Appliance Manufacturers And Importers Should Prepare For Increased DOE Enforcement Activity In 2023 – Energy Law

Key Takeaways

1. In 2023, the Department of Energy is likely to increase
   enforcement of its energy and water conservation standards.




2. The penalties associated with violating energy and water
   conservation standards can exceed $500 per violation and result in
   multi-million-dollar penalties.




3. Manufacturers and importers of appliances and other consumer
   and industrial products can mitigate enforcement risk by
   refamiliarizing themselves with the energy and water efficiency
   regime and conducting internal compliance audits.

As the Biden Administration enters its third year, now with a
party split in Congress, it seems likely that the Administration
will redouble its focus on executive branch regulatory tools that
can be used to achieve energy-related policy objectives, including
with respect to energy efficiency and reducing carbon emissions.
For manufacturers and importers of appliances and certain other
consumer, lighting, plumbing and commercial and industrial
products, that means the potential for additional scrutiny of their
products’ compliance with the Department of Energy’s (DOE)
conservation standards for energy and water efficiency. It also
likely means a commensurate increase in DOE enforcement activity
for non-compliance with the applicable efficiency standards or the
associated test procedures required to demonstrate compliance, as
well as registration and labeling requirements. Given the magnitude
of the penalties associated with violating efficiency standards,
currently $503 per violation, which can quickly run into multiple
millions of dollars across noncompliant units, manufacturers and
importers should consider refamiliarizing themselves with DOE’s
conservation standards regime.

Background

The Energy Policy and Conservation Act (EPCA), as amended,
authorizes DOE to set mandatory energy and water efficiency
standards for over 60 consumer and commercial/industrial products,
on everything from external power supplies and battery charges to
refrigerators, microwave ovens and refrigerators—even exit
signs. They also cover a number of lighting and plumbing products.
Each efficiency standard has two components: a conservation
standard that sets a product’s minimum efficiency, and a test
procedure, which the manufacturer or importer must apply in
demonstrating compliance with that conservation standard. By law,
DOE must update its efficiency standards every six years, and the
agency is not permitted to weaken its standards; it can only raise
the standards.

Enforcement

Understanding whether a product is covered by EPCA and if you
have complied with the applicable certification and conservation
standard is essential for any manufacturer or importer of
potentially covered products to understand their compliance risk.
Currently, DOE has the authority to issue a civil penalty of up to
$503 for each noncompliant unit introduced in to the stream of
commerce—i.e., sold or made available for sale.
These penalties can add up to millions, if not tens or hundreds of
millions, of dollars. In addition to the DOE’s civil penalty
authority, the agency can also require manufacturers or importers
of noncompliant products to discontinue the sale of products and
remove them from the stream of commerce.

Understanding how to respond if you discover noncompliance or
find yourself subject to a DOE enforcement action can help minimize
enforcement risk. The agency’s penalty guidelines and
Crowell’s practical experience provide some basic principles
for companies to consider: (i) self-reporting violations can be an
effective means of limiting enforcement penalty amounts and
maintaining goodwill with the agency; (ii) DOE may consider
reducing penalties where the company has taken well documented
corrective action before DOE has opened an investigation into
allegations of noncompliance; and (iii) early and consistent
engagement with the agency, including requesting any testing
performed by DOE personnel, can help companies identify DOE’s
mistakes. It is therefore also important that companies compile any
applicable testing or other relevant materials in their own
possession, which can be valuable tools in demonstrating compliance
with EPCA’s regime and/or in narrowing the scope of DOE’s
inquiry. Finally, consult with your SEC attorneys if you are a
public company. If the possible penalty is sufficiently large, you
may be required to publicly disclose the proposed or final
penalty.

Conclusion

Given the likely increase in enforcement activity, manufacturers
and importers of covered products should consider refamiliarizing
themselves with the EPCA regime. Those regulated companies that do
not already have robust compliance programs should consider whether
to implement testing and certification regimes, and those that do
have compliance programs should consider whether to bolster those
regimes in light of evolving regulatory requirements.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.