Comments to DOE: Energy Conservation Standards Program

Comments Submitted by the Competitive Enterprise Institute, Consumers’ Research, Center for the American Experiment, JunkScience.com, Project 21, Caesar Rodney Institute, Rio Grande Foundation, Committee for a Constructive Tomorrow, FreedomWorks Foundation, Heartland Institute, Thomas Jefferson Institute, Independent Women’s Forum, Independent Women’s Voice, and Institute for Energy Research

INTRODUCTION

            The undersigned free market and consumer organizations have a longstanding interest in bringing to light the deleterious consequences of federal regulations, which are often neglected by agencies in their attempts to adopt a regulatory agenda. For over 20 years, we have participated in rulemakings conducted by the Department of Energy (DOE) as well as litigation regarding energy and water conservation standards for home appliances. This includes agency actions impacting dishwashers, air conditioners, clothes washers and dryers, showerheads, and light bulbs.[1]  Our particular focus has been on ensuring that the consumer protections built into the law are given full weight in the rulemaking process. In our view, these protections have often been downplayed or ignored by the agency when setting excessively stringent efficiency standards that raise overall costs and/or reduce product quality and choice.

            It is for these reasons that we supported DOE’s January 15, 2021 Final Interpretive Rule creating a separate category for non-condensing natural gas furnaces.[2]  Failure to do so would have violated the law by effectively eliminating this furnace type despite it being the best option for some homeowners.[3]

            It is also for these reasons that we opposed DOE’s December 29, 2021 Final Interpretive Rule reversing the previous Final Interpretative Rule and eliminating the protection for non-condensing furnaces.[4] This Final Interpretive Rule made possible the Notice of Proposed Rulemaking (NOPR) at issue here that would set out stringent new efficiency standards for furnaces that non-condensing versions cannot meet.  We believe this NOPR violates the law and harms consumers and therefore should not be finalized.[5]

SUMMARY OF THE ARGUMENT

            The Energy and Policy Conservation Act of 1975 (EPCA) authorizes DOE to set and periodically consider amending energy and water conservation standards for most home appliances, including furnaces.[6]  Such standards are to be set to “achieve the maximum improvement in energy efficiency…which the Secretary determines is technologically feasible and economically justified.”[7]  Further, the agency cannot adopt any standard unless it would save a significant amount of energy.[8]

            EPCA does not, as DOE now strongly suggests, prioritize efficiency above all else in the standards-setting process.  Instead, the statute contains a number of provisions protecting consumers from excessively stringent standards that may do more harm than good.  For example, in determining whether a standard is economically justified, DOE is required to balance the potential energy savings over the life of the appliance against any additional costs in the form of a higher purchase price and/or increased maintenance expenses.[9]  These costs can increase sharply with the stringency of the standard, and a point may be reached where the level is set so stringently that it costs consumers more than it saves them.  EPCA seeks to avoid such a result.[10]   This is but one example of the provisions in EPCA that serve as a brake on regulatory overreach.

            Most relevant here is the provision in the law categorically prohibiting any new or amended standard if the Secretary finds, by a preponderance of evidence, that it is “likely to result in the unavailability in the United States…of performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States at the time of the Secretary’s finding.”[11] [Hereinafter the “features provision.”]  The features provision is virtually tailor-made to protect consumers from natural gas furnace standards so stringent so as to effectively force non-condensing versions off the market in favor of condensing furnaces with very different characteristics that make them incompatible with some homes. 

            Finally, climate change considerations do not play a role under EPCA and in any event DOE should not use the Interagency Working Group’s (IWG) social cost of greenhouse gases (SC-GHGs) analysis to calculate net regulatory benefits. The SC-GHG—an estimate of the present value of the cumulative climate damages of an incremental ton of carbon dioxide equivalent (CO2e) greenhouse gas (GHG) emissions out to the year 2300—is too speculative and subjective, and too easily manipulated for political purposes, to be weighed in the same scales with the near-term consumer costs of the proposed standards. As it happens, the IWG exercise is egregiously biased due to its reliance on overheated climate models, inflated emission scenarios, and pessimistic adaptation assumptions. Using biased SC-GHG estimates to estimate net benefits is arbitrary and capricious. DOE’s net-benefits calculation also overlooks the obvious problem that, however estimated, the climate benefits of the proposed standards are too small to be detected or verified; “benefits” no one can experience are so in name only.   

ARGUMENT

I. EPCA PROTECTS NON-CONDENSING FURNACES AND CONSUMER CHOICE

            No two homes are exactly alike, nor are any two homeowners.  The above-mentioned features provision acknowledges individualized circumstances and preferences and preserves them by ensuring that DOE standards are not set so high as to create one-size-fits-all limitations.

            Even if only a few homeowners need non-condensing furnaces, the law would protect them, but in truth quite a few do.   As other commenters have described in detail, a natural gas furnace must be compatible with a home’s venting system, and condensing furnaces are frequently not.[12]   Further, it is not merely a matter of spending money to modify the existing venting system to be compatible with a condensing furnace.  Depending on the home’s configuration, it may not be practical or even possible to do so.  In other cases, it could be done but with very real disadvantages such as compromised safety or the need for ducts traversing rooms or components that take up additional space. The problems are particularly acute in homes where a non-condensing furnace shares the venting system with other appliances such as a water heater, and continued operation of these other appliances may be jeopardized by a switch to a condensing furnace.   

