1. The four questions that separate energy efficiency from beneficial electrification
The old framework asked one question: did metered fuel use go down? For a heat pump, that question isn’t enough. Different jurisdictions have solved the problem differently, but almost all of them are ultimately answering some subset of these four:
Does electricity use decrease?
Not necessarily. A gas-to-electric conversion almost always increases the site’s electricity use, even when the building is more efficient overall. That’s the whole reason the old accounting framework misclassified heat pumps as load growth.
Does total building energy decrease?
Often, and increasingly central. Converting gas Btus into electric kWh at a coefficient of performance well above 1.0 typically reduces total site energy consumption. That’s the metric a growing number of state statutes and technical reference manuals now use as the gating test.
Do emissions decrease?
Increasingly important. When a state or utility is chasing a decarbonization target rather than a pure kWh-savings target, emissions replace or supplement the site-energy test. New York City’s Local Law 97 beneficial electrification credit is the highest-profile example of an emissions-only framework applied to buildings (Urban Green Council).
Does the customer benefit economically?
Increasingly explicit. Site-energy savings and dollar savings are not the same thing. Several states now require utilities to estimate the actual monthly-bill and annual-cost impact for the customer before the electrification measure is installed — a separate disclosure from the engineering savings the utility claims for its own goals.
Key idea: there isn’t one national definition of beneficial electrification. Different states have decided which of these four questions matter, and in what order, before ratepayer dollars flow.
2. Illinois: an unusually clean statutory example
Illinois is one of the cleaner examples of a legislature answering the accounting question directly rather than leaving it to a rulemaking. Beginning in 2022, under the Climate and Equitable Jobs Act (Public Act 102-0662, signed September 15, 2021), the state amended the Public Utilities Act to explicitly allow electric utilities to promote electrification of space heating, water heating, cooling, drying, cooking, industrial processes, and other end uses that would otherwise be served by combustion of fossil fuel at the premises — provided the electrification measure reduces total energy consumption at the premises (Illinois Public Act 102-0662). The specific electrification provision lives in 220 ILCS 5/8-103B(b-27). Utilities can then count those reductions toward their statutory energy-efficiency savings goals.
How the calculation works. Illinois isn’t pretending the heat pump reduces electricity consumption. It explicitly recognizes that fossil fuel decreases while electricity increases, and asks whether the net Btu result at the premises is positive. The 2026 Illinois Statewide Technical Reference Manual (Volume 3, Residential) applies this test directly to residential air-source heat pumps. The formula stated in the TRM is:
SiteEnergySavings (MMBtu) = GasConsumptionReplaced − ElectricConsumptionAdded
Or, expressed with the therm-to-kWh conversion the way it’s often written in policy briefs:
Electrification Savings (kWh-equivalent) = (Fossil Btu Avoided ÷ 3,412) − Added Electric kWh
If SiteEnergySavings is positive, the fuel-switch measure qualifies. If it’s negative — meaning the heat pump added more kWh than it displaced in Btu terms — the measure fails and the utility can’t count it (IL-TRM Vol. 1, Overview).
The savings goal itself is capped. The Illinois Energy Efficiency Policy Manual is explicit that even qualifying electrification savings can only make up a limited share of a utility’s annual savings goal: 5% per year from 2022 through 2025, 10% per year from 2026 through 2029, and 15% per year from 2030 onward — and at least 25% of the counted electrification savings must come from customers in low-income housing (IL EE Policy Manual v3.1). Independent evaluators verify compliance annually.
Why this framing is unusual. Illinois didn’t redefine energy efficiency to mean “kWh savings only.” It added a parallel measurement path that stipulates fossil fuel decreases and electricity increases in the same transaction, and lets the utility count net-positive Btu-at-the-premises as if it were traditional efficiency savings — up to a defined cap and with LMI protection built in. That’s a much clearer public-policy answer than the one many other states reached through regulatory workarounds.
3. The bill-impact disclosure: why this provision exists, and what Heatpump Economics does
The same Illinois statute contains a second provision that’s easy to miss but goes to the core of what this site is about. Section 8-103B(b-27) requires that, prior to installing an electrification measure, the utility provide the customer with:
“an estimate of the impact of the new measure on the customer’s average monthly electric bill and total annual energy expenses”
That’s reproduced verbatim in the state’s policy manual for program administrators, along with detailed guidance on how the estimate is to be computed and disclosed to individual customers using their specific circumstances where possible (IL EE Policy Manual v3.1, Section 12.1).
