Electric vs Gas Water Heater: 10-Year Cost Comparison by State

Choosing between an electric and gas water heater involves more than comparing sticker prices. The real cost emerges over years of operation, and where you live dramatically affects which technology wins. We break down the 10-year total cost of ownership across different state energy markets.

Understanding Water Heater Efficiency Ratings

Water heater efficiency is measured by the Uniform Energy Factor (UEF), which replaced the older Energy Factor (EF) rating. The UEF indicates how efficiently a water heater converts energy into hot water, with higher numbers meaning better efficiency.

Typical UEF ratings by type:

• Standard electric tank: 0.92-0.95 UEF
• Standard gas tank: 0.60-0.70 UEF
• High-efficiency gas tank: 0.80-0.82 UEF
• Heat pump water heater: 2.75-4.00 UEF
• Tankless gas: 0.87-0.96 UEF

Notice that heat pump water heaters achieve UEF ratings above 1.0 because they move heat from surrounding air rather than generating it directly. This makes them two to four times more efficient than conventional electric water heaters.

The Operating Cost Formula

To calculate annual water heating costs, use this formula:

Annual Cost = (Hot Water Usage x 365 x Temperature Rise x 8.33) / (UEF x Energy Content) x Rate

For a typical household using 64 gallons of hot water daily with a 70 degree F temperature rise:

• Standard electric (0.93 UEF): ~4,800 kWh/year
• Standard gas (0.65 UEF): ~240 therms/year
• Heat pump (3.5 UEF): ~1,270 kWh/year

Your actual costs depend entirely on local electricity and natural gas prices.

State-by-State Cost Differences

Energy prices vary dramatically across the United States, creating clear winners and losers depending on your location.

Cheap Gas States: Texas and the Gulf Coast

Average rates: $0.12/kWh electricity | $0.80/therm natural gas

Texas and other Gulf Coast states benefit from abundant natural gas production, resulting in some of the lowest gas prices nationally. Electricity rates remain moderate.

Annual operating costs:

• Standard electric: ~$576/year
• Standard gas: ~$192/year
• Heat pump: ~$152/year

Gas water heaters dominate in Texas, with annual savings of nearly $400 compared to standard electric. However, heat pump water heaters edge out even gas in operating costs while offering the bonus of dehumidifying garage or utility spaces.

Cheap Electricity States: Washington and the Pacific Northwest

Average rates: $0.09/kWh electricity | $1.35/therm natural gas

Hydroelectric power gives Washington, Oregon, and Idaho some of the nation’s cheapest electricity. Combined with higher gas prices, electric water heaters become surprisingly competitive.

Annual operating costs:

• Standard electric: ~$432/year
• Standard gas: ~$324/year
• Heat pump: ~$114/year

Heat pump water heaters are the clear winner here, costing roughly one-third what gas units cost to operate. Even standard electric water heaters come within $100 of gas annually.

High-Cost States: California and the Northeast

California average rates: $0.25/kWh electricity | $1.60/therm natural gas

Massachusetts average rates: $0.22/kWh electricity | $1.45/therm natural gas

High energy costs in both categories make efficiency critical. Standard water heaters of either type become expensive to operate.

Annual operating costs (California):

• Standard electric: ~$1,200/year
• Standard gas: ~$384/year
• Heat pump: ~$318/year

Gas still wins against standard electric in California, but heat pump technology delivers the lowest operating costs despite high electricity rates. The efficiency multiplier overcomes the price premium.

Upfront Costs and Installation

Equipment and installation costs significantly impact total ownership cost:

Typical installed costs:

• Standard electric tank (50 gal): $800-$1,200
• Standard gas tank (50 gal): $1,200-$1,800
• High-efficiency gas tank: $1,600-$2,200
• Heat pump water heater: $2,200-$3,500
• Tankless gas: $2,500-$4,000

Gas water heaters cost more upfront due to venting requirements and gas line connections. Heat pump units carry premium prices but qualify for federal tax credits of up to $2,000 under current energy efficiency incentives, potentially cutting the effective cost significantly.

10-Year Total Cost of Ownership

Combining upfront costs with a decade of operation reveals the true cost picture. We assume 2% annual energy price increases.

Texas (Cheap Gas Market)

• Standard electric: $1,000 + $6,330 = $7,330
• Standard gas: $1,500 + $2,110 = $3,610
• Heat pump: $2,800 + $1,670 = $4,470

Winner: Gas (saves $860 over heat pump, $3,720 over standard electric)

Washington (Cheap Electricity Market)

• Standard electric: $1,000 + $4,750 = $5,750
• Standard gas: $1,500 + $3,560 = $5,060
• Heat pump: $2,800 + $1,250 = $4,050

Winner: Heat pump (saves $1,010 over gas, $1,700 over standard electric)

California (High-Cost Market)

• Standard electric: $1,000 + $13,180 = $14,180
• Standard gas: $1,500 + $4,220 = $5,720
• Heat pump: $2,800 + $3,490 = $6,290

Winner: Gas (saves $570 over heat pump in operating costs, but heat pump closes gap with tax credits)

The Heat Pump Factor

Heat pump water heaters deserve special consideration. Despite higher upfront costs, they offer compelling advantages:

• Efficiency: 2-4x more efficient than any other option
• Tax credits: Federal credits up to $2,000 reduce effective cost
• Dehumidification: Removes moisture from installation space
• No combustion: Eliminates carbon monoxide risk and venting needs
• Future-proofing: Aligns with grid decarbonization trends

The main limitation is installation location. Heat pump water heaters need at least 750 cubic feet of air space and work best in unconditioned spaces like garages where they can extract ambient heat without cooling your living area in winter.

Making Your Decision

Consider these factors when choosing:

Choose gas if:

• Natural gas costs under $1.00/therm in your area
• Electricity exceeds $0.15/kWh
• You have existing gas infrastructure
• Upfront cost is the primary concern

Choose heat pump if:

• Electricity costs under $0.15/kWh
• You have suitable installation space
• You qualify for tax credits and rebates
• You want the lowest long-term operating cost

Choose standard electric if:

• Upfront budget is extremely limited
• Installation space prevents heat pump use
• Your area has very cheap electricity

The Bottom Line

There is no universal winner in the electric versus gas water heater debate. Geography matters enormously. Homeowners in Texas and other cheap-gas states save thousands by choosing gas. Those in the Pacific Northwest can confidently go electric, with heat pumps offering exceptional value.

For most homeowners, the 10-year analysis reveals that heat pump water heaters deliver the lowest total cost of ownership in moderate-to-high electricity markets once tax credits are applied. In cheap gas markets, conventional gas water heaters remain the economical choice.

Run the numbers with your actual utility rates before deciding. A few minutes of calculation can save you thousands over the life of your water heater.