WASHINGTON, DC — The date is Dec. 31, 2005, and the hvac contractor is faced with a choice: Should he load up on all of the 10-SEER units he can get his hands on? Or, should he put his money on the new, higher efficiency unit, the production of which takes effect the next day?

With the 10-SEER unit he’ll have a price advantage. With the more efficient unit, he’ll have to sell a more expensive product based on payback period and lifecycle cost.

This scenario will be played out across the country, following the Department of Energy’s (DOE’s) decision on which of three SEER levels — 11, 12, or 13 — to impose on the industry. The DOE is required by the National Appliance Energy Conservation Act (NAECA) to reassess the efficiency standards for residential-light commercial hvac equipment. Its final ruling is due before the end of 2000, after which the manufacturers have five years to gear up for whichever SEER level is chosen.

At its public hearing on December 9 here, DOE did not hint as to which SEER level it is leaning toward. Instead, manufacturers and other interested parties in attendance had the opportunity to comment on a wide range of topics, focusing on the economic and engineering assumptions used by DOE to guide its decision.

Relatively calm

Unlike the bitter combat in the earlier round of NAECA standards in the late 1980s, the recent DOE public hearing was relatively calm, in adhering to one of the rules imposed by a facilitator: “Listen as an ally.”

However, some sniping occurred. One industry representative (“I’m speaking for myself”) referred to “pressure groups” influencing DOE and noted at one point, “We’re chasing butterflies.”

And an environmental specialist referred to industry cost figures as “the blackest of black boxes.”

The day-long meeting was punctuated by dozens of charts, graphs, and assumptions that DOE and its contractors offered. The stakes are high because the final rule will affect the millions of residential-sized air conditioners and heat pumps shipped annually.

The sheer complexity of the subject ranged across such arcane subjects as Carnot Efficiency (an ideal abstraction never attained), microchannel heat exchangers, advanced compressor motors, and the relative merits of SEER and EER in the energy efficiency scheme.

The hvac industry, represented by the Air-Conditioning and Refrigeration Institute (ARI), complimented the agency on its conscientious attempt to study the ramifications of its proposed rule.

Others in attendance represented environmentalists, energy conservation groups, utilities, and state agencies.

ARI spokesman Larry Wethje said he was “disappointed” that the agency gave equal importance to two broad methods of calculating the cost to manufacturers to produce each of the three SEER levels.

Real-world costs

He said primacy should be given to the industry’s own cost data, submitted voluntarily, and reflecting real-world cost and price levels.

Less important, he said, was the “tear-down” or “reverse-engineering” method, in which the agency literally dismantled a trio of 3-ton units (a 10-SEER split air conditioners with fancoil, a 10-SEER packaged heat pump, and a 12-SEER split heat pump condenser). In this way, DOE said it could help determine how equipment cost and price changes with efficiency increases.

While both methods resulted in a fair amount of “convergence” in the analysis of cooling-only units, the results diverged sharply for the heat pump products. A chart showing the rise in production cost that accompanies SEER increases drew a lot of attention, much of it contentious.

The discussion also included assumptions on such sensitive subjects as markups along the three-step distribution chain: manufacturer to distributor, distributor to contractor, and contractor to consumer.

The proposed rule was published in the Nov. 24, 1999, Federal Register. The comment period closes Feb. 7, 2000. 

Sidebar: AlliedSignal, Honeywell merger is a done deal

MORRIS TOWNSHIP, NJ and MINNEAPOLIS, MN — AlliedSignal Inc. and Honeywell Inc. announced that they received clearance from the European Commission to complete their merger, and have done so.

The companies completed the merger Dec. 1 after the close of trading on the New York Stock Exchange, marking the launch of the $24 billion global technology company operating under the Honeywell name.

The new company’s stock commenced trading under the symbol HON on Dec. 2 on the New York Stock Exchange. The stock also will trade on the London, Chicago, and Pacific stock exchanges.

“Today is an exciting day for the shareowners, employees, and customers of the new Honeywell,” said Lawrence A. Bossidy, chairman of the company. “The new Honeywell is a broader and more resilient company, possessing the efficiency, diversity, and durability to generate consistent earnings performance and growth.”

Michael R. Bonsignore, the company’s ceo, said, “We are poised to deliver on all of our commitments, making the new Honeywell a great company to do business with, invest in, and work for.

“We have a proven Six Sigma productivity engine, which enables us to pursue exciting prospects for future revenue growth through a wider range of products and integrated solutions offerings and through the critical mass the combined company has gained in Europe and Asia.”

With the merger’s closing, Bossidy noted that the integration process is now on an accelerated timetable. “We expect to complete the bulk of our integration activities by mid-year 2000.”

The new company’s leadership group, which was announced on June 7 of this year, has been driving the integration process.

Robert D. Johnson, formerly president and ceo of AlliedSignal’s Aerospace business, and Giannantonio Ferrari, formerly Honeywell’s president and chief operating officer, are the new company’s two chief operating officers.