DOE Regulatory Updates – Tankless and Commercial Water Heaters

Over the last few weeks, you’ve likely heard or seen water heaters mentioned in the news more than ever before. There are a number of fluid regulatory matters making headlines that could impact both tankless and commercial water heating solutions. Congress is reviewing one U.S. Department of Energy (DOE) regulation that deals with efficiency standards for tankless water heaters, and another regulation that could impact commercial water heaters is under legal review. The rulings are independent of one another. While the outcome of these reviews may not be resolved for weeks, if not longer, we wanted to provide an update on what we know now.

On December 26, 2024, DOE published a Final Rule for gas-fired instantaneous water heaters (commonly referred to as tankless water heaters). In that Final Rule, DOE raised the required minimum efficiencies for these products to levels that would necessitate the use of condensing technology for the most common capacities and inputs. Currently, compliance with this Rule is required by December 26, 2029.

As the new Congress (i.e., both House of Representatives and Senate) takes office and Administration transitions in the White House, they have the ability to review regulations passed by the previous Administration (with certain limitations). This review process is commonly referred to as the Congressional Review Act (CRA). If the House and Senate pass legislation and then the President signs it into law, the regulation can be rolled back or eliminated. Congress is actively working through the process of reviewing the tankless water heater Final Rule (mentioned above) and could potentially eliminate the tankless water heater Final Rule. Just recently, on February 27, 2025, the House of Representatives passed their version of the CRA. Next, the Senate will work to pass their version of the CRA, and if it does, it will go to the President’s desk for signature. 

Separately, on January 17, 2025, a group of states and other parties filed a petition in the Eleventh Circuit Court of Appeals challenging the Final Rule, above. This litigation is running parallel to the CRA process.

In addition to the above actions specific to the Final Rule for instantaneous (tankless) gas water heaters, a group of parties had already filed a petition in the U.S. Court of Appeals for the D.C. Circuit on February 25, 2022, regarding the Interpretative Rule. This Rule concludes that non-condensing technology (and associated venting) used on residential furnaces, commercial water heaters, and other similarly situated products and equipment is NOT a performance-related feature for purposes of the Energy Policy and Conservation Act (EPCA). This has major implications on how DOE regulates gas products and whether non-condensing products can ultimately be eliminated from the market. This would have implications for the commercial water heater rule published on October 6, 2023, set to be enforced on products manufactured on and after October 6, 2026. The Appeals Court heard oral arguments in this case on November 21, 2024, and we are expecting their ruling any time now.

The regulatory landscape is a dynamic situation that our Government Affairs Team is monitoring extremely closely. We are committed to providing you with timely, relevant updates as we gain more clarity and learn new information. As each one of these rulings goes through the review process and decisions are reached, we’ll keep you posted on the outcomes, as well as our path forward. We are prepared to meet the needs of our customers and continue to strengthen and expand our product portfolio.

Please share this message with your teams as you see fit. If you have any questions, feel free to reach out to our team directly at BWCGovReg@bradfordwhite.com.