Federal Energy Rulemaking: Non-stop, Self-Perpetuating

Aug. 31, 2016
The commercial-packaged-boiler rules are just one of 29 energy-conservation proposals in the U.S. Department of Energy’s regulatory pipeline.

In June, we reported on a U.S. Department of Energy (DOE) proposal to tighten efficiency standards for commercial packaged boilers (CPB) (see “New Efficiency Standards Sought for Commercial Packaged Boilers”).

Three months later, that rulemaking is still open. When it might be finished is difficult to say. The CPB effort has been ongoing for three years. It started in August 2013 with a “proposed determination,” a document withdrawn by the DOE a year later. At least two public meetings have been held, and there have been five public-comment periods.

Indeed, this one proposal has consumed considerable time and resources. Now, consider the bigger picture: The CPB rules are just one of 29 energy-conservation proposals in the DOE’s regulatory pipeline! And that does not include six additional rules sent from the DOE to the Office of Management and Budget (OMB) for final review. In fact, of eight DOE rules under OMB review, six deal with energy-conservation standards. There is more: Testing and certification procedures form yet another body of rules!

The OMB is supposed to complete its reviews within 90 days, though that does not always happen. During the next few months, business managers who need to keep up with this panoply of rulemaking should be on the lookout. For example, standards for miscellaneous refrigeration products were submitted to the OMB in May; August was listed as the target month for “final action.” Standards for residential non-weatherized gas furnaces were received at the OMB on June 2; they were expected by September.

The DOE’s regulatory activity received Congressional attention this summer. On June 10, the U.S. House of Representatives Committee on Energy and Commerce, Subcommittee on Energy and Power, held a hearing titled “Home Appliance Energy Efficiency Standards Under the Department of Energy—Stakeholder Perspectives.” A number of critical business concerns emerged:

Out-of-date legislative basis. The Energy Policy and Conservation Act (EPCA) was signed into law in 1975. It requires the DOE to review efficiency standards every six years and—if warranted—update them. Businesses today contend the EPCA is dated, detached from current technology and markets.

During the June 10 hearing, Kevin J. Cosgriff, president and chief executive officer (CEO) of the National Electrical Manufacturers Association, testified the EPCA causes the DOE to focus on mature “products that have been through multiple iterations of energy-conservation standards,” products that “should be sunset from the program.”

The EPCA’s six-year cycle forces the DOE to chase its tail: New rulemaking for a covered product starts barely after the industry has begun to comply with the current regs.

“Consumers and manufacturers will see only diminishing returns from continuing rulemakings,” Cosgriff testified.

A confusing and unpredictable process. Businesses sometimes complain that public-comment periods are too short, making it impossible to work through substantive issues; that public meetings really are just one-way listening sessions, rather than working sessions; that industry comments are glossed over; and that, sometimes, the sequence of decision-making, such as the DOE’s plans to issue final test procedures for CPB prior to issuing standards, gets turned topsy-turvy.

Costs and declining return on investment. For businesses, a single rule can be significant; a file cabinet full of rules spells constant trouble. Stephen Yurek, president and CEO of the Air-Conditioning, Heating, and Refrigeration Institute, testified at the June 10 House hearing. The three central ideas for Yurek were:

  1. Consumers—retail and commercial—pay a disproportionate price for marginal efficiency improvements. Manufacturers worry that new regs may result in equipment that meets federal goals, but not the goals of customers, for whom a final increment of efficiency may not be worth the higher cost. Sales, then, are delayed, while older, less-efficient equipment is kept in service.
  2. American employment takes a big hit from this non-stop regulatory activity.
  3. Smaller businesses are hit particularly hard.

It is not just small businesses, of course. Consider Rheem Manufacturing Co., the largest manufacturer of water-heating products in North America. In April 2015, Rheem submitted comments on standards for commercial warm-air furnaces, a rulemaking that started in May 2013 and was supposed to be completed in June 2016, but, as of this writing, remains unfinished.

Karen Meyers, vice president, government affairs, for Rheem, was asked to expand on the comments she submitted for Rheem in 2015. Meyers said that, “By far, the majority of Rheem’s research-and-development (R&D) dollars are being spent to meet regulatory activities.”

Economies grow when the pie gets bigger. R&D is fundamental to growth. But that is when R&D is focused on new products, new technologies, lower costs, and simpler and more straightforward systems, not when engineers are focused on, in Meyers’ words, “spending most of their time tweaking and testing designs without an official rule or deadline.”

Meyers added: “This leaves very little time for manufacturers to focus on innovative solutions to produce products that have the potential to save many more quads of energy than what the DOE is proposing.”

Meyers suggests some ideas to make rulemaking more productive. Her ideas are in line with those of her peers:

  • Congress needs to revisit and update the EPCA. Legislative directives need to be aligned with 21st-century market and technological realities. Yurek suggested that HR 8, North American Energy Security and Infrastructure Act of 2015, is a good legislative starting point. (HR 8 passed the House last December. It now is in the Senate’s Committee on Energy and Natural Resources.)
  • Deadlines matter. Uncertainty has consequences. Rulemaking needs to be finished on time.
  • For customers, price matters. They are not easily drawn to products that may be marginally more efficient but considerably more expensive.
  • Negotiations make better rules. The DOE’s partnerships are helpful, but business reps contend the working-group process is short-circuited, that it does not deliver expected commitments and follow-through.

The DOE’s regulatory process is not without merit, but it needs to be fixed ... fast.

Tom Ewing is a freelance writer specializing in energy and environmental issues.