We Just Don’t Know

Back in September I wrote a post that bitched because a certain law had a loophole that was being exploited.

I now have an update of sorts.

I will limit this discussion to residential A/C equipment to keep the discussion simple.

To review, the original intent of the law that was enacted as of January 1 of this year was to eliminate the manufacture of any residential A/C that contained the refrigerant R-22. Unfortunately the law was written poorly, and quickly the Chinese manufacturers flooded the market with air conditioners that were shipped dry, meant to be charged with R-22 in the field. R-22 is still available at relatively low prices.

Last week in Chicago I attended a lecture by the head of a large HVAC trade group. Apparently the DOE (Department of Energy) is frowning upon this loophole and may be doing something to not allow the dry units to be sold.

Meanwhile, several of the major manufacturers are (as of this writing) gearing up production for dry R-22 units.

So what to do. Jump in and risk the units being outlawed at a later date (as is what most think will happen) or sit here and let my competitors get a leg up on the thing?

This isn’t the only pending issue in my industry – there are a lot of credits available now for replacing your old heating and cooling system with one of a much higher efficiency – those credits are due to expire at the end of the year unless re-upped. This was expected to be done but Congress left town to campaign and it is tabled. They may or may not get on it with the lame duck session (like so many other items).

This is a very nervous and interesting time for my industry. I am sure there are many, many others who are also watching Congress like never before in this uncertain last few months of the year.

14 thoughts on “We Just Don’t Know”

  1. I find your lack of faith in our betters from DC disturbing. You’re just some peon who runs a business, while they have ahhh run for office…many times.

  2. Here is a microcosm of the economy and why it is stalled.

    For years, I heard people complaining about how incompetent and ineffective Congress (and state legislatures) are and my reply was always that they were very competent and effective at their job, which was getting elected. Anything else was a sideline. Now, I think even that area of competence is gone.

  3. Dan from Madison:

    What you speak of addresses the issue of “business climate.” It is not whether you believe or disbelieve in Global Warming, Climate Change, or whatever it is called this week, whether you agree or disagree that banning R-12 or R-22 or R-whatever is a good idea, or even whether you agree or disagree with government payments for people buying airconditioners.

    The real issue is this process of “making up the rules as we go along”, producing huge amounts of uncertainty having a very real effect on your business and that of others. I could suggest contacting Tammy Baldwin’s office with your concerns, explaining that your interest is not in maintaining “some loophole” or in fighting environmental legislation in any way, but that your local Madison business needs a level playing field and some better idea of what to expect. Who knows, her staff may be receptive to this kind of thing. I would not expect much, but stranger things can happen.

    The other person you could contact is Brett Hulsey, the Democrat running for the 77’th State Assembly District, and the “heir apparent” to Spencer Black, presumably the voters don’t select the Green Party. Brett considers himself “Mr. Environment”, but his day job is consulting on big commercial A/C projects, and he may be sympathetic to the idea that consistent rules can help both the environment and local business. Don’t know how much clout someone in the Wisconsin Assembly will have, but he may “network” with people who could help out.

  4. Paul – you are correct. Me and my whole industry needs to know what the heck the govt. expects. If I make the leap on bringing in the dry units and the DOE all of a sudden decides they will prosecute, all of that inventory is destined for the dumpster.

    I would imagine that other industries are in limbo as well.

    You can’t be serious about writing Baldwin. Maybe some of the others and maybe some of the new people who get elected this cycle.

  5. Obviously you need to look for a R-22 design that is assembled efficiently in-situ out of a limited number of pieces (2-6). That way you won’t be selling dry units, but repair kits (or an ‘upper’ repair kit and a ‘lower’ repair kit).

    Meanwhile my admiration goes out to the German engineer who found a way around the light bulb ban: http://www.heatball.de/

  6. Daran – way too many designs and re-designs on this equipment over the years to make that feasible. Repair parts are readily available right now, it is a labor equation. If you have a compressor take a dump and need to replace it, that is much more labor intensive than simply replacing a whole condensing unit. (Cut ’em out and cut ’em in, as we say in the industry)

  7. It depends on whether the bureaucrats can act without Congressional authorization via a statute to plug the loophole. They will if they can.

    But if a new statute is required, I wouldn’t count on the next Congress getting anything done beyond continuing budget resolutions.

  8. In the next Congress, I don’t see continuing resolutions. I see many, many small appropriations bills. Obama can veto them all but will have to explain each veto. Also, there will be no boasting about “shutting down the government.” That was Gingrich braggadocio which served us badly.

  9. I agree that it’s not matter of whether R22 is bad, or good, or whether we should conserve, or not: it’s the lack of sensible, predictable direction.
    The Feds neither lead, nor follow, NOR get out of the way: they’ve pulled the vehicle of government halfway across both lanes and snapped off the key.
    God help you if you find a way to provide a solution and prosper financially from your achievement, DanMad; then you will truly become one of the counterrevolutionary kulaks.

  10. Mlyster – the only good news is that ALL of us in the industry are in the same boat. From day to day it is getting more and more difficult for an independent business owner to assess where the best place to put risk is. The goalposts keep moving.

  11. Are we living through “Atlas Shrugged” ? I have started it several times. I guess I will have to make a greater effort as it seem to be the story we are all living now. It is a bit turgid, though. One of my English professors, back when they taught English literature, told us he had to take a trip on a freighter with one passenger cabin to read Spenser’s The Fairie Queene.”

  12. Dan,

    Will your factory or suppliers consider consignment inventory over stock?

    Most residential heating appliances I sell require us to keep a stock simply to remain competitive, so if more gov’t requirements makes a residential A/C package no different in price and profit to your competitor’s products then it’s not worth the effort. The risk of ending up with unsellable stock is pretty high. Gov’t eco-laws generally take 6 months to a year to go into effect, so if you consider stocking units stock what you can sell in 6 months time at most.

  13. Petey – both. Only in rare occasions would a distributor such as myself receive inventory on consignment. A more popular arrangment would be for me to buy the inventory and the manufacturer offer a “re-balancing” on the stuff if it doesn’t sell. In other words, we can get different products from the manufacturer that sell in exchange for the stuff that we don’t sell but usually this is only right out of the gate when you are switching vendors.

    In this game, 100% of the risk falls on the distributor.

    And you are correct. If you don’t stock, you lose.

    I would bring in 6 months stock, but nobody knows right now what the DOE will do. Once they decide to enforce, the inventory is instantly illegal. The law will most likely not change anytime soon, but it is the beaurocrats that have everyone in a bind right now.

  14. Dan from Madison, the dry R22 units will be the cut-em-out replacements as you note. They will sell to the lower budget market, such as rentals or apartment complexes that have on-site repair or contracted repair personnel.
    I have seen people looking for R-22 units for just that market here in GA. The owners prefer to patch rather than replace.
    Doesn’t’ the ex-post-facto law thingy stop DOE and EPA from declaring products that meet the letter of the law unlawful? For that matter, if the units were left unlabeled as to their refrigerant, and were totally barren of lubricant and refrigerant, their operation would depend on what was charged, the lubricant added and the orifice or expansion valve in the air handler.
    I realize that involves money to stock and install lube, refrigerant and expansion device, but it’s better than nothing??

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