Thanks Tigerdunes - Can you make some suggestions? The issue is that with the recent cold weather my Electric bill just for the month of Jan ran up to $400. I have installed all energy effecient lights so I am attributing around $300 to the Heat pump running on Auxillary heat. The basement furnace being gas is running ok on the bills. I need to know if it would make sense changing the heat pump by putting in the 10 grands. I have not had much experience with Heat Pumps in the past so I am hoping that the high bill is because of this unusually cold weather and it would just work out fine once it gets a little warmer.

Hold on RAVI! I am not sure if I understand it correctly. I posted what I THINK is how it works, but the guys on here may tell you I am wrong. I posted to see if I understood it correctly or not, but got what I think was a veiled insult from saltidawg, not sure if he intended that or not.... I ended up with the 2 stage, but I think it was knee jerk reaction to a price reduction my contractor offered me that made it seem like a good idea. I so excited that I got him to lower his price that I forgot the big picture and didn't ask him if he could also give me a better price on a one-stage (the 1-stage he had offered was a lower end, so I would have had to negotiate a better 1-stage). Therefore, I think I may be spending more than I need to and am HOPING the 2-stage was a wise idea. If price is the issue, get the 1-stage. Are you the guy where it was $1300 more? My quote from a large company here, was $1300 more for the 2-stage than the 1-stage. It ended up as a decent price for a package of work I was having done so I went with it. If I were just doing the hvac, I would not pay $1300 more for the 2-stage, with everything else the same. I think mike_home has some very good posts explaining everything. If you can afford it I think the 2-stage is nice to have, but not necessary. I have also read and been told that the 2-stage will help with the uneven cooling because it blows lower but longer. You might see if anyone responds to that claim, though I see you say they are larger rooms...can they add vents? Also, this may not be true, but my the salesman (claims he was a mechanic/installer) said that my furnace needs are between 80 and 100k so he is giving me the 100k because the blower will be stronger (they will and that should help with the cooling upstairs. I have 2 rooms that are usually warmer, they get the south sun that doesn't help either.That is sort of what you are saying with the cooling and the fan. Why does the 3.5 not get the rebate?

I didn't quite get that. What's the drawback for over-sizing on heating? I'm doing intentional over-sizing here to accommodate our major need, which is cheap heating (the same reason as people using Acadia heat pumps). From what I understand, oversized cooing may cause some problem with humidity removal being not enough (for which I am addressing with a two-stage system). Never heard anything about heating though. Could somebody enlighten me, please?

Great question. I think you may be confused on some things, so I am going to lay out some detailed info. First some background. Adding a gas furnace sounds like a given. Be sure to have your ductwork evaluated and make any changes to size or do any sealing of any leaky ducts. That is "step one" and with a minimal investment will get you heat in colder months, and also the possibility of "fan only" mode in warmer months to at least assist in circulating the air. This would be your most affordable option right now. The furnace would be in the basement. With your preferences for having the system on/off per your schedule, please add a programable thermostat. If you are into tech, look at the ecobee wi fi stat that you can operate from your phone or any web connection. This gives not only the ability to use your phone as a remote control for your system (why get out of bed if you get chilly in the middle of the night...just grab your phone and adjust), you can also be on your way home and adjust the temperature to be as you want it when you arrive home. If you would never use these features, then a standard programmable stat would allow a 7 day schedule to have the pre-set temperatures you wish to be programmed to occur automatically. Now, to add cooling to the home is a second step. You very well could do step one first, and do step 2 later if budget dictates this. To add cooling to an older home such as yours, a couple of things will need to be addressed. First, is your ductwork set up for enough return air for cooling? If not, then things like undercutting the bottom of the doors by 1/2 to and inch can be done to increase air circulation. If your current heat system is forced air then your home is most likely already configured properly for adding air conditioning. The second and more expensive question is do you have enough electrical power available for running AC? Depending on your electrical system, and how much renovations have been done on your home, you may need to upgrade your panel. You should have this evaluated if you are doing renovations, even if you decide to add the AC later, or want to be able to add it later. This would be a good selling feature even if you yourself don't ever add the AC. Then the third consideration on adding cooling is should you do straight AC for the outdoor unit, or an outdoor unit that is a heat pump. A standard direct expansion air to air heat pump is no different than straight AC in how it cools. (I am not discussing ground source heat pump systems, only basic DX, or direct expansion systems that use refrigerant. A ground source system would cost 3-4 times as much as a DX system, and is very extensive requiring wells or a water loop in a pond or well.) Based on cost of the equipment alone, a heat pump will be only slightly more costly than AC-- likely around $800 more would be a good estimate. What is the difference? An AC only condensing unit with the compressor is the outdoor part of the system. It will be hooked up via pressurized"freon" lines (although it is now called R410A refrigerant, not technically freon which is also known as R-22) to a evaporator coil that sits on top of the furnace in your basement. The fan from your furnace blows air from your home across the evaporator coil with the cold freon circulating in its tubes, and the heat from your home warms the freon, the freon circulates back outside in its piping system (the line set), and the fan out side blow the heat into the outside atmosphere. Then the compressor starts the process over. This is basically how AC works. So to add in AC you will need to add a coil on the furnace, the line sets between the indoor furnace and coil and the outdoor unit, and add the outdoor condensing unit. A heat pump is basically a AC condensing unit that has a reversing valve to switch the direction of the refrigerant flow. In cooling mode, it cools exactly the same way as the AC system. When the system is operating in HP mode, that is for heating the home. It is actually warming the refrigerant from the heat in the outside air and then the refrigerant flows to your home, and the coil and fan on the furnace are transferring the heat into your home's inside atmosphere. Remember the refrigerant is compressed, so it is pressurized and really cold, so 45 degree outside air really offers a good amount of heat to be transferred to the system. The advantage of a HP is that the amount of heat you get out for the amount of KW used is efficient. So that is the "big deal" But this is only important if your electric rates are very low compared to your natural gas rates, OR if you cannot do a gas furnace and your only other heat option would be electric heat. If you compare HP energy use to other all electric heat -either electric baseboard heat, or a heat strip in an air handler (sometimes called an electric furnace), then the HP may be the better buy. If you will primarily heat with natural gas, and have a mild climate (as you do), then it will most likely not be the best use of your money. Additionally, a mechanically simper AC only system would be preferred over the more complex piping and valves on a HP would require. So, I suggest checking out the duct work and adding in gas furnace. Get a good programmable stat. At the time of your remodel add in the electric to add in AC. Put in the AC if you would use it. Probably not worth the extra money to get the heat pump. Hope this has helped you with this. Here is a link that might be useful: Ecobee Home Model Smart SI