### MISCELLANEOUS HANDOUTS AT MEETINGUNITED STATES OF AMERICA BEFORE THE DEPARTMENT OF ENERGY

Comments on the ) Public Workshop Convened Fluorescent Lamp Ballast ) March 17, 1995 Engineering Analysis )

COMMENTS OF THE BALLAST SECTION OF THE NATIONAL ELECTRICAL MANUFACTURERS ASSOCIATION

Submitted March 31, 1995

The Ballast Section of the National Electrical Manufacturers Association ("NEMA") submits these written comments on the Fluorescent Lamp Ballasts Engineering/Economic Analysis Assumptions, prepared by the Lawrence Berkeley Laboratory ("LBL"), dated February 24, 1995, for eventual use in a Draft Technical Support Document ("TSD") pertaining to reconsideration of proposed fluorescent lamp ballast energy conservation standards. These comments are intended to supplement comments made by representatives of NEMA and its member-manufacturers at the Public Workshop, convened on March 17, 1995. The NEMA -Ballast Section represents manufacturers with over 90 percent of the nation's sales of both energy-efficient electromagnetic and electronic lamp balla..ts.

AMI PRO 05ENQ01 !. SAM PC DOCS 0252278Such analyses will reveal the level of uncertainty that attends

any conclusion regarding life cycle cost savings.

3. Data for Ballasts with Energy-Saving Lamps
NEMA originally submitted ballast efficiency data for ballasts operated with standard lamps. NEMA did not submit data for ballasts operated with reduced-wattage, energy saving ("ES") lamps, because such data was more limited compared to data provided for standard lamps. However, LBL has relied on data from other available sources, which NEMA manufacturers believe is inaccurate in several respects. NEMA submits, in Appendix B, ballast efficiency data for the relevant product classes with ES lamps. The Tables in Appendix B are presented in the same format as NEMA's original data point submissions to LBL.

NEMA believes that its data for energy savings lamps are reliable and should be utilized by LBL in revising the Engineering Analysis. The data in Appendix B has been incorporated into NEMA's revised Series 1 Tables.

4. Cathode Cutout
NEMA makes corrections in the Series 4 Tables to the lamp life assumed for cathode cutout ballasts for 2-lamp T8 and T12 ballasts. The lamp industry recognizes that cathode cutout

6

AMI PRO 45ENQ01!.SAM PC DOGS 0252278ballasts, like electronic instant start ballasts for T8 lamps,

reduce lamp life to 15 , 000 hours.'

5. Normalized Fixture Watts
LBL's Engineering Analysis made adjustments to wattage for thermal fixture effects and for normalizing light output. NEMA agrees that such adjustments should be made. However, NEMA believes that LBL's Analysis contains errors in the thermal fixture wattage adjustments and that LBL's normalization does not take account of thermal fixture effects on light output. LBL made its adjustments for fixture watts and normalized fixture watts in two steps. Because thermal fixture effects. apply to both wattage and light output, NEMA proposes an integrated method for calculating normalized fixture watts.

LBL's errors in specifying the fixture watts adjustments are evident from Table C.1 (Appendix C). Thermal effect reductions in wattage should, in absolute size, vary with input wattage. However, as shown on Table C.1, LBL's data for some ballasts had adjustment factors that do not vary with the level of input wattage. Thus, some ballasts with lower input wattage had greater adjustments than other ballasts in the same product class with higher input wattage. NEMA relies on input wattage adjustment factors contained in the Advanced Lighting Guidelines

Lamp manufacturers' published life data show that cathode cutout ballasts cause reduced lamp life of 15,000 hours, rather than the 20,000 hours with energy efficient magnetic ballasts.
7
AMI PRO I15ENQOI!.SAM PC DOCS C_/522178California Energy Commission

Building and Appliance Efficiency Office nt" 1

Core With coils, transforms current to control lamps Case Protects ballast components
Figure 1 Typical Electromagnetic Fluorescent Ballast

Contents Capacitor Corrects power factor and limits current (for high power ballasts only)

