If your CPU is giving out 120W heat, chances are it's using at least that amount of electrical energy. As pdf27 stated, energy is neither created or destroyed. Since the CPU produces no sound or light energy, all the energy coming out will be as heat.
The reason a .4v difference can increase heat output so much is for two reasons. The CPU is consuming 1.65v at spec, so a .4v increase might seem small in our head but to the CPU it's a 24% increase in voltage!
The second and main reason the CPU gets so hot when you bump up voltage is because you're also trying to raise its frequency. You don't raise CPU voltage for no good reason, you're trying to make the CPU do more work. So of course it's going to get hotter and draw more current (think of current as the amount of 'juice', and voltage as the size of each glass). More current means more heat since Power(watts) = Current x Voltage, and since you've already raised the voltage 24% your power consumed/given-out-as-heat rises considerably.
This link's useful for calculating the cost of running your PC:
http://www.ukpower.co.uk/running-costs-elec.asp