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NJ electricity rates averaged $0.26/kWh in 2026 after 17-20% increases. At these rates, gas-to-heat-pump savings are narrower than in cheaper-electricity states, but pairing solar with a heat pump offsets the rate impact.
NJ has a unique challenge: expensive electricity ($0.26/kWh) combined with relatively cheap natural gas ($1.35/therm). This page gives you the honest numbers, no exaggeration, and shows exactly how to make heat pumps work economically at current rates.
$0.26/kWh
NJ Average Rate
#12 Highest
National Ranking
~$250/yr
Savings vs Gas (Heat)
~$1,350/yr
Savings vs Oil
Federal 25C Tax Credit Expired (Dec 31, 2025)
The $2,000 federal heat pump tax credit is no longer available. In NJ, your electric rate and state/utility rebates are now the #1 and #2 factors in heat pump economics.
After the June 2025 increases, every NJ utility charges significantly higher rates. Here is what you are paying now and why.
| Utility | Service Area | 2026 Rate | Change vs 2024 | Customers | Notes |
|---|---|---|---|---|---|
PSE&G | Northern & Central NJ | $0.26/kWh | +17% | ~2.3M electric | Largest NJ utility. BGS auction drove June 2025 increase. |
JCP&L (FirstEnergy) | Central & Western NJ | $0.27/kWh | +20% | ~1.1M electric | Steepest increase. Higher delivery charges than PSE&G. |
Atlantic City Electric (ACE) | Southern NJ | $0.24/kWh | +15% | ~560K electric | Lowest NJ rate. South Jersey advantages. |
Rockland Electric (RECO) | Bergen & Passaic (NW NJ) | $0.25/kWh | +16% | ~73K electric | Smallest NJ utility. Shares Orange & Rockland parent. |
Rate
$0.26/kWh
Customers
~2.3M electric
Largest NJ utility. BGS auction drove June 2025 increase.
Rate
$0.27/kWh
Customers
~1.1M electric
Steepest increase. Higher delivery charges than PSE&G.
Rate
$0.24/kWh
Customers
~560K electric
Lowest NJ rate. South Jersey advantages.
Rate
$0.25/kWh
Customers
~73K electric
Smallest NJ utility. Shares Orange & Rockland parent.
The national average is ~$0.18/kWh. NJ residents pay 44% above average. However, Northeast states like Massachusetts ($0.33/kWh) and Connecticut ($0.30/kWh) pay even more. NJ rates are high but not the worst in the region.
The 17-20% increases did not happen overnight. Five structural factors are driving NJ electricity rates upward, and most are likely to continue.
Data center demand in Northern Virginia and the PJM region has driven capacity market prices to record levels. NJ utilities must purchase capacity through PJM auctions, and these costs are passed directly to ratepayers.
New Jersey's Basic Generation Service (BGS) auctions determine default supply rates. The February 2025 BGS auction cleared significantly higher, driving the June 2025 rate increases across all utilities.
NJ utilities are investing billions in grid modernization, storm hardening, and underground cable replacement. These capital expenditures are recovered through delivery charges on customer bills.
Despite lower commodity gas prices, pipeline capacity costs in the constrained Northeast corridor remain high. These transmission costs flow through to gas-fired generation that supplies NJ.
NJ's Renewable Portfolio Standard requires utilities to source increasing percentages of renewable energy. Solar Renewable Energy Certificates (SRECs) and offshore wind contracts add costs to rates.
