trends
in energy

DOE Proposes Guidlines
for Home Energy Ratings

The U.S. Department of Energy (DOE) issued voluntary guidelines for home energy rating systems (HERS) in a long-awaited public Notice of Proposed Rulemaking in July. Written comments on the proposed standards were due to DOE in late October, and a final ruling is expected by early 1996.

In 1993, a coalition of over 100 energy rating providers, state energy offices, utilities, lenders, and housing industry representatives formed the Home Energy Rating System Council to help DOE develop uniform guidelines for home energy rating systems nationwide. After 18 months of research and input, the HERS Council Technical Committee developed a standard rating methodology. DOE hopes that the guidelines will encourage state and local governments, real estate agents, mortgage lenders, and rating systems around the country to link home energy ratings for new and existing houses to mortgage financing (see "Making Energy Mortgages Work," HE May/June '95, p. 27).

The proposed guidelines would establish (1) procedures for certification of the technical accuracy of residential rating tools and software, (2) training requirements for home energy raters, (3) data collection requirements, (4) quality control requirements, and (5) monitoring and evaluation requirements for rating system providers. DOE also requested comments on a national accreditation process for energy rating systems.

The scoring system is based on a scale of 0 to 100 with the most efficient house scoring 100 points (see "How Do You Score a House?" HE May/June '95, p. 30). A star rating is also incorporated, to make the system more accessible to the consumer.

Houses are compared to an efficient reference house that has a similar structure and the same types of equipment, but with insulation values and equipment efficiencies set by the HERS council. The reference house uses the same energy sources for space and water heating as the house being rated. A house that scores 100 points uses no purchased energy. A house that is calculated to use the same amount of energy as the reference house scores 80 points, or four stars. A five-star-plus house is roughly twice as efficient as the reference house. The least efficient house, scoring 0 points, would use five or more times as much purchased energy as the reference house.

DOE hopes that, if uniform HERS are adopted nationwide, many of the market barriers to financing for energy efficiency investments can be removed. These barriers include the real estate industry's and consumers' failure to recognize the market value of efficiency investments, and lenders' unwillingness to loan more dollars for a superefficient house with very low utility bills. By providing national uniformity, the guidelines would make it easier for lenders to package and sell energy mortgages to the secondary mortgage market.

The timing couldn't be better. Financing for energy efficiency is becoming more widely available due to increased lending and utility competition, increased consumer awareness, and requirements in the Energy Policy Act of 1992 for the Federal Housing Administration to promote energy-efficient mortgages.

Fannie Mae, Freddie Mac, the Federal Housing Administration, mortgage lenders, banks, and utilities such as Pacific Gas and Electric Company have all recently introduced innovative financing products for energy efficiency upgrades as they seek out new market opportunities to stay ahead of increasing competition. The increased availability of uniform ratings will enable lenders and utilities to expand their new energy loan programs much more rapidly and help to increase consumer demand. Bob Basile, chairman of the National Association of Home Builders' Energy Committee, states that "an important part of [consumer] education is keeping things relatively simple and more uniform across the country. A common rating system would help with the education process."

For more information on the proposed rules or availability of the final rule, contact Bob Mackey at DOE (202/586-7892) or the national HERS Council at (202)638-3700.