### 541 AMERICAN 6 AS /JAN . 1 9 9 2 

# Nobody can - or would

too much ofa good thing?

WHEN PRESIDENT RONALD REAGAN SIGNED the National Appliance Energy Conservation Act of 1987 (NAECA) into law, he forever changed the home-appliance market. NAECA's efficiency standards affect 14 classes of residential appliances; seven classes include gas-fired models. While manymanufacturers and utilities supported a uniform standard because of concern over conflicting state regulations, they may have gotten more than they bargained for. Under the act, the U.S. Department of Energy (DOE) must set, review and - if "technologically feasible" and "economically justified" - raise minimum efficiency standards over the course of the next 15 or 20 years. Where are these standards headed? WhileA.G.A. and the gas industry solidly back conservation and efficiency efforts, concern remains that NAECA's efficiency standards could be raised too high, increasing up-front appliance and installation costs to the pointthat consumers and builders eschew gas appliances for electric ones - and end up conSTICKER SHOCK? Homeowners shopping forges furnaces

-as well as other appliances - will find higherprices if manufacturers are required to make equipment increasingly more efficient. 

# •••

PHOTO BYPAIA



### AMERICAN GAS/JAN 

### 1 9 9 2 

# Nobody can

- or

# would

- argue about the benefits of energy efficiency. But isNAECA

toomuch of agood thing?

WHENPRESIDENTRONALD REAGAN SIGNED the National Appliance Energy Conservation Act of 1987 (NAECA) into law, he forever changed the home-appliance market. NAECA's efficiency standards 

### affect 14 classes of residential appliances; seven classes include gas-fired models. While many manufacturers and utilities supported a uniform standard because ofconcern over conflicting state regulations, they may have gotten more than they bargained for. Under the act, the U.S. Department of Energy (DOE)
must set, review and

- if 

### "technologically feasible" and "economically justified"

- raise minimum efficiency standards over the

course ofthe next 15 or 20 years. Where are these standards headed? While A.G.A. and the gas indm:try solidly back conservation and efficiency efforts, concern remains that NAECA's efficiency standards couldbe raised 

### too high, increasing up-front appliance and installation costs to the point that consumers and builders eschew gas appliances for electric ones

- and endup conSTICKERSHOCK?Homeownersshopping

### forgas furnaces

- as wellas otherappliances

- will findhigherprices ifmanufacturers are required
to make equipmentincreasinglymore efficient.

e .•suming far more energy at the source than

they save at the site.

The "No Standard" Standard
NAECA is an extensive amendment to 1975's Energy Policy Conservation Act(EPCA), which authorized - but did not require - DOE to mandate energy efficiency standards for major home appliances. In an effort to put teeth in EPCA, Congress first amended it in 1978 via the National Energy Conservation Policy Act. This amendment named 13 classes of appliances for which DOE was required to establish standards; the agency's only guidelines for the process werethat the standards be "technologically feasible" and "economically justified." By 1980, DOE had proposed standards foreight classes of appliances. However, in January 1981 it suspended the rulemaking process, and in April 1982 it announced that no standards were economically justified. This decision, which became known as the "nostandard" standard, prompted a legal challenge as well as much consternation on Capitol Hill. DOE lost both the ensuing lawsuit and its battle on the Hill. The court held that DOE had not satisfied the law's requirement, while congressional ire at DOE's "no standard" standard assured quick passage of NAECA. NAECA leaves little room for DOE to waver from its congressionally mandated course. The act describes the minimum standards DOE must adopt for each appliance and sets forth specific criteria the Secretary of Energy must use to set future standards. Each standard must be reviewed twice after the initial,mandated minimum levels go into effect, creating an ongoing process of standards-setting and review - and the possibility of tougher efficiency standards - that will not end until the year 2012. NAECA is more far-reaching than EPCA in several other ways. Policies for amending test 

