Heat pump adoption is accelerating across the Northeast and Mid-Atlantic, driven by state climate goals, consumer demand for efficient heating technologies, and the need to reduce reliance on volatile fossil fuel markets. Yet while heat pump technology has advanced significantly, electricity rate design has not always evolved to reflect how these systems are used.
As a result, many households that switch to heat pumps face higher winter electric bills that do not necessarily align with the actual cost of serving them. These challenges can weaken the affordability case for electrification at a time when policymakers, utilities, and consumers are increasingly focused on clean heating solutions.
In this report, NEEP examines how modern electric rate design can improve affordability for heat pump users while better aligning customer bills with grid costs. The analysis compares heating costs for households transitioning from natural gas, oil, and propane to heat pumps, explores real-world rate designs currently in use across the region, and presents an illustrative seasonal rate designed to better reflect heat pump usage patterns.
NEEP Findings
- Modern rate designs can significantly reduce heating costs for households using heat pumps.
- Heat pump-specific rates generally produce the greatest customer savings.
- Well-designed technology-neutral rates can also deliver meaningful affordability benefits and support electrification goals.
- Modernizing electric rates can help address unintended cost shifts between customers and better align charges with underlying grid costs.
- States and utilities have multiple pathways to improve affordability while supporting broader energy and climate objectives.
The report includes six state case studies and offers practical guidance for regulators, utilities, and policymakers considering rate reforms that can make clean heating more affordable, equitable, and scalable across the region.
Download the report to explore the findings, case studies, and recommendations for advancing heat pump-friendly rate design.
