Gas is the U.S. Energy Information Administration (EIA) 2025 Minnesota residential average, and electricity is Xcel Energy's standard and dual-fuel rates, the same data behind redo.energy calculators.
Most heat pump articles assume gas is expensive. Minnesota has cheap gas. Pipeline gas here runs about $1.07 a therm, some of the cheapest heating fuel in the country.
The math the gas advocates are right about
A modern 95 percent efficient furnace burning $1.07 gas delivers heat, priced per million British thermal units (MMBtu), at:
$1.07 / (0.1 MMBtu x 0.95) = $11.26 per million BTU
A cold-climate heat pump at a Minnesota seasonal coefficient of performance (COP) of about 2.8, meaning 2.8 units of heat per unit of electricity, running on Xcel Energy's standard residential rate of 17.0 cents per kilowatt-hour, delivers the same heat at $17.79 per million BTU. The heat pump loses by about 58 percent. It loses even against an older 80 percent furnace, which makes heat at $13.38. Anyone who tells you a heat pump beats cheap pipeline gas on the standard Minnesota rate is probably selling heat pumps. Our calculator agrees that gas wins this head to head. It prices a Minneapolis home's heating a little lower, at about 15 cents, which puts the heat pump at about $15.66 per million BTU, still about 39 percent behind the new furnace.
That would be the end of the story, except that the standard rate is not the only rate.
The rate that flips it
Xcel Energy publishes a dual-fuel rate, sometimes called controlled service, of about 5.9 cents per kilowatt-hour, roughly a third of the standard price. The discount has a logic to it: the rate applies to heating load the utility is allowed to switch off during the few coldest peak hours of the winter, and the utility will only sign you up because you keep a backup heat source for exactly those hours. Minnesota Power, Otter Tail, and a number of co-ops run similar (occasionally even cheaper) programs.
Run the same heat pump on 5.9 cent power and heat costs $6.21 per million BTU. That is not close anymore, in the other direction. The heat pump now beats the new 95 percent furnace by about 45 percent per unit of heat.
How dual-fuel actually works in a house
Your heat pump carries the house on the cheap interruptible rate. On the handful of worst mornings each winter, the utility flips that circuit off and your furnace, the one you were going to keep anyway, takes over until the peak passes. The interruptions are real but rare, and the furnace covers them; you will mostly not notice they happened. Cooling benefits come along free, since the heat pump replaces your air conditioner and nobody interrupts you in July.
We ran a typical Minneapolis home, one that burns about $1,160 of gas a year for heat, through our calculator. It picked a Bosch IDS Ultra, a cold-climate heat pump, at about $16,600 after rebates. As a dual-fuel setup on Xcel's controlled rate, keeping the furnace, it came out about $540 a year ahead of gas-only heating. That edge is real but slow: the payback is about 19 years, with gas prices rising 4 percent a year and electricity 3 percent, as our calculator assumes. It flags that as an extended payback. Converting the same house fully, with the furnace removed, the same Bosch (about $16,800 after rebates) and the standard rate, came out about $540 a year behind. Same house, same machine. Nearly all of that swing is the rate; the rest is the furnace, rather than electric resistance, covering the coldest hours. The controlled rate is what puts the dual-fuel setup ahead of gas at all.
What to check before buying or signing anything
Ask your utility for the dual-fuel, controlled service, or off-peak heating rate by name; it usually requires a separate meter or a small control device on the heat pump circuit, installed by the utility or your electrician. Then make sure the installer sets the changeover correctly. A dual-fuel system that hands off to the furnace too early gives the savings away; one that runs the heat pump below its economic balance point gives them away in the other direction. The changeover temperature is a number, not a vibe, and it falls straight out of the rate math above.
The takeaway
Heat pump economics are local to a degree national coverage cannot survive. Sixty miles and one utility boundary can flip the verdict. The rate schedule your house sits on matters more than the brand on the equipment, and it is exactly the sort of thing you need to nail down before you consider a heat pump, let alone any specific make or model.
redo.energy calculators model your actual utility's rates, including dual-fuel programs where they exist. Run your address before you believe anyone's verdict, including ours.