Trump Administration prohibits use of $8.8 billion in federal rebates to incentivize consumers to switch from oil, propane, and natural gas to heat pumps.

The Department of Energy (DOE) has notified states that rebate programs created under the Biden-era Inflation Reduction Act (IRA) may not be used to incentivize consumers to switch from liquid- or gas-fired heating systems to electric heat pumps.

The new guidance covers two separate federal rebate programs which are administered by state energy offices: the Home Owner Managing Energy Savings (HOMES) program, which provides rebates of up to $8,000 for whole-home energy efficiency improvements, and the High-Efficiency Electric Home Rebate (HEEHR) program, which provides rebates of up to $14,000 for the installation of electric appliances and equipment.

These changes are a direct result of our advocacy. In February 2025, NEFI spearheaded a letter to DOE and EPA joined by the American Public Gas Association (APGA), American Supply Association (ASA), National Propane Gas Association (NPGA), Organization of Energy Service Professionals (OESP), and Plumbing-Heating-Cooling Contractors (PHCC) National Association, calling for a comprehensive review of these programs and explicitly requesting that they be modified to prevent states from using federal dollars to force consumers away from reliable, affordable heating fuels. That letter was followed by direct engagement with DOE officials, during which we made clear the impact these programs were having on our members and their customers. The guidance issued last week reflects what we asked for.

The most immediate practical impact is that homeowners can no longer access federally funded home energy rebates to switch from conventional fuels to an electric heat pump. The financial incentive that was driving some consumers toward fuel-switching has been removed. For your customers who may have been weighing their options, this levels the playing field considerably.

It also sends a clear policy signal that the current administration is not in the business of using taxpayer dollars to pick winners and losers in the home heating market. Affordability and consumer choice -- not mandated electrification -- are now the organizing principles of these programs.

Under the rules established by the Biden Administration, the nearly $9 billion in federal funding provided for these programs by the IRA were explicitly designed to encourage homeowners to remove working heating oil, propane, and natural gas heating systems and replace them with electric heat pumps. The new guidance eliminates this entirely. Going forward, rebates under these programs are limited to upgrading existing electric equipment to more efficient electric equipment, and to new construction. Homes that use heating oil, propane, and natural gas are no longer targets of this federally subsidized electrification campaign.

Additionally, the DOE now also requires that states prioritize weatherization (e.g., insulation and air sealing upgrades) before allowing homeowners to access rebates for heating and cooling equipment. This raises the cost and complexity bar for electrification retrofits significantly. Importantly, households may now retain their existing fossil-fuel heating systems even when installing a heat pump, meaning our equipment stays in the home. States have until August 29, 2026 to bring their programs into compliance with the new rules. Your state association will be the best resource for information on the implications of these changes for your local programs.

Links to the three program notices are below:

• Program Notice 26-1 – HOMES Rebate Program
• Program Notice 26-2 – HEEHR Program for States and Territories
• Program Notice 26-3 – HEEHR Program for Indian Tribes

Our work on issues such as this is made possible by the generous support of our members and contributions to our advocacy fund. If you're not already a member, please join today. Please also consider contributing – or increasing your contribution – to the NEFI Advocacy Fund.

We will continue to engage at the federal level to ensure this policy direction holds, and coordinate with state association partners to monitor implementation. For more information about this legislation or NEFI's advocacy efforts, contact NEFI Manager of Government Affairs Liam Dotson at liam.dotson@nefi.com.