## B

## Y
TODD BERNHARDT

procedures are more specific than EPCA's;the act requires a "maximum quantity of energy use" in addition to a "minimum standard of energy efficiency"; and NAECA federal standards preempt all state and local laws,regulations and requirements regarding energy use and efficiency, except under certain circumstances. Finally, the act provides moreopportunity for public scrutiny of DOE-decision-making - it extends notice and comment periods, relaxes access to the courts andallows consumers, manufacturers, distributors and other interested parties to petition DOE for d amen ments.
Phasing in Phase IIThough NAECA covers a wide range ofproducts, the gas industry is most con-. cerned about furnacesand water heaters, according to Phil Mahla, A.G.A. director of residential marketing and market research, andJim Ranfone, A.G.A. director of building energy codes and standards. Water heaters, for now, are not strainingunder the efficiency and marketing ramifications of Phase I of the new standards, which for them became effecitve Jan. 1, 1990. "There were no real changes in the market asfar as gas or electric water heaters were concerned," says Ranfone. "It's still about a 50- 50 mix of the two and it just raised the level of efficiency for both, maintaining an equal playing field." But, cautions Mahla, DOE is reviewing -and will possibly increase - minimum efficiency levels via three five-year phases. PhaseI involved the initial setting and implementation of standards, while Phases II and III will involve the review and amendment process. "The disagreement right now is among the Congress was not pleased when DOE announced a "no standard" standard in 1982 for home appliance efficiency.



### A M E R I C A N GA S /JAN . 1 9 9 2 sUlning far more energy at the source than they save at the site.

The 

### "No Standard" Standard
NAECA is an extensive amendment to 1975's Energy Policy Conservation Act (EPCA), which authorized

- but did not require

- DOE to mandate energy efficiency standards for major home appliances. In 

### an effort to put teeth in EPCA, Congress first amended it in 1978 via the National Energy Conservation Policy Act. This 

### amendment named 13 classes of appliances for which DOE was required to establish standards; the agency's only guidelines for the processwere that the standards be "technologically feasible" and "economicallyjustified."

. By 1980, DOE hadproposed standards for eightclasses ofappliances. However, inJanu

### ary 1981 it suspended the rulemaking process, and in April 1982 it announced that 

### no standards were economically justified. This 

### decision, which became known as the "no standard" standard, prompted a legal challenge as well as much consternation on Capi- wi Hill.

. 

### DOE lost both the ensuing lawsuit and its battle on the Hill. 

### The court held that DOE had not satisfied the law's requirement, while congressional ire at DOE's "no standard" standard assured quick passage ofNAECA. NAECAleaves littleroomforDOEtowaver from its congressionally mandated course. The act describes the minimum standards DOE must adopt for each appliance and sets forth specific criteria the Secretary ofEnergy must use to set future standards. Each standard must be reviewed twice after the initial, mandatedminimum levels go into effect, creating an ongoingprocess ofstandards-setting and review

- and the possibility oftougher efficiency standards

- thatwill

### notenduntil the year 2012. NAECA is more far-reaching than EPCA in .,everalotherways. Policies for amendingtest 

### IY TODD BERNHARDT



### procedures are more specific than EPCA's; the act requires a "maximum quantity ofenergy use" in addition to a "minimum standard ofenergy efficiency"; and NAECA federal standards preempt all state and local laws, regulations and requirements regarding energy use and efficiency, except under certain circumstances. Finally, the actprovides more opportunity for public scrutiny ofDOE-decision-making

- it extends notice and commentperiods, relaxes access to the courts and allows consumers, manufacturers, distributors and other interested parties to petition DOE for amendments.
Phasing in Phase II 

### ThoughNAECA covers a wide range of products, the gas industry is most con-

. cerned about furnaces and water heaters, according to PhilMahia, A.G.A. directorofresidential marketing and market research, and Jim Ranfone, A.G.A. director ofbuilding energy codes and standards. Water heaters, for now, are not straining under the efficiency and marketing ramifications ofPhase I ofthe new standards, which for them became effecitve Jan. 1, 1990. "Therewere no realchanges inthe market as far as gas or electricwater heaters were concerned," says Ranfone. "It's still about a 50- 50 mix 

### ofthe two and itjustraised the level ofefficiency for both, maintaining an equal playing field." But, cautions Mahla, DOE is reviewing

- and will 

### possibly increase

- minimum efficiency levelsviathree five-yearphases. Phase I involved the initial setting and implementation ofstandards, while Phases II and IIIwill 

### involve the review and amendment process. "The disagreement right now is among the Congress wasnotpleasedwhen DOEannounceda "no standard" standardin 1982

### forhome appliance eHiciency.



### AMERICAN GAS/JAN. 1992MINIMUM EFFICIENCY LEVELS AND EFFECTIVE DATES FOR GAS APPLIANCES

COVERED BY NAECA

PRODUCT NAECA EFFECTIVE

MINIMUM DATE

FURNACES Manufactured All input sizes 78% AFUE after 1/1/92

...................... Mobile home .......................... ...................... Manufactured use only 75%AFUE after 9/1/90
BOILERS Boilers, 80% AFUE Manufactured hot water after 1/ 1 /92

.................... Boilers

, .........................