Annual heating costs compared honestly. The heat pump case is strong for oil/propane/electric resistance homes, but modest for gas conversions at current NJ rates.
| System | Fuel | Fuel Price | Annual Heating Cost | vs HP (COP 3.0) |
|---|---|---|---|---|
| Gas Furnace (96% AFUE) | Natural Gas | $1.35/therm | $1,100/yr | Save $250/yr |
| Heat Pump (COP 3.0 avg) | Electricity | $0.26/kWh | $850/yr | -- |
| Heat Pump (COP 4.0 avg) | Electricity | $0.26/kWh | $640/yr | -- |
| Oil Boiler (85% AFUE) | Heating Oil | $3.80/gal | $2,200/yr | Save $1,350/yr |
| Propane Furnace (92% AFUE) | Propane | $3.25/gal | $1,850/yr | Save $1,000/yr |
| Electric Resistance | Electricity | $0.26/kWh | $2,550/yr | Save $1,700/yr |
Price
$1.35/therm
Annual Cost
$1,100/yr
NJ avg gas price. Most homes use this.
Price
$0.26/kWh
Annual Cost
$850/yr
At NJ avg electric rate. Heating only.
Price
$0.26/kWh
Annual Cost
$640/yr
High-efficiency unit. Mild-temp average.
Price
$3.80/gal
Annual Cost
$2,200/yr
Still ~15% of NJ homes. Huge savings switching.
Price
$3.25/gal
Annual Cost
$1,850/yr
Rural NJ. Strong HP savings case.
Price
$0.26/kWh
Annual Cost
$2,550/yr
Baseboard heat. Worst case. HP saves 65%+.
At $0.26/kWh electricity and $1.35/therm gas, heat pump heating savings are only ~$250/yr vs a high-efficiency gas furnace. NJ gas is CHEAP relative to electricity, which narrows the savings. Compare to MA where $0.33/kWh vs $1.85/therm creates a much wider spread. We will not exaggerate these numbers.
Oil homes ($1,350/yr savings), propane ($1,000/yr), or electric resistance ($1,700/yr) get excellent returns. Plus, heat pumps replace both AC and furnace with one system, and when paired with solar, total savings skyrocket.
Six proven strategies to overcome NJ's high-rate challenge and maximize your heat pump savings.
Generate your own electricity at an effective cost of $0.05-$0.08/kWh. With NJ's excellent SREC-II program ($85.90/MWh for 15 years) and 1:1 net metering, solar effectively reduces your heat pump operating cost by 70-80%. This is the single most impactful strategy.
A COP 4.0 unit costs $640/yr to heat vs $850/yr for a COP 3.0 unit at NJ rates. That $210/yr difference adds up. Cold-climate models like Mitsubishi Hyper-Heating or Daikin Aurora maintain high COP even at 5F.
Keep your gas furnace as backup for the coldest days (below 15-20F). The heat pump handles 80-90% of heating hours at high efficiency, and gas kicks in only during extreme cold when HP efficiency drops. Best economics for NJ's gas-dominant market.
NJ allows third-party electric suppliers (TPS). You can lock in a lower supply rate than your utility's BGS rate while keeping the same delivery utility. Compare offers at NJ BPU's supplier list. Savings of $0.01-$0.03/kWh are possible.
PSE&G and JCP&L offer optional time-of-use rate schedules. Pre-heat or pre-cool during off-peak hours (11 PM - 7 AM) at lower rates, then coast through peak periods. A smart thermostat automates this strategy.
NJ's Whole Home program requires energy audits that often reveal air sealing and insulation needs. Reducing your home's heating load by 20-30% means a smaller, cheaper heat pump and lower annual operating costs at any rate.
At $0.26/kWh, heat pump savings vs gas are modest. But with solar generating electricity at $0.05-$0.08/kWh, your heat pump effectively operates at one-third the cost. This transforms the economics from modest to excellent.
Your NJ electric bill has two main parts: supply (BGS) and delivery. Understanding the structure helps you find savings opportunities.
~2.3M customers — Northern & Central NJ
HP Tip: PSE&G offers $900 heat pump rebates + on-bill financing up to $75K. Combine with TOU for additional 10-15% savings.
~1.1M customers — Central & Western NJ
HP Tip: JCP&L offers tiered rebates: $500/$750/$1,000. Cold-climate HPs get the highest tier. Consider third-party suppliers to reduce the supply component.
