The DOE announced on July 2 that residential HVAC appliances regulated under the pending regional efficiency standards (non-weatherized gas furnaces, mobile home gas furnaces, and non-weatherized oil furnaces) must be installed no later than May 1, 2013. Weatherized gas furnaces, central air conditioners, and heat pumps will follow the same “install by” enforcement ruling, but with a Jan. 1, 2015 compliance date.

Time is of the Essence

The sudden DOE announcement will prohibit any residential furnaces performing below 90-percent AFUE from being installed in the Northern region any later than May 1, 2013, regardless when they were manufactured. The ruling could lead to millions of dollars worth of stranded inventory across the Northern region, and the entire United States.

AHRI formally requested the 18-month delay in a July 30 letter addressed to Steven Chu, secretary of energy, Department of Energy.

Stephen Yurek, president and CEO, AHRI

“This extension of the standards’ effective date is needed in order for manufacturers to have adequate time to prepare for compliance with regional furnace standards and related standards enforcement and product labeling requirements, and to ensure that any changes in furnace minimum standards are timed to coincide with the start of the 2014-2015 heating season,” wrote Stephen Yurek, president and CEO, AHRI.

“We request that DOE grant this petition as soon as possible, but by no later than Sept. 15, 2012; otherwise, manufacturers and distribution channels will begin to incur significant market disruptions and economic losses as they will have to reposition product offerings and distribution for the upcoming heating season.”

The change from the manufactured by date to the installed by date has the industry concerned.

“Using the date of manufacture as the standards’ effective date is the traditional approach that avoids market disruptions and economic losses caused by potential stranded inventory. DOE has since taken the position that the agency is bound by statute to apply the 90 percent AFUE furnace standard for the Northern region of the country to furnaces installed in that region on or after May 1, 2013,” said Yurek, in the letter.

“Making the effective date of the regional standard for furnaces the date of installation instead of the date of manufacture is not what the parties that signed the consensus agreement contemplated, and it effectively advances the implementation of the standard by a minimum of eight months.

“That is the amount of time it would take distribution channels from manufacturers to distributors to installers to do what is necessary to avoid having stranded inventory as of May 1, 2013. Economic losses throughout the distribution channel in the rapidly approaching 2012-2013 heating season can be avoided by delaying the effective date of the amended furnace standards, as requested. The requested 18-month extension will likewise avoid market disruptions caused by a standards change in the middle of the 2013-2014 heating season.”

Industry Support

Leaders at Heating, Air-conditioning, and Refrigeration Distributors International (HARDI) and the Air Conditioning Contractors of America (ACCA) support the idea of an extension.

Charlie McCrudden, vice president of government relations, ACCA

 Charlie McCrudden, vice president of government relations, ACCA, said his organization has serious concerns about the compliance and enforcement timelines.

“Even if DOE and the Federal Trade Commission (FTC) meet the statutorily required deadline of completing the rule by mid-January 2013, it may be too late for supply channel planning purposes,” he said. “Distributors and contractors are already making purchasing decisions, and knowing there’s the potential for losses due to stranded equipment is impacting those decisions. No one wants inventory with a shelf life.”

 Jon Melchi, director of government affairs, HARDI, said HARDI believes that DOE’s approach to regional standards has been very difficult on distributors.

Jon Melchi, director of government affairs, HARDI

“HARDI certainly believes that delays by the DOE, changes to long-standing protocol pertaining to the sale of existing inventory, and uncertainty regarding product labeling and potential enforcement schemes have made the rapidly approaching compliance date very difficult for the supply chain to handle.”

While HARDI is in favor of the extension, Melchi expressed concern with implementing an installation ban in the middle of heating season.

“I think a lot of the potential ramifications of this extension will be unknown until we see what type of enforcement scheme DOE decides to use, and if DOE reconsiders its decision on the sale of existing inventory,” he said. “One concern that distributors may have is if an installation ban is maintained, and the effective date for gas furnaces in the Northern region were pushed to November, it would fall within the heating season, which is never ideal,” he said.

DOE Response?

Yurek said he is hopeful the DOE recognizes and appreciates where AHRI started from, and how much they’ve compromised, through this process. “Regional standards and direct final rules are new, both to the DOE and to industry and other stakeholders, and all of us are learning from this experience,” he said. “AHRI has readily engaged in negotiating consensus standards in order to expedite the rulemaking process, and does not want this to be a disappointing endeavor, discouraging us from ever doing it again.”

McCrudden said he is unsure if the DOE will consider this extension, or if they are even obligated to respond. Regardless of their obligations, he is hopeful they do address the request, in order to avoid a potentially disruptive situation.

“An extension would add more time for the industry to adequately prepare for the transition from a ‘manufactured by’ enforcement policy to an ‘installed by’ enforcement policy,” he said. “The ideal remedy is for DOE to return to a manufactured by date enforcement policy because it won’t result in stranded inventory, but the extension option can help mitigate the problem.”

Melchi is hopeful the DOE seriously considers this extension request. “In our system of government, you have to hope and believe that DOE would give any request its full consideration,” he said. “That being said, we do look at the track record on similar requests and have consistently advised our membership to plan for a May 1, 2013 compliance date in the Northern region.” Department of Energy spokesperson Lindsey Geisler did not provide specific comments on the request, but did say that DOE does intend to address the concern.

“DOE is committed to engaging stakeholders from industry, environmental advocates, and consumer groups to develop technically and economically feasible efficiency standards that reduce energy waste, drive manufacturing innovation, and save consumers money,” she said. “Interested parties are invited to comment on the equipment standards and test procedures for the rulemakings. This is a typical step in the process, and DOE will review and respond to all comments on the proposal as part of the final rule.”

To read the complete AHRI request, visit http://bit.ly/QJLY1z.

Publication date: 8/27/2012