, and it falls as the outdoor air gets colder. Electric baseboards and electric furnaces have a COP of exactly 1. The whole method is two divisions: gas price per cubic metre divided by useful kWh per cubic metre, and electricity price per kWh divided by COP.
Heat pump vs furnace running cost: the cost per kWh of heat
On heat pump vs furnace running cost, a gas furnace delivers heat for about 2.9 cents per kWh at today's Ontario prices, and a heat pump lands anywhere between 1.3 and 13 cents depending on the outdoor temperature and, more than most people expect, on which electricity rate plan the house is on.
| Heat source and condition | Energy price used | Cents per kWh of heat | Per 1,000 kWh of heat |
|---|---|---|---|
| Gas furnace, 95 per cent AFUE | 29.0 cents per m3 | 2.93 | $29 CAD |
| Gas furnace, 98 per cent AFUE | 29.0 cents per m3 | 2.84 | $28 CAD |
| Heat pump, mild, COP 3.0, ULO overnight | 3.9 cents per kWh | 1.30 | $13 CAD |
| Heat pump, cold, COP 2.0, ULO overnight | 3.9 cents per kWh | 1.95 | $20 CAD |
| Heat pump, mild, COP 3.0, TOU off-peak | 9.8 cents per kWh | 3.27 | $33 CAD |
| Heat pump, mild, COP 3.0, Tiered tier 1 | 12.0 cents per kWh | 4.00 | $40 CAD |
| Heat pump, cold, COP 2.0, TOU off-peak | 9.8 cents per kWh | 4.90 | $49 CAD |
| Heat pump, cold, COP 2.0, Tiered tier 1 | 12.0 cents per kWh | 6.00 | $60 CAD |
| Heat pump, deep cold, COP 1.5, TOU off-peak | 9.8 cents per kWh | 6.53 | $65 CAD |
| Heat pump, mild, COP 3.0, TOU on-peak | 20.3 cents per kWh | 6.77 | $68 CAD |
| Heat pump, cold, COP 2.0, TOU on-peak | 20.3 cents per kWh | 10.15 | $102 CAD |
| Heat pump, cold, COP 2.0, ULO on-peak 4 to 9 p.m. | 39.1 cents per kWh | 19.55 | $196 CAD |
| Electric baseboard or electric furnace, COP 1.0 | 9.8 to 20.3 cents per kWh | 9.80 to 20.30 | $98 to $203 CAD |
Two things jump out of that table. A heat pump on Ultra-Low Overnight power is cheaper than gas by a wide margin, and the same heat pump on Ultra-Low Overnight on-peak power between 4 and 9 p.m. costs nearly seven times what gas costs. Ultra-Low Overnight is not a better plan, it is a sharper one.
The break-even COP, the single number that settles it
The break-even COP reduces heat pump vs furnace running cost to a single number: the efficiency a heat pump has to hit to match a 95 per cent gas furnace on the same house, and it depends entirely on which electricity rate plan you are on. Compare it against the COP your unit actually delivers at a given outdoor temperature and you have your answer without any further arithmetic.
| Electricity rate plan and period | COP needed to match gas | Realistic? |
|---|---|---|
| Ultra-Low Overnight, 11 p.m. to 7 a.m. | 1.33 | Yes, cleared even at minus 21 degrees Celsius |
| Time-of-Use off-peak | 3.34 | Only in mild weather, and only just |
| Tiered, tier 1 | 4.09 | Rarely in an Ontario winter |
| Tiered, tier 2 | 4.85 | No |
| Time-of-Use mid-peak | 5.36 | No |
| Time-of-Use on-peak | 6.93 | No |
| Ultra-Low Overnight, on-peak 4 to 9 p.m. | 13.34 | Not physically possible |
Natural Resources Canada puts air-source COP at 2.0 to 5.4 at plus 8 degrees Celsius and 1.1 to 3.7 at minus 8 degrees Celsius. Set those against the table and the pattern is clear: on Ultra-Low Overnight a heat pump beats gas in every condition an Ontario winter produces, on off-peak Time-of-Use it is roughly a tie in mild weather and a loss in cold, and at any peak price it loses every time.
How we know this
We calculated it rather than quoted it, and the whole method is above so you can repeat it. Gas cost per kWh of heat equals the price per cubic metre divided by 37.5 megajoules times the AFUE, converted at 3.6 megajoules per kWh. Heat pump cost per kWh of heat equals the electricity price divided by the COP. Energy content is the Natural Resources Canada figure, COPs are NRCan's own measured test results rather than manufacturer best cases, and both energy prices are the current regulated ones. Every rate on this page moves: gas quarterly, electricity on November 1. Re-run the arithmetic rather than trusting a page that was right last year.
