WHEN LAST I HEARD, U.N. SECRETARY GENERAL Kofi Annan had reached agreement with Iraqi President Saddam Hussein on weapons inspections, staving off war. But the American Gas Association is still battling the electric industry and the U.S. Department of Energy to save market share for its gas-fired water heaters. This battle is serious.

The water heater war takes in a wide range of issues and players. I hear that ASHRAE (the American Society of Heating, Refrigerating and Air-Conditioning Engineers), has raised gas industry ire with its new proposed standard 90.1. The industry complains that Underwriters Laboratories Inc. has begun to develop "non-governmental" indoor air quality standards with the complicity of the Environmental Protection Agency and the Consumer Products Safety Commission.

Demographics also play a role. Aging baby boomers use less hot water than teenagers. This fact alone could influence water heater standards. The current DOE model evaluates gas and electric water heater efficiency according to "energy factor,"or EF (em the ratio of heat output to energy input (em assuming a typical household will use exactly 64.3 gallons of hot water per day. A smaller reservoir capacity presumably could shorten recovery time, tipping the delicate balance between gas and electric appliances.

To win the day, natural gas must praise the enemy (em it must promote the most efficient electric water heater on the horizon. And electricity must do the reverse. Here's the idea: Convince the DOE that the most advanced technology for your opponent's water heaters is feasible and available. That forces the DOE to assign a higher minimum acceptable EF for your opponent, making him add high-tech features to his product line, forcing his price up. That should lead consumers and home builders to disdain your opponent's appliances (em and instead buy yours.

Mark Krebs, director of market planning for Laclede Gas Co., sees dire consequences if gas should lose.

"The electric industry certainly understands that without the gas-fueled water heater, with just a furnace supporting the fixed-cost portion of the gas bill, the cost-effectiveness of extending natural gas to a new home or subdivision is marginal.

"Pretty much all we have is the water heater and the furnace. If we lose the water heater, well1/4 that's the electric utility strategy in this new rulemaking."

Design Options

Both sides acknowledge that DOE efficiency standards can affect the market in home appliances. Consider the question of heat-pump technology.

Gas water heaters typically run on a blue flame burner, while the electric appliance employs resistance heating. As the DOE explains, "a heat pump water heater can easily double the EF, compared to a resistance type." But an HPWH would be expensive (em too pricey to compete successfully against gas, according to Steven Rosenstock, manager of electrotechnology policy at the Edison Electric Institute.

In the DOE's most recent proposal, its Technology Assessment and Screening Analysis, which was released about two months ago as Appendix B (supplement) to its 1997 Draft Water Heater Rulemaking Framework, the agency decided to eliminate heat-pump technology options from further consideration:

"DOE believes that the service and installation industry is not prepared. Plumbers with the expertise1/4 are rare. Existing HVAC technicians would not be able, nor perhaps willing, to handle large volumes of heat pump water heater installations. Also, in retrofit situations, installation1/4 in tight enclosures is impractical." (For the DOE announcement, see Water Heating Standards: Design Options, Docket No. ee-rm-97-900, 63 Fed. Reg. 2186, Jan. 14, 1998. For more on design options, see www.regwarn.org, the gas industry's so-called "Regulatory Early Warning System," put together by Mark Krebs, who rates his Internet page as "PG," for "predominantly grim.")

Well, the gas industry hit the ceiling when it read the DOE findings, especially since it appeared that the government had relied on comments filed by The Southern Company that raised concerns about product reliability and inadequate infrastructure. Since then, Virginia Power has also filed comments:

"Virginia Power concurs with the DOE conclusion to screen out heat pump water heaters. However, [we] consider that the differences between a HPWH and an electric resistance water in terms of recovery capabilities, installation flexibility and operation are more relevant than lack of infrastructure.[D]ue to their inherent efficiency, HPWH's do not warrant a separate efficiency standard at this time."

So there you have it; electric heat pumps are too darn efficient for their own good.

But now comes the U.S. Treasury Department, giving a boost to the gas industry. Six weeks ago, in its Green Book, which explains the Clinton Administration's budget proposal for FY 1999, Treasury described a proposed tax credit for electric HPWH's. As Treasury explained, "Qualifying heat pump water heaters would be required to yield an energy factor greater than or equal to 1.7 in the standard DOE test procedure."

The gas industry asks, "How can the DOE reject electric heat pumps as a design option when the Administration wants to promote them with a tax credit?"

Rosenstock says that DOE should consider HPWH's as a separate appliance, with separate standards. Also: "If they like the technology so much, the gas industry can market their own gas-fired heat pumps. The technology is there. Just attach a heat exchange unit."

A Site Bias?

Beyond the world of HVAC contractors, the gas industry's real beef is the DOE's failure to account entirely for the cost of the total fuel cycle (em for the full energy cost from cradle to grave. Gas wants the DOE to consider how the power was generated; what it cost the railroad to haul the coal; what it cost the coal mining company to rehabilitate land ravaged by strip mining, etc. The gas industry rails against the DOE's "site bias" (em measuring fuel efficiency only at the point of energy consumption.

Listen to Mark Krebs: "The big issue here [is that] DOE is already holding us to a higher standard by their site-bias in energy management that ignores the fuel-cycle analysis. DOE thinks our gas water heaters are only about 60-percent efficient (as compared with a 90-percent efficiency for electricity), so they target gas for improvements."

Krebs has a point. In Executive Order 12902, signed March 8, 1994, President Clinton directed the DOE to study and report on using life-cycle analysis for federal energy purchases. The report would address "the full fuel cycle," including energy exploration and development, processing, transportation, storage and disposal, etc.

But fuel-cycle analysis is a minefield. Should DOE weigh the cost of aircraft carriers patrolling the Persian Gulf to safeguard oil fields?

Rosenstock adds that, with retail choice, electricity customers may change their energy supplier and their fuel source on a whim, making it impractical to estimate the complete full fuel cycle for electric appliances.

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