What the energy efficiency reform act could mean for Arizona water heaters.

"The Senate Energy and Natural Resources Committee considered S. 5338, the Energy Efficiency Reform Act of 2026, which would make significant changes to the federal appliance efficiency standards process. Among other provisions, the bill would eliminate DOE’s mandatory six-year review cycle, void 2023 efficiency rules for consumer furnaces and commercial water heaters, and restrict states from replacing certain federal standards if they are revoked. Supporters point to regulatory costs and consumer choice, while opponents contend the changes could increase long-term energy costs and limit states’ ability to establish efficiency requirements."

The Senate Energy and Natural Resources Committee recently held a hearing on S. 5338, the Energy Efficiency Reform Act of 2026. The bill is not law. It is still in committee. Even so, it is worth paying attention to if you own a home or commercial building in the Valley, because it goes straight at how the federal government sets efficiency rules for furnaces and commercial water heaters.

This post explains what the bill would do, what it would not do, and what Arizona property owners should actually watch for when they replace equipment.

What the bill is

S. 5338 was introduced on August 6, 2026, by Sen. Mike Lee of Utah. The committee heard it on September 16, 2026.

Supporters say the current DOE process raises equipment prices and squeezes product choice. Opponents say the bill would slow or block future efficiency updates and could raise long-term energy costs. Both views are in the hearing record. The useful question for a Phoenix-area property is what would change on the job site.

The three provisions that matter for water heating

1. It would cancel two 2023 DOE rules. On enactment, the bill would void the December 18, 2023 consumer furnace rule and the October 6, 2023 commercial water heating equipment rule. The commercial rule is the one that hits restaurants, apartments, schools, and medical buildings. It pushed many gas commercial storage and instantaneous heaters to condensing-level efficiency. Condensing equipment saves energy but needs different venting and a condensate drain. On a retrofit, that work is often the expensive part.

Those two rules are already in court. In June 2026 the Supreme Court sent the case back after the current administration said the rules misread “performance characteristics,” including venting type. S. 5338 would not wait for that case. It would wipe the rules by statute.

This bill does not cancel every water heater standard. Older residential tank standards stay. A separate 2024 rule for residential gas tankless units was already disapproved in 2025.

2. It would end DOE’s mandatory six-year review. Current law generally forces a review every six years. The bill drops that clock. Petitions for a new standard could still be filed, with a higher evidence bar and a tighter definition of “significant energy savings” using full-fuel-cycle energy.

3. It would limit how states step in if a federal standard is revoked, and related language would restrict state or local bans on a covered product based on fuel source. Arizona has not been in the same fight as some coastal cities, but nationwide preemption still shapes what manufacturers ship here.

What does not change tomorrow morning

A hearing is not a signed law. Until something is enacted or a court issues a final order:

• Installs still follow Arizona code, manufacturer instructions, and the listing on the unit.

• Heaters already in service stay legal. These rules apply to new manufacture and sale.

• Condensing tankless is still a strong fit for many Valley homes because of demand, standby loss, and maintenance — not because a bill requires it.

• Commercial replacements should still be planned around venting, gas capacity, condensate, and recovery.

Why the Valley should care

Hard water, retrofit venting, and fuel choice matter more here than the press release. Scale will kill an efficient heat exchanger that is never flushed. Moving an older building from atmospheric venting to condensing venting is a construction problem. Gas tankless still fits many whole-home jobs; electric tankless still depends on the panel. Lifetime energy savings and first-cost / venting cost can both be true on different properties.

If you are replacing equipment this year

Do not sit on a leaking tank waiting for Congress. Ask what venting the replacement actually needs. Treat efficiency as a system: scale control, recirculation, and pipe insulation often save more than one extra point of rated efficiency. Keep the model and serial number.

Call Tankless Pros AZ at (602) 833-1533 if you want a site-specific look at a residential tankless or a commercial heater coming due.