DTE Electricity Rates for Heat Pumps

Updated 10/13/2022

Managing Utility Costs for Electrified Buildings

Electrification of existing buildings is a crucial step in decarbonization. The process involves replacing fossil fuel-burning equipment with electric equipment. Consumers want to know how fuel switching affects operating costs and if they will save money or pay more. Switching to an electric car leads to significant savings since driving it costs the equivalent of $1.41 per gallon. The impact on utility costs from switching a building's heating source from natural gas to electricity will depend on electricity cost and equipment efficiency. Lowering the cost per kilowatt-hour during the winter and selecting high efficiency equipment can lead to lower utility bills.

DTE, one of Michigan's main utility providers, offers special electricity rates for building heating. These rates include:

Rate D1.1 provides the deepest discount for winter electricity costs, however it is not available in voltages suitable for large capacity, commercial heat pumps. Rider No.8 provides these higher voltages and is suitable for larger, heating dominant commercial installations. Further information about what each rate costs and who qualifies is provided below. We will also look at the Breakeven Heat Pump Efficiency required to save money compared to natural gas equipment.

DTE Electricity Rates for Heat Pumps

Rate No. D1.1 - Interruptible Space Conditioning Service Rate

Best for residential and small commercial properties

Season
Cost per kWh
Percentage of Base Rate
Property
June-October (Cooling)
$0.142070
82%
Residential
November-May (Heating)
$0.109700
64%
Residential
June-October (Cooling)
$0.128063
99%
Commercial
November-May (Heating)
$0.095033
73%
Commercial

This rate is available for residential and commercial properties. It provides a separately metered, interruptible service for central air conditioning and/or central heat pumps. To create a separately metered service, an electrician installs a dedicated space conditioning meter next to the main building electricity meter. The mechanical equipment is then wired to a panel fed from the new meter. The service is interruptible, meaning DTE can turn off the electricity to the space conditioning equipment through a radio control unit. This allows DTE to balance its electricity demand. For example, it may temporarily turn off air conditioning equipment during a hot summer afternoon. In exchange for this, the customer gets a lower electricity rate. The utility will limit interruptions to intervals of no longer than 30 minutes in any hour and no longer than 8 hours in any 24-hour period. This is a relatively minor inconvenience to customers, whose thermostats may drift a few degrees off set point. Applied over many properties, it provides a big benefit to the utility.

 

Electricity Costs

The electricity costs for rate No. D1.1 are split between winter (November-May) and summer (June-October). There is a significantly higher discount for electricity over the winter which makes this a good rate to use with heat pumps. The savings are greater for residential properties.

Qualifying Equipment

Only ducted or hydronic (hot water) systems qualify. Window AC and through the wall units are not allowed on this rate. The compressor and condenser fans contained in the outdoor unit of a heat pump should be fed through the space conditioning meter. The indoor blower in the air handling unit or furnace cannot be fed through the space conditioning meter if it has a redundant gas-fired heater or other heating or cooling source beyond the heat pump. For ground source systems the heat pump and dedicated water pump will be fed from the space conditioning meter. A well pump that provides drinking water may not be connect to the dedicated meter.

More detailed installation requirements are provided in DTE's Electric Service Installation Guide.

Switch from Existing Rates

Customers with the following rates can switch to D1.1:

  • Residential Rates D1, D1.2, D1.3, and D2

  • Commercial General Service Rate D3

Available Voltages

Rate D1.1 is available for lower voltage services typical of residential and light commercial.

  • 120/240V single phase (typical on all residential and some light commercial properties)

  • 208V three phase may be available for commercial properties

Rate No. D5 - Water Heating Service Rate

Good for buildings with large water heating demand

Cost per kWh
Percentage of Base Rate
Property
$0.124463
72%
Residential
$0.092853
72%
Commercial

This rate is available for residential and commercial properties. It provides a separately metered, interruptible service for domestic water heating equipment. To create a separately metered service, an electrician installs a dedicated water heating meter next to the main building electricity meter. The water heater is then wired to a panel fed from the new meter. The service is interruptible, meaning DTE can turn off the electricity to the water heater through a radio control unit. This allows DTE to balance its electricity demand. For example, it may temporarily turn off water heaters during periods of surging electricity demand. In exchange for this, the customer gets a lower electricity rate. The utility will limit interruptions to intervals of no longer than 4 hours in any 24-hour period. This is a relatively minor inconvenience to customers, whose water may cool a few degrees. Applied over many properties, it provides a big benefit to the utility.

 

Electricity Costs

The electricity costs for rate No. D5 provide a 28% discount from the standard rates.

Qualifying Equipment

Electric resistance and heat pump water heaters qualify for this rate. Solar assisted water heaters also qualify. Tank water heaters must be at least 30 gallons for residential properties and 40 gallons for commercial properties. Multiple water heaters may be connected to a single customer meter or multiple individual water heater meters in multi-occupancy buildings.

