REQUIRE RESIDENTIAL ENERGY LABELING AND ENERGY AUDITS

Residential energy-efficiency programs increase energy efficiency, relieve energy cost burden, and improve the health of the occupants receiving the benefits of the program. When an energy-efficiency program is designed specifically for low-income communities, it has the added benefit of providing services to those that are most vulnerable. In Nevada, through the Weatherization Assistance Program (WAP), the Nevada Housing Division (NHD) provides low-income families energy audits that identify qualified energy-efficiency measures that are then implemented at no cost to qualified owners and renters. NHD’s weatherization program includes funding from the Governor’s Office of Energy (GOE) thorough the Home Energy Retrofit Opportunity for Seniors (H.E.R.O.S.) program, which provides an additional $8,000 maximum per home in weatherization assistance to low-income seniors who qualify. 

According to a paper published by the National Association of State Energy Officials (NASEO), the benefits of these programs can be enhanced by obtaining an energy label, which provides additional value to participants by documenting the upgrades and improvements to the residence. This can be accomplished through various forms of documentation, energy audits and the results of the implemented measures, energy savings figures, or energy labeling that shows pre and post energy costs and energy use. 

Residential energy labeling broadly refers to providing standardized energy performance information about a home. An energy label can convey energy use and cost information and is usually accompanied by an analysis that measures the efficiency of the home. An energy label can inform prospective buyers or renters about the current energy costs of the home, allowing a more-informed decision before occupying it. 

If a policy is adopted, an energy label would provide various benefits to the residential community, such as: consumer protection after improvements have been implemented, assistance to the homeowners in making informed decisions about energy improvements, and providing potential purchasers the opportunity to understand the current energy costs and usage of a home.

A home buyer energy audit with a home energy score would provide a potential buyer of a residence the current efficiency status of the home. This would include information about the expected monthly utility bills, what could be improved prior to the final closing of the transaction, as well as how the improvements would affect the overall price of the home. 

Such audits encourage home energy-efficiency investments and expand consumer options. If a buyer desires an efficient home and an audit shows that it is, sellers have the potential of being the top choice for consumers who are considering multiple options.

If a policy is adopted, an energy auditor or Home Energy Score Certified Assessor would perform and provide an energy audit to buyers during the purchase of a residence, similar to an appraisal or home inspection. The audit would be provided to the purchaser and the seller prior to the closing to allow for the negotiation of implementing the measures before the closing occurs. This will increase awareness of efficiency measures available to the buyer along with the cost-benefit of implementing the measures to allow further insight into total home ownership costs.

Through the U.S. Department of Energy’s (DOE) Better Buildings Solution Center, a Home Energy Score program was launched in 2012, which is a standardized methodology for measuring a home’s efficiency and producing an efficiency “rating.” The Score informs the home buyer or homeowner how much energy the home is expected to use, how much this will cost them, and how to cost-effectively lower energy expenses. Over the past eight years more than 90,000 homes have been scored.

Developed by DOE and its national laboratories, the Home Energy Score provides homeowners, buyers, and renters directly comparable and credible information about a home’s energy use. Like a miles-per-gallon rating for a car, the Home Energy Score is based on a standard assessment of energy-related assets to easily compare energy use across the housing market.

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GREENHOUSE GAS IMPLICATIONS

While DOE and other states have adopted similar policies or created programs, the impacts are calculated based on energy savings rather than greenhouse gas (GHG) emissions reductions. However, there are tools available that can calculate what the savings would equate to. So, with accurate data for Nevada on what the actual savings achieved are, there is a way to convert that calculation into emissions reductions. 

Understanding the full GHG implications of this policy would require the estimated changes in net electricity consumption over time as a result of adoption. More-detailed information from energy providers on the anticipated GHG emissions profile of supplied energy over time for major regions of the state would also be necessary. 

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CLIMATE JUSTICE

During the Green Building listening session, Nevadans expressed support of improved efficiency in homes and businesses. Several stakeholders at the Urban Planning listening session emphasized that additional outreach specifically to low-income communities, communities of color, and Indigenous communities is necessary to ensure fair and equitable policies. 

Ensuring equity and social justice for all Nevadans is a top priority that should be considered in the adoption of policies or programs surrounding energy audits, energy scores, and energy labeling. These policies can benefit low- to moderate-income (LMI) communities, primarily through an energy labeling program. This could also happen through an energy audit program that would allow the owner of the property to implement measures prior to renting, creating healthy and efficient residences for the tenants. Providing home buyers, owners, and renters with energy audit results and recommendations will increase education and awareness of energy efficiency. Additional disparities and mechanisms to implement cost-saving efficiency benefits for renters should be further explored.

