A new rule established by the Bay Area Air Quality Management District (BAAQMD) back in March, 2023 might make Milpitas homeowners take another look at their water heaters…
The rule was devised to phase out NOx-emitting water heaters. NOx stands for “oxides of nitrogen,” which are known for polluting the air. As of January 1, 2027, only zero-NOx residential water heaters may be sold in the area. As of January 1, 2031, commercial and multifamily heaters will have to comply with zero-NOx standards, as well.
To find out if you have a NOx heater, you can check the product’s label or data plate. The original installation documentation or product listing can be helpful, too, or you can also ask a local plumber or HVAC technician to check. Here in California, about 40% of homes have NOx water heaters.
The new rule came into existence to curb pollution and protect human health. Indeed, NOx-emitting heaters have been found to cause as much Bay Area pollution as passenger vehicles. Meanwhile, they are estimated to cause 85 premature deaths a year while running up almost $900 million in healthcare costs. Those in proximity to NOx heaters, especially children and the elderly, can be vulnerable to cardiac or respiratory issues, including asthma, infections, and other conditions. Hence the move to shift toward an all-electric heater environment.
Per the rule, existing heater installations don’t need to be changed unless they’ve stopped working or there’s another reason to replace them. Still, homeowners would be wise to take advantage of available rebates to get their systems upgraded, lest they wish to face a slew of “hidden” costs. And local rebate options run on limited funds, so it’s best to take advantage of them before those funds run out.
The costs of switching from NOx to electric heaters can hit households hard. Low-income households in particular cannot easily carry out upgrades that generally run up a bill of between $7,000 and $12,000, to say nothing of added electrical wiring upgrades, which can cost an added $10,000. A group of local realtors has even organized through toocostlybayarea.com to protest the change.
In the meantime, rather than feeling blindsided by the new requirements (which have had limited public visibility), let’s take note of some useful rebate options:
- SVCE offers rebates for Heat Pump Water Heaters (HPWHs) of up to $2,000, plus additional incentives if you meet certain income qualifications.
- The Home Electrification and Appliance Rebates (HEEHRA) created under the Biden-era Inflation Reduction Act offer up to $8,000 in rebates for single-family homeowners who meet certain income requirements.
- TECH Clean California offers HPHW incentives, too; these got fully reserved earlier in the year, but a fresh crop became available on July 15, 2025.
- And the 25C tax credit offers a 30% credit toward the cost of qualifying energy-efficient improvements, including up to $2,000 for HPWHs. But due to Trump era cuts, this federal opportunity will only last till December 31, 2025. To take advantage, you have to hurry.
- The City of Milpitas even offers its own Electric Milpitas rebates.
It may seem like the 2027 residential changes are still a long way away. And upgrading our heaters isn’t always the top priority in our minds. But when it comes to upgrades that are so expensive, careful planning and a resourceful mindset can not only protect our wallets, but very literally help to keep us warm.
Written by: Eric Shapiro and Robert Jung
