SMUD pays businesses $1,500 per ton to swap gas-fired packaged or split HVAC for a heat pump in 2026. Its Multifamily program pays up to $3,000 per compressor for an inverter heat pump at a property with five or more units. Light commercial buildings apply through Complete Energy Solutions or Custom Retrofit. Apartment complexes apply through the Multifamily program (SMUD Business Go Electric). In all three, the heat pump money is for gas-to-electric work, and SMUD has to see the project before it is installed.
This guide covers HVAC only: heat pumps for heating and cooling, the electrical work they need, and the order of the paperwork. It skips lighting, refrigeration, EV chargers, cooking and laundry, which SMUD pays for as separate measures. Homeowners should read our guide to SMUD's residential heat pump rebates instead. The home program has its own tiers and rules.
- Is Your Building Residential or Commercial?
- What Does SMUD Pay for Light Commercial Heat Pumps?
- Which Commercial Program Fits Your Building?
- How Do You Apply for Custom Retrofit?
- What Does SMUD Pay for Multifamily HVAC at 5+ Unit Properties?
- How Does the Multifamily Program Work?
- Which Mistakes Cost a Commercial Incentive?
- Frequently Asked Questions
- How Do You Get a Quote With the Incentive Built In?
Key Takeaways
- SMUD's February 2026 business flyer lists $1,500 per ton for packaged and split heat pumps. Built-up or skid heat pumps get $3,000 per ton. Both are for gas-to-electric jobs only.
- Electrical work has its own money on commercial jobs: $20,000 for a transformer upgrade, $2,500 for a main panel and $7,000 through the Commercial Infrastructure Incentive.
- Properties with five or more units get set amounts per compressor, per system or per apartment. Heat pumps with a natural refrigerant earn a 20% adder (SMUD Multifamily).
- The rate on the SMUD bill picks the program. "C&I TOD" means commercial. "Time of Day" means residential.
- Work that starts before SMUD signs off risks losing the money, so the Grid Capacity Evaluation goes in first.
Is Your Building Residential or Commercial?
The program depends on how SMUD bills the building, not on how it looks. SMUD's Q3 2026 newsletter to contractors gives an example. A historic home that runs a business may be on a commercial rate, even though it looks like a house. A project filed under the wrong program can be delayed or denied.
Check the rate name printed on the SMUD bill.
| Rate on the SMUD bill | What it means | Where the project goes |
|---|---|---|
| C&I TOD | Commercial and industrial time-of-day rate | Complete Energy Solutions, Custom Retrofit or Multifamily |
| Time of Day | Residential rate | SMUD's residential heating and cooling rebates |
Unit count matters too. SMUD's home rebates cover single-family homes and buildings of up to four units, as long as each unit has its own SMUD meter (SMUD Heating and Cooling Rebates). The Multifamily program starts at five units. So a fourplex goes through the home rebates, and a five-unit building goes through the Multifamily program.
Location is the last check. These are SMUD programs, so the building has to buy its power from SMUD. For example, a business in Roseville gets its power from Roseville Electric, the city's own utility. None of these SMUD programs apply there. Our Roseville HVAC service page covers that city.
What Does SMUD Pay for Light Commercial Heat Pumps?
A Go Electric incentive is SMUD's payment for replacing gas equipment with efficient electric equipment, such as a heat pump. SMUD's February 2026 business flyer lists one set of heat pump amounts. They apply in Complete Energy Solutions, Custom Retrofit and Integrated Design Solutions.
| Equipment (gas-to-electric only) | 2026 SMUD incentive |
|---|---|
| Packaged and split-system heat pumps, commercial systems | $1,500 per ton |
| Built-up or skid heat pumps for space heating or domestic hot water | $3,000 per ton |
| Heat pump water heater (residential, commercial or split system) | $7,000 per unit |
A ton here means 12,000 Btu/h of cooling. So a 5-ton rooftop heat pump works out to $7,500 before any cap. SMUD's Complete Energy Solutions page shows the same $1,500 per ton for heat pump HVAC. It also says lower amounts apply when the old equipment is electric resistance, not gas.