What this cannot know is your house: its insulation, its ductwork, the balance point your equipment actually holds, and how many hours your thermostat calls in each pricing window. That is what the free in-home estimate measures.
Heat pump vs furnace running cost: when does the heat pump win?
Three situations, all common across Peel and Halton, where the arithmetic favours a heat pump without argument.
- Homes heated with electricity. Baseboards and electric furnaces deliver heat at 9.8 to 20.3 cents per kWh because their COP is 1. A cold-climate heat pump cuts that by half to two thirds across a season. This is the strongest financial case in Ontario and it also earns the largest rebate, up to $7,500 CAD instead of $2,000 CAD.
- Homes heated with oil or propane. Rural Caledon, the edges of Bolton and parts of Halton Hills. Delivered fuel prices are volatile and generally well above natural gas per unit of heat, and the rebate treats these homes exactly like electric ones.
- Homes on Ultra-Low Overnight that can shift heating into the overnight window. A well-insulated house with a smart thermostat can pre-heat overnight at 3.9 cents and coast through the 4 to 9 p.m. block. That is the only configuration where a heat pump beats gas outright in a Peel winter, and it demands a house that holds heat.
- Homes that can drop gas service entirely. If the furnace, water heater and stove all go electric, the $27.69 CAD monthly customer charge disappears, worth $332 CAD a year before HST. That matters for small, tight homes.
Possible downside, stated plainly. We sell and install both, so read this with that in mind. For a gas-heated home in Peel in 2026, we will usually tell you the heat pump will not cut your winter fuel bill. The reasons to buy one are the air conditioner it replaces, the rebate, the shoulder-season comfort and the emissions. If a contractor promises you a large winter fuel saving on a gas home, ask them for their gas price per cubic metre and their assumed COP.
How does a cold-climate heat pump perform in an Ontario winter?
Cold-climate units keep working well below freezing, with capacity and efficiency both falling as the temperature drops. Natural Resources Canada says newer air-source models operate down to between minus 15 and minus 25 degrees Celsius. In NRCan's own Ottawa-area test house, a ducted cold-climate unit measured a COP averaging 1.5 at minus 21.1 degrees Celsius and 3.0 at plus 4.9 degrees Celsius, and a mini-split held close to 2.0 at minus 25 degrees Celsius.
Two caveats decide how that translates into a bill. Capacity falls with temperature, so NRCan's guidance is to size a heat pump to cover the majority of the annual heating energy and let a supplementary system carry the occasional peak. And in Mississauga and Brampton the coldest hours land in the winter on-peak windows, which means a heat pump's least efficient operation coincides with its most expensive electricity. Backup heat is part of the design, not an optional extra. Our cold-weather heat pump performance article goes further, and our heat pump installation page covers what we fit.
Safety, on the gas side. Gas furnaces, their venting and their combustion air are regulated work in Ontario. The Technical Standards and Safety Authority (TSSA) requires fuels fired appliances to be installed and serviced by TSSA registered contractors employing TSSA certified gas technicians. A poorly vented gas appliance can produce carbon monoxide, which is colourless and odourless. If a CO alarm sounds, leave the building and call 911 from outside.
Safety, on the electrical side. Adding a heat pump or electric backup heat can push a home past the capacity of its existing electrical service. That assessment, and any panel or service upgrade it calls for, is licensed electrical work under the Electrical Safety Authority (ESA). Never let anyone add electric resistance backup without confirming the service can carry it. Aire One Peel is a TSSA registered fuels contractor, licence FS R0076624709.
Is a dual-fuel or hybrid system worth it in Ontario?
A dual-fuel system pairs a heat pump with a gas furnace and switches between them at a set outdoor temperature. Natural Resources Canada calls that switchover the economic balance point: "the temperature below which the ratio of electricity to a supplemental fuel means that using the supplementary system is more cost effective."
On the numbers above, that balance point in Peel Region today is warmer than most people expect. On off-peak power a heat pump at COP 3 roughly ties a 95 per cent furnace, and at COP 2 it loses. At any peak price the furnace wins at every temperature. So a dual-fuel setup in a gas home in 2026 saves money by running the heat pump in mild, cheap-electricity hours and letting the furnace carry the cold snaps and the peak windows.
