-Caveat Lector- Hot Air for Consumers Federal home-appliance regulations may work as a feel-good crusade, but they don’t solve energy-supply problems. By Ben Lieberman, a senior policy analyst with the Competitive Enterprise Institute in Washington, D.C. July 5, 2001 9:00 a.m. Given the recent weather, we should all be thankful for affordable air conditioning, but an environmental-advocacy group and several state governments have launched a lawsuit that could send the price of central A/C systems through the roof. If successful, these parties will force the federal Department of Energy (DOE) to enact a stringent new energy-conservation standard for air conditioners, despite the agency's own determination that it's a bad deal for consumers. In one of the final acts of the Clinton administration, the outgoing president enacted a new rule requiring central-air conditioners to be 30 percent more efficient than the existing standard. The agency estimates that the new rule, to take effect in 2006, will boost the cost of a new air conditioner or heat pump by $335 to $435. Others, including the National Association of Home Builders, fear even higher costs. DOE admits that only a minority of homeowners can ever hope to earn back this higher up-front cost in the form of energy savings over the life of the system. Under one set of assumptions, DOE concludes that 58 percent of homeowners will suffer net cost hikes from owning an ultra-efficient air conditioner, with 25 percent experiencing net savings and the rest breaking even. Worse yet, the agency found that the new rule would disproportionately burden low-income households. As many as 69 percent would end up spending more to stay cool. The higher equipment costs may price some homeowners out of central air entirely, a particularly troublesome prospect in light of several recent studies showing that air conditioning saves lives during heat waves. Sensing an onslaught of problematic policy decisions that could blow up on their watch, the Bush administration decided to take a second look at this and several other last-minute Clinton regulations. The new team at DOE decided that an earlier proposal calling for a 20 percent efficiency increase was more reasonable, and so it announced plans to revise the final rule. As a consequence of this relatively minor change, administration critics are shouting "regulatory rollback" and pointing to California's electricity shortage as evidence that the 30-percent standard is necessary. The Natural Resources Defense Council (NRDC) and the states of California, New York, and Connecticut have filed suit in the U.S. District Court for the Southern District of New York, seeking to reinstate the 30-percent standard. California's Attorney General Bill Lockyer complained that, "the Bush administration is making it harder for California in the current energy crisis by ignoring or trying to eliminate the toughened efficiency standards for residential air conditioners." NRDC's Ashok Gupta criticized the administration's decision as "staggeringly short-sighted," noting that several other states are also concerned about brownouts. In truth, the extreme 30-percent requirement will do little to solve the nation's present electricity problems. DOE believes that it will be at least a decade before the rule affects energy use, as it will take several years beyond the 2006 effective date for the new A/C units to penetrate the marketplace in significant numbers. Thus, the short-term shortfall in electricity supply should be solved by then — unless the power-plant obstructionists keep nixing badly needed new capacity. Nor is it likely that the new rule will ever save as much juice as predicted. More than a dozen home-appliance conservation standards are now in place as a result of a 1987 federal law. But the actual energy savings from these measures have fallen short of projections, and indeed per-capita residential-energy use has not declined over the past decade. One concern is that the higher price of ultra-efficient refrigerators, clothes washers, air-conditioners, and other appliances causes some homeowners to forestall new purchases and hold on to their older, far less efficient models. Another is the so-called rebound effect, the tendency for people to use energy-efficient products more intensively. Federal home-appliance regulations may work as a feel-good crusade, but have proven not to be a realistic approach to solving energy-supply problems. If the 30-percent standard is reinstated, it will reduce electricity use, but probably less than predicted, and almost certainly not enough to justify the substantial costs or avert any electricity shortages. 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