The flyer sets four conditions for every amount. The system must meet Title 24 minimums. The money covers gas-to-electric jobs only. Every retrofit needs an inspection before the install. And every project must close its permits and pass an inspection after the install.
The flyer also pays for the electrical work a conversion can trigger.
| Infrastructure support (CES and Custom Retrofit) | 2026 SMUD incentive |
|---|---|
| Transformer upgrade | $20,000 |
| Main panel upgrade | $2,500 |
| Commercial Infrastructure Incentive (CII) | $7,000 |
These amounts matter. A heat pump that replaces a gas furnace adds electric load the building never carried. SMUD's Complete Energy Solutions page calls the infrastructure money a stipend of up to $7,000. SMUD decides it case by case, for Go Electric jobs that need work up to the meter. The same three amounts appear in SMUD's March 2025 edition of the flyer, so they carried into 2026 unchanged.
Here is how it plays out on a real job. SMUD's Q3 2026 newsletter to contractors tells of a customer who called thirteen HVAC contractors. The customer wanted to replace a swamp cooler and a bulky gas heater. Only the last contractor brought up SMUD's incentives. The customer got $7,500 through Custom Retrofit for a 5-ton mini-split heat pump. That is the same $1,500 per ton, and the contractor who priced it in won the job.
Which Commercial Program Fits Your Building?
SMUD runs its commercial Go Electric money through three programs. The building decides which one you use (SMUD Business Go Electric).
- Complete Energy Solutions (CES) is SMUD's program for small and mid-sized businesses. It starts with a free energy assessment and helps pick the equipment and the installer. It pays the incentive at the end. For Go Electric jobs, the CES team asks for a recent gas bill.
- Custom Retrofit serves larger commercial and industrial customers. It also covers complex systems in existing buildings that are not homes. SMUD must approve every project before the install. The program is open to customers on a nonresidential rate.
- Integrated Design Solutions (IDS) covers new construction. SMUD asks owners to call early in design, before the big decisions are made.
Custom Retrofit has the clearest written limits. Its manual caps Go Electric set amounts at the lesser of the per-unit amount, 90% of eligible project cost, or $250,000 (SMUD Custom Retrofit Procedures Manual, July 2026). Eligible cost can include engineering, equipment, materials, removal, tax and shipping. It cannot include spare parts, maintenance contracts or backup equipment.
Two more rules change how a light commercial system is designed. A dual fuel system is a heat pump with gas backup heat. It qualifies only if the heat pump can carry at least 90% of the yearly heating load (SMUD manual, July 2026). Even then, SMUD counts only the heat pump's compressor size, and the rate may be lower. Systems with heat recovery move heat from zones that need cooling to zones that need heat. Those may earn higher rates.
For what the replacement costs before any incentive, see our commercial HVAC replacement cost guide. For when an aging unit is due, see our guide to rooftop unit replacement.
How Do You Apply for Custom Retrofit?
SMUD's Q3 2026 newsletter to contractors lists four steps, and the order is the point. Every commercial incentive, heat pump HVAC included, needs SMUD's approval before anything is bought or installed.
- Submit a Grid Capacity Evaluation. A Grid Capacity Evaluation (GCE) is SMUD's free check of how much room is left on the transformer that serves the building. The customer or the contractor files it on SMUD's PowerClerk portal. It needs the meter number and a short project description. It is the longest step, at 5 to 7 business days, so it goes in first.
- Sign the application. SMUD sends it by DocuSign once it has the customer's name and email.
- Schedule the pre-inspection. SMUD photographs the old gas equipment, which usually means roof or utility room access. The visit usually takes 15 to 30 minutes.
- Send the quote. The quote lists the scope and the cost, with equipment submittals if you have them. It also says whether heat strips are part of the install.
