EE-RM/STD-98-440 3 o /

36368 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

DEPARTMENT OF ENERGY Office of Energy Efficiency and b. Rebound Effect

Renewable Energy's (EERE) Web site at: 5. Rebuttable Payback Period

Office of Energy Efficiency and http//www.eren.doe.gov/buildings/ ShipmentsNational Energy Savings

Renewable Energy codes_standards/applbrf/ . ets e at cdesnstralair~conditioaer hmlb2. Heat Rates

central_airconditioner.html. 3. Fuel Switching

10 CFR Part 430 FOR FURTHER INFORMATION CONTACT D. Impact on Manufacturers

[Docket Number EE-RM-98-4401 Michael Raymond, U.S. Department of 1. Cumulative Regulatory Burden

Energy, Office of Energy Efficiency and 2. Financial Burdens Associated with New

RIN 1904-AA7 7 Efficiency Standards RIN~ ~1904-AA77 Renewable Energy, Forrestal Building, 3. Small Manufacturers

Energy Conservation Program for EE-41, 1000 Independence Avenue, 4. Manufacturer Cot Estimates

Consumer Products; Central Air SW., Washington, DC 20585-0121, (202) E Effect on Competition

Conditioners and Heat Pumps Energy 586-0854, e-mail: F. Effect on Utility or Performance

Conservation Standards michael.raymond@ee.doe.gov, or 1. Dehumidification

Michael Bowers, Esq., U.S. Department G. Electric System Reliability/Peak Power

AGENCY: Office of Energy Efficiency and of Energy, Office of General Counsel, 1. Peak Power

Renewable Energy, Department of Forrestal Building, GC-72, 1000 2. Reliability

Energy. Independence Avenue, SW., H. Other Issues

ACTION: Final rule. Washington, DC 20585, (202) 586-9507, 2. TXV Requirement

SUMMARY: The Department of Energy e-mail: mike.bowers@hq.doe.gov. 3. State Exemption From DOE Standards

SUMMARY: The Department of Energy SUPPLEMENTARY INFORMATIOl 4. Effective Date

(DOE) today amends the existing energy 4. Effective Date

conservation standards for central air Table of Contents. Employment Impacts conditioners and heat pumps by raising Table of Contents 6. Employment Impacts

conditioners and heat pumps by raising I. Introduction 7. Space-Constrained Products

the minimum energy efficiency levels I. Rulemaking History a. Through-the-Wall Products

by 20 percent for most central air III. Authority of DOE to Reconsider and b. Small Duct, High Velocity Systems

conditioners and heat pumps, with Withdraw the January 22, 2001 Final 8. Basis for HSPF Level

somewhat lower levels for certain space- Rule and Adopt a 12 SEER Standard for 9. Non-Regulatory Approaches

constrained products. DOE also today Central Air Conditioners 10. Energy Policy

withdraws a final rule, published on A. DOE's Analysis of EPCA's Anti- VII. Analytical Results and Conclusions

January 22, 2001, that would have Backsliding Provision A. Overview of Analytical Results

established even higher standards. DOE B. Discussion of Public Comments on the 1. General

has determined that the standards in the Anti-Backsliding Provision 2. Through-the-Wall Products

has determined that the standards in the 1. Environmental Advocates' Views 3. Small Duct, High Velocity Systems

January 22 final rule, which never 2. ARI's Views B. Conclusions Regarding Conventional

became effective, are not economically IV. Basis for DOE's Decision to Withdraw the Products

justified under the Energy Policy and January 22, 2001 Final Rule C. Conclusions Regarding SpaceConservation Act (EPCA). Finally, DOE A. Legal Issues Constrained Products

adopts provisions that clarify the point B. Policy Issues 1. Through-the-Wall Products

in time at which DOE's discretion to V. Amended Energy Conservation Standards 2. Small Duct, High Velocity Systems

amend standards becomes limited under A Overview V P R

1. Central Air Conditioner and Heat Pump Review

EPCA. Features A. Review Under the National

DATES: The final rule amending 10 CFR 2. Consumer Benefits Environmental Policy Act

part 430 published January 22, 2001 (66 3. National Benefits B. Review Under Executive Order 12866

FR 7170) is withdrawn as of May 23, B. Statutory Framework C. Review Under the Regulatory Flexibility

2002. The effective date of the C. Methodology Used in DOE Analyses Act

amendments to the Code of Federal D. General Discussion of DOE's D. Review Under the Paperwork Reduction

Regulations in this rule is August 6, Consideration of Statutory Criteria E. Review Under Executive Order 12988

2002. . Technological Feasibility F. Review Under Executive Order 12630

2. Economic Justification Factors . Review Under Executive Order 13132

ADDRESSES: You may read copies of the a. Economic Impact on Manufacturers and H. Review Under the nfunded Mandates

public comments, the Technical ConsumersRefo Act f 199

Support Document for Energy Efficiency b. Life-cycle Costs and Rebuttable Re Under the Treasury and General

Standards for Consumer Products: Presumption Government Appropriations Act, 1999

Central Air Conditioners and Heat c. Energy Savings J. Review Under Executive Orde 13211

Pumps (TSD), the transcript of the d. Lessening of Utility or Performance of K. ongressiona Notification

public public hearing, hearing, workshop transcripts inin e. Impact of Lessening of Competition I. Introduction

his proceeding, the petition forsubmitt f. Need of the Nation to Conserve Energy DOE today publishes three final reconsideration submitted by the Air- g. Other Factors

Conditioning and Refrigeration Institute, VI. Discussion of Comments rulemaking determinations with respect

and other post-promulgation A. Impact on Consumers to amended central air conditioner and

submissions at the DOE Freedom of 1. Low-Income Consumers heat pump energy conservation

Information (FOI) Reading Room, U.S. 2. Electricity Prices standards under section 325 of the

Department of Energy, Forrestal 3. Installation Costs Energy Policy and Conservation Act (42

Building, Room 1E-190, 1000 4. Manufactured Housing Owners U.S. Code (U.S.C.) Section 6295). First,

Indep dence venue SW.B. Life-Cycle Cost an Payback Period for reasons described in detail in

Independence Avenue, SW., 1. Product Lifetime

Washington, DC 20585, (202-586-3142), 2. Warranty, Maintenance, and Service Section IV of this Supplementary

between the hours of 9 a.m. and 4 p.m., Costs Information, DOE hereby withdraws the

Monday through Friday, except Federal 3. Markups January 22, 2001 final rule that would

holidays. You may obtain copies of the 4. Energy Use have established 13 as the mandatory

TSD and analysis spreadsheets from the a. Residential Energy Consumption Survey Seasonal Energy Efficiency Rating

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440 :H304 

36368 Federal Register / Vol. 67, No. 100/ Thursday, May 23, 2002/ Rules and Regulations 

DEPARTMENT OF ENERGY 

Office of Energy Efficiency and 

Renewable Energy 

10 CFR Part 430 

[Docket Number EE-RM-98-440) 

RIN 1904-AA77 

Energy Conservation Program for 

Consumer Products; Central Air 

Conditioners and Heat Pumps Energy 

Conservation Standards 

AGENCY: Office of Energy Efficiency and 

Renewable Energy. Department of 

Energy. 

ACTION: Final rule. 

SUMMARY: The Department of Energy 

(DOE) today amends the existing energy 

conservation standards for central air 

conditioners and heat pumps by raising 

the minimum energy efficiency levels 

by 20 percent for most central air 

conditioners and heat pumps, with 

somewhat lower levels for certain spaceconstrained products. DOE also today 

withdraws a final rule, published on 

January 22, 2001, that would have 

established even higher standards. DOE 

has determined that the standards in the 

January 22 final rule, which never 

became effective, are not economically 

justified under the Energy Policy and 

Conservation Act (EpeA). Finally. DOE 

adopts provisions that clarify the point 

in time at which DOE's discretion to 

amend standards becomes limited under 

EPCA. 

DATES: The final rule amending 10 CFR 

part 430 published January 22, 2001 (66 

FR 7170) is withdrawn as of May 23, 

2002. The effective date of the 

amendments to the Code of Federal 

Regulations in this rule is August 6, 

2002. 

ADDRESSES: You may read copies of the 

public comments, the Technical 

Support Document for Energy Efficiency 

Standards for Consumer Products: 

Central Air Conditioners and Heat 

Pumps (TSD), the transcript of the 

public hearing, workshop transcripts in 

this proceeding, the petition for 

reconsideration submitted by the AirConditioning and Refrigeration Institute, 

and other post-promulgation 

submissions at the DOE Freedom of 

Information (FOI) Reading Room, U.S. 

Department of Energy, Forrestal 

Building, Room lE-190, 1000 

Independence Avenue, SW .• Washington, DC 20585, (202-586-3142), 

between the hours of9 a.m. and 4 p.m., 

Monday through Friday, except Federal 

holidays. You may obtain copies of the 

TSD and analysis spreadsheets from the 

Office of Energy Efficiency and 

Renewable Energy's (EERE) Web site at: 

http://www.eren. doe.govlbuildingsl 

codes_standardslapplbrfl 

centraCair_conditioner.html. 

FOR FURTHER INFORMA1l0N CONTACT. 

Michael Raymond, U.S. Department of 

Energy, Office of Energy Efficiency and 

Renewable Energy, Forrestal Building, 

EE-41, 1000 Independence Avenue, 

SW., Washington, DC 20585-0121, (202) 

586-0854, e-mail: 

michael.raymond@ee.doe.gov, or 

Michael Bowers, Esq., U.S. Department 

of Energy. Office of General Counsel, 

Forrestal Building, GC-72, 1000 

Independence Avenue, SW., 

Washington, DC 20585, (202) 586-9507, 

e-mail: mike.bowers@hq.doe.gov. 

SUPPLEMENTARY INFORMATIOJlt 

Table of Contents 

J. Introduction 

II. Rulemaldng History 

III. Authority of DOE to Reconsider and 

Withdraw the January 22, 2001 Final 

Rule and Adopt a 12 SEER Standard for 

Central Air Conditioners 

A. DOE's AnalYSis of EPCA's AntiBacksliding Provision 

B. Discussion of Public Comments on the 

Anti-Backsliding Provision 

1. Environmental Advocates' Views 

2. ARI's Views 

IV. Basis for DOE's Decision to Withdraw the 

January 22, 2001 Final Rule 

A. Legal Issues 

B. Policy Issues 

V. Amended Energy Conservation Standards 

A. Overview 

1. Central Air Conditioner and Heat Pump 

Features 

2. Consumer Benefits 

3. National Benefits 

B. Statutory Framework 

C. Methodology Used in DOE Analyses 

D. General Discussion of DOE's 

Consideration of Statutory Criteria 

1. Technological Feasibility 

2. Economic Justification Factors 

a. Economic Impact on Manufacturers and 

Consumers 

b. Life-cycle Costs and Rebuttable 

Presumption 

c. Energy Savings 

d. Lessening of Utility or Performance of 

Products 

e. Impact of Lessening of Competition 

f. Need of the Nation to Conserve Energy 

g. Other Factors 

VI. Discussion of Comments 

A. Impact on Consumers 

1. Low-Income Consumers 

2. ElectriCity Prices 

3. Installation Costs 

4. Manufactured Housing Owners 

B. Life-Cycle Cost and Payback Period 

1. Product Lifetime 

2. Warranty, Maintenance, and Service 

Costs 

3. Markups 

4. Energy Use a. Residential Energy Consumption Survey 

b. Rebound Effect 

5. Rebuttable Payback Period 

C. Shipments/National Energy Savings 

1. Shipments Forecasts 

2. Heat Rates 

3. Fuel Switching 

D. Impact on Manufacturers 

1. Cumulative Regulatory Burden 

2. Financial Burdens Associated with New 

Efficiency Standards 

3. Small Manufacturers 

4. Manufacturer Cost Estimates 

E. Effect on Competition 

F. Effect on Utility or Performance 

1. Dehumidification 

G. Electric System Reliability/Peak. Power 

1. Peak Power 

2. Reliability 

H. Other Issues 

1. Minimum EER Requirement 

2. TXV Requirement 

3. State Exemption From DOE Standards 

4. Effective Date 

5. Environmental Impacts 

6. Employment Impacts 

7. Space-Constrained Products 

a. Through-the-Wall Products 

b. Small Duct, High VelOcity Systems 

8. Basis for HSPF Level 

9. Non-Regulatory Approaches 

10. Energy Policy 

VII. Analytical Results and Conclusions 

A. Overview of Analytical Results 

1. General 

2. Through-the-Wall Products 

3. Small Duct, High Velocity Systems 

B. Conclusions Regarding Conventional 

Products 

C. Conclusions Regarding SpaceConstrained Products 

1. Through-the-Wall Products 

2. Small Duct, High Velocity Systems 

VIII. Procedural Issues and Regulatory 

Review 

A. Review Under the National 

Environmental Policy Act 

B. Review Under Executive Order 12866 

C. Review Under the Regulatory Flexibility 

Act 

D. Review Under the Paperwork Reduction 

Act 

E. Review Under Executive Order 12988 

F. Review Under Executive Order 12630 

G. Review Under Executive Order 13132 

H. Review Under the Unfunded Mandates 

Reform Act of 1995 

I. Review Under the Treasury and General 

Government Appropriations Act, 1999 

J. Review Under Executive Order 13211 

K. Congressional Notification 

I. Introduction 

DOE today publishes three final 

rulemaking determinations with respect 

to amended central air conditioner and 

heat pump energy conservation 

standards under section 325 of the 

Energy Policy and Conservation Act (42 

U.S. Code (U.S.C.) Section 6295). First, 

for reasons described in detail in 

Section IV of this Supplementary 

Information, DOE hereby withdraws the 

January 22, 2001 final rule that would 

have established 13 as the mandatory 

Seasonal Energy Efficiency Rating 
EE-RM/STD-98440 -- t 3

Federal Register/Vol. 67, No. 100/Thirsday, May 23, 2002/Rules and Regulations 36369

(SEER)' for most central air Proposed Rulemaking (ANOPR) 2000, to hear oral views, data and

conditioners and central air announcing DOE's intention to revise arguments on the proposed rule.

conditioning heat pumps (heat pumps). the existing central air conditioner and On January 22, 2001, at the close of

DOE withdraws the final rule because it: heat pump efficiency standard pursuant the Clinton Administration, DOE

(1) Was promulgated without consulting to section 325(d) of EPCA, as amended published a final rule that would have

with the Attorney General on potential by NAECA. 58 FR 47326. The fiscal year required a SEER of 13 for all classes of

anti-competitive effects, (2) contained a (FY) 1996 appropriations legislation for central air conditioners, except for

material defect in the statement of basis DOE imposed a moratorium on "niche" products which were omitted

and purpose required by the proposed and final energy conservation from the rule, and a corresponding

Administrative Procedure Act (APA), (3) standards. Public Law 104-134. During HSPF of 7.7 for central air conditioning

contained an effective date in conflict the moratorium, DOE responded to heat pumps (Final Rule, "Energy

with the Congressional Review Act's lie- congressional concern about how the Conservation Program for Consumer

before-the-Congress requirement for appliance standards program was Products; Central Air Conditioners and

major rules, and (4) was based on an working by consulting with a broad Heat Pump Energy Conservation

assessment of benefits and burdens that spectrum of interested persons on Standards," 61 FR 7170).

resulted in an erroneous conclusion that possible improvements. As a result, on Pursuant to President Bush's

a 13 SEER standard for both central air July 15,1996, DOE published a new Regulatory Review Plan,3 DOE

condi: ioners and central air policy on how it would conduct conducted an internal review of the

condit. rning heat pumps would be appliance standards rulemaking (61 FR final, not-yet-effective rules issued

cr-,on, ically justified under title III, 36974). The new policy, "Procedures for under section 325 of EPCA that DOE

vmrt B o' the Energy Policy and Consideration of New or Revised Energy published at the end of the Clinton

i :onservetion Act (EPCA) (42 U.S.C. S f Administration, including final rules

1e t (EPCA) (42 U.S.C. Conservation Standards for Consumer concerning energy conservation

( 291 et s q.). Second, DOE adopts Products," is commonly referred to as concerning energy conservation

regulatcry provisions that implement the Process Improvement Rule and is heaters, and central air conditionhewash w ers aternd

secdion '25(o)(1) of EPCA, including codified at 10 CFR part 430, subpart C, central air conditioninhe a nd

defi.itio.u of the statutory terms Appendix A. Under this new policy, nentral air conditioning h eat pumps.

"mam:imun: allowable energy use" and DOE presented for comment an o nteinin wththe a sandard ct el is

"minimum required energy efficiency," analytical framework for the central air economically justified under section

and t:ereby pinpoints the point in time conditioner and heat pump standards 325 (42 U.S.C. 6295(o)(2)(B)), DOE

at which DCE's discretion to alter an rulemaking during a workshop on June examined each of these three rules to

amended standard becomes limited. The 30 1998. The analytical framework determine, among other things, whether

basis for this determination is discussed described the different analyses that the rulemaking rcord was complete

in Section III of this Supplementary DOE would conduct, the methods for and whether the affirmative

Information. Third, DOE finalizes 12 conducting them, the use of new determination of economic justification

SEER and 7.4 Heating System spreadsheets, and the relationship of the was based on adequate findings with

Performance Factor (HSPF) 2 as the various analyses. On November 24, regard to the statutorily required

amended energy conservation standard 1999, DOE published a Supplemental considerations that make up the test of

for most central air conditioners and ANOPR for central air conditioners and conomic justification.

central air conditioning heat pumps and heat pumps and invited additional While DOE examined the three

adopts lower standards for certain comment on issues raised following appliance energy conservation

space-constrained products. The basis publication of the original ANOPR. 64 standards rulemakings under the

for these determiaions is discusse in FR 66306. President's Regulatory Review Plan,

Sections V through VII of this DOE published a notice of proposed DOE received petitions for

Supplementary Information rulemaking on October 5, 2000 (October reconsideration for each final rule. In

H. Rulemaking History 5, 2000 NOPR). 65 FR 59590. The addition, DOE received notice that the

The existing standards for residential energy efficiency standards that DOE Gas Appliance Manufacturers

central air conditioners and heat pumps proposed for residential central air Association (with regard to the water

were prescribed by the National conditioners and heat pumps were as heater rule) and the Air-Conditioning

Appliance Energy Conservation Act of follows: and Refrigeration Institute (ARI) and

1987 (NAECA) (Pub. L. 100-12) and -Split-system and single-package air certain manufacturers (with regard to

have been in effect since 1992. The conditioners-12 SEER the central air conditioner rule) had

current central air conditioner and heat -Split-system and single package heat filed petitions for review in the United

pump efficiency standards are as pumps-13 SEER7.7 HSPF States Court of Appeals for the Fourth

follows: Circuit.

-Through-the-wall air conditioners and Ultimately, DOE decided that neither

-Split system air conditioners and heat heat pumps-11 SEER/7.1 HSPF. the clothes washer rule nor the water

pumps--lo SEER/6.8 HSPF

-Single package air conditioners and In addition to the increase proposed heater rule warranted further

heat pumps-9.7 SEER/6.6 HSPF in SEER and HSPF, DOE requested rulemaking action and denied the

On September 8, 1993, DOE comments on a proposal to adopt a related petitions for reconsideration. See

ublished an Advance Notice of standard for steady-state cooling 66 FR 19714 (April 17, 2001). With

published Advance an efficiency, denominated EER (or Energy regard to central air conditioners and

1 The Seasonal Energy Efficiency Ratio or SEER Efficiency Ratio). The proposal of an central air conditioning heat pumps,

is DOE's measure of energy efficiency for the EER was designed to ensure more DOE concluded that ARI had raised

seasonal cooling performance of central air efficient operation at high outdoor

conditioners and central air conditioning heat temperatures, during periods when 3 This Plan was set forth in a memorandum from

pumps. "electricity u by Assistant to the President and Chief of Staff Andrew pThe Heating Seasonal Performance Factor is electricity by air conditioners is at January22 ad p ed in

DOE's measure of energy efficiency for the seasonal its peak. A public hearing was held in the Federal Register on January 24, 2001 (66 FR

heating performance of heat pumps. Washington, D.C. on November 16, 7702).

EE-RM-STD-98-440 COMMENT 304

.• EE·RM/STD-88-44Q - It ~4 

Federal Register/Vol. 67. No. lOO/Thursday. May 23. 2002/Rules and Regulations 36369 

(SEER) 1 for most central air 

conditioners and central air 

conditioning heat pumps (heat pumps). 

DOE withdraws the final rule because it: 

(1) Was promulgated without consulting 

with the Attorney General on potential 

anti-competitive effects. (2) contained a 

material defect in the statement of basis 

and purpose required by the 

Administrative Procedure Act (APA). (3) 

contained an effective date in conflict 

with the Congressional Review Act's Iiebefore-the-Congress requirement for 

major rules, and (4) was based on an 

assessment of benefits and burdens that 

resulted in an erroneous conclusion that 

a 13 SEER standard for both central air 

condi: ioners and central air 

condit 1ning heat pumps would be 

lCC'"OII. ically justified under title m, 

lurt B 0' the Energy Policy and 

, :onserv,-,tion Act (EPCA) (42 U.S.C. 

( 291 et 5 'q.). Second, DOE adopts 

rllgulatcrr provisions that implement 

sf'clion ~\2':i(0)(1) of EPCA, including 

dP,£;.litio.ll of the statutory terms 

"ma;:imun·. allowable energy use" and 

"min.;mum required energy efficiency," 

and tl:ereby pinpoints the point in time 

at whkh DeE's discretion to alter an 

amende.:! ~~andard becomes limited. The 

basis for this determination is discussed 

in Section III of this Supplementary 

Information. Third, DOE finalizes 12 

SEER and 7.4 Heating System 

Performance Factor (HSPF) 2 as the 

amended energy conservation standard 

for most central air conditioners and 

central air conditioning heat pumps and 

adopts lower standards for certain 

space-constrained products. The basis 

for these determinations is discussed in 

Sections V through VII of this 

Supplementary Information 

n. Rulemaking History 

The existing standards for residential 

central air conditioners and heat pumps 

were prescribed by the National 

Appliance Energy Conservation Act of 

1987 (NAECA) (Pub. L. 100--12) and 

have been in effect since 1992. The 

current central air conditioner and heat 

pump efficiency standards are as follows: 

-Split system air conditioners and heat 

pumps-10 SEER/6.8 HSPF 

-Single package air conditioners and 

heat pumps-9.7 SEER/6.6 HSPF 

On September 8, 1993, DOE 

published an Advance Notice of 

1 The Seasonal Energy Efficiency Ratio or SEER 

is DOE's measure of energy efficiency for the 

seasonal cooling performance of central air 

conditioners and central air conditioning heat 

pumps. 

2 The Heating Seasonal Performance Factor is 

DOE's measure of energy efficiency for the seasonal 

heating performance of heat pumps. 

Proposed Rulemaking (ANOPR) 

announcing DOE's intention to revise 

the existing central air conditioner and 

heat pump efficiency standard pursuant 

to section 325(d) of EPCA, as amended 

by NAECA. 58 FR 47326. The fiscal year 

(FY) 1996 appropriations legislation for 

DOE imposed a moratorium on 

proposed and final energy conservation 

standards. Public Law 104-134. During 

the moratorium, DOE responded to 

congressional concern about how the 

appliance standards program was 

working by consulting with a broad 

spectrum of interested persons on 

possible improvements. As a result, on 

July 15, 1996, DOE published a new 

policy on how it would conduct 

appliance standards rulemaking (61 FR 

36974). The new policy, "Procedures for 

Consideration of New or Revised Energy 

Conservation Standards for Consumer 

Products," is commonly referred to as 

the Process Improvement Rule and is 

codified at 10 CFR part 430, subpart C, 

Appendix A. Under this new policy, 

DOE presented for comment an 

analytical framework for the central air 

conditioner and heat pump standards 

rulemaking during a workshop on June 

30, 1998. The analytical framework 

described the different analyses that 

DOE would conduct, the methods for 

conducting them, the use of new 

spreadsheets, and the relationship of the 

various analyses. On November 24, 

1999, DOE published a Supplemental 

ANOPR for central air conditioners and 

heat pumps and invited additional 

comment on issues raised following 

publication of the original ANOPR. 64 

FR 66306. 

DOE published a notice of proposed 

rulemaking on October 5, 2000 (October 

5,2000 NOPR). 65 FR 59590. The 

energy efficiency standards that DOE 

proposed for residential central air 

conditioners and heat pumps were as 

follows: 

-Split-system and single-package air 

conditioners-12 SEER 

-Split-system and single package heat 

pumps-13 SEER/7.7 HSPF 

-Through-the-wall air conditioners and 

heat pumps-ll SEERl7.1 HSPF. 

In addition to the increase proposed 

in SEER and HSPF, DOE requested 

comments on a proposal to adopt a standard for steady-state cooling 

effiCiency, denominated EER (or Energy 

Efficiency Ratio). The proposal of an 

EER was designed to ensure more efficient operation at high outdoor 

temperatures, during periods when 

electricity use by air conditioners is at 

its peak. A public hearing was held in 

Washington, D.C. on November 16, 

2000, to hear oral views, data and 

arguments on the proposed rule. 

On January 22, 2001, at the close of 

the Clinton Administration, DOE 

published a final rule that would have 

required a SEER of 13 for all classes of 

central air conditioners, except for 

"niche" products which were omitted 

from the rule, and a corresponding 

HSPF of 7.7 for central air conditioning 

heat pumps (Final Rule, "Energy 

Conservation Program for Consumer 

Products; Central Air Conditioners and 

Heat Pump Energy Conservation 

Standards," 61 FR 7170). 

Pursuant to President Bush's 

Regulatory Review Plan,3 DOE 

conducted an internal review of the 

final. not-yet-effective rules issued 

under section 325 of EPCA that DOE 

published at the end of the Clinton 

Administration, including final rules 

concerning energy conservation 

standards for clothes washers, water 

heaters, and central air conditioners and 

central air conditioning heat pumps. 

Consistent with the EPCA criteria for 

determining whether a standard level is 

economically justified under section 

325 (42 U.S.C. 6295(0)(2)(B)), DOE 

examined each of these three rules to 

determine, among other things, whether 

the rulemaking record was complete 

and whether the affirmative 

determination of economic justification 

was based on adequate findings with 

regard to the statutorily required 

considerations that make up the test of 

economic justification. 

While DOE examined the three 

appliance energy conservation 

standards rulemakings under the 

President's Regulatory Review Plan, 

DOE received petitions for 

reconsideration for each final rule. In 

addition, DOE received notice that the 

Gas Appliance Manufacturers 

Association (with regard to the water 

heater rule) and the Air-Conditioning 

and Refrigeration institute (ARl) and 

certain manufacturers (with regard to 

ilie central air conditioner rule) had 

filed petitions for review in the United 

States Court of Appeals for the Fourth 

Circuit. 

Ultimately, DOE decided that neither 

the clothes washer rule nor the water 

heater rule warranted further 

rulemaking action and denied the 

related petitions for reconsideration. See 

66 FR 19714 (April 17, 2001). With 

regard to central air conditioners and 

central air conditioning heat pumps, 

DOE concluded that ARI had raised 

J This Plan was set forth in a memorandum from 

Assistant to the President and Chief of Staff Andrew 

H. Card. dated January 20. 2001. and published in 

the Federal Register on January 24. 2001 (66 FR 

7702). 
EE-RM/STD-98-440 - 3q

36370 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

substantial questions as to the legal wall product classes, DOE proposed SEER standards is the text of the statute.

sufficiency of and basis for the January somewhat lower standards. DOE Section 325(o)(1) of EPCA provides as

22, 2001 final rule and that the interests conducted a public hearing in follows:

of justice therefore dictated that DOE Washington, D.C. on October 2, 2001, to The Secretary may not prescribe any

further postpone the rule's effective date hear oral views, data and arguments on amended standard which increases the

in light of the pendency of ARI's the proposed rule. maximum allowable energy use, or, in the

petition for judicial review in the Fourth II Authority of DOE T Reconsider case of showerheads, faucets, water closets,

Circuit and its related petition for and Withdraw the January 22 2001 or urinals, water use, or decreases the

reconsideration. 66 FR 20191 (April 20, n R and t minimum required energy efficiency, of a

2001). At that time DOE indicated that St andard for Ctral A covered product.

it would likely resolve these issues 42 U.S.C. 6295(o)(1).

through supplemental rulemaking that The issue of DOE's authority to The critical term in section 325(o)),

would be forthcoming shortly. withdraw the January 22 final rule and it ree t rulemaking on central

On June 19, 2001, the State of New propose a 12 SEER standard was first air conditioners and heat pumps, is

York, several other states, the Natural raised in ARI's March 23, 2001 petition "minimum required energy efficiency."

Resources Defense Council, Consumer for reconsideration (ARI, No. 138) and E des n deine this term.