~560K customers — Southern NJ
HP Tip: ACE offers up to $1,300 in heat pump rebates. With NJ's lowest rate, South Jersey is the state's best heat pump territory. The southern 4A climate zone also means milder winters.
~73K customers — Bergen & Passaic
HP Tip: RECO has limited heat pump rebate programs. Check NJ Whole Home programs for state rebates up to $7,500 that apply regardless of utility.
Rates will likely continue rising. Grid modernization, offshore wind cost recovery, and capacity market pressure drive increases through 2028.
| Year | Avg Rate | Change | Primary Driver |
|---|---|---|---|
| 2024 | $0.22 | Baseline | Pre-BGS auction rates |
| 2025 (Jun) | $0.26 | +17-20% | BGS auction + PJM capacity |
| 2026 (est) | $0.27-0.28 | +4-8% | Grid modernization surcharges |
| 2027 (est) | $0.28-0.30 | +4-7% | Offshore wind cost recovery begins |
| 2028 (est) | $0.29-0.32 | +3-7% | Continued capacity market pressure |
Pre-BGS auction rates
BGS auction + PJM capacity
Grid modernization surcharges
Offshore wind cost recovery begins
Continued capacity market pressure
If NJ rates rise to $0.30-$0.32/kWh by 2028, your solar system still generates at $0.05-$0.08/kWh. Every rate increase IMPROVES your solar's value. With SREC-II and 1:1 net metering, NJ solar pays back in 6-8 years even without the federal 25D ITC.
The electricity-to-gas price ratio matters more than the electric rate alone. NJ has a unique challenge in this comparison.
| State | Electric Rate | Gas Price | HP Savings vs Gas | Assessment |
|---|---|---|---|---|
Massachusetts | $0.33/kWh | $1.85/therm | ~$450/yr | Higher electric, but gas expensive too — better ratio for HP |
Connecticut | $0.30/kWh | $1.65/therm | ~$350/yr | High rate, moderately expensive gas — decent ratio |
New Jersey | $0.26/kWh | $1.35/therm | ~$250/yr | CHEAP gas narrows savings. Solar essential to close the gap. |
Rhode Island | $0.28/kWh | $1.70/therm | ~$380/yr | Moderate gas — better ratio than NJ |
New York | $0.24/kWh | $1.50/therm | ~$300/yr | Slightly lower rate, similar gas — marginal |
Electric
$0.33/kWh
Gas
$1.85/therm
Electric
$0.30/kWh
Gas
$1.65/therm
Electric
$0.26/kWh
Gas
$1.35/therm
Electric
$0.28/kWh
Gas
$1.70/therm
Electric
$0.24/kWh
Gas
$1.50/therm
Massachusetts has the most expensive electricity ($0.33/kWh) but shows the best heat pump savings vs gas (~$450/yr) because its gas is also expensive ($1.85/therm). NJ's cheap gas ($1.35/therm) is why gas-to-HP savings are narrower here. But for oil or propane homes, NJ shows excellent returns regardless of electric rates.
Common questions about NJ electricity rates and heat pump economics.
NJ electric rates averaged $0.26/kWh after June 2025 increases of 17-20% across major utilities. The primary driver was the Basic Generation Service (BGS) auction clearing at record highs, fueled by PJM capacity market prices driven by data center demand in Northern Virginia. Grid infrastructure investments and renewable energy compliance costs also contribute. NJ is the 12th most expensive state for electricity in the US.
It depends on what you are replacing. Switching from gas furnace: savings are modest (~$250/yr heating only) because NJ gas is cheap at $1.35/therm. Switching from oil: savings are substantial (~$1,350/yr) because oil is expensive at $3.80/gal. Switching from propane: strong savings (~$1,000/yr). Switching from electric resistance: massive savings (~$1,700/yr). The heat pump also provides AC in summer, which adds value if you are comparing total heating + cooling costs.
