Manufacturers of gas-powered furnaces and water heaters will not be urged — yet — to sell more electric appliances over the coming years, with proposed new guidance from the region’s air quality regulator being rejected by its governing board on Friday, June 6.

The South Coast Air Quality Management District, the air quality regulator for 17 million residents in large swaths of Los Angeles, Orange, Riverside and San Bernardino counties, rejected two rules aimed at increasing the prevalence of electric heating systems on the market on Friday.

The Governing Board, though, passed a motion to send the item back to committee for further consideration and reevaluation — though the proposal will likely not come before the board again this year, AQMD staff said.

The rejection of the amendments to the two rules — which were initially approved in 1978 — would have implemented an option for manufacturers to sell more zero-emission furnaces and water heaters, or pay mitigation fees if they opt to sell natural gas-powered appliances instead.

Starting in 2030, manufacturers would have been asked to hit a zero-emission appliance sales target of 30%, the air district’s staff report for the Friday hearing said. That target would have gradually risen each year, with a target of 90% by 2036.

The aim of the proposed rules, according to the AQMD, was to eliminate nitrogen oxides pollution in the L.A. Basin, which is one of the leading causes of smog formation in the region.

“Ground level or ‘bad’ ozone is not emitted directly into the air,” according to the EPA, “but is created by chemical reactions between oxides of nitrogen (NOx) and volatile organic compounds in the presence of sunlight.”

Ozone pollution has myriad health impacts. It can cause difficulty breathing and shortness of breath, inflame and damage airways, aggravate lung diseases, worsen asthma, and cause chronic disease in the lungs, the EPA said.

Under the AQMD’s proposed guidance, NOx emissions from residential appliances were expected to decrease by six tons per day.

AQMD officials also argued that the changes are necessary to help the agency meet federal pollution regulation requirements under the Clean Air Act.

The L.A. Basin, the staff report said, is in “extreme nonattainment” for four ozone standards across the region, AQMD said.

“As we know, if we fail to meet requirements of the Clean Air Act, there could be regional sanctions in our region,” Michael Krause, AQMD’s rule planning manager, said during the Friday hearing, “as well as other more stringent measures on our sources in our region.”

The rules would not have required consumers to buy electric furnaces and water heaters — rather, AQMD said, the proposed sales targets aimed to reduce the availability of electric heating appliances in the market over the next several years.

There has been much controversy over the proposal since its development began in 2023, largely because an initial version of the plan actually would have required consumers to transition to electric appliances once the normal lifespan of their original furnace or water heater had expired.

But following direction from the AQMD Governing Board in November to conduct additional public outreach about that aspect of the proposal with cities and local governments, agency staff removed that requirement from the plan.

“Based on extensive stakeholder feedback, staff made significant revisions and released a revised proposal,” the Friday staff report said, “that allows manufacturers to sell zero-emission units (with no mitigation fee) and NOx-emitting gas units (with a mitigation fee).”

Still, AQMD has received more than 14,000 public comments about the proposal — many of which were against its approval. The agency said the massive reaction is because of “misinformation provided by outside groups,” the staff report said, “implying the proposed rules are still a mandate and consumers will not be able to purchase NOx-emitting gas units.”

AQMD staff, in its Friday staff report, once again attempted to clear the air regarding consumer concern.

“It is not a mandate. It’s not a ban. It’s not this complete phasing out of natural gas,” Krause said. “We’re giving manufacturers options to sell both their NOx- emitting gas units as well as their zero-emission units, and thus the consumers out there then have a choice from the manufacturers.”

Based on the lifetime of these appliances — 25 years for heating systems and 15 years for water heaters — about 200,000 furnaces and 300,000 water heaters will be replaced annually in the region, according to the air district.

There was also some concern that the cost of the mitigation fees on gas-powered appliances would be passed on to the consumer.

Under the AQMD’s guidance, manufacturers would have been required to pay a $100 fee for each NOx-emitting furnace sold, and $50 for each NOx-emitting water heater, according to the staff report.

“Space and water heating units are a major household expense, but these units have a long service life, meaning the upfront mitigation fee equates to less than $4.00 per year of the equipment life,” the staff report said, “which should not change the level of affordability for the consumer.”

Manufacturers who sell more gas-powered appliances than allowed under the AQMD-set targets during a sales year would have been required to pay additional fees of $500 for furnaces and $250 for water heaters.

