Gas Industry Takes Furnace Efficiency Fight to Supreme Court

The American Gas Association, American Public Gas Association, and National Propane Gas Association have petitioned the U.S. Supreme Court to overturn a federal appeals court ruling that upholds the Department of Energy's efficiency standards for residential gas furnaces—a decision that could effectively ban non-condensing furnace models starting in 2028.

The petition follows a November ruling by the D.C. Circuit Court of Appeals that sided with the DOE, concluding that the agency's 95% Annual Fuel Utilization Efficiency (AFUE) requirement does not violate federal law. For HVAC contractors, the outcome of this case will determine whether a significant portion of their current product offerings—and the installation practices built around them—remain viable.

The DOE rule mandates that all residential gas furnaces manufactured after December 18, 2028 must achieve at least 95% AFUE. Traditional non-condensing furnaces typically operate at around 80% efficiency, while condensing models reach 90% or higher by converting excess heat to vapor for additional heating capacity.

The practical effect: non-condensing furnaces—which currently make up more than half of the U.S. market—would no longer be manufactured for residential use after the deadline.

Related standards affecting commercial equipment take effect even sooner. Commercial storage tank gas water heaters must achieve 95% thermal efficiency by October 2026, with instantaneous models required to hit 96%.

The shift from non-condensing to condensing furnaces isn't just a product swap. Condensing furnaces require different venting systems (typically PVC instead of metal flue pipes) and produce acidic condensate that must be drained—often requiring new plumbing connections.

For existing homes with non-condensing systems, this creates significant retrofit costs. According to industry data cited by ACCA, installing a condensing furnace costs $1,345 compared to $801 for a non-condensing unit—a 68% premium before accounting for structural modifications.

In older homes and multifamily buildings, the retrofit challenges multiply. Some buildings lack adequate space for condensate drainage. Others have venting configurations that can't easily accommodate the lower-temperature exhaust of condensing units. In cold climates, condensate lines can freeze, and the vapor plumes from condensing furnace exhaust have raised concerns about ice formation on walkways.

"Retrofitting older homes and multifamily buildings to install condensing models can be costly, technically difficult, or even impossible under current building codes," noted Sean Robertson of ACCA, adding that the burden falls particularly hard on low-income households.

The gas industry's Supreme Court petition centers on two main arguments.

First, trade groups contend the DOE rule violates the Energy Policy and Conservation Act (EPCA), which explicitly prohibits efficiency standards that "result in the unavailability" of products with unique performance characteristics currently available to consumers. The industry argues that non-condensing furnaces have distinct characteristics—simpler venting, no condensate management, lower installation costs—that make them uniquely suited for certain applications.

The D.C. Circuit disagreed, concluding that how heat is vented does not qualify as a "performance characteristic" under the statute.

Second, and perhaps more significant for the broader regulatory landscape, the petition argues the appeals court's decision effectively revived Chevron deference—the judicial practice of deferring to agency interpretations of ambiguous statutes—which the Supreme Court explicitly overturned in its June 2024 Loper Bright Enterprises v. Raimondo decision.

If the Supreme Court agrees that the D.C. Circuit improperly deferred to the DOE's interpretation, the case could become a significant test of how courts apply the post-Loper Bright legal framework to agency regulations.

The Department of Energy defends the rule as a straightforward application of its statutory mandate to set efficiency standards that benefit consumers.

According to DOE projections, the 95% efficiency standards for gas appliances could save consumers nearly $25 billion over 30 years. At the household level, the agency estimates average utility cost savings of $350 over the equipment's lifecycle—roughly $50 per year in reduced heating bills.

The agency argues that while installation costs for condensing equipment may be higher, the operational savings justify the upfront investment over time.

The Supreme Court receives thousands of petitions annually and grants review in only a small fraction. Whether the justices take up this case will likely depend on their interest in clarifying the post-Loper Bright landscape and the scope of EPCA's product availability protections.

If the Court declines to hear the case, the D.C. Circuit ruling stands and the 2028 manufacturing deadline remains in effect.

Importantly, the current rules are based on manufacturing dates, not installation deadlines. Contractors can continue selling and installing existing inventory of non-condensing equipment after the manufacturing cutoff—though supply will eventually run out.

For HVAC contractors: The rule forces a fundamental shift in product offerings and installation practices. Contractors should begin training technicians on condensing furnace installation requirements—including venting, condensate management, and the structural assessments needed for retrofits. Building expertise now creates competitive advantage regardless of how the legal challenge resolves.

For service technicians: Understanding the differences between condensing and non-condensing systems becomes essential. Service calls on the remaining installed base of non-condensing equipment will continue for years, but new installation work will increasingly involve condensing technology.

For sales teams: Customer conversations about furnace replacement will need to address retrofit requirements and costs honestly. For some homes, the transition to condensing equipment will be straightforward. For others—particularly older construction—the full cost picture including structural modifications may lead customers to consider alternatives.

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