When a household replaces a gas furnace (~$5K) with a heat pump (~$16K minus $14K HEAR rebate = $2K net), the upfront savings are significant. But at current flat rates, higher annual operating costs consume that advantage within years. At off-peak TOU rates, the savings compound instead.
Cumulative cost at flat rates vs. gas
Year 4–8
When cumulative HP cost overtakes gas. At WE flat ($0.193/kWh): year 4. At WPSC flat ($0.148/kWh): year 8. The $3K upfront advantage is consumed by higher annual operating costs.
Cumulative cost at off-peak TOU vs. gas
$6,100+
Cumulative savings vs. gas at COEV-R off-peak through year 10. The heat pump stays permanently below gas. Rate design — not the rebate — makes the economics permanent.
Rebates address the upfront cost of conversion. Rate design addresses the ongoing cost of operation. Without rate reform, HEAR creates LMI heat pump adopters who face higher monthly bills than gas-heating neighbors within a few years.
Wisconsin completed 8 programmatic milestones (rebates, definitions, community frameworks) but 0 rate design milestones. The rebate buys time. Only rate reform makes electrification permanently economic for LMI households.
Assumptions: Both scenarios assume the household needs a new heating system. Gas furnace replacement: ~$5,000 installed. Heat pump: ~$16,000 installed minus $14,000 HEAR rebate = $2,000 net. Annual heating load: 80 MMBtu. Gas: 90% AFUE at $9/MMBtu = $800/yr. HP COP 3.0. At WPSC Rg-1 flat ($0.14802/kWh): $1,157/yr. At WE Rg1 flat ($0.19342/kWh): $1,512/yr. At COEV-R off-peak ($0.06223/kWh): $486/yr. At Rg-RR off-peak ($0.07518/kWh): $588/yr. No rate escalation modeled.
Sources: HEAR max rebate ($14,000) — WI CEP 2025, p.20. WPSC Rg-1 ($0.14802) — Sheet E5.00. WE Rg1 ($0.19342) — WE brochure p.3. COEV-R off-peak ($0.06223) — Sheet E13.01. Rg-RR off-peak ($0.07518) — Sheet E5.60. Gas ~$9/MMBtu — approx. WI residential. Equipment costs, heating load, COP, and furnace AFUE are modeling assumptions for a typical WI single-family home.