UPDATED... November 2005

Efficiency Measures, Upgrading Old Equipment Are Best Bets for Reducing High Energy Costs

With sky-high oil and gas prices this winter, residential consumers can reap significant returns on their money by investing in energy efficiency measures, according to a new report by the Consumer Energy Council of America (CECA). The CECA report, "Smart Choices for Consumers: Analysis of the Best Ways to Reduce High Heating Costs," examines three categories of investments strategies available to residential consumers: (1) investing in energy efficiency measures, (2) investing in upgrading older equipment, and (3) investing in converting from one fuel to another fuel. The report then details which measures produce the best returns for consumers.

CECA analyzed a variety of approaches to saving energy, from the simple "house doctoring" which includes plugging leaks around doors and electrical outlets, to full scale insulation of walls and ceilings, to installation of a flame retention burner in older oil heating equipment. The CECA report points out that with current fuel costs, low cost measures yield high returns. Some examples of excellent low cost investments include:

• Programmable thermostat - with a return of up to 124%, this is one of the cheapest measures, yet produces the biggest bang for the buck.
• Ceiling insulation - since most of the heat rises through the attic, more insulation can provide a 41% return on investment.
• Flame retention burner - changing the burners in older oil systems to new flame retention burners can provide a 34% return on investment.

In examining the different heating equipment, the CECA report determines that the age and the efficiency level of the consumer's old equipment makes all the difference. Many older oil and gas systems are significantly less efficient than modern systems, so upgrading a system more than 15 years old could produce excellent fuel savings and a positive return on the investment. For example:

• Furnaces - consumers with older gas and oil furnaces can achieve returns of up to 25% by upgrading to modern high efficiency equipment.
• Boilers - consumers with older gas and oil boilers can achieve returns of up to 15% by upgrading to modern high efficiency equipment.

On the other hand, federal efficiency guidelines took effect roughly 15 years ago, mandating efficiency levels of at least 78-80%. Consumers who have heating equipment less than 15 years old are advised to consider alternate investments, as upgrading would not be economic.

The CECA report also addresses whether residential consumers can save money on fuel costs by switching from one fuel to another. CECA's analysis shows that various factors affect the day-to-day prices of oil and gas, but over the long run, the market brings prices back in line with each other. This has been true over the past 25 years, and the analysis shows nothing that would interrupt this trend.

Price spikes caused by Hurricanes Katrina and Rita make it tempting to consider exploiting price differences. CECA analysis concludes that since equipment lasts for 20 years, switching fuels is a costly and long-term gamble. Investments in efficiency, on the other hand, save both money and energy for the residential consumer.