Home Depot and Whirlpool Face Class Action for "Fraudulent" Energy Star Appliance

        A lawsuit was filed on Friday in the United States District Court for the Northern District of Ohio on behalf of nationwide and Ohio-only classes of consumers who purchased three models of Maytag Centennial washing machines whose ENERGY STAR status was later revoked. 

          The plaintiffs allege that Whirlpool and Home Depot are in violation of Ohio’s Consumer Sales Practices Act, Ohio’s Deceptive Trade Practices Act, unjust enrichment under Ohio law, Ohio common law fraud, and breach of contract because they paid more up front for an energy efficient appliance which turned out not to be energy efficient.  The complaint is available here.      

           In November 2009, Adam Savett purchased a Maytag Centennial washing machine from a Home Depot retail store in Ohio. The machine he chose bore the now-familiar ENERGY STAR label, which is issued under a program jointly administered by the Environmental Protection Agency and the Department of Energy. While ENERGY STAR-qualified washing machines typically demand higher retail prices than standard models, consumers are projected to come out ahead due to the long-term operating savings that result from the more efficient use of both water and energy. 

            However, less than 10 months after Savett purchased his machine, an independent laboratory completed a DOE efficiency test of that model, revealing that the unit did not meet ENERGY STAR standards. In order to qualify for the ENERGY STAR label, the Maytag machine would have had to have been at least 37% more energy efficient than the minimum energy efficiency standards mandated by law.

            Now, Whirlpool Corporation, which acquired Maytag in 2006 and continues to sell appliances under the Maytag name, and Home Depot, are facing a nationwide class action lawsuit for fraud.

           Many green legal prognosticators, including me, anticipated that a suit of this type would be forthcoming.  The increased interest in green and energy efficiency has also led to a rise in "greenwashing"--making claims of environmental friendliness or energy efficiency simply for marketing purposes.  This suit echoes the allegations in Henry Gifford's ill-fated lawsuit against the United States Green Building Council that their buildings were not as energy efficient as promised. 

         It remains to be seen whether actual fraud, which requires the intent to deceive, was committed in this case.  Nonetheless, it is significant that this type of suit has been filed. 

More analysis to come….

Congress Introduces New "Energy Efficiency" Legislation

Contrary to common belief that nothing is really happening in green building at the Congressional level these days, I provide the following two counterexamples. Of course, neither of these efforts are designed to promote energy efficiency or green building, but that doesn't mean that nothing is happening.

 An amendment to the Senate Appropriations Bill for Energy and Water introduced by Senators Wicker (R-MS), Boozman (R-AR), and Inhofe (R-OK) would essentially eliminate the use of LEED and Energy Star for DOE green building programs.  According to the NRDC:  

This rider would prevent the Department of Energy (DOE) from using strong green building energy rating standards. The amendment limits DOE to using only green building standards that are developed and approved in accordance with American National Standards Institute (ANSI) rules. Such a requirement would effectively limit DOE to using only the National Association of Home Builders (NAHB) and Green Globes building standards.The amendment would disallow the use of many other strong rating systems, including LEED, EPA Energy Star Portfolio Manager, and EPA Energy Star Homes, which have substantially increased the number of environmentally-friendly buildings in our country.
 

In other news, Rep. Charles J. Fleischmann [R-TN-3] introduced a bill yesterday in the House H.R.3441 to repeal the Department of Energy's home weatherization assistance program.  The DOE weatherization assistance program provides funding to states to weatherize the homes of low income households to make them more energy efficient.  According to the WAP website:

During the past 33 years, WAP has provided weatherization services to more than 6.4 million low-income households. Families receiving weatherization services see their annual energy bills reduced by an average of about $437, depending on fuel prices.  

According to a recent release from the National Association for State Community Services Programs, the WAP received $5b in funding from ARRA, which weatherized 534,208 low-income houses through August 2011. This made the WAP seventh out of approximately 200 federal programs funded by American Recovery and Reinvestment Act (Recovery Act) in jobs created or retained, with 14,090 jobs  for the third quarter beginning July 1 and ending September 30, 2011.

The bill is not yet available from the GPO, but it can be followed on Thomas through this link

 

[High]rising Star: DOE Preparing to Launch an Energy Star-like System for Commercial Buildings

For several years, property owners have become increasingly aware of the potential for energy efficient buildings to decrease operating costs, improve occupancy, and demand higher rental prices.