Introduction ...................................................................................... i Technology Description ................................................................... 2 Current Products .............................................................................. 9 Application Guidelines .................................................................... 11 Guideline Specifications ................................................................. 13 Manufacturer/Product References ................................................. 14 

## Introduction Recent advances in fluorescent lamp ballast technology have created opportunities for improved lamp performance and increased energy efficiency. Relatively new products, such as electronic high-frequency and heater cutout ballasts, are now widely available and accepted in the marketplace. The recent trend toward more competitive pricing of these products should continue, due to an expansion of manufacturing facilities and morecompetition between manufacturers. Energy-efficient ballasts are an excellent energy-saving strategy that should not be overlooked by anyone who is interested in saving money through the use of efficient lighting products. The most prevalent fluorescent lamps for general commercial lighting today continue to be the rapid start 4-foot lamp (F40T12) and the instant start, 8-foot, "slimline" (F96T12). However, the more efficacious, smaller diameter F32T8 lamp is gaining in popularity in general lightingapplications and as an energyefficient replacement for standard lamps. This guideline mainly addresses electronic ballasts that operate full-size fluorescent lampsENERGY-EFFICIENT FLUORESCENT BALLASTS

identified occurs in libraries equipped with magnetic detectors used to prevent theft. However, as long as electronic ballasts are at least 10 to 15 feet away from the detector units, problems with the detectors are unlikely to occur. A second potential system compatibility problem with electronic ballasts may occur in conjunction with high-frequency power line carrier (PLC) control systems. The carrier frequency for PLCs usually ranges from 50 kHz to 200 kHz. These frequencies may be affected by one of the harmonic currents generated by electronic ballasts. The extent of this potential problem has not as yet been fully researched. However, in simple PLC systems for residential applications when lighting and other appliances share the same distribution network, electronic ballasts may not be compatible. This may be resolved by the selection of a more appropriate frequency for the PLC system. In commercial systems where the PLC is isolated from the lighting circuits, problems may be minimal. If, however, the PLC is used to control the lighting system, the probability of problems occurring will increase. It is important to realize that the possible compatibility problems posed by the use of electronic ballasts arise only on rare occasions. The above incompatibilities can be resolved or avoided, and they should not be used to disqualify the use of electronic ballasts in other applications. option to consider when a project budget does not permit electronic ballasts. Heater cutout ballasts can be used in any non-dimming situation involving straight 40-watt F40T12 and F40T10 lamps, and a heater cutout ballast for F32T8 lamps is now available. Typical applications include offices, schools, retail and wholesale stores, health care facilities, and general industrial and commercial lighting. Because of their lower initial cost they are especially appropriate for use as replacement ballasts in retrofit applications. Some heater cutout ballasts may have a problem starting very high-voltage F40T10 lamps when the line voltage is below the rated center voltage (120/277V). In addition, some lamp manufacturers derate lamp life when lamps are operated by heater cutout ballasts.

Guideline Specifications The following ballast specifications may be used as a guideline for full-size fluorescent lamp ballasts. In general, for important applications, detailed specifications should be included for ballasts. The specification may include acceptable manufacturers and model numbers, especially when using electronic ballasts. Electronic Ballasts 1. UL Listed Class P 2. Sound Rated A 3. Total harmonic distortion <_ 32% (<20% for rebates) with input current third harmonic not to exceed ANSI recommendation 5. Power factor >_ 0.90 6. Enclosure size and wiring in same color as magnetic ballast (for retrofit applications) 7. Ballast factor of (see chart or manufacturer's literature, or as required) 8. Light regulation ±10% with ±10% input voltage variation

Heater Cutout Ballasts Heater cutout ballasts are less expensive than electronic ballasts and are a viable energy-efficient 4. Ballast shall conform to ANSI specification C. 82,11-19XX 9. Lamp current crest f 10. Flicker 10% or less v lamp suitable for the 11. Lamps shall be opei (instant start) (rapid (rapid start, steppec (rapid start, continu( adjustable output) n 12. Shall be designed t withstand line transi IEEE 587, category 13. Shall meet FCC Rul Regulations, Part 11 14. Circuit diagrams ar ballast connection= displayed on all ba packages 15. Three year warrant $10 labor allowanc Heater Cutout Ballast 1. UL listed class P 2. Sound rated A 3. Energy-efficient bE heater cutout circt require restrike period 4. Standard ballast enclosure size and wiring 5. Light regulation ±10% with ±10% input voltage variation 7. Power factor >_ 0.90 8. Lamp current crest factor <_1.7



# 13

### H y b ri d B allasts III 

## Life Test Results and System Pe rform ance Data

By G lenn D . Garbow icz

and
B eth R. Jug Advance Transformer Co. 

