Builder KB Home Copies Cars' 'MPG' With 'EPG' Energy Guide

One of the nation's largest home builders is borrowing from another beleagured industry--automotive--to help sell homes.

KB Home (KBH) this week is rolling out an Energy Performance Guide, dubbed the "EPG." Modeled after a car's MPG, which tells buyers how many miles can be driven on a gallon of gas, EPG estimates a home's monthly utility payments. The EPG scale, on which a lower score means higher energy efficiency and lower bills, will be posted in all model homes and a certificate will be presented to the buyer upon purchase.

The rating, which Los Angeles-based KB Home says is the first of its kind for a national builder, is the latest idea from companies competing to one-up each other with environmentally friendly features.

Last month, KB Home partnered with Martha Stewart Living Omnimedia Inc. (MSO) to unveil a Florida concept home that includes solar panels on the roof, kitchen composting bins and a rainwater-collection system. Meritage Homes Corp. (MTH) recently opened six new energy-efficient communities that it says can decrease monthly utility usage by up to 67%. Beazer Homes USA Inc. (BZH) is adding features to conserve water and energy and improve air quality.

For years, green houses were too pricey to be mass produced, and it is only in the last few years that builders have been able to tap green technology. While companies excitedly tout these green offerings, consumers haven't shown great interest. Buyers have long been more concerned about location and price and unwilling to pay extra for features with values that may be hard to understand.

"I will build whatever the market demands," said Eric Lipar, chief executive of LGI Homes, a Texas-based builder. "It's not what the public wants."

KB Home, however, thinks its EPG initiative will help it stand out in a crowded market, albeit one where new home buyers are few and far between these days. "It's going to be a game changer in our industry, and when I say industry, it's new and resale," said Chief Executive Jeff Mezger.

The concept is simple: Tell buyers now how much to expect with utility bills instead of their being surprised later. Under the EPG scale, new homes are rated, on average, about 100, while resale homes come in around 130. KB Homes score an average 82, making them 48% more energy efficient than the typical resale home, the company says. A third party will calculate the ranking for each home using local utility rates and average power usage.

But given consumers' practices with MPG stickers--the public's affection for gas-guzzling vehicles makes them seem more like window dressing--one has to wonder if buyers will pay attention. Mezger pointed out that those buyers knew up front what they were purchasing.

Meanwhile, Wall Street will likely need convincing of the value. "We really like KB Home's stock, but we don't think being green is a primary reason to buy one of their homes," said Robert Wetenhall Jr., a home-builder analyst with RBC Capital Markets.

An undeterred Mezger said KB Home is already at work on its next green initiatives. "Stay tuned," he said.

-By Dawn Wotapka, Dow Jones Newswires; 212-416-2193; [e-mail];