Theoretically, all of the benefits of energy efficient buildings should yield a higher property values for green buildings and lower values for non-energy efficient buildings.  However, real estate appraisers often fail to properly value the energy efficiency features, meaning that the building will be appraised for the same value as another building without the investment in energy efficient systems, features, etc.   

 If energy efficient properties are appraised below their actual value, it can lead to a reduced resale value, lower rents, and poorer financing options than the owner would realize if the appraisal took into account the value of the property’s green attributes.

On August 8, 2011, the Department of Energy issued a "Request for Information" seeking input from stakeholders on a "Commercial Building Asset Rating Program"--let's call it "Highrise Star."  The goal of Highrise Star is to create an Energy Star-like system for commercial buildings.  The program would establish common inputs for calculating energy efficiency, select a modeling tool to evaluate the inputs for individual buildings and output a rating with which to compare the energy efficiency of different buildings.

The goal of the new program is primarily to address the issue of valuing energy efficiency (it does not address other green features like water usage, etc.) discussed above by providing a common metric for comparing the energy efficiency of commercial properties, and providing a reliable and common system for evaluating commercial building energy efficiency. 

The devil is in the details, of course.  The RFI proposes several different models for valuing energy, evaluating energy efficiency, and conveying the information.  If the DOE program is created, the commerical real estate community could soon be using a 100 point scale, like LEED, or a star system like the Energy Guide labels on appliances.  The robustness of the inputs and the energy model is critical to accurately evaluating building energy use, the simplicity of the input system will determine whether commercial building owners will use it to rate their facilities, and the representation of the "score" will determine whether users will actually understand and act on the information.

Many will ask "Where does this leave LEED?"  The proposed commercial building program is much less ambitious than LEED, in that it focuses exclusively on energy use. However, if every building has a "[High]rise Star," commercial building owners may be less likely to seek LEED to verify the green-ness of the facility.  Since Highrise Star will be free, the incentive to invest in LEED may be significantly reduced.  The ultimate test will be one of reliability--if Highrise Star is seen as robust, reliable and easy to use, LEED will have its work cut out for it to compete.  If it is viewed as too "easy" to achieve high marks for energy efficiency or if the interface is too cumbersome, then LEED will not be so directly effected.   

In any event, since government programs are often VERY slow to be developed, it may be a while before [High]rise Star comes on line.

Garbage In, Garbage Out

There is a corner of the Federal government that, unless you are as data obsessed as I am, you never knew existed.  For the part 25 years, the Energy Information Administration (EIA) has collected  baseline data on commercial building energy usage, known as CBECS.  CBECS is the only government source of statistical data for energy consumption and related characteristics of commercial buildings.   The data EIA has collected forms the underlying data for programs like Energy Star and LEED, and laws like Energy Independence and Security Act of 2007 (EISA 2007).

Two pieces of bad news were released today.  First, the EIA tried to cut costs by contracting out its building energy information gathering.  Unfortunately, the data gathered by its contractor was so shoddy that the EIA is refusing to release the data. 

According to a press release from the EIA:

EIA regrets to report that the 2007 Commercial Buildings Energy Consumption Survey (CBECS) has not yielded valid statistical estimates of building counts, energy characteristics, consumption, and expenditures. Because the data do not meet EIA standards for quality, credible energy information, neither data tables nor a public use file will be released.

Worse still, according to the EIA, the budget cuts made in this year's budget negotiations have reduced the EIA budget so severely that it will suspend collection of 2011 data.  In other words, the best building data we have to work with at this point is almost 10 years old, and no further data is being collected. 

Because approximately 30% of all energy is used by buildings, without a good baseline assessment of current building energy use, it will be difficult to:

  1. Accurately benchmark current building performance; and
  2. Accurately model building energy efficiency efforts. 

If energy models are based on bad or old or unreliable data, the results in practice may not live up to the predictions, and it will be easier to dismiss efforts to comprehensively transform building energy usage.  In other words, garbage in, garbage out.   

To address this situation, there are two choices. 

 A relatively unbiased private organization, like ASHRAE or the International Code Council, could collect the data.  Although the standard setting organizations will have their own internal and external customers to serve, and questions will inevitably arise as to the bias and validity of the data, they possess the relevant expertise and are currently relied upon to provide input into laws (like building codes).  The other option is for the Department of Energy or other government agency to recognize data gathering as a priority, and reallocate funds for the purpose of building energy efficiency data collection. 

