Propane vs. electricity cost depends on local fuel rates and the heating system’s efficiency. For delivered heat, propane commonly costs about $30-$49 per million BTU, electric resistance heat about $35-$59, and an efficient heat pump about $14-$24 using the sample rates below.
The comparison uses $2.50-$4.00 per gallon for propane and $0.12-$0.20 per kilowatt-hour for electricity; actual bills vary by location, season, and supplier.
| Item | Low | Average | High | Notes |
|---|---|---|---|---|
| Propane furnace heat | $30 per million BTU | $40 per million BTU | $49 per million BTU | At 90% furnace efficiency and $2.50-$4.00 per gallon |
| Electric resistance heat | $35 per million BTU | $47 per million BTU | $59 per million BTU | At $0.12-$0.20 per kWh |
| Electric heat pump heat | $14 per million BTU | $19 per million BTU | $24 per million BTU | Illustrative seasonal COP of 2.5 |
| Annual heat for 50 million BTU | $700-$1,500 | $950-$2,350 | $1,200-$2,950 | Depends on system type and fuel rate |
Assumptions: delivered-energy charges only; excludes fixed utility fees, equipment purchase, maintenance, and taxes.
What Propane and Electric Heat Cost Per Million BTU
For a typical furnace, propane costs about $30-$49 per million BTU of useful heat; resistance electricity costs about $35-$59. The heat pump estimate is lower, around $14-$24 per million BTU, because it moves heat rather than making all of it from electricity. These figures compare operating energy, not the cost to install or replace equipment.
A gallon of propane contains roughly 91,500 BTU. At 90% furnace efficiency, about 82,350 BTU reach the home as heat. At $2.50-$4.00 per gallon, that works out to approximately $30-$49 per million useful BTU. A 95% furnace uses less propane per unit of delivered heat, lowering the fuel cost by roughly 5% compared with a 90% model, all else equal.
Electric resistance equipment converts nearly all electricity into heat at the point of use. It takes about 293 kWh to deliver one million BTU; at $0.12-$0.20 per kWh, that is approximately $35-$59. A heat pump with a seasonal coefficient of performance (COP) near 2.5 uses about 117 kWh for the same heat, or roughly $14-$24.
These are working estimates rather than guaranteed local quotes. Propane prices can include delivery fees or tank charges, while electric bills may include delivery charges beyond the advertised energy rate. Use the full marginal rate on the bill when comparing the next unit of consumption.
How Furnace, Tank, and Wiring Charges Shape Quotes
Equipment, installation, and site work can outweigh a small difference in annual fuel bills. The following broad U.S. ranges are planning estimates for common residential projects, not bids. They vary with capacity, access, local labor, existing ductwork, and whether an old system must be removed.
| Quote item | Low | Average | High | Typical scope |
|---|---|---|---|---|
| Propane furnace installed | $3,500 | $6,500 | $11,000 | Common 60,000-100,000 BTU unit and standard replacement labor |
| Heat pump installed | $5,500 | $9,500 | $16,000 | Central ducted system; complex upgrades may exceed range |
| Electric resistance furnace installed | $2,000 | $4,000 | $7,500 | Equipment and standard electrical installation |
| Propane tank setup | $500 | $1,500 | $3,500 | Small aboveground tank or more involved tank placement |
| Electrical panel or circuit upgrade | $500 | $2,000 | $5,000 | Added capacity, wiring, or panel work where required |
Some propane suppliers lease tanks, reducing initial setup charges but potentially requiring fuel purchases from that supplier. Ask whether tank rental, leak checks, delivery, and minimum-use fees are included. For electric equipment, confirm that the quote covers breakers, disconnects, wiring, and any panel work, not just the heating unit.
Installation prices should identify equipment capacity and efficiency, labor, permits, removal, and warranty. For example, 10-16 labor hours at $75-$125 per hour represents $750-$2,000 before equipment, materials, and overhead.
How kWh Rates, Propane Prices, and Cold Weather Change the Bill
Fuel rates and system performance matter more than the equipment label alone. At $0.12 per kWh, resistance heat is about $35 per million BTU; at $0.20, it is about $59. A heat pump at COP 2.5 costs about $14-$24 across those same rates. If cold weather reduces its seasonal COP to 1.8, its cost rises to roughly $20-$33 per million BTU.
Propane’s cost moves with the delivered price per gallon. At $2.50 per gallon, a 90% furnace delivers heat for around $30 per million BTU. At $4.00 per gallon, it is around $49. Delivery distance, order size, tank ownership, and contract terms can affect the final per-gallon amount, so compare the invoice total rather than a posted commodity price.
Heating demand also changes the annual result. A well-insulated home requiring 30 million BTU of seasonal heat spends less than a drafty home needing 70 million BTU, even at identical rates. Higher indoor setpoints, air leakage, and long cold spells increase consumption. In very cold conditions, a heat pump may use backup resistance strips, which can sharply increase electricity use.
When estimating a heat pump’s cost, use its seasonal performance for the local climate rather than a best-case rating. A system designed for cold-weather operation may maintain a higher COP at low outdoor temperatures than a standard model, but its purchase price can be higher. Request projected annual kWh and the assumptions behind the estimate.
What a 50-Million-BTU Heating Season Looks Like
For the same 50 million BTU of delivered seasonal heat, a heat pump can use substantially less energy spending than resistance heat. At the sample average rates—$3.25 per gallon propane and $0.16 per kWh electricity—the estimated seasonal operating costs are about $1,975 for a 90% propane furnace, $2,345 for resistance heat, and $940 for a heat pump at COP 2.5.
| System and assumptions | Energy use | Low-rate bill | Average-rate bill | High-rate bill |
|---|---|---|---|---|
| 90% propane furnace | About 607 gallons | $1,520 | $1,975 | $2,430 |
| Electric resistance | About 14,655 kWh | $1,760 | $2,345 | $2,930 |
| Heat pump at COP 2.5 | About 5,862 kWh | $700 | $940 | $1,170 |
Low and high bills pair the low and high energy rates in the opening table: propane at $2.50 or $4.00 per gallon, and electricity at $0.12 or $0.20 per kWh. The table uses rounded figures and excludes fixed fees. The heat pump’s COP is held constant to make the comparison readable; actual seasonal performance can differ.
