We previously reported in June that the U.S. Department of Energy (DOE) significantly revised its rules for the state-administered home energy rebate programs created under the Inflation Reduction Act of 2022 (IRA). Among the many changes announced was a new prohibition on issuing electric appliance and equipment rebates for fuel switching from oil- and gas-fired systems. It further requires that electrification rebates only be used to replace an existing electric system or in new construction. The new rules are in effect as of September 1, and every new rebate reservation in every state must now comply with the revised rules. Projects reserved on or before August 31 may still be completed and paid under the prior rules, but no new ones may be written that way.

In August, DOE also updated its guidance with a FAQ document that it treats as governing how states run the programs, answering several questions raised by state energy offices and industry organizations over the summer. Four clarifications of interest to NEFI members include:

• A customer may keep the existing oil or propane system. A heat pump qualifies for an electric appliance rebate only if the existing fuel system stays in place and is not decommissioned. The new guidance also abandons the prior requirement that a heat pump must become the primary heat source for the home.

• Weatherization is addressed, but the state sets the threshold. The revised rules direct states to address insulation and air sealing in connection with heat pump projects. Each state must establish its own requirements and submit them for federal review and approval. So, what a household must do first depends on where it is located.

• Emergency replacements are allowed. When a system fails, a state may approve the equipment first and schedule an assessment and any envelope work to weatherize the home for a later date.

• HVAC work stays with qualified contractors. Even in states that allow do-it-yourself retail purchases for some measures, HVAC installations must be completed by qualified contractors.

Two cautions remain. Discretion will remain with states on whether to narrow eligibility for the Home Owner Managing Energy Savings (HOMES) whole-home rebates by household type, existing condition, fuel type, or technology, so even though federal rules no longer screen out delivered fuels, it does not guarantee that a given state will offer the whole-home efficiency rebates for all technologies. This may vary state-by-state. State and utility electrification incentives are untouched by any of this. DOE says it will publish further answers on a monthly or quarterly basis, so the details can still move.

The programs also remain slow to reach the field. Northeast and Mid-Atlantic states hold roughly $1.81 billion of the $8.8 billion Congress provided for the two programs, but nationwide, the whole-home efficiency rebate program is open in only seven states and the District of Columbia, and on its own in just two. Many states were waiting for the new rules, which are now public. So, it is likely additional states may begin launching HOMES and High-Efficiency Electric Home Rebate (HEEHR) programs in the coming months.

If a state refuses the rebate program funding (South Dakota has), fails to launch programs, or does not comply, DOE may reallocate those funds to other states operating that same program. Funding expires when funds are exhausted or on September 30, 2031, whichever is sooner. States may appropriate additional funding for these programs, but additional federal funding is unlikely.

This victory is an example of your NEFI Advocacy Fund contributions in action. NEFI and the Plumbing-Heating-Cooling Contractors National Association (PHCC) met with the Department of Energy in 2025. In that meeting, we confirmed that the IRA home energy rebate funds had already been obligated under the prior administration and could not be rescinded, and made the case that federal dollars should not pay to pull working heating oil and propane systems out of homes. NEFI and its coalition partners pressed that argument for more than a year, and the revised rules reflect it.

NEFI President and CEO Jim Collura walked members through the changes to the HOMES and HEEHR rebate programs at the closing luncheon of the Southern New England Energy Conference on Tuesday, September 15. His slides, including state-by-state program status, regional funding totals, and the full rebate tables, are available here.

Direct questions on this issue to NEFI President & CEO Jim Collura at jim.collura@nefi.com or call (202) 441-8857.