BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
ALEX PADILLA, CHAIR
SB 1198 - Huff Hearing Date:
April 20, 2010 S
As Amended: April 12, 2010 FISCAL B
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DESCRIPTION
Current law requires the CEC to adopt regulatory standards for
minimum levels of operating efficiency for appliances the use of
which requires a significant amount of energy or water on a
statewide basis. The regulations cannot result in any added
total costs for consumers over the designed life of the
regulated appliances.
This bill requires the CEC, when calculating the costs to
consumers of proposed regulations, to utilize consumer financing
interest rates and to calculate the costs based on the average
life of the regulated appliance. These calculation standards
would apply to regulations effective after December 31, 2010.
Current federal law authorizes the Federal Trade Commission to
require energy disclosures for certain consumer electronics,
including televisions, personal computers, cable or satellite
set-top boxes, stand-alone digital video recorder boxes, and
personal computer monitors and preempts state labeling
regulations once a rule is adopted for a specific appliance.
This bill preempts enactment of a CEC labeling regulation for
televisions until and unless the FTC adopts a labeling rule by
July 1, 2011.
BACKGROUND
Energy Efficiency - California has pursued its energy demand
reduction goals through two primary avenues: utility-sponsored
programs to reduce end-user consumption, and codes and standards
designed to lower the energy use of buildings and appliances. By
2004, these efforts had cumulatively saved more than 40,000
gigawatt hours (GWh) of electricity and 12,000 megawatts (MW) of
peak electricity, equivalent to 24 500-MW power plants. More
than half of the statewide savings has come from the building
and appliance standards, with the balance resulting from
programs implemented by the state's investor owned utilities
(IOUs) and local publicly owned utilities (POUs). As a result
of these efforts California's energy use per capita has remained
stable for more than 30 years while the national per capita
average has steadily increased and is nearly double that of
California.
CEC Appliance Standards - California's Appliance Efficiency
Regulations were established in 1976 in response to a
legislative mandate to reduce California's energy consumption.
The regulations are updated periodically to allow consideration
and possible incorporation of new energy efficiency technologies
and methods.
The Appliance Efficiency Regulations include standards for both
federally-regulated appliances and non-federally-regulated
appliances. Twenty-three categories of appliances are included
in the scope of these regulations which include commercial and
residential products including water heaters, clothes washers,
dishwashers, traffic signals, lighting and heath and air
conditioning systems. The standards within these regulations
apply to appliances that are sold or offered for sale in
California, except those sold wholesale in California for final
retail sale outside the state and those designed and sold
exclusively for use in recreational vehicles or other mobile
equipment.
Pending CEC Television Standards - The CEC has adopted energy
efficiency standards for new televisions offered for sale in
California beginning in 2011 and 2013. Currently, statewide TV
energy consumption is estimated to be 6,360 million kilowatt
hours (kWh) per year, or roughly two percent of California's
gross system electricity usage. This percentage is expected to
increase as the current stock (mostly analog cathode ray tubes)
is replaced by the newer and larger TV types. There are many
"large-screen" digital televisions on the market that use 500 or
more kilowatt-hours per year, as much energy as many new
refrigerators.
The first television standard (Tier 1) will take effect January
1, 2011, and reduce energy consumption by average of 33 percent.
The second measure (Tier 2) will take effect in 2013 and, in
conjunction with Tier 1, reduce energy consumption by an average
of 49 percent.
Televisions sold in California starting January 1, 2011 will
also be required to be permanently marked with the on mode power
consumption in watts and list the same data in any publication
website, document or retail display that is used for selling the
product. The regulation package specifies July 1, 2010 but the
CEC reports that this was a typographical error that will be
changed to January 1, 2011 at the Office of Administrative Law
(OAL).
The proposed regulations will generate an estimated 6,515 GWh in
energy savings annually after all existing stock is replaced.
The overall energy cost savings to consumers for California is
expected to be approximately $8.1 billion. The estimated total
value of this regulation is approximately $8.7 billion, which is
the sum of energy cost savings from the proposed standards and
savings in avoided construction cost of a $615 million natural
gas power plant.
The regulation package has been adopted by the CEC but has not
yet been submitted to the OAL for approval. Submission is
anticipated in two to four weeks.
Pending FTC Television Labeling Requirement - The FTC's
Appliance Labeling Rules require energy disclosures for a
variety of covered products, including home appliances,
lighting, and plumbing products. The Rule requires most covered
products to have, at the point of sale, yellow EnergyGuide
labels containing estimated annual operating cost information
based on Department of Energy (DOE) test procedures. The label
information must also appear in catalogs and on Internet sites
offering the products for sale.
The FTC has proposed to extend the labeling rule to televisions.
