Regulation Alert: Don't Expand Energy Efficiency Standards

Article excerpt

Household energy use is heavily affected by federal regulations on appliances. Under the 1987 National Appliance Energy Conservation Act (NAECA), the Department of Energy has set energy conservation standards for a wide range of home appliances. (See chart below.)

Home Appliances Currently Regulated:

clothes washers and dryers
refrigerators and freezers
kitchen ranges and ovens
direct heating equipment
air conditioners
florescent lighting
water heaters
pool heaters

The results of this effort have been mixed. Standards likely have raised energy efficiency levels beyond what would have prevailed in their absence. At the same time, the rules have significantly increased the purchase price of many appliances, and in some cases have adversely impacted product choice, features, performance, and reliability.

Now, the DOE is considering new standards for a host of previously unregulated products. (See chart on page 25.) However, given the problems with past standards, the DOE is well advised to take a very cautious approach to new regulations.

Consider the Interests of Consumers. The NAECA contains a number of provisions designed to protect consumers from detrimental energy conservation standards. Unfortunately, the weight given these consumer protections is left to the discretion of the DOE.

The DOE is required, as part of its determination of a new standard's economic justification, to take into account the impact of the proposed rule on the purchase price of a regulated product. However, the NAECA contains no bright-line rule under which an initial cost increase precludes imposition of a new standard. Thus, the DOE conducted an analysis of its recent clothes washer rule and found that the standard would increase the purchase price by $249, an astonishing 59% jump. Despite this unprecedented consumer burden, the agency went ahead with the final rule last January.

Similarly, the agency is required to calculate the life-cycle cost of a product in order to determine whether the higher initial cost is earned back in the form of energy savings over the life of the product. Once again, there are no numerical limits beyond which a standard cannot be promulgated. In the case of the new central air conditioner rule, the DOE's analysis found that a significant number of consumers will suffer net life-cycle costs, but nonetheless the DOE went ahead with the rule.

In addition to requiring cost considerations, the NAECA contains provisions to protect consumers from conservation standards that may diminish product choice, features, and performance. However, the agency has implemented these provisions so loosely as to render them nearly meaningless. Well documented concerns about potential adverse impacts of the new clothes washer, air conditioner, and water heater standards were essentially ignored by the agency.

The NAECA also contains provisions designed to limit any increase in maintenance and repair costs as a consequence of new standards. Strict energy conservation standards frequently reduce product reliability, resulting in higher maintenance and repair costs (or warranty costs) for consumers. In the case of the clothes washer rule, reports had already emerged that some compliant models were less reliable than their non-compliant counterparts. Nonetheless, the DOE simply ignored such concerns, claiming a lack of clear evidence.

Most major energy-using appliances (e.g, heating and air conditioning systems, refrigerators, water heaters, cooking products, clothes washers and dryers) have already been regulated, and the DOE is now turning its attention to a list of minor energy users. Thus, the potential energy savings from regulating these products are quite small and easily offset by any adverse impacts on the consumer. Under these circumstances, consumers are best served if DOE does not create new energy conservation standards. …