Atlantic City Electric (ACE) in Southern NJ has the lowest average rate at approximately $0.24/kWh, about 8-12% less than PSE&G ($0.26/kWh) and JCP&L ($0.27/kWh). ACE territory covers most of Southern NJ below the Trenton line. However, all NJ utilities are above the national average of $0.18/kWh.
Most analysts project continued increases of 4-8% annually through 2028. Key drivers: offshore wind cost recovery starting in 2027, ongoing grid modernization surcharges, PJM capacity market pressure from data center growth, and the socialized cost of NJ's clean energy mandates. Solar with net metering is the most reliable hedge against future rate increases.
NJ has a unique challenge: relatively high electricity ($0.26/kWh) combined with cheap natural gas ($1.35/therm). Massachusetts at $0.33/kWh with $1.85/therm gas actually shows BETTER heat pump economics because the electricity-to-gas price ratio is more favorable. Connecticut at $0.30/kWh with $1.65/therm is similar. NJ's cheap gas narrows the heat pump savings window, making solar pairing essential.
Install them together if possible. Solar at an effective cost of $0.05-$0.08/kWh makes your heat pump operate at one-third the utility rate. NJ's SREC-II program ($85.90/MWh for 15 years) and 1:1 net metering make solar financially compelling even without the federal 25D ITC (which expired Dec 31, 2025). A 7-9 kW solar system typically offsets a heat pump's annual electricity consumption.
NJ allows you to buy your electricity supply from a licensed third-party supplier (TPS) instead of your utility's default BGS rate. You keep the same utility for delivery, billing, and outage service. Some TPS plans offer rates $0.01-$0.03/kWh below BGS. However, be cautious of variable-rate plans and teaser rates. Check the NJ BPU's licensed supplier list and compare the full-term cost carefully.
A typical 3-ton heat pump in NJ adds approximately $60-$90/month to your electric bill during winter heating months at $0.26/kWh. However, you eliminate your gas heating bill ($90-$130/month in winter). Net impact varies: gas-to-HP switch saves $10-$40/month in winter; oil-to-HP switch saves $80-$150/month. In summer, the heat pump replaces your AC with equal or slightly lower electricity use due to higher efficiency.
PSE&G offers an optional residential time-of-use rate schedule. Off-peak hours (typically 11 PM to 7 AM weekdays and all weekend) are billed at a lower rate. Heat pump owners can pre-heat or pre-cool during off-peak hours and coast through peak periods using a smart thermostat. This strategy can save 10-15% on heat pump operating costs. Contact PSE&G directly to switch your rate schedule.
The Basic Generation Service (BGS) auction is NJ's mechanism for setting default electricity supply prices. Every February, the NJ BPU conducts an auction where power suppliers bid to serve customers who have not chosen a third-party supplier. The winning auction prices become your supply rate starting June 1. In 2025, these auctions cleared at record highs due to PJM capacity market costs, directly causing the 17-20% rate increases.
Yes, hybrid systems are arguably the best option for NJ's market conditions. At $0.26/kWh electricity and $1.35/therm gas, the crossover temperature (where HP cost equals gas cost) is approximately 15-20F. A hybrid system runs the heat pump down to that temperature, then switches to gas backup. This captures 80-90% of heat pump efficiency benefits while avoiding the coldest-day efficiency penalty. It also eliminates the need for emergency heat strips.
Rising rates actually improve heat pump payback for oil and propane switchers (their fuel costs rise too). For gas-to-HP conversions, rising electric rates slightly extend payback if gas prices stay flat. However, the broader trend matters: if NJ electric rates hit $0.30/kWh by 2027 while gas stays at $1.35/therm, a standard heat pump's heating cost savings shrink further. This reinforces the importance of solar pairing to lock in a low effective electricity rate.
Continue your research with these related guides on NJ heat pump costs, rebates, and comparisons.
Find out exactly how much a heat pump will cost and save based on your NJ home, your local utility, and current electric rates. Includes solar + heat pump pairing analysis.
Last updated: February 2026