• How to Work with Your Local Utility Company

    April 1, 2007
    Editor's note: At last year's HARDI Annual Conference, Gene Rodrigues, director of Energy Efficiency, Southern California Edison, spoke to attendees under

    Editor's note: At last year's HARDI Annual Conference, Gene Rodrigues, director of Energy Efficiency, Southern California Edison, spoke to attendees under the auspices of the HVAC Systems & Equipment Council. He discussed the outlook for electrical energy supply and introduced the Consortium for Energy Efficiency. I invited Paul Kyllo, a member of Rodrigues' staff, to draft an update for our readers.

    With customer demand outpacing the construction of new generating facilities and transmission capacity reaching its limits in certain regions of the country, lawmakers, regulators and utilities are looking at or turning to energy efficiency as a cost-effective means to meeting the nation's energy needs. In fact, in California, energy efficiency is the first “loading order” resource one must consider before renewable and clean fossil-fueled supply-side options.

    The facts support this strategy, demonstrated by the fact that between 1974 and 2004, per capita electricity use in the United States grew at an annual rate of 1.4 percent. Over the same period, California's electricity use remained relatively flat.

    To help fulfill its commitment of meeting the state's energy needs through energy-efficiency, the California Public Utilities Commission allocated more than $580 million in 2006 to the state's four investor-owned utilities (Pacific Gas & Electric, San Diego Gas & Electric, Southern California Edison and Southern California Gas) for managing their portfolios of energy-efficiency programs. This represents more than 30 percent of the total amount funded nationwide for utility energy-efficiency programs.

    Energy-efficiency programs help utility customers save money by reducing their energy costs and also foster a cleaner environment by reducing greenhouse gases. The four California utilities will offer programs that experts say will reduce consumption equal to the output of three 500-megawatt power plants over the next three years, and the lifetime savings that result from these programs is equivalent to removing 650,000 cars from the road.

    Utility energy-efficiency programs include strategies to address customers' primary electric end-uses, such as lighting, HVAC, refrigeration, motors and air compressors. One common program approach uses rebates or incentives to encourage customers to purchase efficient equipment.

    Trends in HVACR Energy-Efficiency Programs

    Air-conditioning, which the Department of Energy estimates is responsible for 16 percent of residential electricity use, has been a major focus of incentive programs in the past. Recent adoption of a 13 SEER federal efficiency standard for single-phase air conditioners below 5.4 tons has raised the bar to a point where equipment incentives are not as cost-effective from the standpoint of avoided utility generation costs. In response, utilities are changing their program designs to focus on HVACR services through quality installation programs that improve the operating efficiency of existing systems and ensure that new installations operate efficiently from the start.

    Quality installation and maintenance of HVACR systems offer the potential for greater energy savings (35 percent) and peak demand reduction (14 percent) than efficient equipment alone. Consider that a new 13 SEER unit may only be operating at 10 SEER if the ducts leak. If there are issues with refrigerant charge, air flow and ducts, this same unit may be operating at less than 8 SEER. The types of services included in such programs include adjusting refrigerant charge to proper levels, sealing ducts to reduce leakage, cleaning coils to improve heat transfer and retrofitting economizers to avoid stuck open dampers.


    In January 2007, the Consortium for Energy Efficiency (CEE) revised its tier structure to adopt higher air-conditioning equipment efficiency standards for both residential and commercial markets. These standards provide an indication of where equipment efficiency levels are heading. Manufacturers will need to start developing and producing equipment in production quantities that meet or exceed these efficiency standards, as codes will eventually adopt these higher efficiencies. Utility incentive programs can help the customer market transition to these higher standards much as they did when the federal standard was 10 SEER.

    Utilities in much of the Southwest and West are summer-peaking, with air-conditioning loads driving peak electrical demand requirements. Even in the Northeast, summer peaks driven by air-conditioning have been increasing with changing weather patterns and increased saturation of air-conditioning in homes and buildings. Nationally, demographic trends show that population is increasing most rapidly in the South, Southwest and West, where air-conditioning demand is highest. Within California, high growth areas tend to be in hot climate regions. In fact, 35 percent of new building permits in California are in the Inland Empire. These factors have increased attention on the importance of EER to equipment specifications, and both ENERGY STAR® and CEE integrate both SEER and EER requirements for equipment. Manufacturers are responding to this trend as they plan new equipment developments and are working to optimize both efficiency ratios. The current market challenge is helping to ensure that contractors recommend — and customers select — coils that properly match condensers to achieve their rated efficiency levels.