            A forced shift towards condensing furnaces would disproportionately burden lower-income homeowners who tend to have older and more space-constrained houses – the kinds most likely to need a non-condensing furnace.   Thus, the NOPR may have adverse environmental justice implications not acknowledged by the agency.  

            The circumstances are as varied as the nation’s housing stock, and condensing furnaces cannot suit every need.  In fact, the elimination of non-condensing furnaces would likely force some homeowners to make a switch, not to a condensing natural gas furnace but to an electric furnace, with higher operating costs as well as other potential disadvantages.[13]  The extent to which the NOPR would induce natural gas furnace users to abandon natural gas entirely in favor of electric furnaces further underscores that the features provision has been violated.

            From a consumer choice perspective, it is important to emphasize that, with or without the NOPR, any homeowner who wants a condensing furnace (or an electric one for that matter) will always be free to select one.  The only thing at issue here is whether or not to foreclose the option of a non-condensing furnace.

            DOE makes the argument that heat is heat and thus whether the heat is delivered by a non-condensing or condensing furnace is of no consequence to consumers and therefore not a protected feature.[14]   In DOE’s words, “the technology used to supply heated air or hot water is not a performance-related ‘feature’ that provides a distinct consumer utility under EPCA.”[15]   This is an unacceptably narrow reading of the features provision, whose broad language protects every aspect of a product that is of relevance to consumers. Here, the feature at issue is more accurately characterized as the furnace’s compatibility with the home in which it is to be installed – which of course is of great importance to the homeowner. 

            It should be emphasized that what counts as a protected feature under EPCA is not what the agency chooses but what the public demands, to be determined by whether that feature was available on the market at the time of the rulemaking (“substantially the same as those generally available in the United States at the time of the Secretary’s finding”).[16]  Here, the existing and ongoing demand for condensing furnaces is undeniable.

            DOE also observes that non-condensing furnaces are less energy efficient than condensing ones, and thus asserts that preserving them would fundamentally undercut the purpose of EPCA.[17]   As discussed previously, this efficiency-obsessed approach is not how EPCA works and indeed ignores many of its statutory protections.  EPCA requires a balancing in which efficiency is not pursued to the point that it jeopardizes the interests of homeowners.  DOE’s exaltation of efficiency disregards considerations that were important to the Congress that enacted EPCA and is accordingly arbitrary and capricious.

            Here, DOE’s insistence on treating efficiency as paramount would effectively write the features provision out of the law.   The entire point of this provision is to protect product characteristics likely to be sacrificed by an excessively stringent standard.  Note also that the statute contains a related provision setting out the process of promulgating separate rules with a stringency level calibrated so as to preserve any such features (most appliances have multiple efficiency standards depending on their precise characteristics), and it explicitly acknowledges that such separate standards would need to be less stringent than the one that caused the problem in the first place.

            There is a proper way under EPCA for DOE to pursue greater efficiency for non-condensing furnaces, and that is to create a separate standard achievable by models with this feature.  In contrast, EPCA does not allow DOE to promulgate a one-size-fits-all standard that only condensing furnaces can meet.

II. CLIMATE CHANGE CONSIDERATIONS ARE SUPRERSEDED BY THE       CONSUMER PROTECTIONS IN EPCA, AND THEIR QUANTIFICATION BY DOE IS HIGHLY PROBLEMATIC

            Climate change is nowhere mentioned in EPCA’s detailed instructions to DOE on how to set and amend appliance efficiency standards.  Regardless, the agency has elsewhere proclaimed that “[a]ddressing the effects of climate change is a top priority of the Energy Department,” and that this new agency-wide agenda includes “working to dramatically increase the efficiency of appliances….”[18]   The NOPR itself references Executive Order 13990, “Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis,” (January 25, 2021), the United States re-entering the Paris Agreement, and “the need to confront the global climate crisis” as justification for strengthening furnace standards.[19] 

            The economic analysis in the NOPR incorporates the social cost of greenhouse gas emissions and thus the benefits of avoiding these emissions.   It quantifies projected climate benefits exceeding $1 billion dollars annually and $16.2 billion dollars in total.[20]  

            However, the recent Supreme Court decision in West Virginia v. Environmental Protection Agency strongly suggests that climate change concerns do not create statutory authority beyond that which is clearly stated by Congress.[21]   Indeed, if the Environmental Protection Agency is not permitted to use climate change to justify a rule forcing a shift away from coal-fired power plants absent clear statutory authority, then DOE may not do the same to non-condensing furnaces.  Nonetheless, DOE proposes to do just that and includes the social cost of greenhouse gas emissions in its determination that the proposed new standards are economically justified. 

            Further, whether or not the social cost of greenhouse gas emissions is a valid consideration in the appliance standards-setting process, it would in any event be superseded by the consumer protections in the statute.  In particular, the features provision preserves consumer choice and does so independently of the agency’s determination of economic justification.  In other words, a new or amended standard, no matter how economically justified the agency believes it to be, cannot sacrifice a product characteristic that is on the market at the time of the rulemaking.  This includes non-condensing furnaces.  In this way, EPCA ensures that freedom of choice takes precedence over the pursuit of any environmental agenda.