Energy Efficiency:

Opportunities Exist for Federal Agencies to Better Inform Household Consumers

GAO-07-1162: Published: Sep 26, 2007. Publicly Released: Oct 4, 2007.

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Franklin W. Rusco
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Household energy use accounts for nearly one-fourth of all energy consumed in the United States, amounting to more than $200 billion per year spent by consumers. Recent increases in energy prices have heightened consumers' interest in making their households more energy efficient. To this end, the federal government manages two key efforts--EnergyGuide and Energy Star--to inform consumers about the energy consumed by certain household products. EnergyGuide is a mandatory labeling program created under the Energy Policy and Conservation Act of 1975 (EPCA) and administered by the Federal Trade Commission (FTC) with assistance from the Department of Energy (DOE). It requires manufacturers to label and prominently display information about the energy consumption and annual energy costs of 11 categories of household products. In recent years, manufacturers have used adhesive backed labels adhered to appliances and so-called "hang tags" loosely attached to the interior or exterior of appliances. In its August 2007 revisions to the rule, FTC, among other things, prohibited the use of hang tags on the exterior of appliances, but continues to allow them on the inside. The law requires retailers to provide this information in catalogs offering products for sale. In 2000, FTC interpreted its authority over catalogs to encompass Web sites and required retailers to provide the same information on Web sites where consumers may purchase such products. The law prohibits retailers from removing labels placed by manufacturers or making them illegible. Also, EPCA requires DOE, in consultation with FTC, to study new product categories to determine whether they should be added to the EnergyGuide program and to report annually on the energy savings of the program. Energy Star is a voluntary labeling program created in response to the Clean Air Act amendments of 1990, and the Energy Policy Act of 1992 and jointly administered by the Environmental Protection Agency (EPA) and DOE. In general, it is designed to identify models for 26 categories of household products that, without sacrificing performance, are the most energy efficient (the top 25 percent). Manufacturers are permitted to apply the Energy Star logo to products that the manufacturers identify are qualified, based on EPA or DOE criteria. Standards for internal control in the federal government require federal agencies, including FTC, EPA, and DOE, to establish goals, measure performance, and report program costs and accomplishments in order to improve management and program effectiveness. In this context, Congress asked us to analyze the EnergyGuide and Energy Star programs to determine (1) how these programs have changed over time, (2) how federal agencies verify the accuracy of the energy consumption estimates for household products covered by these programs, (3) the actions federal agencies take to ensure that the EnergyGuide is available to consumers and that the Energy Star logo is not misused, and (4) how federal agencies measure the effectiveness and cost of these programs.

Overall, opportunities exist for the EnergyGuide program to improve how it provides information that could help consumers improve their households' energy efficiency and decrease energy consumption nationally. The EnergyGuide program has changed little over time, even though energy consumption patterns are changing substantially. Although FTC has pursued labeling for some products that are covered by law but are currently not subject to labeling, such as televisions, it does not have independent authority under EPCA to add some new products to the EnergyGuide program, such as computers and microwave ovens. FTC is not required to, and does not, independently verify energy consumption estimates provided by manufacturers. FTC staff told us they rely on manufacturers to verify competitors' energy consumption estimates and to report any problems to FTC. However, FTC only tracks some of the complaints it receives from manufacturers and therefore could not provide the exact number of complaints it receives about the EnergyGuide program. FTC does not know whether EnergyGuide is available to consumers because it has undertaken no significant efforts since 2001 to ensure EnergyGuide's availability to consumers in showrooms and on Web sites. FTC does not measure the overall effectiveness or costs of the EnergyGuide program, contrary to federal standards for internal controls, and DOE does not measure the energy savings of the program, as required by law. Overall, Energy Star has been generally successful in identifying and highlighting the most energy efficient products, but faces some challenges. Energy Star has regularly expanded to include new products and keep pace with a changing market. However, 6 of 26 categories of household products currently qualify for Energy Star based on factors other than the estimated total energy consumption. DOE and EPA test some products to verify their energy consumption estimates, but generally rely on manufacturers to verify competitors' efficiency estimates. EPA monitors stores, Web sites, and advertising to prevent misuse of the Energy Star label and follows up on problems. GAO inspections found few instances of the Energy Star mark being misused. DOE and EPA conduct efforts to measure the effectiveness of the Energy Star program which are useful but have limits. To measure effectiveness, DOE analyzes sales data to estimate energy savings, which were about $7 billion per year. Separately, EPA analyzes a consumer awareness survey of the Energy Star program. However, this survey does not assess how many additional energy-efficient products are purchased due to awareness of the Energy Star program.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: After a decade of congressional cycles, it appears that the Congress does not plan on acting to implement GAO's suggested matter to give FTC the specific authority to require retailers to display EnergyGuides. As such, we are closing this matter as not implemented. (February 2017)

    Matter: To ensure that consumers have consistent access to information about the energy efficiency of household products, Congress may wish to consider granting FTC with specific authority to require retailers to prominently display the EnergyGuide in retail showrooms.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOE has taken steps that will allow it to broaden coverage of the Energy Guide program. In 2010, DOE published a final rule in the Federal Register to define the term "household" and related terms (75 FR 13217, March 19, 2010). With the "household" definition in place, DOE may exercise statutory authority to include products beyond the EPCA specified products as covered consumer products. DOE can then set test procedures and efficiency standards for these products. With this new authority, FTC has taken steps to issue a standard for televisions (October 2010). Beginning in May 2011, manufacturers will have to place an Energy Guide label on new televisions offered for sale. The placement of this label will provide consumers with more information regarding estimated energy consumption prior to purchase.