The provision exists because the Illinois legislature recognized what the accounting formula alone doesn’t say: a heat pump can be a legitimate energy-efficiency measure at the meter and simultaneously make the customer’s bill go up. Energy savings and customer cost savings are not the same thing. The engineering test uses Btus at the premises. The customer’s bill uses dollars, and dollars are governed by the ratio of the electricity rate to the natural-gas rate, which the utility does not control and which varies enormously by state and by rate class.
That’s exactly why Heatpump Economics exists. The engineering answer, the emissions answer, and the customer’s bill answer are three different questions, and any honest heat-pump decision has to answer all three separately.
4. A worked example: 68% less site energy, and still $178 more per year
The clearest way to show how a heat pump can pass the regulatory test and still fail the household’s dollar test is to run the numbers on a single home. Assume a home needs 100 MMBtu of useful annual heating.
The engineering side (Btus at the premises)
A 95% efficient gas furnace needs:
100 ÷ 0.95 = 105.3 MMBtu of natural gas
A heat pump running a seasonal COP of 3.0 needs:
100 ÷ 3.0 = 33.3 MMBtu equivalent of electricity
Convert the electric side to kWh (1 MMBtu ≈ 293.07 kWh):
33.3 MMBtu × 293.07 kWh/MMBtu ≈ 9,769 kWh
The heat pump reduces site energy consumption by roughly 68%. Under the Illinois formula, GasConsumptionReplaced (105.3 MMBtu) minus ElectricConsumptionAdded (33.3 MMBtu) is +72.0 MMBtu — comfortably positive. The measure qualifies.
The customer side (dollars on the bill)
Now apply prices. 105.3 MMBtu of natural gas is about 1,053 therms (1 therm ≈ 0.1 MMBtu).
Same 100 MMBtu of useful heating — annual fuel cost by system
Illustrative rates: $1.50/therm for natural gas and $0.18/kWh for electricity are close to the current U.S. average residential prices. Actual rates — and therefore the sign of the annual cost difference — vary substantially by ZIP code and rate class.
Same heating outcome. Same house. The heat pump:
- Saves approximately 68% of site energy — a huge efficiency improvement that the Illinois formula counts as qualifying beneficial electrification.
- Increases annual heating cost by about $178 — not because the equipment is worse but because U.S. residential electricity and natural gas are priced in roughly a 4:1 to 5:1 ratio per delivered Btu.
Regulatory question: does the electrification measure reduce total energy at the premises? Yes. Customer question: does the heat pump save the household money? Not at these rates.
These aren’t contradictory answers — they’re answers to different questions. And that’s the whole point of the Illinois disclosure requirement: the utility has to tell the customer what the bill will actually do, separately from what the utility gets to claim for its own savings goal.
What moves the customer answer. Rates. A more favorable spark spread — lower electric rates, higher gas rates, or both — flips the sign quickly. So does a higher seasonal COP (cold-climate models above 3.5 in mixed-humid winters), off-peak or heat-pump-specific rate tariffs, and demand-response participation. Those levers are what make heat pumps a money-saving measure in some rate territories and not others, even for the same equipment and the same load.
Bottom line
Heat pumps forced utility energy-efficiency programs to answer a question the old framework couldn’t: is a project that increases electricity use still efficiency? Different states have answered differently. Illinois answered by legislating a clear net-Btu-at-the-premises test in its TRM, capping how much of a utility’s savings goal can come from electrification, requiring at least 25% of counted electrification savings to serve low-income housing, and separately requiring the utility to disclose the actual customer bill impact before the equipment goes in. The two requirements aren’t redundant — they’re acknowledging that energy savings and money savings are two different measurements, and that any honest program has to be transparent about both.
For a household reading this, the takeaway is simple: a heat pump can be the right decision on emissions, on total energy, and on comfort, and still increase the annual utility bill at current rates — or vice versa. The Incentives calculator and the Utility Rates page are built specifically so those three questions can be answered separately for a given ZIP code, rate class, and equipment choice.