New gas furnace + new AC
- Installed
- $11,000$8,600–$13,400
- Energy per year
- $750Baseline
- 15-year total
- $22,200
- Payback
- Baseline
Heat pump or new furnace and AC? For City of Memphis customers
For City of Memphis customers in Tennessee, on the utility's current tariff, local weather.
Quick answer · updated
As of November 2026, for a typical 1,800 sq ft gas-heated home on City of Memphis electricity rates in Tennessee that needs a new furnace and AC: It depends on your quotes. A heat pump saves about $100 a year to run, so it comes out ahead over 15 years if its quote is no more than $1,500 above the quote for a new furnace and AC.
Electricity
15.8¢/kWh
+16% vs. Tennessee average
Heating fuel
$1.24/therm
Gas: 46% of homes here
Climate
2,875
heating degree days · Memphis Intl AP 72334
Rebates
Not checked
not yet researched in Tennessee
Our estimate for this home
It depends on your quotes
It depends on your quotes. A heat pump saves about $100 a year to run, so it comes out ahead over 15 years if its quote is no more than $1,500 above the quote for a new furnace and AC.
Total cost over 15 years
Installed cost plus energy, year by year. Hover or tap the chart to compare.
- New gas furnace + new AC
- Heat pump (replaces both)
- High-efficiency cold-climate heat pump
Show as a table
| Option | Installed cost (typical, range, after rebates) | Energy cost per year | 15-year total | Payback vs. like-for-like |
|---|---|---|---|---|
| New gas furnace + new AC | $11,000 $8,600–$13,400 |
$750 |
$22,200 | Baseline |
| Heat pump (replaces both) Lowest 15-year cost | $11,000 $7,600–$14,300 |
$650 saves $100/yr |
$20,700 | Same price up front, cheaper to run |
| High-efficiency cold-climate heat pump | $14,300 $10,500–$19,100 |
$500 saves $250/yr |
$21,800 | 13.5 years |
What this is based on
- Electricity: RS Standard Residential Rate tariff for City of Memphis, effective 2026-03-04, from the U.S. Utility Rate Database, applied tier by tier to the extra kWh.
- Weather: Memphis Intl AP 72334 (2,875 heating and 2,314 cooling degree days a year, 1991-2020).
- Heating fuel prices (EIA): gas $1.24/therm (Tennessee, average of the last five winter months); propane $3.25/gallon (Tennessee average this heating season); heating oil $5.97/gallon (regional average this heating season).
- Homes in City of Memphis's Tennessee area heat with electricity 52%, gas 46%, propane 1% (U.S. Census Bureau, American Community Survey 2019-2023). The calculator starts with gas, the most common furnace fuel here; pick yours above.
- Tennessee HVAC installer wages are 9% below the U.S. median (BLS), so installed prices are scaled by 0.95.
- Energy use for heating and cooling:
- New gas furnace + new AC: 2,832 kWh and 275 therms a year for heating and cooling
- Heat pump (replaces both): 4,526 kWh a year for heating and cooling
- High-efficiency cold-climate heat pump: 3,504 kWh a year for heating and cooling
Rebates
- We haven't checked heat pump rebates in Tennessee yet, so these numbers leave them out. Utility and state programs can take thousands off a heat pump: ask City of Memphis and your contractor what's available. Each dollar of rebate adds a dollar to the quote gap a heat pump can carry.
How City of Memphis's rates change the answer
City of Memphis's electricity price for a typical home is 16% above the Tennessee average ($0.158 vs. $0.137 per kWh). A heat pump moves your heating from gas, propane or oil to electricity, so the electricity price is the biggest single factor: calculators that use a state average can get the answer wrong for your utility. At these prices, a heat pump is cheaper to run than gas heat for a typical home here.
Common questions
Is a heat pump worth it for City of Memphis customers?
It depends on your quotes. A heat pump saves about $100 a year to run, so it comes out ahead over 15 years if its quote is no more than $1,500 above the quote for a new furnace and AC. This is for a typical 1,800 sq ft home with average insulation that heats with gas and needs both a new furnace and AC; change the details in the calculator above for your home.
How much does a heat pump cost to run on City of Memphis's rates?
About $650 a year for heating and cooling with a heat pump (4,526 kWh), compared with about $750 a year for a new furnace and AC, for a typical 1,800 sq ft home with weather like Memphis Intl AP's.
How much does a heat pump cost to install in Tennessee?
Our typical installed price for a heat pump in Tennessee is about $10,983 (range $7,640 to $14,325), against about $10,983 for a new furnace and AC. Prices are published study ranges scaled for home size and Tennessee installer wages; rebates in Tennessee have not been checked yet, so they are not included. Always compare real quotes.
What electricity price does this use?
Electricity: RS Standard Residential Rate tariff for City of Memphis, effective 2026-03-04, from the U.S. Utility Rate Database, applied tier by tier to the extra kWh.
How we calculate this
Heating and cooling need
Your home's yearly heating and cooling need comes from 1991-2020 NOAA climate normals for the nearest weather station, scaled by floor area and insulation level. If you know last winter's gas use, compare it with the therms in the energy-use list above.
Heating fuels
Choose the fuel your furnace burns: gas, propane, heating oil or electricity. Gas uses the state's average residential price over the last five winter months; propane and heating oil use the U.S. Energy Information Administration's weekly residential prices for this heating season (state, regional or U.S. average, as available), converted by heat content (91,500 Btu per gallon of propane, 138,500 per gallon of oil). An electric furnace is priced through the same electricity rates as the heat pump. The starting fuel is the most common furnace fuel in the utility's area (U.S. Census Bureau, American Community Survey).
Equipment efficiency
New gas or propane furnace 95% AFUE, new oil furnace 85%, electric furnace 100%; new AC SEER2 13.4; standard heat pump SEER2 15.2 / HSPF2 7.8; high-efficiency cold-climate heat pump SEER2 21.5 / HSPF2 10.6. Heat pump efficiency falls as it gets colder, and in cold months part of the heat comes from backup electric strips (or your old furnace, if you keep it). Existing equipment is assumed to be 15-20 years old: an 80% gas or propane furnace, a 78% oil furnace or a SEER2 9.5 AC.
Installed costs
Installed prices vary a lot, so we show a typical price and a range for a home of about 1,800 sq ft with existing ductwork, scaled for larger or smaller homes: furnace and AC together $9,000–$14,000; furnace alone $3,800–$7,000; AC alone $4,500–$9,000; standard heat pump $8,000–$15,000; high-efficiency cold-climate heat pump $11,000–$20,000; electrical panel upgrade, if needed, $1,500–$4,000. These are national figures drawn from published studies and program data (NESCAUM / Energy Solutions, Heat Pumps in the Northeast and Mid-Atlantic: Costs and Market Trends (October 2024); Rewiring America, Upfront cost of home electrification (March 2024); EIA, Updated Buildings Sector Appliance and Equipment Costs and Efficiencies (2023)). The most useful number here is how much more a heat pump can cost than a like-for-like quote and still come out ahead: get quotes for both and compare.
Labor and rebates
Half of each installed price is treated as labor and scaled by the state's median HVAC installer wage relative to the U.S. median (U.S. Bureau of Labor Statistics). Listed rebates are subtracted when the box is ticked; per-ton rebates assume about one ton of capacity per 600 sq ft. Rebates change often and have eligibility rules, so confirm with the program before you buy.
Not included
Financing, maintenance (similar for all options), local town rebates, and changes in energy prices over time.