After the install, SMUD may inspect the new system in person or by video call. The manual says to expect one incentive check within 30 days of complete paperwork. Paperwork filed more than 60 days after the job is done can forfeit the money (SMUD Custom Retrofit Procedures Manual). To ask for the application, email CustomRetrofit@smud.org or call the program line at 916-732-5095 (SMUD Custom Retrofit).
What Does SMUD Pay for Multifamily HVAC at 5+ Unit Properties?
SMUD's Multifamily program is its Go Electric program for existing properties with five or more units, from the clubhouse to the apartments. The heat pump HVAC amounts below come from SMUD's multifamily incentives page, checked September 30, 2026.
| Heat pump HVAC measure | Incentive |
|---|---|
| Inverter-driven split system, 17 SEER or 16 SEER2 and up, single head or ducted | $3,000 per compressor |
| Additional mini-split heads | $600 per head, per unit |
| Inverter-driven through-the-wall unit, 10.9 EER and up | $1,000 per compressor |
| DX heat pump, split or rooftop, 15 SEER or 15.2 SEER2 and up, with a smart thermostat | $1,400 per system |
| Common spaces, commercial-size heat pump, single or two-stage | $1.25 per sq ft served |
| Common spaces, commercial-size inverter or variable-capacity system | $2.00 per sq ft served |
| Commercial-size heat pump serving several apartments, single or two-stage | $1,000 per apartment served |
| Commercial-size inverter or variable-capacity system serving several apartments | $1,500 per apartment served |
The program's January 2026 handbook still lists $2,500 per compressor for the inverter split system. The web page pays more. SMUD's Q3 2026 newsletter to contractors announced the increase for existing multifamily properties, so the web page has the current figures.
SMUD adds three bonuses that matter on HVAC jobs (SMUD Multifamily page, September 2026).
- Heat pumps that use a natural refrigerant earn a 20% adder on the matching heat pump measures.
- Electrical engineering and permit support for gas-to-electric jobs pays $3,000 per project.
- Panel, circuit, three-phase or transformer upgrades for gas-to-electric jobs pay up to $600 per unit.
The refrigerant adder needs the right equipment. Most new split systems use R-454B or R-32 after the 2025 refrigerant change, and neither is a natural refrigerant. The adder fits equipment such as CO2 (R-744) or propane (R-290) heat pumps.
Some efficiency upgrades pay only when the HVAC is a heat pump, old or new. For instance, attic insulation from R-19 or less up to R-38 pays $0.50 per square foot. Sealing ducts to 10% leakage or less pays $100 per ducted system (SMUD Multifamily). Some properties already heat with electric resistance, or with heat pumps rated 13 SEER or lower. They can earn up to 25% of the matching Go Electric amount for a high-efficiency heat pump (SMUD multifamily page, checked September 30, 2026).
The handbook caps the totals per property, per project. Go Electric measures top out at $250,000, the electrical bonus at $50,000 and efficiency measures at $50,000, each up to the project cost (SMUD Multifamily Program Participant Handbook, January 2026).
The Energy Assistance Program Rate (EAPR) is SMUD's monthly bill discount for income-qualified households. Properties where more than half the tenants are on EAPR may qualify for 25% or more in equity incentives (SMUD Multifamily). SMUD's Q3 2026 newsletter to contractors adds one more point. Qualifying multifamily properties can now get up to 90% of project cost for eligible efficiency and gas-to-electric upgrades (SMUD Contractor Network newsletter, Q3 2026).
How Does the Multifamily Program Work?
To take part, a property must make at least one gas-to-electric change. A property that is already all-electric under the program's rules also qualifies. Either way, the owner must agree to a Tenant Engagement Plan. Tenant engagement is SMUD's outreach to residents about the new equipment. It can be a newsletter, an on-site event or an apartment visit.
The program runs in six steps: desktop review, site visit, scope of work, reserving funds, the install and the final submittal. It starts with an interest form. SMUD says a Multifamily Program Advisor will reach out within 5 business days. Frontier Energy makes the first contact. The Association for Energy Affordability or Brighton Energy then sets up the site visit, in person or virtual.