Each television would be required to have specific information
consistent with EnergyGuide labels for other products including
annual energy costs based on a uniform electricity rate of
eleven cents per kWh, an on-mode usage rate of five hours per
day and 19 hours per day in standby mode to calculate annual
cost and energy consumption information. The label would also
have comparative information to other televisions grouped by
screen size.
COMMENTS
1) Author's Intent . The author proposes amendments to
clarify the bill so that it achieves the following:
a. Suspends the CEC regulation that requires the
labeling and advertising of televisions with
consumption data until July 1, 2011. At that time the
CEC label requirement would be permanently suspended
if the FTC has adopted its yellow EnergyGuide label
requirement for televisions regardless of its
effective date. In that instance the CEC label
requirement would not become operative. If the FTC
fails to act by July 1, 2011, the CEC labeling
regulation would become operative. If the FTC acted
at a later date the CEC labeling regulation would be
preempted by federal law.
b. Supersedes the CEC's Tier 2 television
efficiency regulation which takes effect on January 1,
2013 and require the CEC to reopen the rulemaking to
use a new calculation for the cost of a television
which would include the cost of consumer financing in
the cost of the regulated product.
c. Apply a consumer's cost of financing an
appliance in all appliance regulations adopted by the
CEC after January 1, 2011.
d. Strike the language regarding discount rates,
payback calculation and life cycle cost estimates and
average life of the product.
2) Cost of the Appliance . The adoption of appliance
regulations is limited to those which the CEC determines
are cost-effective for consumers. When determining that
value the CEC is required to consider the energy saved, the
impact of the efficiency regulation on the product's
efficacy, and the life cycle cost to the consumer of
complying with the standard.
The added total cost is obtained by comparing the cost and
performance of a typical model that a consumer would be
expected to purchase with the proposed upgraded or new
standard in effect, to the cost and performance of a
typical model that the consumer would be expected to
purchase without the proposed upgraded or new standard in
effect. In summary, a new or upgraded appliance standard
must not result in any added cost to the consumer over the
design life of the appliance.
The author opines that the CEC is using an artificially low
number for the cost of the product which inflates the value
of the electricity savings when compared to product cost.
He reports that the CEC does not include the consumer's
cost of financing the product and since most consumers
"charge it" and don't pay cash this added cost should be
part of the calculation upon which the regulation is based.
However the inclusion of the consumer's cost of financing
the product would not appear to change the cost analysis
since the CEC compares the cost of the product with the
efficiency improvement to the cost of the product without
the improvement and then compares both costs to the energy
saved over the design life of the product. In both cases
adding the financing costs to the cost of the product would
have the same result on both sides of the analysis by
increasing both costs by the same amount.
3) Do-Over . The application of the costs of consumer
financing to the product cost as called for by this bill is
directly intended to require the CEC to reopen its 2013
Tier 2 television regulation and apply a new cost standard.
The Tier 1 and Tier 2 regulations affect the same products
and are primarily directed at LCD and plasma televisions.
The Tier 2 efficiency standard is more rigorous. The
efficiency standards apply to the active mode and standby
mode power consumption, power factor, and luminance control
for televisions with a screen smaller than 1,400 square
inches (aka 58" screen). Larger televisions will be
addressed in a Phase II rulemaking at a later date.
The Consumer Electronics Association was a strong opponent
of the regulations finding that the regulations were
"detrimental to innovation, consumers, and industry" and
"exaggerate the 'problem' to be solved and overestimate the
potential energy savings." They further opined that "when
the potential energy savings from the proposed regulations
are more reasonably calculated, the costs to consumers
outweigh the benefit."
The CEC found otherwise and adopted the regulations with
the support of environmental advocacy groups, electric
utilities and some television manufacturers.
4) Labeling . The CEC's labeling regulation or "marking
requirement" has two parts. First it requires that each
television be permanently marked with its on mode power
consumption in watts. Second it requires that
publications, websites, and retail displays also include
the consumption data. The FTC's yellow EnergyGuide label
is of greater benefit to most consumers than the second CEC
label since it clearly states the estimated cost of
operating the appliance on an annual basis.
The intent of the bill is to prevent the television
manufacturers from complying with the CEC regulation.
Federal action by the FTC does appear likely; the
manufacturers don't want to comply with one regulation for
a year or two, suspend that requirement and implement the
federal standard. Both parts of the CEC marking regulation
would likely be preempted if the FTC adopts its proposed
rule.
POSITIONS
Sponsor:
Consumer Electronics Association
Support:
Consumer Electronics Association
Oppose:
Breathe California
Environmental Defense Fund
Natural Resources Defense Council
Pacific Gas & Electric Company
Planning and Conservation League
Union of Concerned Scientists
Kellie Smith
SB 1198 Analysis
Hearing Date: April 20, 2010