The civil penalties for violations of the appliance efficiency regulations will become effective on July 1.

The California Energy Commission (CEC) has been establishing energy efficiency standards for new appliances sold or offered for sale in California since 1977 and has been requiring appliance manufacturers to certify compliance with these standards. Many of these standards have ultimately also been adopted as federal standards. The CEC has promoted compliance with these requirements through outreach, education, and enforcement. From an enforcement perspective, the CEC has historically pursued cooperative agreements. The agency did not typically pursue judicial enforcement or penalties, and there were no regulations that implemented the statutory provisions for imposing administrative penalties.

The CEC’s approach is likely to change this summer.

Administrative penalties for violations of the CEC’s appliance efficiency standards are just around the corner. The CEC has proposed regulations that would authorize administrative civil penalties applicable to each unit sold or offered for sale in California in violation of the requirements of Title 20 California Code of Regulations (CCR) section 1608. The maximum penalty pursuant to Public Resources Code Section 25402.11 is $2,500 per violation. To be clear, that means a potential maximum penalty of $2,500 per unit sold. Given the significant sales in California of many of the appliances subject to these regulations, these administrative penalties could be astronomical.

BACKGROUND

The CEC adopted appliance efficiency regulations at Title 20 CCR, sections 1601–1608. These regulations apply to a laundry list of new appliances sold or offered for sale in California. The list of covered appliances includes everything from large energy users (such as refrigerators, air conditioners, water heaters, and washing machines) to smaller appliances (such as lamps, TVs, battery chargers, and external power supplies). In addition to establishing efficiency standards for each type of appliance, the regulations require manufacturers to (1) apply specific testing procedures to determine whether appliances meet the applicable standards, (2) certify compliance for any appliance sold in California, (3) provide information concerning the appliance for entry into a publicly available database, and (4) mark appliances as directed to show that they meet California requirements. The enforcement provisions have focused on restraining and discouraging the sale of noncompliant appliances.

The statute authorizing the CEC to establish an administrative enforcement process for violations of the appliance efficiency regulations, including administrative penalties (California Government Code section 25402.11) was enacted in 2011. After extensive prerulemaking activities, the administrative civil penalty provisions were formally proposed in August 2014. The Final Statement of Reasons and rulemaking package was submitted to the Office of Administrative Law (OAL) on March 2, 2015, but the CEC withdrew the regulation on April 13, 2015 to make revisions recommended by OAL.

CEC’S RECENT ACTION

On May 13, 2015, the CEC adopted the revised version of the proposed regulations that established an administrative enforcement process and penalties for the appliance efficiency standards and associated regulations. The revised version is intended to address the concerns raised by OAL and pave the way for final approval. OAL approved the administrative civil penalty provisions on May 29. The new regulations will be codified at 20 CCR section 1609 and are set to become effective on July 1.

THE NEW PENALTIES

The revised regulations identify three categories of violations subject to the administrative penalties: (1) failure to register appliances in the appliance efficiency database; (2) failure to meet the efficiency standards or comply with the regulations relating to testing, marking, or certifying that an appliance meets the efficiency standards; and (3) knowingly providing false information in a statement made under penalty of perjury pursuant to any of the efficiency regulations.

Potential liability is not limited to manufacturers. If an appliance is sold or offered for sale in California in violation of the regulations that require the appliance be listed in the appliance efficiency database, civil penalties can be assessed against manufacturers, retailers, contractors, importers, and distributors that sell or offer to sell the appliance. For other violations subject to administrative penalties, the potentially liable parties are any person who manufactures, imports, or distributes an appliance.

The proposed regulations provide that an administrative civil penalty may be assessed up to the maximum amount provided by section 25402.11 of the Public Resources Code for each unit of an appliance sold or offered for sale in California or for each false statement. The current maximum penalty under section 25402.11 is $2,500.

In determining an administrative civil penalty for each violation, the regulations provide that the CEC shall consider the following factors: (1) the nature and seriousness of the violation, (2) the persistence of the violation, (3) the number of violations, (4) the length of time over which the violation occurred, (5) willfulness, (6) harm resulting from energy wasted, (7) the number of persons responsible, (8) efforts to correct the violation prior to initiation of enforcement, (9) cooperation, and (10) undue financial burden on responsible parties.

The administrative action is to be initiated by the issuance of a Notice of Violation, and the CEC can pursue an adjudicative proceeding before an administrative law judge in accordance with the proposed regulations.

CONCLUSION

The CEC will soon add administrative civil penalties to the enforcement toolbox. Given the size of the potential penalty on a per-unit basis and the sales figures for many of the appliances subject to the regulations, it is likely to be a very powerful tool that will change the nature of enforcement actions under the appliance efficiency regulations.