    Recommendation: To ensure that consumers have access to information about the energy efficiency of the types of household products that account for a significant and growing portion of household energy consumption, such as computers and televisions, the Secretary of Energy, in consultation with FTC, should regularly review product categories not currently covered to assess whether they should be included in the EnergyGuide program.

    Agency Affected: Department of Energy

  2. Status: Closed - Not Implemented

    Comments: Based on contact with FTC's liaison in June 2011, FTC believes that it is taking action on a very limited basis. FTC regularly does review cost and benefits of specific regulations that fall under the Appliance Labeling Rule. For example, FTC has commissioned consumer research regarding the efficacy of current disclosures of light bulbs. However, it has not measured the overall effectiveness of the EnergyGuide program as a whole and does not believe that it should have to do so.

    Recommendation: To ensure that the EnergyGuide program is effectively achieving its goal of improving household energy efficiency by establishing goals, measuring performance, and reporting program costs and accomplishments, the Chairman of the Federal Trade Commission, as required under federal standards for internal control in the federal government, should regularly measure the cost and, to the extent practical, the effectiveness of the EnergyGuide program.

    Agency Affected: Federal Trade Commission

  3. Status: Closed - Not Implemented

    Comments: Based on contact with DOE's liaison in August 2011, DOE agreed with the recommendation but has not taken actions to implement it.

    Recommendation: To assist FTC in measuring effectiveness, the Secretary of Energy should measure the energy savings of the EnergyGuide program, as required by EPCA.

    Agency Affected: Department of Energy

  4. Status: Closed - Implemented

    Comments: FTC has taken three key steps to assess the extent to which its rules are being followed. First, in November 2008, the FTC staff conducted multiple store visits across the country and inspected Web sites to gauge rule compliance and examine the extent to which required information is available to consumers. In particular, FTC staff visited 89 retail stores and collected information about the EnergyGuide label for 8,616 appliances. We found that the EnergyGuide label was missing on 21% of the appliances we reviewed and that the label was not easily read on 3% of the appliances. In the spring of 2009, the FTC staff reviewed 25 Web sites and examined a total of 618 appliances. We found that 75% of the appliances did not provide either an image of the EnergyGuide label or the disclosures required by the FTC's Appliance Labeling Rule. Second, in July 2009, the FTC staff sent warning letters to the operators of these 25 Web sites. The FTC staff conducted follow-up reviews of the Web sites and the Commission has taken action against those retailers it alleges were not in compliance with the Rule. Relatedly, on November 1, 2010, the Commission issued complaints and accepted consent agreements against three retailers to resolve allegations that they failed to provide the EnergyGuide information online. PC Richard & Son agreed to pay $180,000, Abt Electronics agreed to pay $137,500, and Pinnacle Marketing Group agreed to pay $100,000. The Commission also issued notices of proposed penalty of $540,000 against Universal Computers and Electronics and $100,000 against Universal Appliances, Kitchens, and Baths. Third, FTC staff also has implemented procedures to collect and maintain any complaints we receive concerning appliance labeling. Last year, we received six complaints that related to appliance labeling. The FTC staff will continue to follow these procedures with respect to complaints received in the future.

    Recommendation: To ensure that consumers have consistent access to accurate information about the energy efficiency of household products, the Chairman of the Federal Trade Commission should monitor the availability of the EnergyGuide label and, within existing authority, enforce compliance through periodic inspections of retailers' showrooms and Web sites and by routinely and systematically tracking complaints, the issues they raise, and the manner in which these matters are resolved.

    Agency Affected: Federal Trade Commission

  5. Status: Closed - Implemented

    Comments: FTC has taken steps to improve its oversight of the availability of the Energy Guide label. In particular, in developing the rule for televisions, FTC agreed with commenters on the rule that it should require online retailers to provide access to an image of the Energy Guide label. The commission has also taken actions against online sellers of other products who were not providing such access, resulting in consent settlements and proposed fines of over $1 million.

    Recommendation: To ensure that EnergyGuide remains effective in a changing retail market, the Chairman of the Federal Trade Commission should clarify FTC's rules regarding the display of EnergyGuide information in the current retail environment, such as for warehouse retailers and Web-based product purchasing.

    Agency Affected: Federal Trade Commission


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