## June 5, 1995f- I Lifetime: 5000 10000 20000 50000

Shape (beta): 5

. 514 95 % Cl: ( 4.291, 7.085) MTTF: 19827 Welbuli - Scale (63.2%): 21474 95% Cl: (20154. 22879) 95% CI - Location : 0 Sample Size: 36 Failures: 34Figure 2 -Reduced light output hybrid ball ast with 34W-T12 lamps Weibull : Distribution Survival .1 1

10

30
50

80

iE

95

0

99.5

99.9

Lifetime: 5000 10000

Shape ( beta): 6 .927 95% Cl: ( 5.335, 8.994) MTTF: 19598 Scale (63.2%): 20962 95% Cl: (19944, 22032) Location : 0 Sample Size: 36 Failures: 36 20000 w rU Waibull - 95% CI -Lifetime: 5000 10000 20000 aria Shape (beta ): 9.945 95% Cl: (7.617, 12.99) MTTF: 23501 Welbull - Scale (63 .2%): 24708 95% Cl: ( 23859, 25588 ) 95% Cl - Location : 0 Sample Size: 36 Failures: 34

# High Energy Price Forecasts

That Are Born e by Consumers, Taxpayers ,

and Shareholders

By



### Glenn R. Schleede*

March 17, 1996

*Energy Market & Policy Analysis, Inc., P.O. Box 3875, Reston, Virginia. Phone: 703, 709-2213Illustrations of Costs Resulting from High Energy Price Forecasts that are Borne by Consumers, Taxpayers, and Shareholders - Contents -
PAe Introduction ...............................................................1 A. Electric industry ..........................................................1 1. The role of faulty energy price forecasts .................................... 2 

### 2. High estimates of avoided costs led to high cost power purchases , costly commitments to " renewables ," and heavy subsidization of "demand

- side" measures ........ 2 3. Over- investment in generating facilities .................................... 2 4. Long-term fuel contracts with prices above market levels .. ..................... 3 

### 5. Magnitude of the extra costs now faced by electric industry customers, shareholders, and creditors and, in some cases , taxpayers ....................... 3 6. Who will pay ? ....................................................... 4 B. Natural gas industry ...................................................... 4 1. High cost gas purchase contracts signed by gas pipelines ....................... 4 2. Existing and potential excess pipeline capacity ............................... 4
C. Investments in oil and gas exploration ......................................... 5 D. Bank failures resulting from non-performing loans to energy companies .............. 5
E. Government spending for energy research, development , demonstration, and commercialization projects ................................................. 5 F. Overbuilding of nuclear generating plants by TVA and in the Pacific Northwest ......... 5 G. Bonneville Power Administration ' s contract to purchase power from an IPP ............ 6 H. Overestimating the value of leases and lease revenues ............................. 6 Biased analyses based on high energy price forecasts ............................. 7 1. DOE's biased analysis of the costs and benefits of alternatives for the future of the Naval Petroleum Reserves .................................... 7 2. Federal agency estimates of savings from potential Federal Energy Management Program (FEMP) projects .................................... 7 3. Questionable claim of " energy cost savings " by a lobbying organization ............ 7March 17, 1996



### Illustrations of Costs Resulting From High Energy Price Forecasts
Undoubtedly, there is no complete accounting of the huge costs that have been incurred by consumers, t ayers, shareholders, and investors as a result of decisions that were based on high energy price forecasts that have proven to be faulty. However, it is possible to identify key categories of extra costs and, in some cases , estimates of the dollar magnitude of the costs that have been and still are being incurred because the Energy Information Administration (EIA) and other forecasters drastically overestimated energy prices and/or energy demand

