The Basics of Federal Regulation of Commercial Water Heaters

Like their residential counterparts, commercial water heaters are required to meet minimum energy efficiency standards that are set by the United States Department of Energy (DOE) in order to be legally sold in the United States. However, there are ways that federal law handles commercial products differently.

It should be noted that there is a special class of gas-fired commercial water heaters that are known as “residential-duty commercial water heaters.” As the name would suggest, these products share a blend of residential and commercial regulatory characteristics. Residential-duty commercial water heaters are gas-fired storage products with an input above 75,000 Btu/h and lower than or equal to 105,000 Btu/h. These products also have a storage capacity of less than 120 gallons and are not capable of heating water at above 180° Fahrenheit. While these products are considered by DOE to be commercial products, their efficiency is measured and reported as if they were residential products.

For commercial water heater products that do not fall into this special category, their efficiency is rated by a Thermal Efficiency (TE), and for storage products, a maximum Standby Loss (SBL). While like their residential counterparts, required to have their minimum efficiency standards undergo DOE review every six years, the Department is also compelled by federal law to consider building energy efficiency requirements for commercial buildings. These are set by the American Society of Heating, Refrigerating, and Air Conditioning Engineers (ASHRAE) through their Standard 90.1, which is scheduled to be updated every three years. Once ASHRAE Standard 90.1 is updated, DOE is required, within 18 months, to review their minimum efficiency standards for commercial products to ensure they are in line with the commercial building energy efficiency requirements set by the standard.

For commercial water heaters, the last time DOE updated energy conservation standards for these products was on October 6, 2023. While the update saw an increase in stringency for minimum TE and maximum SBL for gas-fired water heaters, existing standards for oil-fired and electric water heaters remained unchanged. The new minimums relative to gas-fired water heaters are significant, and the new efficiency standards will now require commercial water heaters, both storage and tankless, to utilize condensing technology to meet these new requirements.

Federal law provides product manufacturers with a three-year compliance glidepath to manufacture products that meet the newly established DOE efficiency standards. This means that beginning October 6, 2026, the gas-fired commercial products that are built, and offered for sale in U.S. markets will look different from how they do today.

Another element to federal law that is worth mentioning is what is colloquially known as the “anti-backsliding provision.” This prevents DOE from taking future actions that would impact already established energy efficiency requirements in a way that would increase energy use from any products relative to the latest, finalized, standard. In short, now that DOE has established a minimum efficiency standard that commercial water heaters must utilize condensing technology to meet, the Department is prohibited from taking any future actions that would effectively “undo” this requirement.

While there are certainly nuances to the process that are not detailed above, this is a general breakdown of how this process typically informs DOE rulemakings related to commercial water heaters. If you have any questions about the upcoming October 6, 2026, manufacturing compliance date for commercial water heaters, or have any other government-related questions, concerns, or topics you’d like to discuss, BWC’s Government and Regulatory Affairs Team is always happy to help in any way we can. Please feel free to reach out to us directly at BWCGovReg@bradfordwhite.com.