Comments Regarding Energy Conservation Standards for Consumer Furnaces

The undersigned free market and consumer organizations have a longstanding interest in bringing to light the deleterious consequences of federal regulations, which are often neglected by agencies in their attempts to adopt a regulatory agenda. For over 20 years, we have participated in rulemakings conducted by the Department of Energy (DOE) as well as litigation regarding energy and water conservation standards for home appliances. This includes agency actions impacting dishwashers, air conditioners, clothes washers and dryers, showerheads, and light bulbs.¹ Our particular focus has been on ensuring that the consumer protections built into the law are given full weight in the rulemaking process. In our view, these protections have often been downplayed or ignored by the agency when setting excessively stringent efficiency standards that raise overall costs and/or reduce product quality and choice.

It is for these reasons that we supported DOE’s January 15, 2021 Final Interpretive Rule creating a separate category for non-condensing natural gas furnaces.² Failure to do so would have violated the law by effectively eliminating this furnace type despite it being the best option for some homeowners.³

It is also for these reasons that we opposed DOE’s December 29, 2021 Final Interpretive Rule reversing the previous Final Interpretative Rule and eliminating the protection for non- condensing furnaces.⁴ This Final Interpretive Rule made possible the Notice of Proposed Rulemaking (NOPR) at issue here that would set out stringent new efficiency standards for furnaces that non-condensing versions cannot meet. We believe this NOPR violates the law and harms consumers and therefore should not be finalized.

SUMMARY OF THE ARGUMENT

The Energy and Policy Conservation Act of 1975 (EPCA) authorizes DOE to set and periodically consider amending energy and water conservation standards for most home appliances, including furnaces.⁵ Such standards are to be set to “achieve the maximum improvement in energy efficiency…which the Secretary determines is technologically feasible and economically justified.”⁶ Further, the agency cannot adopt any standard unless it would save a significant amount of energy.⁷

EPCA does not, as DOE now strongly suggests, prioritize efficiency above all else in the standards-setting process. Instead, the statute contains a number of provisions protecting consumers from excessively stringent standards that may do more harm than good. For example, in determining whether a standard is economically justified, DOE is required to balance the potential energy savings over the life of the appliance against any additional costs in the form of a higher purchase price and/or increased maintenance expenses.⁸ These costs can increase sharply with the stringency of the standard, and a point may be reached where the level is set so stringently that it costs consumers more than it saves them. EPCA seeks to avoid such a result.⁹ This is but one example of the provisions in EPCA that serve as a brake on regulatory overreach.

Most relevant here is the provision in the law categorically prohibiting any new or amended standard if the Secretary finds, by a preponderance of evidence, that it is “likely to result in the unavailability in the United States…of performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States at the time of the Secretary’s finding.”¹⁰ [Hereinafter the “features provision.”] The features provision is virtually tailor-made to protect consumers from natural gas furnace standards so stringent so as to effectively force non-condensing versions off the market in favor of condensing furnaces with very different characteristics that make them incompatible with some homes.

Finally, climate change considerations do not play a role under EPCA and in any event DOE should not use the Interagency Working Group’s (IWG) social cost of greenhouse gases (SC-GHGs) analysis to calculate net regulatory benefits. The SC-GHG—an estimate of the present value of the cumulative climate damages of an incremental ton of carbon dioxide equivalent (CO2e) greenhouse gas (GHG) emissions out to the year 2300—is too speculative and subjective, and too easily manipulated for political purposes, to be weighed in the same scales with the near-term consumer costs of the proposed standards. As it happens, the IWG exercise is egregiously biased due to its reliance on overheated climate models, inflated emission scenarios, and pessimistic adaptation assumptions. Using biased SC-GHG estimates to estimate net benefits is arbitrary and capricious. DOE’s net-benefits calculation also overlooks the obvious problem that, however estimated, the climate benefits of the proposed standards are too small to be detected or verified; “benefits” no one can experience are so in name only.

ARGUMENT

1. EPCA PROTECTS NON-CONDENSING FURNACES AND CONSUMER CHOICE

No two homes are exactly alike, nor are any two homeowners. The above-mentioned features provision acknowledges individualized circumstances and preferences and preserves them by ensuring that DOE standards are not set so high as to create one-size-fits-all limitations.

Even if only a few homeowners need non-condensing furnaces, the law would protect them, but in truth quite a few do. As other commenters have described in detail, a natural gas furnace must be compatible with a home’s venting system, and condensing furnaces are frequently not.¹¹ Further, it is not merely a matter of spending money to modify the existing venting system to be compatible with a condensing furnace. Depending on the home’s configuration, it may not be practical or even possible to do so. In other cases, it could be done but with very real disadvantages such as compromised safety or the need for ducts traversing rooms or components that take up additional space. The problems are particularly acute in homes where a non-condensing furnace shares the venting system with other appliances such as a water heater, and continued operation of these other appliances may be jeopardized by a switch to a condensing furnace.

A forced shift towards condensing furnaces would disproportionately burden lower- income homeowners who tend to have older and more space-constrained houses – the kinds most likely to need a non-condensing furnace. Thus, the NOPR may have adverse environmental justice implications not acknowledged by the agency.

The circumstances are as varied as the nation’s housing stock, and condensing furnaces cannot suit every need. In fact, the elimination of non-condensing furnaces would likely force some homeowners to make a switch, not to a condensing natural gas furnace but to an electric furnace, with higher operating costs as well as other potential disadvantages.¹² It is plausible that such fuel switching is at least part of the agency’s underlying goal here. Although the NOPR does not specifically endorse the electrification agenda, the Biden Administration has elsewhere set it out as a policy priority.¹³ The extent to which the NOPR would induce natural gas furnace users to abandon natural gas entirely in favor of electric furnaces further underscores that the features provision has been violated.

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