A Sticky Situation in the Energy Bill

Air Conditioning Distributors Oppose Varying Standards

Posted December 11, 2007 at 6:13pm

The Heating, Airconditioning & Refrigeration Distributors International isn’t much of a player on Capitol Hill. The group represents industry wholesalers and distributors and hasn’t ever registered to lobby. It has no outside consultants on retainer, and its chief advocate is based back at its headquarters in Columbus, Ohio.

But a seemingly noncontroversial provision in the hotly contested energy bill has the group — pardon the pun — downright steamed.

“This issue is the biggest legislative or regulatory issue ever to affect distributors,” said HARDI Vice President Talbot Gee. “It’s just unprecedented. The outcome of this will dictate our long-term involvement in D.C. There just is no bigger issue for us.”

The issue that has Gee fuming is a small piece tucked in the energy bill that would allow the Energy Department to carve up the United States into separate regions for the purposes of energy-efficiency standards.

That would mean that air conditioners in the balmy Southeast would need to be more energy-efficient than the national standard. And oft-used heating systems in the chilly Northeast would need to meet higher standards.

Debate over the issue has sparked a split among branches of the heating and cooling industry, with manufacturers agreeing to the regional standards and HARDI members, Air Conditioning Contractors of America and the Plumbing-Heating-Cooling Contractors Association pooling their resources and taking the opposite stand.

The groups opposed to the provision say if carried out, it could hurt their businesses, expose them to liability if the wrong units go to the wrong region and could create something of a black market for outlawed systems.

“The unintended consequences of requiring a higher efficiency product is that the cost to the consumer is going to be higher,” said Charlie McCrudden, director of government relations for the Air Conditioning Contractors of America. “The unit and installation are going to be more expensive.”

The energy bill, which the Senate could vote on later this week, is being held up by more controversial renewable electricity standards and an energy tax package.

Steven Nadel, the executive director of the American Council for an Energy Efficient Economy, which has lobbied for the provision, said the regional energy standards for heating and air conditioning systems will remain in the bill despite ongoing negotiations on other areas. “This issue is along for the ride. Ultimately, I think it will be enacted,” he said.

If that happens, then the matter will move to the Energy Department for a rulemaking, and McCrudden said his shop will have to hire consultants. Gee, too, said his group would have to make a more significant investment in D.C. And Gee already plans to register to lobby.

Both Gee and McCrudden said their groups favor one national standard that applies to all states because it creates certainty in their market. It also allows their members to move their products around the nation easily.

For example, if there’s a heat wave in Texas, the companies can tap air conditioners from other parts of the country, they say. But if there are regional standards, then a product that’s legal in Minnesota could be banned in Texas.

They say they also worry that unlicensed heating and air conditioning contractors, what they call bootleggers, will smuggle in lesser units that don’t meet a specific state’s standard, but would be cheaper, thus undermining contractors who are playing by the rules. “These bootleggers will undercut all the legit contractors,” McCrudden said.

But supporters of the regional standards aren’t buying it.

“The reason we think it makes sense is the U.S. is a diverse country climatically,” Nadel said. “What makes optimal sense in Florida doesn’t make sense in Minnesota.”

Nadel disagrees with the provision’s opponents over costs as well. “We think this will decrease the cost” over the long term, he said. Already, he added, wholesalers stock heating and cooling units of varying energy efficiency.

“It’s going to save energy, in our view, and save money and reduce emissions that contribute to global warming,” Nadel said.

But McCrudden said the standards for air conditions were increased by about 30 percent in January 2006. Since that change, McCrudden contends that there has been a 20 percent decrease in the sale of new units, while there has been a 20 percent increase in the sale of replacement parts. He says that means more people are choosing to fix old units as opposed to buying the newer, more efficient, but costlier, systems.

“The intent behind this is to try to save more energy, but you’re actually encouraging people to keep old equipment online longer,” Gee said.

In the past, when a legislative issue such as this one would heat up, HARDI would look to the larger lobby of the heating and air conditioning manufacturers. But in this case their interests have diverged.

According to McCrudden and Gee, earlier this year the heating and air conditioning manufacturers groups were on their side.

But as the energy bill made its way through the House and Senate committees, “there were other provisions put in the bill that gave them more problems. They negotiated those issues away on the backs of us,” McCrudden said.

Lobbyists for those manufacturing groups say they are mostly happy with the current provision.

Mike Blevins, director of government affairs and communications for GAMA, whose members make space and water heating units, said his group supports the provision now because Congress improved an earlier version.

“We certainly did have some concerns because we don’t think regional standards are necessary,” he said.

But, he added, it became clear that if an energy bill passes Congress this year, those regional standards will be in it. The group lobbied to change the original wording. “The language that is now in there is more precise,” Blevins said. The current version, for example, specifies that the Energy Department can proscribe only one regional standard in addition to the national standard.

The other manufacturers group, the Air-Conditioning and Refrigeration Institute, agrees.

(The two manufacturing groups are in merger talks, but nothing official has been announced or voted on, Blevins confirmed.)

Scott Segal, an energy lobbyist with Bracewell & Giuliani, represents ARI and said the group favors the overall bill. “We recognize there are shortcomings in the provisions, but we felt the compromise was improved in the direction of achieving business objectives by our participation in the negotiations.”

Even though they’re on different sides when it comes to the regional standards issue, Blevins can agree with HARDI and its allies on the importance of the matter.

“This has been a very big issue for us,” Blevins said. “While it is not seen in the public view as important as auto fuel-efficiency standards, for our industry, these issues are very important. In fact, there are no greater issues.”

Even so, Gee said the response from Congress has been disappointing. “All we’ve heard all year is what a little issue this is in such a big bill,” Gee said.

“There are very few Members of Congress who even know that this is in here. My members have been very, very aggressive in contacting their Members, but the response has been frustrating because the awareness has been little to none.”