This paper first demonstrates that an efficient design for a house in conditioned operation mode differs from that for the Same house in the free-running operation mode. and that this is a primary reason for the inability of current energy based rating schemes to adequately assess the performance of passive design in a temperate climate. We examine the Australian Nationwide House Energy Rating Scheme as an example of this problem. A new practical framework for a house rating scheme is then presented. In this proposed framework, the efficiency of a house design is evaluated with reference to its thermal performance in free-running mode, in addition to its projected energy loads in conditioned operation mode. The study uses simulation to evaluate the thermal performances of houses, and employs multiregression analysis to develop the framework. The reliability of proposed framework as compared to the current energy based rating scheme is demonstrated. By attributing more value to the performance of houses in the free-running than the conditioned operation, it is assumed that policy objectives for reducing energy demand for space heating and cooling in the residential building sector are more likely to be achieved. (C) 2008 Elsevier B.V. All rights reserved.