After causing years of uncertainty and economic hardship for the HVAC industry, the regional standards lawsuit appears to finally be resolved.

On Tuesday, March 11, the American Public Gas Association (APGA) and U.S. Department of Energy (DOE) filed a joint settlement motion with the U.S. Court of Appeals for the D.C. Circuit to vacate the contentious regional furnace efficiency standards while allowing for an 18-month sell-through period for distributors to comply with the air conditioner and heat pump standards, which take effect Jan. 1, 2015, and agreeing not to penalize distributors as part of any enforcement scheme for the Regional Standard. The motion now awaits court approval.

“In addition to the positive results, which many believed to be unattainable just years ago, this issue has also enabled our industry to come back together and lay the foundation for a formidable three-legged stool representing all aspects of the HVACR supply chain,” Talbot Gee, executive vice president and COO of Heating, Air-conditioning & Refrigeration Distributors International (HARDI), said.

 

Relief for Distributors

Regional Standards Settlement Facts

• The energy efficiency standard for residential gas furnaces in the North has been remanded; DOE will begin the process of assessing a new standard using a more transparent process. 


• It is likely that a new furnace standard will not take effect until 2021-2022. Until a new standard is established, a national standard of 80 percent AFUE is the law of the land. 


• On Jan. 1, 2015, the efficiency standard for central air conditioners in the South will be 14 SEER. In the Southwest, that standard will be 14 SEER with a 12 EER. 


• Distributors in the South and Southwest will have 18 months (until July 1, 2016) to sell any inventory of 13-SEER equipment that was manufactured before Jan. 1, 2015. 


•DOE has agreed not to assess civil penalty upon distributors for violations related to the enforcement of regional efficiency standards for central air conditioners and heat pumps. 


• DOE will present a proposal for a negotiated rulemaking regarding the enforcement of the regional standard to the Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC). If approved ASRAC, DOE will attempt to use a negotiated rulemaking as a means to determine an effective enforcement scheme by engaging all interested parties, gathering data, and attempting to reach consensus amongst all stakeholders. 


• DOE will evaluate and assess the usage of the Direct Final Rule process, which was used to establish the regional efficiency standards and was the focus of the lawsuit challenging the standards. 


For more information regarding the settlement and HARDI Advocacy, go to http://www.hardinet.org/advocacy. 

The regional standards lawsuit, in which the APGA challenged the DOE’s rulemaking process for promulgating regional energy efficiency standards, has dragged on for more than two years and was expected to stretch at least through the end of 2014. HARDI, which was represented in the lawsuit by Cause of Action, a non-profit and nonpartisan government accountability organization, pushed hard over the past several months to expand the lawsuit to include air conditioners and heat pumps. 

In a press release, HARDI called the settlement agreement “a victory for HVACR distributors.” HARDI president Royce Henderson said the 18-month sell-through period will give distributors and suppliers the opportunity to sell existing inventory at a reasonable price. 

“It also avoids moving inventory from one region to another, gives us time to phase in the new models, and gives us two pre-season order periods to adjust our inventory,” Henderson said. “Having the right products in our warehouses in the market we serve is one our most important services to our manufactures and our customers. This settlement gives us the capability to do that and allows us the space to have the right equipment, not obsolete product.”

Henderson added that the settlement sets the precedent “that the DOE will have to follow proper guidelines in future rulemakings or changes to regional standards.” 

Steve Porter, co-chair of HARDI’s Committee on Government and Trade Relations, agreed that the sell-through period is especially beneficial for HARDI’s members and is something the organization is pleased with.

“This settlement protects distributors from significant damage associated with stranded inventory and confirms our belief that distributors should not be penalized for the enforcement of this standard,” Porter said. “Had HARDI not been engaged in this lawsuit, this settlement would not be possible.”

Henderson said the lawsuit also helped improve communication between industry organizations. “We had meetings with AHRI, ACCA, and HARDI, and [we] feel it is important to keep that communication moving forward in the future, at least at the Board level,” he said.

While the settlement has been filed with the consent of all parties involved, the fate of the lawsuit ultimately lies in the hands of the court, which could take weeks to make a final decision.