Op-Ed: The 40-Year Legacy Of Energy Efficiency Legislation

October 30, 2015

Law360, New York (October 30, 2015, 10:13 AM ET)

Long lines of cars inched forward to reach gas pumps. Cars with odd-numbered plates could get gas on Mondays; those with even-numbered plates on Tuesdays. This was just one manifestation of the oil embargo imposed in October 1973 by members of the Organization of Arab Petroleum Exporting Countries. The embargo quadrupled the price of oil by the time the embargo ended in March 1974.

This punch to the gut of the American economy convinced Congress that something needed to be done to address the country’s suddenly evident energy vulnerability. This year is the 40th anniversary of one of those measures that is still very much at work: the Energy Policy and Conservation Act of 1975 — the heart of which is energy conservation through increased efficiency.

EPCA brought the importance of efficiency to the fore of energy policy, where it has remained ever since. But energy efficiency is about to become even more important, as demonstrated by its role in the Clean Power Plan for combating greenhouse gas emissions and the role it will play at the forthcoming United Nations Climate Change Conference in Paris.

In light of the 40th anniversary of EPCA and the key role of energy efficiency under the Clean Power Plan and at the U.N. conference, a brief overview of the energy efficiency landscape — and horizon — is surely warranted.

EPCA’s Efficiency Programs

A central element of energy conservation is EPCA’s program for increasing the efficiency of appliances and industrial equipment. It commands the U.S. Department of Energy to adopt efficiency standards and test procedures; commands the Federal Trade Commission to adopt labeling; and preempts state requirements.

The program had a somewhat rocky start. EPCA initially provided for mandatory standards only if voluntary targets for 13 appliances were unlikely to be met by 1980. In 1978, citing shortages due to increasing demand for energy and vulnerability to interruptions of foreign oil supplies, an impatient Congress required the DOE to issue mandatory standards for the 13 appliances, unless the department decided that standards were not justified.

Under President Ronald Reagan, the DOE indeed decided that standards for most of the appliances were not justified. This determination was judicially overturned in 1985, and the matter was remanded to the DOE for further rulemaking. There was the prospect of a lengthy federal regulatory vacuum and a proliferation of state standards that would complicate industry planning.

This situation was unsatisfactory both to industry and energy conservation advocates. They negotiated amendments to EPCA in 1987 establishing stringent uniform national standards, rulemakings to update those standards and stronger preemption. Since then there have been further amendments to EPCA that have added more products, ramped up rules for existing covered products, streamlined the rulemaking process and allowed regional standards under strict criteria. Standards now set include those for refrigerators, heating and air conditioning products, water heaters and boilers, laundry products, cooking products, plumbing products, external power supplies and electric motors. Special situations can be handled through exceptions and waivers.

The DOE has recently been busy with a host of notice and comment standards rulemakings, spurred by litigation to force faster action and by President Obama, who has pressed for expedition. The agency is also expanding rulemaking into new products such as battery chargers, and computer and battery backup systems. By law, the DOE adopted standards must be technologically feasible and economically justified.

Beginning in 2009, the DOE also instituted more formalized certification and enforcement procedures. These are backed by rules authorizing civil penalties up to $200 per unit and requirements to notify purchasers of violations. Enforcement can be stimulated not only by the DOE’s internal testing, but also by media reports, complaints by competitors and results of trade association certification and testing programs.

The DOE penalty guidelines provide for the department to take into account a variety of mitigating and aggravating considerations when assessing civil penalties. Findings of violation, publicized by the DOE, have also fueled consumer claims, including class actions.

Vehicle efficiency is also a key component of EPCA. As with appliances and industrial equipment, the vehicle program began with a focus on reducing oil imports and now also focuses on greenhouse gas emissions. EPCA provides for Corporate Average Fuel Economy standards. The U.S. Department of Transportation’s National Highway Traffic Safety Administration sets and enforces the standards, including passenger cars and light trucks (and now also medium-duty trucks and heavy-duty commercial trucks), using the U.S. Environmental Protection Agency‘s calculations of average fuel economy for specified categories of a manufacturer’s vehicles.

