The R.H. Peterson Co. and the Department of Energy
THE STORY OF BUSINESS: R.H. PETERSON CO.
The Department of Energy (DOE) is proposing to change the definition of “vented hearth heater” to include hearth products that were previously classified as merely decorative.1 This change means that a portion of the industry will now be subject to an entirely different set of regulations. At a time when small businesses are struggling to survive in the economy, the last thing they need are burdensome regulations.
REGULATION AND OVERREACH
DOE Regulation
The Cost of Doing Business
Burden on Small Businesses
DOE Regulation
According to DOE, the proposed heater regulation will result in increased energy savings. In 2010 the average American consumed 317 million Btu of energy.2 They estimate that eliminating standing pilot lights in these products will result in:3
Average annual savings of 3.67 million Btu per unit for decorative vented hearth products.
Average annual savings of 9.53 million Btu per unit for vented gas logs.
This regulation will bring the average energy consumption by an American who owns one of these products down from 317 million to 307.47 Btu, annually.
The Cost of Doing Business
The DOE breaks down the estimated cost of this regulation to manufacturers of decorative products:4
Total decorative product lines in the United States: 110
Number of product lines that would need to be updated by July 1, 2014: 42
Number of product lines that would need to be retested and recertified as a result of incorporating standing pilot lights: 77
Estimated product conversion cost to the industry: $693,000
Burden on Small Businesses
While the DOE hopes to improve standards of industry and reduce energy consumption, the amended regulation would hurt small businesses and consumers, according to the Office of Advocacy, an independent agency within the Small Business Administration.5 Advocacy stated that the gas log sets are designed specifically for decoration and should never have been added to the category of heating equipment.
The DOE is required to show that all new or amended standards to energy policy must be technologically feasible and economically justified.6 Advocacy believes that the DOE drastically underestimated the burden this regulation will have on small businesses in the industry.
Why isn’t this regulation technologically feasible?
The SBA Office of Advocacy says, “The current procedure for testing direct heating equipment includes protocols for measuring convective heat transfer…there is no protocol for testing the heating efficiency of gas log sets precisely because they are not heaters.”7
Essentially, the regulation requires that gas log sets that were previously exempt from energy efficiency standards — because they were never intended to heat a living space — be changed to function more like heaters. Manufacturers will have to redesign their products in order to comply with the standard efficiency testing of heaters that are already in place. Or the products have to be taken off the market by July 1, 2014.8
Why isn’t this regulation economically justifiable?
Advocacy based its conclusion on three problems with the DOE’s assessment of the economic cost of this amended regulation:9
1. The DOE underestimates the number of manufacturers in the industry;
2. The required certification of vented gas log sets is impractical; and
3. The elimination of standing gas pilots will be too costly.
DOE identified a total of 17 small manufacturers of vented and unvented gas log sets. Small businesses estimate there are many more – somewhere between 20 and 50 small manufactures, according to Advocacy.10Therefore, the costs to the industry are likely to be greater than the DOE’s estimate of $693,000.
Certification of Vented Gas Logs Sets is Impractical
Since most manufacturers custom design gas log sets for already-existing fireplaces, there was previously no need for a certification standard like this in the industry.11 This standard would eliminate custom designed products, reduce consumer choice, and increase consumer costs (small businesses have suggested a unit designed to the new standard could be “40 to 50 percent more expensive to build”).12
The Elimination of Standing Gas Pilots Will Be Too Costly
The amended definition of these products was justified in part by the projected savings in energy consumption. However, small businesses in the industry have identified problems with DOE’s calculation of overall energy savings:13
Small business measure the lifetime of an average gas set as is five to seven years, while the DOE assumed a 15 year lifetime.
Small businesses have encouraged consumers to extinguish their pilot lights during the off-season to save energy. The DOE assumed that 75 percent of pilot lights were left on, year round.
DOE based its assumption off of a study conducted in 1997 that stated only 20 percent of gas log sets used standing gas pilot lights. Today, small businesses argue the majority of gas log sets use standing gas pilot lights.
Electronic ignition systems could double or even triple the average price consumers pay for a gas log set.14
To view this fact sheet as a .pdf click here.
- 76 Fed. Reg. at 43941: http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/dhe_hearth_heater_nopr.pdf ↩
- http://205.254.135.7/tools/faqs/faq.cfm?id=85&t=1 ↩
- 76 Fed. Reg. at 43946: http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/dhe_hearth_heater_nopr.pdf ↩
- 76 Fed. Reg. at 43949: http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/dhe_hearth_heater_nopr.pdf ↩
- Office of Advocacy: http://www.sba.gov/advocacy/816/27911 ↩
- Energy Policy Conservation Act, Section 8258a.(b): http://www1.eere.energy.gov/femp/pdfs/necpa_amended.pdf ↩
- Office of Advocacy: http://www.sba.gov/advocacy/816/27911 ↩
- 76 Fed. Reg. at 43946: http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/dhe_hearth_heater_nopr.pdf ↩
- Office of Advocacy: http://www.sba.gov/advocacy/816/27911 ↩
- Office of advocacy: http://www.sba.gov/advocacy/816/27911 ↩
- Office of advocacy: http://www.sba.gov/advocacy/816/27911 ↩
- Office of advocacy: http://www.sba.gov/advocacy/816/27911 ↩
- Office of advocacy: http://www.sba.gov/advocacy/816/27911 ↩
- Office of advocacy: http://www.sba.gov/advocacy/816/27911 ↩
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