Revised DOE Guidance Prohibits Fuels Switching for IRA Heat Pump Rebates

On June 1, the U.S. Department of Energy (DOE) released updated guidance for states administering the $8.8 billion in home electrification rebates authorized under the Inflation Reduction Act (IRA). A key change in the revised guidance prohibits the use of rebate funds to encourage homeowners to replace fossil fuel-based heating systems—including natural gas, heating oil, and propane—with electric heat pumps.

The updated guidance applies to two federal rebate programs administered through state energy offices:

• Home Owner Managing Energy Savings (HOMES), which offers rebates of up to $8,000 for whole-home energy efficiency upgrades.
• High-Efficiency Electric Home Rebate (HEEHR), which provides rebates of up to $14,000 for the installation of qualifying high-efficiency electric appliances and equipment.

In addition, the DOE now requires states to prioritize weatherization measures—such as insulation and air sealing improvements—before homeowners can access rebates for heating and cooling equipment. This new requirement is expected to increase both the cost and complexity of residential electrification projects.

States have until August 29, 2026, to update their programs and comply with the revised federal guidance.

Impact on Pennsylvania

The Pennsylvania Department of Environmental Protection (DEP) is responsible for administering approximately $258 million in federal rebate funding allocated to the Commonwealth. In 2024, DEP launched Penn Energy Savers, a consumer-facing platform designed to manage and distribute the available rebates.

With the release of the updated DOE guidance, it remains unclear when Pennsylvania will officially launch its rebate programs or how the state will modify its implementation plans to align with the new federal requirements.