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An Energy Ruling That's Simply Hot Air

By Cindy Skrzycki
Tuesday, October 24, 2006

The Energy Department has decided to keep the home fires burning at about the same level as they are now, even in the face of lobbying by both energy conservation groups and some manufacturers.

A proposed "energy conservation standard" that the department unveiled Oct. 6 moved the energy-efficiency needle almost imperceptibly for home gas furnaces -- to 80 percent from 78 percent, the standard set in 1989. The agency rejected an option to raise the standard to 90 percent, which would have saved more energy and trimmed heating bills for consumers in colder climates.

The long-awaited announcement frustrated energy groups that lobbied for a significant increase in efficiency, as well as parts of the industry that wanted to see more robust standards for some heating units.

Department officials said a higher standard wouldn't have been cost-effective for those in states with mild winters to have only the option of buying a furnace that is 90 percent efficient, which means it turns 90 percent of the fuel into heat.

The department also turned down some innovative ideas from energy groups and manufacturers, saying it didn't have the authority to act. The agency rejected the idea of a regional standard, which would make the highest efficiency rating applicable only to the coldest states. Instead, it said states could apply for exemptions to the rule if they wanted a tougher standard.

The regulators also gave thumbs down to a plan advanced by the boiler industry and energy groups to increase efficiency in gas models. They proposed eliminating pilot lights and installing a reset mechanism that automatically adjusts to the outside air temperature.

Setting the standard at 80 percent represents virtually no change, since almost all new regular gas furnaces are at least that efficient.

Furnace makers such as Trane, a division of American Standard Cos. ; Carrier Corp., a division of United Technologies Corp. ; and Lennox International Inc. also sell products that are more than 90 percent efficient. Sales of those models have been brisk in Northeastern states. And three states -- Vermont, Massachusetts and Rhode Island -- have passed laws setting the requirement for gas furnaces at 90 percent, a standard that has to be approved by federal regulators.

Massachusetts residents would pay about $540 more for a furnace rated 90 percent than for a basic unit, yet they could save $125 a year on energy use, according to estimates by the Appliance Standards Awareness Project , a business and consumer-advocacy group in Boston.

The Energy Department "seems to be looking for the narrowest possible way to comply with the law, and cost-effective energy savings were clearly of secondary importance," said Steven Nadel , executive director of the American Council for an Energy-Efficient Economy , a nonprofit research group based in the District.

There is intense interest in the proposal because 3.5 million gas furnaces and 300,000 residential boilers were sold last year.

Department officials said that in rejecting a higher standard, they took into account manufacturers' concerns that there were potential condensation and venting problems when efficiency ratings are set between 80 and 90 percent.

"The department's proposal sets a national standard but still gives states as much flexibility as we can under the statute," said David Rodgers , acting deputy assistant secretary for technology development in the department's Office of Energy Efficiency and Renewable Energy .

Rodgers said the law requires the agency to consider standards that are economically justifiable and technologically feasible and that save a significant amount of energy.

Under the Energy Policy and Conservation Act, the Energy Department is charged with reviewing the efficiency of commercial and residential appliances and equipment, including refrigerators, washers and dryers, air conditioning and furnaces.

The agency has fallen years behind in issuing the efficiency standards and is under pressure from Congress to get on a schedule and stick with it. In September 2005, the Natural Resources Defense Council , a national environmental group, joined with 15 states and two consumer organizations in going to court in New York. They asked that the department face a legally binding deadline for issuing 22 energy-efficiency standards -- including this one.

In a report to Congress last January, the agency said it is committed to addressing the backlog and has set "firm and achievable" schedules.

In the case of furnaces and boilers, work on a new standard began in 1993 but didn't receive priority status at the Energy Department until 2001. The first published notice of a rulemaking came in July 2004, and the department expects to complete the rule sometime next year. Much to the chagrin of energy advocates, it said the effective date won't be until Jan. 1, 2015.

"It's absurd to set such a weak standard and not implement until 2015," said Andrew deLaski , executive director of the Appliance Standards Awareness Project.

Joseph Mattingly , general counsel for the Gas Appliance Manufacturers Association in Arlington, said the industry urged setting the standard at 80 percent because that level avoids safety concerns.

"In a perfect world, the units would be installed according to manufacturers' instructions, so we have to have something that is forgiving of less-than-perfect installation," Mattingly said. He said consumers who don't live in cold-weather states were not likely to need a high-efficiency furnace.

Energy advocates tried to address cost and safety issues by supporting a regional standard: 90 percent for cold Northern states and 80 percent for warmer states.

The industry opposed that and likes the idea of states setting their own standards even less. It told the Energy Department that encouraging states to override the federal standard is "an abuse of discretion."

A big disappointment for both sides was the department's rejection of an agreement among 28 manufacturers of oil and gas boilers and four energy-efficiency organizations.

"DOE at every juncture finds a reason to follow a less energy-efficient path," deLaski said. "Even when business says, 'Give us more efficiency,' they say no."

Mattingly said the industry will ask the department to make a "limited policy exemption" to accept the agreement. Energy groups said adopting it would save twice as much energy for gas boilers than the standard the department proposed.

Cindy Skrzycki is a regulatory columnist for Bloomberg News.

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