California Contractor Surpasses 785th Home-Performance Project
Back when California first came out with its energy efficiency rebates, Richard Hiteshew, owner/manager of A-1 Guaranteed Heating & Air Inc. in Vallejo, California, was certain the standards were impossibly high.
“I’d been doing it for 30 years, and I was all ‘you can’t do it that way,’” he said.
As chance would have it, one of several houses he owned in Vallejo became vacant, and he decided to run an experiment.
“It was time to either prove it or not prove it,” he said.
Hiteshew took out a 2.5-ton, 60,000-Btu package unit. He ripped out the existing duct system, replaced it with a .75-ton heat pump ducted mini split, and put in Panasonic fans in the bathrooms. When he turned on the furnace for the first time, the temperature increased 8°F in an hour. After that, he replaced the lighting with high-efficiency lighting, air sealed the house, and added insulation and a 2.5-kW solar panel. The house now creates just about as much power as it uses.
It was a sea change for Hiteshew — especially after he and his lead installers started Building Performance Institute Inc. (BPI) training.
“At the first class, the teacher realized we were a heating and air conditioning company and introduced us to the group as the people who were making all this work necessary,” he said. “We took this as a paradigm shift and decided to move forward and be better.”
Fast forward about a decade, and home-performance projects account for nearly half of A-1’s business.
“You have to slow down and do everything right: use the right size ductwork, the right size registers … it’s a whole different philosophy than what we’d been doing the past 30 years,” Hiteshew said.
A-1, a residential energy retrofit company serving Solano, Napa, and Contra Costa counties, was founded 22 years ago in Hiteshew’s garage after his boss wouldn’t give him his daughter’s birthday off from work. Hiteshew got into home-performance projects about eight or 10 years ago. Since then, the company has doubled in size and revenue; it’s now at 33 employees and 15 vehicles and is rapidly outgrowing its 5,000-square-foot office. Currently, the company is on its 785th project to receive a rebate and has helped customers receive more than $2 million total in incentives.
“California has some pretty lofty energy goals: They want the stock of existing homes to be 50 percent more energy efficient by 2030,” said Larry Waters, A-1’s home energy specialist and the head salesperson for energy upgrades. “So [the state] started the Energy Upgrade California program for companies to join up.”
At the height of the program, more than 500 companies participated. That has since dropped to just over 100 because it’s a complicated program to navigate, Waters said. But A-1 is one of the companies that stuck with the program.
“We were able to kind of master it to where it’s become a giant portion of our business,” said Waters.
Most of A-1’s projects are retrofits in the $15,000-$75,000 range.
“It’s changing the way the entire house works; it’s taking everything out and starting from scratch,” said Waters. “When we do solar, we have a saying: reduce before you produce. We reduce a customer’s need for energy down to as little as possible, so we can put as small a system on as possible to take care of the additional need.”
Like most of A-1’s installers, Waters holds BPI and North American Technician Excellence (NATE) certifications. In 2011, when the company started doing this, employees decided to only take training from efficiency programs: Efficiency First, BPI, and utilities. It was a bit of a challenge at first, according to Waters.
“My guys, like a lot of guys, based their performance on how many systems they could do, how quickly,” he said. “We had to change the culture to how tight we could make the systems, how high we could make them perform — and that was a bit of a trip.”
Dave Avels, operations manager, said that getting everybody trained was the biggest challenge companywide.
To make it more fun, the team turned performance projects into a contest, with a scoreboard at the company headquarters.
“A bit of an ‘I did it, can you do it?’ type of thing,” Hiteshew said.
It was also a major capital expense. Certification for the first three employees took a year and almost $10,000 to complete. Since then, Hiteshew has sent all his lead installers to BPI training — something he said is rare.
“I’ve learned more about heating and a/c and the whole-house system, as we refer to it, in the past five years here than I had in the past 35 years,” said Avels. “We had to get everybody to buy in to what we were doing. But once we did, they got very into it. Now that the guys are out on the job, they’re going above and beyond.”
If getting everyone certified was the company’s biggest challenge, it also served to become its biggest strength.
“I think that’s why we’re so successful: Our guys know what they’re talking about,” said Avels.
And the staff makes sure the customers know what they’re talking about, too. When Waters is out on a call, no matter what the issue, he starts with a complete diagnosis. That’s what sets them apart, he said.
“With our competition, 95 percent of them will just come in and give them a price for what we call ‘changing the box’ — just changing the furnace or a/c and putting in the exact same system they have, maybe try to upgrade the efficiency of the furnace or air conditioner,” said Waters. “That’s as far as they go.”
In contrast, Waters and his coworkers strive for an in-home sales process that’s completely different than anyone else’s in the area.
“We do a really thorough walk-through and what I call a ‘crawl-through’ of the house,” Waters said.
