Energy efficiency standards for household appliances have been adopted in many countries to mitigate negative externalities, reduce emissions, and save energy. Using Chinese provincial-level panel data from 2008 to 2018, this paper builds a difference-in-difference model to examine the mechanism by which energy-efficiency upgrades in China’s air conditioners affect urban household electricity usage. The results show that the upgrades have brought about an obvious reverse effect, with urban household electricity usage increasing rather than decreasing. Reducing the unit costs of energy service has enhanced residents’ sensitivity to cooling demand. Driven by the substitution and income effects, urban residents may increase the intensity and frequency of their AC use. Additionally, this reverse effect is heterogeneously dependent on the family size and urban residents’ age structure rather than their educational level. When families are larger and have more children, the reverse effect is more pronounced. This paper’s findings provide useful recommendations for policy-makers to formulate policies that are synergistic with energy efficiency standards for household appliances.