RPC Reg Spotlight June 5, 2012

 

Regulatory Action in the Spotlight:

 

Department of Energy rule on residential furnaces, air conditioners, and heat pumps

 

Adverse Effects:

 

  • High cost will negatively affect HVAC businesses.
  • Many of the costs will be passed along to consumers.
  • Different geographic standards will make it difficult for manufacturers.

 

Response of the Obama Administration:

 

On June 27, 2011, the Department of Energy (DOE) unveiled its final rule (RIN: 1904-AC06) entitled, “Energy Efficiency Standards for Residential Furnace, Central Air Conditioners and Heat Pumps.”  This rule, which went into effect on October 25, 2011, seeks to impose new minimum standards and regional standards for residential heating, ventilation, and air conditioning (HVAC) residential units.  Under the new standards, non-weatherized residential furnaces and mobile home gas furnaces installed on or after May 1, 2013, in the Northern Region must be at least 90% Annual Fuel Utilization Efficiency (AFUE). In all other states, non-weatherized gas furnace and mobile home furnaces installed on or after May 1, 2013 would be 80% AFUE.

 

These new standards will apply to products “manufactured in, or imported into, the United States on or after May 1, 2013, for non-weatherized gas and oil-fired furnaces and mobile home gas furnaces, and on or after January 1, 2015, for weatherized furnaces and central air conditioners and heat pumps.” 

 

 

Impact on the United States:

 

The estimated cost of the regulation is $657.5 million.  Many of these costs will be passed along to customers.  Additionally, this regulation disproportionately harms low-income consumers, who will be less likely to be able to afford the new equipment.  Lastly, the regulation is more stringent, and therefore more expensive, for those Americans in the “Northern Region,” which covers the following states: Alaska, Colorado, Connecticut, Idaho, Illinois, Indiana, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming.

 

The National Propane Gas Association came out in opposition to this regulation, believing the DOE did not adequately take into consideration the high costs of compliance.  In a letter to DOE, dated October 17, 2011, (NPGA) wrote:

 

DOE’s analysis fails to consider numerous economic scenarios. One cost that has not been considered is the cost of enforcement. Builders and installers will be required to make sure that the unit they are installing was intended for the geographic location in which it is being placed. This burden will ultimately be borne by the consumer in both increased construction costs and additional time to complete the project. NPGA believes the cost of compliance is a hard cost and is a part of the cost of the regulation. For these and other reasons stated herein, NPGA finds the direct final rule is not economically justified and we respectfully request that the direct final rule be withdrawn on this basis.

 

 

In Closing:

 

This regulation is costly and unnecessarily complicated.  Once again, the Obama administration has increased the regulatory burden on Americans, and has unnecessarily done harm to small businesses.  In comments submitted to DOE by the Air Conditioning Contractors of America (ACCA) on the proposed rule, they wrote:  “[DOE] created a new regulatory scheme that is ripe for abuse without fully considering the costs of compliance or the exposure to problems…DOE should have performed a review under the Regulatory Flexibility Analysis for this rulemaking.  The proposed rule, with regional standards, will likely have a significant impact on the tens of thousands of small business HVAC contractors across the country.” 

 

 

Relevant Legislation:

 

In response to bureaucratic red tape and the rising costs of federal regulations, the House of Representatives passed, on December 7, 2011, the Regulations From the Executive in Need of Scrutiny (REINS) Act of 2011.  The REINS Act sought to restore accountability and transparency to the regulatory process by requiring Congress approve all new major regulations.  The bill was passed by a vote of 241 – 184 and was sponsored by Rep. Geoff Davis.