. This paper provides illustrations involving: ® The electric industry ® The natural gas industry ® Investments in oil and gas exploration in the late 1970s and early 1980s ® Bank failures resulting from non

-performing loans to some energy companies ® Tax dollars wasted on impractical energy R&D projects ® Overbuilding of nuclear capacity by TVA and in the Pacific Northwest ® Bonneville Power Administration's contract to purchase power from a NUG ® Minerals Management Service (MMS ) over estimating the value of oil and gas leases ® Biased analyses by DOE and lobbying organizations -- based on high price forecasts A. Electric i ndustry A large share of the extra costs resulting from high energy price forecasts will be borne by electric industry consumers, shareholders, and other investors -- and potentially by taxpayers -- because of ® Faulty estimates by utilities and PUCs of "avoided costsi1 because of high forecasts of energy prices and/or demand. ® Heavy investments in long

-lived capital intensive assets such as electric generating plants. ® Federal government and/or state PUC requirements that utilities sign long-term contracts to buy power from non-utility generating firms (NUGs). ® Independent power producers' (IPPs ) decisions to build electric generating plants and electric utilities ' decisions to sign power purchase contracts with IPPs. ® PUC requirements or encouragement that utilities invest in or buy power from generating units that use "renewable " energy. ® PUC requirements or encouragement that electric utilities subsidize actions by customers to reduce electricity use or shift uses to low demand periods ("demand-side" measures). Long-term fuel supply contracts with prices that proved to be above market.

1 "Avoided costs" are estimates of the cost that an electric utility would incur if it produced electricity with its own facilities rather than buying from others or rather than subsidizing conservation.-2-

1. The role of faulty energy price forecasts. Faulty, high energy price forecasts contributed in a major way to the extra costs because utilities have been using large amounts of oil, coal, and natural gas to fuel electric generating units and EIA and other forecasters drastically overestimated the prices for these fuels. The high fuel prices led to high PUC and utility estimates of "avoided costs." For example: ® California Public Utility Commission (CPUC) President Daniel Fessler recently reported2 that the CPUC assumed that oil prices would be $118 per barrel when they calculated avoided costs. ® A Commissioner from the Maine PUC has reported that Central Maine Power Company's avoided cost calculations assumed oil would cost $100 per barrel.3 2. High avoided costs led to high cost of power purchases , commitments to "renewables ," and heavy subsidization of "demand- side " measures . The high estimates of avoided costs were then used by PUCs and/or electric utilities as the basis for: ® Prices in contracts that electricity that utilities: ® Were required to sign with owners of "qualifying facilities" (QFs) pursuant to the Public Utility Regulatory Policy Act (PURPA), and ® Agreed to sign with IPPs and other non-utility generators (NUGs). ® Commitments that some utilities were required to make to invest in or buy power from generating facilities fuel by "renewable" energy. ® Economic analyses that helped determine the level of subsidies that utilities would provide to encourage customers to avoid use of electricity or other forms of energy or to shift uses to periods of low demand. 3. Over-investment in generating facilities . Faulty forecasts of high energy prices and rapid growth in electricity demand also contributed to over-investment in generating facilities. For example: Investments in nuclear generating plants that were justified in part by forecasts of high oil prices. No nuclear plants were ordered after 1973 and some ordered before 1973 were canceled. However, construction continued on some nuclear plants because owners assumed the plants would be an economical way of avoiding the use of oil that was forecast to cost $100 per barrel or more. Lower oil price forecasts probably would have led to cancellation of more nuclear plants -- with the result that utilities would be facing less "stranded costs" than they now face. ® Investments in IPP-owned generating units and utilities' decisions to sign contracts with IPPs were often predicated on forecasts of rapid growth in electricity demand. The prices for power from IPPs were often based on high energy price estimates and decisions by IPPs to build, and financial institutions to finance projects were also based on expectations of high electricity demand and high fuel prices. In most cases, electric