Federation of America, and the Public i a responding letter submitted to However, in context, it is clear that a

Utility Law Projt ct sue i DOE in Federal Secretary Abraham by various SEER and an HSPF are benchmarks of

court challengin its acions delaying environmental organizations on April 6, S and n red energy icinc

the effective date of the January 22 final 2001 (Alliance to Save Energy (ASE), etfor central a conditionergy ir efficiency

rule. The cases w ^ con~olidated, with.;S, 1 8 ^^ 1

^^^^^^ th at rule. The cases w h;e con-olidated, with al., ASE, No. 183). ARI contended pumps. See 42 U.S.C. 6295(d)(l) and that

the states of Calif innia, Connecticut, section 325(o)(1) of EPCA, which pumps. See 42 U.S.C. 6295(d)() and

Vermont, Maine, 4ew Jer- By and prohibits DOE from decreasing the (d)2). The key question, however, is

Nevada joining the iawsuii (State of maximum allowable energy use or whicmh SR aned HSPFe efficiency " New York et al. v. A.rahin', 01 Civ. minimum required energy efficiency of "minimum required energy efficiency

5499 (LTS) and 01 C. covered products, did not apply to central air conditioners and heat

5499 (LTS) and 01 Citiiv. reconsideration of the January 22 final pumps that may not be decreased by an 5500(LTS)(SDNY); 4 a peti'.ik n for amended st an d ar d

review was also filed with tl.e Court of rule because DOE had suspended the amend stanHSPF

Appeals for the Second Circvit (Docket effective date of the rule (ARI, No.138 Had the new SEER and HSPF set out No. 01-4103)at p.3, n.2). This provision has been in the January 22, 2001, final rule been

petition and published a three part anti-backsliding provision." The set forth) been made applicable only to

petition and published a three part appliances manufactured on or after

supplemental supplemental proposal proposal with with regard regard to to environmental advocates took a contrary appliances 3, manufactured 2006, we think this would on or after

energy conservation standards for position, arguing that the anti- January 23,2006, we think this would

central air conditioners and central air backsliding provision did apply and, be a close question. A reasonable

conditioning heat pumps. 66 FR 38822. thus, that DOE was precluded from argument could be made that the new

cdFirst, DE proposed regulatory 32 reconsidering the rule and proposing a SEER and HSPF became "required"

First, DOE proposed regulatory less stringent standard (ASE et a]., No. immediately as to such appliances

provisions to clarify that section 183 at p. 5). In the April 20, 2001, notice provided they were manufactured on or

325(o)(rulemaking authority to prqualifiescribe postponing the effective date of the after January 23, 2006. A reasonable

rulemaking authority to prescribe January 22 final rule, DOE stated its argument could also be made that the

amended energy conservation effintention to issue a further notice of new SEER and HSPF would not be

standards, applies as of an effective date proposed rulemaking that would "required" until January 23, 2006, when

for modifying the Code of Federal proposed rulemaking that would "required" until January 23,2006, when

modifying for the notice propose a 12 SEER/7.4 HSPF standard appliances manufactured after that date

Regulations (CFR) set forth in the noticefor central air conditioners and heat would have had to comply with them.

of final rulemaking and establishedstated that it would invite We address this question, and other

consReview Act (5 U.S.C. 801-804). Seconal public comment on its explanation of considerations bearing on the answer to

Review Act (5 U.S.C. 801-804). Second, the statutory authority to make such a it, at greater length below.

in order to correct arguable legal errors proposal upon reconsideration of the In fact, however, the January 22, 2001

and policy shortcomings, DOE proposed proposal upon reconsideration of the In fact, however, the January 22,2001 policy a nd shortcomings, DOE proposed January 22 final rule (66 FR 20101). final rule expressly stated that the

to withdraw e a n u a r y e-ase a l s t of Subsequently in the notice of amendments it set out to existing

Third, based on a re-assessment of supplemental proposed rulemaking standards in the Code of Federal

factual inford, DOE proposed to published on July 252001 (July 25 Regulations would not take effect until

determine that elevation prop ofE the currently SNOPR), DOE included a detailed 30 days after publication in the Federal

enforceable central air conditioner c and explanation of its interpretation of Register. Well before that date arrived,

enforceable central air conditioning heat pump section 325(o)(1) of EPCA. We repeat on February 2, 2001, DOE postponed

entral conservation air standards by 20 much of the July 25 SNOPR explanation that effective date for an additional 60

enercent is the maximum increase that is here as a preface to a discussion of days. Before that 60-day period had

percent is the maximum increase that ispublic comments received on this issue. passed, on April 18, 2001, DOE further

economically justified. For product (Repeating DOE's analysis of section postponed the amendments' effective

classes other than through-the-wall 325(o)(1) here also will assist readers date pending the outcome of petitions

products, DOE proposed a SEER of 12 who otherwise would have to look back by ARI for reconsideration and for

with a corresponding HSPF of 7.4 which at a copy of the July 25 SNOPR) judicial review.

would apply to products manufactured As a result, the new SEER and HSPF,

in 2006. With respect to through-the- A. DOE's Analysis of EPCA's Anti- though set out in a final rule, never in

Backsliding Provision any sense achieved the status of being

en April 25d 2002a the district cout dismissed The starting point for the analysis of the "required" "minimum energy

court lacked subject matter jurisdiction to consider DOE's authority to reconsider the efficiency" benchmarks. There has

the matters raised by the plaintiffs. January 22 final rule and propose 12 never been a single moment under any

EE-RM-STD-98-440 COMMENT 304

36370 Federal Register / Vol. 

subst~ntial questions as to the legal 

sufficiency of and basis for the January 

22, 2001 final rule and that the interests 

of justice therefore dictated that DOE 

further postpone the rule's effective date 

in light of the pendency of ARI's 

petition for judicial review in the Fourth 

Circuit and its related petition for 

reconsideration. 66 FR 20191 (April 20, 

2001). At that time DOE indicated that 

it would likely resolve these issues 

through supplemental rulemaking that 

would be forthcoming shortly. 

On June 19, 2001, the State of New 

York, several other states, the Natural 

Resources Defense Council, Consumer 

Federation of AI'1erica, and the Public 

Utility Law Praj( ct sue l DOE in Federal 

court challengin ~ its aCl;ons delaying 

the effective date of ~e rilluary 22 final 

rule. The cases '" ~~'e cOllt'olidated, with 

the states of Calif n'nia, ::::onnecticut 

Vermont, Maine, .J,~w Jl'.r~ 3y and ' 

Nevada joining thr:l .awslli: (State of 

New York et a1. v. A,1rohtlll1, 01 Civ. 

5499 (LTS) and 01 elv. 

5500(LTS)(SDNY); 4 a peti:i,n for 

review was also filed with tl. e Court of 

Appeals for the Secont1 Circl..'.it (Docket 

No. 01-4103). 

On July 25, 2001, DOE !S.dnted ARI's 

petition and published a three part 

supplemental proposal with regard to 

energy conservation standards for 

central air conditioners and central air 

conditioning heat pumps. 66 FR 38822. 

First, DOE proposed regulatory 

provisions to clarify that section 

325(0)(1). which qualifies DOE's 

rulemaking authority to prescribe 

amended energy conservation 

standards, applies as of an effective date 

for modifying the Code of Federal 

Regulations (CFR) set forth in the notice 

of final rulemaking and established 

consistent with the Congressional 

Review Act (5 U.S.C. 801-804). Second, 

in order to correct arguable legal errors 

and policy shortcomings, DOE proposed 

to Withdraw the January 22 final rule. 

Third, based on a re-assessment of 

factual information and analyses already 

in the record, DOE proposed to 

determine that elevation of the current Iv 

enforceable central air cocditioner and' 

central air conditioning heat pump 

energy conservation standards by 20 

percent is the maximum increase that is 

economically justified. For product 

classes other than through-the-wall 

products, DOE proposed a SEER of 12 

with a corresponding HSPF of 7.4 which 

would apply to products manufactured 

in 2006. With respect to through-the4 On April 25. 2002. the district court dismissed 

the consolidated actions on the ground that the 

court lacked subject matter jurisdiction to consider 

the matters raised by the plaintiffs. 

." EE-RM/STD-98-440 - 30,-/ 

67, No. lOO/Thursday, May 23, 2002/Rules and Regulations 

wall product classes, DOE proposed 

somewhat lower standards. DOE 

conducted a public hearing in 

Washington, D.C. on October 2,2001, to 

hear oral views, data and arguments on 

the proposed rule. 

III. Authority of DOE To Reconsider 

~d Withdraw the January 22, 2001 

Fmal Rule and Adopt a 12 SEER 

Standard for Central Air Conditioners 

The issue of DOE's authority to 

withdraw the January 22 final rule and 

propose a 12 SEER standard was first 

raised in ARI's March 23, 2001 petition 

for reconsideration (ARI, No. 138) and 

in a responding letter submitted to 

Secretary Abraham by various 

environmental organizations on April 6, 

2001 (Alliance to Save Energy (ASE), et 

a1., ASE, No. 183). ARI contended that 

section 325(0)(1) of EPCA, which 

prohibits DOE from decreasing the 

maximum allowable energy use or 

minimum required energy efficiency of 

covered products, did not apply to 

reconsideration of the January 22 final 

rule because DOE had suspended the 

effective date of the rule (AR!, No. 138 

at p. 3, n. 2). This provision has been 

referred to in the rulemaking as EPCA's 

"anti-backsliding provision." The 

env!r.onmenta~ advocates took a contrary 

pOSItion, argumg that the antibacksliding provision did apply and, 

thus, that DOE was precluded from 

reconsidering the rule and proposing a 

less stringent standard (ASE et a1., No. 

183 at p. 5). In the April 20, 2001, notice 

postponing the effective date of the 

January 22 final rule, DOE stated its 

intention to issue a further notice of 

proposed rulemaking that would 

propose a 12 SEER/7.4 HSPF standard 

for central air conditioners and heat 

pumps, and stated that it would invite 

public comment on its explanation of 

the statutory authority to make such a 

proposal upon reconsideration of the 

January 22 final rule (66 FR 20101). 

Subsequently in the notice of 

supplemental proposed rulemaking 

published on July 25, 2001 Guly 25 

SNOPR), DOE included a detailed 

explanation of its interpretation of 

section 325(0)(1) of EPCA. We repeat 

much of the July 25 SNOPR explanation 

here as a preface to a discussion of 

public comments received on this issue. 

(Repeating DOE's analysis of section 

325(0)(1) here also will assist readers 

who otherwise would have to look back 

at a copy of the July 25 SNOPR.) 

A. DOE's Analysis of EPCA 's AntiBacksliding Provision 

The starting point for the analysis of 

DOE's authority to reconsider the 

January 22 final rule and propose 12 

SEER standards is the text of the statute. 

Section 325(0)(1) of EPCA provides as 

follows: 

The Secretary may not prescribe any 

amended standard which increases the 

maximum allowable energy use, or, in the 

case of showerheads, faucets. water closets, 

or urinals. water use, or decreases the 

minimum required energy efficiency, of a 

covered product. . 

42 U.S.C. 6295(0)(1). 

The critical term in section 325(0)(1), 

as it relates to the rulemaking on central 

air conditioners and heat pumps, is 

"minimum required energy efficiency." 

EPCA does not define this term. 

However, in context, it is clear that a 

SEER and an HSPF are benchmarks of 

"minimum required energy efficiency" 

for central air conditioners and heat 

pumps. See 42 U.S.C. 6295(d)(1) and 

(d)(2). The key question. however, is 

which SEER and HSPF represent the 

"minimum required energy efficiency" 

for central air conditioners and heat 

pumps that may not be decreased by an 

amended standard. 

Had the new SEER and HSPF set out 

in the January 22. 2001, final rule been 

allowed to take effect, but (as the rule 

set forth) been made applicable only to 

appliances manufactured on or afte~ 

January 23, 2006, we think this would 

be a close question. A reasonable 

argument could be made that the new 

SEER and HSPF became "required" 

immediately as to such appliances 

provided they were manufactured on or 

after January 23, 2006. A reasonable 

argument could also be made that the 

new SEER and HSPF would not be 

"required" until January 23, 2006, when 

appliances manufactured after that date 

would have had to comply with them. 

We address this question, and other 

considerations bearing on the answer to 

it, at greater length below. 

. In fact, however, the January 22, 2001 

fmal rule expressly stated that the 

amendments it set out to existing 

standards in the Code of Federal 

Regulations would not take effect until 

30 days after publication in the Federal 

Register. Well before that date arrived, 

on February 2, 2001, DOE postponed 

that effective date for an additional 60 

days. Before that 60-day period had 

passed, on April 18, 2001, DOE further 

postponed the amendments' effective 

date pending the outcome of petitions 

by AR! for reconsideration and for 

judicial review. 

As a result, the new SEER and HSPF. 

though set out in a final rule, never in 

any sense achieved the status of being 

the "required" "minimum energy 

efficiency" benchmarks. There has 

never been a single moment under any 
EE-RM/STD-98.440 - 3? fFederal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36371

understanding of the word "required" at in section 325(o)(1), the question permissible interpretation of section

which any central air conditioner or remains whether DOE should construe 325(o)(1), DOE believes that the view set

heat pump, including one manufactured the term "minimum required energy out in our proposed rule is the better

after January 23, 2006, could even efficiency" to mean (A) energy one.

arguably have been legally required to efficiency standards that are not yet The latter view-that a standard is

be manufactured in conformity with enforceable against the manufacturers, only covered by section 325(o)(1) after

them. Hence, whatever might have been but that have been prescribed in a final manufacturers are required to comply

the case had the January 22 final rule rule amending prior standards, which with it-does at first blush appear to be

been allowed to take effect, we do not amendments have been made to the CFR the most natural reading of the phrase.

see how the publication of a final rule pursuant to an effective date that has This view, however, is in tension with

that would have changed those passed; or (B) energy efficiency the rest of the sentence, which, as

standards, but was prevented by later standards that are currently enforceable explained above, suggests that the

agency action from doing so, could against the manufacturers if they relevant point of comparison is the

possibly establish "minimum required manufacture and sell a non-compliant standard being amended, regardless of

energy efficiency" benchmarks. product. whether manufacturers actually have to

This interpretation of "minimum DOE believes that alternative (A) is comply with it. Moreover, if adopted,

required energy efficiency" is reinforced the preferable construction of the term, this view would allow the Secretary to

by the rest of the sentence in sect on but only if the effective date selected for change the energy efficiency standards

325(o)(1) of which the phrase is E part. the final rule is consistent with other right up to the minute before the

That sentence establishes a limitk tion applicable laws and regulations and compliance date. This seems to slight

on the "amended standards" the allows the Secretary an opportunity important reliance interests given

Secretary may prescribe. That wo. ding promptly to correct legal and policy significant weight in other respects by

strongly suggests that the "minim, in errors that may have been contained in EPCA's provisions on central air

required energy efficiency" levels oelow 'he final rule. If that precondition is conditioner standards. For example.

which the Secretary may not go art the satisfied, DOE believes alternative (A) section 325(d) provides that with

ones established by the standards Leing X ill better advance the relevant respect to central air conditioners, any

amended. Because of the various actions s, itutory and policy considerations amended standard contained in a final

postponing the effective date of the un.derlying section 325(o)(1): To rule published on January 1, 1994, can

amendments to the standards it pr.mote greater energy efficiency while apply only to products manufactured on

proposed, the January 22, 2001 rule providing greater certainty to or after January 1, 1999. It similarly

never actually effectuated any manufacturers who must plan and make provides that any amended standard

amendment to the prior standards. the expenditures necessary to comply contained in a final rule published

Therefore, the standards that DOE with an amended energy conservation between January 1, 1994, and January 1,

proposed to amend are not the ones that standard-which is often a multi-year 2001, can apply only to products

would have been in place had the endeavor with substantial costs. We manufactured on or after January 1,

amendments set out in the January 22 note that the relative certainty the 2006. The purpose of these delays is

rule actually been made. Rather, they interpretation set out in alternative (A) plainly to give manufacturers a

are the standards prescribed by NAECA produces for manufacturers, which is a significant amount of time to develop

(SEER of 10.0 and HSPF of 6.8 for split key comparative advantage of this and manufacture new products after a

systems manufactured after January 1, interpretation over the competing one, new standard is adopted but before it

1992, SEER of 9.7 and HSPF of 6.6 for is intimately tied to a proper effective becomes enforceable. These delays also

single package systems manufactured date choice that facilitates prompt error suggest that a change of standard on the

after January 1, 1993), unamended until correction, thereby potentially avoiding eve of the manufacture of a product

now by anything, including the never- litigation that would seriously would be quite disruptive-which

made-effective amendments set out in undermine the certainty sought to be stands to reason given the lead-time

the January 22, 2001 rule. achieved. necessary to be in a position to

Notwithstanding public comments DOE believes that this resolution of manufacture a compliant product. Thus,

(discussed below), DOE continues to the ambiguities in the statute is to allow a standard to be blocked at the

believe the foregoing analysis consistent with the statute's text, last minute before the compliance

establishes that EPCA is unambiguous structure, legislative history, and the deadline would potentially leave a

on the question of whether standards fundamental policy choices it makes. rather large residual uncertainty

that are published in the Federal We believe that on balance this difficult to reconcile with the central

Register, but not yet effective, represent approach better accomplishes the purpose of establishing a climate of

the "minimum required energy statute's objectives than either adopting regulatory stability served by these

efficiency" benchmarks for central air alternative (A) without the qualification closely related portions of EPCA.

conditioners and heat pumps for set out above, thereby establishing a set The legislative history of section

purposes of section 325(o)(1). We think of procedures that could have the effect 325(o)(1), although sparse, also suggests

it is clear from the statutory text that of preventing the Secretary, within a that this interpretation may not be the

such standards do not represent the short period after publication of a final one best suited to accomplish the

benchmarks for "minimum required rule that would modify such standards, statute's objectives. In discussing this

energy efficiency." We also believe that from correcting defects in them that provision in the House bill, the House

even if the statute were found to be come to his attention; or adopting report states:

ambiguous, for the reasons set out in the alternative (B), thereby reading the

discussion that follows, that would not phrase "minimum required energy DOE may not prescribe an amended standard that increases the maximum

be the interpretation that we should efficiency" to encompass only energy allowable energy use or decreases the

select as a matter of policy. efficiency standards as of the date upon minimum required energy efficiency of a

If published but not yet effective which manufacturers have to comply covered product. The purpose of this

standards are not the benchmarks for with those standards. Although at least requirement is to prevent the Secretary from

"minimum required energy efficiency" the latter approach may well be a weakening any energy conservation standard

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440 - 30 if 

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36371 

understanding of the word "required" at 

which any central air conditioner or 

heat pump, including one manufactured 

after January 23, 2006, could even 

arguably have been legally required to 

be manufactured in conformity with 

them. Hence, whatever might have been 

the case had the January 22 final rule 

been allowed to take effect, we do not 

see how the publication of a final rule 

that would have changed those 

standards, but was prevented by later 

agency action from doing so, could 

possibly establish "minimum required 

energy efficiency" benchmarks. 

This interpretation of "minimum 

required energy efficiency" is reinforced 

by the rest of the sentence in sect on 

325(0)(1) of which the phrase is [ part. 

That sentence establishes a limite tion 

on the "amended standards" the 

Secretary may prescribe. That woo :ling 

strongly suggests that the "minim, In 

required energy efficiency" levels .)plow 

which the Secretary may not go art. t'le 

ones established by the standards Lcing 

amended. Because ofthe various actic.ns 

postponing the effective date of the 

amendments to the standards it 

proposed, the January 22, 2001 rule 

never actually effectuated any 

amendment to the prior standards. 

Therefore, the standards that DOE 

proposed to amend are not the ones that 

would have been in place had the 

amendments set out in the January 22 

rule actually been made. Rather. they 

are the standards prescribed by NAECA 

(SEER of 10.0 and HSPF of 6.8 for split 

systems manufactured after January 1, 

1992, SEER of9.7 and HSPF of6.6 for 

single package systems manufactured 

after January 1, 1993), unamended until now by anything, including the nevermade-effective amendments set out in 

the January 22. 2001 rule. 

Notwithstanding public comments 

(discussed below), DOE continues to 

believe the foregoing analysis 

establishes that EPCA is unambiguous 

on the question of whether standards 

that are published in the Federal 

Register, but not yet effective. represent 

the "minimum required energy 

efficiency" benchmarks for central air 

conditioners and heat pumps for 

purposes of section 325(0)(1). We think 

it is clear from the statutory text that 

such standards do not represent the 

benchmarks for "minimum required 

energy efSciency." We also believe that even if the statute were found to be 

ambiguous, for the reasons set out in the 

discussion that follows, that would not 

be the interpretation that we should 

select as a matter of policy. 

If published but not yet effective 

standards are not the benchmarks for 

"minimum required energy efficiency" 

in section 325(0)(1), the question 

remains whether DOE should construe 

the term "minimum required energy 

efficiency" to mean (A) energy 

efficiency standards that are not yet 

enforceable against the manufacturers, 

but that have been prescribed in a final 

rule amending prior standards, which 

amendments have been made to the CFR 

pursuant to an effective date that has 

passed; or (B) energy effiCiency 

standards that are currently enforceable 

against the manufacturers if they 

manufacture and sell a non-compliant 

product. 

DOE believes that alternative (A) is 

the preferable construction of the term, 

but only if the effective date selected for 

the final rule is consistent with other 

applicable laws and regulations and 

allows the Secretary an opportunity 

promptly to correct legal and policy 

errors that may have been contained in 

'.he final rule. If that precondition is 

~atisfied, DOE believes alternative (A) 

, ·ill better advance the relevant 

s. ltUtOry and policy considerations 

uLderlying section 325(0)(1): To 

pr.)mote greater energy efficiency while 

providing greater certainty to 

manufacturers who must plan and make 

the expenditures necessary to comply 

with an amended energy conservation 

standard-which is often a multi-year 

endeavor with substantial costs. We 

note that the relative certainty the 

interpretation set out in alternative (A) 

produces for manufacturers, which is a 

key comparative advantage of this 

interpretation over the competing one, 

is intimately tied to a proper effective 

date choice that facilitates prompt error correction, thereby potentially avoiding 

litigation that would seriously 

undermine the certainty sought to be 

achieved. 

DOE believes that this resolution of 

the ambiguities in the statute is 

consistent with the statute's text. 

structure, legislative history, and the 

fundamental policy choices it makes. 

We believe that on balance this 

approach better accomplishes the 

statute's objectives than either adopting 

alternative (A) without the qualification 

set out above, thereby establishing a set 

of procedures that could have the effect 

of preventing the Secretary, within a 

short period after publication of a final 

rule that would modify such standards, 

from correcting defects in them that come to his attention; or adopting 

alternative (B). thereby reading the 

phrase "minimum required energy 

efficiency" to encompass only energy 

efficiency standards as of the date upon 

which manufacturers have to comply 

with those standards. Although at least 

the latter approach may well be a 

permissible interpretation of section 

325(0)(1), DOE believes that the view set 

out in our proposed rule is the better one. 

The latter view-that a standard is 

only covered by section 325(0)(1) after 

manufacturers are required to comply 

with it-does at first blush appear to be 

the most natural reading of the phrase. 

This view, however, is in tension with 

the rest of the sentence, which, as 

explained above, suggests that the 

relevant point of comparison is the 

standard being amended. regardless of 

whether manufacturers actually have to 

comply with it. Moreover, if adopted, 

this view would allow the Secretary to 

change the energy efficiency standards 

right up to the minute before the 

compliance date. This seems to slight 

important reliance interests given 

significant weight in oilier respects by 

EPCA's provisions on central air 

conditioner standards. For example. 

section 325(d) provides that wiili 

respect to central air conditioners, any 

amended standard contained in a final 

rule published on January 1, 1994, can 

apply only to products manufactured on 

or after January 1, 1999. It similarly 

provides iliat any amended standard 

contained in a final rule published 

between January 1, 1994, and January 1, 

2001, can apply only to products 

manufactured on or after January 1, 

2006. The purpose of these delays is 

plainly to give manufacturers a 

significant amount of time to develop 

and manufacture new products after a 

new standard is adopted but before it 

becomes enforceable. These delays also 

suggest iliat a change of standard on ilie eve of the manufacture of a product 

would be quite disruptive-which 

stands to reason given ilie lead-time 

necessary to be in a position to 

manufacture a compliant product. Thus. 

to allow a standard to be blocked at ilie 

last minute before the compliance 

deadline would potentially leave a 

railier large residual uncertainty 

difficult to reconcile with ilie central 

purpose of establishing a climate of 

regulatory stability served by iliese 

closely related portions of EPCA. 

The legislative history of section 

325(0)(1). aliliough sparse, also suggests 

that this interpretation may not be the 

one best suited to accomplish ilie 

statute's objectives. In discussing this 

provision in the House bill, the House 

report states: 

DOE may not prescribe an amended 

standard that increases the maximum 

allowable energy use or decreases the 

minimum required energy efficiency of a 

covered product. The purpose of this 

requirement is to prevent the Secretary from 

weakening any energy conservation standard 
EE-RM/STD-98-440 - 30J

36372 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

for a covered product, whether established in the CRA, before a final rule can become 325(o)(1) and its companion provisions

this Act or subsequently adopted. This serves "effective," DOE must send a report to and also comports well with the

to maintain a climate of relative stability with Congress (5 U.S.C. 801(a)(1)(A) and (B)). ordinary understanding of when a rule

respect to future planning by all interested With respect to a "major rule" within containing such standards has

parties ^ * 'the meaning of 5 U.S.C. 804(2), the CRA established "requirelments]."

House Report No. 100-11 at p. 22 provides for the passing of a 60- DOE's decision to exercise its

(emphasis added). calendar-day-lie-before-the-Congress discretion to adopt this interpretation of

This language suggest that section period, after submission of the agency section 325(o)(1) is not meant to

325(o)(1) was specifically expected, at report, at the end of which a final rule intimate a view with respect to or

least in the view of the House could become effective in the absence of suggest how anti-backsliding provisions

Committee, to act harmoniously with a Congressional resolution of in other statutes should be interpreted.

the other provisions of EPCA discussed disapproval (5 U.S.C. 801(a)(3)). CRA Decisions of that type would of course

above in facilitating regulatory certainty allows for an exception to the 60-day- turn on the specific language and policy

The latter purpose is better lie-before requirement only if the of those provisions, just as today's

accomplished by construing the President determines that a major rule decision did here.

provision to become applicable at a should take effect before the end of that Based on this consideration of the

point well before the compliance date. period because of an imminent health or meaning of section 325(o)(1), DOE

On the other hand, the reliance safety threat or other emergency; proposed to adopt a series of

interests at stake also are not best served becau se it is lecessary to the amendments to the EPCA rules intended

enfor ement If criminal laws or to address these general issues. First, it

in the long run by taking the opposite nation -l sec,iity; or if it is issued proposed definitions of the terms course and adopting the view that "maximum allowable energy use" and

section 325(o)(1) bbecomes applicable at pursu It to a ,~atute implementing an "maximum allowable energy use and

internc tional trade agreement (5 U.S.C. "minimum required energy efficiency"

the earliest possible moment. Let us 801(c)). as energy conservation standards

imagine, for example, that DOE were In DeE's view, this last set of established by a final rule that has

routinely to make final rules containing considera-ions a so points the way to become effective in the sense that it has

standards potentially subject to section the answer to the question of at what modified the Code of Federal

325(o)() effective as soon as possible time amencmentr to an energy- Regulations. It further proposed to

under the Administrative Procedure Act efficiency-setting-i;tandard should best include in its definition that to qualify,

(APA). This would likely result in its be viewed as having set "minimum the final rule has to have made that

making such rules effective 30 days after required energy pfficiency" benchmarks. modification on a date selected

publication. DOE also could refuse to For the reasons explained at the consistent with the CRA and other

reconsider any aspect of such a rule beginning of this section, that time must applicable law. Finally, in order to

relevant to the standard (unless it could be after the final rulemaking the avoid confusion, it proposed a technical

complete its consideration and correct amendments to the standard is in effect. amendment adding a definition of the

any errors within that 30-day time But, consistent with the objective of EPCA term "effective date," which

period), no matter how serious or section 325(o)(1) and the other closely EPCA, inconsistently with the Office of

legitimate a question might be raised, related EPCA provisions of promoting Federal Register guidance, treats as

since to do so effectively, it would have regulatory certainty, and to harmonize synonymous with "compliance date."

to prevent the standard from going into section 325(o)(1) with common B. Discussion of Public Comments on

effect. administrative practice and the CRA, B nics f Pvon

This approach, however, would not such final rules should ordinarily be the An-Backsliding Provision

be the best way for DOE to promote made effective only after a reasonable DOE's analysis of section 325(o)(1)

regulatory certainty either. It is common hiatus after the date of publication has and related proposals were the subject

for agencies to entertain petitions for elapsed, allowing for prompt use of of comment by the environmental

reconsideration at least for a short ordinary administrative error correction advocates and by ARI. Their comments

period after issuance of a final rule as procedures and completion of elaborated upon the basic positions each

well as to correct errors on their own congressional review under CRA. This had taken in connection with ARI's

motion during that time. Moreover, is the earliest that manufacturer petition for reconsideration. The

there is good reason why agencies planning in reliance on a final major environmental advocates prefaced their

follow this course, since otherwise such rule to amend appliance energy comments with the observation that

errors would have to await the conservation standards can realistically ultimately the question whether the

completion of judicial review before be expected to begin. The certainty of anti-backsliding provision prevents DOE

they could be corrected, thereby the regulatory regime sought to be from withdrawing the January 22 final

creating substantial delay and achieved therefore cannot occur until rule and proposing a 12 SEER standard

uncertainty. Accordingly, this approach that time. would likely be resolved in the Federal

too, in addition to running counter to Accordingly, DOE believes it should litigation previously mentioned (see

ordinary administrative practices that construe section 325(o)(1) as applying to "Rulemaking History.").

there is no reason to believe section standards designed to set "minimum Environmental Advocates" Views

325(o)(1) was intended to abrogate, is required energy efficiency" benchmarks

not the best way to advance the at the point in time a final rule The environmental advocates, led by

regulatory stability sought by section containing such a standard becomes the Natural Resources Defense Council

325(o)(1) and the other related EPCA effective. It also believes, however, that (NRDC) and several states, argue that

provisions discussed above. it should take care to select effective EPCA's anti-backsliding provision

With respect to major rules, this dates for final rules containing such applies upon publication of final

approach also would create unnecessary standards that are consistent with the standards in the Federal Register, and

conflict between section 325(o)(1) and CRA and any other applicable law. This that DOE is powerless thereafter to

the Congressional Review Act (CRA) (5 approach will best promote the entertain and grant a petition for

U.S.C. 801-804) enacted in 1996. Under regulatory certainty sought by section reconsideration that requests lower

EE-RM-STD-98-440 COMMENT 304

EE·RM/STD·98-440 - 30L{ 

36372 Federal Register/Vol. 67, No. 100 I Thursday, May 23, 2002/Rules and Regulations 

for a covered product, whether established in 

this Act or subsequently adopted. This serves to maintain a climate of relative stability with 

respect to future planning by all interested 

parties * * * 

House Report No. 10(}-11 at p. 22 

(emphasis added). 

