The short answer
On PG&E's current rates, most Bay Area homes are modeled to save, as long as they switch to PG&E's Electric Home (E-ELEC) rate plan. That is RMI's finding, published September 28, 2026, for about 1.4 million single-family homes with gas appliances:
| Bay Area single-family homes that replace… | Homes that save | Average saving |
|---|---|---|
| A gas water heater, with a heat pump water heater | 19 in 20 | $360/yr |
| Gas water heater and gas furnace, with heat pumps | Nearly 90% | $320/yr |
| …and an existing air conditioner | — | $420/yr |
| …in a home with no air conditioner before | Nearly 3 in 4 | — |
For low-income (CARE) households, more than 99% of the roughly 128,000 homes RMI modeled saved with a heat pump water heater. Average water-heater savings ranged from $320 to $430 a year across the nine Bay Area counties.
⚠️ These are modeled, not measured. They assume PG&E bundled service (not a community choice provider such as MCE), efficient new equipment, and enrollment in the Electric Home rate. They don't cover homes with solar.
What changed: PG&E's March 2026 rate reform
On March 1, 2026, PG&E added a fixed monthly Base Services Charge under a CPUC decision, and cut the price of each kilowatt-hour to match:
- $24.15 a month for most customers, $12.08 for FERA, and $6.00 for CARE.
- The CPUC estimated PG&E's per-kWh price would fall by about 4.7 cents.
Cheaper kilowatt-hours favor appliances that run on electricity instead of gas. RMI reports that PG&E's electricity rates per kWh are roughly back to 2022 levels, while gas rates are up about 15% over the same period.
What bills on the older rates showed
California's TECH Clean California program measured real bills, priced at 2022–2023 rates, before the change. Its draft report was filed with the CPUC in March 2026:
| Non-solar homes that replaced… | Average change in annual bill | Median |
|---|---|---|
| A gas furnace AND an air conditioner | −$304 (saved) | −$260 |
| A gas furnace, with no air conditioner before | +$69 (cost more) | +$35 |
| A gas water heater, with a heat pump water heater | −$97 (saved) | −$6 |
That covers 1,515 projects. Across all 10,000+ projects, including solar homes, the program's evaluator put the average at about $11 a year saved, roughly break-even. Winter bills rose and summer bills fell.
Why the two studies disagree
- Rates. TECH priced bills before the March 2026 change. RMI priced them after it. Cheaper kilowatt-hours are most of the difference.
- Rate plan. RMI assumes homes enroll in the Electric Home rate. Real households often stay on whatever plan they had. RMI notes that this step "falls to the customer".
- Measured vs. modeled. TECH counted real bills from real installs. RMI simulated typical homes with efficient equipment.
- Where. TECH covers the whole state. RMI covers Bay Area single-family homes on PG&E only.
What both agree on: replacing an old air conditioner at the same time gives the biggest savings, and homes with no AC before come out worst.
If you have solar
Neither study includes solar homes, so don't apply their figures to yours. With solar, the questions are different:
- When does your system produce, and when would the heat pump run? Heating runs mostly on winter mornings and evenings, when solar is weakest. Many heat pump water heaters can be scheduled to run at midday.
- What does your tariff pay for exports? On NEM 3 (Net Billing), midday exports earn little, so using that power yourself is worth far more than sending it out. On NEM 1 or 2, the trade-off is closer.
- Changing rate plans? If you're on net metering, ask PG&E how a switch affects it before you make one.
What to do next
- On PG&E? Switch to the Electric Home rate (E-ELEC) once you have a heat pump. An EV or battery also qualifies. Enroll in your PG&E account. It doesn't happen automatically. On SCE or SDG&E, ask which rate plan suits a heat pump.
- Check rebates. TECH Clean California and your utility list current incentives. RMI reports Bay Area agencies have announced about $85 million a year in incentives, $41 million of it for heat pumps.
- Ask for a load calculation (Manual J). SB 222 makes it part of the fast online permit. It's also how you avoid an oversized unit.
- Replacing an AC soon anyway? That's when a heat pump pays best. Get the quote before the old unit dies.
- In the Bay Area, plan ahead. The Bay Area Air District's zero-NOx rules phase out the sale of NOx-emitting gas water heaters for most homes from 2028, and NOx-emitting gas furnaces from 2029.
Deciding whether to go electric?
What a heat pump does to your bill depends on your rates, your climate, and, if you have solar, how much your panels already cover. If you own a SunPower or Enphase system, WattHacker's energy review goes through it with you one to one, using your own numbers.
- We measure your system first, so the plan starts from what your roof actually makes.
- You get running costs, energy saved, install costs, and rebates, plus what to do first and what to do next.
Still have questions about your own system? I'll go through it with you — your panels, your bill, and what's worth doing about it.
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Common questions
Do heat pumps save money in California?
Increasingly, yes. On PG&E's rates since March 2026, RMI modeled Bay Area single-family homes and found nearly 90% would save by replacing both a gas furnace and a gas water heater with heat pumps, about $320 a year on average, assuming they enroll in an electric-home rate plan. Bills measured on 2022-2023 rates by TECH Clean California were closer to break-even overall. Neither study covers homes with solar.
Does a heat pump water heater save money in California?
On today's PG&E rates, usually. RMI's 2026 model found 19 of every 20 Bay Area single-family homes would save by replacing a gas water heater with a heat pump water heater, about $360 a year on average, and more than 99% of low-income CARE homes would save. Bills measured on 2022-2023 rates showed a smaller saving: $97 a year on average, with a median of only $6.
What is PG&E's Electric Home rate (E-ELEC)?
A time-of-use rate plan for homes with an electric vehicle, a battery, or an electric heat pump for water heating or space heating and cooling; the home does not have to be fully electric. It is cheapest from midnight to 3 p.m. and most expensive from 4 to 9 p.m. You have to enroll yourself in your PG&E account. RMI's savings figures assume homes are on it.
What is the Base Services Charge on my PG&E bill?
A fixed monthly charge PG&E introduced on March 1, 2026, under a CPUC decision: $24.15 a month for most customers, $12.08 for FERA, and $6.00 for CARE. In exchange, the price per kilowatt-hour went down, which the CPUC estimated at about 4.7 cents for PG&E. It makes electric appliances like heat pumps cheaper to run than before.
Where does the $304 a year figure come from?
From the TECH Clean California Best Practices draft report, filed with the CPUC in March 2026. It is the average bill saving for 1,515 non-solar homes that replaced a gas furnace and an existing air conditioner with a heat pump, priced at 2022-2023 rates, before PG&E's March 2026 rate change.
Is a heat pump worth it if I have solar?
It can be, but neither study includes solar homes, so don't apply their figures to yours. What matters is whether your panels produce power when your home could use it, and what your net metering tariff pays for exports. Heating runs mostly on winter mornings and evenings, when solar produces least. If you are on net metering, ask PG&E how a rate-plan change affects it before you switch.
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