R-22: Contractor Perspectives On The Confusion

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November 1, 2012

Although the price of R-22 has doubled — some say tripled — in the past year, air conditioning contractors appear to be taking it in stride. “I’m not surprised at the price increase, and I think you’ll see it go up considerably more in the next couple of years,” says Bill Anderson, president, LBA Air Conditioning Heating and Plumbing, Mission, KS. “We saw this with R-12. You’ll see it with R-22. We knew prices were going to go up dramatically as there was less production. We’ve been installing R-410A equipment for quite a few years. It wasn’t a big shock. We’ve known for 20 years this was coming down the road.”

In fact, Anderson likes the new price tag. “To me, I feel like it’s been a benefit,” he says. “It stops the customers who have a leak and are just adding R-22 to their systems. Once you have them properly charged, the units start to leak the next day. Although I’m probably on the other side of the fence from other contractors, I believe the price increase will encourage more customers to do the right thing.”

Brian Holt, president, Mast Heating & Cooling, Zeeland, MI, concurs. “If the ozone layer were being damaged by CFC refrigerants and R-22 is the next in the crosshairs, let’s make it impractical for people to want to use that, so we no longer have to depend on their conscience to protect the environment,” he says. “We can count on their wallet doing the right thing.”

Selling a Service Item

In Holt’s opinion, the ongoing saga with R-22 began years ago. “When the law mandated an alternative refrigerant be put in place, the EPA created a loophole saying that a dry R-22 condensing unit would be a suitable thing to sell to people as a service item,” he says. “That was a detriment to our industry. It shouldn’t have happened, but it did. Not being able to produce R-22 equipment didn’t effectively eliminate the use of the refrigerant. So now elevating the cost will do that. Now there’s something tangible to take to the consumer and say, ‘You shouldn’t use it,’ as if it wasn’t a valid enough reason before to protect the environment.”

He points out that until the cost skyrocketed, the average customer with a failed outdoor unit, if given the choice, would opt to put in an R-22 unit. “What better deterrent to using that refrigerant than to elevate the price until it is no longer a practical alternative,” he says.

Like other contractors, Holt anticipated the price increase and purchased several skids of R-22 in advance. “We treat the sale of R-22 like we would the sale of any product. It carries a markup that covers our overhead and allows us a profit that we can sustain ourselves on. The stuff tripled in cost so the retail value tripled in cost. It’s a pass-through. It’s also a deterrent.”

He adds that he tries to be more flexible on the price for commercial accounts with systems that hold 200 to 300 pounds of refrigerant. “We’ve had to sit down and negotiate our markup on R-22 to be fair and equitable to them,” he says. “It’s like anything else. If you use a larger quantity, usually it comes at a narrower margin. commercially, it’s much harder to make the switch. We have a lot of large split systems at universities that we service. When we go to change the condensing unit, we have to flush the entire system and put in new expansion valves and retrofit it to a current refrigerant. The systems that aren’t being retrofitted, they just have to pay a premium for refrigerant to keep them running.”

Lose the Loophole

When the government mandated the phase out of R-22, Kevin Walsh admits he wasn’t a fan. “I thought it was completely unnecessary,” says the president of Schaafsma Heating & Cooling Co. in Grand Rapids, MI. But now he thinks its past time for the industry to move on.

“I wish that the loophole regarding the shipment of dry-charged units had not ever been found,” he says. “While I didn’t think it was necessary for us to switch to R-410A, once it became evident that they were going to phase out R-22, we told our customers in 2008 and 2009 that as of January 1, 2010, you’re not going to be able to buy any more R-22 air conditioners. We ended up with egg on our face when at the end of 2010, the EPA says, ‘No, the unit is just a part.’ Then the manufacturers started making them again. That loophole made us look like we were lying to customers.”

Walsh feels fortunate that his company didn’t have any customer backlash from the episode, but he knows contractors that did. Now, he can’t help but wonder about the priorities of those contractors who continue to consistently install dry-charged condensing units.

“I think it’s really a shame that in 2011 almost 30 percent of all shipments were dry-charged units. It doesn’t speak well for our industry. Those contractors that are putting in dry-charged units on a regular basis are not doing their customers any favors. In all honesty, if the government was really serious about energy efficiency and phasing out R-22 they would close this loophole.”

“Now don’t get me wrong,” he continues. “We still probably put in one or two R-22 units a year.” He explains that there are occasions when R-22 units are appropriate. “But 30 percent is ridiculous.”

Steps to Take

Jerry Denton, CEO, DHC Comfort, Inc., White House, TN, reports that refrigerant that cost consumers about $35 a pound during the summer of 2011 now retails for about $60 a pound when purchased from his midsized company. “I hear of companies that are charging $90 to $100 per pound of refrigerant. I’ve also heard of companies charging $40 to $50 a pound. Those are usually smaller, one-man operations that don’t realize they can’t replace that refrigerant for what they are selling it for.”

Regardless of the reason, Denton supports the reduction in R-22 allocations. “I totally believe in the phasing out of R-22,” he says. “Although we do hear complaints from customers that it’s just a ploy to make people buy new refrigerant. I believe it’s for real, that there is global warming, and that everybody needs to do their part.”

To adjust to the new market realities of R-22, contractors suggest four steps:

1. Keep tabs on your product inventory. “We’ve locked our refrigerant up,” Denton says. “We buy it by the skid, which is 40 cylinders, and unload it into a locked room. Only I and one other person have a key. We have four service techs that use the most refrigerant. They have to fi ll out a daily form, documenting the refrigerant they’ve used. We will not give them another jug of refrigerant unless they can document where the entire refrigerant has gone.”

2. Recapture the refrigerant. In years past, Denton gave to his local supplier any refrigerant recovered during a day’s process of repairs. Not anymore. “We’ve found there’s a lot of value to that,” he says. “We now have our own recycling tank where we’re reclaiming that refrigerant and selling it. We sold a tank in June for $1,500. That money helped to pay expenses. It does take time, but it’s time well spent.”

3. Keep customers informed. Every other month, Denton sends out a newsletter to almost 5,000 customers. “When we first realized what was happening with refrigerant, we definitely got that in the newsletter. A lot of people called from that. We wanted to warn our customers about the price increase and entice them to replace their unit and upgrade to the R-410A refrigerant.”

4. Improve efficiency. “Look at this as an opportunity to upgrade your customers’ situation by converting them to a new system with R-410A or making the leak repair and stopping the problem and help their efficiency,” Anderson says. “Don’t fight the problem by trying to get some sort of sort of working drop-in refrigerant that’s a few dollars cheaper a pound. Maintain the right practices, and do what’s best for the customer.”