EPCA has been amended to focus as well on efficiency improvements in buildings. Amendments in 2005 provided for tax deductions at improvement energy systems of commercial buildings. Amendments in 2007 included efficiency improvements in federal and commercial buildings.

In 2015, building efficiency was given a further boost by the bipartisan Better Buildings Act of 2015, part of the Energy Improvement Act of 2015. It provides for development by the General Services Administration, in consultation with the DOE, of model commercial leasing provisions and best practices regarding investments in cost-effective energy efficiency and water efficiency measures. It also provides for a Tenant Star Program to promote energy efficiency in separate spaces leased by tenants or otherwise occupied within commercial buildings.

Further efficiency legislation is being considered, including the Energy Policy Modernization Act, a bipartisan bill that is working its way through Congress. Energy efficiency is the first title, with provisions on buildings, appliances and manufacturing.

The DOE is an active participant in the intergovernmental International Partnership for Energy Efficiency Cooperation to help accelerate adoption of energy efficiency policies and practices. It also works with Canada and Mexico, through the North American Energy Working Group, to enhance cooperation on energy efficiency programs.

Energy Star

In 1992, the voluntary Energy Star program was added to the federal energy efficiency portfolio — harnessing market forces to drive efficiency to higher levels.

Under this joint initiative of the DOE and EPA’s, manufacturers enter into agreements allowing qualifying high-efficiency products to use the Energy Star logo and to be listed as Energy Star-qualified. This is a valuable marketing tool.

A qualifying product generally needs to exceed the mandatory efficiency level set by a DOE standard. The program also includes products not subject to DOE standards, such as set-top boxes, telephones and televisions. The Energy Star program now covers residential and commercial and industrial buildings.

Energy Star products are subject to testing and verification; noncompliant products are subject to loss of the right to use the Energy Star logo and an obligation to notify purchasers. The EPA can also publish noncompliant products as being disqualified under the program; this can stimulate consumer claims.

Energy Star has been relatively nimble in developing criteria. EPCA provides generally for public comment on proposed criteria and lead times of 270 days.

Energy Star has been employed elsewhere, such as the requirement that federal agencies favor Energy Star and other energy efficient products in purchases, and utility rebate programs and state standards that reference Energy Star.

State Programs

In negotiating the 1987 amendments to EPCA, industry agreed to stringent federal standards in exchange for strengthened preemption in order to protect itself against a patchwork of state requirements. Nonetheless, there has continued to be state activity in energy efficiency. States have issued rules for products that are not covered by federal efficiency standards, and have taken advantage of statutory exceptions to preemption, such as state procurement, and building code requirements that qualify under specified criteria. States have also adopted incentive programs such as tax incentives and rebates for purchase of efficient products. While EPCA narrowly provides for state petitions for waiver of preemption for “unusual and compelling” state or local energy interests, the criteria are sufficiently stringent that none have been granted.

The strongest program has been in California, which has had appliance efficiency standards since 1977. The California Energy Commission is currently conducting rulemakings on numerous products, ranging from bathroom appliances to computers, thus adding to its extensive set of regulations. It recently adopted a rule currently allowing for civil penalties up to $2,500 per unit — dramatically larger than the $200 per unit civil penalties authorized under the DOE program.

In some instances, the DOE has considered existing state standards in the development of federal standards. An example is the DOE rulemaking for battery chargers, in which department is proposing standards generally based on those of California.

State energy efficiency efforts have been given a further impetus by the Clean Power Plan.

Voluntary Programs

Voluntary programs are an important component of energy efficiency.

In 2012, industry undertook an innovative approach to energy efficiency: a voluntary, nonregulatory agreement for set-top box energy conservation. In 2013, an amendment to the agreement was entered into by industry, energy conservation groups and the DOE. It provides for Tier 2 requirements and expands the scope of devices included in the Tier 2 requirements. The agreement provides for verification testing, reporting and posting of information. A steering committee includes industry and conservation group representatives.