“If the manufacturer stays within the target goals, no ‘over the target’ fee is required,” the report said. “If the rules did not include ‘over the target’ fees, the sales targets would not have any impact, i.e., the manufacturers would not be motivated to sell zero-emission units and it would remain business as usual for the region.”

All mitigation fees collected by the AQMD will be used to fund its new Go Zero pilot program, which will offer rebates and other financial incentives aimed at encouraging residents and small businesses to install zero-emission space and water heating appliances.

“The Go Zero program seeks to target up to 75% of the incentive funds to overburdened communities,” the staff report said, “to help residents who need the most financial assistance to transition to clean, modern, healthy appliances.”

SoCal Gas and other energy industry officials, though, argued that the rules would limit consumer choices and raise the cost of appliances.

“In theory, the alternative compliance pathway should allow consumers to continue to choose affordable natural gas appliances to install in their home,” Kevin Barker, SoCal Gas’ senior manager for energy and environmental policy, wrote in an April letter to the district. “However, the manufacturer mitigation fees being proposed will be passed through to consumers, unnecessarily increasing the price of natural gas appliances and thereby making affordable appliances unavailable.”

On Friday, several members of the district’s governing board expressed similar concerns about the potential impact on consumers.

“We tried to come up with a market-based solution that everyone could live with. The costs are the biggest issue, and we’ve heard a lot about that today,” Highland Mayor and board member Larry McCallon said. “Staff has done an amazing job; however, in the area I represent, there is nobody that’s talked to me that supports this rule. So I’ve done a bad job — or someone’s done a bad job — in either communicating, or the rule is one that is not right for public consumption.”

Yorba Linda Mayor and board member Carlos Rodriguez also argued that if the amendments were passed, it would send a clear message to consumers that the AQMD doesn’t care about the material consumer impacts of their policies.

“The message of this policy is clear —  if you exercise your consumer choice, you will be punished,” Rodriguez said. “So let’s stop the pretense of consumer choice without adding a significant financial consequence through a new fee. Instead, we should lean into closing the technological divide and work with manufacturers to find market rate solutions.”

Other board members, though, said the AQMD and its staff spent the last two years getting feedback from the public and many other stakeholders — and incorporating solutions to their concerns into the proposal.

“Based on the ways in which the staff has changed this rule to accommodate feedback from the community, from manufacturers, landlords and from the real estate community,” said L.A. Councilmember and AQMD board member Nithya Raman, “I think it would be a grave error not to move this forward, with the commitment that we will always come back to it and review our work — and make sure that we’re doing right by the people.”

More than 200 public commentators — ranging from local government officials to business representatives and environmental advocates — spoke during Friday’s public hearing.

Besides concerns about affordability, many in opposition to the amendments argued that California’s electrical grid is not prepared to support additional burden — though state energy officials recently announced that the chance of major power outages this summer is relatively low.

Those in opposition also argued that the air district should instead focus its efforts on reducing pollution from other sources, like cars and ships.

“By 2037, power plants emit three tons (of NOx) per day, refineries admit four tons per day, (and) passenger vehicles emit seven tons a day,” said LA County Supervisor and AQMD board member Holly Mitchell. “So to those who were suggesting that we should focus on other areas — news flash, we are.”

Many public commentors on Friday also spoke in favor of the changes, arguing they take a much-needed step towards a clean energy future and protect human health.

“We have already heard many excuses, and we will throughout today for why these rules shouldn’t happen — but they are just that excuses,” said Tomas Castro with Climate Action Campaign. “There is no excuse good enough for why we shouldn’t have clean air. There’s no excuse good enough for why we shouldn’t save lives from air pollution, and there is no excuse good enough for why we shouldn’t have a clean energy future.”

Alongside reducing more NOx emissions than virtually any other AQMD rule, the agency’s Friday staff report said, the changes would have also benefitted public health.

Between 2027 and 2053, the rules would have saved an estimated $59 billion in health expenses, according to the air district.

Each year, the reduction in pollution would prevent an average of 280 new asthma diagnoses, 44 emergency room visits from respiratory problems and 6,100 lost school days, AQMD said.

The agency also planned to assess the implementation of the new sales targets in 2028, a year after the manufacturer compliance option goes into effect — which would have reviewed the initial target goals and mitigation fees to determine if changes were needed, AQMD said.

CalMatters contributed to this report.