This language suggest that section 

325(0)(1) was specifically expected, at 

least in the view of the House 

Committee, to act harmoniously with 

the other provisions ofEPCA discussed 

above in facilitating regulatory certainty. 

The latter purpose is better 

accomplished by construing the 

provision to become applicable at a point well before the compliance date. 

On the other hand, the reliance 

interests at stake also are not best served 

in the long run by taking the opposite 

course and adopting the view that 

section 325(0)(1) becomes applicable at 

the earliest possible moment. Let us 

imagine, for example, that DOE were 

routinely to make final rules containing 

standards potentially subject to section 

325(0)(1) effective as soon as possible 

under the Administrative Procedure Act 

(AP A). This would likely result in its 

making such rules effective 30 days after 

publication. DOE also could refuse to 

reconsider any aspect of such a rule 

relevant to the standard (unless it could 

complete its consideration and correct 

any errors within that 30-day time 

period), no matter how serious or 

legitimate a question might be raised, 

since to do so effectively, it would have 

to prevent the standard from going into 

effect. 

This approach, however, would not 

be the best way for DOE to promote 

regulatory certainty either. It is common 

for agencies to entertain petitions for 

reconsideration at least for a short 

period after issuance of a final rule as well as to correct errors on their own motion during that time. Moreover, 

there is good reason why agencies 

follow this course, since otherwise such 

errors would have to await the 

completion of judicial review before 

they could be corrected, thereby 

creating substantial delay and 

uncertainty. Accordingly, this approach 

too, in addition to running counter to 

ordinary administrative practices that 

there is no reason to believe section 

325(0)(1) was intended to abrogate, is 

not the best way to advance the 

regulatory stability sought by section 

325(0)(1) and the other related EPCA 

provisions discussed above. 

With respect to major rules, this 

approach also would create unnecessary 

conflict between section 325(0)(1) and 

the Congressional Review Act (CRA) (5 

U.S.C. 801-804) enacted in 1996. Under 

the CRA, before a final rule can become 

"effective," DOE must send a report to 

Congress (5 U.S.C. 801(a)(1)(A) and (B)). 

With respect to a "major rule" within 

the meaning of 5 U.S.c. 804(2), the CRA 

provides for the passing of a 60-

calendar-day-lie-before-the-Congress 

period, after submission of the agency 

report, at the end of which a final rule 

could become effective in the absence of a Congressional resolution of 

disapproval (5 U.S.C. 801(a)(3». CRA 

allows for an exception to the 60-daylie-before requirement only if the 

President determines that a major rule 

should take effect before the end of that 

period because of an imminent health or safety threat or other emergency; 

becau ,e it is lecessary to the 

enfor( ement l,f criminal laws or 

nation 11 sec.n'ty; or if it is issued 

pursue 1t to a ~tatute implementing an 

internE :ional tr"de agreement (5 U.S.c. 

801(c». 

In DOE's vi£:w. this last set of 

considera:ions a ~o points the way to 

the answer to the question of at what 

time amenc.'ment~ to an energyefficiency-stltting-:ltandard should best 

be viewed a6 having set "minimum 

required energy pfficiency" benchmarks. 

For the reasons explained at the 

beginning of this section, that time must 

be after the final rulemaking the 

amendments to the standard is in effect. 

But, consistent with the objective of 

section 325(0)(1) and the other closely 

related EPCA provisions of promoting 

regulatory certainty, and to harmonize 

section 325(0)(1) with common 

administrative practice and the CRA, 

such final rules should ordinarily be 

made effective only after a reasonable 

hiatus after the date of publication has 

elapsed, allowing for prompt use of 

ordinary administrative error correction 

procedures and completion of 

congressional review under CRA. This 

is the earliest that manufacturer 

planning in reliance on a final major 

rule to amend appliance energy 

conservation standards can realistically 

be expected to begin. The certainty of 

the regulatory regime sought to be 

achieved therefore cannot occur until 

that time. 

Accordingly, DOE believes it should 

construe section 325(0)(1) as applying to 

standards designed to set "minimum 

required energy efficiency" benchmarks 

at the point in time a final rule 

containing such a standard becomes 

effective. It also believes, however, that 

it should take care to select effective 

dates for fmal rules containing such 

standards that are consistent with the 

CRA and any other applicable law. This 

approach will best promote the 

regulatory certainty sought by section 

325(0)(1) and its companion prOvisions 

and also comports well with the 

ordinary understanding of when a rule 

containing such standards has 

established "requirelmentsl." 

DOE's decision to exercise its 

discretion to adopt this interpretation of 

section 325(0)(1) is not meant to 

intimate a view with respect to or suggest how anti-backsliding provisions 

in other statutes should be interpreted. 

Decisions of that type would of course 

turn on the specific language and policy 

of those provisions, just as today's 

decision did here. 

Based on this consideration of the 

meaning of section 325(0)(1), DOE 

proposed to adopt a series of 

amendments to the EPCA rules intended 

to address these general issues. First, it 

proposed definitions of the terms 

"maximum allowable energy use" and 

"minimum required energy efficiency" as energy conservation standards 

established by a final rule that has 

become effective in the sense that it has 

modified the Code of Federal 

Regulations. It further proposed to 

include in its definition that to qualify, 

the final rule has to have made that 

modification on a date selected 

consistent with the CRA and other 

applicable law. Finally, in order to 

avoid confusion, it proposed a technical 

amendment adding a definition of the 

EPCA term "effective date," which 

EPCA, inconsistently with the Office of 

Federal Register guidance, treats as synonymous with "compliance date." 

B. Discussion of Public Comments on the Anti-Backsliding Provision 

DOE's analysis of section 325(0}(1) 

and related proposals were the subject 

of comment by the environmental 

advocates and by ARI. Their comments 

elaborated upon the basic positions each 

had taken in connection with ARI's 

petition for reconsideration. The 

environmental advocates prefaced their 

comments with the observation that 

ultimately the question whether the 

anti-backsliding provision prevents DOE 

from withdrawing the January 22 final 

rule and proposing a 12 SEER standard 

would likely be resolved in the Federal 

litigation previously mentioned (see 

"Rulemaking History."). 

1. Environmental Advocates" Views 

The environmental advocates, led by 

the Natural Resources Defense Council 

(NRDC) and several states, argue that 

EPCA's anti-backsliding provision 

applies upon publication of final 

standards in the Federal Register, and 

that DOE is powerless thereafter to 

entertain and grant a petition for 

reconsideration that requests lower 
EE-RM/STD-98-440 - 3L/

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36373

amended standards. (NRDC, No. 250; NRDC argues that the key word in DOE also thinks NRDC's view of the

Attorneys General of New York and section 325(o)(1) is "prescribe," which importance of the word "prescribe" in

Massachusetts, No. 277; State of it states occurs when a final rule is section 325(o)(1) is wrong. The word

Vermont, No. 268; Attorney General of published in the Federal Register, and "prescribe" is nowhere defined in

California, No. 249). that it is the act of "prescribing" a final EPCA, but it does not necessarily mean

The NRDC commented that the APA rule that triggers application of the anti- "publication." For example, section

contains no provision for backsliding provision. NRDC finds 325(p), concerning the procedure for

"withdrawing" a final rule, and that if supports for this interpretation of prescribing any new or amended

DOE wishes to change the rule, it may "prescribe" in section 325(p), which standard, provides that "la] final rule

propose to "amend, revise or revoke" includes publication of a final rule as prescribing an amended or new energy

the rule consistent with the APA. NRDC the last step in the procedure for conservation standard or prescribing no

also states there is no statutory or prescribing a new or amended standard, amended or new standard for a type (or

regulatory provision allowing interested and in the deadlines for various class) of covered products shall be

persons to "petition for amendments of product standards that published as soon as practicable * * *"

reconsideration" of a final rule. DOE are determined by reference to the date 42 U.S.C. 6295(p)(4). The use of the

does not believe these arguments have of publication of the previous standard. word "prescribe" in the same provision

merit. DOE chose to use the word NRDC also points to House Report in which the word "publish" is used is

"withdraw" at the suggestion of staff in language stating that action 325(o)(1) a clear indication that Congress may

the Office of the Federal Register. prevents DOE from w 'akenir. any have considered the two words to have

"Withdraw" is the term that Office uses energy conservation si nd!2rd for a different meanings. It is not necessary to

to describe the action of an agency in product "whether esta lishel ;n this resolve the question of the meaning to

pulling back a rule document before it Act or subsequently ad )pted," and the word "prescribe" because it begs the

is officially filed and published in the states that use of the w ,rd "adc oted" critical question of what DOE may not

Federal Register. (Document Drafting confirms its view that tlE anti- prescribe under section 325(o)(1). With

Handbook, Chapter 4, p. 4-2 (Oct. backsliding provision applies when a respect to central air conditioners and

1998)). The Office of the Federal rule is published in the Feieral heat pumps, the what that DOE may not

Register decided that the word Register. Thus, under NRDC's prescribe under section 325(o)(1) is any

"withdraw" also is apt when an agency interpretation, once DOE publish d the amended standard "which increases the

proposes to rescind a published final January 22 final rule, it was oowerless * * * minimum required energy

rule before it becomes effective, thus to reconsider it and propose a lower efficiency" of a central air conditioner

pulling it back before it modifies the energy conservation standard. or heat pump. We continue to believe

Code of Federal Regulations. (Document . . that standards in a published rule that

Drafting Handbook, Chapter 2, p. 2-33 DOE redeer that the term mnt mum have never become effective are in no

(Oct. 1998)). By proposing to withdraw ed sense "required" energy efficiency

January 22 final rule and only descriptor of energy or water levels, and therefore cannot be the

th12 SEER stanary 22 final rule and proposing efficiency used in section 325(o)(1), but baseline for determining whether the a 12 SEER standard, DOE was proposing it is the only descriptor that applies to baseline or determning whethe

actions that, if adopted and t s the only descriptor that applies to amended standards increase the

implemented in a future final rule, standards for central air conditioners minimum required energy efficiency.

would rescind or repeal the January 22 and heat pumps. That is why DOE's Finally, DOE disagrees with NRDC's

final rule. This course of action is analysis focuses on the word conclusion that the structure and

entirely consistent with the APA. While "required." It is true that for other language of EPCA point to the date of

an agency generally has inherent covered products, the applicable publication of amended standards as the

authority to reconsider its decisions, as descriptor would be "maximum time at which section 325(o)(1) applies.

the comments of ARI state (ARI, No. allowable energy use" or "maximum More specifically, DOE does not think

259, at p. 6), the APA specifically gives allowable water use." For those the statutory intervals for issuance of

interested persons the right to petition products, the key word would be amended standards, which reference to

for rulemaking (5 U.S.C. 553(e)). "allowable." But for the same reasons the date the previous amendment is

NRDC further believes DOE has why, as explained in DOE's analysis published, are relevant to the question

misconstrued section 325(o)(1) by above, the SEER and HSPF levels set out of when the anti-backsliding provision

placing undue weight on the word in the January 22 final rule never in any applies. The fact that Congress required

"required" in the term "minimum sense achieved the status of being the DOE to periodically review and publish

required energy efficiency." (Several "required" "minimum energy amendments to standards does not seem

state officials submitted comments efficiency" benchmarks, it is not much to have any bearing on the question of

similar in most respects to the NRDC easier to see how a rule that never what point in time standards are

views summarized here and in the became effective could set "maximum required for purposes of section

discussion that follows.) NRDC faults allowable" amounts of water or energy 325(o)(1).

DOE for ignoring the terms "maximum use. At least until a new rule The Attorneys General of the States of

allowable energy use" and "maximum establishing maximum allowable energy New York and Massachusetts attacked

water use" in the same provision. All of or water use became effective, the the legality of DOE's February 2, 2001,

these terms, NRDC argues, are simply "maximum allowable energy" or and April 20, 2001, notices delaying the

measurements of energy conservation "maximum allowable water use" for a effective date of the January 22 final rule

and do not refer in any way to product subject to one of these (Attorneys General of New York and

compliance dates or requirements for standards would remain the preexisting Massachusetts, No. 277). In their view,

manufacturers. NRDC, therefore, standard. Accordingly, today's rule DOE lacked good cause for not

concludes that the word "require" is contains definitions of "maximum proposing the delays for public

ambiguous and that one needs to look allowable energy use" and "maximum comment. They dismiss DOE's analysis

to the entire statutory scheme to allowable water use" that parallel the of, and provisions for, implementing the

determine when the anti-backsliding definition of "maximum required anti-backsliding provision as a post hoc

provision applies. energy efficiency" that DOE adopts. attempt to justify its allegedly illegal

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440- 3 D~ 

Federal Register/Vol. 67. No. lOO/Thursday. May 23. 2002/Rules and Regulations 36373 

amended standards. (NRDC. No. 250; 

Attorneys General of New York and 

Massachusetts. No. 277; State of 

Vermont. No. 268; Attorney General of 

California. No. 249). 

The NRDC commented that the AP A 

contains no provision for 

"withdrawing" a final rule. and that if 

DOE wishes to change the rule. it may 

propose to "amend. revise or revoke" 

the rule consistent with the APA. NRDC 

also states there is no statutory or 

regulatory provision allowing interested 

persons to "petition for 

reconsideration" of a final rule. DOE 

does not believe these arguments have 

merit. DOE chose to use the word 

"withdraw" at the suggestion of staff in 

the Office of the Federal Register. 

"Withdraw" is the term that Office uses 

to describe the action of an agency in 

pulling back a rule document before it 

is officially filed and published in the 

Federal Register. (Document Drafting 

Handbook. Chapter 4. p. 4-2 (Oct. 

1998». The Office of the Federal 

Register decided that the word 

"withdraw" also is apt when an agency 

proposes to rescind a published final 

rule before it becomes effective. thus 

pulling it back before it modifies the 

Code of Federal Regulations. (Document 

Drafting Handbook, Chapter 2, p. 2-33 

(Oct. 1998)). By proposing to withdraw 

the January 22 final rule and proposing 

a 12 SEER standard. DOE was proposing 

actions that, if adopted and 

implemented in a future final rule, 

would rescind or repeal the January 22 

final rule. This course of action is 

entirely consistent with the AP A. While 

an agency generally has inherent 

authority to reconsider its decisions, as 

the comments of ARI state (ARI. No. 

259, at p. 6), the APA specifically gives 

interested persons the right to petition 

for rulemaking (5 U.S.c. 553(e)). 

NRDC further believes DOE has 

misconstrued section 325(0)(1) by 

placing undue weight on the word 

"required" in the term "minimum 

required energy efficiency." (Several 

state officials submitted comments 

similar in most respects to the NRDC 

views summarized here and in the 

discussion that follows.) NRDC faults 

DOE for ignoring the terms "maximum 

allowable energy use" and "maximum 

water use" in the same provision. All of 

these terms. NRDC argues, are simply 

measurements of energy conservation 

and do not refer in any way to 

compliance dates or requirements for 

manufacturers. NRDC, therefore, 

concludes that the word "require" is 

ambiguous and that one needs to look 

to the entire statutory scheme to 

determine when the anti-backsliding 

provision applies. 

NRDC argues that the key word in 

section 325(0)(1) is "prescribe." which 

it states occurs when a final rule is 

published in the Federal Register, and 

that it is the act of "prescribing" a final 

rule that triggers application of the antibacksliding provision. NRDC finds 

supports for this interpretation of 

"prescribe" in section 325(p). which 

includes publication of a final rule as 

the last step in the procedure for 

prescribing a new Dr amended standard, 

and in the deadlines for various 

amendments of product standards that 

are determined by reference to the date 

of publication of the previous standard. 

NRDC also points to House Report 

language stating that f ection 325(0)(1) 

prevents DOE from w ·akeniq any 

energy conservation Sl mt:!~rd for a 

product "whether esta '!ishei ;n this 

Act or subsequently ad llJted," ~nd 

states that use of the w lId "adc'Jted" 

confirms its view that tJlt anti· 

backsliding provision applies when a 

rule is published in the ftderal 

Register. Thus. under NRD:'s 

interpretation, once DOE pl.'blishfd the 

January 22 final rule. it was )lowerless 

to reconsider it and propose ,l lownr 

energy conservation standard. 

DOE agrees that the term "minimum 

required energy efficiency" is not the 

only descriptor of energy or water 

efficiency used in section 325(0)(1), but 

it is the only descriptor that applies to 

standards for central air conditioners 

and heat pumps. That is why DOE's 

analysis focuses on the word 

"required." It is true that for other 

covered products, the applicable 

descriptor would be "maximum 

allowable energy use" or "maximum 

allowable water use." For those 

products, the key word would be 

"allowable." But for the same reasons 

why, as explained in DOE's analysis 

above. the SEER and HSPF levels set out 

in the January 22 final rule never in any 

sense achieved the status of being the 

"required" "minimum energy 

efficiency" benchmarks, it is not much 

easier to see how a rule that never 

became effective could set "maximum 

allowable" amounts of water or energy 

use. At least until a new rule 

establishing maximum allowable energy 

or water use became effective, the 

"maximum allowable energy" or 

"maximum allowable water use" for a product subject to one of these 

standards would remain the preexisting 

standard. Accordingly, today's rule 

contains definitions of "maximum 

allowable energy use" and "maximum 

allowable water use" that parallel the 

definition of "maximum required 

energy efficiency" that DOE adopts. 

DOE also thinks NRDC's view of the 

importance of the word "prescribe" in 

section 325(0)(1) is wrong. The word 

"prescribe" is nowhere defined in 

EPCA. but it does not necessarily mean 

"publication." For example, section 

325(p), concerning the procedure for 

prescribing any new or amended 

standard, provides that "[al final rule 

prescribing an amended or new energy 

conservation standard or prescribing no 

amended Dr new standard for a type (or 

class) of covered products shall be 

published as soon as practicable * * *" 

42 U.S.C. 6295(p)(4). The use of the 

word "prescribe" in the same provision 

in which the word "publish" is used is 

a clear indication that Congress may 

have considered the two words to have 

different meanings. It is not necessary to 

resolve the question of the meaning to 

the word "prescribe" because it begs the 

critical question of what DOE may not 

prescribe under section 325(0)(1). With 

respect to central air conditioners and 

heat pumps, the what that DOE may not 

prescribe under section 325(0)(1) is any 

amended standard "which increases the 

* * * minimum required energy 

efficiency" of a central air conditioner 

or heat pump. We continue to believe 

that standards in a published rule that 

have never become effective are in no 

sense "required" energy efficiency 

levels, and therefore cannot be the 

baseline for determining whether the 

amended standards increase the 

minimum required energy efficiency. 

Finally, DOE disagrees with NRDC's 

conclusion that the structure and 

language of EPCA point to the date of 

publication of amended standards as the 

time at which section 325(0)(1) applies. 

More specifically, DOE does not think 

the statutory intervals for issuance of 

amended standards, which reference to 

the date the previous amendment is 

published. are relevant to the question 

of when the anti-backsliding provision 

applies. The fact that Congress required 

DOE to periodically review and publish 

amendments to standards does not seem 

to have any bearing on the question of 

what point in time standards are 

required for purposes of section 

325(0)(1). 

The Attorneys General of the States of 

New York and Massachusetts attacked 

the legality of DOE's February 2, 2001, 

and April 20, 2001, notices delaying the 

effective date of the January ZZ final rule 

(Attorneys General of New York and 

Massachusetts, No. 277). In their view, 

DOE lacked good cause for not 

proposing the delays for public 

comment. They dismiss DOE's analysis 

of. and proviSions for, implementing the 

anti-backsliding provision as a post hoc 

attempt to justify its allegedly illegal 
EE-RM/STD-98-440- 30o

36374 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

delays of the January 22 final rule. section 325(o)(1) can be reasonably before the compliance date, this view

Implicit in their comment is the view interpreted to apply upon the would slight important reliance

that the January 22 final rule actually publication of final standards in the interests that, as DOE explained in its

became effective and, thus, became the Federal Register. However, assuming analysis, are given significant weight by

required standards for purposes of DOE had the discretion to adopt such an other provisions and the legislative

section 325(o)(1). Based on this interpretation, DOE would not choose history of EPCA. For these reasons, DOE

understanding of the anti-backsliding the date of publication as the date for continues to believe that section

provision, the States of New York and purposes of section 325(o)(1). As 325(o)(1) should be construed as

Massachusetts consider DOE's action to explained previously, a practice of applying to standards designed to set

withdraw the January 22 final rule and routinely making published standards "minimum required energy efficiency"

adopt 12 SEER standards to be a effective in the shortest time after benchmarks at the point in time a final

"rollback" of established standards. publication (normally 30 days after rule containing such a standard

As explained in the February 2, 2001, publication under the APA) is not likely becomes effective for purposes of

notice, DOE temporarily delayed the to provide greater certainty about the revising the Code of Federal

effective date of the January 22 final rule point in time when standards would Regulations, as long as the effective date

in conjunction with Executive branch take effect. If DOE were unable to that is selected is consistent with the

wide direction from the Assistant to the respond to legitimate requests for CRA and any other applicable law. In

President and Chief of Staff. DOE reconsideration and correction of error;, today's rule, DOE adopts provisions that

explained that seeking public comment then the only avenues available to in plement this approach.

would be impracticable and contrary to aggrieved stakeholders would be ARI stated that if DOE adopted the

the public interest, and further that the lawsuits in Federal courts or efforts to aTp roach it proposed in the July 25

imminence of the effective date in the obtain a legislative reversal under the SI O.PR, then it would like the

rule constituted good cause for making CRA. This would not lead to definitions of "minimum required

the temporary delay effective upon expeditious correction of errors or enerr y efficiency" and "maximum

publication. 66 FR 8745-46. The further resolution of issues and would not allowv able energy use" revised to ensure

postponement of the effective date on advance the goal of regulatory certainty. that DOE has sufficient time to complete

April 20, 2001, was based in part on Such a practice also would create any ac ninistrative action it takes in

several reasons why seeking public needless conflict with the CRA's 60-day respon ;e to a petition for

comment and delaying the effective date lie-before-the-Congress provision for reconsi ieration. ARI recommended

of the action were impracticable, major rules. adding vo each definition the words "or

unnecessary, and contrary to the public, .the date on which DOE completes

interest. 66 FR 20191. These reasons are 2 ARI s Viewsaction on any timely-initiated

not repeated in full here, but DOE ARI agrees with DOE that the existing administrative reconsideration,

explained why in light of ARI's petition "minimum required energy efficiency" whichever is later." (ARI, No. 259 at pp.

for reconsideration and its lawsuit in levels for central air conditioners and 20-21). We think ARI's suggested

the Court of Appeals for the Fourth heat pumps, which DOE may not lower, language is a useful addition to the

Circuit, DOE concluded there was good are the standards established by definitions. Therefore, we have revised

cause for further delaying the January 22 NAECA, effective on January 1, 1992 the proposed definitions of "maximum

final rule's effective date pending (i.e., 10 SEER/6.8 HSPF for split systems allowable energy use" and "minimum

consideration of ARI's petition and and 9.7 SEER/6.6 HSPF for single required energy efficiency," to be added

judicial review. Thus, DOE thinks the package systems). However, ARI to section 430.2, accordingly. In

short-term delays of the January 22 final believes the term "minimum required addition, DOE adds a similar definition

rule's effective date to deal with energy efficiency" should be understood of "maximum allowable water use,"

substantial legal questions were lawful, to mean the existing efficiency standard which was inadvertently omitted in the

and it rejects the characterization of as of the effective date under EPCA, i.e., July 25 SNOPR.

DOE's proposals as a "rollback" of the the date on which the standard is Under the provisions adopted in

energy conservation standards. required to be complied with (ARI, No. today's final rule, DOE will select a date

The Attorneys General of the States of 259 at p. 19). ARI believes its for the "Effective Date" line of the

New York and Massachusetts and the interpretation would avoid the risk of notice of final rulemaking that in most

American Council for an Energy- having the anti-backsliding provision instances will be 60 to 80 days after the

Efficient Economy (ACEEE) argued that apply unreasonably early, which could date of publication. (DOE has chosen 75

choosing an effective date for purposes prevent DOE from taking appropriate days after the date of publication for the

of section 325(o)(1) other than the date administrative action to correct a effective date of today's rule.) DOE

of publication of amended standards promulgated standard or to respond to would expect that any petition for

would lead to delay and cause extraordinarily changed circumstances. reconsideration, to be considered

uncertainty with respect to when DOE acknowledged in its analysis of timely, ordinarily would be submitted

manufacturers must make investments section 325(o)(1) that the view that a to DOE before the effective date

needed to comply with amended standard is only covered by the anti- specified in the notice of final

standards. (Attorneys General of New backsliding provision after rulemaking.

York and Massachusetts, No. 277 at p. manufacturers are required to comply DOE did not receive any public

9; ACEEE, No. 284 at p. 3). The with it is an arguable one. This view, comments on the proposed definition of

Northeast Energy Efficiency however, is in tension with the rest of the term "effective date" as used in

Partnerships, Inc. (NEEP) argued DOE's the sentence, which suggests that the EPCA and 10 CFR 430.32. This

proposed approach would give relevant point of comparison is the definition clarifies that for purposes of

stakeholders another opportunity to try standard being amended, regardless of construing the term under EPCA (but

to influence decision makers and would whether manufacturers actually have to not for purposes of determining the

"politicize" the standard setting comply with it. Moreover, by allowing point at which amendments to a

process. (NEEP, No. 273 at p. 3). As the Secretary to change the energy standard qualify for protection under

explained above, DOE does not believe efficiency standards at any point in time section 325(o)(1)), the "effective date" is

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440_ 30'-( 

36374 Federal Register / Vol. 67, No. 100/ Thursday, May 23, 2002/ Rules and Regulations 

delays of the January 22 final rule. 

Implicit in their comment is the view 

that the January 22 final rule actually 

became effective and, thus, became the 

required standards for purposes of 

section 325(0)(1). Based on this 

understanding of the anti-backsliding 

provision, the States of New York and 

Massachusetts consider DOE's action to 

withdraw the January 22 final rule and 

adopt 12 SEER standards to be a 

"rollback" of established standards. 

As explained in the February 2, 2001, 

notice, DOE temporarily delayed the 

effective date of the January 22 final rule 

in conjunction with Executive branch 

wide direction from the Assistant to the 

President and Chief of Staff. DOE 

explained that seeking public comment 

would be impracticable and contrary to 

the public interest, and further that the 

imminence of the effective date in the 

rule constituted good cause for making 

the temporary delay effective upon 

publication. 66 FR 8745-46. The further 

postponement of the effective date on April 20, 2001, was based in part on several reasons why seeking public 

comment and delaying the effective date 

of the action were impracticable, 

unnecessary, and contrary to the public 

interest. 66 FR 20191. These reasons are 

not repeated in full here, but DOE 

explained why in light of ARl's petition 

for reconsideration and its lawsuit in 

the Court of Appeals for the Fourth 

Circuit, DOE concluded there was good 

cause for further delaying the January 22 

final rule's effective date pending 

consideration of ARl's petition and 

judicial review. Thus, DOE thinks the 

short-term delays of the January 22 final 

rule's effective date to deal with 

substantial legal questions were lawful, 

and it rejects the characterization of 

DOE's proposals as a "rollback" of the 

energy conservation standards. 

