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                                                                    EXHIBIT 10.3


                             SUBSCRIPTION AGREEMENT


         This Agreement (hereinafter the "Agreement") is entered into this 30th
day of September, 2003, by and between Nicholas Anderson ("Anderson") and Power
Efficiency Corporation ("PEC").

         WHEREAS, Anderson desires to purchase from PEC, and PEC desires to sell
to Anderson, 536,638 shares of PEC's common stock at the per shares price of
$0.87;


         NOW, THEREFORE, in consideration of the foregoing and of the promises
and covenants contained herein, it is hereby covenanted and agreed as follows:

         1.       Agreed Subscription; Purchase Price. Anderson hereby purchases
                  from PEC 536,638 newly issued shares of PEC's common stock
                  (the "Shares") for the purchase price of $466,875 ($0.87 per
                  share). The purchase price shall be paid to PEC by the
                  cancellation of $466,875 of debt owed by PEC to Anderson. The
                  debt hereby cancelled consists of:

                  a.       The promissory note executed by PEC in favor of
                           Anderson dated June 6, 2002 for the principal amount
                           of $375,000, plus $28,125 of interest on the
                           promissory note representing all of the accrued
                           interest on such promissory note; and

                  b.       All of the accrued but unpaid salary currently owed
                           by PEC to Anderson representing an aggregate amount
                           of $63,750.

         2.       Acknowledgments; Economic Risk; No Liquidity. Anderson
                  understands and agrees that the purchase of the Shares is not
                  a liquid investment. In particular and in addition to the
                  representations in Section 3 hereof, Anderson recognizes,
                  acknowledges and agrees that:

                  a.       Anderson must bear the economic risk of investment in
                           the Shares for an indefinite period of time since the
                           Shares have not been registered under the Securities
                           Act of 1933, as amended (the "Securities Act") or
                           applicable state securities laws ("State Acts"), and,
                           therefore, cannot be transferred or sold unless
                           either they are subsequently registered under the
                           Securities Act and applicable State Acts, or an
                           exemption from registration is available and a
                           favorable opinion of counsel to that effect is
                           obtained.

                  b.       Although there is a limited public market for the
                           Company's Common Stock, which is thinly traded on the
                           National Association of Securities Dealers' Over the
                           Counter Bulletin Board ("OTCBB") under the symbol
                           "PREF", the Shares are being issued in a private
                           transaction exempt from the registration requirements
                           of the Securities Act and therefore cannot be freely
                           resold. The Shares are restricted securities. The
                           Shares may be resold in accordance with the
                           provisions of Securities Act Rule 144.


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         3.       Representations. Anderson represents to, and agrees with the
                  Company that:

                  a.       Anderson has carefully reviewed and understands the
                           risks of and other considerations relating to a
                           purchase of the Shares.

                  b.       Anderson is acquiring the Shares for which he hereby
                           subscribes as principal for his own investment
                           account, and not (1) with a view to the resale or
                           distribution of all or any part thereof, or (2) on
                           behalf of another person. No person other than the
                           undersigned will have a direct or indirect interest
                           in the Shares subscribed for hereby.

                  c.       Anderson consents to the placement of a legend on any
                           certificate(s) evidencing the Shares stating that
                           such securities have not been registered under the
                           Securities Act and setting forth or referring to the
                           restrictions on transferability and sale thereof. The
                           Anderson is aware that the Company will make a
                           notation in its appropriate records with respect to
                           the restrictions on the transferability of such
                           securities.

         4.       Terms of Subscription and Closing.

                  a.       This subscription, upon acceptance by the Company,
                           shall be binding upon the heirs, executors,
                           administrators, successors and assigns of Anderson.

                  b.       This Agreement shall be construed in accordance with
                           and governed by the laws of the State of Delaware,
                           without giving effect to conflict of laws principles.

                    [Signature page to immediately follow.]


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         IN WITNESS WHEREOF, the parties hereto have executed this Subscription
Agreement dated September 30, 2003.


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POWER EFFICIENCY CORPORATION,                Nicholas Anderson, individually
a Delaware Corporation

                                             -----------------------------------
By:
    -----------------------------------
Name:  Richard Koch
Title: President & CEO

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