AC or furnace failing? Heat pump vs. like-for-like for Salt River Project customers

If your air conditioner or furnace is on its way out, you can replace it with the same kind of system or switch to a heat pump. Here is what each costs to install and to run on Salt River Project's electricity rates in Arizona.

It depends on your quotes. A heat pump saves about $180 a year to run, so it comes out ahead over 15 years if its quote is no more than $2,900 above the quote for a new furnace and AC (counting about $225 in rebates; compare quotes before rebates).

Option	Installed cost (typical, range, after rebates)	Energy cost per year	15-year total	Payback vs. like-for-like
New gas furnace + new AC	$11,400 $8,900–$13,800	$730	$22,200	Baseline
Heat pump (replaces both) Lowest 15-year cost	$11,100 $7,700–$14,600 after $225 rebate	$540 saves $180/yr	$19,300	Cheaper up front and to run
High-efficiency cold-climate heat pump	$14,100 $10,200–$19,100 after $675 rebate	$400 saves $330/yr	$20,100	8.5 years

Typical 1,800 sq ft home with average insulation, both systems replaced. Change the details below.

Your home

What needs replacing?

Both (furnace and AC are old) My AC failed (furnace is fine) My furnace failed (AC is fine)

Heated floor area (sq ft)

Insulation and air sealing

ZIP code (optional)

Your electricity price ($/kWh, optional)

From your bill: total charges ÷ kWh used.

Your gas price ($/therm, optional)

Arizona winter average: $1.78.

With a heat pump I'd cancel gas service (no other gas appliances), saving the monthly gas customer charge (about $15) My electrical panel may need upgrading for a heat pump (adds about $2,400; an electrician can tell you) Include rebates I'm likely to qualify for (SRP Cool Cash rebate)

What this is based on

Electricity: E-23 Tier 1 BASIC PRICE PLAN FOR RESIDENTIAL SERVICE tariff for Salt River Project, effective 2026-01-01, from the U.S. Utility Rate Database, applied tier by tier to the extra kWh.
Weather: TEMPE ASU (1,183 heating and 3,681 cooling degree days a year, 1991-2020).
Gas: Arizona average residential price over the last five winter months (EIA), $1.78/therm.
Installation labor: Arizona HVAC installer wages are 3% below the national median (BLS, $28.56 vs. $29.33/hour), so installed prices here are scaled by 0.99.
Energy use:
- New gas furnace + new AC: 4,120 kWh and 113 therms a year for heating and cooling
- Heat pump (replaces both): 4,381 kWh a year for heating and cooling
- High-efficiency cold-climate heat pump: 3,231 kWh a year for heating and cooling

Rebates

SRP Cool Cash rebate (checked 2026-11-08, valid to 2027-04-30): SEER2 15.2 or better, AHRI-listed, participating contractor. $75/ton single-stage, $150 multi-stage, $225 variable-capacity; same for AC and heat pumps (our like-for-like AC at SEER2 13.4 does not qualify).
APS ended residential HVAC rebates on January 1, 2026. Efficiency Arizona's income-based HEAR rebates no longer cover gas-to-electric switches (since September 1, 2026). The federal 25C tax credit ended with 2025 installs.

How Salt River Project's rates change the answer

Salt River Project's electricity price for a typical home is 11% below the Arizona average ($0.138 vs. $0.155 per kWh). A heat pump moves your heating from gas 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 for a typical home here.

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 shown below.

Equipment. New furnace 95% AFUE; 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 a 15-20 year old 80% furnace or 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)). Local labor costs, your ductwork and your electrical panel all move the price, and rebates can lower it. The most useful number on this page 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). Rebates listed on this page are subtracted when you tick the box; 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.