Toe Attorneys General of the States of 

New York and Massachusetts and the 

American Council for an EnergyEfficient Economy (ACEEE) argued that 

choosing an effective date for purposes 

of section 325(0)(1) other than the date 

of publication of amended standards 

would lead to delay and cause 

uncertainty with respect to when 

manufacturers must make investments 

needed to comply with amended 

standards. (Attorneys General of New 

York and Massachusetts, No. 277 at p. 

9; ACEEE, No. 284 at p. 3). The 

Northeast Energy Efficiency 

Partnerships, Inc. (NEEP) argued DOE's 

proposed approach would give 

stakeholders another opportunity to try 

to influence decision makers and would 

"politicize" the standard setting 

process. (NEEP, No. 273 at p. 3). As 

explained above, DOE does not believe 

section 325(0)(1) can be reasonably 

interpreted to apply upon the 

publication of final standards in the 

Federal Register. However, assuming 

DOE had the discretion to adopt such an interpretation, DOE would not choose 

the date of publication as the date for 

purposes of section 325(0)(1). As 

explained previously, a practice of 

routinely making published standards 

effective in the shortest time after 

publication (normally 30 days after 

publication under the AP A) is not likely 

to provide greater certainty about the 

point in time when standards would 

take effect. If DOE were unable to 

respond to legitimate requests for 

reconsideration and correction of error;, 

then the only avenues available to 

aggrieved stakeholders would be 

lawsuits in Federal courts or efforts to 

obtain a legislative reversal under the 

CRA. This would not lead to 

expeditious correction of errors or resolution of issues and would not 

advance the goal of regulatory certainty. 

Such a practice also would create 

needless conflict with the CRA's 60-day 

lie-before-the-Congress provision for 

major rules. 

2. ARl's Views 

ARl agrees with DOE that the existing 

"minimum required energy efficiency" 

levels for central air conditioners and 

heat pumps, which DOE may not lower, 

are the standards established by 

NAECA, effective on January I, 1992 

(j.e., 10 SEER/6.8 HSPF for split systems 

and 9.7 SEER/6.6 HSPF for single 

package systems). However, ARl 

believes the term "minimum required 

energy efficiency" should be understood 

to mean the existing efficiency standard as of the effective date under EPCA, i.e., 

the date on which the standard is 

required to be complied with (ARl, No. 

259 at p. 19). ARl believes its 

interpretation would avoid the risk of 

having the anti-backsliding provision 

apply unreasonably early, which could 

prevent DOE from taking appropriate 

administrative action to correct a promulgated standard or to respond to 

extraordinarily changed circumstances. 

DOE acknowledged in its analysis of 

section 325(0)(1) that the view that a 

standard is only covered by the antibacksliding provision after 

manufacturers are required to comply 

with it is an arguable one. This view, 

however, is in tension with the rest of 

the sentence, which suggests that the 

relevant point of comparison is the 

standard being amended, regardless of 

whether manufacturers actually have to 

comply with it. Moreover, by allowing 

the Secretary to change the energy 

efficiency standards at any point in time 

before the compliance date, this view 

would slight important reliance 

interests that, as DOE explained in its 

analysis, are given significant weight by 

other provisions and the legislative 

history of EPCA. For these reasons, DOE 

continues to believe that section 

325(0)(1) should be construed as 

applying to standards designed to set 

"minimum required energy efficiency" 

benchmarks at the point in time a final 

rule containing such a standard 

becomes effective for purposes of 

revising the Code of Federal 

Regulations, as long as the effective date 

that ~s selected is consistent with the 

CRA and any other applicable law. In 

today's rule, DOE adopts provisions that 

in plement this approach. 

ARI stated that if DOE adopted the 

aPJ roach it proposed in the July 25 

SW.lPR, then it would like the 

de.rillitions of "minimum required 

enl'r~ y efficiency" and "maximum 

allo~ 'ible energy use" revised to ensure that DOE has sufficient time to complete 

any a( ninistrative action it takes in 

l'espon 1e to a petition for rl~consi ieration. ARI recommended 

adding to each definition the words "or 

thl' datf. on which DOE completes 

action on any timely-initiated 

administrative reconsideration, 

whichever is later." (ARI, No. 259 at pp. 

20-21). We think ARI's suggested 

language is a useful addition to the 

definitions. Therefore, we have revised 

the proposed definitions of "maximum 

allowable energy use" and "minimum 

required energy efficiency," to be added 

to section 430.2, accordingly. In 

addition, DOE adds a similar definition 

of "maximum allowable water use," 

which was inadvertently omitted in the 

July 25 SNOPR. 

Under the provisions adopted in 

today's final rule, DOE will select a date 

for the "Effective Date"line of the 

notice of final rulemaking that in most 

instances will be 60 to 80 days after the 

date of publication. (DOE has chosen 75 

days after the date of publication for the 

effective date oftoday's rule.) DOE 

would expect that any petition for 

reconsideration, to be considered 

timely, ordinarily would be submitted 

to DOE before the effective date 

specified in the notice of final 

rulemaking. 

DOE did not receive any public 

comments on the proposed definition of 

the term "effective date" as used in 

EPCA and 10 CFR 430.32. This 

definition clarifies that for purposes of 

construing the term under EPCA (but 

not for purposes of determining the 

point at which amendments to a standard qualify for protection under 

section 325(0)(1)), the "effective date" is 
EE-RM/STD-98-440- 3 d

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36375

the date on which an amended energy competition likely to result from such heating systems. The Department of

conservation standard becomes standard and shall transmit such Justice urged DOE to take these

enforceable. DOE also did not receive determination, not later than 60 days after concerns into account and consider

comments on proposed section 430.34, the publication of a proposed rule "setting a lower SEER standard for heat

which tracks the language of section prescribing or amending an energy pumps, such as the standard included

325(o)(1). Therefore, DOE today adopts conservation standard, in writing to the in Trial Standard Level 2, and a lower

e325()(1). T herefore, DOE today adopts Secretary, together with an analysis of the SEER standard for air conditioners for

these provisions without substantive nature and extent of such impact. Any such SEER standard for air conditioners for

change. determination and analysis shall be retrofit markets where there are space

IV. Basis for DOE's Decision To published by the Secretary in the Federal constraints and for manufactured

Register. housing." 66 FR 7200.

Withdraw the January 22,2001, Final Regster housing." 66 FR 7200.

iRule 42 U.S.C. 6295(o)(2)(B)(ii). DOE published a final rule on January Rule 42 U.S.C. 6295(o)(2)(B)(i). 22 2 adopted standards that co t, .t is cr 22, 2001, that adopted standards that

In the July 25 SNOPR, DOE discussed In context, it is clear that the term corresponded to Trial Standard Level 4

possible legal errors in the promulgation "the standard" in section 325(o)(2)(B)(i) (the next higher level) and prescribed a

of the January 22 final rule and refers to any new or amended energy minimum SEER of 13 for all the product

economic issues that DOE believed had conservation standard finally prescribed classes, except for niche products, with

not been adequately considered in by DOE under section 325(0) of EPCA. a corresponding 7.7 HSPF. While the

determining the energy efficiency levels Because the Department of Justice must preamble to the final rule addressed the

that are the maximum technologically transmit its determination to DOE Department of Just'ce's specific

feasible and economically justified (66 within 60 days after the publication of concerns al: ut the proposed 12 SEER

FR 38827-29). On the basis of these a proposed rule, EPCA contemplates standards fc - enira' air conditioners/13

possible legal and policy errors, DOE that the Department of Justice's SEER/7.7 Ht PF stand ard for central air

proposed to withdraw the January 22 determination on the anti-competitive conditioning heat pump systems (66 FR

final rule and proposed to adopt a 12 effects of a proposed rule usually will 7192-93), DOE did n;t have the benefit

SEER standard for most central air enable DOE to fulfill its substantive of the Departmnnt o,ustice's views on

conditioners and heat pumps, rather obligation to consider the Department's the potential anti-corn etitive impact of

than the 13 SEER standard in the expert opinion on the anti-competitive the final 13 SEER stat ards for both air

January 22 final rule (66 FR 38842). impact of a final standard. However, as conditioners and heat pumps. This is

DOE today finally withdraws the the following discussion shows, this particularly of concern ,n light of

January 22 final rule and amends the will not always be the case. information in the TSD indicating that

energy conservation standards for DOE submitted the October 5, 2000, standards at Trial Standard Level 4

central air conditioners and heat pumps NOPR to the Attorney General for (uniform 13 SEER standards) could

at the 12 SEER level except for two review pursuant to the foregoing cause several major manufacturers to

types of space-constrained products provisions. The NOPR described the consider selling their production assets

(through-the-wall products and small range of potential trial standards rather than make the investment

duct, high velocity systems) that are considered by DOE, and proposed required to meet the new standard or

subject to lower standards. In taking this adoption of Trial Standard Level 3, i.e., face the loss of profits caused by the

action, DOE corrects the legal and a minimum SEER of 12 for central air absence of premium products in the

policy errors that were the basis for conditioner product classes and a SEER marketplace (see July 25 SNOPR at

DOE's decision to withdraw the January of 13, with a corresponding HSPF of 7.7, 38827). Therefore, DOE believes the

22 final rule. for central air conditioning heat pumps. Department of Justice's views on the

The Department of Justice, consistent potential of the standards in the January

A. Legal Issues with its past practice, confined its 22 final rule to accelerate consolidation

In the July 25 SNOPR, DOE response to the proposed standards, in the industry should have been

acknowledged that to comply with corresponding to Trial Standard Level 3. obtained.

section 325(o)(2)(B)(i) of EPCA, DOE The Department of Justice had several As part of its review of the January 22

arguably should have invited the concerns about the proposed rule's final rule pursuant to the President's

Department of Justice to submit a potential impact on competition (see Regulatory Review Plan, DOE on March

supplemental statement of its views on December 4, 2000, letter in the 20, 2001, requested the views of the

the potential anti-competitive impact of Appendix to this notice). First, the Department of Justice on the 13

a 13 SEER standard for both central air Department of Justice was concerned standards for central air conditioners

conditioners and heat pumps which was the proposed rule would have a and heat pumps. The Department of

included in the January 22 final rule (66 disproportionate impact on small Justice's letter responding to our request

FR 38827-28). manufacturers. Second, it was is published in the Appendix to this

Section 325(o)(2)(B)(i) requires DOE concerned that the proposed standard notice. While some commenters were

to determine whether the benefits of a for heat pumps, and in some instances critical of the substance of the

new or amended energy conservation the standard for air conditioners, would Department of Justice's determinations

standard exceed its burdens by have an adverse impact on some about the anti-competitive impact of 13

considering "to the greatest extent manufacturers of equipment to be used SEER standards (see Section VI below).

practicable" seven factors, including: to retrofit existing housing and used in none of the comments disputed DOE's

"(V) the impact of any lessening of manufactured housing. Third, it was view that it should have obtained the

competition, as determined in writing concerned that the proposed 13 SEER Department of Justice's views on 13

by the Attorney General, that is likely to for central air conditioning heat pumps SEER standards for both central air

result from the imposition of the could cause consumers to shift from conditioners and heat pumps.

standard" (42 U.S.C. 6295(o)(2)(B)(i)). heat pumps to other systems that A second legal error that DOE

Section 325(o) also provides that: include resistance heat systems, considered in deciding to propose

For purposes of clause (i)(V), the Attorney reducing the competition that presently withdrawal of the January 22 final rule

General shall make a determination of the exists between manufacturers of heat was the absence of any discussion of

impact, if any, of any lessening of pumps and manufacturers of those other cumulative regulatory burden in the

EE-RM-STD-98-440 COMMENT 304

EE·RM/STD-98-440 - 3 (j i 

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36375 

the date on which an amended energy 

conservation standard becomes 

enforceable. DOE also did not receive 

comments on proposed section 430.34, 

which tracks the language of section 

325(0)(1). Therefore, DOE today adopts 

these provisions without substantive 

change. 

IV. Basis for DOE's Decision To 

Withdraw the January 22, 2001, Final 

Rule 

In the July 25 SNOPR, DOE discussed 

possible legal errors in the promulgation 

of the January 22 final rule and 

economic issues that DOE believed had 

not been adequately considered in 

determining the energy efficiency levels 

that are the maximum technologically 

feasible and economically justified (66 

FR 38827-29). On the basis of these 

possible legd and policy errors, DOE 

proposed to withdraw the January 22 

final rule and proposed to adopt a 12 

SEER standard for most central air 

conditioners and heat pumps, rather 

than the 13 SEER standard in the 

January 22 final rule (66 FR 38842). 

DOE today finally withdraws the 

January 22 final rule and amends the 

energy conservation standards for 

central air conditioners and heat pumps 

at the 12 SEER level except for two 

types of space-constrained products 

(through-the-wall products and small 

duct, high velocity systems) that are 

subject to lower standards. In taking this 

action, DOE corrects the legal and 

policy errors that were the basis for 

DOE's decision to withdraw the January 

22 final rule. 

A. Legal Issues 

In the July 25 SNOPR, DOE 

acknowledged that to comply with 

section 325(0)(2)(B)(i) of EPCA, DOE 

arguably should have invited the 

Department of Justice to submit a 

supplemental statement of its views on 

the potential anti-competitive impact of 

a 13 SEER standard for both central air 

conditioners and heat pumps which was 

included in the January 22 final rule (66 

FR 38827-28). 

Section 325(0)(2)(B)(i) requires DOE 

to determine whether the benefits of a 

new or amended energy conservation 

standard exceed its burdens by 

considering "to the greatest extent 

practicable" seven factors, including: 

"(V) the impact of any lessening of 

competition, as determined in writing 

by the Attorney General, that is likely to 

result from the imposition of the 

standard" (42 U.S.C. 6295(0)(2)(B)(i)). 

Section 325(0) also provides that: 

For purposes of clause (i)(V), the Attorney 

General shall make a determination of the 

impact, if any, of any lessening of 

competition likely to result from such 

standard and shall transmit such 

determination, not later than 60 days after 

the publication of a proposed rule 

prescribing or amending an energy 

conservation standard, in writing to the 

Secretary, together with an analysis of the 

nature and extent of such impact. Any such 

determination and analysis shall be 

published by the Secretary in the Federal 

Register. 

42 U.S.C. 6295(0)(2)(B)(ii). 

In context, it is clear that the term 

"the standard" in section 325(0)(2)(B)(i) 

refers to any new or amended energy 

conservation standard finally prescribed 

by DOE under section 325(0) of EPCA. 

Because the Department of Justice must 

transmit its determination to DOE 

within 60 days after the publication of 

a proposed rule, EPCA contemplates 

that the Department of Justice's 

determination on the anti-competitive 

effects of a proposed rule usually will 

enable DOE to fulfill its substantive 

obligation to consider the Department's 

expert opinion on the anti-competitive 

impact of a final standard. However, as 

the following discussion shows, this 

will not always be the case. DOE submitted the October 5, 2000, 

NOPR to the Attorney General for 

review pursuant to the foregoing 

provisions. The NOPR described the 

range of potential trial standards 

considered by DOE, and proposed 

adoption of Trial Standard Level 3, i.e., a minimum SEER of 12 for central air 

conditioner product classes and a SEER 

of 13, with a corresponding HSPF of 7.7, 

for central air conditioning heat pumps. 

The Department of Justice, consistent 

with its past practice, confined its 

response to the proposed standards, 

corresponding to Trial Standard Level 3. 

The Department of Justice had several 

concerns about the proposed rule's 

potential impact on competition (see 

December 4, 2000, letter in the 

Appendix to this notice). First, the 

Department of Justice was concerned 

the proposed rule would have a 

disproportionate impact on small 

manufacturers. Second, it was 

concerned that the proposed standard 

for heat pumps, and in some instances 

the standard for air conditioners, would 

have an adverse impact on some 

manufacturers of equipment to be used 

to retrofit existing housing and used in 

manufactured housing. Third, it was concerned that the proposed 13 SEER 

for central air conditioning heat pumps 

could cause consumers to shift from 

heat pumps to other systems that 

include resistance heat systems, 

reducing the competition that presently 

exists between manufacturers of heat 

pumps and manufacturers of those other 

heating systems. The Department of 

Justice urged DOE to take these 

concerns into account and consider 

"setting a lower SEER standard for heat 

pumps, such as the standard included 

in Trial Standard Level 2, and a lower 

SEER standard for air conditioners for 

retrofit markets where there are space 

constraints and for manufactured 

housing." 66 FR 7200. 

DOE published a final rule on January 

22, 2001, that adopted standards that 

corresponded to Trial Standard Level 4 

(the next higher level) and prescribed a 

minimum SEER of 13 for all the product 

classes, except for niche products, with a corresponding 7.7 HSPF. While the 

preamble to (he fiTlal rule addressed the 

Departmen~ of Just "ce's specific 

concerns al::Jut the proposed 12 SEER 

standards fc' '~enlra 1 air conditioners/13 

SEER!?7 H~ PF st<.niard for central air 

conditionine heat l'ump systems (66 FR 

7192-93). DUE' did n;)t have the benefit 

of the Departmlmt o,r Justice's views on 

the potential Jnti-com letitive impact of 

the final 13 SEEi"{ sta,ll ards for both air 

conditioners and heat I- umps. This is 

particularly of CO!1cern ,n light of 

information in the TSD j ndicating that 

standards at Trial ~tandard Level 4 

(uniform 13 SEER standards) could 

cause several major manufacturers to 

consider selling their production assets 

rather than make the investment 

required to meet the new standard or 

face the loss of profits caused by the 

absence of premium products in the 

marketplace (see July 25 SNOPR at 

38827). Therefore, DOE believes the 

Department of Justice's views on the 

potential of the standards in the January 

22 final rule to accelerate consolidation 

in the industry should have been 

obtained. 

As part of its review of the January 22 

final rule pursuant to the President's 

Regulatory Review Plan, DOE on March 

20, 2001, requested the views of the 

Department of Justice on the 13 

standards for central air conditioners 

and heat pumps. The Department of 

Justice's letter responding to our request 

is published in the Appendix to this 

notice. While some commenters were 

critical of the substance of the 

Department of Justice's determinations 

about the anti-competitive impact of 13 

SEER standards (see Section VI below), 

none of the comments disputed DOE's 

view that it should have obtained the 

Department of Justice's views on 13 

SEER standards for both central air 

conditioners and heat pumps. 

A second legal error that DOE 

considered in deciding to propose 

withdrawal of the January 22 final rule 

was the absence of any discussion of 

cumulative regulatory burden in the 
EE-RM/STD-98-440 -30-

36376 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

statement of basis and purpose for the fraction of consumers who would incur standard for split-system air

January 22 final rule. One aspect of the significant life-cycle cost increases (25 conditioners, the most common type of

assessment of manufacturer burden percent and 34 percent of average and residential air conditioning equipment,

required by EPCA (42 U.S.C. low income consumers, respectively, at represents a 20 percent improvement in

6295(o)(2)(B)(i)(I)) is the cumulative 12 SEER versus 39 percent and 50 energy efficiency. For split-system heat

impact of multiple DOE standards and percent, respectively, at 13 SEER). pumps, the new standard represents a

the regulatory actions of other Federal DOE also based its decision to 20 percent improvement in cooling

agencies and States that affect the propose the withdrawal of the January efficiency and a 9 percent improvement

manufacture of a covered product. The 22 final rule on its conclusion that DOE, in heating efficiency. The standard will

preamble to the January 22 final rule in determining whether 13 SEER was increase the cooling efficiency of singlecontained an assertion that DOE economically justified, had not package air conditioners and singleconsidered cumulative burdens, but it adequately assessed the potential package heat pumps by 24 percent and

did not discuss the magnitude of the regulatory burden and financial impacts the heating efficiency of single-package

burden or how DOE took it into account on manufacturers of central air heat pumps by 12 percent. DOE has

in evaluating manufacturer impact (see conditioners and heat pumps. See July determined that the new standards are

66 FR 7174). In light of the evidence of 25 SNOPR at 38828-29. First, DOE the highest efficiency levels that are

cumulative regulatory burdens on concluded that the cumulative technologically feasible and

manufacturers documented in the TSD, regulatory burden on manufacturers was economically justified as re 1uired by

DOE thinks the mere assertion that DOE not given sufficient weight in the law.

considered the cumulative burdens on determination of economic justification. DOE adopts somewhat lo ver

manufacturers was not an adequate As discussed previously, the statement amended standards for thro E,h-the wall

statement of basis and purpose for of basis and purpose for the final rule central air conditioner and 1 sat pun p

DOE's determination on manufacturer did not explain how DOE considered products to ensure that more Efficiernt

impact resulting from a 13 SEER the cumulative impact on manufacturers versions remain available for tiis

standard. See July 25 SNOPR at 38828. of the costs of complying with various application. DOE establishes 10.9 SiER

Finally, as explained in DOE's new regulatory actions. DOE also and 7.1 HSPF as the standard for

analysis of EPCA's anti-backsliding concluded that inadequate through-the-wall split systems, and 10.

provision, the effective date included in consideration was given in the January SEER and 7.0 HSPF for through-the-wa 1

the January 22 final rule (i.e., the date 22 determination to the effect of 13 single package systems.

30 days after the date of publication of SEER standards on industry net cash Finally, DOE creates a new class for

the notice) was in direct conflict with flow and the maldistribution of small duct, high velocity central air

the CRA requirement that a major rule regulatory burden on the two major conditioners and heat pumps. These

may not take effect until the later of the types of manufacturers (66 FR 38829). products are designed for retrofit

date occurring 60 days after the date DOE's tentative conclusions in the applications and have special

Congress receives the agency's report July 25 SNOPR about the appropriate requirements that make it unlikely they

under 5 U.S.C. 801 or the date the rule weight to give to the benefits and can meet the efficiency standards that

is published in the Federal Register. 5 burdens of 13 SEER versus 12 SEER DOE today establishes for conventional

U.S.C. 801(a)(3)(A)). standards, and the resulting conclusion equipment. As discussed in Section VI,

B. Policy Issues about which level is economically DOE received public comments that

DOE also based its decision to justified, were the subject of extensive supported creation of a separate class

DOE also based its decson January t 22 public comment. These comments are for these products. While DOE includes

propose withdrawal of he January 22 discussed in Section VI of this a definition of "small duct, high

standards on its review of the analysis Supplementary Information, and the velocity system" in the final rule and

stof benefits and burdens that analysis that supports DOE's creates a separate class for them, DOE

of benefits and burdens January the 22 determination that 12 SEER is the retains the NAECA prescribed standard

deterination that 13 SEER is the maximum efficiency level that is levels for small duct, high velocity

maximum efficiency level that is technologically feasible and products in today's final rule because

technologically feasible and economically justified is set forth in DOE has not yet conducted the analysis

economically justified. As a result of its Section VI. required to determine whether higher

review of the January 22 rule, DOE V. Amended Energy Conservation levels are technologically feasible and

tentatively concluded that a 13 SEER Standards economically justified. DOE in the near

standard was not economically justified, future intends to begin a rulemaking to

and therefore DOE proposed to A. Overview determine if a higher standard is and therefore DOE proposed to

withdraw the January 22 final rule and The amended standards in today's warranted.

proposed to adopt a 12 SEER standard rule take into account a decade of Several aspects of today's standards

(66 FR 38828-29). technological advancements and will warrant highlighting, as follows.

As explained in the July 25 SNOPR save consumers and the nation money, 1. Central Air Conditioner and Heat

(66 FR 38828) DOE believed that in significant amounts of energy, and have Pum Features

issuing the January 22 final rule, the substantial environmental and

previous Administration had given economic benefits. When they go into The efficiency levels in today's final

inadequate consideration to the fraction effect, the amended standards will raise rule can be met by central air

of consumers, and especially low the energy efficiency standards to 12 conditioner and heat pump designs that

income consumers, who would incur SEER for new central air conditioners are already available in the market. DOE

significant increases in life-cycle cost as and to 12 SEER/7.4 HSPF for new fully expects variations of these models

a result of the 13 SEER standard. DOE central air conditioning heat pumps. to exist under the new standards,

decided to propose a 12 SEER standard, The standards will apply to products offering all the features and utility that

instead of 13 SEER, because the analysis manufactured for sale in the United are found in currently available

showed it would result in a lower States, as of January 23, 2006. The products.

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD·98-440 "'30~ 

36376 Federal Register/Vol. 67, No. IOO/Thursday, May 23, 2002/Rules and Regulations 

statement of basis and purpose for the 

January 22 final rule. One aspect of the 

assessment of manufacturer burden 

required by EPCA (42 U.S.C. 

6295(0)(2)(B)(i)(I)) is the cumulative 

impact of multiple DOE standards and 

the regulatory actions of other Federal 

agencies and States that affect the 

manufacture of a covered product. The 

preamble to the January 22 final rule 

contained an assertion that DOE 

considered cumulative burdens, but it 

did not discuss the magnitude of the 

burden or how DOE took it into account 

in evaluating manufacturer impact (see 

66 FR 7174). In light of the evidence of 

cumulative regulatory burdens on manufacturers documented in the TSD, 

DOE thinks the mere assertion that DOE 

considered the cumulative burdens on manufacturers was not an adequate 

statement of basis and purpose for 

DOE's determination on manufacturer 

impact resulting from a 13 SEER 

standard. See July 25 SNOPR at 38828. 

Finally, as explained in DOE's 

analysis of EPCA's anti-backsliding 

provision, the effective date included in 

the January 22 final rule (i.e., the date 

30 days after the date of publication of 

the notice) was in direct conflict with 

the CRA requirement that a major rule 

may not take effect until the later of the 

date occurring 60 days after the date 

Congress receives the agency's report 

under 5 U.S.C. 801 or the date the rule 

is published in the Federal Register. 5 

U.S.C. 801(a)(3)(A)). 

B. Policy Issues 

DOE also based its decision to 

propose withdrawal of the January 22 

final rule and to propose 12 SEER 

standards on its review of the analysis 

of benefits and burdens that 

underpinned the January 22 

determination that 13 SEER is the 

maximum efficiency level that is 

technologically feasible and 

economically justified. As a result of its 

review of the January 22 rule, DOE 

tentatively concluded that a 13 SEER 

standard was not economically justified, 

and therefore DOE proposed to 

withdraw the January 22 final rule and 

proposed to adopt a 12 SEER standard 

(66 FR 38828-29). 

As explained in the July 25 SNOPR 

(66 FR 38828) DOE believed that in 

issuing the January 22 final rule. the 

previous Administration had given 

inadequate consideration to the fraction 

of consumers. and especially low 

income consumers. who would incur 

significant increases in life-cycle cost as a result of the 13 SEER standard. DOE 

decided to propose a 12 SEER standard. 

instead of 13 SEER. because the analysis 

showed it would result in a lower 

fraction of consumers who would incur 

significant life-cycle cost increases (25 

percent and 34 percent of average and 

low income consumers. respectively. at 

12 SEER versus 39 percent and 50 

percent. respectively. at 13 SEER). 

DOE also based its decision to 

propose the withdrawal of the January 

22 final rule on its conclusion that DOE. 

in determining whether 13 SEER was 

economically justified. had not 

adequately assessed the potential 

regulatory burden and financial impacts 

on manufacturers of central air 

conditioners and heat pumps. See July 

25 SNOPR at 38828-29. First. DOE 

concluded that the cumulative 

regulatory burden on manufacturers was 

not given sufficient weight in the 

determination of economic justification. 

As discussed previously. the statement 

of basis and purpose for the final rule 

did not explain how DOE considered 

the cumulative impact on manufacturers 

of the costs of complying with various 

new regulatory actions. DOE also 

concluded that inadequate 

consideration was given in the January 

22 determination to the effect of 13 

SEER standards on industry net cash 

flow and the maldistribution of 

regulatory burden on the two major 

types of manufacturers (66 FR 38829). 

DOE's tentative conclusions in the 

July 25 SNOPR about the appropriate 

weight to give to the benefits and 

buraens of 13 SEER versus 12 SEER 

standards. and the resulting conclusion 

about which level is economically 

justified, were the subject of extensive 

public comment. These comments are 

discussed in Section VI of this 

Supplementary Information. and the 

analysis that supports DOE's 

determination that 12 SEER is the 

maximum efficiency level that is 

technologically feasible and 

economically justified is set forth in 

Section Vll. 

v. Amended Energy Conservation 

Standards 

A. Overview 

The amended standards in today's 

rule take into account a decade of 

technological advancements and will 

save consumers and the nation money, 

significant amounts of energy, and have 

substantial environmental and 

economic benefits. When they go into 

effect. the amended standards will raise 

the energy efficiency standards to 12 

SEER for new central air conditioners 

and to 12 SEER/7.4 HSPF for new central air conditioning heat pumps. 

The standards will apply to products 

manufactured for sale in the United 

States, as of January 23. 2006. The 

standard for split-system air 

conditioners. the most common type of 

residential air conditioning equipment. 

represents a 20 percent improvement in 

energy efficiency. For split-system heat 

pumps. the new standard represents a 20 percent improvement in cooling 

efficiency and a 9 percent improvement 

in heating efficiency. The standard will 

increase the cooling efficiency of singlepackage air conditioners and singlepackage heat pumps by 24 percent and 

the heating efficiency of single-package 

heat pumps by 12 percent. DOE has 

determined that the new standards are 

the highest efficiency levels that are 

technologically feasible and 

economically justified as re fuired by 

law. 

