Energy Bill That’s Not So Cool

With summer not too far away, we should all be thankful for affordable air conditioning, but a little-noticed provision in the Senate version of the energy bill could send the future price of central AC systems through the roof.

If successful, Congress would force the federal Department of Energy (DOE) to enact a stringent new energy conservation standard for air conditioners, despite the agency’s own determination that it’s a bad deal for consumers.

In one of the final acts of the Clinton administration, the outgoing president finalized a new rule requiring central air conditioners to be 30 percent more efficient than the existing standard.

DOE estimated that the new rule, to take effect in 2006, will boost the cost of a new air conditioner or heat pump by $335 to $435. Others, including the National Association of Homebuilders, fear even higher costs.DOE admits that only a minority of homeowners can ever hope to earn back the increased up-front cost in the form of energy savings over the life of the system. Under one set of assumptions, DOE concludes that 58 percent of homeowners will suffer net costs from owning an ultra-efficient air conditioner, with 25 experiencing net savings and the rest breaking even.

Worse yet, the agency found that the new rule will disproportionately burden low-income households. As many as 69 percent will end up spending more to stay cool. It should be noted that air conditioning not only provides comfort but has been proven to save lives in very hot weather. Thus, affordable AC is important for public health.

Sensing an onslaught of problematic policy decisions that could blow up on their watch, the Bush administration decided to take a second look at this and several other last-minute Clinton regulations. The new team at DOE decided that an earlier proposal calling for a 20 percent efficiency increase was more reasonable, and has decided to revise the final rule.

As a consequence of this relatively minor change, administration critics are shouting “regulatory rollback” and pointing to last year’s California electricity shortages and the post-September 11 push for “energy security” to argue for the ultra-strict 30 percent increase. Sen. Tom Daschle, South Dakota Democrat, has added a provision to the massive Senate energy bill to reinstate the 30 percent rule.

In truth, the extreme 30 percent requirement will do little to solve the nation’s energy problems. DOE believes it will be at least a decade before the rule affects energy use, as it will take several years beyond the 2006 effective date for the new AC units to penetrate the marketplace in significant numbers. Thus, any near-term shortfalls in electricity supply should be solved by then — unless power plant obstructionists block new capacity. And the tie-in to September 11 and the nation’s dependence on Middle Eastern oil doesn’t really make sense, as very little electricity is generated from petroleum.

Nor is it likely that the new rule will ever save as much juice as predicted. More than a dozen home appliance conservation standards are now in place as a result of a 1987 federal law. But the actual energy savings from these measures have fallen short of projections, and indeed per capita residential energy use has not declined over the past decade. One reason is that the higher price of ultra-efficient refrigerators, clothes washers, air-conditioners and other appliances causes some homeowners to forestall new purchases and hold on to their older, far less efficient models. Another is the so-called rebound effect, the tendency for people to use energy efficient products more intensively.

Federal home appliance regulations may work as a feel-good crusade, but have proven not to be a realistic approach to solving energy supply problems. If the 30 percent standard is reinstated, it will reduce electricity use, but probably less than predicted, and almost certainly not enough to justify the substantial costs or avert any electricity shortages.

Nonetheless, it may be hard to stop this measure. The big energy issues — particularly whether the Arctic National Wildlife Refuge should be opened to oil drilling and whether automobile fuel economy standards should be raised — will get most of the attention in the coming energy debate. It would be a shame if this unnecessary and anti-consumer air conditioner standard were to slip through.