2 Seminar on February 27, 1996 -- Johns Hopkins University' s Strategic and International Studies (SAIS) 3 NARUC Bulletin No. 49-1993 , December 6, 1993, p.2.-3- utilities and their customers bear the high costs. However, in some cases (e.g., in California) the price that is paid for electricity will drop to market levels after the contracts have been in effect for 10 years. At that point the IPP owners and/or their creditors will bear the cost risk. As electricity demand growth slowed and it became obvious that many proposed QF and IPP generating units would not be needed, some electric utilities have "bought their way out" of contracts -- resulting in rather high costs for customers in the short term but savings in the longer term. 4. Long-term fuel contracts with prices above market levels. Some electric utilities and non-utility generators have entered into long-term contracts for fuel (usually natural gas, coal, or oil) for their generating facilities. (Non-utility generators were often required to sign long-term fuel supply contracts in order to get financing for their facilities.) The price for fuel in these contracts was often based on high fuel price forecasts. These contracts also add extra, potentially stranded, costs. 5. Magnitude of the extra costs now faced by electric industry customers, shareholders, and creditors , and, in some cases , by taxpayers. Many estimates have been made of the magnitude of the high costs that are now being faced -- some of which may become "stranded costs." The exact amounts of these costs can only be estimated since they depend, in many cases, on the future market price for electricity. If the market price for electricity drops as most observers expect, "stranded" costs will increase. Examples of estimates of the extra costs and "stranded" costs now being faced include the following: ® An official of Southern California Edison (SCE) reported in 19944 that SCE's customers had already incurred above market costs of $2 billion during the period from 1985 through 1993 and face an additional $5.9 billion in the years ahead (with annual costs peaking at $900 million in 1996 ). These extra costs were attributed to CPUC requirements that SCE enter into power purchase contracts with PURPA "qualifying facilities" and generators using renewable energy. ® Cambridge Energy Associates estimated in March 1995 that California utilities face stranded costs in the range of $13 billion to $26 billion -- depending upon the market price of electricity in the years ahead.'

4 Presentation by L. D. Hamlin, Southern California Edison to a Conference on State Trends in Energy and the Environment, Santa Fe, New Mexico, June 14, 1994. ' Cambridge Energy Associates, Decision Brief, Shedding Light on Stranded Costs by Gary Simon and Aldyn Hoekstra, March 1995, pp. 2-3.-4- Moody's Investor Service estimated in August 1995 that total stranded costs for U.S. investor owned utility companies at "$50 to $300 billion, depending upon on market price assumptions."' 6. Who will pay? As indicated by the above sources, the actions by state PUCs and electric utilities, often based on faulty energy priceforecasts, have resulted in huge costs -- some of which may become " stranded costs " as the electric industry becomes more competitive. These extra costs will eventually: ® Be paid by electric customers through their monthly bills; ® Be bome by investors in electric utilities or IPPs in the form of write-downs if the costs can be recovered from customers; or ® Be borne by creditors if the utilities and/or IPPs become bankrupt. 

### In some cases, some of the costs may be shifted to taxpayers. This will occur if ® Electric utilities are permitted to accelerate the depreciation of their assets, thus reducing their tax payments to federal, state and local governments; ® Lower profits, losses , or bankruptcies result in reduced corporate income tax payments to federal or state governments; or ® Tax-paying utilities' assets are sold off to entities that can finance the purchases with tax-exempt bonds. This approach is contemplated in the proposed sale of certain assets of the Long Island Lighting Company to the Long Island Power Authority (LIPA). B. Natural Gas Industry Decisions based on high estimates of energy prices and demand have also added extra costs for natural gas industry customers, shareholders, and creditors, and for taxpayers. The causes and the effects are somewhat less complex in the gas industry than in the electric industry. Examples of extra costs in the gas industry include: 1. High cost gas purchase contracts signed by gas pipelines . Many gas pipeline companies signed "take or pay" contracts for natural gas supplies during the late 1970s and early 1980s based on forecasts that gas supplies were running out and the prices would increase rapidly. However, market prices for natural gas at the wellhead decreased in the early 1980s (particularly after the ill-effects of the Natural Gas Policy Act of 1978 had passed). This left pipelines with large commitments for gas at prices well above market-clearing levels. 2. Existing and potential excess pipeline capacity. Changes in regulation, including open access to interstate pipelines (FERC Order 436) and unbundling of pipeline services (FERC Order 636), has resulted in major changes in the natural gas industry. Slower than forecasted increases in natural gas demand in California has resulted in excess pipeline capacity in the West. Further, as local gas distributing companies (LDCs) across the nation