The fuel saving is smaller than the marketing suggests. The practical wins are real: you keep gas heat as backup, you replace the air conditioner, and you qualify for the $2,000 CAD heat pump rebate on equipment you were buying anyway. And if electricity gets cheaper relative to gas, or a carbon charge returns to gas bills, the balance point moves colder and the heat pump does more of the work. A dual-fuel system lets you follow that with a control setting instead of a new installation. Our hybrid heat dual-fuel article covers the setup.
Upfront cost, rebates and what each system lasts
A heat pump costs more upfront than a furnace and earns a rebate a furnace cannot, and both last roughly the same number of years. Natural Resources Canada puts air-source heat pump service life at 15 to 20 years, and a condensing gas furnace in Ontario typically lasts about the same.
| System | Installed, CAD | Rebate, checked Aug 24 2026 |
|---|---|---|
| Gas furnace, 95 to 98 per cent AFUE | $3,500 to $8,500, most pay $4,500 to $6,500 | None |
| Central air conditioner only | Quoted at your free in-home estimate | None |
| Ducted cold-climate heat pump | $6,000 to $14,000 | Gas home $500 per ton to $2,000. Electric, oil, propane or wood home $1,250 per ton to $7,500 |
| Ductless cold-climate, single then multi zone | $3,500 to $7,000, then $8,000 to $15,000 | Same as above if cold-climate rated |
| Dual fuel, furnace plus heat pump together | Quoted at your free in-home estimate | Gas home $500 per ton to $2,000 |
| Rented heat pump, any heating fuel | Monthly, see terms | Capped at $500 per ton to $2,000 even in an electric home |
| Ground source, geothermal | $20,000 to $45,000 | Gas home $3,000. Other fuels $2,000 per ton to $12,000 |
The rental line is worth reading twice. If you rent a heat pump instead of buying one, the rebate drops to the gas-home tier even if your house runs on electricity, which can cost you $5,500 CAD of rebate. The federal Canada Greener Homes Loan is closed: Natural Resources Canada states funding is fully committed and new applications cannot be approved. Our Ontario HVAC rebate guide tracks changes, and our heat pump installation cost guide and furnace cost guide hold the detailed pricing.
Which is cheaper to run in your house?
Three questions. Settles the heat pump vs furnace running cost question using the same figures as the tables above.
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Want this math run on your own bills?
Bring a winter gas bill and a winter hydro bill to a free in-home estimate. We will show the balance point for your house, the rebate tier you land in, and furnace, heat pump and dual-fuel pricing side by side. We handle the mandatory rebate pre-approval before anything is installed. Aire One Peel Heating & Cooling, TSSA-registered fuels contractor FS R0076624709, 1625 Courtneypark Dr E, Mississauga, ON L5T 1V9. Serving Mississauga, Brampton, Etobicoke, Milton, Georgetown, Caledon and Bolton.
Heat pump vs furnace running cost: frequently asked questions
Is a heat pump cheaper to run than a gas furnace in Ontario?
Usually not. On 2026 prices the heat pump vs furnace running cost comparison favours gas for a home already heated with it, because a 95 per cent AFUE furnace delivers heat for about 2.9 cents per kWh before tax. A heat pump matches that only in mild weather on off-peak electricity, and costs 5 to 10 cents per kWh of heat in deep cold or at peak hours. Against electric, oil or propane heat it wins easily.
Is a heat pump cheaper than electric baseboard heat?
Yes, by a wide margin. Baseboards have a coefficient of performance of 1, so they deliver heat at 9.8 to 20.3 cents per kWh on Ontario's Time-of-Use electricity line. A cold-climate heat pump delivers the same heat for roughly a third to a half of that across a season, and the home qualifies for a rebate of up to $7,500 CAD.
What is the current Ontario electricity rate for heating?
Time-of-Use prices in effect since November 1, 2025 are 9.8 cents off-peak, 15.7 mid-peak and 20.3 on-peak per kWh. Tiered is 12.0 cents for the first 1,000 kWh a month in winter and 14.2 above it. Ultra-Low Overnight is 3.9 cents from 11 p.m. to 7 a.m. and 39.1 cents on weekdays from 4 to 9 p.m. Delivery charges are extra.
What does natural gas cost in Mississauga in 2026?