More detailed installation requirements are provided in DTE's Electric Service Installation Guide.

Switch from Existing Rates

Customers with the following rates can switch to D5:

  • Residential Rates D1, D1.2, D1.3, and D2

  • Commercial General Service Rate D3

Available Voltages

Rate D5 is available for all voltage services that typical water heaters require.

  • 120/240V Single Phase (typical on all residential and some light commercial properties)

  • 208V Three Phase

  • 277/480 Three Phase

Standard Contract Rider No.8 - Commercial Space Heating

Best for large, heating dominant, commercial heat pump systems

This rate is available for commercial properties. It provides a separately metered service for electric space heating, water heating, air conditioning, or humidity control equipment. To create a separately metered service, an electrician installs a dedicated meter next to the main building electricity meter. The mechanical equipment is then wired to a panel fed from the new meter. Unlike Rates D1.1 and D5, this service is not interruptible.

 

Electricity Costs

The electricity costs for Rider No.8 are split between winter (November-May) and summer (June-October). During the summer, electricity costs are higher than the general service rate. Over the winter there is a discounted rate for electricity used after the first 1,000 kWh per month. A typical 20-ton heat pump would consume 1,000 kWh after about 40 hours of run time at full capacity. This rate is best suited for large, heating dominated, commercial applications.

Season
Cost per kWh
Percentage of Base Rate
Property
June-October (Cooling)
$0.144763
112%
Commercial
November-May (Heating) First 1000 kWh
$0.144763
112%
Commercial
November-May (Heating) After First 1000 kWh
$0.104393
81%
Commercial

Qualifying Equipment

 Electric space heating, water heating, air conditioning, or humidity control equipment may be connected to the dedicated meter provided that all of the space heating is fully electric. An electric heat pump supplemented by a fossil fuel furnace installed on a permanent basis may also be connected.

Switch from Existing Rates

Customers with the following rates can add Rider No.8:

  • Commercial General Service Rate D3

  • Large Commercial General Service Rate D4

Available Voltages

Rider No.8 is available for all typical commercial voltages and phases. This allows larger heat pumps to be connected than would be served by Rate D1.1.

  • 120/240V Single Phase

  • 208V Three Phase

  • 277/480 Three Phase

 
 
 
 

Breakeven Heat Pump Efficiency

How efficient does a heat pump need to be to match the cost of natural gas equipment

Property
Gas Equipment Comparison
DTE Electric Rate
Breakeven COP
Residential
Furnace - 95% Efficiency
D1.1
3.18
Commercial
Furnace - 95% Efficiency
D1.1
2.71
Commercial
Boiler - 85% Efficiency
Rider No.8
2.77
Commercial
Water Heater - 80% Efficiency
D5
2.23

Electricity costs between three and four times as much as natural gas per unit of energy. This means that equipment efficiency is crucially important when electrifying a building's heating system.

Gas-Fired Equipment Efficiency

Older furnaces and boiler with water above 135°F have efficiencies between 80 - 85%. Modern condensing furnaces and lower temperature boilers can have efficiencies around 95%. 

Electric Resistance Efficiency

Electric resistance heating, with current passed through heating elements, is found in electric baseboards and traditional electric water heaters. Practically all the electricity is converted to heat, giving this equipment near 100% efficiency.

Heat Pump Efficiency

Instead of generating heat from electricity like resistance heating, a heat pump moves heat from a cold space to a warm space. Electricity powers a refrigerant compressor inside the heat pump and can move two to four kilowatts of heat for every kilowatt of power. This gives heat pumps efficiencies between 200 - 400%.

 

The industry standard measure of heat pump heating efficiency is the Coefficient of Performance (COP). The COP is defined as the heat output divided by the electric power consumed. A 200% efficient heat pump has a COP of 2. The table below explores the breakeven heat pump COP where operating costs are equal to that of the listed gas equipment at the DTE electricity rates discussed.

*The Rider No.8 calculation uses a blended rate with 10% from the first 1000 kWh rate and 90% from the after 1000 kWh rate.

*Based on a residential gas cost of $0.9889/CCF and commercial gas cost of $1.00409/CCF.

Commercial water heaters will have the easiest time surpassing the breakeven COP. Commercial rates D1.1 and Rider No.8 have breakeven COP's within the range of available heat pump models. The cost breakdown for residential heat pumps gives a higher breakeven COP which may be harder to achieve.

Keep in mind that the COP of heat pumps decreases as the temperature of the source air or water decreases. This means that the COP changes throughout the heating season. The manufacturer listed COP is likely for an outdoor temperature of 47°F.  An averaged COP can be calculated for a specific location's typical weather. In Michigan it will likely be lower than the listed COP.

The breakeven COP depends on the cost of natural gas, which can fluctuate on a monthly basis.