The crawl-through includes taking photos (with the homeowner’s permission) of the entire house from the attic to the underside of the floors.
“I tell them where the deficiencies in the building envelope are, tell them where the deficiencies are in the alignment of the thermal boundaries, and how if we make those corrections, we can reduce the size of their systems pretty dramatically,” he said. “I’ve had companies that I’ve gone up against come in and tell people things when they never looked at any of it — and once I came down with the pictures, the customer said, ‘Well, that other guy said that it was all fine,’ and I’m like, ‘Well, here’s the picture — obviously it’s not.’”
The pre-assessment comes at no cost, which is how A-1 gets a lot of its leads.
“We don’t necessarily advertise for home performance; we introduce the customer to the concept when out looking at maybe installing a new heating or air conditioning system, and we more or less flip those leads into home-performance jobs,” Waters said.
For customers who are looking specifically for energy-efficient upgrades, A-1 is registered on the California energy program’s website as well as the Property Assessed Clean Energy (PACE) website. The certifications are also listed on the company website, and A-1 has participated in target market coupon advertising. But the most effective way to convert new customers, according to Waters, is sharing the experience of previous customers.
“I just had a project in Vallejo; they called up because they needed a new furnace, and they ended up removing the entire forced air heating system that was a downflow system,” he said. “It was a 3-ton in a 1,200-square-foot house, and they were complaining it wouldn’t cool the house properly in the summer.”
Waters ended up taking out that system, patching underneath the floor, air sealing the house, and installing an 18,000-Btu heat pump mini-split unit in the attic with 5 ducts and a 5.5-kW solar system. Now the customer pays $300 a year in energy costs — a hefty reduction from their previous bill of $1,400.
“The customers that go through the whole zero-net housing are just so much more satisfied,” Hiteshew said. “People want to do it because it’s the right thing to do.”
Rebates don’t come into the picture until a little later.
“I put together a list for what makes sense for the customer, based on my very thorough inspection,” Waters said. “Once I get the customer to approve the concept of the list, then we’ll do an energy audit, and then we can pinpoint what the incentive will be — but only after the customer has already bought into the price of the job; the rebates are very secondary, they’re just kind of a cherry on top.”
For most customers, the average rebate is about $3,500.
“Our average install sale has gone from $8,000 before we started doing this, up to $19,000,” Waters said. “We get more than half the work we look at, and we’re extremely busy.”
If a customer decides to stick with traditional equipment, Waters still takes steps to keep everything as efficient as possible.
“We put in 92 percent furnaces, properly sized coils, and basic air conditioners, and we upfit the efficiency to meet the energy program criteria,” he said. “We engineer every duct system, from the register to the box all the way back to the unit; we use Wrightsoft [software] to size each system and size the ductwork and figure out how many cfm we need for each room, and then we size the ductwork according to the cfm requirement — so, often, the houses that we do will have a different size register in every room.”
That lets the homeowner control the airflow of each room precisely to make sure the whole house heats and cools evenly.
“And when we do that, we can do it with a much smaller system,” he said. “We generally take out 3-ton systems and put in 1,800 Btu, which is a ton and a half.”
When it comes to that kind of efficiency, Waters said it’s all in the details … detailed measurements, that is.
“Most companies operate off rule of thumb; they don’t use their tape measure or measure anything,” he explained. “They ask the customer how many square feet the house is, and if they say 1,500, they say ‘OK, it needs a 3-ton.’ So the average is 400-550 square feet per ton: that’s what people around here are installing.”
But that’s how things were done 40 years ago, he said.
“And since 40 years ago, people have gotten new windows in their houses; they’ve gotten insulation in their houses, they’ve done a lot of things to make their houses more efficient, but companies still come and install the same size system,” said Waters.
Instead of estimating, Hiteshew’s company does a precise load calculation on each house.
“We’re able to really tighten things up and see how we can improve,” he said. “Most of our projects use mini-split heat pumps now for central heating and cooling, combined with solar, so we can go near net-zero on each house. We’ve gone to installing systems that are up to 985 square feet per ton.”
Mini-split ducted systems are becoming a big part of A-1’s business, Waters noted.
“Back in 2016, we did just a handful — like three; last year, 25, and this year, 18 so far,” he said.
Customers like that they’re virtually silent, use very little energy, and run almost constantly, keeping the house at a precise temperature.
“We’re able to condition a couple hundred square feet with one small register — sometimes 8 inches by 8 inches in size,” said Waters.
Hiteshew’s energy upgrade projects also include insulation, windows, solar, tankless water heaters, roofing, and whole-house air sealing. All of those are done in-house, with the exception of insulation and windows, which are subcontracted.
“Most of my colleagues, when we tell them what we’re doing, say it can’t be done,” Waters said. “And we’re doing it every day. We’re pushing the envelope.”
Publication date: 5/14/2018