Energy Fairness for All the People

ARI’s Position

On July 13, I outlined the position of ARI in testimony before the Senate Energy and Resources Committee. As a national trade association that represents the manufacturers of over 90% of North American-produced central a/c and commercial refrigeration equipment, ARI supports DOE’s proposed 20% increase in the seasonal energy efficiency ratio (SEER) standards for central air conditioners and heat pumps.

ARI supports a 20% increase in the SEER standards because it is fair, balanced, and economically justifiable. It takes into account climatic, regional, and economic differences in our nation. It meets our energy-efficiency needs without punishing those working families, senior citizens, and the vast majority of the country that will never recover in energy savings the increased costs of a 13-SEER product. A 12-SEER product is beneficial to both consumers and industry, and represents a significant additional contribution to the nation’s goal of conserving energy supplies.

In fact, I believe 12 SEER will result in more energy savings nationwide than a mandated 13 SEER, because of the dynamics of the marketplace.

The industry has worked diligently over the last 20 years to improve the efficiency of residential central air conditioners and heat pumps. We are proud that we have been able to provide our customers with equipment that is at least 40% more efficient than 20 years ago. Concurrently, the industry effected a seamless transition to non-ozone-depleting refrigerants, and introduced new compressor technologies, while continuing to offer the consumer affordable choices for comfort, health, and safety.

Obviously, air conditioners with a 13 SEER are manufactured and sold today. So are 14s, 15s, and 16s. We like those products. But, they are more expensive — and for good reason. They cost a lot more to make. Yet they are made and sold today to the fortunate who can afford them and to those who believe they will recoup the added cost through energy savings. This latter group lives predominantly in the southern tier states, primarily Florida, Texas, Arizona, and Southern California. Frankly, if the industry had only its immediate self-interest in mind, it would rally behind a 13 SEER standard, take the money and run. But the short-term monetary boon to the industry would be outweighed by the impact on consumers, jobs, and, in the long term, the industry.

First Cost Vs. Energy Savings

Consider: There will be no meaningful economic payback for the overwhelming majority of the country. Seventy-five percent of consumers purchasing a 13 SEER will incur a net cost. In other words, at the end of the lifetime of the product, the savings in operating cost will not be sufficient to offset the incremental first cost of the product. The situation is even worse for low-income consumers — 83% will not benefit from a 13 SEER standard.

It simply makes no sense as a national policy. Indeed, it is economically dangerous to consumers and industry alike, and runs counter to our mutual goal of energy conservation. And, there could be significant increased health risks to senior citizens and lower-income families who rely on affordable a/c today — not just for their comfort, but for their health and safety.

After all, the increased cost to the consumer going from a 10-SEER product to a 13-SEER product will be over $700. In what is an incredibly price-sensitive marketplace, what do you think the average consumer will do when confronted with that? Probably exactly what you or I would do — keep the old one — which is likely to be a 6- to 9-SEER product manufactured in the 1980s. This is less energy efficient. Keeping older equipment operating longer runs counter to our mutual goal of energy conservation.

The increased costs of a 13 SEER minimum standard will have a disproportionate impact on lower-income homeowners and the elderly. It is simply inaccurate to suggest that those in low-income brackets do not purchase homes and therefore would be unaffected by the costs of a 13 SEER minimum standard. There are 13.2 million homeowners with incomes below $21,920 per year; another 9.8 million (or 23 million total) with incomes below $35,072; and an additional 11.8 million (34.8 million total) with incomes below $52,608, according to the National Low Income Housing Coalition. While $52,000 may not sound like a lot of money, if you are trying to house, feed, clothe, and educate children, this additional cost — without a return on the investment — is a significant burden. For older Americans, there is a significant burden too. Half of the households headed by persons 65 and older live on less than $37,000 annually.

Manufactured Homes

Also, consider the impact on residents of nine million manufactured homes: In many instances, the 13 SEER standard will not allow sufficient physical space to fit the indoor coil of air conditioners with a cooling capacity of 3 tons and up in the standard 20-in.-wide by 22-in.-deep alcove or closet used to store the heating-cooling equipment.

