ACHRNEWS

Regulatory Issues Dominate ACCA CEO Forum

April 9, 2012
CEO Forum
LAS VEGAS — At the 2012 Air Conditioning Contractors of America (ACCA) annual conference, attendees had the opportunity to hear top executives from five major industry manufacturers discuss some of the hottest topics in HVAC. During the annual CEO forum moderated by Mike Murphy, publisher of The NEWS, executives answered questions submitted by ACCA members. Some of the topics included regional standards, dry-charged unit sales, the R-22 price spike, new home performance standards, the elimination of tax credits, and the business outlook for 2012.

Murphy directed the questions to Chris Nelson, vice president, sales and marketing, Carrier Corp.; Chris Peel, corporate senior vice president and COO, Rheem Manufacturing Co.; Rod Rushing, vice president and general manager of unitary products, Johnson Controls; Dave Swift, president and CEO, Goodman Global Inc.; and Doug Young, president and COO of Lennox International Inc.

Regulatory Environment

Contractors’ concerns about the current regulatory environment dominated most of the forum. The discussion kicked off with a question about the petitions filed by ACCA and the Heating, Airconditioning, Refrigeration Distributors International (HARDI) against the Department of Energy (DOE) in its final rule related to regional efficiency standards and their impact.

Young reminded the audience the industry had tried unsuccessfully to fight against DOE having control over the standards and subsequently tried to “guide” the issue to something that was manageable. He also referred to the documentation rules and procedures now under consideration when he stated, “Everybody has to be involved here, including the contractor, the distributor, and the manufacturer, so that we can make this [the regulation] manageable, and we have to give a little bit to find a solution.”

The CEOs also revisited the issue of dry-charged units, which had dominated the forum held in 2011. Nelson received applause from the audience when he stated, “We [Carrier] don’t like the dry charge loophole created by the EPA ruling, and we want to close the loophole that wasn’t ever intended to exist.”

The panel members also expressed their opinion that the EPA is not going to make any ruling in the near future to close the allowance, so R-22 units will be part of the product mix for the rest of 2012. According to Peel, “That ship has sailed because the EPA has taken a position to not take a position.”

Swift had a different view; he said that because of the current economic climate, the R-22 units are “a pretty good economic opportunity” for a lot of consumers. Without the option of purchasing R-22 units, he said, the majority of those sales would move into compressor repairs and more window unit sales.

Murphy then asked the group to comment on R-22 production and the impact on the sale of dry-charged units. The question was related to the rapid rise in R-22 refrigerant prices that shocked many contractors.

The CEO panel claimed the price spike was based on the lack of clarity from the EPA and a temporary window when refrigerant manufacturers had to halt production. They predicted the price will come down when EPA clarifies the allocation levels, and they also agreed the price increase would not have a negative effect on dry-charged unit sales because of the large difference in price between those units and comparable R-410a units.

Additionally, Nelson urged contractors in the audience to have upfront discussions with homeowners about what it could cost to service an R-22 unit in the future.

The forum participants also discussed whether or not the industry should continue to push for the re-establishment of 25C tax credits. Rushing led off, stating, “We can’t expect tax subsidies to go on forever.” He based this conclusion on the current mood in Washington where the emphasis is on cutting the budget and avoiding any additional spending programs.

Home Energy Performance

Home energy performance was another topic on the minds of ACCA members. One question posed to the CEOs was, “How do you help ensure that home performance remains under the HVACR industry?"

Swift appealed to the audience by saying, “If we don’t work together as an industry to try and find a whole-house energy solution ourselves, the government will find a solution for us.”

Along with the other CEOs, Swift commended ACCA for its work on the new ANSI standard for improving existing home energy performance. All the members of the panel pledged to work closely with the association to ensure that HVAC contractors take the lead validating the energy efficiency of a home and not be relegated to subcontractor status.

Nelson said the movement toward home performance and energy audits puts the industry in a great place because HVAC represents the most technical equipment in the house that consumes more than 50 percent of the energy. He pointed out, “It’s just expanding the definition of what we consider a system to include the whole home.”

Nelson also announced Carrier’s new Energy Experts program, which provides tools and training to its dealers to help them get involved in this emerging business and learn how to conduct energy audits.

Peel talked about a Rheem software program called Design Star, which assists its dealers in designing systems for the whole-home environment and includes energy audit tools.

Another related question was asked about the viability of the North American Technician Excellence (NATE) certification program in light of the recent restructuring of the organization. All the panel members voiced strong support for NATE and discussed its increased importance as the industry embraces new home energy performance standards. “NATE is a critical part of our industry’s past and an even more critical part of our future,” Swift said.

Peel added, “I would like to see NATE get to the point where the automotive industry is with its ASE [Automotive Service Excellence] service technicians, where it’s actually a recognized consumer mark and they get paid for it.”

Forecasts for 2012

Before the forum closed, Murphy asked each of the CEOs to give a forecast for 2012.

Nelson said he anticipates many of the same dynamics in 2012 that made up the industry in 2011 with a little “tailwind” from slow economic growth.

Swift said that the industry is trading business uncertainty in 2011 for regulatory uncertainty in 2012.

Young was cautiously optimistic about 2012, predicting slow growth for Lennox and its dealers.

Peel, however, was optimistic about 2012 prospects because of the significant investment Rheem has made in product development over the last three years.

“The forward economy doesn’t look a whole lot different than the backward,” Rushing said. He noted that Johnson Controls is dealing with the situation by “focusing on serving customers better and running the businesses as efficiently as possible.”

This was the 10th annual CEO forum, and it was sponsored by The NEWS at the national ACCA conference.

Publication date: 04/09/2012