Proposed Revisions to DOE’s Process Rule Include Beneficial Changes and Areas for Improvement

May 21, 2019


While many rulemakings establish regulations on private entities, occasionally agencies will publish rules that regulate the agencies themselves. On February 13, 2019, the Department of Energy (DOE) did just that, releasing a notice of proposed rulemaking (NPRM) that updates its internal rulemaking procedures for energy conservation standards, titled “Energy Conservation Program for Appliance Standards: Proposed Procedures for Use in New or Revised Energy Conservation Standards and Test Procedures for Consumer Products and Commercial/Industrial Equipment” (Process Rule).

DOE’s Process Rule guides implementation of the agency’s Appliance Standards Program, which tests and labels covered products, establishes minimum standards for energy efficiency, and certifies and enforces procedures. The procedures were initially codified in 1996 in the Code of Federal Regulations (10 CFR part 430, subpart C, appendix A), but the agency has not updated them since.

I submitted a public comment on DOE’s proposed revisions to the Process Rule. The public comment focused on eight areas of interest in the revised Process Rule, highlighting both beneficial changes and additional areas for improvement, but this commentary examines how the Process Rule connects with two broader concepts in regulatory policy—formalizing internal procedures and retrospective review.

Making the Process Rule Binding

DOE’s current rulemaking methodology would undergo substantial changes if the proposed Process Rule is finalized. In its effort to “update and modernize” its procedures, DOE made the important decision to make the revised Process Rule binding on itself and remove the current language that precludes judicial review.

By requiring mandatory compliance, DOE expects to increase the predictability and consistency of the rulemaking process for creating new energy conservation standards and revising existing ones. This expectation is well founded. Binding DOE to its internal procedures creates incentives for it to follow through on its commitments. The NPRM notes that existing procedures have been applied inconsistently, specifying the need to address “that DOE has not rigorously followed the Process Rule in many instances.” Relatedly, formalizing the revised Process Rule would make informal practices, such as “applying the Process Rule to both consumer products and commercial equipment,” a predictable expectation.

Furthermore, formalizing the revised Process Rule also implies that its other beneficial aspects will be credibly implemented. Specifically, formalization could expand opportunities for public participation on energy conservation standards because the agency will be bound to its proposed procedures for early stakeholder input. Recent testimony by RSC director Susan E. Dudley emphasized how early public engagement enhances transparency at a stage when input is particularly valuable, and it helps an agency consider a wide range of alternatives before narrowing its focus. Empirical research indicates that certain types of early engagement, such as advance notices of proposed rulemaking (ANPRMs) and requests for information (RFIs), are positively associated with higher quality regulatory impact analyses.

Opening itself to review by the courts is a way for DOE to credibly commit to any finalized procedures and hold its analysis to a higher standard. Research suggests that one benefit of judicial review is that it motivates agencies to improve their regulatory impact analyses. As explained in the public comment, this happens in two ways: (1) agencies improve their economic analysis when they revise remanded rules with flawed analysis; and (2) agencies are incentivized to conduct better economic analysis from the outset.

These positive upsides of formalizing the revised Process Rule suggest that DOE should move ahead with its decision to make these procedures binding.

Planning for and Conducting Retrospective Review

DOE’s earlier RFI sought feedback on retrospective review, and its proposed rule also requested comments on whether and how to “conduct retrospective reviews of the energy savings and costs of energy conservation standards.” While DOE has not decided on a specific approach yet, it “is continuing to evaluate the prospect of conducting these types of reviews, including on a longer-term (e.g., 10-year) basis.”

Retrospective review provisions would help DOE improve the effectiveness and transparency of its energy conservation standards. Multiple executive orders across presidential administrations underscore the importance of retrospective review in the regulatory process. DOE conducts ex ante analyses of energy conservation standards that “rely heavily upon assumptions about future prices of energy and other goods, opportunity costs, producer and consumer preferences, and behavior.” Including ex post analyses in its Process Rule would help DOE evaluate the effectiveness of existing standards at meeting their objectives and provide information on the accuracy of DOE’s assumptions and projections.

The two main components of retrospective review provisions should be: (1) to review existing standards and analytical assumptions, and (2) to establish new standards differently by incorporating metrics, indicators, and timelines at the outset. In other words, retrospective review can be both a backward- and forward-looking approach, which aligns the initial drafting and analysis of a rule with its observed outcomes. Then, agencies can propose necessary revisions in a process of iterative improvement.

The “evidence-based regulation” framework referenced in the public comment offers practical steps for enhancing the regulatory process, focusing on three stages: regulatory design (e.g., setting performance goals), regulatory decision-making (e.g., assessing expected costs and benefits), and retrospective review (e.g., comparing measured outcomes to performance goals). Put simply, the framework can be used for designing regulations ex ante so that their performance can be evaluated ex post. In effect, ex ante analyses can be thought of as “hypotheses of the effects of regulatory actions” that can be tested against actual outcomes with ex post evaluation.

One specific area where DOE could incorporate retrospective review is in its analysis of significant energy savings. The agency is proposing a threshold-based approach with twin lenses looking at (1) the total amount of projected energy savings and (2) the relative percentage increase in efficiency obtained by setting or amending standards. Because the expected energy savings and efficiency gains are based on projections, DOE should determine the accuracy of its savings estimates for those standards that are implemented. Ex post analysis could inform future projections, especially when energy conservations standards for a similar product or equipment type are being revised, and provide an indicator of how effectively the significance threshold is functioning and whether it is set at the right level.

While DOE claims that it is effectively relying on retrospective review “by asking if anything has changed since issuance of the last standard or test procedure,” such an approach is missing a substantial component of what makes retrospective review valuable. The approach lacks an “evaluation mindset” that sees evaluating outcomes as providing critical feedback for improving future analysis. In short, retrospective review helps an agency look back on what needs to be changed, while also facilitating the design of new regulations and planning for implementing future reviews.

Thus, DOE should establish provisions for retrospective review in the final draft of the revised Process Rule.


Agencies can make significant strides by voluntarily committing themselves to better regulatory practices. DOE’s proposal would revise its current procedures in multiple ways, including making the Process Rule binding on the agency. Mandatory compliance could make DOE’s internal procedures more predictable and consistent, enhance the implementation of other beneficial changes to the Process Rule, and improve the quality of the agency’s economic analysis.

DOE is also considering implementing provisions for retrospective review in its Process Rule. Incorporating ex post analysis into its rulemaking process could assist with assessing existing energy efficiency standards and improve the design or revision of standards in the future. Instituting retrospective review is one improvement that would better advance DOE’s commitment to updating and modernizing the Process Rule.