Federal ‘Cash for Appliances’ Program Should Spur Sales

11 September 2009 10,163 views No Comment

RISMEDIA, September 10, 2009—(MCT)—Did you recently trade in that old clunker for a new car? OK, so how are you fixed for a new refrigerator? Or maybe a new dishwasher or heat pump?

Brace yourself. A federal “cash for appliances” program is likely on its way to a store near you before the end of the year. Comparatively unnoticed in the economic stimulus package approved by Congress earlier this year was a $300 million program offering rebates to buyers of more energy-efficient appliances and other products with the Energy Star label.

The Energy Star conservation program was created in 1992 by the U.S. Environmental Protection Agency and evolved into an international standard for energy-efficient consumer products. Products with the Energy Star seal — they can range from a building to central air conditioners to computers — typically are 10% to 30% more energy efficient than comparable products.

Just like the recently completed Cash for Clunkers program, the more modest cash for appliances program is designed to boost the U.S. economy through consumer spending and take less energy-efficient products out of circulation.

Yet, it differs from Cash for Clunkers on key points. The individual states will run their own appliance rebate programs, and consumers will not have to haul their bulky appliances to a store in exchange for new ones.

State and federal officials, including those at the Department of Energy, which is overseeing appliance rebate funds, recently stressed that they’re still working on the details. States and some U.S. territories have until Oct. 15 to present DOE with a plan for how they want to implement their cash for appliances programs.

That’s one of the concerns. Different states will likely propose varying products that qualify for varying rebate amounts, expected to range from $50 to $200.

Yet DOE insisted that states do the tailoring of programs for their jurisdictions.

“The Department of Energy has a lot of confidence that the states will implement it effectively,” said DOE spokeswoman Jen Stutsman. “The rebate programs will build off existing state and utility rebate programs and make use of appliances in a particular climate that yield the most energy savings.” Stutsman said DOE expects the state programs to allow “piggybacking.” In other words, if you buy an energy-efficient refrigerator that qualifies for a $100 rebate from the Sacramento Municipal Utility District, you’d get that on top of the federal rebate.

That multiple-rebate possibility is appealing to Christopher Zajic, owner and manager of Zajic Appliance Sales & Service in Sacramento. “It seems almost too good to be true. That would be something if that’s what they’re going to do — and right before Christmas,” he said. “People are always looking for energy-efficient appliances, so yeah, I absolutely think that could help.” Zajic’s store has rows of gleaming, energy-saving washers, dryers, ranges, ovens and more. He said sales and service revenue is up compared with last year, but the U.S. home appliances industry overall has been lagging.

Through the first six months of this year, home appliance sales nationwide totaled $7.6 billion, compared with $8.5 billion in the year-ago period, according to the U.S. Census Bureau’s retail trade survey. The possibility of a late-year boost in appliance sales appeals to big-box retailers. “We’re very excited about the program. We’re looking forward to participating in it,” said Kathryn Gallagher, spokeswoman for Home Depot’s Western division. “It has a lot of benefit to it. Energy efficiency is something we continually drive,” she said, adding that the program would help consumers save energy and money. “We think this might prompt people to buy appliances who might otherwise wait a couple years to buy,” Gallagher said. She added that “we’re hopeful for a consistent program a across all 50 states because we have stores in all 50 states.”

Cash for appliances has been endorsed by the Washington-based Association of Home Appliance Manufacturers, which said shipments of new appliances are off about 15 percent this year compared with 2008. Not everyone, however, is pleased with the concept. Republican critics have charged that the Obama administration is setting a dangerous precedent by offering “free government money” in troubled industries that need to operate more efficiently.

Major appliance makers like General Electric, Whirlpool and Electrolux have grumbled that the $300 million program is too small to boost their fortunes.

Los Angeles-based sales analyst and author Grant Cardone agrees, characterizing cash for appliances as “a Band-Aid solution.” He said: “Quick fixes like the cash for appliances program are OK for the short term but won’t be enough to uplift a downtrodden appliance industry in this slow economy.”

Sacramento shopper Sarah Lopez was likewise skeptical as she eyed appliances at Best Buy. “I don’t know if $50 or $200 is going to make a difference. … I’m really worried about how we’re going to pay back all this money the government is putting down,” she said.

But at the nearby Lowe’s Home Improvement Center, Audrey Buchanan saw promise: “If you can get $200 on top of a (utility) rebate on top of a deal a store might be offering at Christmas … yes, I think that would get me to buy a new refrigerator.”

Federal Rebate Plan Takes Shape

Offficials are still working out details of a proposed “cash for appliances” program that would enable consumers to get rebates on purchases of more energy-efficient home appliances. The program might not take effect until late fall, but here’s how it’s shaping up:

—States that want to participate must present a finalized plan by Oct. 15. That could be tricky, as differing states likely will propose varying rebate amounts and varying appliances to qualify for rebates. Some are already calling for the Department of Energy to adopt a national plan.

—Assuming federal approval, states will receive varying parts of the $300 million. The distribution formula is $1 for every resident in a given state. As the most populous state, California stands to receive about $35.2 million.

—DOE expects about 10% to 25% of federal funding to the states will be spent on administrative costs.

—DOE anticipates that “a vast majority of funding” will be awarded by Nov. 30.

—DOE has not disclosed rebate amounts. The Washington-based Association of Home Appliance Manufacturers believes rebates will range from $50 to $200.

—New appliances must bear the Energy Star label.

—DOE recommends states focus their programs on heating/cooling equipment, appliances and water heaters “as these products offer the greatest energy savings potential.” Energy Star-qualified appliances include central/room air conditioners, heat pumps, boilers, furnaces, clothes washers, dishwashers, freezers, refrigerators and water heaters.

—Transporting the old appliance to a store is not required. Many retailers haul away old appliances for little or no charge under terms of appliance purchase deals. Utilities also have pickup-and-recycling plans. DOE is encouraging states to develop recycling plans in their proposals.

—DOE expects state programs to offer federal rebates in addition to existing rebates on energy-efficient appliances. SMUD, for example, has rebates of $100 to $200 for high-efficiency washers and $100 for efficient refrigerators.

Distributed by McClatchy-Tribune Information Services.

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