6 Moody's Investors Service, Stranded Costs will Threaten Credit Quality of U.S. Electrics, by Paul Fremont and Robijn Hornstra, August 1995, p.1.-5- give up firm capacity commitments that they no longer need under the new market structure (when contracts expire), interstate pipelines in other regions may be faced with excess capacity. Such developments may lead to further financial strains in the industry and to costs that will have to be borne by consumers, shareholders, creditors, or taxpayers. C. Investments in Oil and Gas Exploration During the late 1970s and early 1980s, hundreds of millions of dollars were invested in oil and gas exploration based on forecasts that oil and gas prices would increase rapidly. Many of these investments have had to be written off at tremendous cost to investors. D. Bank Failures Resulting from Non-performing Loans to Energy Companies During the 1980s, many commercial banks and savings and loan (S&Ls) institutions experienced non-performing loans to oil and gas exploration companies and other energy firms that had madeinvestments based on forecasts of high oil and gas prices. In some cases, the costs of nonperforming loans were borne by owners and shareholders of the banks and S&Ls. In other cases, the costs have been borne by taxpayers who have paid the costs of the S&L bailouts. E. Government Spending for Energy Research, Devel opment, Demo nstration and Commercialization Projects Federal agencies (Atomic Energy Commission, Energy Research and Development Administration, Federal Energy Administration, U. S. Synthetic Fuels Corporation, and Department of Energy) have spent some $100 billion tax dollars on energy supply and conservation technologies since 1955 -- with the vast majority spent since 1975. Many of the projects that were subsidized were "justified" on the basis of high energy price and energy demand forecasts that have proven to be faulty. A large share of this money has been wasted because the projects proved to be technically infeasible or impractical, or to have no realistic chance of producing or conserving energy competitively in the marketplace. In short, much of the money was wasted. The projects on which the large dollars were wasted included the proposed Liquid Metal Fast Breeder Reactor (LMFBR), oil shale projects, synthetic fuels form coal projects (including SRC-1 and SRC-2, the "solvent refined coal" projects; and the Great Plains Gasification Project). Overbuilding of Nuclear Generating Plants by TVA and in the Pacific Northwest High forecasts of electricity demand contributed to the overbuilding of nuclear generating capacity by the Tennessee Valley Authority (TVA) and in the Pacific Northwest:-6- According to the GAO, "TVA is $26 billion in debt and has invested $14 billion in nonproducing nuclear assets..."' ® Commitments to build nuclear generating plants in the Pacific Northwest that were not needed led to the largest municipal bond default in U.S. history. Apparently only the interest expense for TVA's $14 billion in nonproducing nuclear assets is being passed through to TVA's customers. Eventually, of course, someone will have to stand the cost of the $14 billion principal. GAO has concluded that TVA' s financial condition puts it at a competitive disadvantage for the future when the electric industry will be more competitive. G. Bonneville Power Administration's Contract to Purchase Power from an IPP DOE's Inspector General has concluded that Bonneville Power Administration erred in using high gas price forecasts when deciding to sign a contract to purchase power from a privately owned gas

