Energy Efficiency Policy Under Trump (Part II: EERE’s Process Rule & Overhaul)

By Mark Krebs -- December 9, 2020

“In the past, economic justification could be attained by simply providing, on average, cumulative energy savings that barely exceeded the additional costs of energy improvements over the life of the appliance. The “career professionals” within EERE–its National Labs and subcontractors–have become very adept at gaming (skewing) the determinations in favor of more regulations. Unfortunately for consumers, this trend continues virtually unabated.”

In 1996, EERE published a Process Rule for developing and issuing new or revised appliance efficiency standards and test procedures. The generally useful initiative is embodied in the Code of Federal Regulations (CFR) under 10 CFR Appendix A to Subpart C of Part 430.

The Process Rule has been treated by EERE as a guide (think Barbossa and the Pirate code). Among its original and retained objectives was (ostensible) regulatory transparency.

How well EERE followed (or will follow) its own rule to attain its objectives remains highly debatable. For example, EERE proposals are supposed to be accompanied by “transparent and robust” Technical Support Documentation. These TSDs have excelled at robust (if 1,000+ page counts are an indication), but they have failed miserably in terms of transparency (as defined by independent subject matter experts being able to reasonably interpret and replicate EERE’s technical determinations).

EERE never considered its Process Rule as enforceable (despite its CFR listing), so it arguably lacked judicial “teeth.”  Per the last paragraph of the 1996 Process Rule:

(c) Judicial review. The procedures, interpretations, and policies stated in this appendix are not intended to establish any new cause of action or right to judicial review. [emphasis added]

RFI on Reducing Regulation, Controlling Regulatory Costs

On May 29, 2017, DOE published a Request for Information (RFI) titled Reducing Regulation and Controlling Regulatory Costs (Docket DOE-HQ-2017-0016). It was in response to the following Executive Order’s (EO’s)

1. EO 13771 titled ‘‘Reducing Regulation and Controlling Regulatory Costs,’’ (January 30, 2017)
2. EO 13777 titled ‘‘Enforcing the Regulatory Reform Agenda,’’ (February 24, 2017)
3. EO 13783 titled ‘‘Promoting Energy Independence and Economic Growth” (March 28, 2017)

An overhaul of the 1996 Process Rule was long overdue, and Trump’s deregulatory Executive Orders provided that opportunity.  Hopes were high that the new process rule would not be so burdensome and complicated. 

In December of 2017, the overhaul began. EERE opened EERE-2017-BT-STD-0062 and requested comments regarding the need to overhaul its Process Rule. The energy efficiency advocates’ overall response was basically “If it aint broke, don’t fix it.”  Industry’s response was that it was seriously broken and needed major fixing. 

On February 13, 2019, EERE issued a Notice of Proposed Rulemaking (NOPR). Basically, neither side was satisfied; this could be argued by EERE as a reasonable semblance of balance.True to form, NRDC cried foul via a press release. For example:

• DOE proposal to change how it sets efficiency standards creates new hurdles, advocates say
• DOE unveils efficiency plan that critics call a ‘disaster’ (E&E News subscription required)

On February 14, 2020, EERE published a “supplemental” NOPR for its Process Rule AND a Final Rule. Yes it’s confusing. 

Process Rule Implementation

Meanwhile, EERE continued to implement its new Process Rule. On August 19, 2020, EERE published another Final Rule titled Procedures for Evaluating Statutory Factors for Use in New or Revised Energy Conservation Standards (adding to the confusion).

In the end, basically, what these efforts accomplished was to add some modest refinement of what EPCA simply left open to better define economic justification (among other minor improvements). In so doing, however, EERE further triggered the energy efficiency advocates’ disapproval of the Process Rule overhaul. NRDC’s resultant lawsuit will be discussed in greater detail in Part III of this series tomorrow.

In the past, economic justification could be attained by simply providing, on average, cumulative energy savings that barely exceeded the additional costs of energy improvements over the life of the appliance. The “career professionals” within EERE–its National Labs and subcontractors (i.e., Navigant Consulting)–have become very adept at gaming (skewing) the determinations in favor of more regulations. Unfortunately for consumers, this trend continues virtually unabated.

