When the newly elected Democratic leadership took over the House and Senate this year, they looked to undo some of the laws passed under a Republican majority Congress and Republican White House. House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.) put out markers in January that they wanted to review and rewrite the massive and comprehensive Energy Policy Act of 2005 (EPACT). In their view, EPACT, which took nearly six years through three Congressional sessions to pass, was a government subsidized giveaway to big oil and gas companies, electric utilities, and automobile and other manufacturing interests that did not address our nation’s energy problems.

With their new majorities, Democratic leaders vowed to end subsidies to oil and gas companies, increase the minimum average fuel economy for cars and small trucks (which includes SUVs), promote alternative and select domestic energy sources, reduce the emissions of greenhouse gases, and increase energy efficiency through raised appliance standards.

The Senate moved first when Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) released S. 1115, the Energy Efficiency Promotion Act of 2007 on April 16, 2007. The bill targeted the low-hanging fruit of energy efficiency – figuring that gains in efficiency would help the federal government, businesses, and consumers to counter rising energy costs. And while nearly everyone supports energy efficiency initiatives, there was a devil lurking within the details.

The Senate bill contained many “consensus” provisions. That’s Capitol Hill-speak for bills that are non-controversial because they have been worked out between opposing parties ahead of time. For example, one of the consensus provisions set new Annual Fuel Utilization Efficiency (AFUE) ratings for residential gas, oil, and electric boilers that also included specific design requirements that was negotiated between environmentalists and manufacturers and submitted to the Department of Energy for approval last year. When the Department of Energy inexplicably rejected the agreement saying they didn’t have the authority to regulate AFUE standards and design requirements on the same product, the parties requested that Congress codify the agreement into law.

But the bill also included language that would give the Department of Energy (DOE) the authority to create regions based on climate where a higher AFUE or SEER rating would be the minimum standard. This proposal would set aside a system in place that works effectively while dramatically alters the regulatory landscape for HVACR manufacturers, distributors, contractors, and consumers.

Under the Energy Policy Act and Conservation Act (EPCA), the DOE is authorized to set the minimum efficiency standards for a variety of residential appliances, including refrigerators, dishwashers, lighting, and heating and air conditioning products. EPCA restricts the DOE to setting a single national minimum efficiency standard for each product, but must routinely review the standard for increase if it is technically feasible and economically justified.

This set of rules dictating efficiency standards was developed under a consensus agreement between the manufactures and energy efficiency advocates during the 1970s and 1980s, where all stakeholders gave something away and got something in return. Manufacturers got a single federal standard that applied to the entire country and efficiency advocates got a higher standard that could be ratcheted up over time. Contractors and consumers benefited from a stable marketplace with a dependable supply chain.

The Senate regional standards proposal is significant because it singles out heating and air conditioning products for special consideration under the law. No single product covered under EPCA has ever been treated with a regional standard. Allowing a federal agency to set a patchwork of standards is unprecedented.

Along the way the Senate bill had many more controversial proposals added through amendments, including provisions to extract fuel from coal and raise fuel efficiency on cars. Senators from coal states want assurances of federal loans for programs that would create diesel fuel out of coal. The process shows promise but is very expensive and creates harmful byproducts. After nearly two months of committee hearings and debate on the floor, the bill was approved by the full Senate on June 26, 2007.

In May, the House Energy & Commerce Committee released four “discussion drafts” that dealt with electric utility policy, alternative fuels including coal to gasoline, DOE loan guarantee programs, and you guessed it, energy efficiency for appliances. Like the Senate bill, it contained several of the same consensus provisions worked out ahead of time. And like the Senate bill, the House discussion draft included a provision creating higher minimum efficiency standards for heating and cooling appliances based on regional climate.

Air Conditioning Contractors of America (ACCA) has traditionally supported a single, federal standard because it maintains certainty in the market place for manufacturers, distributors, contractors, and most importantly, consumers. Regional standards would take away the portability of heating and cooling equipment, restricting a distributor or contractor’s ability to respond to market fluctuations and shortages. Under a regional standards plan, contractors that perform work in several states, and the distributors that serve them, would be forced to keep separate inventories.

The most significant problem for contractors is the enforcement of regional standards. Under current law, the manufacturers must certify that their products meet the federal minimum standard. Once the product has left the manufacturers loading dock, it is assumed that it’s compliant and there’s no need for further oversight. The bills before the House and Senate shift the enforcement burden to contractors, opening up contractors to new levels of liability. Yet the bills remain silent on who would actually enforce these provisions. Would it be the local building inspectors, the DOE police? The questions must be asked: Would every HVAC installation require a permit? Or an inspection after work is completed? It is unrealistic to expect this bill to be enforced fairly or in an expeditious manner. These regulatory hurdles may grind the industry to a halt.

Regional standards also would create ripe opportunities for unlicensed contractors to illegally install equipment purchased in an adjoining region. Moonlighters would only have to drive across a state border to purchase a lower efficiency (and cheaper) product, tipping the scales against the legitimate contractor.

The unintended economic consequences of regional standards will trickle down to small business contractors who are the face of the industry to the consumers. High efficiency heating and cooling products cost more, have unique installation issues that require more labor hours, and sometimes even require demolition and reconstruction. These added costs may place the higher efficiency products out of the reach of the consumer. The end result: the national inventory may remain older and more inefficient. At the same time, we will fail to retire older equipment that may contain refrigerants that use Chlorofluorocarbons (CFCs) and Hydrochlorofluorocarbons (HCFCs), which are slowly being phased out. In effect, implementation of regional standards could impede the changeover to a more efficient national inventory while denying many consumers the long-term benefits of energy-efficient heating and cooling equipment.

The House Energy and Commerce Committee completed its work on energy efficiency legislation after two marathon committee markup sessions that lasted two days each. Rep. Paul Gillmor (R-Ohio) offered an amendment to strike the provision granting DOE the authority to create regional standards. It failed along a party line vote. The amendment offered by Rep. Dennis Hastert (R-Ill.) to require a study of the practicality and effectiveness of regional standards conducted by independent review panels before Congress could grant DOE the authority to create regional standards failed as well. However, an amendment by Rep. John Barrow (D-Ga.) requiring a study conducted by the DOE as a preliminary step during any rulemaking allowing regional standards did pass by voice vote. The study would require input from contractors, manufacturers, distributors and other interested parties. The study and the normal rulemaking process will consider whether regional standards are economically justified, technologically feasible, and would attain significant energy savings. The bill was passed out of committee on mostly party line votes and awaits action on the House floor. It’s possible that may occur before the end of July.

Over the past two months industry lobbyists have spent countless hours on these important bills. If and when the House bill passes it must be “conferenced” with the Senate bill that passed in May before it could become law. The bills are very different so the conference committee may take weeks to approve a compromise bill that can be passed by both chambers. And, after all that work, President Bush could still veto the bill.

Charlie McCrudden holds a bachelor’s degree in American Studies from Franklin and Marshall College and a master’s degree in Urban and Regional Planning from the University of Virginia.