-fired electric generating plant

. 8 This contract has far reaching implications for Bonneville's customers and, potentially , for U. S. taxpayers. BPA's attempt to withdraw from the arrangement apparently is being challenged by the plant developer in a $1 + billion lawsuit. H. Overestimating the value of Leases and Lease Revenues The Department of the Interior's Minerals Management Service (MMS) estimates the value of blocks of public lands that are offered for lease. Also, for federal budget purposes, MMS must develop estimates of the revenue that will be received from lease bonus payments and royalties received by the Federal Government. All these estimates depend to some extent on future energy price expectations, but information on the price forecasts used by MMS is not readily available. During the balanced budget discussions of 1995, it became clear that MMS estimates of the potential value of leasing of ANWR was based on outdated fuel price forecasts. Whether MMS has developed new estimates is unknown.MMS' over-estimate of the value of one lease block in the Western Gulf of Mexico (Brazos A52) led to a loss of approximately $11 million during the 1980s. The instance involved a bid of approximately $26 million by an oil and gas exploration company for the lease. MMS turned down the bid as inadequate. The following year, the same company submitted a lower bid and it was again turned down. In the third year, the same company bid approximately $15 million for the same lease block. The bid was then accepted. Apparently, MMS had overvalued the
' General Accounting Office, Tennessee Valley Authority - Financial Problems Raise Questions About Long-Term Viability, August 1995, p. 3. 8 Office of Inspector General, U.S. Department of Energy, Audit of Bonneville Power Administration's Energy Resource Programs, DOE/IG-0379, September 1995.-7-

lease initially largely because it was using a high forecast of natural gas prices. As natural gas prices continued their downward trend , MMS apparently realized that it had overestimated the value of the lease

. Meanwhile , the U. S. Treasury received some $11 million less in lease bonus revenue than it would have received had a more realistic natural gas price forecast been used and the initial bid been accepted. I. Biased Analyses Based on High Price Forecasts In addition to the above cases where high price forecasts have resulted in demonstrable costs to consumers, taxpayers, and investors, there are other instances where the use of energy price forecasts raises important public policy issues. Instances such as the following should not be overlooked as the Congress considers problems caused by faulty forecasts. 1. DOE's biased analysis of the costs and benefits of alternatives for the future of the Naval Petroleum Reserves (NPRs). In April 1994, DOE prepared an unusually biased analysis of the value of the NPRs using questionable price forecast data and even more suspect analytical procedures.' DOE's gas price assumption for 1995 was some 30% above the actual U. S. average and even further above prices in California where most of the NPR's gas reserves are located. The highly suspect analytical technique involved the use of one set of price forecasts to analyze two of three alternatives for the future handling of the NPRs. DOE then used higher price assumptions when evaluating a third alternative. Apparently the third alternative -- creation of a government corporation to take over the NPRs -- was the alternative favored by those preparing the report. It is quite amazing that the DOE leadership would allow such an biased analysis to be issued. 2. Federal agency estimates of savings from potential Federal Energy Management Program (FEMP) projects. DOE issued a price forecast in November 1995 10 that Federal agencies and certain private sector organizations apparently are required to use during the next year to evaluate FEMP projects. The forecast was rendered obsolete by EIA's energy price forecast issued in January -- two months after the DOE/Commerce forecast. 3. Questionable claim of " energy cost savings " by a lobbying organization . A November 1995 report by American Council for an Energy Efficient Economy includes a claim that "appliance standards already adopted will save consumers $132 billion (i.e., energy cost savings minus the increased first cost) over the lifetime of products purchased by 2030.»11 Any estimate of "energy savings" during such a long period of time (some 40 to 55 years, including the life of the appliances) is unlikely to be valid. Information in the report suggest
9 U.S. Department of Energy , Organizational Alternatives for the Naval Petroleum and Oil Shale Reserves, April 1994. 10 Energy Price Indices and Discount Factors for Life-Cycle Cost Analysis 1996, NISTIR 85-3273-10 (1095 ), prepared by the U.S. Department of Commerce for U.S. DOE, Federal Energy Management Program. 11 American Council for an Energy Efficient Economy, National Appliance Efficiency Standards : Cost-Effective Federal Regulations , November 1995, p. 6.-8- that the estimate was based on energy price expectations that are at least three years old. The $132 billion energy cost savings estimate undoubtedly would be much lower if it were based on ETA's latest, sharply reduced energy price forecast. The estimate would be even lower if EIA had reflected in its forecast that reductions in electric rates that are almost certain to occur as the electric industry becomes more competitive. These three examples illustrate the need for the Congress to be very wary of analyses, claims and justifications presented by the DOE/Contractor Complex.