Utilities are overcharging Rhode Island heat pump owners

New report finds Rhode Island’s electric rates overcharge many heat pump customers

Conservation Law Foundation news release

Rhode Island is encouraging more families to install energy-efficient heat pumps because they can lower energy bills, improve air quality, and reduce climate pollution. 

Yet many households that make the switch aren’t seeing as much savings as they should because the state’s electric rates charge them more than it costs the utility to serve them.

A new independent analysis by Switchbox, commissioned by the Environmental Defense Fund, Conservation Law Foundation, Green Energy Consumers Alliance, Acadia Center, and Sierra Club, finds that Rhode Island’s current electric rates systematically overcharge many households that use heat pumps. The report, Heat Pump Rates in Rhode Island: Analysis of Fair Rates for Heat Pump Customers, shows those households often pay more than they should while effectively subsidizing an outdated fossil fuel heating system. 

The report recommends a dedicated heat pump rate that better reflects the actual cost of serving heat pump customers, helping more households save money while making heat pumps more accessible.

“Heat pumps give us a way to slash heating and cooling bills, something every Rhode Islander wants. Why should we let an outdated system prevent us from saving money?” asked Jamie Rhodes, Conservation Law Foundation’s director of clean buildings. “A heat pump rate would help bring utility operations into the 21st century. The premise is simple: you pay for how much it costs for the utility to provide your electricity. Nothing more, nothing less. No more inflating prices, no more lifelines for heating fuels that are already dying out – that’s just common sense.”

Key findings of the report include:

• Households with heat pumps overpay on their electric bills by an average of about $902 per year.
• Current electric rates wipe out potential savings for many families, with only 21% of households that heat with natural gas saving by switching to a heat pump.
• Under the proposed heat pump rate, 87% of households that heat with natural gas would save by switching.
• Rhode Island’s electric grid has significant room for more heat pumps, with local distribution lines generally unconstrained in winter and substantial capacity to accommodate additional demand.
• The proposed heat pump rate would correct this imbalance with little impact on other customers.

The report comes as Rhode Island policymakers and regulators consider several proposals to help customers manage high winter electricity costs. The organizations welcome efforts to provide near-term bill relief but note those measures do not address the report’s central finding that many heat pump customers are systematically overcharged for electric delivery service. They urge the Rhode Island Public Utilities Commission to adopt a permanent heat pump rate that better reflects the actual cost of serving heat pump customers.

The report finds Rhode Island can help correct this imbalance without significantly increasing costs for other customers by adopting a dedicated heat pump rate that better reflects the actual cost of serving heat pump customers. The finding builds on recommendations Environmental Defense Fund and Sierra Club recently filed in Rhode Island Energy’s general rate case. [See: Public Utilities Commission ends gas subsidies; advances heat pump adoption] While short-term winter bill relief may help customers manage higher seasonal electricity costs, the organizations say lasting savings will require permanent rate reform.

“Rhode Island has made heat pump adoption a priority because it benefits families, the electric grid and the climate,” said Jolette Westbrook, Director and Senior Attorney, Regulatory Solutions at Environmental Defense Fund. “The next step is ensuring electric rates reflect the actual cost of serving heat pump customers so families who make the switch can realize the savings they expect.”

“A heat pump rate is a smart, equitable, and urgently needed tool to accelerate the clean energy transition,” said Amanda Barker, Clean Energy Program Director at Green Energy Consumers Alliance. “It not only reflects the true cost of serving heat pump customers but also unlocks meaningful savings for a wide range of households, including low-income residents and those currently using expensive heating fuels. By adopting a strong heat pump rate like the one proposed in this report, regulators can make clean, affordable heating a reality for many more Rhode Island families.”

“A heat pump rate in Rhode Island will ensure that heat pump customers aren’t overcharged for choosing efficient, clean heating,” said Sarah Krame, Staff Attorney at Sierra Club. “This is smart rate design that will ensure that Rhode Islanders have fair electric rates and can leave outdated heating technologies behind in favor of a clean energy future.”

“Rhode Island’s 2025 Climate Action Strategy underscores the need for a dramatic increase in heat pump adoption,” said Emily Koo, Senior Policy Advocate & Rhode Island Program Director at Acadia Center. “An equitable electric rate for heat pump customers is foundational to transforming the way that we heat our buildings and support affordability.”

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