On October 16, 2020, the NRDC initiated litigation as NRDC et. al. vs. Brouillette et. al.  Basically, what NRDC seems to want from this appeal is to regain what they had under Obama: an even less minimally restrained EERE that is costly for industry to oppose but better assists EERE and its “energy efficiency” allies to “determine” what they deem is in energy consumers best interests.

MasterResource readers may recall an article that reviewed a recent House Committee on Energy and Commerce hearing titled Hearing Summary: “Wasted Energy: DOE’s Inaction on Efficiency Standards & Its Impact on Consumers and the Climate”.  The article also summarized the vociferous complaints from the “energy efficiency” and “beneficial electrification” advocates (one and the same) about how EERE (under Trump) was kowtowing to industry.

According to a November 2019 Congressional Research Service (CRS) report, Department of Energy Appliance and Equipment Standards, the following changes are being made to the Process Rule:

On February 13, 2019, DOE proposed changes to the rulemaking procedures for standards and test procedures, or “Process Rule.” (84 Federal Register (FR) 3910) For standards, DOE would establish a “threshold” for energy saving that must be met to update or create a standard, among other changes. The energy-saving “threshold” would require a standard to save 0.5 quadrillion Btu (quads) over 30 years or to save 10% of the total site energy used by a product or equipment type. According to DOE, of the 57 product/equipment standards that DOE set, the average national site energy savings is 0.96 quad, and the average percent reduction in national site energy use is 13%. Thirty-two of the 57 standards set by DOE would meet one of the proposed threshold conditions. The proposed rule would also add a requirement that test procedures be established at least 180 days before a related standard.

Obscured behind the CRS uninspired and wonky review of EERE modest Process Rule improvements are some serious flaws (aside from the ones that the NRDC claims). One of the most striking of these flaws was EERE’s decision to outsource peer review of EERE’s energy efficiency rulemaking processes to the National Academies of Sciences (NAS). Named Review of Methods for Setting Building and Equipment Performance Standards, it is right out of Ayn Rand’s State Science Institute of Atlas Shrugged.

Gas Industry Protest

What the gas industry asked for in the record of initially filed comments was public workshops to openly explore process rule reforms. What was received was a “peer review” that was limited to an EERE chosen panel and an NAS project management that drastically limited public participation.  This is verifiable by:

1. This link to NAS and then observing that almost all of 25 sessions (so far) have been closed
2. A (so far unanswered) letter to Assistant Secretary Simmons titled “DOE Staff and Contractors in Apparent Violation of Process Established for Peer Review.”

Despite the claimed “transparency” objectives within EERE’s newly overhauled process rule. “the (peer review) fix was in.”  However, we won’t know the extent of this until the NAS issues its final report.

Problems Remain

Another serious flaw with EERE’s newly completed Process Rule is that EERE apparently intends to use “national average energy prices” for determining consumer impacts” (at page 8706). Such averages can and do drastically inflate consumer savings claims due to the improper inclusion of fixed charges (like billing fees) that don’t vary with reduced energy consumption. After decades of giving lip service to the use of consumer marginal energy rates (CMER), EERE has now confessed its preference for average energy costs.

To provide some insight into the ever-increasing complexity of these processes, on November 19, 2019 EERE attempted to explain it all via their process overview presentation.  This presentation took the better part of the day and left a largely Doctorate-level peer review target audience admittedly bewildered.  No wonder, considering the following is just a fraction of the presentation’s numerous flowcharts:

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NOTE: Part I in this series yesterday examined the overall direction, some bright spots, and disappointments of government energy efficiency policy of the last four years. Part III tomorrow examines ongoing litigation of EERE initiatives by the NRDC.

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Mark Krebs, a mechanical engineer and energy policy analyst has been involved with energy efficiency design and program evaluation for more than thirty years.  He has served as an expert witness in dozens of State energy efficiency proceedings and submitted scores of Federal energy-efficiency filings.  Mark’s first article was in the Public Utilities Fortnightly titled “It’s a War Out There: A Gas Man Questions Electric Efficiency” (December 1996). For more about by Mark, see his MasterResource archive.