DOE adopts somewhat 10 ver 

amended standards for thro l,h-U.e· wall 

central air conditioner and 1 3at pun p 

products to ensure that morF Efficit'nt 

versions remain available for tnis 

application. DOE establishes HI.9 Sltt:R 

and 7.1 HSPF as the standard fc.r 

through-the-wall split systems, and 10. ) 

SEER and 7.0 HSPF for through-tne-waol 

single package systems. . 

Finally, DOE creates a new clas~ for 

small duct, high velocity central air 

conditioners and heat pumps. These 

products are designed for retrofit 

applications and have special 

requirements that make it unlikely they can meet the efficiency standards that 

DOE today establishes for conventional 

equipment. As discussed in Section VI. 

DOE received public comments that 

supported creation of a separate class 

for these products. While DOE includes 

a definition of "small duct. high 

velocity system" in the final rule and 

creates a separate class for them. DOE 

retains the NAECA prescribed standard 

levels for small duct. high velocity 

products in today's final rule because 

DOE has not yet conducted the analysis 

required to determine whether higher 

levels are technologically feasible and 

economically justified. DOE in the near future intends to begin a rulemaking to 

determine if a higher standard is 

warranted. 

Several aspects oftoday's standard., 

warrant highlighting. as follows. 

1. Central Air Conditioner and Heat 

Pump Features 

The efficiency levels in today's final 

rule can be met by central air 

conditioner and heat pump designs that are already available in the market. DOE 

fully expects variations of these models 

to exist under the new standards. 

offering all the features and utility that are found in currently available 

products. 
EE-RM/STD-98-440. 3 0f

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36377

2. Consumer Benefits central air conditioners and heat pumps. average consumer of the standards

Table 1 summarizes the Table 2 presents the implications for the becoming effective in 2006.

"characteristics" of today's typical

TABLE 1.-CHARACTERISTICS OF TODAY'S TYPICAL CENTRAL AIR CONDITIONERS AND HEAT PUMPS 1

Split system air Split system heat Single package Single package

conditioner pump air conditioner heat pump

Average Installed Price ...................................... $2,236 ................ $3,668 ................ $2,607 ................ $3,599

Annual Utility Bill 2 .......................................... 189 ..................... 453 ..................... 189 ..................... 453

Life Expectancy ............................................................................ 18.4 years .......... 18.4 years .......... 18.4 years .......... 18.4 years

Energy Consumption per year .................................................... 2,305 kWh .......... 6,549 kWh .......... 2,305 kWh .......... 6,549 kWh

"Typical" equipment have cooling and heating efficiencies of 10 SEER and 6.8 HSPF, respectively.

2 Utility bill pertains to the energy cost of operating the air conditioner or heat pump.

TABLE 2.-IMPLICATIONS OF NEW STANDARDS FOR THE AVERAGE CONSUMER

Split system air Split system heat Single package Single package

conditioner pump air conditioner heat pump

Year Standard Comes into Effect ................................................. 2006 ................... 2006 ................... 2006 ................... 2006

New Average Installed Price ........................................................ $2,449 ................ $3,812 ................ $2,765 ................ $3,748

Estim ated Price Increase .............................................................. 213 ..................... 144 ..................... 158 ..................... 149

A nnual U tility Bill Savings ........................................................ 31 ....................... 50 ....................... 31 ....................... 50

Average Net Saving over Equipment Life .................................... 113 ..................... 365 ..................... 163 ..................... 421

Energy Savings per Year ............................................................. 384 kW h ............. 768 kW h ............. 384 kW h ............. 768 kW h

The most typical air conditioner (i.e., save money or would be negligibly reduced by the elimination of

split system air conditioner which impacted as a result of the 2006 approximately 80 thousand metric tons

comprises approximately 65 percent of standard.7 In the case of a new typical (kt) of nitrous oxides (NOx) from 2006

today's central air conditioning and heat heat pump, all consumers either would through 2020. In total, DOE estimates

pump market) has an installed price of save money or be negligibly impacted. 8 this standard will have a net benefit to

$2,236 and an annual utility costs of DOE also investigated how these the nation's consumers of $2 billion

$189. In order to meet the 2006 standards might affect low income over the period 2006 through 2030.9

standard, DOE estimates that the consumers. On average, DOE estimates B Stt Frm r

installed price of a typical air that it is likely that low income air B. Statutory Frmework

conditioner would be $2,449, an conditioner and heat pump consumers Part B of Title III of EPCA provides for

increase of $213. 5 This price increase would also save money over the life of the Energy Conservation Program for

would be offset by an annual energy the equipment as a result of the Consumer Products other than

savings of about $31 on the utility bills. standard. Automobiles (42 U.S.C. 6291 et seq.).

The most typical heat pump (i.e., split National Benefits The consumer products subject to this

system heat pump) currently has an program include central air conditioners

installed price of $3,668 and annual The standards in today's rule will and heat pumps. Under the Act, the

utility costs of $453. In order to meet the provide benefits to the nation. DOE program consists essentially of three

2006 standard, DOE estimates that the estimates the standards will save parts: testing, labeling, and Federal

installed price of a typical heat pump approximately 3 quads of energy over 25 energy conservation standards.

would be $3,812, an increase of $144.6 years (2006 through 2030). This is As previously stated, NAECA

This price increase would be offset by equivalent to all the energy consumed prescribed initial Federal energy

an annual energy savings of about $50 by nearly 17 million American conservation standards for central air

on the utility bills. households in a single year. In 2020, the conditioners and heat pumps (42 U.S.C.

DOE recognizes that most consumers standards will avoid the construction of 6295(d)). NAECA further specified that

pay energy prices that are higher or three 400 megawatt coal-fired plants DOE is to review and publish amended

lower than the "typical" consumer and and nineteen 400 megawatt gas-fired standards by January 1, 1994 (42 U.S.C.

operate their equipment more or less plants. These energy savings would 6295(d)(3)(A)). Under EPCA, any new or

often. Consequently, DOE has result in cumulative greenhouse gas amended standard must be designed so

investigated the effects of the different emission reductions of approximately as to achieve the maximum

energy prices across the nation and 24 million metric tons (Mt) of carbon, or improvement in energy efficiency that is

different air-conditioning usage an amount equal to that produced by technologically feasible and

patterns. DOE estimates that 75 percent approximately 2 million cars every year. economically justified (42 U.S.C.

of all consumers purchasing a new Additionally, air pollution would be 6295(o)(2)(A)).

typical air conditioner would either Section 325(o)(2)(B)(i) provides that

Based on estimates supplied by ARI, 61 percent before DOE determines whether a

s Based on estimates supplied by the industry of all consumers purchasing a new typical air standard is economically justified, it

trade association, the Air-Conditioning and conditioner will either save money or will be o

Refrigeration Institute (ARI), the installed price is negligibly impacted as a result of the 2006 standard. must first solicit comments on a

estimated to be $2,510, an increase of $274. Based on estimates supplied by ARI, 97 percent

Based on estimates supplied by ARI, the of all consumers purchasing a new typical heat Net benefit assumes NAECA efficiency scenario.

installed price is estimated to be $3,933, an increase pump will either save money or will be negligibly Net benefit would be $3 billion for Roll-up

of $265. impacted as a result of the 2006 standard. efficiency scenario.

EE-RM-STD-98-440 COMMENT 304

EE·RM/STD·98-440_ 30 Lf 

Federal Register/Vol. 67, No. IOO/Thursday, May 23~ 2002/Rules and Regulations 36377 

2. Consumer Benefits 

Table 1 summarizes the 

"characteristics" of to day's typical 

central air conditioners and heat pumps. average consumer of the standards 

Table 2 presents the implications for the becoming effective in 2006. 

TABLE 1.-CHARACTERISTICS OF TODAY'S TYPICAL CENTRAL AIR CONDITIONERS AND HEAT PUMPS 1 

Split system air Split system heat Single package 

conditioner pump air conditioner 

Single package 

heat pump 

Average Installed Price ................................................................. $2.236 ................ $3.668 ................ $2.607 ................ $3.599 

Annual Utility BiII2 ......................................................................... 189 ..................... 453 ..................... 189 ..................... 453 

Life Expectancy............................................................................ 18.4 years .......... 18.4 years .......... 18.4 years .......... 18.4 years 

Energy Consumption per year ................. ..................................... 2.305 kWh .......... 6.549 kWh .......... 2.305 kWh .......... 6.549 kWh 

1 ''Typical'' equipment have cooling and heating efficiencies of 10 SEER and 6.8 HSPF. respectively. 

2 Utility bill pertains to the energy cost of operating the air conditioner or heat pump. 

TABLE 2.-IMPLICATIONS OF NEW STANDARDS FOR THE AVERAGE CONSUMER 

Split system air Split system heat Single package 

conditioner pump air conditioner 

Single package 

heat pump 

Year Standard Comes into Effect ................................................. 2006 ................... 2006 ................... 2006 ................... 2006 

New Average Installed Price ........................................................ $2.449 ................ $3.812 ................ $2.765 ................ $3.748 

Estimated Price Increase .............................................................. 213 ..................... 144 ..................... 158 ..................... 149 

Annual Utility Bill Savings ............................................................. 31 ....................... 50 ....................... 31 ....................... 50 

Average Net Saving over Equipment Life ............ ..... ............... .... 113........... .......... 365........ .......... ... 163.. ..... .... .......... 421 

Energy Savings per Year ............................................................. 384 kWh ............. 768 kWh ............. 384 kWh ............. 768 kWh 

The most typical air conditioner (i.e., 

split system air conditioner which 

comprises approximately 65 percent of 

today's central air conditioning and heat 

pump market) has an installed price of 

$2,236 and an annual utility costs of 

$189. In order to meet the 2006 

standard, DOE estimates that the 

installed price of a typical air 

conditioner would be $2,449, an 

increase of $213.5 This price increase 

would be offset by an annual energy 

savings of about $31 on the utility bills. 

The most typical heat pump (i.e., split 

system heat pump) currently has an 

installed price of $3,668 and annual 

utility costs of $453. In order to meet the 

2006 standard, DOE estimates that the 

installed price of a typical heat pump 

would be $3,812, an increase of $144.6 

This price increase would be offset by an annual energy savings of about $50 

on the utility bills. 

DOE recognizes that most consumers 

pay energy prices that are higher or 

lower than the "typical" consumer and 

operate their equipment more or less 

often. Consequently. DOE has 

investigated the effects of the different 

energy prices across the nation and 

different air-conditioning usage 

patterns. DOE estimates that 75 percent 

of all consumers purchasing a new typical air conditioner would either 

• Based on estimates supplied by the industry 

trade association. the Air-Conditioning and 

Refrigeration Institute (ARI). the installed price is 

estimated to be $2.510. an increase of $274. 

• Based on estimates supplied by ARI. the 

installed price is estimated to be $3.933. an increase 

of$265. 

save money or would be negligibly 

impacted as a result of the 2006 

standard. 7 In the case of a new typical 

heat pump. all consumers either would save money or be negligibly impacted.s 

DOE also investigated how tliese 

standards might affect low income 

consumers. On average. DOE estimates 

that it is likely that low income air 

conditioner and heat pump consumers 

would also save money over the life of 

the equipment as a result of the 

standard. 

3. National Benefits 

The standards in today's rule will 

provide benefits to the nation. DOE 

estimates the standards will save 

approximately 3 quads of energy over 25 

years (2006 through 2030). This is 

equivalent to all the energy consumed 

by nearly 17 million American 

households in a single year. In 2020. the 

standards will avoid the construction of 

three 400 megawatt coal-fired plants 

and nineteen 400 megawatt gas-fired 

plants. These energy savings would 

result in cumulative greenhouse gas 

emission reductions of approximately 

24 million metric tons (Mt) of carbon. or 

an amount equal to that produced by 

approximately 2 million cars every year. 

Additionally. air pollution would be 

7 Based on estimates supplied by ARI. 61 percent 

of all consumers purchasing a new typical air 

conditioner will either save money or will be 

negligibly impacted as a result of the 2006 standard. 

• Based on estimates supplied by ARI. 97 percent 

of all consumers purchasing a new typical heat 

pump will either save money or will be negligibly 

impacted as a result of the 2006 standard. 

reduced by the elimination of 

approximately 80 thousand metric tons 

(kt) of nitrous oxides (NOx) from 2006 

through 2020. In total, DOE estimates 

this standard will have a net benefit to 

the nation's consumers of $2 billion 

over the period 2006 through 2030.9 

B. Statutory Framework 

Part B of Title III of EPCA provides for 

the Energy Conservation Program for 

Consumer Products other than 

Automobiles (42 U.S.C. 6291 et seq.). 

The consumer products subject to this 

program include central air conditioners 

and heat pumps. Under the Act. the 

program consists essentially of three 

parts: testing. labeling, and Federal 

energy conservation standards. 

As previously stated. NAECA 

prescribed initial Federal energy 

conservation standards for central air 

conditioners and heat pumps (42 U.S.C. 

6295(d». NAECA further specified that 

DOE is to review and publish amended 

standards by January 1. 1994 (42 U.S.C. 

6295(d)(3)(A)). Under EPCA. any new or 

amended standard must be designed so 

as to achieve the maximum 

improvement in energy efficiency that is 

technologically feasible and 

economically justified (42 U.S.C. 

6295(o)(2)(A». 

Section 325(0)(2)(B)(i) provides that 

before DOE determines whether a 

standard is economically justified, it 

must first solicit comments on a 

• Net benefit assumes NAECA efficiency scenario. 

Net benefit would be $3 billion for Roll-up 

efficiency scenario. 
EE-RM/STD-98-440- 330/L

36378 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

proposed standard (42 U.S.C. NOPR (65 FR 59593, 59612) and January economically justified. This

6295(o)(2)(B)(i)). That section further 22 final rule (66 FR 7172), DOE presumption of economic justification

provides that, after reviewing the determined that 18 SEER is the can be rebutted upon a proper showing.

comments, DOE must determine maximum technologically feasible level Using the reverse engineering

whether the benefits of the standard (Max Tech Level) for cooling efficiency manufacturing costs, the standards DOE

exceed its burdens, based, to the greatest for all product classes and capacities adopts today for split heat pumps and

extent practicable, on a weighing of the covered by this rulemaking. The Max packaged heat pumps can be shown to

following seven factors: Tech Level for heating efficiency is 9.4 have satisfied the rebuttable

(i The economic impact of the standard on HSPF, which is the highest HSPF rating presumption requirements in section

the manufacturers and on the consumers of currently available in residential heat 325(o)(2)(B)(iii).' 0 Therefore, DOE

the products subject to such standard; pumps. DOE's determinations of presumes that the standards adopted for

(ii) The savings in operating costs technological feasibility for central air split system and single package heat

throughout the estimated average life of the conditioners and heat pumps have not pumps are economically justified. The

covered product in the type (or class) been disputed in the written and oral analysis, however, shows that split

compared to any increase in the price of, or comments of interested persons in the system air conditioners and single

in the initial charges for, or maintenance rulemaking. package air conditioners do not meet the

expenses of, the covered products which are standard for use of the rebuttable

likely to result from the imposition of the 2. Economic Justification Factors presumption of economic justification.

standard; DOE has considered the seven Therefore, DOE does not presume them

(iii) The total projected amount of energy (ii) Thel total projected amount of energy statutory factors for determining to be economically justified. If the

imposition of the standard; whether a conservation standard is rebuttable presumption does not apply,

(iv) Any lessening of the utility or the economically justified. This section DOE must perform additional analysis

performance of the covered products likely to briefly summarizes DOE's consideration to determine economic justification. As

result from the imposition of the standard; of these factors. More detailed discussed in Section VII, DOE has

(v) The impact of any lessening of consideration of these factors is performed an analysis for all classes of

competition, as determined in writing by the provided in the discussion of comments central air conditioner and heat pump

Attorney General, that is likely to result from in Section VI and the discussion of products that shows the standards in

the imposition of the standard; analytical results in Section VII of this today's rule are indeed economically

conservation n at on al and n er y Supplementary Information. justified.

(vii) Other factors the Secretary considers a. Economic Impact on Manufacturers c. Energy Savings

relevant. and Consumers EPCA requires DOE, in determining

In addition, section 325(o)(2)(B)(iii) The record for this rulemaking the economic justification of a standard,

establishes a rebuttable presumption of contains several discussions of the to consider the total projected energy

economic justification in instances economic impact on manufacturers and savings that are expected to result

where the Secretary determines that consumers See 66 FR 7174-78, 7185- directly from revised standards. DOE

"the additional cost to the consumer of 7191, and 66 FR 38828-29, 38834-35. In forecasted energy savings through the

purchasing a product complying with the July 25 SNOPR, DOE identified use of a national energy savings (NES)

an energy conservation standard level deficiencies in the assessment of spreadsheet, as discussed in the October

will be less than three times the value manufacturer and consumer impacts 5, 2000 NOPR (65 FR 59590, 59593).

of the energy * * * savings during the that was the basis for adoption of the DOE relies on the same spreadsheets

first year that the consumer will receive January 22 final rule. Later sections of and assumptions for its estimate of the

as a result of the standard, as calculated this Supplementary Information address NES that would result from

under the applicable test procedure the public comments received and implementation of today's standards.

* * *." (42 U.S.C. 6295(o)(2)(B)(iii)). DOE's conclusions on these subjects. As discussed in the October 5, 2000

The rebuttable presumption test is an NOPR, section 325(o)(3)(B) of EPCA

alternative path to establishing b. Life-Cycle Costs and Rebuttable prohibits DOE from adopting a standard

economic justification. Presumption for a product if that standard would not

C. Methodology Used in DOE Analyses DOE considered life-cycle costs, as result in "significant" energy savings.

discussed in the January 22 final rule. The energy savings for the standard

For this final rule, the methodologies 66 FR 7173, 7175, 7187-90. DOE levels DOE is adopting today are nonused to evaluate the seven factors calculated the installed price and trivial-indeed they are substantialdescribed above are unchanged from operation and maintenance costs for a and therefore we consider them

those used in the analyses that DOE range of consumers around the nation to "significant" within the meaning of

relied on for the October 5 proposed estimate the range in life-cycle cost

rule and the January 22 final rule. DOE's benefits that consumers would expect to 1

oTo avoid confusion, DOE points out that the

methodology is discussed in the October receive due to new standards. DOE has statute requires DOE to use "the applicable test

5, 2000 NOPR (65 FR 59594-97) and the made no change in its assumptions and procedure" to calculate the payback periods for

January 22 final rule (66 FR 7173-74). analyss of lif-cycle costs in making the the rbuttabl presumption. A January ~~~~~~~~analysis cofai fe-cycle csti explained nmigth in the October 5, 2000 NOPR (65 FR

Additionally, the TSD that accompanies determinations in today's notice of final 59596). the annual cooling and heating energy

this rulemaking provides a detailed rulemaking. consumption calculations based on DOE's test

description of every aspect of the Section 325(o)(2)(B)(iii) of EPCA procedure are significantly greater than the

various analytical methodologies used. provides that if, according to the weigha average values from DOE's life-cycle cost

analyses based on the 1997 Residential Energy

D. General Discussion of DOE's applicable test procedure, the increase Consumption Survey, used in other DOE analyses.

Consideration of Statutory Criteria in initial price of an appliance due to a For this reason, the payback periods presented in

conservation standard would repay Section VI of this portion of the preamble, entitled

1. Technological Feasibility itself to the consumer in energy savings "Analytical Results and Conclusions," are elfto the consumer in energy savings significantly longer than those calculated to

Pursuant to section 325(p)(2) of EPCA, in less than three years, then DOE is to determine whether the rebuttable presumption

and as discussed in the October 5, 2000 presume that such standard is applies to these products.

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440_ 30 It 

36378 Federal Register/Vol. 67, No. lOO/Thursday. May 23. 2002/Rules and Regulations 

proposed standard (42 U.S.C. 

6295(0)(2)(B)(i)). That section further 

provides that. after reviewing the 

comments. DOE must determine 

whether the benefits of the standard 

exceed its burdens. based. to the greatest 

extent practicable. on a weighing of the 

following seven factors: 

(i) The economic impact of the standard on the manufacturers and on the consumers of 

the products subject to such standard; 

(ii) The savings in operating costs 

throughout the estimated average life of the 

covered product in the type (or class) 

compared to any increase in the price of, or in the initial charges for, or maintenance 

expenses of, the covered products which are 

likely to result from the imposition of the 

standard; 

(iii) The total projected amount of energy 

savings likely to result directly from the 

imposition of the standard; 

(iv) Any lessening of the utility or the 

performance of the covered products likely to 

result from the imposition of the standard; 

(v) The impact of any lessening of 

competition. as determined in writing by the 

Attorney General, that is likely to result from 

the imposition of the standard; 

(vi) The need for national energy 

conservation; and 

(vii) Other factors the Secretary considers 

relevant. 

In addition. section 325(0)(2)(B)(iii) 

establishes a rebuttable presumption of 

economic justification in instances 

where the Secretary determines that 

"the additional cost to the consumer of 

purchasing a product complying with 

an energy conservation standard level 

will be less than three times the value 

of the energy * * * savings during the 

first year that the consumer will receive as a result of the standard, as calculated 

under the applicable test procedure * * *." (42 U.S.c. 6295(0)(2)(B)(iii)). 

The rebuttable presumption test is an alternative path to establishing 

economic justification. 

C. Methodology Used in DOE Analyses 

For this final rule. the methodologies 

used to evaluate the seven factors 

described above are unchanged from 

those used in the analyses that DOE 

relied on for the October 5 proposed 

rule and the January 22 final rule. DOE's 

methodology is discussed in the October 

5,2000 NOPR (65 FR 59594-97) and the 

January 22 final rule (66 FR 7173-74). 

Additionally. the TSD that accompanies 

this rulemaking provides a detailed 

description of every aspect of the 

various analytical methodologies used. 

D. General Discussion of DOE's 

Consideration of StatutoI)' Criteria 

1. Technological Feasibility 

Pursuant to section 325(p)(2) ofEPCA, 

and as discussed in the October 5. 2000 

NOPR (65 FR 59593.59612) and January 

22 final rule (66 FR 7172). DOE 

determined that 18 SEER is the 

maximum technolOgically feasible level 

(Max Tech Level) for cooling efficiency 

for all product classes and capacities 

covered by this rulemaking. The Max 

Tech Level for heating efficiency is 9.4 

HSPF. which is the highest HSPF rating 

currently available in residential heat 

pumps. DOE's determinations of 

technological feasibility for central air 

conditioners and heat pumps have not 

been disputed in the written and oral 

comments of interested persons in the 

rulemaking. 

2. Economic Justification Factors 

DOE has considered the seven 

statutory factors for determining 

whether a conservation standard is 

economically justified. This section 

briefly summarizes DOE's consideration 

of these factors. More detailed 

consideration of these factors is 

provided in the discussion of comments 

in Section VI and the discussion of 

analytical results in Section VII of this 

Supplementary Information. 

a. Economic Impact on Manufacturers 

and Consumers 

The record for this rulemaking 

contains several discussions of the 

economic impact on manufacturers and 

consumers See 66 FR 7174-78.7185-

7191, and 66 FR 38828-29.38834-35. In 

the July 25 SNOPR. DOE identified 

deficiencies in the assessment of 

manufacturer and consumer impacts 

that was the basis for adoption of the 

January 22 final rule. Later sections of 

this Supplementary Information address 

the public comments received and 

DOE's conclusions on these subjects. 

b. Life-Cycle Costs and Rebuttable 

Presumption 

DOE considered life-cycle costs, as discussed in the January 22 fmal rule. 

66 FR 7173.7175.7187-90. DOE 

calculated the installed price and 

operation and maintenance costs for a 

range of consumers around the nation to 

estimate the range in life-cycle cost 

benefits that consumers would expect to 

receive due to new standards. DOE has 

made no change in its assumptions and 

analysis of life-cycle costs in making the 

determinations in today's notice of final 

rulemaking. Section 325(0)(2)(B)(iii) of EPCA 

provides that if. according to the 

applicable test procedure. the increase 

in initial price of an appliance due to a conservation standard would repay 

itself to the consumer in energy savings 

in less than three years. then DOE is to 

presume that such standard is 

economically justified. This 

presumption of economic justification can be rebutted upon a proper showing. 

Using the reverse engmeering 

manufacturing costs, the standards DOE 

adopts today for split heat pumps and 

packaged heat pumps can be shown to 

have satisfied the rebuttable 

presumption requirements in section 

325(0)(2)(B)(iii).10 Therefore. DOE 

presumes that the standards adopted for 

split system and single package heat 

pumps are economically justified. The 

analysis. however. shows that split 

system air conditioners and single 

package air conditioners do not meet the 

standard for use of the rebuttable 

presumption of economic justification. 

Therefore. DOE does not presume them 

to be economically justified. If the 

rebuttable presumption does not apply. 

DOE must perform additional analysis 

to determine economic justification. As 

discussed in Section VII, DOE has 

performed an analysis for all classes of 

central air conditioner and heat pump 

products that shows the standards in 

today's rule are indeed economically 

justified. 

c. Energy Savings 

EPCA requires DOE, in determining 

the economic justification of a standard, 

to consider the total projected energy 

savings that are expected to result 

directly from revised standards. DOE 

forecasted energy savings through the 

use of a national energy savings (NES) 

spreadsheet. as discussed in the October 

5,2000 NOPR (65 FR 59590, 59593). 

DOE relies on the same spreadsheets 

and assumptions for its estimate of the 

NES that would result from 

implementation oftoday's standards. 

As discussed in the October 5, 2000 

NOPR, section 325(0)(3)(B) of EPCA 

prohibits DOE from adopting a standard 

for a product if that standard would not 

result in "significant" energy savings. 

The energy savings for the standard 

levels DOE is adopting today are nontrivial-indeed they are substantialand therefore we consider them 

"significant" within the meaning of 

10 To avoid confusion, DOE points out that the 

statute requires DOE to use "the applicable test 

procedure" to calculate the payback periods for 

purposes of the rebuttable presumption. As 

explained in the October 5, 2000 NOPR (65 FR 

59596). the annual cooling and heating energy 

consumption calculations based on DOE's test procedure are significantly greater than the 

weighted-average values from DOE's life·cycle cost 

analyses based on the 1997 Residential Energy 

Consumption Survey, used in other DOE analyses. 