75% AFUE ..................

Manufactured steam after 1/1/92

WATER Energy HEATERS factor= 0 62 Manufactured Storage .

(RSV x0.0019) after 1/1/90

.................. Instantaneous ..........................

Energy .....................

Manufactured factor= 0.62 afterl0/12/91

SWIMMING POOL 78% Manufactured HEATERS Thermal

Efficiency after 1/1/90

RANGES No constant AND OVENS burning pilot Manufactured

on models w/ after 1/ 1 /90 electric cord

DRYERS No constant Manufactured

burning pilot after 1/1/88

'RSV = Rated Storage Volume various interest groups - the conservation groups, the gas industry, the electric industry, the manufacturers, whatever - as to what those minimum levels should be," he says. "Now that we're in Phase II of the process with water heaters, the long-term goal of the gas industry is to make sure that we don't lose this equal playing field - and that'swhere A.G.A.'s government relations activities, as well as our involvement in regulatory and codes-setting bodies, come into play." For instance, says Ranfone, A.G.A. has been working closely with a Gas Research Institute (GRI)-sponsored research project to develop a technical and economic analysis of various water-heater efficiency-improvement design options. "We want to help ensure that any newlevel is - as the law requires - 'economically justified,' " he says. "For example, the analysis scientifically explains why we wantto maintain the availability of gas water heaters that need no electrical supply to operate and can be vented using traditional systems.It doesn't make sense to substantially increase the first-cost of a gas water heater for a minimal increase in efficiency, since a seven- or 10-year payback means little when you're dealing with an appliance that has a life expectancy of about 11 years. "DOE understands that the gas industry is very concerned about this rulemaking," Ranfone continues. The analysis has been submitted to DOE, which will take it - and information provided by other groups - intoconsideration as it decides whether to propose an efficiency-level increase.
Tilting the Playing Field NAECA requires that, as of Jan. 1, 1992, all gas furnaces must operate at a minimum of78 percent AFUE (annual fuel utilization efficiency). Because the AFUE definition assumesfurnaces are located indoors and all combustion air is provided from the outside through ducts or grills, efficiencies added by vent dampers are not considered in the definition.Consequently, NAECA almost eliminates conventional atmospherically vented furnaces,which last year accounted for about 65 percent of shipments. That left fan-assisted combustion systems (78-83 percent AFUE), also known as FACS, and full-condenser (90-95 percent AFUE) furnaces. While both of these units are moreefficient, both are more expensive. Installation of the FACS units can also be more difficult and expensive, due to special venting requirements. In an effort to deal with this, A.G.A. Laboratories and Battelle Columbus Laboratories, under the sponsorship of GRI, researched and in September 1991 published new tables that make adjustments in ventingtechniques and parameters, allowing contractors to vent these mid-efficiency pieces of equipment correctly. One furnace manufacturer, Lennox, has entered the marketplace with a 78 percentAFUE product that can be vented using traditional techniques. Rather than a FACS design, the furnace features a "burner-box damper," which helps bring the efficiency up to NAECA levels by helping prevent excess loss of heat.Ranfone explains A.G.A.'s role in the product's introduction: "Lennox filed a petition with DOE, requesting to test this design. A.G.A. supported it, not on behalf of Lennox but saying that all manufacturers should be able to attempt to get efficiency ratings using the same test methodology - and, in fact, one other manufacturer is looking into thetechnology. We want to maintain the availability of cost-effective gas furnaces, with lower installation costs, in the marketplace." What can the gas industry expect from the 78 percent standard? "A.G.A. is looking out for the industry's interests. We're explaining to our members what the new rules are, but because the standard is so new , we don't know exactly how much the marketplace will be affected," says Ranfone. "Our members need to be aware of the changes and the competition they will create. They need to watch the marketplace, because that's where NAECA's effect will be seen."And what about the prospects for increased efficiency standards? The Phase II review process for furnaces will begin in1993, and the standard will be decided several years before it is implemented in 2001. "A.G.A. fully intends to actively participate in the rulemaking process," assures Mahla, "to represent the interests of both the consumer and the gas industry. If a proposal is not economically justifiable, as prescribed by the law, we're going to insist that final rules do meet the mandates of the law." As part of this plan, A.G.A. recently named six gas utility representatives to a new GRItechnical advisory group that will study furnace-efficiency and boiler issues. In addition, Ranfone (who will represent A.G.A. in theGRI group) cites A.G.A.'s work with individual utilities and states on furnace efficiency and marketing issues.
Countering the Heat PumpNAECA's 78 percent AFUE standard for furnaces hit Southern utilities especially hard.G i v e n the South's benevolent climate, highefficiency furnaces are not economically f e a -s i b l e f o r many residents, a f a c t that propo

