Summary: GAO discussed its report on the Department of Energy's (DOE) efforts to develop appliance energy efficiency standards. The report primarily focused on the basis for the DOE proposal to establish no standards for eight appliances. The National Energy Conservation Policy Act (NECPA) directed DOE to prescribe efficiency standards, or make a no-standards determination, for each of 13 major household appliances. Based on its work, GAO determined that the DOE no-standards proposal is highly questionable. First, the analysis in support of the proposal relies heavily on an unvalidated key assumption that consumers will purchase substantially more efficient appliances in response to increases in real energy prices. Moreover, the DOE assumption seems to ignore the fact that home builders, who purchase many of the major energy-using appliances, are more sensitive to first costs than to energy efficiency. Secondly, DOE was inconsistent in considering the impact of market forces. In estimating energy savings from imposing appliance standards, DOE projected a base case and a standards case for a 27-year period and concluded that the difference in energy consumption under the two cases was the effect of appliance standards. However, in the base case, consumers were projected to purchase more energy efficient appliances because of increasing energy prices but, in the standards case, consumers' purchase decisions were not affected by changing energy prices. Finally, DOE used four markedly different future energy price projections during the standards development process and, for the analysis supporting its current proposal, used future energy price assumptions significantly higher than other available estimates. Overall, the DOE analysis appeared to consider the impact of market forces only when such an impact supported its no-standards proposal. GAO found that, because of federal preemptive provisions of NECPA, a final no-standards determination would impact on energy conservation and utility load management efforts in many states.