For this reason, the payback periods presented in 

Section VII of this portion of the preamble, entitled 

"Analytical Results and Conclusions," are 

significantly longer than those calculated to 

determine whether the rebuttable presum pti on 

applies to these products. 
EE-RM/STD-98-440 = - 30 

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36379

section 325 of the Act as construed by final rule still presented anti- g. Other Factors

the court in Natural Resources Defense competitive concerns. More specifically, n ) f A all th

Council v. Herrington, 768 F.2d 1355 the Department of Justice concluded ect o n 3 o o

(D.C. Cir. 1985). that while the final rule's exclusion of Secretary of Energy, in determining

d Lseing of Utiy or Pe of niche products might alleviate whether a standard is economically d. Lessening of Utility or Performance of competitive problems for manufacturers justified, to consider any other factors

Products of those products, the Department of that the Secretary deems to be relevant

This factor cannot be quantified. In Justice remained concerned about the (42 U.S.C. 6295(o)(2)(B)(i)(VI)). Under

establishing classes of products, DOE impact of the final rule on this provision, DOE considered the

has attempted to eliminate any manufacturers of standard equipment potential improvement to the reliability

degradation of utility or performance in who could not make 13 SEER of the electrical system and health

the products covered by today's rule. equipment that would fit into space- effects caused by foregone air

Attributes that affect utility include the constrained sites. The Department of conditioner purchases. These issues are

product's ability to cool and Justice also concluded the January 22 discussed in the October 5, 2000 NOPR

dehumidify. In some applications, noise final rule would have a disproportionate (65 FR 59605); the January 22 final rule

levels may also be an aspect of utility. impact on smaller manufacturers of heat (66 FR 7195); and in the Discussion of

Product size or configuration can also be pumps. Finally, the Department of Comments that follows. The Utility

considered utility if a change in size Justice was of the view that the 13 SEER Impacts Analysis in Chapter 11 of the

would cause the consumer to install the standard for air conditioners presents TSD describes the technical analysis

product in a location or in a manner the same kinds of anti-competitive used in estimating the effects of

inconsistent with the consumer's problems as the 13 SEER standard for adopting new efficiency standards on

preferences. The separate treatment of heat pumps, and urged DOE to adopt a installed generation capacity. As will be

through-the-wall products and small 12 SEER standard for all products described in the Discussion of

duct, high velocity systems in today's covered by the rule. Comments, the Utility Impacts Analysis

rule is based in part on utility and DOE submitted the July 25, 2001, has been revised. Updated results are

performance considerations. supplemental proposed rule to the provided in Appendix M of the TSD.

e. Impact of Lessening of Competition Department of ustice for comment. The VI. Discussion ofCo ents

Assistant Attorney General, Antitrust

This economic justification factor has Division, responded in a letter dated A. Impact on Consumers

two aspects: On the one hand, it October 19, 2001, (see Appendix to this T r

assumes that there could be some notice) that the Department of Justice The record for this rulemaking

lessening of competition as a result of had concluded that the proposed 12 includes numerous discussions of the

standards; on the other hand, it directs SEER standards would not adversely distributions, extent, and type of

the Attorney General to gauge the affect competition. This factor is burdens on the typical consumer aswell

impact, if any, of that effect and DOE discussed further in Section VI.E of this as on low-income consumers. See 65 FR

must consider the Attorney General's Supplementary Information. 59623-59624, 66 FR 7189-7190, and 66

views in determining whether an FR 38834. In the January 22 notice of

efficiency level is economically f. Need of the Nation To Conserve final rulemaking, DOE determined that

justified. Energy most consumers, including low-income

In order to assist the Attorney General DOE recognizes that energy consumers, would likely benefit

in making such a determination, DOE conservation benefits the nation in financially over the life of the

provided the Attorney General with several important ways. Enhanced equipment, but that all consumers

copies of the October 5, 2000, NOPR energy efficiency improves the nation's would bear higher initial costs, and

and the TSD for review. The Attorney energy security, strengthens the many consumers, though not the

General's determination, in a letter economy, and reduces the majority, would never recover the

dated December 4, 2000, was discussed environmental impacts of energy higher first costs in the form of savings

in the preamble to the January 22 final production. As part of the analysis in their utility bills. However, the

rule. 66 FR 7176, 7199-200. The supporting today's rule, DOE estimated previous Administration concluded that

Attorney General's December 4, 2000, energy savings and the national the national energy savings and the

determination is included in the consumer benefits and estimated slight financial benefit to the typical

Appendix to this notice of final reduction in emissions of pollutants and consumer overrode any negative and

rulemaking. greenhouse gases resulting from those maldistributed consumer impacts. Upon

During the review conductedenergy savings. See the October 5, 2000 review undertaken in conjunction with

pursuant to the President's Regulatory NOPR for a qualitative discussion of President Bush's Regulatory Review

Review Plan, DOE invited the Attorney how these standards affect energy Plan, DOE focused on analytical results

General to submit supplemental views savings and those benefits. 65 FR showing that the benefits of the

on the January 22 final rule. The 59622-3. The amount of energy savings standards adopted in the January 22

Department of Justice, in a letter dated ultimately associated with a particular final rule would accrue to a much

April 5, 2001, provided comments on standard level is also affected by the smaller fraction of consumers,

whether the final rule effectively effect of a given standard on particularly low-income consumers,

removed its concerns regarding possible competition and consumer cost. than is the case for recent standards for

lessening of competition that could Selecting a standard level should take other products. Therefore, DOE sought

result from the October 5 proposed into account manufacturer-and to mitigate those burdens by proposing

standards. The Department of Justice's therefore inevitably consumer-costs, in on July 25 a 12 SEER standard, which

April 5, 2001, letter is also included in order to encourage robust competition would reduce the increase in equipment

the Appendix to this notice. The and heightened introduction of newer, cost compared to the 13 SEER

Department of Justice concluded that more efficient units into the inventory requirements issued on January 22. See

the 13 SEER standards for heat pumps of units available for purchase and use July 25 SNOPR, 66 FR 38828, 38834.

and air conditioners in the January 22 by consumers. DOE received extensive public

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440 .. '30 ~ 

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36379 

section 325 of the Act as construed by 

the court in Natural Resources Defense 

Council v. Herrington, 768 F.2d 1355 

(D.C. Cir. 1985). 

d. Lessening of Utility or Performance of 

Products 

This factor cannot be quantified. In 

establishing classes of products, DOE 

has attempted to eliminate any 

degradation of utility or performance in 

the products covered by today's rule. 

Attributes that affect utility include the 

product's ability to cool and 

dehumidify. In some applications, noise 

levels may also be an aspect of utility. 

Product size or configuration can also be 

considered utility if a change in size 

would cause the consumer to install the 

product in a location or in a manner inconsistent with the consumer's 

preferences. The separate treatment of 

through-the-wall products and small 

duct, high velocity systems in today's 

rule is based in part on utility and 

performance considerations. 

e. Impact of Lessening of Competition 

This economic justification factor has 

two aspects: On the one hand, it assumes that there could be some lessening of competition as a result of 

standards; on the other hand, it directs 

the Attorney General to gauge the 

impact, if any, of that effect and DOE 

must consider the Attorney General's 

views in determining whether an efficiency level is economically 

justified. 

In order to assist the Attorney General 

in making such a determination, DOE 

provided the Attorney General with 

copies of the October 5, 2000, NOPR 

and the TSD for review. The Attorney 

General's determination, in a letter 

dated December 4, 2000, was discussed 

in the preamble to the January 22 final 

rule. 66 FR 7176, 719~200. The 

Attorney General's December 4,2000, 

determination is included in the 

Appendix to this notice of final 

rulemaking. 

During the review conducted 

pursuant to the President's Regulatory 

Review Plan, DOE invited the Attorney 

General to submit supplemental views 

on the January 22 final rule. The 

Department of Justice, in a letter dated 

April 5, 2001, provided comments on whether the final rule effectively 

removed its concerns regarding possible 

lessening of competition that could 

result from the October 5 proposed 

standards. The Department of Justice's 

April 5, 2001,letter is also included in 

the Appendix to this notice. The 

Department of Justice concluded that 

the 13 SEER standards for heat pumps 

and air conditioners in the January 22 

final rule still presented anticompetitive concerns. More specifically, 

the Department of Justice concluded 

that while the final rule's exclusion of 

niche products might alleviate 

competitive problems for manufacturers 

of those products, the Department of 

Justice remained concerned about the 

impact of the final rule on manufacturers of standard equipment 

who could not make 13 SEER 

equipment that would fit into spaceconstrained sites. The Department of 

Justice also concluded the January 22 

final rule would have a disproportionate 

impact on smaller manufacturers of heat 

pumps. Finally, the Department of 

Justice was of the view that the 13 SEER 

standard for air conditioners presents 

the same kinds of anti-competitive 

problems as the 13 SEER standard for 

heat pumps, and urged DOE to adopt a 

12 SEER standard for all products 

covered by the rule. 

DOE submitted the July 25, 2001, 

supplemental proposed rule to the 

Department of Justice for comment. The 

Assistant Attorney General, Antitrust 

Division, responded in a letter dated 

October 19, 2001, (see Appendix to this 

notice) that the Department of Justice 

had concluded that the proposed 12 

SEER standards would not adversely 

affect competition. This factor is 

discussed further in Section VI.E of this 

Supplementary Information. 

f. Need of the Nation To Conserve 

Energy 

DOE recognizes that energy 

conservation benefits the nation in 

several important ways. Enhanced 

energy efficiency improves the nation's 

energy security, strengthens the 

economy, and reduces the 

environmental impacts of energy 

production. As part of the analysis 

supporting today's rule, DOE estimated 

energy savings and the national consumer benefits and estimated 

reduction in emissions of pollutants and 

greenhouse gases resulting from those 

energy savings. See the October 5, 2000 

NOPR for a qualitative discussion of 

how these standards affect energy 

savings and those benefits. 65 FR 

59622-3. The amount of energy savings 

ultimately associated with a particular 

standard level is also affected by the 

effect of a given standard on competition and consumer cost. 

Selecting a standard level should take 

into account manufacturer-and 

therefore inevitably consumer-costs, in 

order to encourage robust competition 

and heightened introduction of newer, more efficient units into the inventory 

of units available for purchase and use by consumers. 

g. Other Factors 

Section 325(0) of EPCA allows the 

Secretary of Energy, in determining 

whether a standard is economically 

justified, to consider any other factors 

that the Secretary deems to be relevant 

(42 U.S.C. 6295(0)(2)(B)(i)(VI)). Under 

this provision, DOE considered the 

potential improvement to the reliability 

of the electrical system and health 

effects caused by foregone air 

conditioner purchases. These issues are 

discussed in the October 5, 2000 NOPR 

(65 FR 59605); the January 22 final rule 

(66 FR 7195); and in the Discussion of 

Comments that follows. The Utility 

Impacts Analysis in Chapter 11 of the 

TSD describes the technical analysis 

used in estimating the effects of 

adopting new efficiency standards on 

installed generation capacity. As will be 

described in the Discussion of 

Comments, the Utility Impacts Analysis 

has been revised. Updated results are 

provided in Appendix M of the TSD. 

VI. Discussion of Comments 

A. Impact on Consumers 

The record for this rulemaking 

includes numerous discussions of the 

distributions, extent, and type of 

burdens on the typical consumer as well as on low-income consumers. See 65 FR 

59623-59624,66 FR 7189-7190, and 66 

FR 38834. In the January 22 notice of 

final rulemaking, DOE determined that 

most consumers, including low-income 

consumers, would likely benefit 

financially over the life of the 

equipment, but that all consumers would bear higher initial costs, and 

many consumers, though not the 

majority, would never recover the 

higher first costs in the form of savings 

in their utility bills. However, the 

previous Administration concluded that 

the national energy savings and the 

slight financial benefit to the typical 

consumer overrode any negative and 

mal distributed consumer impacts. Upon 

review undertaken in conjunction with 

President Bush's Regulatory Review 

Plan, DOE focused on analytical results 

showing that the benefits of the 

standards adopted in the January 22 

final rule would accrue to a much 

smaller fraction of consumers, 

particularly low-income consumers, 

than is the case for recent standards for 

other products. Therefore, DOE sought 

to mitigate those burdens by proposing on July 25 a 12 SEER standard, which 

would reduce the increase in equipment 

cost compared to the 13 SEER 

requirements issued on January 22. See 

July 25 SNOPR, 66 FR 38828, 38834. 

DOE received extensive public 
EE-RM/STD-98-440- 30o

36380 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

comments on this subject in response to prohibitive expense at any efficiency literature provides expressions for

the July 25 SNOPR. level. (OOE, No. 275 at pp. 4-5; determining the renter and landlord

1. Low-Income CGoodman, No. 269 at p. 4; National pass-through-fractions as a function of

1. Low-Income ConsumersGrid, No. 241-00 at p. 2; Texas ROSE, elasticities for long-run housing supply

As stated in the July 25 SNOPR, DOE No. 241-SS at pp. 12-16). and demand. The renter pass-throughis particularly concerned that new Countering the above comments, York fraction defines that portion of a

standards be designed to distribute their International (York), Trane Company landlord's investment cost (such as the

burdens and benefits as fairly as and American Standard Heating and Air cost associated with more efficient airpractical. Although some disparity is Conditioning (Trane), Southern conditioning equipment) that gets

expected in any national standard, the Company, ARI, Edison Electric Institute passed through to the renter in the form

disparity in impacts between low- (EEI), Rheem Manufacturing (Rheem), of an increased rental price. The renter

income and typical consumers is of Carrier Corporation (Carrier), and pass-through-fraction is defined by the

greater concern at more stringent George Mason University Mercatus following expression:

efficiency standards because increases Center (Mercatus Center) all argued that Where,

in first cost and increases in life cycle the increased cost of more efficient aircosts are felt more sharply by lower conditioning equipment cannot be es

income consumers. afforded by those consumers living on Pass-thru-FractionRnter = -

Many advocates of a 13 SEER fixed or low incomes. For those low- e ed

standard argued that because a majority income consumers that are elderly or of es = elasticity of long-run housing

of low-income central air conditioner ill-health, Carrier and Mercatus Center supply and

and heat pump consumers are renters, stated that the increased first cost ed = elasticity of long-run housing

most would not bear the first cost associated with more efficient demand.

increases associated with more efficient equipment could cause these consumers The landlord pass-through-fraction

equipment. These comments asserted to forego the purchase of new defines that portion of a renter's benefit

that landlords would have to absorb any equipment leading to potential adverse due to a landlord's investment (such as

first cost increase because rental prices health effects for this sub-population. utility bill savings associated with more

are dictated by housing availability, real With regard to low-income renters, both efficient air-conditioning equipment)

estate prices, and a number of other Trane and Southern Company that get passed back through to the

market forces as opposed to first cost maintained that landlords will pass on landlord in the form of an increased

increases in any single appliance. The the higher first costs associated with rental price. The landlord pass-throughcomments also asserted that because more efficient equipment to renters. fraction is defined by the following

landlords typically purchase the least Southern Company elaborated by stating expression:

expensive, and in turn, the least the "renters get it free" argument only

efficient equipment, stringent efficiency has validity in the very short-term. In Passhru-Fraction o = e d

standards are one of the few options the long term, higher costs experienced O e- ed

provided to renters to protect them from by landlords will inevitably result in The existing literature provides a range

unduly high energy bills. (ACEEE, No. higher costs to their tenants. Southern of elasticities for long-run housing

284 at p. 3; Appliance Standards Company asserts that DOE would be supply (0.3 to 0.7) and demand (-0.1 to

Awareness Project (ASAP), No. 244 at better served looking at cost- -1.0). The literature suggests that there

pp. 1-2; Austin Energy, No. 243 at p. 2; effectiveness from a direct-cost, societal will always be some form of renter passConsumer Federation of America (CFA), viewpoint, and avoid speculating on though but not necessarily some form of

No. 246 at p. 2; NEEP, No. 273 at p. 3; changes in landlord profit margins landlord pass-through. As a result, the

State of Vermont, No. 268 at p. 3; decades from now. (York, No. 270 at pp. minimum and maximum pass-throughGoodman Global Holdings (Goodman), 2-3; Trane, No. 262 at pp. 4-5; Southernfractions are 23 percent and 121

No. 269 at p. 4; ASE, No. 282 at p. 4; Company, No. 257 at p. 2; ARI, No. 259 percent respectively, of a landlord's

California Energy Commission (CEC), at p. 2; EEI

, No. 253 at p. 4; Rheem, No. investment cost. As shown above, the

No. 263 at p. 2; NRDC, No. 250 at pp. 248 at p. 2; Carrier, No. 280 at p. 2; literature suggests that it is possible that

17-18; Environmental Ministries of Mercatus Center, No. 242 at p. 11). some landlords will not be able to pass

Southern California, No. 263 at p. 4; DOE believes roughly half of low on all investment costs while other

Texas Ratepayers' Organization to Save income households are renters. The landlds m actually pass on more

Energy (Texas ROSE), No. 241-SS at pp. 1997 Residential Energy Consumption than 100 percent of these costs. Tose

15-16; National Consumer Law Center Survey (RECS) that was used as the landlor o are unae to passonall

(NCLC), No. 241-NN at p. 1; Texas basis for determining the impacts of f these added costs will, of course, be

Natural Resource Conservation increased efficiency standards on adversel affected ys this rulemaking

Commission (TNRCC), No. 286 at pp. 1 -households estimates that 49.8 percent unless they are directly responsible for

2; American Geothermal DX, No. 241- of low-income households with central the utility bills asociated with air

HH at p. 1; EPA, No. 276 at p. 5). air-conditioners or heat pumps are conditioning use, although their renters

Goodman, Oregon Office of Energy renters. What is at issue is the extent to ae much more likely to benefit s

(OOE), National Grid, and Texas ROSE which increased equipment costs will Landlords that would be adversely

stated that low-income consumers in be borne by occupants of these

general would benefit from stringent households or by the building owners. landlord pass-through fractions as a function of

efficiency standards. Goodman argued DOE examined existing literature on elasticities for long-rim housing supply and

that any first cost increase would be the economics of rental markets to demand. Typical supply elasticities can be found in

made up through lower energy bills, determine whether any previous Pindykck, R. and D. Rubinfeld. Microeconomics,

while Texas ROSE asserted that the analyses might help resolve the 2001, Prentice Hall (citing de Leeuw, F. and N.

stringency of the efficiency standard is dsgemnsothsEkanen. "The Supply of Rental Housing", AER. Vol.

stringency of the efficiency standard is disagreements on this issue." The 61,1971, pp 80817). Typical demand elasticities

immaterial as most low-income _______can be found in Hanushek, E.A. and J.M. Quigley,

households would find buying a new 11 Pindykck. R. and D. Rubinfeld, Microeconomic "The Determinants of Housing Demand", Research

central air conditioning unit a Theory, 2001, provides equations for renter and in Urban Economics. Vol. 2,1982, pp. 221-242.

EE-RM-STD-98-440 COMMENT 304

36380 

EE·RM/STD-98-44Q... 3o~ 

Federal Register/Vol. 67, No. lOO/Thursday, May 23, 2002/Rules and Regulations 

comments on this subject in response to 

the July 25 SNOPR. 

1. Low-Income Consumers 

As stated in the July 25 SNOPR, DOE 

is particularly concerned that new 

standards be designed to distribute their 

burdens and benefits as fairly as practical. Although some disparity is 

expected in any national standard, the 

disparity in impacts between lowincome and typical consumers is of 

greater concern at more stringent 

efficiency standards because increases 

in first cost and increases in life cycle 

costs are felt more sharply by lower 

income consumers. Many advocates of a 13 SEER 

standard argued that because a majority 

of low-income central air conditioner 

and heat pump consumers are renters, 

most would not bear the first cost 

increases associated with more efficient 

equipment. These comments asserted 

that landlords would have to absorb any 

first cost increase because rental prices are dictated by housing availability, real 

estate prices, and a number of other 

market forces as opposed to first cost 

increases in any single appliance. The 

comments also asserted that because 

landlords typically purchase the least 

expensive, and in tum, the least 

efficient equipment, stringent efficiency 

standards are one of the few options 

provided to renters to protect them from 

unduly high energy bills. (ACEEE, No. 

284 at p. 3; Appliance Standards 

Awareness Project (ASAP), No. 244 at 

pp. 1-2; Austin Energy, No. 243 at p. 2; 

Consumer Federation of America (CF A), 

No. 246 at p. 2; NEEP, No. 273 at p. 3; 

State of Vermont, No. 268 at p. 3; 

Goodman Global Holdings (Goodman), 

No. 269 at p. 4; ASE, No. 282 at p. 4; 

California Energy Commission (CEC), 

No. 263 at p. 2; NRDC, No. 250 at pp. 

17-18; Environmental Ministries of 

Southern California, No. 263 at p. 4; 

Texas Ratepayers' Organization to Save 

Energy (Texas ROSE), No. 241-SS at pp. 

15-16; National Consumer Law Center 

(NCLC), No. 241-NN at p. 1; Texas 

Natural Resource Conservation 

Commission (TNRCC), No. 286 at pp. 1-

2; American Geothermal OX, No. 241-

HH at p. 1; EPA, No. 276 at p. 5). 

Goodman, Oregon Office of Energy 

(ODE), National Grid, and Texas ROSE 

stated that low-income consumers in 

general would benefit from stringent 

efficiency standards. Goodman argued 

that any first cost increase would be 

made up through lower energy bills, 

while Texas ROSE asserted that the 

stringency of the efficiency standard is 

immaterial as most low-income 

households would find buying a new 

central air conditioning unit a 

prohibitive expense at any efficiency 

level. (OOE, No. 275 at pp. 4-5; 

Goodman, No. 269 at p. 4; National 

Grid, No. 241-00 at p. 2; Texas ROSE, 

No. 241-8S at pp. 12-16). 

Countering the above comments, York 

International (York), Trane Company 

and American Standard Heating and Air 

Conditioning (Trane), Southern 

Company, ARI, Edison Electric Institute 

(EEn. Rheem Manufacturing (Rheem), 

Carrier Corporation (Carrier), and 

George Mason University Mercatus 

Center (Mercatus Center) all argued that 

the increased cost of more efficient airconditioning equipment cannot be 

afforded by those consumers living on 

fixed or low incomes. For those lowincome consumers that are elderly or of 

ill-health, Carrier and Mercatus Center 

stated that the increased first cost 

associated with more efficient 

equipment could cause these consumers to forego the purchase of new equipment leading to potential adverse 

health effects for this sub-population. 

With regard to low-income renters, both 

Trane and Southern Company 

maintained that landlords will pass on the higher first costs associated with more efficient equipment to renters. 

Southern Company elaborated by stating 

the "renters get it free" argument only 

has validity in the very short-term. In 

the long term, higher costs experienced 

by landlords will inevitably result in 

higher costs to their tenants. Southern 

Company asserts that DOE would be 

better served looking at costeffectiveness from a direct-cost, societal 

viewpoint, and avoid speculating on 

changes in landlord profit margins 

decades from now. (York, No. 270 at pp. 

2-3; Trane, No. 262 at pp. 4-5; Southern 

Company, No. 257 at p. 2; ARI, No. 259 

at p. 2; EEl, No. 253 at p. 4; Rheem, No. 

248 at p. 2; Carrier, No. 280 at p. 2; 

Mercatus Center, No. 242 at p. 11). 

DOE believes roughly half of low 

income households are renters. The 

1997 Residential Energy Consumption 

Survey (RECS) that was used as the 

basis for determining the impacts of 

increased efficiency standards on households estimates that 49.8 percent 

of low-income households with central 

air-conditioners or heat pumps are renters. What is at issue is the extent to 

which increased equipment costs will 

be borne by occupants of these 

households or by the building owners. DOE examined existing literature on the economics of rental markets to 

determine whether any previous 

analyses might help resolve the 

disagreements on this issue.ll The 

11 Pindykck. R. and D. Rubinfeld. Microeconomic 

Theory, 2001, provides equations for renter and 

literature provides expressions for 

determining the renter and landlord 

pass-through-fractions as a function of 

elasticities for long-run housing supply 

and demand. The renter pass-throughfraction defines that portion of a landlord's investment cost (such as the 

cost associated with more efficient airconditioning equipment) that gets 

passed through to the renter in the form 

of an increased rental price. The renter 

pass-through-fraction is defined by the 

following expression: Where, 

hru F · es Pass-t - ractlOn Renier = --

es-ed 

e. = elasticity of long-run housing 

supply and 

ed = elasticity of long-run housing 

demand. 

The landlord pass-through-fraction 

defines that portion of a renter's benefit 

due to a landlord's investment (such as utility bill savings associated with more efficient air-conditioning equipment) 

that get passed back through to the 

landlord in the form of an increased 

rental price. The landlord pass-throughfraction is defined by the following 

expression: 

. -ed Pass-thru-FractlonLandlord =--

es-ed 

The existing literature provides a range 

of elasticities for long-run housing 

supply (0.3 to 0.7) and demand (- 0.1 to 

-1.0). The literature suggests that there 

will always be some form of renter passthough but not necessarily some form of 

landlord pass-through. As a result, the 

minimum and maximum pass-throughfractions are 23 percent and 121 

percent, respectively, of a landlord's 

investment cost. As shown above, the 

literature suggests that it is possible that 

some landlords will not be able to pass 

on all investment costs, while other 

landlords may actually pass on more than 100 percent of these costs. Those 

landlords who are unable to pass on all 

of these added costs will, of course, be 

adversely affected by this rulemaking 

(unless they are directly responsible for 

the utility bills associated with air 

conditioning use), although their renters are much more likely to benefit. 

Landlords that would be adversely 

landlord pass-through fractions as a function of 

elasticities for long-run housing supply and 

demand. Typical supply elasticities can be found in 

Pindykck. R. and D. Rubinfeld. Microeconomics. 

2001. Prentice Hall (citing de Leeuw. F. and N. 

Ekanen. "The Supply of Rental Housing". AER. Vol. 

61.1971. pp. 806-817). Typical demand elasticities 

can be found in Hanushek. E.A. and J.M. Quigley. 

"The Determinants of Housing Demand". Research 

in Urban Economics. Vol. 2. 1982. pp. 221-242. 
EE-RM/STD-98-440- 304

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36381

affected may be more likely to seek Cooperative Association (NRECA), No. contracts entered into by California to

alternatives, such as small capacity 278 at pp. 1-2; Environmental guarantee electricity supplies in the

units or even delayed replacement of Ministries of Southern California, No. State. Increased competition in

failed units. Those landlords that pass 236 at pp. 2-3; Texas ROSE, No. 241- electricity markets is also represented

on more than 100 percent of the costs SS at pp. 7-8; NCLC, No. 255 at pp. 2- through changes in the financial

of new equipment could benefit from 4; Northwest Power Planning Council structure of the industry and efficiency

efficiency standards, but their renters (NWPPC), No. 287 at pp. 1-3; and operating improvement. The impact

are much more likely to be adversely Environmental Protection Agency of EIA's assumptions are evidenced

affected. Since no study could be found (EPA), No. 276 at p. 4). Some comments from the average residential electricity

that addressed the specific population further argue that the costs of electricity price estimated by AEO2002 for the year

of renters likely to be affected by this price increases due to air-conditioning 2001. The average rate estimated by

rulemaking, DOE believes there is are passed, in the form of higher rates, AE02002 for 2001 is 4.2 percent greater

insufficient basis to change its analytical onto all consumers for all end uses, (or 0.3 ¢/kWh) than that estimated by

methods or conclusions regarding the regardless of the importance of their role the AEO2000. Although the AEO2002

likely effects of central air conditioner in creating the price increase. Thus, short-term projections have taken into

and heat pump standards on low- DOE's analysis should account for how account recent events, EIA estimates

income renters. lower air-conditioning consumption that long-term volatility in energy

2. Ectricity Pr-ices lowers electricity bills for all consumers markets will not occur from recent

2 y and not only those that utilize air events or from the impacts of such

In proposing a 12 SEER standard in conditioners. (NEEP, No. 273 at pp. 2- future events as supply disruptions or

the Ju'y 25 SNOPR, DOE stated that a 3; NRDC, No. 250 at pp. 14-17). severe weather. Again, this is evidenced

lower 'ractir n of consumers would be Trane, ARI, and EEI all disagree that from the average residential electricity

iegatix ely impacted in terms of life- recent price increases due to electricity price forecasts from the AEO2002.

cycle cost than under a 13 SEER deregulation will lead to higher Starting in the year 2003 average rates

s'andanr.l. See 66 FR 28828. electricity rates in the long-term. For are projected to drop below those

Severrl comments disagreed with example, Trane asserts that competition forecasted by the AEO2000 and remain

DOE's 'i e-cycle cost conclusions, will cause energy prices to consumers to that way until 2010. After 2010 the rates

claiming hat DOE's analysis remain stable. EEI adds that price forecasted by both the AEO2002 and

significantly underestimates the benefits collapses have recently occurred in AE02000 are essentially the same. In

of the 13 SEER rule due to its failure to some of the same regional markets terms of the consumer analysis, this

account fcr recent increases in which experienced rate increases. EEI means that the life-cycle results based

electricity prices. The comments note also states that retail price caps have on the AEO2000 price projections

that DOE based its seasonal price been instituted in many areas of the would remain virtually unchanged if the

forecasts on electricity price data from country that have been deregulated in AEO2002 projections were to be

1996-97 that were adjusted downward order to shield residential consumers substituted in their place.

using Energy Information from the price fluctuations in the With regard to Synapse Energy

cAdministration (EA) projections ofC wholesale market. (Trane, No. 262 at pp. Economics' wholesale electricity price

future annual electricity prices. Citing 14-16; ARI, No. 259 at pp. 33-34; EEI, analysis, DOE does recognize that

recent residential rate data from areas of No. 253 at p. 3). wholesale summertime electricity prices

the country that have undergone some Rather than speculate on how current are on average 2V/2 c/kWh greater than

form of electricity deregulation (e.g., volatility in energy markets will impact average wholesale rates. But as was

Massachusetts, California, and the future electricity prices, DOE has stated in the January 22 final rule, DOE

Northwest), the comments assert that consistently relied on EIA energy price cannot speculate as to how wholesale

DOE's electricity cost projections fa to forecasts and has used other forecasts, prices will be translated into retail

recognize the significant summertime including the various EIA scenarios, to prices to residential consumers. It is

consumer price increases that are bound the energy prces used i the possible that this difference in

accompanying restructuring of the standards analysis. EIA's most recent wholesale rates will ultimately result in

electric utility industry. For additional Annual Energy Outlook (AEO) for the higher marginal energy prices for the

support, some comments refer to an Annual Energy Outlook (AEO) for the higher marginal energy prices for the

analysiso couted by Synapse Energy year 2002 recognizes that over the past operation of central air conditioners.