In any event, a reliable party must step up to fill the data void, or future efforts to actualize the most cost effective method of reducing energy use and greenhouse gases will be squandered.  We will pay now through unnecessarily high energy costs and the price tag for participating in conflicts in the Middle East, and future generations will pay for damage to the environment.  Garbage in, garbage out. 

 

The Emperor And His Energy Saving, 100% Recycled Clothes

The AP reported that 15 phony items were admitted to the EPA's Energy Star program because manufacturers' claims of energy efficiency are not verified:

But the General Accountability Office, Congress` investigative arm, said Energy Star doesn`t verify claims made by manufacturers -- which might explain the gasoline-powered alarm clock, not to mention a product billed as an air room cleaner that was actually a space heater with a feather duster and fly strips attached, and a computer monitor that won approval within 30 minutes of submission.

 

A gasoline powered alarm clock? Seriously? 

Last week I posted about the United Nations suspending its third carbon credit auditing company in 15 months.  These situations undermine all efforts towards a more sustainable future. Take, for example, the damage done by the climate change email debacle.  To be credible, solid, verifiable evidence must be the foundation of efforts designed to change the mind of skeptics and convert naysayers.  Otherwise, we will be measuring climate change using a gasoline powered thermometer...hey...now there's an idea...

Part 3 of Regulating Green Series--To LEED or Not To LEED

One of the primary considerations in regulating green in whether to incorporate a third party green building standard, like LEED, National Association of Home Builders Green, Green Globes, etc. into the regulations.  In addition to determining whether to include a third party standard, regulators must also consider which standard to use and whether to mandate certification.  There are pros and cons to each choice which regulators concerned about crafting great green regulations should carefully consider.

1. Third Party Standard, Proprietary Standard or Hybrid?

 There are three regulatory models currently being used to determine whether a project is "green".  One is to reference a third party standard like LEED or Green Globes--if a project meets LEED Silver criteria, it receives a 10% tax credit.  Another mechanism is to create proprietary green criteria--setting out targets for energy efficiency, water usage, etc.  Finally some government entities, like Boston, use a hybrid model, tacking on specific green targets on top of a third party rating system. 

The third party rating system is easy and inexpensive, but gives local regulators the least control.  What if the third party sets a requriement which is illegal or preempted? What if the third party sets a requirement which is inappropriate or impossible for your local conditions?

The proprietary system requires the most in house expertise.  The regulators in charge of setting the green targets must understand sustainability and legal drafting very well to make this work.  Also, the system must be updated to keep pace with the rapidly changing innovations in the green building industry. 

The hybrid model works well to include local considerations into the  green criteria, but does not solve the issue of lack of control over the rating system.

2. Which Third Party standard? 

The Leadership in Energy and Environmental Design (LEED) rating systems from the US Green Building Council, a non-profit organization, is the most common rating system incorporated into green regulations.   Energy Star, a government sponsored system, is also common.

Some regulations, in an attempt to be neutral, state that projects need to meet LEED "or equivalent" standard.   Which standard is equivalent to LEED may be difficult to determine. NAHB Green applies to residential projects only, and Green Globes, while licensed to a non-profit organization, is owned by Jones Lang Lasalle, a real estate money management and services firm.  According to their website:

ECD Energy and Environment Canada, which developed the Green Globes™ system and licenses it exclusively to the GBI in the United States, has been acquired by international real estate money management and services firm, Jones Lang LaSalle (JLL). Under the terms of the acquisition, the GBI\'s licenses—both for the New Construction tool and the module for Continual Improvement of Existing Buildings—will simply transfer to JLL.
 

3. Certification or no? 

Finally, local governments need to consider whether certification as "green" by a third party is a requirement of the regulatory scheme.  For example, many municipalities make access to tax credits contingent upon acheiving LEED certification.  For voluntary financial incentives, this is not as big of a legal pitfall, although the monetary and transaction costs association with certification may reduce the number of green projects being undertaken.  However, mandating certification by a private third party could run into legal hot water.  For example, the USGBC is under no legal obligation to certify buildings within a specified period of time, or at all.  If the developer could not get a certificate of occupancy without the certification, the developer might sue the city.  Municipalities have gotten around this by having projects submit third party rating system checklists for review by building officials, without requiring certification.  This requires adequate capacity for understanding the green building criteria within the relevant government entities.