### AMERICAN GAS / JAN . 1 9 9 2 m MINIMUM EFFICIENCY LEVELS AND EFFECTIVE DATES FOR GAS APPUANCES COVERED BY NAECA

PRODUCT NAECA EFFECTIVE MINIMUM DATE

FURNACES Manufactured All input sizes 78% AFUE after 1/1/92**M;;b'ii~'h;;;':;e"** •••••u

.........u ••••••••**·M~~~·(~·~i~;~·** use anly 75% AFUE after 9/1/90

BOILERS Boilers, 80%AFUE Manufactured hot water after 1/1/92**·B;;ii~;;:··········** 

### .........................**·M;;~~i;;ci~·;e;r** steam 75%AFUE after 1/1/92

WATER Energy HEATERS factors 0.62 Manufactured Storage (RSV*xO.OOI9) after 1/1/90



### .......................


## ..**·E~~;9Y**

## ..........··**·M~~·~f~~i~~~d·** Instantaneous factors 0.62 after10/12/91
SWIMMING 78% Manufactured POOL Thermal HEATERS Efficiency after 1/1/90

RANGES No constant AND OVENS burnina pilot Manufactured

an mo els w/ after 1/1/90 electric cord

DRYERS No constant Manufactured burning pilot after 1/1/88

*RSV s Rated Storage Volume various interest groups

- the conservation
groups, the gas industry, theelectric industry, the manufacturers, whatever

- as to what those minimum levels should be," he says. "Now that we're in Phase II of the process withwater heaters, the long-term goal ofthe
gas industry is to make sure that we don't lose this equal playing field

- and that's where A.G.A.'s government relations activities, as well as ourinvolvement inregulatory and codes-setting bodies, come into play." For instance, says Ranfone, A.G.A. has been working closely with a Gas Research Institute (GRI)-sponsoredresearchprojectto develop a technical and economic analysis of various water-heater efficiency-improvement design options. "We want to help ensure that any new level is

- as the law requires

- 'economically justified,' " he says. "For example, the analysis scientifically explains why we want to maintain the availabilityofgas waterheaters that need no electrical supply to operate and can be vented using traditional systems. It doesn't make sense to substantially increase the first-cost ofa gas water heater for

a minimal increase in efficiency, since a

seven- or 10-yearpayback means little when you're dealing with an appliance that has a life expectancy ofabout 11 years. "DOE understands that the gas industry is
very concerned about 

### this rulemaking," Ranfone continues. The analysis has been submitted to DOE, which 

### will take it

- and informationprovidedby othergroups

- into consideration as it decides whether to propose an efficiency-level increase. 

### Tilting the Playing Field
NAECArequiresthat, as ofJan. 1, 1992, all
gas furnaces must operate at a minimum of 78percentAFUE (annual fuel utilization efficiency). BecausetheAFUE definition assumes furnaces are located indoors and all combustion air is provided from the outside through ducts or grills, efficiencies added by vent dampers are not considered in the definition. Consequently, NAECA almost eliminates conventional atmospherically vented furnaces, which last year accounted for about 65 percent ofshipments. That left fan-assisted combustion systems (78-83 percent AFUE), also known as FACS, and full-condenser (90-95 percent AFUE) furnaces. While both ofthese units are more efficient, both are more expensive. Installation ofthe FACS units can also be more difficult and expensive, due to special venting requirements. In an effort to deal with this, A.G.A. Laboratories and Battelle Columbus Laboratories, under the sponsorship of GRI,



### AMERICAN GAS/JAN.1992 researched and in September 1991 published

new tables that make adjustments in venting techniques andparameters,allowingcontractors to vent these mid-efficiency pieces of equipment correctly. One furnace manufacturer, Lennox, has entered the marketplace with a 78 percent AFUE product that canbe vented using traditional techniques. Rather than a FACS deSign, the furnace features a "burner-box damper," which helps bring the efficiency up to NAECA levels by helping prevent excess loss ofheat. Ranfone explains A.G.A.'s rolein theproduct's introduction: "Lennox filed a petition with DOE, requesting to test this design. A.G.A. supported it, not on behalfofLennox but saying that all manufacturers should be able to attempt to get efficiency ratings using the same test methodology

