Testimony of Steven Nadel, Executive Director, on Legislative Proposals Related to Energy Efficiency, before the Committee on Energy, U.S. Senate

ACEEE is a non-profit organization dedicated to increasing energy efficiency as a means for both promoting economic prosperity and protecting the environment. We were founded in 1980 and have contributed in key ways to energy legislation adopted during the past 20 years, including the Energy Policy Act of 1992 and the National Appliance Energy Conservation Act of 1987. I appreciate the opportunity to appear before this Committee. Specifically I have been asked to discuss the federal appliance and equipment standards program.

The Federal Standards Program
Federal appliance and equipment efficiency standards were signed into law by President Reagan in 1987 and expanded under President Reagan in 1988 and President Bush in 1992. Minimum efficiency standards were adopted in order to address market failures, replace a patchwork of state standards, save consumers money, and reduce energy use and peak electrical demand. Among the market failures addressed by standards are lack of consumer awareness, rush purchases when an existing appliance breaks down, and purchases by builders and landlords who do not pay appliance operating costs and hence have no financial incentive to value efficiency. Standards remove inefficient products from the market but still leave consumers with a full range of products and features to choose among. Since adoption, standards have sharply cut the energy use of major energy using appliances and equipment while not interfering with manufacturers' ability to offer excellent performance and a wide array of features. For example, the typical refrigerator manufactured today uses less than half the energy of an average 1987 model, but is bigger and offers more features.

Appliance and equipment standards are clearly one of the federal government's most effective energy-saving programs. In 2000, standards on refrigerators and many other products reduced U.S. electricity use by 2.5% and total U.S. energy use by 1.3%, including displacing the need for 70,300 MW of generating capacity (the equivalent of 234 power plants, 300 MW each). These standards reduced consumer energy bills in 2000 by approximately $9 billion with energy bill savings far exceeding any increase in product cost. Consumer energy bill savings to date total about $50 billion with a typical benefit-cost ratio of more than 3:1. By 2020, standards already enacted will save 4.3 quads per year (3.5% of projected U.S. energy use), and reduce peak electric demand by 120,000 MW (more than a 10% reduction).1

Appliance Standards in the Administration Energy Plan
The Bush/Cheney National Energy Policy devotes half-page to the federal standards program and notes that these "standards will stimulate energy savings that benefit the consumer, and reduce fossil fuel consumption, thus reducing air emissions." The Plan then recommends that the Secretary of Energy: (1) "support [the] appliance standards program for covered products, setting higher standards where technologically feasible and economically justified;" and (2) "expand the scope of the appliance standard program, setting standards for additional appliances where technologically feasible and economically justified."