The agreement states that it is “intended to be a complete and adequate substitute for all federal and state legislative and regulatory solutions pertaining to the energy efficiency of set-top boxes.” The agreement also states that the signatories were commencing efforts to develop energy efficiency measures for application to small networking equipment, such as residential modems and routers. An agreement was adopted in 2015.

Trade associations are involved in energy efficiency standards development, and voluntary performance certification and verification programs — such as those administered by the Air-Conditioning, Heating and Refrigeration Institute and by the Association of Home Appliance Manufacturers. Trade association programs help maintain a level playing field on efficiency claims. Models that fail trade association programs will likely come to the attention of the DOE and EPA, which may follow up with enforcement of their own rules.

Clean Power Plan

In August 2015, the EPA issued an ambitious carbon dioxide emissions rule, the Clean Power Plan. It will give a further boost to energy efficiency — at least if the rule survives judicial scrutiny. The role of energy efficiency in relation to the rule has been contentious, and the EPA made a major change in an effort to avoid having energy efficiency derail the rule.

In 2014, the EPA issued a proposed rule that specified four “building blocks,” including demand-side energy efficiency, for determining the agency’s state-specific carbon dioxide emissions goals. Numerous comments criticized inclusion of demand-side energy efficiency for determining the goals, on the grounds that it would impose on power plants requirements that depend on activity “outside the fence.” The EPA responded by eliminating demand-side energy efficiency to determine the goals. But the EPA said that demand-side energy efficiency remains an option that states can use for purposes of meeting the goals. Energy savings through demand-side energy efficiency projects in low-income communities can receive extra credit.

The EPA’s related proposed model rules provide examples of potentially eligible demand-side energy efficiency program and project types. These include publicly or utility-administered energy efficiency programs, including those implemented in low-income residences and facilities; project-based energy efficiency evaluated site by site, for example those implemented by ESCOs at commercial buildings and industrial facilities; state and local government building energy code and compliance programs; and state and local government incremental product energy standards.

U.N. Climate Change Conference

The United Nations Climate Change Conference will be held in Paris in November and December 2015, with a goal of achieving a global agreement on climate pursuant to the U.N. Framework Convention on Climate Change. Energy efficiency will play an important role, and the United States is setting an example, as reflected in the U.S. Intended Nationally Determined Contributions submitted in preparation for the conference. INDCs are being submitted by countries to set forth steps that each will take to address climate change. The U.S. INDC points to the DOE standards for 29 categories of appliances and equipment, a building code determination for commercial buildings and fuel economy standards for light-duty and heavy-duty vehicles. It cites future actions, including the then-forthcoming Clean Power Plan, additional fuel economy standards, standards for “a broad range of appliances and equipment” and a building code determination for residential buildings.

The United States is not alone in this regard. As just one other example, the INDC for China cites efficiency efforts in a broad variety of industries, high efficiency industrial and residential equipment products, building efficiency and vehicle fuel efficiency.

Continuing Role of Energy Efficiency

A lot has changed since Congress acted 40 years ago to adopt EPCA. Oil shortages are no longer an immediate challenge, and climate change now is at the fore. Through it all, energy efficiency has played a key role in meeting achieving environmental and strategic objectives. This will continue and accelerate, as federal, state, private and international initiatives multiply and push efficiency to increasingly higher levels.

For the next 40 years — and beyond — energy efficiency will still be considered the “first fuel.”

—By Scott Blake Harris and John A. Hodges, Harris, Wiltshire & Grannis LLP

Scott Blake Harris is chairman and John Hodges is counsel in Harris Wiltshire & Grannis’ Washington, D.C., office. Harris rejoined the firm in May 2014, having left in 2009 to serve as general counsel of the U.S. Department of Energy.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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