The proposed clothes washer energy conservation standards will impose a substantial and unnecessary burden on American consumers. These proposed rules are in violation of the Energy Policy and Conservation Act, and should not be promulgated.
The Competitive Enterprise Institute (CEI) is a non-profit public interest organization committed to advancing the principles of free markets and limited government. CEI has a longstanding interest in bringing to light the potentially deleterious consequences of regulations, which are often neglected by federal agencies in their attempts to adopt a regulatory agenda.1 CEI has previously participated in the clothes washer rulemaking, with a particular focus on the potential consumer impacts.
1 See, e.g., CEI v. U.S. Department of Transportation, 856 F.2d 1563 (D.C. Cir. 1988);
CEI v. National Highway Traffic Safety Administration, 956 F.2d 321 (D.C. Cir. 1992).
As the following comments will explain, CEI believes that the proposed clothes washer rules will have substantial adverse consequences for consumers, thus violating several consumer protections built into the statutory scheme under which DOE claims authority. Therefore, we believe that the proposed rules should either be substantially revised or withdrawn.
Under the Energy Policy and Conservation Act, as amended (hereinafter referred to as the Act), the Department of Energy (DOE) is authorized to set and periodically amend energy conservation standards for 14 energy-using home appliances, including clothes washers.2 The previous amended standard for clothes washers took effect in 1994. Shortly thereafter, DOE began the process of amending this standard to make it substantially more stringent. After several years and numerous delays, this revision process culminated in a July 27, 2000 Joint Stakeholders Agreement, in which clothes washer manufacturers and various energy efficiency and other advocacy groups (but no consumer organizations) agreed to mutually acceptable new standards for clothes washers. These proposed standards, the first of which requires a 22 percent reduction in energy use by 2004 and the second of which requires a 35 percent reduction by 2007, were incorporated, without changes, in DOE’s October 5, 2000 Notice of Proposed Rulemaking (NOPR).3
Beyond the unusual process by which the NOPR was created, the proposed standards break new substantive ground regarding their adverse affect on consumers. This is particularly true of the 2007 standard, which will raise the cost of clothes washers by 57 percent (from $421 to $661), a far greater percentage increase than in any previous appliance standard.4 DOE’s calculated payback period (the time it takes to earn back the higher purchase price through savings on utility bills) is 7 years, significantly longer than in most previous appliance rulemakings.5 For example, DOE’s most recent energy efficiency standard for refrigerators has a payback period of 4 years.6 In addition, while most appliance standards to date were predicted to have, at most, only a minor adverse effect on the variety and features of regulated appliances available to consumers, DOE’s technical support documents (TSD) indicate a substantial negative impact on clothes washer choice in 2007.7
As will be discussed below, DOE’s own rulemaking record makes a very weak case for amending the existing clothes washer standards, and the actual negative consequences for consumers will likely be far greater than the agency’s analysis indicates. Beyond being bad consumer policy, the proposed standards are in violation of the Act, which requires, among other things, that amended standards be economically justified and preserve consumer choice.
IV. THE PROPOSED STANDARDS VIOLATE THE ACT
1. DOE Cannot Promulgate Two Standards In One Rulemaking
The Act sets out specific requirements for promulgating an amended standard. In the NOPR, DOE has violated these provisions by trying to set two standards in one rulemaking, the first taking effect in 2004 and the second in 2007. The Act states that “[a]ny new or amended conservation standard shall be prescribed in accordance with the following procedure…” and proceeds to spell out the procedural requirements applicable to each standard.8 In addition, the statute requires certain lead times between successive standards to allow the market to adjust. Here, the 2007 standard, coming only 3 years after the 2004 standard, violates the requirement that an amended standard “shall apply to products manufactured after a date which is 5 years after … the effective date of the previous amendment made pursuant to this part….”9 Actual lead times aside, the very existence of a statutory scheme that carefully staggers the implementation of new standards argues against the promulgation of two successive standards simultaneously.
Thus, the statute clearly sets out procedural requirements and lead times with which the 2007 standard is not in compliance.
2. The Proposed Standards Are Not Economically Justified
A new or amended standard must be “economically justified,” based on the economic impact on manufacturers and consumers, the savings in operating costs over the life of the product, the total projected amount of energy savings, any lessening in product utility or performance, the impact on competition, the need for national energy and water conservation, and other factors the Secretary considers relevant.10 This important consumer protection prevents DOE from giving its efficiency agenda priority above all other considerations. Here, the proposed standard is not economically justified.