Energy Efficiency Policy Under Trump (Part III: Litigation)

By Mark Krebs -- December 10, 2020

“The end-result [from ignoring one properly identified modelling “error”], unwittingly or otherwise, massively skewed EERE’s economic ‘determinations’ in favor of stricter standards for commercial packaged boilers. This ‘error’ also exists in other proposed rulemakings. In other words, EERE likely ignored this correction request to avoid embarrassment by exposing deep analytical biases within EERE, its Labs and contractors.”

This post concludes a three-part series on the highs and lows of the DOE’s Office of Energy Efficiency and Renewable Technology during the Trump window of opportunity. Part I was an overview, and Part II examined EERE’s process rule and overhaul efforts to date.

Historically, Final Rules become that when published in the Federal Register. Prior, such rules have been subject to change pursuant to the “error correction” procedure codified at 10 C.F.R. § 430.5 (etc.). As will be explained below, NRDC vs Perry changed that.

Background

On April 3, 2017, the Natural Resources Defense Council, Sierra Club, and Consumer Federation of America notified DOE they will sue in 60 days over its failure to finalize standards for compressors, uninterruptible power supplies, walk-in coolers and freezers, portable air conditioners, and commercial packaged boilers.  That same day, ten “blue” states, the Pennsylvania Department of Environmental Protection, and the City of New York filed a letter with DOE.

On June 13, 2017, these coalitions of environmental groups and agencies made good on their threats and petitioned the US District Court for the Northern District of California (a.k.a., the “9^th Circus”).

As a general (unwritten) rule, it takes formal legal proceedings to get DOE’s attention.  Exceptions are Congressional inquiries from members that can influence DOE’s budget.  DOE could have used the information provided in the APGA/Spire error correction request to rationalize its reluctance to publish (at least) the  commercial boiler rule; but they chose not to.  Instead, DOE apparently chose to myopically chase a defense that they had the authority to not publish, so they could win all  non-published final rules. Instead, they lost them all.

As discussed elsewhere in this series, one plausible reason for ignoring us is that it would have subjected DOE to highly controversial (at best) scrutiny of their methodologies to “determine” cost-effectiveness.  In turn, this would embarrass EERE and the “energy efficiency” advocates who have effectively become preferred clients of EERE.

For third-party summaries see:

• The (partisan) Environmental & Energy Law Program’s Energy Conservation Standards for Consumer Products
• DOE must implement 4 long-delayed efficiency standards, 9th Circuit Rules.

NRDC vs. Perry

In Natural Resources Defense Council versus Perry (Case 3:17-cv-03404-VC Document 81), NRDC won, resulting in a court-ordered publication in the Federal Register of four Final Rules that were ready to go to print but were ostensibly awaiting resolution of several error correction requests.  The following is an excerpt:

For three of the four standards, the Department did not receive any requests for correction. Dkt. No. 66-12 at 3. One error was identified in the fourth standard: a table included the value “>300,000” instead of “≥300,000.” Dkt. Nos. 66-11 at 2, 66-12 at 3. A year later, the Department still has not submitted any of the four energy standards to the Office of the Federal Register for publication. There has been no explanation for this, other than a statement at oral argument by counsel that the Department is “still considering” the four energy standards.

What is key in the above excerpt is the length of time EERE’s legal team took. This was perceived by the presiding Judge as illegal stalling and emboldened NRDC to initiate more stalling-based litigation. What was not made evident by the above excerpt was the fact that there was another error correction request.  

The apparent reason it was ignored was because it went beyond correcting a mere typo. Rather, it was aimed at correcting a major conceptual error in EERE’s Monte Carlo analyses that effectively assumed consumers (even commercial ones) NEVER make rational economic decisions.

The end-result [from ignoring one properly identified modelling “error”], unwittingly or otherwise, massively skewed EERE’s economic “determinations” in favor of stricter standards for commercial packaged boilers. This “error” also exists in other proposed rulemakings. In other words, EERE likely ignored this error correction request to avoid embarrassment by exposing deep analytical biases within EERE, its Labs and contractors.

The American Public Gas Association (APGA), the Air-Conditioning, Heating, and Refrigeration Institute (AHRI), and Spire are appealing the Final Rule for commercial packaged boilers per USCA Case #20-1068.  The main reason for appealing is a lack of clear and compelling evidence as required by EPCA (42 U.S.C. § 6313(a)(6)(A)(ii)(II)).  The previously discussed “modelling error” (to give EERE an unearned benefit of the doubt) is a substantial part of EERE’s lack of “clear and compelling evidence.”

It is important to explain that EERE’s use of Monte Carlo analyses for risk assessment was initiated by request of a now-defunct Federal advisory committee that wanted to perform “what-if” sensitivity analyses of major variables and assumptions.  Instead, EERE, its Labs and contractors weaponized this very practical idea into a massively complex and proprietary system to further obfuscate its processes and force fit its biased analytical determinations to justify yet more energy efficiency regulations.

