Focused on the election, pending energy-efficiency changes might become a hot-button issue for Republicans.
In my January column I predicted that little would happen this year because Congress would politicize nearly every vote between now and November. Political gridlock is to be expected in presidential-election years. We’ve seen this movie before.
It’s important to know how to discern policy and politics when analyzing what’s going on in Washington. Between now and Election Day expect to see party leaders in the House and Senate on the offensive. Sometimes the legislative process to pass a bill is driven by the best intentions to solve a real problem. That’s when you hear public officials make comments such as “we are enacting good policy.” But other times bills are debated and votes are called just to make lawmakers take a position on hot-button issues. And that’s where the politics gets involved.
Republicans hold the majority in the House of Representatives, which means they control the schedule and the agenda. This year you can expect to see more “political” votes on the legislative calendar designed to appeal to their base in advance of November. They’re strategically designed to force votes on issues the other party wants to avoid. Senate Majority Leader Harry Reid, who controls a thin majority in the Senate (and where the minority party has great power), will find himself in the unenviable position of being the political backstop to bills passed by House Republicans. And Reid will be working to protect his 16 fellow incumbents (and seven open-seat candidates) from taking tough votes that can be used in ads running against them by their opponents. Senate Minority Leader Mitch McConnell and his fellow Republicans need to hold on to only eight incumbent seats and three open races.
So if Congress is going to spin its wheels for the next nine months, is it safe to ignore what’s going on in Washington? Not at all. Even though the legislative branch isn’t geared up to pass any laws impacting the HVACR industry, the executive branch is picking up the slack.
I recently attended ACCA’s 44th Annual Conference and Indoor Air Expo in Las Vegas. The conference is a rare opportunity for contractors, distributors, and equipment manufacturers to gather for a few days to discuss all things related to our unique industry, so I began to pick up on what’s on everyone’s mind.
This year I noted a lot of talk about recent and pending actions taken by the federal government — and by federal government I mean certain regulatory agencies, such as the Environmental Protection Agency, the Dept. of Energy, and the National Labor Relations Board. These sentiments were echoed at a Contractor Town Hall meeting and the CEO Forum.
When you take a 50,000-foot view, you realize all levels of the HVACR industry are facing more scrutiny from the federal government than ever before. Rules and their enforcement used to focus on manufacturers and governed the production and use of HCFCs or the minimum energy conservation standards for appliances. Nowadays distributors and contractors find themselves concerned with new rules and regulatory actions.
In the last two months, several federal agencies have concluded rulemakings or comments periods affecting the entire HVACR supply chain. These include adjustments to the production and import of R-22 for 2012-2014 (EPA); changes to the yellow EnergyGuide tag and other information disclosure practices for regional efficiency standards for residential furnaces, heat pumps, and central air conditioners under the Appliance Labeling Rule (Federal Trade Commission); an enforcement plan for the same regional standards (DOE); changes to guidance on whether condensing units should be covered under appliance standards rules (DOE); proposed standard-work specifications for manufactured housing under the Workforce Guidelines for Home Energy Upgrades (DOE); and guidance on the testing and rating of R-22 condensing units (DOE).
Each of these rulemakings will have a direct impact on the whole industry, and it’s good to see the industry partners working together to develop and submit comments.
Take the EPA’s proposed adjustments to the HCFC allocation as an example. As everyone knows, in January the price that R-22 refrigerant manufacturers charge to distributors and contractors dramatically increased in response to actions by the EPA. In most areas the price for a 30-gallon jug or cylinder of R-22 tripled, and rumors abounded about the availability of R-22 in the future.
The price spike took many contractors by surprise, so it’s important to note how and why this happened. Last year, a judge forced EPA to reconsider the allocations it grants to refrigerant manufacturers and importers because the agency failed to recognize a legal 2008 allocation trade between two manufacturers. Faced with a low demand for R-22 (along with near-record low prices), EPA decided it would also consider cutting the allocations enough to manipulate the price to encourage more recycling and reclamation. But the agency’s efforts were delayed by the regulatory process, and by the end of 2011 the EPA still hadn’t told the manufacturers how much R-22 they could produce in 2012 and beyond. By mid-January EPA alerted the industry it could expect allocation reductions to be curtailed between 11% and 47%. At this point most manufacturers changed their policies to reflect increased prices and small purchase allotments. Unfortunately, no one knows what the final allocation amount will be, and we likely won’t find out until July.
In the meantime, the DOE has decided to insert itself into the debate over the manufacture and sale of “dry-charged” condensing units intended as replacement parts in R-22 systems. This is probably the single most controversial topic among contractors, many of whom are still pretty steamed that these units are on the market and extending the lifespan of older, less efficient systems.
The EPA does not seem interested in stopping the sale of dry-charged units, while the DOE is signaling that it might step in to slow down sales. The Clean Air Act gives EPA the authority to control the production and use of HCFCs, therefore it can ban the manufacture of new systems that use R-22. The DOE, on the other hand, has jurisdiction over appliance energy use and in their view, dry-charged units that could not be certified (matched) to the indoor coil violated current energy conservation standards if they did not result in a system that achieved 13 SEER.
Meanwhile, the DOE and the FTC will finish their joint rulemakings on the enforcement of regional standards. The enforcement rules will touch everyone from manufactures to the consumers. Right now we don’t know what the enforcement scheme will look like because it’s too early to tell. But we should know soon because DOE has to do something by January of next year, and the new rules for non-weatherized residential gas furnaces go into effect in May of 2013.
The aggressive stance taken by the federal agencies might not go unnoticed by those on Capitol Hill looking to pick a fight with the Obama Administration. Over the course of this summer we could see hearings by various House committees called for the purpose of reviewing regulatory decisions that harm small businesses or individual industries. Congress will need something to fill the time.
Charles McCrudden is Vice President/Government Relations for the Air Conditioning Contractors of America, www.acca.org. He can be reached at firstname.lastname@example.org.