Opinion ID: 456159
Heading Depth: 2
Heading Rank: 1

Heading: The Development of DOE's Definition

Text: 36 EPCA instructs the Secretary not to issue standards for a type or class of covered product if he determines, by rule, that the establishment of such standard will not result in significant conservation of energy. EPCA Sec. 325(b)(2). In the June 1980 proposed rules, DOE announced a two-part definition of significant conservation, both parts of which had to be met for a proposed standard to pass the test. First, a standard governing a product type or product classes within that type would have been required to result in national energy savings for the product type exceeding 840,000,000 kilowatt hours (2.867 X 10 12 Btu) per year. Second, a standard would have been required to result in energy savings per unit over the product class involved exceeding 30 kilowatt hours (102,390 Btu) per year. See 45 Fed.Reg. 43,976, 44,031-32 (1980); U.S. Department of Energy, Economic Analysis: Energy Efficiency Standards for Consumer Products Sec. 6.3 (1980) [hereinafter cited as 1980 Economic Analysis Document], J.A. at 612-15. 37 DOE explained that this definition was drawn from figures in EPCA itself. Under EPCA as it was first enacted, the Federal Energy Administrator was required to prescribe energy efficiency improvement targets for the same thirteen products that under NECPA became subject to mandatory standards. See EPCA Sec. 325(a)(1)(A), (a)(2), Pub.L. No. 94-163, 89 Stat. 871, 920, 924 (1975). Of those products, ten were given priority. See id. Congress demanded that the targets for those priority products be designed to achieve an overall improvement in efficiency of at least 20 percent, measured by comparing the aggregate efficiency of all models of the ten priority products manufactured in 1972 against the same figure for models manufactured in 1980. See EPCA Sec. 325(a)(1)(B), 89 Stat. at 924. DOE also noted that section 325(a)(2) of EPCA, as amended by NECPA, authorized DOE to prescribe energy efficiency standards for appliances not named in section 322(a) if, among other conditions, 38 (A) the average per household energy use within the United States by products of such type (or class) exceeded 150 kilowatt hours (or its Btu equivalent) for any 12-calendar-month period ending before such determination [and] 39 (B) the aggregate household energy use within the United States by products of such type (or class) exceeded 4,200,000,000 kilowatt-hours (or its Btu equivalent) for any such 12-calendar-month period 40 .... 41 EPCA Sec. 325(a)(2)(A)-(B). 42 DOE evidently reasoned that Congress must have thought significant conservation of energy was possible from standards governing appliances that consumed energy at the minimum levels specified in section 325(a)(2), or Congress would not have authorized DOE to consider standards for those appliances. Cf. 1980 Economic Analysis Sec. 6.3 at 6.4, J.A. at 613. In light of former section 325(a)(1)(B), DOE settled on a 20 percent reduction in energy consumption for an appliance that just met the minimum consumption levels as a reasonable definition of significant savings. A 20 percent reduction in energy consumption for an appliance that consumes 4,200,000,000 kilowatt hours nationally per year yields a savings of 840,000,000 kilowatt hours (2.867 X 10 12 Btu) per year--the amount specified in the first part of the 1980 definition of significance. A 20 percent reduction in energy consumption for an appliance unit that consumes 150 kilowatt hours per year yields a savings of 30 kilowatt hours (102,390 Btu) per year--the amount specified in the second part of the definition. See 45 Fed.Reg. at 44,031-32. These levels, DOE announced, would screen out standards that produced only marginal conservation, id. at 44,032, and so fulfill the purposes of the significance requirement. 15 43 On April 2, 1982, the new administration issued proposed rules that completely repudiated the 1980 approach to defining significance. See 47 Fed.Reg. 14,42 4, 14,429-31 (1982). 16 DOE first announced that savings would be assessed as significant or insignificant over the 19-year period 1987 to 2005, see id. at 14,426-27, rather than on the annual basis proposed in 1980. DOE's basic approach was to compare, for each product, three measures of the difference between projected energy consumption during that period if standards were not imposed and if they were imposed. DOE then examined those figures, which it viewed as gauging the savings attributable to standards, for significance. 17 44 DOE's notice set forth its three measures of energy consumption and the level at which savings under each measure would be deemed significant. DOE argued that the overall goal of NECPA's conservation programs was to reduce national dependence on imported oil. For this reason, a saving for each of the thirteen product types would be deemed significant only if that saving made a significant contribution to reducing this Nation's energy dependence on foreign nations. Id. at 14,429. According to DOE, the definition proposed in 1980 recognized as significant savings so low as to be non-measurable in national reports, id. at 14,429 n. 14, and was therefore not rigorous enough under DOE's new approach. In place of the 1980 definition, DOE proposed three alternative tests for significant savings. 