Contrary to the belief of some, air conditioners made for manufactured houses are conventional products and are, in fact, covered by the rule. They are not part of the “space-constrained” products exempted from this rule by DOE. The 13 SEER standard will have a significant impact on manufacturers selling to this market.

A 13 SEER would eliminate 84% of all new central a/c models in the market today and 86% of all new heat pumps, at a cost of $350 million to the industry for redesign and retooling. For some small manufacturers, 100% of all their air conditioner product lines will not satisfy the 13 SEER standard.

According to DOE, thousands of jobs will be lost between the years 2006 and 2030 if a 13 SEER minimum standard is adopted. Accordingly, the U.S. Small Business Administration supports the 20% increase in the SEER standard and opposes a 13 SEER minimum standard.

By contrast, here is what a 12 SEER standard achieves:

A 20% increase over current energy efficiency standards;

Affordable a/c for many more Americans;

Preservation of jobs in the United States; and

Preservation of competition in the industry.

Our belief in the fairness and value of the 12 SEER is shared by others. The Department of Justice expressed concerns that a 30% increase in a standard to 13 SEER will have anti-competitive implications for the industry.

Of significance, the Air Condi-tioning Contractors of America (ACCA), representing top air conditioning and refrigeration contractors in this country, who understand the dynamics of the marketplace best of all, believes 12 SEER represents the best, fairest approach to increasing energy efficiency and attaining the greatest energy conservation. The Manu-factured Housing Institute has voiced its concern regarding a 13 SEER standard because of the higher costs to residents of 9 million homes, mostly occupied by families on limited incomes. The National Association of Home Builders opposes a 13 SEER standard, cautioning that each $1,000 added to the cost of new homes disqualifies 400,000 buyers. And finally, and perhaps most significantly, the DOE staff did not support a 13 SEER during last year’s rulemaking, believing a 12 SEER to be in the nation’s best interest.

Increasing efficiency

There are alternative means to achieve increased energy efficiencies. Poor installation and servicing of a/c equipment results in up to a 40% loss in energy efficiency. Consequently, the entire industry banded together several years ago to develop North American Technician Excellence (NATE), to voluntarily improve technician training, require certification for technicians, and improve the installed performance of our equipment through better installation and servicing.

Manufacturers have provided over $6 million dollars to date for the development and management of this independent nonprofit association — similar to what the automobile industry did with Automotive Service Excellence (ASE) over 20 years ago. Even if only 25% were successful, when added to enhanced consumer awareness of the benefits of periodic checkup maintenance contracts, and the 12 SEER, the energy savings would exceed that of a mandated 13 SEER without having citizens bear the cost burden.

Finally, by 2030, the 12 SEER standard would save 3 quads of energy at a cost to the nation of $1 billion dollars. Increasing the SEER an additional 8% increases the cost to the nation to $4 billion dollars.

In summary, the 12 SEER standard is economically justifiable and takes into account the climatic, regional, and economic differences in our nation, compared to a 13 SEER minimum standard, which would impose unjustifiably harsh punishment on certain consumers and regions of our country.

ARI supports a 20% increase in the SEER standards because it provides energy fairness to all the people. It meets our energy efficiency needs without punishing those in working families, senior citizens, and the vast majority of the country that will never recover in energy savings the increased costs of a 13-SEER product.

Ted Rees is president of the Air-Conditioning & Refrigeration Institute (ARI), Fairfax, VA.

Sidebar: What’s Your Opinion?

The News wants to know how contractors view the proposed 12 SEER rule. Do you agree that this standard should be adopted? Or, do you believe the standard should be 13 SEER?

Cast your vote and give us your opinion regarding this “Great Debate.” Letters to the editor can be e-mailed to LetterstoTheNews@bnp.com or completed online at The News’ website (www.achrnews.com). Or, state your opinion and join the debate by going to The News’online forum. Just visit www.achrnews.com and click on “HVACR Forum.”

When voting, please include your full name, title, employer’s name, employer’s city and state, and your contact information (e-mail address or phone number). We ask this so we can place your comments in our weekly Feedback section of The News. We value your opinion. Let us know what you think. (Just know that the U.S. Department of Energy reads The News, too!) — Editor-in-Chief Mark Skaer

Publication date: 08/20/2001