- and, in fact,

one other manufacturer is looking into the technology. We want to maintain the availability of cost-effective gas furnaces, with lowerinstallation costs, in the marketplace." What can the gas industry expect from the 78 percent standard? "A.G.A. is looking out for the industry's interests. We're explaining
to our members what the new rules are, but because the standard is so new, we don't know exactly how much the marketplace

### will be affected," says Ranfone. "Our members need to be aware of the changes and the competition they 

### will create. They need to watch the marketplace, because that's where NAECA's effect 

### will be seen." And what about the prospects for increased efficiency standards? The Phase II review process for furnaces 

### will begin in 1993, and the standard 

### will be decided several years before it is implemented in 2001. "A.G.A. fully intendsto activelyparticipatein the rulemaking process," assures Mahla, "to represent the interests ofboth the consumer and the gas industry. 

### If a proposal is not economicallyjustifiable, as prescribed by the law, we're going to insist that final rules do
meet the mandates ofthe law." As partofthis plan, A.G.A. recentlynamed six gas utility representatives to a new GRI technical advisory group that 

### will study furnace-efficiency and boiler issues. In addition, Ranfone (who 

### will represent A.G.A. in the GRI group) cites A.G.A.'s work with individual utilities and states on furnace efficiency and marketing issues.


### Counteringthe Heat Pump
NAECA's 78percentAFUE standardforfurnaces hit Southern utilities especially hard. Given the South's benevolent climate, highefficiency furnaces are not**economi~ally** feasible for many residents, a fact that propernents of electric heating began to exploit. Gas utilities reacted to this marketing challenge with the hydro-heat system, also known as the combo system. "Without the combo system, I think we would have gotten clobbered by the heatpump," says Bob Watkins, senior vice president of marketing for Public Service Company of North Carolina. "NAECA was kinder to the heat pump - its requirements have not gone up drastically, so its price has not risen much. But, because we priced ourselves so high with these high-efficiency furnaces, the heat pump began making inroads. We responded with the combo heater." Pioneered in the 1970s, combo heaters are the simple marriage of a standard gas water heater with an air handler. When space heat is needed, the wall thermostat triggers a small pump, which circulates hot water from the water heater through a coil in the air handler. The fan in the handler comes on and blows air over the coil, absorbing the coil's beat. The warm air is then circulated through the home. Combo units are efficient, competitively priced, compactly designed, easy to install and maintain, and even extend the life of thewater heater, since increased water circulation reduces sediment build-up and corrosion. In 1990 there were an estimated 375,000 combo units in use from Alaska to Florida, mostly in the starter-home and multifamily markets. Though they are especially popular. in the South, "they work fine even in our climate," according to Ken Cuccinelli, vice president of marketing and technology for Pittsburgh's Consolidated Natural Gas Co. "Just make sure the water heater is sized properly," he counsels.Three states - New York, Utah and Washington - restrict or do not allow the use of combo units. Glenn Frye, director of codes, ordinances, safety and claims for Washington Natural Gas Co., laments this fact. "The boiler people out here have said that combo units must follow the same ASME manufacturing standards as boilers, despite the fact thatcombo units develop neither the high pressures nor the temperatures of a boiler." The regional model-building codes that cover most of the country don't have any prohibitions on combo units, says A.G.A.'s Ranfone. However, individual states interpret codes, including boiler codes, in different ways. A.G.A. is working with manufacturers, state organizations and utilities to deal with this situation. "In fact," he says, "in June,of 1991 we helped Alaska utility ENSTAR get legislation passed that permits the use of combo systems." Combo heaters are just one response to the problems posed by NAECA. NAECA's standards are affecting, and will continue to affect, the nation's gas utilities in terms of load and market share. When it comes to load, utilities are faced with a double-edged sword: No company wants to be viewed as anti-conservation, yet less gas used meansless gas sold. And, in the market, higher purchase and installation costs for gas applianceshave created an opening for electric appliances, which, despite higher operating costs, often boast a lower up-front cost. How are utilities dealing with these challenges? "The main thing we're doing is educating our builders about how and when the newstandards will affect them, and how their potential home-buyers will benefit from reducedheating bills," says Ron Hackemack, residential marketing planner for Lone Star Gas Co., in Dallas, Texas. "Regardless of how the builders react, thenew standards will obviously diminish residential load," he continues, "but we saw it coming and have taken steps to mitigate theloss. Our Gas Advantage home program, targeted to the new construction market, emphasizes the use of such incremental appliances as gas fireplaces, in addition to thetraditional core applications, to build up loadper-home. Also, we've begun promoting Getting affordable gas heat into combo-heating systems to the single-family homes is important to utilities home-builder as a viable option." since the heating system quite Lone Star's marketing efforts also stress often opens the door to many the quality of gas appliances over electric other gas appliances.ones, Hackemack says. "Our electric competition probably outspends us 8-to-1 on rebates, so we don't even try to compete on FIREPLACE AND LOGS

