Heat pump vs gas furnace running cost in Canada: compare with your own bills

Whether a heat pump costs less to run than a gas furnace in Canada comes down to one ratio: the price of electricity per kWh divided by the price of gas per kWh of heat, compared with the heat pump's seasonal efficiency. Against oil, propane and electric baseboards, a heat pump usually wins by a wide margin. Against natural gas, the result can go either way: in provinces where electricity is cheap relative to gas the heat pump saves money, and where gas is cheap it can cost slightly more to run, unless you disconnect gas entirely and stop paying the fixed monthly charge. The method below lets you run the numbers with your own bills instead of anyone's averages.

This guide is part of how to compare HVAC quotes. All prices in the example are illustrative, not current rates.

Step 1: find out how much heat your home uses

Start from last winter's fuel use, or use the bill-based method in the sizing guide. Convert to kWh of useful heat with these approximate energy contents and your appliance efficiency:

Fuel	Approximate energy content	Typical appliance efficiency
Natural gas	about 10.3 kWh per m³	95% (condensing furnace), lower for older units
Heating oil	about 10.6 kWh per litre	80–87%
Propane	about 7.0 kWh per litre	90–95% (condensing)
Electricity (baseboard, electric furnace)	1 kWh per kWh	100%
Heat pump	1 kWh electricity gives 2–4 kWh heat	Seasonal COP roughly 2–3.5 depending on climate and model

Check the heat value printed on or explained by your gas utility; it varies slightly by region.

Step 2: worked example with illustrative prices

Assume the house needs 17,000 kWh of useful heat a year.

System	Fuel needed	Illustrative price	Yearly fuel cost
Gas furnace 95%	17,000 ÷ (10.3 × 0.95) ≈ 1,737 m³	$0.50 per m³ (all variable charges)	≈ $869
Heat pump, seasonal COP 2.6	17,000 ÷ 2.6 ≈ 6,538 kWh	$0.15 per kWh	≈ $981
Electric baseboard	17,000 kWh	$0.15 per kWh	$2,550
Oil furnace 85%	17,000 ÷ (10.6 × 0.85) ≈ 1,887 L	$1.70 per L	≈ $3,208
Propane furnace 92%	17,000 ÷ (7.0 × 0.92) ≈ 2,640 L	$0.95 per L	≈ $2,508

In this illustration the heat pump saves about $2,227 a year against oil, $1,569 against baseboards and $1,527 against propane, but costs about $112 more than gas on variable charges alone.

Step 3: the fixed charge question

Gas bills include a fixed monthly customer charge that you pay as long as you are connected. If the heat pump replaces the furnace and you also switch the water heater, stove and dryer to electric, you can close the gas account. With an illustrative fixed charge of $25 a month ($300 a year), the comparison becomes:

Gas: $869 + $300 = $1,169 (plus the gas used by other appliances)
Heat pump: $981, plus the extra electricity for the appliances that switched

The heat pump now saves about $188 on heating, before counting the electric water heater's cost. If you keep gas for a water heater or stove, the fixed charge stays and the $112 difference stands. A hybrid system that uses gas only on the coldest days is often the cheapest arrangement for homes that keep gas anyway.

Step 4: your break-even electricity price

Set the heat pump's cost equal to gas: break-even price = gas cost ÷ heat pump kWh. In the example, $869 ÷ 6,538 kWh ≈ $0.133 per kWh. If your all-in variable electricity price (energy plus delivery charges per kWh) is below that, the heat pump costs less to run than gas; above it, more. A higher seasonal COP lowers the electricity needed and raises the break-even price.

Electricity pricing structures matter: time-of-use, tiered and winter rates all change the effective price per kWh. In Quebec, where most homes already heat electrically, the comparison is usually against baseboards. Since 1 April 2025 the federal consumer fuel charge has been set to zero, which lowered natural gas prices in provinces that had been under the federal system; British Columbia also ended its consumer carbon tax on the same date. Check your current bills rather than older comparisons.

Step 5: turn savings into payback

Take the yearly saving from Step 2 or 3 and the extra cost of the heat pump over your alternative, and enter both in the heat pump payback calculator. Against oil, a saving of around $2,000 a year can repay a several-thousand-dollar price difference within a few years. Against gas, a saving near zero means the heat pump is justified mainly by cooling, comfort, emissions or a rebate, not by the bill. For a full oil example, see the oil conversion worked example.

What can make the real result differ

Real seasonal COP. Cold winters, defrost cycles and backup heat use lower it. Ask for an estimate based on your climate.
Thermostat habits. Deep night setbacks can trigger backup heat with some heat pumps; steady settings often work better.
Air conditioning. If you already run central air, a heat pump replaces it, which changes the equipment comparison but not the heating bill.
Rate changes. Electricity and gas prices move independently. Testing a range of prices is more honest than a single forecast.
Maintenance. Both systems need service; a gas furnace also needs combustion and venting checks.

FAQ

What seasonal COP should I assume?

Ask for the manufacturer's performance data in your climate. As a rough illustration, a seasonal COP between 2 and 3 is plausible for cold-climate air-source units in much of southern Canada, higher for ground-source systems.

Does a heat pump cost less than baseboards in Quebec?

Usually, because each kWh of electricity yields more than a kWh of heat. The saving depends on the share of the heat the heat pump supplies on the coldest days.

Should I include the gas fixed charge?

Only if you will actually close the gas account. Otherwise you will keep paying it.

Sources

Natural Resources Canada — heating guides and energy content of fuels
Ontario Energy Board — how Ontario gas and electricity bills are structured
Hydro-Québec — Quebec electricity rates
Canada Revenue Agency — fuel charge information
Enbridge Gas and Énergir — gas bill components