Widespread adoption of heat pumps is essential to achieving net-zero emissions by 2050, and the important interim greenhouse gas reduction goals by 2030. However, for many households, high electricity costs remain a barrier to making the switch. To address this, the Massachusetts Department of Public Utilities (DPU) has ordered the state’s three investor-owned utilities (IOU’s - Unitil, National Grid, and Eversource) to introduce seasonal heat pump rates, offering discounted electricity for heat pump users during the winter months, a concept Maine has already implemented.

In addition, at the request of the Department of Energy Resources (DOER), the DPU opened a new proceeding in March to explore even stronger rate designs. The Interagency Rates Working Group (IRWG), a collaboration of state agencies, modeled several possible rate designs that will inform this docket. 

Some Massachusetts Households Can Already Save with Heat Pumps

As of right now, Unitil and National Grid’s heat pump rates have been approved by the DPU. Eversource recently submitted its heat pump rate proposal, and it’s now under review by the DPU. All three utility rates are expected to be in effect by November 1, 2025.  

A recent analysis by Switchbox reveals that many more Massachusetts households can save with heat pumps than many might expect – especially those using delivered fuels, electric resistance heat, and even methane gas. The table below shows savings based on three different scenarios.

Last winter, under default electric rates, about 45% of households would have seen lower heating bills by switching to a heat pump. But with the DPU’s newly approved heat pump rates, that number jumps to 64%. 

AND IT GETS EVEN BETTER.

Under the IRWG’s proposed rates, 82% of households would save money in the winter by making the switch, with typical savings of $687 per heating season!

The DPU’s move to adopt seasonal heat pump rates is very positive. However, if Massachusetts regulators adopt the IRWG proposed heat pump rates, they would enable many more households to save by switching to a heat pump. 

Even households currently using methane gas, the most common heating fuel in the state, stand to benefit. 74% percent of gas-heated homes would see savings, with median seasonal savings of $361. This meets the definition of a game-changer. 

For those using more expensive fuels, the potential for savings is even greater: 91% of homes heated with oil would save, with average savings of $1,071. All homes using electric resistance heat would save, with median savings of $1,755.

Savings Under DOER Proposed Heat Pump Rates Based on Fuel Type

These reforms are especially impactful for low-income residents, many of whom spend a disproportionate share of their income on utilities. Right now, 66% of low-income households pay more than 6% of their income on energy, even with full participation in discount programs. With the DOER’s proposed rate changes and automatic enrollment in income-based electric discounts, that number could drop to just 30% for those who switch from fossil fuels and electric resistance heat to high-efficiency heat pumps, according to Switchbox’s analysis. For families forced to choose between heat, rent, and groceries, this would mean real, measurable relief and a fairer energy system for all. 

It’s All About the Spark Gap 

The Spark Gap is the ratio between prices for electricity and prices for fossil fuels. Heat pumps are far more efficient than systems that run on fossil fuels, so some difference is acceptable. But if the ratio is high, it’s harder to make the financial case for switching away from fossil fuels.

Lower rates do not solve the issue of upfront costs, but they send an excellent price signal to people who may want to convert to heat pumps when their existing fossil fuel system would need replacement anyway. A corollary to this point is that states are already struggling to find money to fund heat pump rebates.

Seasonal Heat Pump Rates = Lower Costs for All Your Winter Energy Use 

For both the approved and proposed rates, the seasonal heat pump rate would apply to a household’s entire electricity usage, not just the heat pump. That means there’s no need for a separate meter. During the winter, heating will make up the bulk of a home’s electricity use, but this lower seasonal rate will also cut costs for everything else powered by electricity: electric vehicles, heat pump water heaters, induction stoves, clothes dryers, and more. Even basic needs like lighting and refrigeration will be cheaper. The result? Significant savings from November through April, especially for households that also have electric vehicles.  

Current Rates Aren’t Fair to Heat Pump Users 

To be clear, the purpose of the seasonal heat pump rate policy is to encourage heat pump adoption, but it would also better align rates with the actual cost of serving heat pump customers. Currently, New England’s electric grid is designed to meet peak demand on hot summer evenings, not winter. As a result, transmission and distribution charges are based on maintaining a summer-peaking grid - costs that heat pump users don’t contribute to. Although heat pumps will increase winter electricity demand, it will be 8 -10 years before the region transitions to a winter peak. Until then, heat pump users won’t trigger major new grid investments even though they will be using more power and paying more to their utility. Without rate adjustments, these customers end up overpaying for winter electricity, effectively subsidizing those without heat pumps. To put it another way, heat pump customers can get relief without imposing an unfair burden on those who do not have heat pumps. 

Conclusion 

Stronger seasonal heat pump rates are a smart, equitable, and urgently needed tool to accelerate the clean energy transition. They not only reflect the true cost of serving heat pump customers but also unlock meaningful savings for a wide range of households, especially low-income residents and those currently using expensive heating fuels. The Massachusetts DPU has taken an important step forward, but there’s still more to be done. By adopting the stronger rates proposed by the Department of Energy Resources, regulators can make clean, affordable heating a reality for many more Massachusetts families. 

Interested in learning more?

Join our upcoming webinar which will explore how smarter rate design can lower bills, improve air quality and support a just transition off fossil fuels. You’ll hear directly from experts at the Massachusetts Department of Energy Resources (DOER), Switchbox, Environmental Defense Fund, Rewiring America and more. Find out how much Massachusetts residents could save by upgrading to a heat pump under DOER’s proposed rates, based on their utility provider, current heating fuel and other factors. You’ll also learn how some heat pump owners could begin seeing lower bills as early as this winter, depending on where they live and whether the utility or DOER rate is implemented. RSVP here.

P.S. In case you’re interested in learning more about the proposed rates that are expected to go into effect this winter, check out the chart below on the 3 different IOU proposals – National Grid & Unitil (both approved) & Eversource (proposed & under review).

You’ll note that Eversource’s proposal takes a different approach than Unitil and National Grid. They decrease both the transmission and distribution rates in the winter; however, they propose to increase those rates in the summer. We are concerned about this as raising the cost of electricity during the hottest months is not equitable, especially as climate change drives more extreme heat. Higher summer rates could penalize the use of efficient electric cooling from heat pumps, undermining the effort to promote heat pump adoption for both clean heating and cooling. Eversource also proposed a different winter definition of October through May instead of November through April, like the other two IOU’s.