95% efficiency rule for gas furnaces stands, court rules

A federal appeals court, in a 2-1 decision on Tuesday, Nov. 4, upheld the Department of Energy’s 95 percent efficiency rule for residential gas furnaces. 

Why it matters: The rule effectively prohibits the manufacture of non-condensing furnaces beginning in late 2028. 

Catch up quick: The federal ‘Energy Policy and Conservation Act’ (EPCA) requires that the Department of Energy (DOE) periodically review energy efficiency standards for certain household appliances. 

• Concluding a rulemaking process that began in 2015, the DOE in late 2023 finalized new standards requiring that any residential furnaces manufactured after December 18, 2028, must have an AFUE rating of at least 95 percent. 
• “This standard is readily achievable by modern condensing furnaces,” the agency said at the time. 

What’s happening: Gas industry groups, including the American Gas Association, and manufacturers challenged the rule, contending that it would force non-condensing furnaces out of the market, as they’re unable to meet the new efficiency standard. (They also argued the DOE failed to provide adequate justification for its decision.)

Between the lines: EPCA prohibits the DOE from imposing efficiency standards that would result in the loss of a product type or a class of performance characteristics.

• The court, citing prior DOE analyses, on Tuesday said that condensing consumer furnaces, “although not identical… offer substantially the same performance characteristics and features as non-condensing options.”

Yes, but: Neomi Rao, the sole dissenting judge, wrote in her opinion that “the ability to vent through a traditional chimney is exactly the kind of real-world feature Congress protected from elimination in the marketplace.” 

• “When replacing a non-condensing furnace, it costs significantly more to install a condensing furnace ($1,345 versus $801),” she added.

Of note: The rule applies to products’ date of manufacture and does not include any contractor-facing sell-through or install deadlines. 

Zoom in: The gas groups argued in a joint statement that Tuesday’s ruling could force consumers to renovate homes to accommodate condensing furnaces’ venting and drainage needs, or abandon gas appliances altogether, at a time when electricity prices are on the rise.

• “Natural gas is the most affordable home heating option for Americans and is 3.5 times more affordable than electricity,” they wrote. “It’s projected to remain one-third to one-half the price of other fuels through 2050.”

The other side: The Appliance Standards Awareness Project has said that the DOE’s standard will save U.S. households an average of $350 over the life of a furnace. 

• “Ensuring new furnaces are more efficient may disappoint some gas utilities, but it’s a triumph for consumers,” Andrew deLaski, the group’s executive director, said in a statement.
• Berneta Haynes, senior attorney at the National Consumer Law Center, added, “Those who rent will especially benefit because the standards will end the sale of very inefficient heating systems that are often installed in rented homes.”

What we’re watching: The American Gas Association and its co-petitioners can appeal the decision, or petition the Supreme Court, HARDI noted; however, “unless a future ruling changes course, DOE’s 95% standard remains in effect.”