DRYER

VEHICLE COOLING COMPRESSOR GRILL POOL
HEATER

STANDBY GENERATOR



### ® AMERICAN 6 A S /JAN . 1 9 9 2 nentsofelectricheatingbegantoexploit. 

### Gas utilities reacted to this marketing challenge with the hydro-heat system, also known as the combo system. ''Without the combo system, I think we would have gotten clobbered by the heat pump," says Bob Watkins, senior vice president of marketing for Public Service Company ofNorth Carolina. "NAECA was kinder
to the heat pump

- its requirements have
not gone up drastically, so its price has not risen much. But, becausewe priced ourselves

so high with these high-efficiency furnaces, the heat pump began making inroads. We responded with the combo heater." Pioneeredinthe 1970s, combo heaters are the simple marriage ofa standard gas water heater with an air handler. When space heat is needed, the wall thermostat triggers a small pump, which circulates hotwater from the water heater through a coil in the air handler. The fan inthehandlercomes on and blows air over the coil, absorbing the coil's heat. The warm airis then circulated through the home. Combo units are efficient, competitively priced, compactly designed, easy to install and maintain, and even extend the life ofthe
water heater, since increased water circulationreduces sedimentbuild-up andcorrosion. In 1990 there were an estimated 375,000 combo units in use from Alaska to Florida, mostly in the starter-home and multifamily markets. Though they are especially popular in the South, "they work fine even in our climate," according to Ken Cuccinelli, vice president of marketing and technology for Pittsburgh's Consolidated Natural Gas Co. "Just make sure the water heater is sized properly," he counsels. Three states

- NewYork, Utah andWashington

- restrict or do not allow the use of combo units. Glenn Frye, director of codes, ordinances, safety and claims for Washington Natural

### Gas Co., lamentsthis fact. "Theboiler people out here have said that combo units
must follow the same ASME manufacturing standards as boilers, despite the fact that combo units develop neither the high pressures nor the temperatures ofaboiler." The regional model-building codes that

cover most of the country don't have any prohibitions on combo units, says A.G.A.'s Ranfone. However, individual states interpret codes, including boiler codes, in different
ways. A.G.A. is working with manufacturers,
state organizations and utilities to deal with this situation. "In fact," he says, "inJune,of 1991 we helped Alaska utility ENSTAR get legislation passed that permits the use of combo systems." Combo heaters are just one response to the problems posed by NAECA. NAECA's standards are affecting, and 

### will continue to affect, the nation's gas utilities in terms of load and market share. When it comes to load, utilities are faced with a double-edged sword: No company wants to be viewed as anti-conservation, yet less gas used means less gas sold. And, in the market, higherpurchase andinstallationcosts for gas appliances have created an opening for electric appliances, which, despite higher operating costs, often boast a lower up-front cost. How are utilities dealing with these challenges? "The main thing we're doing is educating

our builders about how and when the new standards

### will affect them, and how theirpotentialhome-buyers

### willbenefitfrom reduced heatingbills," says Ron Hackemack, residential marketing plannerfor Lone Star Gas Co., in Dallas, Texas. "Regardless ofhow the builders react, the

new standards 

### will obviously diminish residential load," he continues, "but we saw it coming and have taken steps to mitigate the loss. Our Gas Advantage home program, targeted to the new construction market, emphasizes the use of such incremental appliances as gas fireplaces, in addition to the traditional coreapplications, tobuildup loadper-home. Also, we've begun promoting combo-heating systems to the single-family home-builder as a viable option." Lone Star's marketing efforts also stress the quality of gas appliances over electric
ones, Hackemack says. "Our electric competition probably outspends us 8-to-l on rebat6s, so we don't even try to compete on 

### Gettingaffordablegas heatinto homes isimportantto utilities since the heatingsystem quite ohenopens the doorto many othergas appliances.