It is also proper to explain that EERE is attempting to revise its Error Correction Rule per Docket Number EERE-2020-BT-STD-0015.  EERE’s main purpose for this is to prevent future judicial enforcements compelling it to publish Final Rules under error correction review within 30 days.  Additionally, however, EERE is trying to limit the scope of its error correction rule to catching mere typo’s while simultaneously making it entirely discretionary.  This would block future error correction requests that are more substantial (like the one submitted by APGA and Spire).  Of the few comments submitted for this docket, one was from NRDC (defending a 30-day time limit) and the rest from industry, (with joint comments filed by AHRI being the most comprehensive).  Excerpt:

For the sake of transparency, fairness, and basic good government procedure, the Joint Commenters recommend that the Secretary respond to all requests for error correction, even if the Secretary has decided not to act. The requester should know whether their request was received, considered and the Department’s rationale for not acting on the request. Public notice and a response are basic tenants of reasoned decision-making and should be followed during the error correction process as well.

Miscellaneous Details Meet the Devil

The Office of Management and Budget (OMB) has an oversight role to play regarding EERE’s appliance efficiency determinations.  This includes review of agency Final Rules.  However, OMB’s use of such authority is minimal.  On February 25, 2020, OMB published Docket No. OMB-2019-0006 to seek public comments titled Proposals, Submissions, and Approvals: Improving and/or Reforming Regulatory Enforcement and Adjudication.  The broadly worded purpose of this docket was to find ways to decrease “regulatory bullying.”  Gas industry comments were submitted to OMB.  Of particular relevance is a critique of EERE’s process for determining minimum efficiency standards provided to the NAS panel.

The primary messages in the critique for NAS was the need for true transparency and to start accounting for energy savings validated by “Consumer Marginal Energy Rates” (CMER).  Proper CMER crosschecks can efficiently provide powerful quality control cross-checks to “average costs” (that are blended into non-transparent oblivion) and various proprietary and/or “black box” analytical techniques historically favored by EERE.

The debate with EERE over the use of CMER started in the mid Nineties. Before then, EERE basically used average energy cost estimates.  Since then, EERE has argued everything between it is too difficult to do CMER and it is already doing CMER.  Going forward, EERE says it will be returning to “national average energy prices.”  If so, this will continue to inflate EERE’s claimed consumer energy cost savings.

Rather than reiterate all of this here, please click on the above NAS critique link and read it.  If you do, you will most likely be amazed at just how uneconomic forced energy efficiency investments can be when analyzed correctly.

The letter and critique were also emailed to members of NAS Peer Review Committee; all of which are from academia with the exception of Clark Gellings, a retired Electric Power Research Institute (EPRI) executive who still represents the electric utility industry and has been promoting “beneficial electrification” for decades.  In contrast, there was no one appointed to this expert panel with a background in natural gas even though two openings went unfilled.

The Beatings Will Continue Until Morale Improves

Where will efficiency be heading given a Biden Administration? Consider the following graphic:

 Source: DOE sponsored presentation for webinar on 12/12/2019 titled Electrification – What Does It Mean for Energy Efficiency?

Simply put, energy efficiency is poised to be phased out and replaced with carbon efficiency. This will wean consumers off the direct use of natural gas; either forcibly and/or through taxpayer subsidized energy efficiency rebates and tax credits.  Such “beneficial electrification” further assumes that renewables will inexpensively dominate the grid and thus simultaneously provide lower cost and emissions relative to natural gas.

Electrification under the guise of “deep decarbonization” is already well underway.  The “electrify everything” philosophy was on full display at EERE’s Building Technologies Office (BTO) virtual peer review conference that took place on November 16-18, 2020 as evidenced by the following excerpt from BTO program for this event:

Trends and Opportunities in Electrification (Karma Sawyer)

Beneficial electrification has been a hot topic and a focus of many energy organizations for years, including utilities; state and local governments; regional, state, and local energy efficiency organizations; and manufacturers.

A key reason is that beneficial electrification — electrification combined with decarbonizing electricity generation — provides a strategy to meet the urgent climate crisis with existing technologies that improve energy efficiency. It also provides a useful framework for understanding the importance of integrating technologies, especially grid-interactive efficient buildings, across the entire energy sector, from generation to electricity infrastructure and end uses. In this future vision for the nation, solar and wind will do the heavy lifting, and electrification will continue to ramp up so that we use far more electricity. The details of these evolving energy trends will vary nationwide, but there will be big changes in how we transmit, store and use electricity. Increasingly, both the public and private sectors will look to BTO as a neutral, data-driven entity that can guide our entire country through a big transition. [yellow highlight added]

Does this look “neutral” to you? Regardless, EERE’s appliance efficiency regulations must contend with long-standing legislation (EPCA) that may restrict such an envisioned electric energy monoculture; as could the Senate if it remains in GOP hands.

Additionally, it appears that the far-left wing of the House majority has taken some hits in the recent election. Some if not many Democrats blame the progressive wing for these losses. Consequently, this collectively could slow the progress towards electrification and the war on gas (the leading alternative to electricity) that has continued unabated for decades.  Accordingly, consumer alternatives to electricity are not yet gone, but they are under increasing siege that is poised to intensify further under a Biden Administration.

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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.