From the U.S. Government Accountability Office, www.gao.gov Transcript for: Watchdog Report #9: Covert Testing of the Energy Star Certification Program Audio interview by GAO staff with Greg Kutz, Managing Director, Forensic Audits and Special Investigations Released on: March 10, 2010 [ Background Music ] [ Narrator: ] Welcome to GAO's Watchdog Report, your source for news and information from the Government Accountability Office. It's March 10th, 2010. The Energy Star Certification Program, a project of the Environmental Protection Agency and the Department of Energy, labels energy-saving products to promote efficiency. You may have seen Energy Star labels on everything from light bulbs and refrigerators, to windows and roofing materials. But what does it take to get an Energy Star certification? A group led by Greg Kutz, Managing Director of GAO's Forensic Audits and Special Investigations team, recently tested the reliability of Energy Star's certification process. GAO analyst Jeremy Cluchey sat down with Greg to learn more. [ Jeremy Cluchey: ] How does the Energy Star Program work? [ Greg Kutz: ] The Energy Star Program was started in the early 1990s to reduce greenhouse emissions and lower energy costs for consumers. What companies do is apply for Energy Star partnership, and once they become partners, they can then submit products for Energy Star certification. Once a product is certified, it can be marketed by the company to consumers and it can have that famous Energy Star seal affixed to the product. [ Jeremy Cluchey: ] Your team set out to test the integrity of the Energy Star certification process. Can you talk about that process and how you went about investigating it? [ Greg Kutz: ] Sure. Following what I just told you there that we set up four bogus companies to actually test what the certification process was. All four of our bogus companies were accepted as Energy Star partners. Once we were accepted as Energy Star partners we applied with 20 different products for those four companies, 15 of which were approved for Energy Star certification, 2 were rejected, and 3 we never heard back. [ Jeremy Cluchey: ] Can you tell me a little bit about the sorts of products that GAO submitted? [ Greg Kutz: ] Yeah, we started with products that were pretty typical: computer monitors, dishwashers, HVAC systems. Then once we saw that it looked like it was really a rubber stamp or a self-certification program, we got a little bit more aggressive and we used the gas-powered alarm clock which is probably the most egregious example of something that was approved. And another real interesting example was a geothermal heat pump which is a high-end product, very costly product, and the product we had to certify had 20 percent more energy efficiency than any product certified by Energy Star. [ Jeremy Cluchey: ] Under what sort of timeline were these products certified by the Energy Star program? [ Greg Kutz: ] Some of them within a matter of minutes, others took hours, and some took days. But literally some of the products took a matter of a few minutes, meaning it's not clear whether human beings got involved or whether the system simply had certain edit checks and accepted the product. But certainly in a few minutes you can't do any validation. Even in a few hours you can't do much of a validation. [ Jeremy Cluchey: ] What were the ramifications for this certification of these products? Were you contacted by any real companies that were relying on the Energy Star certification? [ Greg Kutz: ] Yes, we had a--four of our companies were Energy Star partners and one of those partners was actually contacted by two real companies who, relying upon the Energy Star certification and the partnership, wanted to buy products from our company, wanted to set up a relationship with our company to buy our bogus products. [ Jeremy Cluchey: ] Are there consequences for companies that fraudulently self-certify their products with Energy Star? [ Greg Kutz: ] There have been a couple of companies we’re aware of that have been found to have misrepresented their products, but for the most part we haven't seen a whole lot of action with respect to companies identified with bogus products or products that have bogus certifications from a standpoint of overrepresenting their energy savings. And given it's a self-certification process, that's why we believe this is very vulnerable to fraud and abuse. [ Jeremy Cluchey: ] What steps can EPA and the Department of Energy take to strengthen the integrity of the Energy Star certification process? [ Greg Kutz: ] Well, again, as I mentioned right now it is more of a self-certification process, so if you're going to call it a certification process, our view would be you need to have some sort of risk-based certification controls in place where let's say for your more expensive products or your more high-energy consumption products, let's say the geothermal heat pump, those should have more due diligence than a bathroom ceiling fan, for example. It doesn't seem right now there's any risk basis or any dollar basis or any energy consumption basis for products that have due diligence. So more due diligence probably on a risk basis. [ Jeremy Cluchey: ] Based on GAO's findings in this report, what would you say are the major implications for consumers of the Energy Star certification process? [ Greg Kutz: ] Well I believe consumers in the past have believed that the Energy Star certification was just that. Our report shows that it's more of a self-certification. So there's a little bit of a buyer beware behind this to make sure that you know that the products you're buying are what they say they are and not necessarily to pay a lot more for an Energy Star product unless you're certain that it truly is more efficient than the competitive product. [ Background Music] [ Narrator: ] To learn more, visit GAO's Web site at GAO.gov and be sure to tune in to the next edition of GAO's Watchdog Report for more from the congressional watchdog, the Government Accountability Office.