FIREPLACE AND LOGS GRILL



### AMERICAN STANDBY GENERATOR



### GAS/JAN.1992that level. We feel that they have to rebate soheavily because the products need to be rebated in order to get accepted. So we've gone to the consumers with the message that gas isthe way to go, for many reasons - its efficiency, its value, its comfort. Our tag line is,`Don't Compromise. Demand Gas.' The consumer has carried this message to the builders, as our 71 percent market share of new construction demonstrates." Cuccinelli of Pittsburgh's Consolidatedconcedes that NAECA's tougher efficiency requirements for gas furnaces have created a first-cost marketing "inequity" between gas and electric furnaces, "but that's spilt milk." Like Lone Star, Consolidated is educating builders about higher-efficiency furnaces and combo heaters, and Cuccinelli hopes that"when the marketplace reacts to one particular [furnace] product and the numbers go up, we'll see some economies of scale and lower prices." Consolidated reaches the replacementmarket through direct advertising, cooperative advertising with dealers and bill stuffers. Most important, says Cuccinelli, the companystrives to "maintain a good relationship withour dealers, so that they have all the facts when they're in the marketplace face-to-face with a customer." However, Cuccinelli remains concerned about the possibility of increased efficiency standards for furnaces: "If they go to the next level, they'll wipe out another whole class of furnaces, and where do you go from there? The real problem is, when you add a significant additional cost to the furnace for a fewAFUE percentage points, you've actually created a net economic loss. If about 1 percent of the buyers in the country switched from gas to electricity, we would lose more of thenation's energy than gained through 'conservation.' Very, very minimal amounts of market shift can have significant impact on the nation's energy." Public Service Company of North Carolina is actively pushing combo units in its service area. Bob Watkins testified at DOE hearings, as well as at state and regional hearings, in favor of the combo system while it was being developed. The company is also making sure it maintains load by getting "the second and third appliance," he says. "We almost insiston it because the economic feasibility of running a line into a new subdivision just doesn't pan out when you're only dealing with gas heating." Like the others, Watkins believes in the importance of education and communication. "I think the best thing you can do is visit the vendors in your area, so you can look at things from their point of view. We work with all the major vendors in our area, go withthem on jobs to show them how the technology can be applied and help them draw the specs. In addition, we work with architects and engineers to be sure that natural gas appliances get spec'ed." Finally, he says, "you need good, basic, toe-to-toe salesmanship. If you don't have your sales force up to speed, you're at a disadvantage. How is the consumer going to know unless your sales force knows? There's nobody to tell the story." Washington Natural's Glenn Frye probably has the most experience with the new furnaceefficiencies, since his state decided to "fastforward" the 78 percent AFUE requirement and implement it July 1, 1991, six months before NAECA's implementation date. Since Washington Natural is a leading vendor of appliances, this meant that the company had to reduce inventory, but Frye says the real problem has been a combination of factors: "If it were just NAECA itself we were dealing with, there'd be no problem. But we've got myriad other items out there - like higherinitial equipment costs, new venting requirements, a higher degree of code enforcement by the state, and contractors who would like afew dollars more to install a more complicated piece of equipment. Together, it all adds up."Phase H of the water-heater standards particularly concerns Frye. "I hope we don't go to mandated electronic ignition requirements for water heaters," he says. "The state people in charge of the electrical code would like to see a situation where tapping into a 120 volt house line - whether it's for a furnace or awater heater - would always require a permit, installation by a licensed electrician and an electrical inspection after the fact. That's not necessary and would cause additional cost and installation problems." So how can the gas industry deal with the possibility of such stricter NAECA standards? Frye echoes A.G.A.'s Jim Ranfone and PhilMahla, saying that involvement in the standards-setting process is the key. "My advice to anyone interested in this issue is, recognize that NAECA exists and that it's a continuing process," he counsels. "Thetime to get involved with these issues is before they become law, because once that happens, all you can do is read 'em and weep. If you're not out there - and our involvement with A.G.A. allows us to stay in the loop - you won't know what's happening. All of a sudden, you wake up one day and oops! There's another standard we've got to live with. Somebody has to carry the banner." q