18 Under the first of these tests, savings were significant if they amounted to at least 10,000 barrels per day (bpd) of oil or an equivalent amount of natural gas. DOE later explained that this test was not satisfied if the combined savings of oil and gas equaled the equivalent of 10,000 bpd, but required that the full figure be met for one or the other of the two commodities separately. See 47 Fed.Reg. 57,198, 57,208 (1982). 45 DOE's second test for significance was based on its finding that conservation of energy would also be significant if the electricity saved would have a significant impact on the environment or significantly reduce the need for additional generating capacity. 47 Fed.Reg. 14,424, 14,430 (1982). DOE noted that according to the environmental assessment accompanying the June 1980 proposed rules, those rules would not have had a significant effect on the environment. Id. at 14,430; see 1980 Environmental Assessment at 5-11, J.A. at 241. It concluded that [b]ecause the standards proposed in the June 30 proposal were predicted to create greater energy savings than the standards analyzed in this proposal, DOE believes that no single standard considered in today's proposal could have a significant effect on the environment. 47 Fed.Reg. at 14,430. DOE further decided that to have an effect on the need for new generating capacity, a national saving of electricity would have to exceed 1 percent of national usage. See id. That figure was therefore chosen as the second threshold level for significance. 46 Finally, DOE recognized that the first two proposed tests had a built-in bias towards products that use a great deal of energy in the first instance. Id. In particular, DOE noted that those tests demanded an annual savings greater than the total annual consumption of some covered products. Standards for these products could not have resulted in significant savings even if the standard reduced energy consumption by the product to zero. DOE therefore proposed a third test, purportedly based on former EPCA section 325, under which savings would be significant if the energy saved as a result of the standard, as measured by the ORNL Model, [would] be 20 percent of the energy that would be used by the product in the no-standard case. Id. 47 These tests were hotly debated in the comments on the proposed rules, and DOE responded in its December 22, 1982 notice of final rules by making several changes. Specifically, DOE abandoned its earlier decision to calculate energy savings over the 19-year period from 1987 to 2005, on the ground that many of the covered products had very different useful lives. Covered products with different useful lives necessarily have different penetration rates--that is, the shorter the useful life of a covered product, the more quickly new appliances of that type will tend to account for a large proportion of all such appliances in use. The penetration rate of a covered product in turn affects how quickly more efficient models will influence national energy consumption. DOE therefore adopted the average life of a product, beginning in 1987, as the appropriate period for analyzing savings for that product under the first two tests for significance. See 47 Fed.Reg. 57,198, 57,203 (1982). 48 The third proposed test presented a special timing problem because, as several commenters informed DOE, 49 [S]ome products would not meet the test even if a standard required every new product sold to use no energy at all. This anomalous result occurred because so much of the energy being measured in the standards case would be energy consumed by products purchased before the standards were put into effect. 50 Id. at 57,208. For this reason, DOE settled on the one-year period following the year of the retirement of the average product purchased immediately preceding the application of a standard, id., as the year during which the third test was to be applied. For example, if standards were put into effect in 1987, the measuring year for an appliance with an average life of 18 years would be 2005. Products purchased in 1986--the last year before standards were imposed--would on average wear out in 2004. Thus in 2005, according to DOE, relatively few pre-standard models would remain to skew the calculation. Finally, DOE noted that former section 325 of EPCA referred to a 20 percent improvement in efficiency, while DOE's definition required a 20 percent decrease in energy use. In fact, however, a 20 percent improvement in efficiency mathematically results in only a 16.67 percent decrease in fuel use, and accordingly DOE substituted that lower percentage in its test. See id. 51 Although commenters voiced numerous other criticisms of DOE's proposed definition of significance, DOE adhered to that definition with the revisions described above. Under DOE's final definition, energy savings from a proposed standard were significant only if they met at least one of the following three tests: (1) the standard would result in the saving of 10,000 bpd of oil or the saving of natural gas equivalent to 10,000 bpd of oil over the period of the average life of the product in question beginning with the year 1987, id. at 57,209; (2) the standard would result in the saving of one percent of national electricity use over the period of the average life of the product in question beginning with the year 1987, id. ; or (3) the savings attributable to a standard for a product were equal to 16.67 percent of the energy that would be used by that product in the absence of a standard measured over the one year period following the period of the average life of the product purchased in the last year before the standard would be imposed, id. at 57,209.