For a household with a different heat requirement, multiply its estimated useful heat by the relevant per-million-BTU cost. Past fuel deliveries, utility usage history, and an energy audit can provide a better estimate than floor area alone. If a quote gives annual savings without stating heat demand, rates, and system efficiency, the projection is difficult to verify.
How Home Size and Equipment Capacity Shift the Estimate
Heating load, not square footage by itself, determines how much fuel a home consumes. A 1,500-square-foot home with good insulation and mild winters may need much less heat than a poorly sealed home of the same size in a colder climate. A contractor’s load calculation should account for windows, insulation, air leakage, ceiling height, and local design temperatures.
Capacity affects purchase price as well as operation. A common residential furnace may fall around 60,000-100,000 BTU per hour, while larger or unusually demanding homes can need more. Oversizing can cause frequent cycling and reduce comfort; undersizing can leave the home short of heat during peak cold. The correct size should follow a documented load calculation, not a rule of thumb based only on square footage.
For heat pumps, the system’s capacity at low outdoor temperatures matters. Ask for heating output at the local winter design temperature, not only nominal capacity at a mild test condition. If the unit relies heavily on resistance backup below a certain temperature, the operating-cost estimate should include that backup use.
Fuel use and electric consumption also respond to thermostat settings and building improvements. Air sealing and insulation can lower the required heat load before a system is replaced. A 10%-20% reduction in heating demand can reduce the variable portion of the annual heating bill by roughly the same percentage, though fixed utility charges remain.
Which System Wins in Mild and Severe Winter Regions
Heat pumps generally have the strongest operating-cost case where electricity is reasonably priced and seasonal performance stays high. In mild and mixed climates, a heat pump can deliver several units of heat per unit of electricity for much of the season. In colder regions, cold-climate models can still perform efficiently, but backup heat and the local electricity-to-propane price ratio become more important.
Regional energy prices vary widely, so national averages are not a reliable household forecast. A home in a low-electricity-rate area may favor a heat pump, while high electric rates combined with inexpensive bulk propane can narrow or reverse the operating-cost difference. Rural delivery charges and propane contract terms can also make propane more expensive than the per-gallon quote suggests.
Compare the local cost per useful million BTU. For propane, divide the price per gallon by about 0.082 for a 90% furnace. For resistance heat, multiply the all-in kWh rate by about 293. For a heat pump, divide that electricity result by its seasonal COP. These simple checks help account for local rates without treating one region’s average as universal.
Where winter temperatures regularly fall below a heat pump’s efficient operating range, obtain a dual-fuel estimate if the home can use both systems. The controls may run the heat pump in milder weather and propane during colder periods. Savings depend on the switch-over temperature, fuel prices, and equipment setup, so the contractor should provide the assumptions and estimated seasonal use.
Installation Hours and Old-System Removal Add to the Price
A straightforward replacement may take a day, while duct, electrical, or fuel-system changes can extend the work and raise labor charges. A furnace swap with compatible connections commonly takes 6-12 crew hours. A central heat pump installation may take 10-20 hours, and a project involving new circuits, duct modifications, or difficult access can require more time or additional visits.
Typical HVAC labor rates range from about $75-$125 per hour per technician, with higher charges possible for emergency work or specialized service. A quote may use a fixed installation price instead of an hourly rate. Either way, ask how many workers are included and whether startup testing, thermostat setup, and disposal of the old unit are covered.
Removing an old furnace or tank can add roughly $150-$600, depending on access, local disposal rules, and whether hazardous or regulated materials are present. Duct repairs, condensate drainage, venting changes, and a new thermostat can add $200-$1,500 or more. Tank relocation or underground tank work can cost considerably more than a routine equipment replacement.
Permits and inspections vary by jurisdiction. Allow roughly $50-$500 for ordinary mechanical or electrical permits, with local fees and project scope determining the actual amount. A code-required panel upgrade or vent correction is separate from the permit fee. Have the written quote distinguish required safety work from optional upgrades.
Lower the Propane or Electric Heating Bill Without Overbuying
Reducing the home’s heat demand and comparing complete bids can save more than choosing equipment by its headline efficiency rating. Seal obvious air leaks, maintain filters, and address insulation gaps before sizing a replacement system. Better load calculations may support a smaller unit and prevent paying for unnecessary capacity.
Get at least two or three itemized estimates using the same heating-load assumptions. Compare equipment model, capacity, efficiency, installation labor, controls, warranty, permits, and removal. For propane, include tank rent or purchase, delivery charges, and minimum-use terms. For electric equipment, include the utility rate and any panel or wiring upgrades in the budget.
A heat pump may cost more upfront than a basic resistance furnace or propane replacement, so compare the installed price difference with realistic annual energy savings. For example, a $2,000 annual operating-cost advantage would recover a $4,000 premium in about two years before maintenance and financing; a $300 advantage would take over 13 years. Actual savings must be based on local rates and seasonal performance.
Avoid paying for features that do not match the house or climate. Variable-speed equipment, premium controls, and high-efficiency models can be worthwhile in some situations, but their added price should be supported by estimated energy savings or comfort needs. Check current utility incentives and local rebates before signing, since eligibility and program budgets change. Do not count an incentive until its requirements are confirmed.