HVAC Got Worse On Purpose

In March 2022, a federal judge in Pennsylvania summarized testimony from a former salesman at Horizon Services, a prominent East Coast heating and cooling contractor. In one case, a technician reported a failed compressor. On that diagnosis, the salesman sold the customer a brand new system for $22,000. The actual problem all along was a “$15 breaker switch”.

The salesman, Philip DelPalazzo, was acting as a whistleblower in this case. His son Vincent, a maintenance technician at the same company, had told him that other technicians "were told that if it is a ten-year old unit and you don't set a lead you are going to be punished." DelPalazzo himself described a 2018 sales call during which the customer said a Horizon technician “sprayed oil by her furnace to make it look like it needed to be replaced when it did not."

Horizon is just one such example.

In 2012, Arizona’s attorney general ordered ARS Rescue Rooter, a contractor that operates nationwide, to “ensure that technicians don’t invent dangerous conditions in the customer’s plumbing or ventilation equipment in order to make a sale”.

In Utah, Action Plumbing is accused of charging a woman with dementia $22,120 to replace fifty light switches.

In Pennsylvania, Curtis Total Service told an 85-year-old her furnace could “blow up at any second” and had her sign a blank contract.

Earlier this month, Illinois sued ABC Plumbing, Heating, Cooling & Electric for the same play Arizona outlawed fourteen years prior. The state alleges that technicians manufactured "emergencies or life-threatening hazards" and had customers sign tablets they “were not allowed to read”.

Those are a selection of cases that we are aware of only because they reached a courtroom. In this month’s member investigation ballot, this topic received more votes than the next two options combined. The comments the vote sparked were even more indicative that something is going deeply wrong in this market.

One comment: “my HVAC guy keeps pushing me to replace my 20 year old functional AC Compressor... which still works fine." Another: HVAC problems, once "a nuisance," are "now viewed with genuine terror at the likely cost of repair or replacement."

Three things happened to this market at once. First, private-equity funds bought the largest regional groups, implemented aggressive sales tactics and tied technicians’ pay to what they sell. Second, the manufacturers producing the hardware have been consolidated to the point that the thirty-four most common household names are produced by only six companies. Hardware prices are up 53% since 2020. Third, refrigerant rules, warranty terms and state licensing laws drive up maintenance and installation costs because a licensed contractor is the only person allowed to buy the gas or install the unit.

In what follows, I’ll uncover who owns your local contractor (and how to tell for yourself). I’ll map the consolidation on the hardware side and share which units are made in the same factories so you can price the cheaper ones. And I’ll share my playbook on what to ask any contractor when they show up, along with the simple tactics you can use to check their word.