Testimony before the U.S. House Energy and Commerce Subcommittee on Energy and Power hearing on Home Appliance Energy Efficiency Standards under the Department of Energy – Stakeholder Perspectives.
Introduction
Thank you Chairman Whitfield, Ranking Member Rush, and Members of the Subcommittee for inviting me to share my research on the effects of the Department of Energy’s appliance efficiency standards on consumers. I am Senior Policy Analyst at the George Washington University Regulatory Studies Center,[1] where I analyze the effects of regulation on public welfare. I recently published an analysis of the costs and benefits of energy efficiency standards for appliances issued over the last decade, and identified areas where these standards unfortunately harm consumers by reducing their choices and increasing the prices of new appliances.
I appreciate the Subcommittee’s interest in the Department of Energy’s (DOE’s) Energy Conservation Program, including its effects on consumers and whether there are opportunities for Congress to improve it. My prepared statement includes the following points:
The pace of regulations setting energy efficiency standards has accelerated during the last decade and is likely to continue. These standards regulate appliances used by most consumers and, because they affect almost all households and incur such large potential benefits and costs, they merit close inspection.
American households reflect significant diversity and have very different needs and preferences when it comes to appliances regulated by DOE’s efficiency standards. As a result, one-size-fits-all energy efficiency standards can deprive consumers of the ability to make purchases that best suit their unique circumstances and constraints. In such cases, these regulations are a cost to consumers rather than a benefit.
Efficiency standards are particularly costly for low-income households who have different constraints and are less able to benefit from the tradeoff between higher upfront costs and lower long-term energy bills as a result of increased efficiency.
Although energy efficiency standards are often billed as having substantial environmental benefits, these benefits are relatively small and typically are not sufficient to outweigh the costs to consumers of the standards.
My recent evaluation of the estimated benefits of energy efficiency rules issued 2007 – 2014 is attached as an addendum to this statement, as is my 2015 journal article on the regressive effects of DOE’s efficiency standards.
Background
The Energy Policy and Conservation Act of 1975 (EPCA) authorizes the U.S. Department of Energy (DOE) to establish energy conservation standards for twenty different categories of covered consumer appliances including refrigerators, freezers, furnaces, dishwashers, clothes dryers, televisions, faucets, and lamps.[2] The number of energy efficiency standards promulgated by DOE has increased rapidly since passage of the Energy Independence and Security Act of 2007 (EISA), which amended the EPCA and required an increase in efficiency standards for energy-using durables.
This increased pace of new standards is expected to continue. The semiannual Unified Agenda, published by the Office of Management and Budget (OMB), lists upcoming regulations planned by agencies for the year ahead. The Spring 2016 Unified Agenda, issued just last month, reveals an ambitious schedule; it lists three energy efficiency standards from DOE in the pre-rule stage, twelve standards in the proposed rule stage, and thirteen in the final rule stage.[3]
Recently, DOE finalized energy conservation standards for residential dishwashers, microwaves, clothes washers, furnaces, and air conditioners—appliances that most households rely on for everyday tasks. Each of these regulations increases the price of appliances in return for reducing long-term energy and water bills. These standards affect nearly all American households, which means it is very important to examine the rationale behind them, as well as their effects on Americans.