The Regulators column in the May 18 Business section gave an incorrect middle initial for the manager of the building technologies program in the Energy Department's Office of Energy Efficiency and Renewable Energy. He is Michael J. McCabe. (Published 5/19/04)

For an agency that stresses efficiency, this may be the least efficient way to do business.

The Department of Energy proposed a rule in 2000 that called for increasing the energy efficiency of commercial water heaters. By Jan. 12, 2001, the final version of the rule was published, and it became effective last October.

So far, so good. Manufacturers said there was no controversy about increasing the energy efficiency of their heaters. They had the technology to meet the new standard. Unlike other energy efficiency standards, this one went uncontested.

But last summer companies found themselves stymied. They had no way to measure the efficiency of the water heaters because the agency had not completed a companion rule to update a mandatory test.

Realizing that they would not be in compliance with the efficiency rule without the new test, companies began lobbying the department to issue the companion rule. "We had visits to DOE. We called. They just can't seem to get this adopted," said Frank Stanonik, chief technical adviser with the Gas Appliance Manufacturers Association, which represents companies that make water-heating equipment.

Trying to light a fire under the agency did not work.

So manufacturers threw up their hands and six applied for waivers from compliance, which the department has begun granting. The procedure amounts to a mini-rulemaking: publishing the request, taking comment on it, and making a final determination. If granted, the waivers prescribe the proper test procedure on a case-by-case basis.

"They dropped the ball," said Timothy Shellenberger, senior vice president of product engineering for American Water Heater in Johnson City, Tenn., one of the companies recently granted a waiver.

For the companies involved, the process has been a textbook example of how the regulatory bureaucracy can lose track of time and paperwork. In this case, department officials said regulatory priorities shifted, leaving what should have been a fairly simple job undone.

The result, because of the waivers, is the effective delay of a rule that would have positive consequences for consumers -- money saved on more efficient water heaters. It also illustrates how an agency ends up spending as much time and effort managing exemptions as it would completing the final rule.

Michael E. McCabe, program manager of DOE's building technologies program, Office of Energy Efficiency and Renewable Energy, said the testing rule is coming, probably by the end of summer. "Given the process, it can be frustrating," he said. "I can feel for those who have to deal with us."

The Energy Department was charged with upgrading energy efficiency standards for all kinds of commercial equipment, including water heaters that serve restaurants, apartment buildings and other businesses, under the Energy Policy and Conservation Act. The department also is supposed to "prescribe test procedures that are reasonably designed to produce results which reflect energy efficiency, energy use and estimated operating costs, and that are not unduly burdensome."

Manufacturers, retailers and distributors cannot advertise or state the energy consumption of their products unless they undergo the DOE-approved test. Unlike residential models, commercial heaters usually don't include a label on the tank. But manufacturers do use the information in their marketing.

As far as figuring out a new test, the law allows the department to adopt "by reference" tests and rating procedures already developed or recognized by an industry group called the American Society of Heating, Refrigerating and Air-Conditioning Engineers. At the time the Energy Department issued its proposal, it said it would ask companies to perform a test developed in 1998; since the proposal never became a final rule, manufacturers are still using a 1992 test.

Shellenberger said having to apply for a waiver for the commercial water heater rule was an annoyance. But another, still unresolved, encounter with the department reinforced his view that things get dropped into a regulatory black hole at the agency. "DOE doesn't take care of business," he said.

At issue was new electronic technology the company incorporated into a line of residential water heaters that allows consumers to change heat settings based on their usage patterns. Again, the company needed a waiver from the DOE test rule -- and asked to use a test it developed -- so it could quantify savings for consumers.

The company never got an answer to the request it sent more than three years ago, in April 2001.

As a result, the company cannot publish the energy efficiency of the heaters based on an approved test method. "We can't label this to a test method because one doesn't exist," Shellenberger said.

McCabe said he was aware of the company's request and the lack of response from the agency. He admitted it probably wasn't good manners not to get back to the company.

"We owe American a response. It's a classic example of inadequate response," he said. "The staff was not swayed by their argument. It should have been completed by denying it."