Electric vs Gas Furnace Monthly Cost Comparison

The choice between an electric furnace and a gas furnace affects monthly utility bills, installation costs, and long-term expenses. This article explains how monthly cost differs by fuel price, efficiency, climate, and system size, offering practical calculations, examples, and tips to optimize heating bills.

Item	Electric Furnace	Gas Furnace
Typical Monthly Heating Cost (Cold Climate)	$80–$300	$50–$200
Typical Monthly Heating Cost (Mild Climate)	$40–$150	$30–$120
Efficiency Range	95%–100% (electric resistance)	80%–98% AFUE
Installation Cost	$1,500–$5,000	$3,000–$8,000
Average Lifespan	15–25 years	15–20 years

How Monthly Heating Cost Is Calculated

Monthly heating cost equals the energy required to meet a home’s heating load multiplied by the unit fuel price and divided by the system’s effective efficiency. Factors include weather, insulation, thermostat settings, and distribution losses.

Basic calculation: Monthly Cost = (Heating Load in kWh or Therms) × (Fuel Price) ÷ (System Efficiency). For electric systems, heating load is usually expressed in kWh; for gas, in therms or cubic feet converted to therms.

Key Factors That Drive Monthly Costs

Energy Price Per Unit

Electricity rates vary widely across the U.S., typically from $0.10 to $0.35 per kWh. Natural gas prices also vary, often between $0.50 and $2.00 per therm depending on region and season.

Higher local electricity prices can make electric heating more expensive than gas, while low gas prices can favor gas furnaces for monthly savings.

System Efficiency

Electric resistance furnaces are nearly 100% efficient at point-of-use, converting all incoming energy to heat. Heat pumps differ and are not covered here. Gas furnaces are rated by AFUE (Annual Fuel Utilization Efficiency); high-efficiency models reach 95%–98% AFUE.

Efficiency affects monthly cost inversely: higher AFUE reduces gas usage but doesn’t change electricity-to-heat conversion for resistance units.

Climate And Heating Degree Days

Heating Demand correlates with Heating Degree Days (HDD). Colder climates with more HDD increase monthly energy consumption. An identical house in Minnesota will incur much higher heating costs than one in California.

Estimate monthly heating load by multiplying HDD by home-specific heat loss coefficients or use utility bills from previous years.

Home Size, Insulation, And Distribution

Larger homes require more heating; poor insulation and air leaks amplify heat loss. Ducted systems can suffer distribution losses of 5%–30%, affecting effective furnace efficiency and monthly cost.

Improving insulation and sealing ducts often yields larger monthly savings than swapping fuel types alone.

Sample Monthly Cost Calculations

Examples below use round numbers to illustrate typical monthly costs for a 2,000-square-foot home with average insulation.

Scenario	Assumptions	Monthly Cost Estimate
Cold Climate — Electric	Heating Load: 1,500 kWh; Electricity: $0.15/kWh; Efficiency: 100%	$225 (1,500×$0.15)
Cold Climate — Gas	Heating Load: 1,500 kWh equivalent ≈ 128 therms; Gas: $1.00/therm; AFUE: 90%	$142 (128×$1.00÷0.90)
Mild Climate — Electric	Heating Load: 600 kWh; Electricity: $0.15/kWh	$90
Mild Climate — Gas	Heating Load: 600 kWh ≈ 51 therms; Gas: $1.00/therm; AFUE: 90%	$57 (51÷0.90)

These examples show that gas heating often yields lower monthly bills in colder climates when gas prices are moderate and AFUE is high. In mild climates or where electricity is cheap, electric furnaces may be competitive.

Regional Price Variations And Their Impact

Northeast and Midwest regions generally have lower natural gas prices due to infrastructure and supply, while some U.S. states with high electricity costs (e.g., California) make electric heating relatively expensive.

State-level incentives, local utility rates, and seasonal demand spikes can shift monthly costs significantly. Checking local utility tariffs and recent usage is critical for accurate monthly estimates.

Installation, Maintenance, And Miscellaneous Monthly Considerations

Installation Costs And Monthly Amortization

Higher upfront cost for a gas furnace or required gas line can be amortized over years. For example, a $4,000 installation amortized over 10 years equals about $33 per month before financing costs.

Electric furnaces tend to have lower installation costs, so monthly amortized cost can be smaller, affecting total monthly expense.

Maintenance And Repair Costs

Gas furnaces require annual inspection and service for combustion safety; average annual maintenance ranges $80–$200. Electric furnaces have fewer mechanical parts and lower service needs but still require periodic checks.