Four rules shape the schedule.
- SMUD accepts only projects that have not started construction.
- Funds can be reserved for the next calendar year. The handbook gives a project one year from reservation to finish.
- Unit-by-unit upgrades and common areas both qualify, so a property can phase the work and reserve money to match.
- Installers must be licensed contractors who take part in the SMUD Contractor Network.
The reservation package asks for a W-9, the rent roll, the common-area gas bill and the SMUD Grid Capacity Evaluation form. It also needs the scope, the build schedule, and signed contracts or cost estimates. Within 60 days of acceptance, the property sends its building permit application. It also sends a single-line electrical drawing with a load calculation. Questions go to Multifamily@smud.org or 916-382-0332.
Which Mistakes Cost a Commercial Incentive?
- Starting work before approval. Custom Retrofit needs a signed application before equipment is ordered and any work begins. The Multifamily program takes only projects that have not started construction.
- Filing under the wrong program. A building that looks like a house but is billed on a "C&I TOD" rate belongs in a commercial program.
- Leaving the Grid Capacity Evaluation for last. It takes 5 to 7 business days, and it is where a transformer problem shows up.
- Overstating tonnage. SMUD's manual treats claiming a 3-ton heat pump as a 5-ton as a deliberate miscalculation. A first offense brings a 90-day suspension.
- Missing the paperwork window. Custom Retrofit can forfeit the money when documents arrive more than 60 days after the job is done.
Frequently Asked Questions
Does SMUD give rebates for commercial HVAC in 2026?
Yes. SMUD's February 2026 business flyer lists $1,500 per ton for packaged and split heat pumps. Built-up or skid heat pumps get $3,000 per ton. Both apply when the heat pump replaces gas equipment. The money runs through Complete Energy Solutions, Custom Retrofit and Integrated Design Solutions, and SMUD has to see the job before the install.
Does replacing a gas rooftop unit with another gas unit qualify?
Not for Go Electric money, which is for gas-to-electric jobs only. Custom Retrofit has a separate efficiency incentive based on first-year kWh savings. It is capped at the lesser of the calculated amount, 50% of eligible project cost or $100,000 (SMUD manual, July 2026).
What counts as multifamily for SMUD?
Five or more units. Buildings of up to four units, with each unit on its own SMUD meter, go through the home heating and cooling rebates instead.
Can an apartment complex convert one unit at a time?
Yes. SMUD's multifamily page says unit-by-unit upgrades and common areas both qualify. The program helps set a timeline and reserve money to match the pace of the work.
How long does the Grid Capacity Evaluation take?
About 5 to 7 business days, according to SMUD's Q3 2026 newsletter to contractors. It calls this the longest step. The application, pre-inspection and quote review come after it, so file the evaluation as soon as the project is real.
Can the contractor receive the SMUD commercial incentive?
Yes, under Custom Retrofit. The customer can assign the incentive to a partner firm, such as the contractor, on the payment request form. That firm must enroll as a SMUD vendor with a W-9.
How Do You Get a Quote With the Incentive Built In?
Alpha Mechanical is a Fair Oaks HVAC contractor enrolled as a commercial contractor in the SMUD Contractor Network. That is the network SMUD's Multifamily program requires its installers to join. Our light commercial HVAC service covers rooftop package units and split systems for businesses across Sacramento and nearby SMUD towns.
When you contact us about a commercial or multifamily heat pump job, we start with the SMUD bill and the Grid Capacity Evaluation. Then we price the equipment with the expected incentive shown on the proposal. Our about us page explains who we are and how a Professional Engineer manages our work.
Editorial review: we checked every amount here on September 30, 2026. The sources were SMUD's program pages, its July 2026 Custom Retrofit manual and its January 2026 Multifamily handbook. The flyer and newsletter amounts come from SMUD's February 2026 business flyer and its Q3 2026 newsletter to contractors.