    From a resource-planning perspective, it is important to recognize the impact of ambient temperatures on air conditioning performance. The effect of temperature is important, and standard ARI tests may not be a good predictor of high-temperature air- conditioning performance. In inland California, outside air temperatures of 115°F with a humidity of 35 percent are not uncommon. Efforts are underway to develop a proof-of-concept air conditioner that can reduce operating demand by 15 percent to 25 percent and energy use by 10 percent to 25 percent under hot, dry conditions.


    Some utility programs have provided incentives to distributors for increasing their stock of premium efficiency units. The net effect of these upstream programs would be that if a distributor only carried premium-efficiency models, that would be the only equipment sold into the market. With or without this program support, distributors play a critical role in influencing how contractors operate and select products. In addition, they are also critical providers of technical, sales and business training, as well as information regarding regulatory changes and other shifts in the industry. In this way, distributors can help contractors to understand the value of promoting whole-system efficiency, overcome barriers to selling based on first cost and provide the needed tools and information to integrate quality installation as a standard business practice.


    HVACR contractors are the primary influencers in how efficiently an air-conditioning system operates, as they select, install and maintain customer equipment. Most customers rely on their contractors to recommend and install equipment. Unfortunately, many contractors are hesitant to offer a premium-efficiency system or full-quality installation due to competitive pricing in the industry. As a result, customers only learn about the lowest-cost options and typically don't receive all the information they need to choose the best system, installation and maintenance options that suit their needs.

    Utility programs targeted to the contractor channel should focus on providing hands-on training to technicians to ensure they are well-versed in proper equipment maintenance and installation. Additionally, contractors need sales tools to help them promote the benefits of premium equipment and services to customers, essentially selling value, comfort and savings rather than competing on price. Providing incentives can also help defray the additional costs required for a technician to provide quality services and motivate the contractor to apply the needed sales techniques to change the business from a low-cost to a high-value model. Finally, third-party verification services can help to confirm for the customer that the equipment is operating at its intended efficiency and that they received the full value of their quality installation investment.

    Recently, respected national organizations have come together to establish a specification that clearly defines “quality installation.” The Air Conditioning Contractors of America (ACCA) released a draft specification in 2006 which addresses a range of requirements from contractor business practices such as licensing, insurance and certifications to technical requirements such as proper sizing, airflow, refrigerant charge, duct leakage and owner education. Organizations including the U.S. EPA, CEE and utility and industry leaders are working together to evaluate this specification in practice to assess the costs and value to the customer for following all recommended practices. In the wake of the federal standard change, utility programs are increasingly focused on working with contractors to ensure they can implement these specifications and that customers understand that efficient air-conditioning goes far beyond specifying equipment.


    Customers, who often do not understand the benefits of premium-efficiency products and services, generally overemphasize initial cost rather than lifetime operating expenses. Additionally, customers will overlook routine maintenance if the air conditioner is blowing cold air. Providing information and education can help overcome market resistance, and provide credibility for the high-quality contractors who are seeking to offer whole-system efficiencies to their customers.

    Customers who participate in quality installation programs benefit in several ways. First and foremost, they can improve the operating efficiency of their existing system and ensure their new system operates as efficiently as possible. Increased efficiency translates into reduced operating costs. Depending on the before and after condition of their system, customers can reduce cooling costs by as much as 50 percent. Second, they can reduce excessive wear on system components, resulting in a system that operates for its full useful life and mitigates the risk of unplanned equipment replacement. Third, preventative maintenance can reduce the risk of mid-season breakdowns that cause inconvenience and typically result in customers paying peak prices for standard equipment installed in the minimum time. Finally, quality installation leads to improved comfort throughout the entire home or building by ensuring proper moisture removal, even temperatures from room to room and reduced operating noise.

    What's on the Horizon?

    The transition to the 13 SEER standard seems to have progressed smoothly from an equipment availability perspective. Despite dire predictions, manufacturers had 13 SEER and higher equipment available by the time the standard took effect, and most of the older inventory had largely cleared the market. The notable impact for energy-efficiency programs is now that equipment is a smaller part of the focus. While discussion of quality installation, reducing duct leakage and proper maintenance had been increasing in recent years, many efficiency program managers now focus on capturing the remaining — and significant — energy savings in air-conditioning. Efficiency experts are working hard to document and quantify the savings potential through quality installation, and we can anticipate that the next few years will see an increased emphasis on contractor training and customer education that take the industry beyond pricing as the basis for sales toward customer service and equipment maintenance as the new value proposition.

    Paul Kyllo is the program manager for commercial and residential HVAC energy-efficiency programs at Southern California Edison. Paul has been managing energy-efficiency programs at SCE for more than eight years. Before SCE, he worked in the engineering and construction industry as an HVAC engineer. Contact him at 626/302-2146 or at [email protected].