Budgeting $7–$20 per month for maintenance and repairs gives a realistic monthly cost picture when comparing systems.

Safety, Venting, And Insurance

Gas systems require venting and carbon monoxide monitoring; homeowners may face costs for CO detectors and periodic vent cleaning. Insurance premiums are typically unaffected, but safety equipment adds a small monthly-equivalent cost.

Environmental Impact And Carbon Costs

Electric furnaces produce no on-site combustion emissions, but overall carbon footprint depends on the electricity generation mix. States with renewable grids yield lower indirect emissions for electric heating.

Natural gas combustion emits CO2 on-site. Some regions or carbon-pricing policies can increase effective monthly cost for gas heating through taxes or required offsets.

When Electric Heating Might Be Cheaper

• Electricity rates are low relative to gas in the local market.
• The home is in a mild climate with limited winter heating demand.
• Heat pump options (not covered here) are available and highly efficient compared to resistance electric furnaces.

In such cases, monthly electric heating bills can be comparable or lower than gas, especially if the utility offers off-peak rates or time-of-use pricing that favors overnight heating or preheating strategies.

When Gas Heating Is Typically Cheaper

• Cold climates with high heating degree days.
• Low natural gas prices in the area.
• High-efficiency gas furnaces with AFUE above 90%.

Under these conditions, gas furnaces usually deliver lower monthly heating costs due to cheaper fuel per unit heat and good AFUE performance.

Practical Tips To Lower Monthly Heating Bills

• Lower thermostat settings by 1–3°F to reduce monthly energy consumption significantly.
• Improve insulation and air sealing to cut heat loss and monthly fuel use.
• Seal and insulate ducts; reduce distribution losses to improve effective system efficiency.
• Install a programmable or smart thermostat to tailor heating schedules to occupancy.
• Consider hybrid systems: a gas furnace paired with a heat pump can optimize monthly costs across seasons.

Incentives, Rebates, And Financing That Affect Monthly Cost

Federal tax credits, state rebates, and utility incentives can reduce upfront costs and indirectly lower monthly expense by making high-efficiency systems more affordable.

Financing promotions with low interest or zero-interest loans convert lump-sum installation costs into manageable monthly payments; include these when comparing total monthly ownership costs.

Decision Checklist For Monthly Cost Comparison

1. Gather recent utility bills for electricity and gas to calculate local unit prices.
2. Estimate annual heating load or use past annual usage to determine monthly averages.
3. Compare installed system AFUE (gas) and distribution losses for both options.
4. Include amortized installation, maintenance, incentives, and safety equipment in monthly totals.
5. Factor in climate severity and expected lifecycle of the equipment.

Using this checklist helps produce a realistic monthly cost comparison tailored to a specific home and location rather than relying on national averages alone.

Real-World Example: Comparing Two Cities

City	Electric Rate	Gas Rate	2,000 sq ft Monthly Electric Cost	2,000 sq ft Monthly Gas Cost
Minneapolis	$0.12/kWh	$1.20/therm	$180 (1,500 kWh)	$150 (128 therms ÷ 0.90)
San Diego	$0.28/kWh	$1.00/therm	$420 (1,500 kWh)	$142 (128 therms ÷ 0.90)

These hypothetical examples show how regional energy prices and climate can flip the cost advantage between electric and gas heating.

Frequently Asked Questions About Monthly Furnace Costs

How Much Will An Upgrade Change My Monthly Bill?

Upgrading from an old low-AFUE gas furnace to a new high-efficiency model can reduce fuel consumption by 10%–30%, lowering monthly bills accordingly. Switching fuel types yields varying results depending on local prices and efficiency gains.

Do Electric Furnaces Have Hidden Costs?

Hidden costs include higher peak demand charges in some commercial rate structures and potential upgrades to home electrical service. Check with the local utility for residential demand charges and service capacity requirements.

Should Homeowners Consider Heat Pumps Instead?

Heat pumps can be far more efficient than electric resistance or gas furnaces in many climates, often delivering lower monthly heating costs. Evaluating a heat pump or hybrid approach is recommended when comparing long-term monthly expense.

Recommended Next Steps For Accurate Monthly Estimates

1. Collect 12 months of utility bills for electricity and gas.
2. Request a professional energy audit to quantify heat loss and duct efficiency.
3. Get quotes for comparable electric and gas systems, including installation, venting, and permits.
4. Calculate amortized installation and maintenance costs to add to monthly energy estimates.

Following these steps provides a data-driven monthly cost comparison to inform the best heating decision for a specific home and budget.