Why the DOE Settlement is Good for Energy Efficiency and Benefits U.S. Customers

January 2013

On January 11, the U.S. Department of Energy (DOE) proposed to settle a lawsuit brought by the American Public Gas Association (APGA) by withdrawing gas efficiency standards enacted in 2011 through a special direct final rule process and by initiating a traditional notice and comment rulemaking for new gas furnace efficiency standards. APGA strongly believes that the Furnace Rule, although intended to increase efficiency, would have undermined energy efficiency goals and increased costs to consumers.  For more information on the lawsuit and the standards in question, click here.

The Furnace Rule Would Cause Consumers to Switch to LESS EFFICIENT Electric Furnaces

  • Increase costs due to venting: Only condensing furnaces meet the proposed 90 percent standard. Most installed furnaces in the northern region are non-condensing furnaces,  which meet the current 80 percent standard. Extensive and expensive venting modifications must be made to accommodate a 90 percent condensing furnace. The Furnace Rule would have caused many consumers to incur an additional estimated $1500-$2200 per installation, not to mention the increased purchase price of around $200 per furnace unit.
  • Building code restrictions: In row houses, town houses and multi-family dwellings (the types of buildings very common in the northern region) a non-condensing furnace may not even be an option because the side venting required is impossible due to physical limitations, building code issues, and/or prohibitively high cost. 
  • Landlords: Heating costs are borne by the tenant, whereas the landlord bears the burden of the upfront cost for the furnace.   A landlord will not see a return on their cost for the more expensive efficient furnace through lower heating bills.  When faced with a higher priced furnace plus additional costs for special venting, landlords will likely turn to inefficient electric heating.  
  • Low-income consumers: Consumers, especially those in lower income brackets, often times do not have the luxury of worrying about operating costs over an extended period of time. Rather,  their primary concern is whether they can afford the new appliance at all, even without the cost hurdle of new venting. For these residents, the higher costs for a 90 percent efficient condensing gas furnace will mean they switch to a less expensive, less efficient electric appliance.  

A Waiver Would Not Work

Early in the process with DOE, a waiver was suggested to ameliorate the negative fuel switching effects.  APGA entered into that waiver negotiation process in good faith, hoping to avoid the costs and time of a litigation battle. Ultimately, the proposed waiver proved unworkable.  

  • Training for installers: A waiver would require that the installers be trained to evaluate  building exemption requirements. This would create an extra level of costly and time consuming training.  Additionally, an agreement could not be reached regarding the availability of online training; and for those outside of major metropolitan areas, in-person training is expensive and not always readily available. Thus, in many areas, the installers would not be trained to grant the waiver at all.
  • Market effects: Even if a waiver was granted, non-condensing natural gas furnaces would either no longer be available in the northern region, or would be prohibitively expensive to obtain.   Shipping a natural gas furnace from the southern region would further increase costs and there would be an inevitable delay for consumer to get their heat back.  Unable to quickly install an 80 percent gas furnace, the consumer would likely install a cheaper, less efficient electric furnace.  

The Settlement is a Victory FOR Efficiency

  • APGA is a long-standing supporter of energy efficiency: The direct use of natural gas is one of the most efficient uses of energy (90 percent compared to 27 percent for electricity).  Natural gas appliances are much more efficient than electric appliances. Consumers who use direct natural gas spend less money on energy bills in the long term than consumers who use electric appliances.
  • Meaningful efficiency gains: APGA supports energy efficiency efforts, but not when they encourage efficiency in name only.  The DOE furnace rule did just that.  Rather than promoting efficiency, the practical effect of the Furnace Rule would have been to drive consumers to choose less efficient electric heating appliances. 
  • An opportunity: By withdrawing the rule, DOE has afforded the country an opportunity to take a more reasoned look at furnace standards.  It is APGA’s sincere hope that we can work with DOE on a new set of furnace standards that will meaningfully increase energy efficiency, by utilizing natural gas, which is an extremely energy efficient heating fuel and by respecting both the regional differences and also the cost pressures faced by U.S. consumers in this economy. 

If you would like to read APGA's press release about the settlement, please click here.

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