Additionally, the recommendations provided in the audit report could include information about available assistance for weatherization and energy-efficiency upgrades, such as DOE’s WAP, the GOE’s H.E.R.O.S. program, and loan programs for energy improvements from the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac. Some of those programs may require an energy audit as a prerequisite, so having one in hand could speed the process.

During a residential sale transaction, home buyers will then have the information they need to pursue improvements that could lower utility bills and make homeownership more affordable in the long term. In addition, knowing that a specific home is expected to have high energy costs could help a prospective home buyer avoid making a costly mistake. 

An energy labeling program could cast a wider net than an energy audit, in that it could encompass units for rent as well as commercial properties. Lower-income households are far more likely to rent and therefore be impacted by this program. Lower-income households, whether homeowners or renters, typically are in older properties and pay a larger percentage of their income for energy costs.

Additional research and discussion are needed to determine if it is more appropriate to have the seller incur the costs of the energy audit instead of the buyer. Negative impacts could include higher closing costs for the buyer or the seller, so it would be beneficial to determine how this is addressed in the residential sales contract.

If sellers were required to have an audit done before listing the home, buyers would have that data available to them while browsing the multiple listing service (MLS). Knowing that their house has a low score may motivate a seller to make inexpensive improvements such as caulking and weatherstripping before listing. This would also eliminate any perception that an energy audit could slow down the buying process. It would also eliminate redundancies where the audit ends up being performed multiple times at the same house if multiple buyers back out or have funding fall through.

Unfortunately, the full effects of an energy audit and labeling program are unknown for Nevada and further analysis is needed to determine how this would benefit the LMI community, communities of color, and Indigenous communities. Additionally, collaboration with the real estate industry is needed to ensure the appropriate balance of policy benefits and respect for private property rights is achieved.

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INTEGRATED ECONOMIC ASSESSMENT

The consideration and implementation of rulemaking around home buyer energy audits and energy labeling requires coordination among the GOE, the Department of Business & Industry (Real Estate Division & Financial Institutions Division), the Nevada Legislature, and local governments, in consultation with the Nevada Division of Environmental Protection (NDEP).

To implement policies such as these, the cost to the state would likely be minimal. However, further research is required to determine how many new full-time equivalent (FTE) staff would be required. Based on programs implemented in other states, it is likely that the agency responsible for oversight, implementation, and compliance would need funding to administer and support the programs.

In Utah, HB 235 (2020) created a home energy information pilot program led by Office of Energy Development (OED). This program is designed to develop a scorecard that home buyers and realtors may use to assess energy efficiency of a home, energy use, and emissions associated with energy use of a home as compared to homes of a similar type. The bill provided a one-time general fund appropriation of $50,000 to the OED in FY 2021.

In Montana, energy labeling stickers must be affixed to the electrical panel of all new residential buildings. While the staffing and budget costs are unclear, the Energy Efficiency and Compliance Assistance division shows the need for at least 1 and up to 7 FTE.

The actual staffing and budget for Nevada to implement these policies is unknown. Further research must be conducted in order to determine what these needs would be.

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IMPLEMENTATION FEASIBILITY

The Nevada Legislature may need to pass new legislation and amend existing legislation to implement this policy. It appears that the Nevada Revised Statutes do not provide explicit legal authority to require disclosure of the cost of operating a home or business before sale of commercial property, or before leasing residential or commercial property. 

NRS 113.120 grants the Nevada Real Estate Division (NRED) authority to adopt regulations prescribing the format and contents of a form for disclosing the “condition” of residential property offered for sale, including the condition of any electrical, heating, cooling, plumbing, and sewer systems on the property, and of the condition of any other aspects of the property which affect its use or value (NRS 113.120(1)). The form must allow the seller to indicate whether or not each of those systems and other aspects of the property has a defect of which the seller is aware. 

This statute may not grant NRED authority to require disclosure of the cost of operating a residence, including energy costs. NRS 113.120 focuses on the condition of equipment (e.g., whether it is working properly or defective). The cost of operating a property, including energy cost, is not necessarily related to the condition of equipment. Equipment may be in perfect condition, working properly, with no defects, and have high (or low) operating costs. 

NRS 645D sets forth the requirements for conducting an energy audit. However, NRS 645D does not specifically discuss incorporating energy audits into the home-buying process. NRED determines what a seller must disclose during the home-buying process through NRS 113.120. Although this statute provides authority to prescribe the format and contents of the disclosure form, it does not impose an obligation to perform a home inspection or an energy audit, nor does it explicitly authorize NRED to impose such obligations. 

Neither home energy labeling nor energy audits are currently required in Nevada before selling or renting a home. The legislature could amend NRS 113.120, and NRED could amend NAC 113.150 and the residential disclosure form to implement this policy.

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