Economics that demonstrated that year energy markets have been However, several other assumptions

summer daytime wholesale elctric extremely volatile. 2 Recent energy about future electricity prices are

prices across the countr averaged market volatiliy as well as the equally reasonable. It is possible that

approximately 2/2 ¢/kWh (kilowatt- economic slowdown and lower prices increased competition will result in

hour) more than annual average following the September 2001 terrorists' higher fixed charges for utility service

wholesale prices. These comments attacks in the United States have been and higher fixed charges would lower

onclude that if DOE's analysis were incorporated in the short-term marginal rates. That is, under

revised to include more recent projections of the AEO2002. To be more competition, utilities may recover more

electricitv prices, the results would specific regarding the AEO2002 of their costs of supplying electricity to

indicate that a 13 SEER standard assumptions, its projections assume a consumers from fixed charges on utility

represents a better choice for consumers transition to full competitive pricing of bills, thereby reducing the cost

and the Nation. (ACEEE, No. 284 at pp. electricity in States with specific consumers have to pay for electricity

8-11; CFA, No. 246 at p. 2; Attorneys deregulation plans. Other States are being supplied at the margin. It is also

General of New York and assumed to continue cost-of-service possible that higher peak load prices for

Massachusetts, No. 277 at pp. 15-16; pricing. Price projections include the electricity would cause consumers to

OOE, No. 275 at p. 3; Pacific Gas & significantly alter the times at which

Electric Company (PG&E), No. 274 at US. Dpartmn of Energy-Energy Information they use air conditioning, thus reducing Elctrie CITIompany l(fl-i&cI.J, IMO. 27/t d Administration (EIA), Early Release of the Annual

pp. 1-2; ASE, No. 282 at p. 4; Goodman, Energy Outlook 2002 EIA website: projected electricity costs (and cost

No. 269 at p. 2; National Rural Electric <http:www.eia.doe.gov/oiaf/aeo/>. savings). Finally, it is possible that the

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440 - 3 0 ~ 

Federal Register/Vol. 67, No. lOO/Thursday, May 23, 2002/Rules and Regulations 36381 

affected may be more likely to seek 

alternatives, such as small capacity 

units or even delayed replacement of 

failed units. Those landlords that pass 

on more than 100 percent of the costs 

of new equipment could benefit from 

efficiency standards, but their renters 

are much more likely to be adversely 

affected. Since no study could be found 

that addressed the specific population 

of renters likely to be affected by this 

rulemaking, DOE believes there is 

insufficient basis to change its analytical 

methods or conclusions regarding the 

likely effects of central air conditioner 

and heat pump standards on lowincome renters. 

2. E;~ctrjcity Prices 

In ;1roposing a 12 SEER standard in 

~ne Ju'y 25 SNOPR, DOE stated that a 

10wH "ractirn of consumers would be 

:legath ely impacted in terms of lifecycle Co.'st than under a 13 SEER 

s.'.andc:,n.1. See 66 FR 28828. Sev~'rr I comments disagreed with 

DOE's .'L ~-cycle cost conclusions, 

claiming hat DOE's analysis 

significantly underestimates the benefits 

oftl.e 13 ~~EER rule due to its failure to 

accmmt fer recent increases in 

electricity prices. The comments note 

that DOE based its seasonal price 

forecasts on electricity price data from 

1996-97 that were adjusted downward 

using Energy Information 

Administration (EIA) projections of 

future annual electricity prices. Citing 

recent residential rate data from areas of 

the country that have undergone some 

form of electricity deregulation (e.g., 

Massachusetts, California, and the 

Northwest), the comments assert that 

DOE's electricity cost projections fail to 

recognize the significant summertime 

consumer price increases that are accompanying restructuring of the 

electric utility industry. For additional 

support, some comments refer to an 

analysis conducted by Synapse Energy 

Economics that demonstrated that summer daytime wholesale electric 

prices across the country averaged 

approximately 21/2 IX/kWh (kilowatthour) more than annual average 

wholesClle prices. These comments 

conclude that if DOE's analysis were 

revised to include more recent 

electricity prices, the results would 

indicate that a 13 SEER standard 

represents a better choice for consumers and the Nation. (ACEEE, No. 284 at pp. 

8-11; CFA, No. 246 at p. 2; Attorneys 

General of New York and 

Massachusetts, No. 277 at pp. 15-16; 

OOE, No. 275 at p. 3; Pacific Gas & 

Electric Company (PG&E), No. 274 at 

pp. 1-2; ASE, No. 282 at p. 4; Goodman, 

No. 269 at p. 2; National Rural Electric 

Cooperative Association (NRECA), No. 

278 at pp. 1-2; Environmental 

Ministries of Southern California, No. 

236 at pp. 2-3; Texas ROSE, No. 241-

SS at pp. 7-8; NCLC, No. 255 at pp. 2-

4; Northwest Power Planning Council 

(NWPPC), No. 287 at pp. 1-3; 

Environmental Protection Agency 

(EPA), No. 276 at p. 4). Some comments 

further argue that the costs of electricity 

price increases due to air-conditioning 

are passed, in the form of higher rates, 

onto alJ consumers for all end uses, 

regardless of the importance of their role 

in creating the price increase. Thus, 

DOE's analysis should account for how 

lower air-conditioning consumption 

lowers electricity bills for all consumers 

and not only those that utilize air 

conditioners. (NEEP, No. 273 at pp. 2-

3; NRDC, No. 250 at pp. 14-17). 

Trane, ARI, and EEl all disagree that 

recent price increases due to electricity 

deregulation will lead to higher 

electricity rates in the long-term. For 

example, Trane asserts that competition 

will cause energy prices to consumers to 

remain stable. EEl adds that price 

collapses have recently occurred in 

some of the same regional markets 

which experienced rate increases. EEl 

also states that retail price caps have 

been instituted in many areas of the 

country that have been deregulated in 

order to shield residential consumers 

from the price fluctuations in the 

wholesale market. (Trane, No. 262 at pp. 

14-16; ARJ, No. 259 at pp. 33-34; EEl, 

No. 253 at p. 3). 

Rather ilian speculate on how current 

volatility in energy markets will impact 

future electricity prices, DOE has 

consistently relied on EIA energy price 

forecasts and has used other forecasts, 

including the various EIA scenarios, to 

bound the energy prices used in the 

standards analysiS. ElA's most recent 

Annual Energy Outlook (AEO) for the 

year 2002 recognizes that over the past 

year energy markets have been 

extremely volatile. 12 Recent energy 

market volatility as well as the 

economic slowdown and lower prices 

following the September 2001 terrorists' 

attacks in the United States have been 

incorporated in the short-term 

projections of the AE02002. To be more 

specific regarding the AE02002 

assumptions, its projections assume a 

transition to full competitive pricing of 

electricity in States with specific 

deregulation plans. Other States are 

assumed to continue cost-of-service 

pricing. Price projections include the 

12 U.S. Department of Energy-Energy Information 

Administration (EIA). Early Release of the Annual 

Energy Outlook 2002. ErA website: 

<http:www.eia.doe.gov/oiaf/aeo/>. 

contracts entered into by California to 

guarantee electricity supplies in the 

State. Increased competition in 

electricity markets is also represented 

through changes in the financial 

structure ofthe industry and efficiency 

and operating improvement. The impact 

ofElA's assumptions are evidenced 

from the average residential electricity 

price estimated by AE02002 for the year 

2001. The average rate estimated by 

AE02002 for 2001 is 4.2 percent greater 

(or 0.3 IX/kWh) than that estimated bv 

the AE02000. Although the AE02002 

short-term projections have taken into 

account recent events, EIA estimates 

that long-term volatility in energy 

markets will not occur from recent 

events or from the impacts of such 

future events as supply disruptions or 

severe weather. Again, this is evidenced 

from the average residential electricity 

price forecasts from the AE02002. 

Starting in the year 2003 average rates 

are projected to drop below those 

forecasted by the AE02000 and remain 

that way until 2010. After 2010 the rates 

forecasted by both the AE02002 and 

AE02000 are essentially the same. In 

terms of the consumer analysis, this 

means that the life-cycle results based 

on the AE02000 price projections 

would remain virtually unchanged if the 

AE02002 projections were to be 

substituted in their place. 

With regard to Synapse Energy 

Economics' wholesale electricity price 

analysis, DOE does recognize that 

wholesale summertime electricity prices 

are on average 21h IX/kWh greater than 

average wholesale rates. But as was 

stated in the January 22 final rule, DOE 

cannot speculate as to how wholesale 

prices will be translated into retail 

prices to residential consumers. It is 

possible that this difference in 

wholesale rates will ultimately result in 

higher marginal energy prices for the 

operation of central air conditioners. 

However, several other assumptions 

about future electricity prices are 

equally reasonable. It is possible that 

increased competition will result in 

higher fixed charges for utility service 

and higher fixed charges would lower 

marginal rates. That is, under 

competition, utilities may recover more 

of their costs of supplying electricity to 

consumers from fixed charges on utility 

bills, thereby reducing the cost consumers have to pay for electricity 

being supplied at the margin. It is also 

possible that higher peak load prices for 

electricity would cause consumers to 

significantly alter the times at which 

they use air conditioning, thus reducing 

projected electricity costs (and cost 

savings). Finally, it is possible that the 
EE-RM/STD-98-440- 30q

36382 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

recent trend toward increased retail 269 at p. 3). American Geothermal DX, installation costs is a factor that

level competition will slow or even an HVAC contractor, asserts that, based supports adopting the less costly 12

stop. DOE recognizes that the Nation's on its experience, any cost difference SEER standard.

electric utility systems are in the midst between installing a 13 SEER unit over 4. Manufactured Housing Owners

of major regulatory, structural and a 12 SEER unit would be minimal.

technological changes which are likely (American Geothermal DX, No. 241-HH York, ARI, and Nordyne Inc.

to have important effects on the at pp. 1-2). Several other comments, in (Nordyne) stated that consumers living

marginal prices for electricity use that particular those from ACEEE, assert that in manufactured homes are especially

are charged to residential customers and DOE's treatment of the "footprint" issue vulnerable to the increased first costs

that these effects may be particularly is speculative, i.e., DOE provides no associated with more efficient

pronounced during periods of especially evidence that installation costs will equipment. They asserted that

high (or low) electricity demand. actually increase for 13 SEER manufactured homes are typically

However, given the many possible equipment. With regard to space- "starter" homes for low-to-middle

scenarios affecting the costs of operating constrained equipment, ACEEE adds income families where any increases in

central air conditioners, DOE has that because DOE has already moved to household expenses, including those

decided to retain for this rulemaking the isolate this type of equipment as associated with more efficient spaceexisting method for estimating future separate product classes, it effectively conditioning equipment, are difficult to

marginal elec'ricity :rices. This analysis dismisses any arguments asserting that afford. Because the life-cycle cost

method utiliz .s the i lost current, the impact of space constraints would analysis made no explicit mention of

comprehensiN e data available on the result in higher installation costs for this sub-population, they are concerned

actual margin; I rate., paid by consumers "mainstream" 13 SEER equipment. that DOE did not consider

and uses price forecas's that closely (ACEEE, No. 284 at pp. 13-14; ASE, No. manufactured-home owners in its

parallel the me s current assessment 282 at p. 5; NRDC, No. 250 at p. 23; analysis. (York, No. 270 at pp. 2-3; ARI,

published by LOE. National Grid, No. 241-00 at p. 2). No. 259 at p. 9; Nordyne, No. 264 at pp.

During the coming years, DOE intends Trane, ARI, and Rheem all argue that 1-2).

to monitor careiully thoe ctual changes 13 SEER equipment is significantly DOE considered all household types

in the marginal electricit ' rates being larger than 12 SEER systems. As a utilizing central air conditioners or heat

paid by consumers and oher electricity result, installation costs are significantly pumps in its consumer life-cycle cost

users, and to look fcor any trends in these greater for 13 SEER units than for 12 analysis, including manufactured

changes that could help improve DOE's SEER units. In particular, they state homes. Of the households with central

analysis. For future efficiency standards there will be many instances where it air conditioners analyzed in the

rulemakings, DOE intends to use the will be very difficult to physically fit consumer life-cycle analysis, 4.5 percent

most recent data available on marginal larger indoor coils, needed to match were manufactured homes. For

rates, considering emerging trends in outdoor 13 SEER condensing units, households with heat pumps, 6.1

such rates that result from significant without retrofitting the air handler percent were manufactured homes.

changes in electricity rate design (such originally designed for a smaller, lower In its decision to propose 12 SEER

as fixed and variable charges, or time- SEER indoor coil. (ARI, No. 259 at pp. standards for conventional products,

of-use rates), metering and demand 25-26; Trane, No. 262 at pp. 5-9; DOE took into consideration the first

management technologies, equipment Rheem, No. 248 at p. 3). cost impacts of higher efficiency

use load shapes, or in the allocations of Throughout the analysis DOE has standards to manufactured home

costs among sectors. assumed that installation costs would owners. In particular, DOE was

Within approximately five years of remain constant as efficiency increased. concerned that the 13 SEER standards

the current rulemaking, DOE expects to As stated in the January 22 final rule, issued in the January 22 final rule could

complete another review of the DOE believes that even if installation cause manufactured home consumers to

efficiency standards for central air costs do generally rise as the size and shift from heat pumps to other systems

conditioners and heat pumps. During weight of equipment increases, that include resistance heat systems. See

this period DOE hopes that sufficient manufacturers will have the incentive July 25 SNOPR, 66 FR 38836.

data will become available to enable it under new standards to reduce the size

to forecast with greater confidence the of 13 SEER equipment using various B. Life-Cycle Cost and Payback Period

marginal rates for residential electricity approaches, such as adopting variable Although a majority of the comments

users. If available, DOE expects to use speed and modulating capacity concerning consumer impacts addressed

such rates to support modified technologies, converting to either low-income impacts or the effect

standards. microchannel heat exchangers, that electricity prices have on the

increasing the size of the unconstrained number of consumers either benefitting

3. Installation Costs outdoor unit or indoor unit only, or or being burdened by increased

The potential increase in installation changing the footprint or elevation of standards, several comments expressed

costs associated with 13 SEER the unit. See January 22 final rule, 66 FR concerns over other elements of the

equipment was cited by DOE as one of 7180. Although DOE still maintains that consumer life-cycle cost analysis.

the reasons for not proposing a 13 SEER installation costs generally are unlikely

standard in its July 25 SNOPR. See 66 to increase due to the above reason, as 1. Prod u c Lifetme

FR 38836. Several comments disagreed stated in the July 25 SNOPR, there is the Energy Market & Policy Analysis, Inc.

with DOE's conclusion that installation possibility that substantial increases in (EMPA) stated that DOE incorrectly

costs could be significantly different installation costs due to larger and used estimates of the full lifetime of the

between 12 and 13 SEER equipment. heavier 13 SEER systems may equipment rather than the time that the

Goodman claims that because their 12 materialize for some consumers, equipment may remain in the

and 13 SEER equipment are similar in especially for those replacing 10 SEER ownership and use of the initial owner.

size, there is almost no difference in the systems. See July 25 SNOPR, 66 FR (EMPA, No. 241-LL at pp. 5-6).

installation costs associated with their 38836. As a result, DOE continues to In analyzing increases in efficiency

12 and 13 SEER systems. (Goodman, No. believe the possibility of increased standards, DOE is required by section

EE-RM-STD-98-440 COMMENT 304

EE-R M/STD-98-440· 304 

36382 Federal Register I Vol. 67, No. 100 I Thursday, May 23, 2002 I Rules and Regulations 

recent trend toward increased retail 

level competition will slow or even 

stop. DOE recognizes that the Nation's 

electric utility systems are in the midst 

of major regulatory, structural and 

technological changes which are likely 

to have important effects on the 

marginal prices for electricity use that 

are charged to residential customers and 

that these effects may be particularly 

pronounced during periods of especially 

high (or low) electricity demand" 

However. given the many possible 

scenarios affecting the costs of operating 

central air conditioners. DOE has 

decided to retain for this rulemaking the 

existing method for estimating future 

marginal elec' ficity")rices. This analysis 

method utiliz lS the 110St current. 

comprehensh:l data c. vailable on the 

actual margin, I rate., l'aid by consumers 

and uses price hrecas:s that closely 

parallel the me 5' cune)\t assessment 

published by L8E. 

During the ccming yeilfs. DOE intends 

to monitor carelully th'3 \ctual changes 

in the marginal electricit. ' rates being 

paid by consumers and 0, her electricity 

users. and to look fc.'r any trends in these 

changes that could help improve DOE's 

analysis. For future e;firiency standards 

rulemakings. DOE intends to use the 

most recent data available on marginal 

rates. considering emerging trends in 

such rates that result from significant 

changes in electricity rate design (such 

as fixed and variable charges. or timeof-use rates). metering and demand 

management technologies, equipment 

use load shapes, or in the allocations of 

costs among sectors. 

Within approximately five years of 

the current rulemaking. DOE expects to 

complete another review of the 

efficiency standards for central air 

conditioners and heat pumps. During 

this period DOE hopes that sufficient 

data will become available to enable it 

to forecast with greater confidence the 

marginal rates for residential electricity 

users. If available. DOE expects to use 

such rates to support modified 

standards. 

3. Installation Costs 

The potential increasa in installation 

costs associated with 13 SEER 

equipment was cited by DOE as one of 

the reasons for not proposing a 13 SEER 

standard in its July 25 SNOPR. See 66 

FR 38836. Several comments disagreed 

with DOE's conclusion that installation 

costs could be significantly different 

between 12 and 13 SEER equipment. 

Goodman claims that because their 12 

and 13 SEER equipment are similar in 

size. there is almost no difference in the 

installation costs associated with their 

12 and 13 SEER systems. (Goodman. No. 

269 at p. 3). American Geothermal DX. 

an HVAC contractor, asserts that. based 

on its experience. any cost difference 

between installing a 13 SEER unit over 

a 12 SEER unit would be minimal. 

(American Geothermal DX. No. 241-HH 

at pp. 1-2). Several other comments. in 

particular those from ACEEE. assert that 

DOE's treatment of the "footprint" issue 

is speculative. i.e., DOE provides no 

evidence that installation costs will 

actually increase for 13 SEER 

equipment. With regard to spaceconstrained equipment, ACEEE adds 

that because DOE has already moved to 

isolate this type of equipment as 

separate product classes. it effectively 

dismisses any arguments asserting that 

the impact of space constraints would 

result in higher installation costs for 

"mainstream" 13 SEER equipment. 

(ACEEE. No. 284 at pp. 13-14; ASE, No. 

282 at p. 5; NRDC. No. 250 at p. 23; 

National Grid. No. 241-00 at p. 2). 

Trane. ARt and Rheem all argue that 

13 SEER equipment is significantly 

larger than 12 SEER systems. As a 

result, installation costs are significantly 

greater for 13 SEER units than for 12 

SEER units. In particular, they state 

there will be many instances where it 

will be very difficult to physically fit 

larger indoor coils, needed to match 

outdoor 13 SEER condensing units. 

without retrofitting the air handler 

originally designed for a smaller, lower 

SEER indoor coil. (AR!, No. 259 at pp. 

25-26; Trane. No. 262 at pp. 5-9; 

Rheem. No. 248 at p. 3). 

Throughout the analysis DOE has 

assumed that installation costs would 

remain constant as efficiency increased. 

As stated in the January 22 final rule, 

DOE believes that even if installation 

costs do generally rise as the size and 

weight of equipment increases. 

manufacturers will have the incentive 

under new standards to reduce the size 

of 13 SEER equipment using various 

approaches. such as adopting variable 

speed and modulating capacity 

technologies, converting to 

microchannel heat exchangers. 

increasing the size of the unconstrained 

outdoor unit or indoor unit only, or 

changing the footprint or elevation of 

the unit. See January 22 final rule, 66 FR 

7180. Although DOE still maintains that 

installation costs generally are unlikely 

to increase due to the above reason. as 

stated in the July 25 SNOPR. there is the 

possibility that substantial increases in 

installation costs due to larger and 

heavier 13 SEER systems may 

materialize for some consumers. 

especially for those replacing 10 SEER 

systems. See July 25 SNOPR. 66 FR 

38836. As a result. DOE continues to 

believe the possibility of increased 

installation costs is a factor that 

supports adopting the less costly 12 

SEER standard. 

4. Manufactured Housing Owners 

York. ARI. and Nordyne Inc. 

(Nordyne) stated that consumers living 

in manufactured homes are especially 

vulnerable to the increased first costs 

associated with more efficient 

equipment. They asserted that 

manufactured homes are typically 

"starter" homes for low-to-middle 

income families where any increases in 

household expenses. including those 

associated with more efficient spaceconditioning equipment. are difficult to 

afford. Because the life-cycle cost 

analysis made no explicit mention of 

this sub-population. they are concerned 

that DOE did not consider 

manufactured-home owners in its 

analysis. (York. No. 270 at pp. 2-3; ARI. 

No. 259 at p. 9; Nordyne. No. 264 at pp. 

1-2). 

DOE considered all household types 

utilizing central air conditioners or heat 

pumps in its consumer life-cycle cost 

analysis. including manufactured 

homes. Of the households with central 

air conditioners analyzed in the 

consumer life-cycle analysis. 4.5 percent 

were manufactured homes. For 

households with heat pumps, 6.1 

percent were manufactured homes, 

In its decision to propose 12 SEER 

standards for conventional products, 

DOE took into consideration the first 

cost impacts of higher efficiency 

standards to manufactured home 

owners, In particular. DOE was 

concerned that the 13 SEER standards 

issued in the January 22 final rule could 

cause manufactured home consumers to 

shift from heat pumps to other systems 

that include resistance heat systems. See 

July 25 SNOPR. 66 FR 38836, 

B. Life-Cycle Cost and Payback Period 

Although a majority of the comments 

concerning consumer impacts addressed 

either low-income impacts or the effect 

that electricity prices have on the 

number of consumers either benefitting 

or being burdened by increased 

standards. several comments expressed 

concerns over other elements of the 

consumer life-cycle cost analysis. 

1. Product Lifetime 

Energy Market & Policy Analysis, Inc, 

(EMP A) stated that DOE incorrectly 

used estimates of the full lifetime of the 

equipment rather than the time that the 

eqUipment may remain in the 

ownership and use of the initial owner, 

(EMPA. No. 241-LL at pp. 5-6). 

In analyzing increases in efficiency 

standards. DOE is required by section 
EE-RM/STD-98-440- 3o4

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36383

325(o)(2)(B)(i) of EPCA to use the full product lifetime. Because heat pumps of equipment lifetime, compressor

lifetime of the equipment for are used during both the cooling and replacement costs were also included in

establishing the operating cost savings heating seasons, they generally incur the analysis.

resulting from higher efficiency more operating hours and more wear With regard to warranty costs, these

standards. The second factor in section during the course of a year than air costs were essentially considered by

325 to be considered for determining conditioners. Thus, the use of a heat incorporating repair costs into the

whether the benefits of the standard pump retirement function for air analysis. As noted above, a product that

exceed its burdens is "the savings in conditioners likely underestimates their is less reliable or contains more

operating costs throughout the lifetime. Although heat pump and air expensive components was assumed to

estimated average life of the covered conditioner lifetimes likely differ, DOE have a higher cost of repair over its

product in the type (or class) compared was unable to obtain any well lifetime. As stated in the October 5,

to any increase in the price of, or in the substantiated data to determine whether 2000 NOPR, either the consumer or the

initial charges for, or maintenance air conditioner lifetimes are longer than warranty provider will bear that added

expenses of, the covered products those for heat pumps. Without such cost directly through more frequent

which are likely to result from the data, the heat pump retirement function service calls or higher repair costs. See

imposition of the standard." 42 U.S.C, was assumed valid for air conditioners. 65 FR 59599-59600. If the cost is

6295(o)(2)(B)(i)(11). covered by warranty, however, the 6295(o)(2)(B)[(i)(l). 2. Warranty, Maintenance, and Service warrantyrovider asses it back t

A retirement function with .n avefage Costsure warrant y holvder passes in form the of

18.4-year equipment lifetime vas ust d future warranty holders in the form of

n the life-cycle cost analysis ir centi al EMPA stated that DOE made no slightly higher warranty prices. DOE

air conditioners and heat pum iF. As attempt to collect or include warranty, believes the incremental increase in the

stated in the January 22 final rile, the maintenance, and service costs in the price of the warranty is equal to, or just

basis of the 18.4-year equipmel t consumer analysis. (EMPA, No. 241-LL slightly higher, than the discounted

lifetime lifetime was was a a survey conducted conducted on at pp. 5-6). On the issue of warranty present value of the incremental repair

more than 2,1 00 heat pumps in a .evelA costs, Mercatus Center adds that the costs over the life of the warranty. Over more that 2of rin 3 S nw 66 the U.Sg e average state region of the U.S.13 See 66 FP reliability patterns of new components the long term then, the average

se7179-7 . e180. 6that are part of high efficiency products consumer always incurs higher repair

The survey determined not only the are less known, so warranty accruals costs, either directly or through higher

lifetime of a complete heat pump may be significantly higher for these warranty prices. Since the life-cycle cost

system, but the life of the original products (i.e., 12 to 13 SEER analysis considers the present value of

compressor as well. Although the equipment). (Mercatus Center, No. 242 consumer life cycle costs on the average

system lifetime is on average over 18 at p. 8). consumer, incremental repair costs and

years, the survey also showed tat the With regard to maintenance and incremental warranty costs are the

years, the survey also showed that the service (or repair) costs, DOE did collect same, and interchangeable.

original compressor lifetime was, on data or make reasonable assumptions to

average, 14 years. Thus, the survey establish both types of costs3. Markups

indicated that essentially all heat pump Maintenance costs are costs to the ARI, Trane, and York all believe that

owners replaced their original consumer of maintaining equipment DOE greatly underestimated the

compressor once in the lifetime of operation such as checking and manufacturer, distributor, and

system. maintaining refrigerant charge levels contractor markups used to derive

Since the heat pump survey clearly and cleaning heat exchanger coils. For consumer purchase prices. ARI

indicates that the original compressor isthe life-cycle cost analysis, maintenance maintains that the manufacturer markup

replaced once in a system's life, DOE's costs were based on data from Service should be approximately 1.35, as

analysis was based on the inclusion of Experts, an HVAC service company. See verified by a survey ARI conducted in

a repair cost for the compressor. TSD, Chapter 5. Maintenance costs were the fall of 2000. Furthermore, ARI

Conducting the analysis in this manner assumed not to change with increased continues to believe that the distributor

retains the average system lifetime of efficiency, the rationale being that the and contractor markups should be

18.4 years but explicitly addresses the general maintenance of more efficient approximately 1.37, as determined by

replacement cost of the compressor, products would not be impacted by the DOE in the 1999 Supplemental Advance

which is the most expensive component more sophisticated components that Notice of Proposed Rulemaking

of a system. As indicated by the survey they contain. (SANOPR). (ARI, No. 259 at pp. 23-25;

data, the compressor was assumed to be Service or repair costs are costs to the Trane, No. 262 at pp. 10-11; York, No.

replaced in the 14th year of the system's consumer for replacing or repairing 270 at p. 3).

life. Although a shorter equipment components which have failed. For As stated in the January 22 final rule,

lifetime is possible, DOE has not been baseline equipment (i.e., 10 SEER) and DOE did assume for the Manufacturer

provided with more substantive data to equipment with efficiencies greater than Impact Analysis that markups increase

support discontinuing its use of the 13 SEER, annualized repair costs were with increasing efficiency under a given

above mentioned survey data. DOE assumed to equal one-half the standard level. However, for the

believes that the survey data provides equipment price divided by the average consumer economic analyses, as the

an accurate representation of central air lifetime (18.4 years). Equipment with minimum standard level increases, DOE

conditioner and heat pump life. efficiencies of 11 through 13 SEER were determined that the distributor and

Although the survey was conducted assumed to incur a one percent increase contractor markups on more efficient

only on heat pumps, the retirement in repair cost over the baseline level. products do decrease. See January 22

function was also used as the basis for Because systems with efficiencies up to final rule, 66 FR 7180.

estimating central air conditioner and including 13 SEER generally do not DOE's analysis of distributor cost data

include sophisticated electronic revealed a measurable difference '3 Bucher. ME.. Grastataro, Coleman. and C.M.. Bucher M.E.. Grastataro, C.M. and Coleman components, repair costs were assumed between the average aggregate markup

in Diverse ASHRAE Cimates. T Lnsctios 1. to remain essentially flat from 10 to 13 on the entire set of direct business costs

96(1): pp. 1567-1571. SEER. As noted above in the discussion and the incremental markup on only

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440- 30tf 

Federal Register/Vol. 67. No. 100/Thursday. May 23. 2002/Rules and Regulations 36383 

325(0)(2)(B)(i) of EPCA to use the full 

lifetime of the equipment for 

establishing the operating cost savings 

resulting from higher efficiency 

standards. The second factor in section 

325 to be considered for determining 

whether the benefits of the standard 

exceed its burdens is "the savings in 

operating costs throughout the 

estimated average life of the covered 

product in the type (or class) compared 

to any increase in the price of. or in the 

initial charges for. or maintenance 

expenses of. the covered products 

which are likely to result from the 

imposition of the standard." 42 U.S.C. 

6295 (0)(2) (B )(i)(n). 

A retirement function with' .n ave"age 

18.4-year equipment lifetime vas USt d 

in the life-cycle cost analysis i 1r cenb al 

air conditioners and heat pum If. As 

stated in the January 22 final n Ie. tho 

basis of the 18.4-year equipmel t 

lifetime was a survey conducteJ on more than 2.100 heat pumps in 3 cleven 

state region of the U.S.n See 66 FP 

7179-7180. 

The survey determined not only the 

lifetime of a complete heat pump 

system. but the life of the original 

compressor as well. Although the 

system lifetime is on average over 18 

years. the survey also showed that the 

original compressor lifetime was. on average. 14 years. Thus. the survey 

indicated that essentially all heat pump owners replaced their original 

compressor once in the lifetime of 

system. 

Since the heat pump survey clearly 

indicates that the original compressor is 

replaced once in a system's life. DOE's 

analysis was based on the inclusion of 

a repair cost for the compressor. 

