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'Second price tag': a product costs more than you think

Posted by Tony Mauro

You've decided to make a big purchase: a big screen TV, a new kitchen appliance, or some other large electrically-powered device. Now comes the joy of price comparison.

Wait! Did you know that you continue to pay for the product after you've brought it home? And I'm not talking about credit card payments. Electronic powered devices obviously need electricity, and you have to pay for for what we like to call "The Second Price Tag".

When we strip features out of the equation and look at like products that have a differing price it's easy to scratch your head and then buy the cheaper product. At least until you investigate the real price. Most appliances – and soon TVs as well – all sport a nice sticker to help you understand the Second Price Tag. It's the EnerGuide Rating label.

The large number (485kWh in this example) is the annual energy consumption of the product as measured by very detailed testing guidelines for what a bunch of engineers and marketing people figured was "normal" use. Use this number to get a very rough estimate on how much the appliance will cost to operate each year, then compare that cost against that of other products.

Lets take a look at how to calculate this.

First we want to figure out what the annual cost to operate to operate the product is:

EnerGuide rating (kWh/year) X local electricity costs ($/kWh) = Annual Electricity Cost.

Second, we need to take a shot at how long the product is likely to last before it is replaced:

Annual electricity cost ($/year) X appliance life (years) = Lifetime Electricity Cost

Lifetime cost

Right about now, you're probably wondering how to figure out how long the appliance will last. Well, the wonderful folks at Natural Resources Canada have a rough guideline shown in the picture to the right.

Crunching the numbers: the true cost

Here's a full example, using B.C.'s blended residential electricity rate, based on the sample EnerGuide label (above) compared to a super efficient product you might buy:

Product 1: Most Efficient

Annual electricity cost calculation:

95kWh X $0.08/kWh = $7.50

Lifetime electricity cost calculation:

$7.50 X life expectancy (14 years) = $105

Product 2: Least Efficient

Annual electricity cost calculation:

485 kWh X $0.08/kWh = $38.80

Lifetime electricity cost calculation:

$38.80 X life expectancy (14 years) = $543

That's a $438 difference. So maybe the extra purchase cost was worth it, based on the Second Price Tag.

As I mentioned in the beginning, EnerGuide labels only apply to appliances, but there is work to incorporate their use on products such as TV so that you can also calculate the Second Price Tag of TVs. In addition, you can always hop over to ENERGY STAR Canada and look at the list of products for energy use comparisons.

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Tony Mauro is an engineer with BC Hydro Power Smart. In addition to contributing to Unplug This Blog!, his blog posts also appear on Futureshop.ca's BrandTalk blog.