### A M E R I C A N GAS / JAN . 1 9 9 2 m AMERICAN that level. We feel that they have to rebate so heavily because the products need to be rebated in orderto get accepted. So we've gone to theconsumerswith the message thatgas is the way to go, for many reasons

- its efficiency, its value, its comfort. Our tag line is, 'Don't Compromise. Demand 

### Gas.' The consumer has carried 

### this message to the builders, as our 71 percent market share of new construction demonstrates." Cuccinelli of Pittsburgh's Consolidated concedes that NAECA's tougher efficiency requirements for gas furnaces have created a first-cost marketing "inequity" between gas and electric furnaces, "but that's spilt milk." Like Lone Star, Consolidated is educating builders about higher-efficiency furnaces and combo heaters, and Cuccinelli hopes that ''when the marketplace reacts to one particular [furnace] product and the numbers go up, we'll see some economies of scale and lower prices." Consolidated reaches the replacement market through direct advertising, cooperative advertisingwithdealers andbill stuffers. Most important, says Cuccinelli, the company strives to "maintain a good relationship with

-
our dealers, so that they have all the facts when they're in the marketplace face-to-face with a customer." However, Cuccinelli remains concerned about the possibility of increased efficiency standards for furnaces: "Iftheygo tothenext level, they'llwipe out anotherwhole class of furnaces, and where do you go from there? The real problem is, when you add a significant additional cost to the furnace for a few AFUE percentage points, you've actually created a net economic loss. Ifabout 1 percent of the buyers in the country switched from
gas to electricity, we would lose more ofthe nation's energy than gained through 'conservation.' Very, very minimal amounts of market shift can have significant impact on the nation's energy." Public Service Company ofNorth Carolina is actively pushing combo units in its service

area. Bob Watkins testified at DOE hearings,

as well as at state and regional hearings, in favor ofthe combo systemwhile it

### was being developed. The company is also making sure it maintains load by getting "the second and third appliance," he says. ''We almost insist

onitbecause the economic feasibility ofrunninga lineinto a newsubdivisionjustdoesn't
pan out when you're only dealing with gas heating." Like the others, Watkins believes in the importanceofeducation andcommunication. "Ithinkthe best thing you can do is visit the vendors in your area, so you can look at



### GAS/JAN.1992 

# IE things from theirpoint ofview. Weworkwith all the major vendors in our area, go with them onjobs to show them how the technology can be applied and help them draw the
specs. In addition, we work with architects and engineers to be sure that natural gas appliances get spec'ed." Finally, he says, "you need good, basiC,
toe-to-toe salesmanship. 

### If you don't have
your sales force up to speed, you're at a disadvantage. How is the consumer going to know unless your sales force knows? There's nobody to tell the story." Washington Natural's Glenn Frye probably hasthemostexperiencewith thenewfurnace efficiencies, since his state decided to "fastforward" the 78 percent AFUE requirement and implement it July 1, 1991, six months before NAECA's implementation date. Since Washington Natural is a leading vendor of appliances, this meant that the company had
to reduce inventory, but Frye says the real problem has been a combination of factors: 

### "Ifitwerejust NAECA itselfwe were dealing with, there'd be no problem. But we've got myriad other items out there

- like higher initial equipment costs, newventing requirements, a higher degree of code enforcement bythe state,andcontractorswhowouldlikea few dollars more to install a more complicated piece of equipment. Together, it 

### all adds up." Phase II ofthewater-heater standardsparticularly concerns Frye. "I hope we don't go to mandatedelectronic ignition requirements forwaterheaters,"hesays. "Thestatepeople in charge ofthe electrical code would like to

see a situation where tapping into a 120-volt house line

- whether it's for a furnace or a water heater

- would always require a permit, installation by a licensed electrician and

an electrical inspection after the fact. That's
not necessary and would cause ad(jitional
cost and installation problems." So how can the gas industry deal with the possibility ofsuch stricter NAECA standards? Frye echoes A.G.A.'s Jim Ranfone and Phil Mahla, saying that involvement in the standards-setting process is the key. "My advice to anyone interested in this issue is, recognize thatNAECA exists andthat it's a continuing process," he counsels. "The time to get involved with these issues is 

### before theybecome law, because once thathappens, all you can do is read 'em andweep. 

### If you're not outthere

- and ourinvolvement with A.G.A. allows us to stay in the loop

- you won't know what's happening. All of a sudden, you wake up one day and oops! There's another standard we've got to live with. Somebody has to carry the banner." 

### 0 

# 1

t