Protecting Our Most Vulnerable: Why DOE’s New Water Heater Rule Hurts Seniors and Low-Income Households
In final days of the Biden administration, the U.S. Department of Energy (DOE) released a Federal Register final rule that effectively bans an entire segment of instantaneous natural gas water heaters from the market. By eliminating non-condensing options, DOE has chosen a path that could place a disproportionate financial burden on seniors and low-income Americans—and push many of the most financially vulnerable consumers toward less efficient electric products with higher ongoing fuel costs.
To be clear – the American Gas Association and our members strongly support efforts to conserve energy and advance innovative technologies. But efforts to increase efficiency must be balanced with consideration of cost to consumers to be effective. Unfortunately, the rule put forth by the Biden administration in their closing hours raises significant concerns towards this end.
In addition to violating the Energy Policy and Conservation Act (EPCA)—which prohibits standards that render products with distinct performance characteristics unavailable—this regulation undermines consumer choice and affordability by removing the option of a non-condensing natural gas water heater.
“DOE’s decision to ban an entire segment of instantaneous water heaters is deeply concerning and irresponsible,” said Matthew Agen, AGA Chief Counsel, Energy. “The final rule is a violation of the Energy Policy and Conservation Act (EPCA), which prohibits DOE from promulgating a standard that renders a product with a distinct performance characteristic unavailable. To make matters worse, DOE’s own analysis claims that the average life-cycle cost savings would amount to barely $112 over the entire 20-year average product life. DOE’s final rule is unjustifiable on legal and practical grounds.”
By removing more affordable non-condensing natural gas water heaters from the market, the new rule will compel many customers to pay significantly higher upfront costs when it comes time to replace their water heaters. According to direct manufacturer pricing, the difference in average product price could be as high as $450—nearly double the $231 differential cited by DOE. That cost differential doesn’t include the potential need for significant renovations to accommodate a new appliance type. That price gap may translate into a daunting hurdle for many households, especially those on fixed incomes.
In fact, DOE’s own numbers suggest that about 40% of customers affected by this rule would experience a net cost increase over the appliance’s lifespan. What’s more, consumers who are forced to opt for electric water heaters to avoid the higher initial price of condensing gas systems may well find themselves facing increased monthly utility costs in the long run. This potential shift away from natural gas, which remains one of the most affordable and widely used energy sources in the nation, runs counter to the goal of lowering overall costs for consumers—especially those who can least afford new burdens.
AGA has repeatedly voiced these concerns to the DOE and regrets that stakeholder feedback was not reflected in the final rule.
“Stakeholders, including AGA, have made these issues known to DOE throughout this process, and regret that DOE chose not to incorporate our feedback into the final rule,” Agen continued. “Forcing low-income and senior customers to pay far more upfront is particularly concerning. DOE’s decision to go ahead with a flawed final rule is deeply disappointing.”
This issue also has broader legal ramifications. AGA is currently awaiting a ruling on another lawsuit (AGA v. DOE) that addresses related legal issues around natural gas furnaces and commercial water heaters. If the court sides with AGA in that case, it could have significant implications for the future of this rulemaking as well.
At AGA, we believe all Americans should have access to safe, efficient, and affordable appliances—and that consumers deserve a full range of options when it comes to how they heat their water and their homes. With more than 74 million residential natural gas customers across the United States, it is critical that government policies support these families’ needs rather than create barriers to affordable energy.