The word “certainty” has often been used by proponents of the newly established regional energy efficiency standards to describe their support of both the Department of Energy’s Direct Final Rule and Senate Bill 398 (INCAA). For HVAC distributors regional standards bring unknown and unforeseen obstacles which Heating, Air-conditioning & Refrigeration Distributors International (HARDI) believes are to the detriment of distributors, contractors and homeowners.
If the DOE is to be taken at its word, on May 1, 2013, it will be illegal for a non-qualifying furnace to be installed in the newly established Northern Region. Historically when there has been an increase in the efficiency standards of products, DOE has allowed for the sale of existing inventory which provides distributors the opportunity to successfully transition inventories. Unfortunately, DOE has indicated that they would not allow for the sale of existing stock, potentially stranding millions of dollars worth of inventory, limiting consumer choice and causing severe financial harm to distributors and small businesses.
Another unforeseen consequence of regional efficiency standards is the extension of enforcement activities by the DOE to include distributors and contractors. According to the law, manufacturers are currently held responsible for the efficiency of products. However, the DOE has indicated its intention of extending enforcement throughout the supply chain, including a scenario in which distributors would be required to collect from contractors the address of installation, serial number and name of the installing contractor of each unit sold and then provide that information to the DOE. This would forever change the way distributors purchase, track and sell inventory and place a massive and unfunded regulatory burden upon small business.
Additionally, those distributors serving multi-state regions will now be faced with a challenge of forecasting sales in a never before seen environment and, due to restrictions on consumer choice, a potential loss of purchasing power and foretelling price increases.
Fortunately for distributors, it does not appear as if Congress is planning on lending its support to Regional Standards, as Senate Bill 398 looks to be stalled. In fact the bill has failed to pass in two different sessions of Congress and ¾’s of the way through the 112th Congress, the bill has not even been introduced in the House of Representatives.
For those who claim that the new standards will bring a technology boom to the industry, it should be pointed out that there is nothing today which prevents manufacturers from producing newer and more efficient technology. Distributors are always excited to bring new technology to the marketplace, however HARDI has noted the drop-off in full-system sales following the last standards increase and believes it’s dangerous to assume that our industry won’t face a similar dilemma this time.
With less than one year before the efficiency standards take effect in the Northern region, questions remain unanswered regarding inventories and enforcement; language from the DOE regarding both issues, can hardly be classified as reassuring. When you add in real concerns about additional cost that this change brings, what appears to be a crystal clear decision for manufacturers is a murky and muddy pool of uncertainty for distributors.
Jon Melchi is director of government affairs for Heating, Air-conditioning & Refrigeration Distributors International (HARDI).