INDUSTRY STANDARDS RULING BY THE DEPARTMENT OF ENERGY (DOE)

Below is some very interesting information from an article in the Air Conditioning/Heating/Refrigeration NEWS:

Regional standards for HVAC equipment have been a hot topic of discussion in the industry, and the proposed rule for the standards could be finalized next week. Currently, the Department of Energy (DOE) is making the rule available for public comment until today, Oct. 17. If DOE decides to proceed with the standards without making changes, the rule will go into effect next week, on Oct. 25. This would mean that new minimum efficiency standards based on geographic region would be applied in May 2013 for nonweatherized furnaces, and in January 2015 for weatherized furnaces, central air conditioners, and heat pumps.

How the Standards Were Developed

Originally, the idea for regional standards was proposed in a comprehensive energy bill passed in 2007, the Energy Independence and Security Act (EISA). The EISA specifically granted the DOE the authority to make separate standards for HVAC equipment based on geographic region.

According to Steve Yurek, president and CEO of the Air-Conditioning, Heating, and Refrigeration Institute (AHRI), the manufacturers realized that an aggressive DOE was going to set regional standards and wanted to have input on their development. “After DOE got the authority in 2007 to create regional standards, they were going to move to it,” he said. Consequently, AHRI decided to negotiate with energy-efficiency groups to develop a consensus agreement for regional standards, which could be adopted by DOE.

Yurek noted that if manufacturers had entered the process later, the industry would not have had input on the regional map, and the resulting standards could have been much more problematic for the industry. He stated that the manufacturers wanted to minimize the impact of the standards on consumers and the entire supply chain, so they negotiated to keep the regions as large as possible and to minimize the required increases in efficiency.

In October 2009, AHRI announced the consensus agreements and officially submitted it to DOE in January 2010. In June 2011, the DOE released its rulemaking, which adopted language directly from the agreements. Yurek said DOE has used consensus agreements in the past for other rulemakings, so AHRI was not surprised that the department chose to adopt its language.

However, the consensus agreements raised a lot of controversy across the HVAC industry. Charlie McCrudden, vice president, government relations, Air Conditioning Contractors of America (ACCA), noted that he understood AHRI’s concern about the Obama administration taking a very aggressive stance on energy-efficiency standards and how this led to the consensus agreements. “Unfortunately, we were not part of those discussions,” he said. This has led to the continued concern from other industry stakeholders, including contractors and distributors, over the standards.

Current Status of the Rule

Essentially, the rule, which was released by DOE on June 27, 2011, states that new minimum efficiency standards for air conditioners, heat pumps, and furnaces will be dependent on the region of the country in which they are installed. The rule divides the United States into three regions: North, South, and Southwest. The North region comprises states with population-weighted heating degree days (HDD) equal to or greater than 5,000; the South comprises states with population-weighted HDD less than 5,000; and the Southwest comprises Arizona, California, Nevada, and New Mexico.

In the North region, most furnaces will be required to have an AFUE of 90 percent or more. In the South, central air conditioners will be required to have a SEER of 14. Heat pump and oil furnace standards will rise on a nationwide basis.

According to DOE’s website, “The standards established in the final rule will be applied starting May 1, 2013, for non-weatherized furnaces, and January 1, 2015, for weatherized furnaces and central air conditioners and heat pumps.”

Yurek added that AHRI had hoped that DOE would adopt the consensus agreement sooner. “We were very disappointed that it took them almost two years to do so,” he said. “We were hopeful that they would take it back in January 2010.”

However, others are still concerned about the specifics of the rule and how it will impact the industry.

“We view this as a small business issue,” said Jon Melchi, manager of government affairs at Heating, Airconditioning & Refrigeration Distributors International (HARDI).

“It fundamentally changes the way our members do business, especially those that service multistate regions. There has been a 40 percent decline in unitary volumes since the last minimum standards increase from 10 to 13 SEER in 2006, when you couple this with a 2011 that’s headed towards a potential decline in unitary volumes; this rule makes a tough business tougher. A rule like this, while well-intentioned, makes life tougher on small business owners and cuts into their margins.”

Sidebar: Bumpy Road to Raise Standards

Part of the rationale behind AHRI’s consensus agreements was a desire to avoid a transition like what happened when the DOE raised the air conditioner efficiency standard from 10 to 13 SEER.

“If you talk to manufacturers in the industry and if you talk to wholesalers and contractors, that 10 to 13 SEER had a significant impact on everybody, on the entire distribution service chain,” said Steve Yurek, president and CEO of Air-Conditioning, Heating, and Refrigeration Institute (AHRI). ARI, AHRI’s predecessor organization, opposed the transition and sued DOE when the standard was released, but ultimately withdrew the suit.

“We had less than 18 months to transition from what was then the current efficiency of 10 SEER to 13 SEER, which had significant economic impacts on the manufacturers but also on the entire distribution chain,” Yurek said

“If we hadn’t fought only on principle and had compromised and negotiated, we could have been at 12 SEER or some other efficiency that would have been better served for the economy today and consumers,” he said. “We wouldn’t have seen some of those things we’ve seen if we didn’t stand on those principles. It was a very hard lesson to learn.”

As a result, the manufacturers approached the consensus agreements for furnaces, air conditioners, and heat pumps as a way to sit down at the table and have a say in the standards development process.

Keep watching for more information.