Energy efficiency ratings can save cash in the long run; here's how

The refrigerator at the Smiths' house failed after 15 years of service. With the estimated repair cost almost equal to the purchase price of a new model, the Smiths decided to buy a new appliance.

After shopping at several stores, they found two different makes of refrigerators that they liked. Both had the same capacities and essentially the same extra features. The price of one refrigerator was $500 while the cost of the second model was $400.

The Smiths bought the $500 model. Why?

They chose the more expensive model because it was more energy-efficient, costing $40 a year to run as opposed to $70 for the cheaper model. The Smiths, in their decision, had the benefit of EnergyGuide labels which told them the approximate annual cost of operating the refrigerator.

EnergyGuides are the product of the appliance-labeling program mandated by the Energy Policy and Conservation Act of 1975. The labeling program, administered by the Federal Trade Commission (FTC), allows consumers to compare the yearly cost of operating major home applianaces and to determine their energy efficiencies.

The black-and-yellow EnergyGuides are affixed by appliance manufacturers to the seven types of major home appliances which account for 73 percent of the energy used in American homes each year. The labels, to be removed only by the consumer, must be clearly visible on all appliances produced on or after May 19, 1980.

Identical information must also be available in catalogs for mail-order customers.

Cost and energy-efficiency calculations, which appear on the labels, are compiled by the FTC from tests conducted by the manufacturers. Tests follow standardized procedures developed by the Department of Energy. EnergyGuide figures are updated when energy costs increase or decrease by 15 percent.

Although the energy-efficient appliances may cost more to buy, long-term operating costs are less and consumers save money, according to the FTC. By using EnergyGuides and simple arithmetic, the Smiths were able to calculate their long-term savings. Here is the formula they used:

First, the purchase price of the less-expensive model was subtracted from the price of the more-expensive model ($500 - 400 EQUALS 100).

Next, the lower yearly operating cost was subtracted from the higher yearly operating cost ($70 - 40 EQUALS 30).

Finally, the Smiths divided the difference in the initial purchase price ($ 100) by the difference in the yearly operating cost ($30). They found the more-expensive, yet more energy-efficient, model would pay for itself in slightly more than three years.

At a saving of $30 a year, the Smiths would realize $450 in savings from yearly operating costs over the expected 15-year life of the new refrigerator. Since the price of the energy-efficient refrigerator was only $100 more, the Smiths expected to save an estimated $350 over the lifetime of the new appliance.

In comparing operating expenses, the Smiths used an energy-cost label, one of three types of EnergyGuides currently in use.

Energy-cost labels are required for refrigerators, refrigerator/freezer combinations, freezers, water heaters, dishwashers, and clothes washers. As the name implies, these labels indicate the estimated annual cost of the energy needed to operate the appliance. This cost is based on a national average electricity rate of 4.97 cents per kilowatt-hour.

The key feature of the energy-cost label is the energy-cost number, the large figure in the center of the label. In the case of energy-cost labels, the higher the energy-cost number, the higher the expense to operate the appliance.

Directly beneath the energy-cost number, a heavy bar shows the range of operating costs, from the lowest to the highest, of competing brands. Consumers can use the graph to quickly gauge how the model under consideration ranks with other models of similar size and features.

The lower half of the label contains a chart that permits shoppers to determine more precisely the costs of operating an appliance based on local utility rates. Energy-cost labels for dishwashers and clothes washers include a double chart that indicates the cost of running the appliances with a gas water heater as well as an electric water heater.

Energy-efficiency-rating labels, sometimes called seasonal-energy-efficiency-ratings, are a second type of EnergyGuide. These labels are used on climate-control devices.

Energy-efficiency ratings were developed for climate-control units because of differences in operation from the five types of appliances covered by energy-cost labels. Heating and cooling units are climate-sensitive and their operating costs depend on factors such as weather patterns, insulation in the house, and amount of use.

Energy-efficiency-rating labels are similar in design to energy-cost labels. The large middle number shows the efficiency of the climate-control device and its range in comparison with other models.

A high energy-efficiency number indicates a more efficient model.

The lower half of the energy-efficiency label provides a cost/use chart for calculating operating costs. Based on local electricity rates and expected hours of annual use, consumers can obtain a more accurate estimate of energy expenses.

Occasionally, a shopper may run into a third type of EnergyGuide called a generic label. These were required on all furnaces and central air-conditioning units at the inception of the appliance-labeling program. Generic labels are being replaced with energy-efficiency-rating labels.

Generic labels list general information about conserving energy in the home. The label directs the consumer to an energy fact sheet available from a retail dealer or heating contractor.

Exempted from the appliance-labeling program are items such as kitchen ranges , ovens, and clothes dryers. Testing of these appliances revealed that most worked at close to 100 percent efficiency. Small appliances such as toasters, coffeemakers, and blenders are exempted also since relatively little energy is required for their use.

The FTC advises buyers to remember that costs printed on the EnergyGuide labels are estimates and are not a guarantee of the actual operating costs of appliances.

Actual costs are still dependent, the agency warns, upon consumer use and upkeep of the appliance as well as prevailing energy rates.