For Enbridge's EGD rate zone effective July 1, 2026, the per-cubic-metre lines add up to about 28.3 to 30.3 cents before HST, plus a fixed $27.69 CAD monthly customer charge. The Ontario Energy Board's typical residential bill for that zone is $1,028.62 CAD a year for 2,400 cubic metres. The federal carbon charge has been zero since April 1, 2025.
Do heat pumps work at minus 20 degrees Celsius in Ontario?
Cold-climate models do. Natural Resources Canada reports newer air-source units operating down to between minus 15 and minus 25 degrees Celsius, and NRCan's own testing measured a coefficient of performance averaging 1.5 at minus 21.1 degrees Celsius. Capacity falls in that range, so backup heat is part of the design rather than an optional extra.
Is dual fuel worth it in Ontario?
For a gas home replacing its air conditioner, often yes. You get the $2,000 CAD heat pump rebate, keep gas heat as backup, and can move the switchover temperature as prices change. Expect modest fuel savings rather than dramatic ones, because a gas furnace still wins below the balance point and at every peak electricity price.
Are there rebates for switching from a furnace to a heat pump?
Yes, through Home Renovation Savings: $500 per ton up to $2,000 CAD for gas-heated homes and $1,250 per ton up to $7,500 CAD for homes heated with electricity, oil, propane or wood. No home energy assessment is required but pre-approval before installation is mandatory. Rented heat pumps are capped at the $2,000 tier regardless of fuel.
Final verdict
If your home runs on electricity, oil or propane, install a heat pump and buy it rather than rent it. If your home runs on natural gas, the heat pump vs furnace running cost comparison favours the furnace in 2026, and the honest reasons to add a heat pump are the air conditioner it replaces, the $2,000 CAD rebate and the comfort, not the winter fuel bill.
One exception is worth checking before you decide: on Ultra-Low Overnight, a heat pump needs only a COP of 1.33 to beat gas, and a tight house that can pre-heat overnight and coast through the evening block can genuinely come out ahead. That is a house question more than an equipment question, and it takes about twenty minutes on site to answer.
Sources and references
- Ontario Energy Board, Electricity rates: TOU, Tiered and ULO prices and periods, in effect since November 1, 2025
- Ontario Energy Board, Enbridge Gas EGD rate zone Rate 1 rate sheet effective July 1, 2026 (PDF)
- Ontario Energy Board, Enbridge Gas backgrounder: typical EGD bill $1,028.62 for 2,400 cubic metres (PDF)
- Enbridge Gas, Federal Carbon Charge: 15.25 cents per cubic metre to March 31, 2025, set to $0.00 effective April 1, 2025
- Natural Resources Canada, Heating with Gas: one cubic metre contains approximately 37.5 MJ; condensing furnaces 90 to 98 per cent AFUE (PDF)
- Natural Resources Canada, Heating and cooling with a heat pump: COP ranges, operating temperatures, 15 to 20 year life, economic balance point
- Natural Resources Canada, CCHT ducted cold-climate air source heat pump assessment: COP 1.5 at minus 21.1 to 3.0 at plus 4.9 degrees Celsius
- Natural Resources Canada, CCHT mini-split cold climate assessment: COP close to 2.0 at minus 25 degrees Celsius
- Home Renovation Savings, heat pump rebates: tiers, rental cap, no energy assessment, mandatory pre-approval
- Natural Resources Canada, Canada Greener Homes Loan: closed, funding fully committed
- Technical Standards and Safety Authority, Be Fuels Wise: registered contractors and certified gas technicians
- Electrical Safety Authority, licensed electrical work requirements in Ontario
Mario Vaghei
General Manager, Aire One Peel Heating & Cooling
Mario runs the Peel Region branch of Aire One Heating & Cooling from Courtneypark Drive in Mississauga. For this page he insisted the carbon charge removal be shown as a before and after rather than mentioned in passing, and asked for the break-even COP table because it is the number he actually quotes on estimates. General Manager is a business role and not a trade credential, and no gas technician or electrician has reviewed this page.
What we updated. August 24, 2026: first publication. Replaces an internal draft that priced furnaces from a competitor blog, quoted the winter Time-of-Use hours without saying they are seasonal, omitted the Ultra-Low Overnight weekend and mid-peak prices and the summer Tiered threshold, missed the rental heat pump rebate cap, and did not connect the April 1, 2025 carbon charge removal to the answer.
Related reading: Heat pump vs furnace: the full comparison · Cost to install a heat pump in Ontario · How much does a new furnace cost · How long does a furnace last in Ontario