AMERICAN 6 AS /JAN . 1 9 9 2 541

Nobody can - or would

too much of a 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 many

manufacturers 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? While

A.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 point

that 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.

 CE-RM-87-102 COMMENT 16

••• 

PHOTO BY PAIA 

AMERICAN GAS/JAN 1 9 9 2 

Nobody can - or would 

- argue about the 

benefits of energy 

efficiency. But is NAECA 

too much of a 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 many 

manufacturers 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? While 

A.G.A. and the gas indm:try 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 point 

that consumers and builders eschew gas appliances for electric ones - and end up conSTICKER SHOCK? Homeowners shopping for gas 

furnaces - as well as other appliances - will 

find higher prices if manufacturers are required 

to make equipment increasingly more 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 were

that the standards be "technologically feasible" and "economically justified."

By 1980, DOE had proposed standards for

eight 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 "no

standard" 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

BY

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 more

opportunity for public scrutiny of DOE-decision-making - it extends notice and comment periods, relaxes access to the courts and

allows consumers, manufacturers, distributors and other interested parties to petition DOE for

amendments.

Phasing in Phase II

Though NAECA covers a wide range of

products, the gas industry is most con-.

cerned about furnaces

and water heaters, according to Phil Mahla, A.G.A. director of residential marketing and market research, and

Jim Ranfone, A.G.A. director of building energy codes and standards.

Water heaters, for now, are not straining

under 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 as

far 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. Phase

I 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

 CE-RM-87-102 COMMENT 16

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 process were 

that the standards be "technologically feasible" and "economically justified." . 

By 1980, DOE had proposed standards for 

eight 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 "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 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 

.,everal other ways. Policies for amending test 

IY 

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 more 

opportunity for public scrutiny of DOE-decision-making - it extends notice and comment periods, relaxes access to the courts and 

allows consumers, manufacturers, distributors and other interested parties to petition DOE for 

amendments. 

Phasing in Phase II 

Though NAECA covers a wide range of 

products, the gas industry is most con-. 

cerned about furnaces 

and water heaters, according to Phil Mahia, A.G.A. director of residential marketing and market research, and 

Jim Ranfone, A.G.A. director of building energy codes and standards. 

Water heaters, for now, are not straining 

under 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 as 

far 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. Phase 

I 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 eHiciency. 

AMERICAN GAS/JAN. 1992 
MINIMUM 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's

where 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 new

level is - as the law requires - 'economically justified,' " he says. "For example, the

analysis scientifically explains why we want

to 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 - into

consideration 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 of

78 percent AFUE (annual fuel utilization efficiency). Because the AFUE 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 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 more

efficient, 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 venting

techniques and parameters, allowing contractors to vent these mid-efficiency pieces of

equipment correctly.

One furnace manufacturer, Lennox, has

entered the marketplace with a 78 percent

AFUE 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 the

technology. 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 in

1993, 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 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.

Countering the Heat Pump

NAECA'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 propoAMERICAN GAS / JAN . 1 9 9 2 m

 CE-RM-87-102 COMMENT 16

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 .......... ·· Instantaneous ·M~~·~f~~i~~~d· 

factors 0.62 after 10/12/91 

SWIMMING 

POOL 78% Manufactured Thermal HEATERS Efficiency after 1/1/90 

RANGES No constant 

AND OVENS burn ina 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, 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's 

where 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 new 

level is - as the law requires - 'economically justified,' " he says. "For example, the 

analysis scientifically explains why we want 

to 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 - into 

consideration 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 of 

78 percent AFUE (annual fuel utilization efficiency). Because the AFUE 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 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 more 

efficient, 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, 

AMERICAN GAS/JAN.1992 

researched and in September 1991 published 

new tables that make adjustments in venting 

techniques and parameters,allowing contractors to vent these mid-efficiency pieces of 

equipment correctly. 

One furnace manufacturer, Lennox, has 

entered the marketplace with a 78 percent 

AFUE 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 the 

technology. 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 in 

1993, 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 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. 

Countering the Heat Pump 

NAECA's 78 percent AFUE standard for furnaces hit Southern utilities especially hard. 

Given the South's benevolent climate, highefficiency furnaces are not economi~ally feasible for many residents, a fact that proper 
nents 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 heat

pump," 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 the

water 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 that

combo 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 means

less gas sold. And, in the market, higher purchase and installation costs 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 their potential home-buyers will benefit from reduced

heating bills," says Ron Hackemack, residential marketing planner for Lone Star Gas Co.,

in Dallas, Texas.

"Regardless of how 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 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

 CE-RM-87-102 COMMENT 16

nents 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 heat 

pump," 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 

heat. 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 the 

water 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 that 

combo 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 means 

less gas sold. And, in the market, higher purchase and installation costs 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 their potential home-buyers will benefit from reduced 

heating bills," says Ron Hackemack, residential marketing planner for Lone Star Gas Co., 

in Dallas, Texas. 

"Regardless of how 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 core applications, to build up 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 

Getting affordable gas heat into 

homes is important to utilities 

since the heating system quite 

ohen opens the door to many 

other gas appliances. 

FIREPLACE 

AND LOGS 

GRILL 

AMERICAN 

STANDBY 

GENERATOR 

GAS/JAN.1992 
that level. We feel that they have to rebate so

heavily because the products need to be rebated in order to get accepted. So we've gone

to the consumers with the message that gas 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 advertising with dealers and bill stuffers.

Most important, says Cuccinelli, the company

strives 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 few

AFUE 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 the

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 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 insist

on 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 with

them 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 furnace

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:

"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 higher

initial equipment costs, new venting requirements, a higher degree of code enforcement

by the state, and contractors who would like a

few 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 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 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 Phil

Mahla, 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. "The

time 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

 CE-RM-87-102 COMMENT 16

AMERICAN 

that level. We feel that they have to rebate so 

heavily because the products need to be rebated in order to get accepted. So we've gone 

to the consumers with the message that gas 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 advertising with dealers and bill 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: "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 few 

AFUE 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 the 

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 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 insist 

on 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 

GAS/JAN.1992 IE 

things from their point of view. We work with 

all the major vendors in our area, go with 

them 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 furnace 

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: 

"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 higher 

initial equipment costs, new venting requirements, a higher degree of code enforcement 

by the state, and contractors who would like a 

few dollars more to install a more complicated piece of equipment. Together, it all 

adds up." 

Phase II 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 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 of such 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 that NAECA exists and that 

it's a continuing process," he counsels. "The 

time 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." 0 

1 

t