Conducting the analysis in this manner 

retains the average system lifetime of 

18.4 years but explicitly addresses the 

replacement cost of the compressor. 

which is the most expensive component 

of a system. As indicated by the survey 

data. the compressor was assumed to be 

replaced in the 14th year of the system's 

life. Although a shorter equipment 

lifetime is possible. DOE has not been 

provided with more substantive data to 

support discontinuing its use of the 

above mentioned survey data. DOE 

believes that the survey data provides 

an accurate representation of central air 

conditioner and heat pump life. 

Although the survey was conducted 

only on heat pumps. the retirement 

function was also used as the basis for 

estimating central air conditioner 

13 Bucher. M.E .• Grastataro. C.M .• and Coleman. 

W.R. "Heat Pump Life and Compressor Longevity 

in Diverse Climates." ASHRAE Transactions. 1990. 

96(1): pp. 1567-1571. 

product lifetime. Because heat pumps 

are used during both the cooling and 

heating seasons, they generally incur more operating hours and more wear during the course of a year than air 

conditioners. Thus, the use of a heat 

pump retirement function for air 

conditioners likely underestimates their 

lifetime. Although heat pump and air 

conditioner lifetimes likely differ, DOE 

was unable to obtain any well 

substantiated data to determine whether 

air conditioner lifetimes are longer than 

those for heat pumps. Without such 

data. the heat pump retirement function was assumed valid for air conditioners. 

2. Warranty. Maintenance. and Service 

Costs 

EMP A stated that DOE made no 

attempt to collect or include warranty, 

maintenance. and service costs in the consumer analysis. (EMP A, No. 241-LL 

at pp. 5-6). On the issue of warranty 

costs, Mercatus Center adds that the 

reliability patterns of new components 

that are part of high efficiency products 

are less known. so warranty accruals 

may be significantly higher for these 

products (j.e .• 12 to 13 SEER 

eqUipment). (Mercatus Center, No. 242 

atp.8). 

With regard to maintenance and 

service (or repair) costs, DOE did collect 

data or make reasonable assumptions to 

establish both types of costs. 

Maintenance costs are costs to the consumer of maintaining equipment 

operation such as checking and 

maintaining refrigerant charge levels 

and cleaning heat exchanger coils. For 

the life-cycle cost analysis. maintenance 

costs were based on data from Service 

Experts. an HVAC service company. See 

TSD, Chapter 5. Maintenance costs were 

assumed not to change with increased 

efficiency, the rationale being that the 

general maintenance of more efficient 

products would not be impacted by the more sophisticated components that 

they contain. 

Service or repair costs are costs to the 

consumer for replacing or repairing 

components which have failed. For 

baseline equipment (i.e., 10 SEER) and 

equipment with efficiencies greater than 

13 SEER, annualized repair costs were 

assumed to equal one-half the 

equipment price divided by the average 

lifetime (18.4 years). Equipment with 

efficiencies of 11 through 13 SEER were assumed to incur a one percent increase 

in repair cost over the baseline level. 

Because systems with efficiencies up to 

and including 13 SEER generally do not 

include sophisticated electronic 

components. repair costs were assumed 

to remain essentially flat from 10 to 13 

SEER. As noted above in the discussion 

of equipment lifetime, compressor 

replacement costs were also included in 

the analysis. 

With regard to warranty costs, these 

costs were essentially considered by 

incorporating repair costs into the 

analysis. As noted above, a product that 

is less reliable or contains more 

expensive components was assumed to 

have a higher cost of repair over its 

lifetime. As stated in the October 5, 

2000 NOPR, either the consumer or the 

warranty provider will bear that added 

cost directly through more frequent 

service calls or higher repair costs. See 

65 FR 59599-59600. If the cost is 

covered by warranty, however, the 

warranty provider passes it back to 

future warranty holders in the form of 

slightly higher warranty prices. DOE 

believes the incremental increase in the 

price of the warranty is equal to, or just 

slightly higher, than the discounted 

present value of the incremental repair 

costs over the life of the warranty. Over 

the long term then, the average consumer always incurs higher repair 

costs, either directly or through higher 

warranty prices. Since the life-cycle cost 

analysis considers the present value of consumer life cycle costs on the average 

consumer, incremental repair costs and 

incremental warranty costs are the 

same, and interchangeable. 

3. Markups 

ARI, Trane. and York all believe that 

DOE greatly underestimated the 

manufacturer, distributor, and 

contractor markups used to derive 

consumer purchase prices. ARI 

maintains that the manufacturer markup 

should be approximately 1.35. as 

verified by a survey ARI conducted in 

the fall of 2000. Furthermore, ARI 

continues to believe that the distributor 

and contractor markUps should be 

approximately 1.37, as determined by 

DOE in the 1999 Supplemental Advance 

Notice of Proposed Rulemaking 

(SANOPR). (ARl, No. 259 at pp. 23-25; 

Trane, No. 262 at pp. 10-11; York, No. 

270 at p. 3). 

As stated in the January 22 final rule, 

DOE did assume for the Manufacturer 

Impact Analysis that markups increase 

with increasing efficiency under a given 

standard level. However, for the 

consumer economic analyses. as the 

minimum standard level increases, DOE 

determined that the distributor and 

contractor markups on more efficient 

products do decrease. See January 22 

final rule, 66 FR 7180. 

DOE's analysis of distributor cost data 

revealed a measurable difference 

between the average aggregate markup on the entire set of direct business costs 

and the incremental markup on only 
EE-RM/STD-98-440- 30l

36384 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

direct equipment costs. In other words, 4. Energy Use the DOE has not justified why it should

for an incremental increase in the cost a. Residential Energy Consumpton not adopt the HSPF 7.7 and SEER 13

of the equipment, the markup required Survey standards for split system heat pumps

to cover the incremental cost increase is since this level of efficiency satisfies the

distinctly different than the average EMPA asserted that DOE violated "rebuttable presumption" requirements

markup required to cover all business well-established statistical principles by of the law. (NWPPC, No. 287 at p. 3).

markupcosts. The average aggregate distributor basing the proposed standards on small As noted in the July 25 SNOPR, DOE

markupco. Teaeragmned to e 1.36 andssubsets of data from EIA's Residential recognizes some standard levels for

markup was determined vbe to 1.36 and Energy Consumption Survey (RECS). As some product classes satisfy the

is assumed to cover the direct business a result, EMPA concludes that DOE rebuttable presumption requirements in

costs that are present at the current simply has no reasonable claim of section 325(o)(2)(B)(iii). But DOE points

baseline (i.e., 10 SEER) level. Note that validity for either the calculations or its out that the statute requires DOE to use the average aggregate distributor markup analytical conclusions. (EMPA, No. "the applicable test procedure" to

of 1.36 is approximately equal to the 241-LL at pp. 2-4). calculate the payback periods for

value used in DOE's analysis for the As stated in the January 22 final rule, purposes of the rebuttable presumption.

SANOPR. The incremental distributor as part of the process to improve the As explained in the October 5, 2000

markup was determined to be 1.11 and energy efficiency standards analysis, NOPR, the annual cooling and heating

is assumed to cover incremental DOF is committed to use of sensitivity energy consumption calculations based

equipment cost increases, such as those ana ysis tc 3ls to evaluate the potential on DOE's test procedure are

associated with increases in equipment dist -ibutio: of impacts among different significantly greater than the weightedefficiency. subi ro.ps c f consumers. DOE believes average values from DOE's life-cycle

DOE's analysis of contractor cost data that IECS provides a nationally cost analyses based on the 1997

revealed a significant difference repri sentati v e household data set which Residential Energy Consumption between the markup required for is su. ted for Lnducting the type of Survey, used in other DOE analyses, between the markup requipred fore nses sensi'iity analyses suggested by the including evaluation of consumer covering labor and equipment expenses Proces Improlrement Rule. Limiting the impacts. 65 FR 59596. For this reason,

and the markup required for covering RECS houselho ds to those equipped the payback periods presented in

only equipment expenses. The markup with either cen ral air conditioners or Section VII of this portion of the

covering all business expenses was heat pumps, tht life-cycle cost analysis preamble, entitled "Analytical Results

determined to be 1.53 while the markup performs e houshold-by-household and Conclusions," are significantly

for only equipment expenses was analysis that predicts the percentage of longer than those calculated to

determined to have a mean value of households that will incur net life-cycle determine whether the rebuttable

1.27. The 1.53 markup value covering cost savings or costs from an increased presumption applies to these products.

all business expenses is approximately efficiency standard. See January 22 final More importantly, DOE's economic

equal to the value used in DOE's rule, 66 FR 7178-7179. justification analysis for a particular

analysis for the SANOPR. Because the b Rebound Effect class of covered product involves

life-cycle cost analysis breaks out the consideration of factors other than the

contractor's installation cost (i.e., the Mercatus Center alludes to what it payback period. For example, as

cost to install the equipment) from the termed the "rebound effect" when discussed in the July 25 SNOPR (66 FR

cost which is charged for the stating that more efficient air- 38837), one reason DOE did not propose

equipment, only the markup value of conditioning due to higher SEER Trial Standard Level 3 (12 SEER for air

1.27 is applicable for marking up the standards would cause consumers to conditioners and 13 SEER for heat

equipment. As with the distributor use their equipment more often, thereby pumps) was the potential of those

markup, a contractor markup associated negating some of the energy savings standards to cause heat pump owners to realized from the more efficient

only with an incremental increase in equipmnt. (Mercatus Center, No. 242 at switch to resistance heating, and

equipment cost was also under the rebound possibly aversely affect competition.

Since the incremental markup was effect is that consumers will use more C. Shipments/National Energy Savings

shown to be close to the average value efficient equipment more often because himents Forecasts

of 1.27, only the average markup value of the greater utility bill savings they . pmes orecas

was used in the analysis. will realize relative to less efficient Mercatus Center asserts that DOE's

As a result of determining lower equipment.shipment model does not account for

distributor and contractor markups on Although DOE recognizes that the reduced equipment sales that occur

incremental equipment cost increases, consumers may utilize more efficient when consumers forego purchases due

such as those associated with more equipment more often, the LCC analysis to the increased equipment prices

efficient equipment, the overall did not attempt to account for the resulting from higher efficiency

markups decrease as efficiency possible reduction in energy savings standards. As a result of delayed

increases. Although comments argued due to a rebound effect. As a result, the consumer purchases, the energy savings increases. Although comments arguedL tod fn tothe nation would build up more that overall distributor and contractor LCC impacts detailed in today's final to the nation would build up more that overall distrbutor and contractor rule may overestimate actual consumer slowly than forecasted by DOE.

markups should not decrease, no data cost and energy savings that result from (Mercatus Center, No. 245 at p. 5). This

was offered to counter DOE's approach. an increase in the minimum energy is effectively an argument that the price

Thus, DOE has retained its methodology efficiency standards for central air elasticity for the air conditioner and

for estimating both distributor and conditioners and heat pumps. heat pump market should be higher

contractor markups. Appendix D of the than what was assumed.

TSD provides more detailed information 5. Rebuttable Payback Period DOE has used historical saturation

on this issue. NWPPC asserts that 13 SEER, at least trends to establish price elasticities for

for split system heat pumps, is the overall air conditioner and heat

economically justified. NWPPC states pump market. Higher saturation levels

EE-RM-STD-98-440 COMMENT 304

36384 

EE-RM/STD-98-440- 30~ 

Federal R.egister/Vol. 67, No. lO~/Thursday, May 23, 2002/Rules and Regulations 

direct equipment costs. In other words, 

for an incremental increase in the cost 

of the equipment, the markup required 

to cover the incremental cost increase is 

distinctly different than the average 

markup required to cover all business 

costs. The average aggregate distributor 

markup was determined to be 1.36 and 

is assumed to cover the direct business 

costs that are present at the current 

baseline (j.e., 10 SEER) level. Note that 

the average aggregate distributor markup 

of 1.36 is approximately equal to the 

value used in DOE's analysis for the 

SANOPR. The incremental distributor 

markup was determined to be 1.11 and 

is assumed to cover incremental 

equipment cost increases, such as those 

associated with increases in equipment 

efficiency. 

DOE's analysis of contractor cost data 

revealed a significant difference 

between the markup required for 

coverino labor and equipment expenses 

and the °markup required for covering 

only equipment expenses. The markup 

covering all business expenses was 

determined to be 1.53 while the markup 

for only equipment expenses was 

determined to have a mean value of 

1.27. The 1.53 markup value covering 

all business expenses is approximately 

equal to the value used in DOE's 

analysis for the SANOPR. Because the 

life-cycle cost analysis breaks out the 

contractor's installation cost (j.e., the 

cost to install the equipment) from the 

cost which is charged for the 

equipment, only the markup value of 

1.27 is applicable for marking up the 

equipment. As with the distributor 

markup, a contractor markup associated 

only with an incremental increase in 

equipment cost was also determined. 

Since the incremental markup was shown to be close to the average value 

of 1.27, only the average markup value 

was used in the analysis. 

As a result of determining lower 

distributor and contractor markups on 

incremental equipment cost increases, 

such as those associated with more 

efficient equipment, the overall 

markups decrease as efficiency 

increases. Although comments argued 

that overall distributor and contractor 

markups should not decrease, no data 

was offered to counter DOE's approach. 

Thus, DOE has retained its methodology 

for estimating both distributor and 

contractor markups. Appendix 0 of the 

TSD provides more detailed information 

on this issue. 

4. Energy Use 

a. Residential Energy Consumption 

Survey 

EMP A asserted that DOE violated 

well-established statistical principles by 

basing the proposed standards on small 

subsets of data from EIA's Residential 

Energy Consumption Survey (RECS). As 

a result, EMPA concludes that DOE 

simply has no reasonable claim of 

validity for either the calculations or its 

analytical conclusions. (EMP A, No. 

241-LL at pp. 2-4). 

As stated m the January 22 final rule, 

as part of the ?rocess to improve the 

energy efficiency standards analysis, 

DOF is committed to use of sensitivity ana ysis tt'lls to evaluate the potential 

dist 'ibutio:.· of impacts among different 

sub! ro~pc; (f consumers. DOE believes 

that ~CS p.ovides a nationally 

reprl sentative household data set which 

is su. ttld fo), l'lnducting the type of 

sensi·h1ty an(llyses suggested by the Proce~s Impl'OTTement Rule. Limiting the 

RECS hc,usebo ds to those equipped 

with either cen ral air conditioners or heat pumos, tht. life-cycle cost analysis 

performs l' hous.~hold-by-household 

analysis th.,t predicts the percentage of 

households that will incur net life-cycle 

cost savings or costs from an increased 

efficiency standard. See January 22 final 

rule, 66 FR 7178-7179. 

b. Rebound Effect 

Mercatus Center alludes to what it 

termed the "rebound effect" when 

stating that more efficient airconditioning due to higher SEER 

standards would cause consumers to 

use their equipment more often, thereby 

negating some of the energy savings 

realized from the more efficient 

equipment. (Mercatus Center, No. 242 at 

pp. 9-10). Assumed under the rebound 

effect is that consumers will use more efficient equipment more often because 

of the greater utility bill savings they 

will realize relative to less efficient 

equipment. 

Afthough DOE recognizes that 

consumers may utilize more efficient 

equipment more often, the LCC analysis 

did not attempt to account for the 

possible reduction in energy savings 

due to a rebound effect. As a result, the 

LCC impacts detailed in today's final 

rule may overestimate actual consumer 

cost and energy savings that result from an increase in the minimum energy 

efficiency standards for central air 

conditioners and heat pumps. 

5. Rebuttable Payback Period 

NWPPC asserts that 13 SEER, at least 

for split system heat pumps, is 

economically justified. NWPPC states 

the DOE has not justified why it should 

not adopt the HSPF 7.7 and SEER 13 

standards for split system heat pumps 

since this level of efficiency satisfies the 

"rebuttable presumption" requirements 

of the law. (NWPPC, No. 287 at p. 3). 

As noted in the July 25 SNOPR, DOE 

recognizes some standard levels for 

some product classes satisfy the 

rebuttable presumption requirements in 

section 325(0)(2)(B)(iii). But DOE points 

out that the statute requires DOE to use "the applicable test procedure" to 

calculate the payback periods for 

purposes of the rebuttable presumption. 

As explained in the October 5, 2000 

NOPR, the annual cooling and heating 

energy consumption calculations based on DOE's test procedure are significantly greater than the weightedaverage values from DOE's life-cycle 

cost analyses based on the 1997 

Residential Energy Consumption 

Survey, used in other DOE analyses, 

including evaluation of consumer impacts. 65 FR 59596. For this reason, 

the payback periods presented in 

Section VII of this portion of the 

preamble, entitled "Analytical Results 

and Conclusions," are significantly 

longer than those calculated to 

determine whether the rebuttable 

presumption applies to these products. 

More importantly, DOE's economic 

justification analysis for a particular 

class of covered product involves 

consideration of factors other than the 

payback period. For example, as 

discussed in the July 25 SNOPR (66 FR 

38837), one reason DOE did not propose 

Trial Standard Level 3 (12 SEER for air 

conditioners and 13 SEER for heat 

pumps) was the potential of those 

standards to cause heat pump owners to 

switch to resistance heating, and 

possibly adversely affect competition. 

C. Shipments/National Energy Savings 

1. Shipments Forecasts 

Mercatus Center asserts that DOE's 

shipment model does not account for 

the reduced equipment sales that occur when consumers forego purchases due 

to the increased equipment prices 

resulting from higher efficiency 

standards. As a result of delayed consumer purchases, the energy savings 

to the nation would build up more 

slowly than forecasted by DOE. 

(Mercatus Center, No. 245 at p. 5). This 

is effectively an argument that the price 

elasticity for the air conditioner and 

heat pump market should be higher 

than what was assumed. 

DOE has used historical saturation 

trends to establish price elasticities for 

the overall air conditioner and heat 

pump market. Higher saturation levels 
EE-RM/STD-98-440 -_o

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36385

are assumed to decrease price elasticity, savings resulting from more efficient reduction in fuel burned in power

which makes sales volume less sensitive standards due to the marginal heat rates plants and (2) the indirect effect

to price increases. Over the past twenty which were used to convert electrical whereby the slowing of electricity

years household saturation levels of energy savings at the site (i.e., at the demand growth slows new investment,

central air-conditioning have increased, household or commercial building) into thereby impeding the rate of overall

primarily due to the steady increase in fuel savings at the source (i.e., at the improvement in power sector efficiency.

real household incomes. In order to power plant). ACEEE contends that the While this latter effect would seem to be

capture the effect that increased value assumed by DOE in 2018 and trivial relative to the first, it grows

equipment price and household income beyond (5519 Btu/kWh) is well below significantly over time because fewer

have on equipment sales, the shipments the heat rate estimates provided by EIA and fewer of more efficient generating

model breaks the air conditioner market (e.g., 9617 Btu/kWh in 2020). Using the plants are added to the power system.

into the following segments: New EIA heat rate estimate would lead to By the end of the forecast period, this

construction, early (discretionary) about a 2-fold increase in energy savings effect becomes a significant drag on the

replacements, regular replacements, and reduction in pollution for 2020, primary energy savings of the standard,

extra repairs, and remodels. In the new with progressively smaller differences which explains why the marginal heat

construction market, the price of air earlier. (ACEEE, No. 284 at pp. 9-10). rate is less than that attributed to new

conditioning has dropped over time The standards analysis has used technology. Further, it is a bigger drag

relative to household income resulting marginal heat rates ralculeted by using on the benefits of peaking end-use

in a corresponding increase in a version of EIA's N itional Energy efficiency improvements. These reduce

saturation to its current value of Modeling System (I' EMS-ERS) 14 to peak demand more and slow investment

approximately 80 percent. Because of translate end use ele t,-iciiy savings to more because the rate of new

the high saturation in the new primary energy savil gs. The marginal construction is heavily dependent on

construction market, the purchase price heat rate is calculates by inposing a growth in peak demand. A more

elasticity for the new housing market is load reduction to the appliait e end-use detailed discussion of this effect can be

small relative to the early replacement being analyzed in NEM.S-BRS and found in Appendix M of the TSD.

market. But although the price elasticity observing the change ,n prima! v energy 3 Fuel Switching

is small, a decrease in shipments to the use. As noted by ACEEE, the n trginal

new construction market will still be heat rates used in the central ai.- As discussed in the July 25 SNOPR,

likely when equipment prices increase conditioning analysis are lower 'ban potential equipment switching from

(as we expect to occur under a new expected. One would expect the central heat pumps to electric resistance

efficiency standard). As a result, for the air-conditioning marginal heat rate to be heating due to high heat pump prices

case of a 13 SEER standard for split higher than those of more base load was cited as one of the reasons for not

system air conditioners for example, appliances (like clothes washers or proposing a 13 SEER standard. The

shipments to the new construction electric water heaters) because this energy savings resulting from 13 SEER

market drop by approximately 3 peak-use appliance displaces more heat pumps would be eliminated if only

percent. For comparison purposes, expensive, less efficient generation. a small fraction of heat pump owners (4

shipments to the early replacement Further, this marginal displaced plant percent) switched to electric resistance

market drop much more significantly should be not unlike the inefficient heating. See July 25 SNOPR, 66 FR

(approximately 15 percent) as this plant in place today because most rapid 38836.

market is far less saturated and the technological change occurs in the base ACEEE, NRDC, and NWPPC all

resulting purchase price is much more load. The key to understanding this disagreed that more efficient heat pump

elastic. With regard to the other market apparent paradox is that this conversion standards would cause consumers to

segments, the regular replacement and rate does not represent a specific switch to electric resistance heating.

extra repair market price elasticities are marginal generator or combination of Both ACEEE and NRDC stated that if

dependent on the age of the equipment generators, but is actually a conversion equipment switching was truly a

in addition to price. Thus, the price factor that incorporates several concern, DOE should prevent such

elasticity for a relatively new air simulated effects resulting from the action not by lowering heat pump

conditioner is much more elastic than standard. efficiency standards, but by promoting

that for a relatively old air conditioner. The primary reason as to why the revisions to building energy codes to

With regard to the remodel market marginal heat rate is lower than minimize the use of resistive heat.

(otherwise known as the market of stock expected is that the overall rate of (ACEEE, No. 284 at p. 14; NRDC, No.

homes without air-conditioning), efficiency improvement of the power 250 at pp. 18-20). ACEEE adds that DOE

historical data reveals that a relatively system with the standard in place is failed to account for the impact that

low number of non-air conditioned slower than estimated by EIA in the electric resistance heating has on

households purchase new air- AEO Reference Case. While there are consumer energy bills (nearly doubling

conditioning equipment. Thus, like the many effects of the standard, DOE's average annual heating bills) in their

early replacement market, the remodel analysis shows the two major assessment of the potential of

market's price elasticity is relatively components of the standard's impact on equipment switching. NWPPC claims

sensitive to first cost increases. the power sector are: (1) The direct that DOE overstated the potential of

Because the price elasticities in the equipment switching if split system heat

shipments model are based on actual "EIA approves use of the name NEMS to pump SEER standards were set higher

historical data, DOE has retained the describe only an AEO version of the model without than those for split system air

historical data, DE has repainedo the any modification to code or data. Because our conditioners NWPPC states that the price elasticities developed for the analysis entails some minor code modifications and conditioners. NWPPC states that the

central air conditioner and heat pump the model is run under various policy scenarios that price difference between a heat pump

standards analysis. deviate from AEO assumptions, the name NEMS- and an air conditioner at the same SEER

BRS refers to the model as used here. For more level is already very high

2. Heat Rates information on NEMS, please refer to the National pproximately 1400). The extra price

Energy Modelling System: An Overview 1998. DOE/ (approximately $1400). The extra price ACEEE asserts that DOE has severely EIAM-01 (98), February 1998. BRS is DOE's Office associated with a more efficient heat

underestimated the national energy of Building Research and Standards. pump (approximately $150 between 13

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440 - ~t>'f 

Federal Register/Vol. 67. No. IOO/Thursday. May 23. 2002/Rules and Regulations 36385 

are assumed to decrease price elasticity. 

which makes sales volume less sensitive 

to price increases. Over the past twenty 

years household saturation levels of 

central air-conditioning have increased. 

primarily due to the steady increase in 

real household incomes. In order to 

capture the effect that increased 

equipment price and household income 

have on equipment sales. the shipments 

model breaks the air conditioner market 

into the following segments: New 

construction. early (discretionary) 

replacements. regular replacements. 

extra repairs. and remodels. In the new construction market. the price of air 

conditioning has dropped over time 

relative to household income resulting 

in a corresponding increase in 

saturation to its current value of 

approximately 80 percent. Because of 

the high saturation in the new 

construction market. the purchase price 

elasticity for the new housing market is 

small relative to the early replacement 

market. But although the price elasticity 

is smaH. a decrease in shipments to the new construction market will still be 

likely when equipment prices increase 

(as we expect to occur under a new 

efficiency standard). As a result. for the 

case of a 13 SEER standard for split 

system air conditioners for example. 

shipments to the new construction 

market drop by approximately 3 

percent. For comparison purposes. 

shipments to the early replacement 

market drop much more significantly 

(approximately 15 percent) as this 

market is far less saturated and the 

resulting purchase price is much more elastic. With regard to the other market 

segments. the regular replacement and 

extra repair market price elasticities are dependent on the age of the equipment 

in addition to price. Thus. the price 

elasticity for a relatively new air 

conditioner is much more elastic than 

that for a relatively old air conditioner. 

With regard to the remodel market 

(otherwise known as the market of stock 

homes without air-conditioning). 

historical data reveals that a relatively 

low number of non-air conditioned 

households purchase new airconditioning equipment. Thus. like the 

early replacement market. the remodel 

market's price elasticity is relatively 

sensitive to first cost increases. 

Because the price elasticities in the 

shipments model are based on actual 

historical data. DOE has retained the 

price elasticities developed for the 

central air conditioner and heat pump 

standards analysis. 

2. Heat Rates 

ACEEE asserts that DOE has severely 

underestimated the national energy 

savings resulting from more efficient 

standards due to the marginal heat rates 

which were used to convert electrical 

energy savings at the site (i.e .• at the 

household or commercial building) into 

fuel savings at the source (i.e .• at the 

power plant). ACHEE contends that the 

value assumed by DOE in 2018 and 

beyond (5519 BtuIkWh) is well below 

the heat rate estimates provided by EIA 

(e.g .• 9617 Btu/kWh in 2020). Using the 

EIA heat rate estimate would lead to 

about a 2-fold increase in energy savings 

and reduction in pollution for 2020. 

with progressively smaller differences 

earlier. (ACEEE. No. 284 at pp. 9-10). 

The standards analysis has used 

marginal heat rates' .dlculf'ted by using a version of EIA's N ltional Energy 

Modeling System (1' EMS-I:: RS) 14 to 

translate end use ele ':tdcii.y ;avings to 

primary energy savil gs. The marginal 

heat rate is calculate, 'Jy imposing a 

load reduction to the applia'lle end-use 

being analyzed in NE.V18-Bl\S and 

observing the change .n prim~ V energy use. As noted by ACEEE. the ,~ Ifginal 

heat rates used in the central ai.-

conditioning analysis are )ower ~an 

expected. One would expeo::t the central 

air-conditioning marginal h~at Tdte to be 

higher than those of more base load 

appliances (like clothes washers or electric water heaters) because this 

peak-use appliance displaces more 

expensive. less efficient generation. 

Further. this marginal displaced plant 

should be not unlike the inefficient 

plant in place today because most rapid 

technological change occurs in the base 

load. The key to understanding this 

apparent paradox is that this conversion 

rate does not represent a specific 

marginal generator or combination of 

generators. but is actuaHy a conversion 

factor that incorporates several 

siInulated effects resulting from the 

standard. 

The primary reason as to why the 

marginal heat rate is lower than 

expected is that the overall rate of 

efficiency improvement of the power 

system with the standard in place is 

slower than estimated by EIA in the 

AEO Reference Case. While there are 

many effects of the standard. DOE's 

analysis shows the two major 

components of the standard's impact on 

the power sector are: (1) The direct 

" ElA approves use of the 1IlIJIl8 NEMS to dascribe only an AEO version of the model without 

any modification to code or data. Because our 

analysis entails some minor code modifications and 

the model is run under various policy scenarios that 

deviate from AEO assumptions, the name NEMSBRS refers to the model as used here. For more 

information on NEMS, please refer to the National 

Energy Modelling System: An Overview 1998. DOEI 

ElA-{)S81 (98), February 1998. BRS is DOE's Office 

of Building Research and Standards. 

reduction in fuel burned in power 

plants and (2) the indirect effect 

whereby the slowing of electricity 

demand growth slows new investment, 

thereby impeding the rate of overall 

improvement in power sector efficiency. 

While this latter effect would seem to be 

trivial relative to the first, it grows 

significantly over time because fewer 

and fewer of more efficient generating 

plants are added to the power system. 

By the end of the forecast period, this 

effect becomes a significant drag on the 

primary energy savings of the standard, 

which explains why the marginal heat 

rate is less than that attributed to new technology. Further, it is a bigger drag 

on the benefits of peaking end-use 

efficiency improvements. These reduce 

peak demand more and slow investment more because the rate of new construction is heavily dependent on 

growth in peak demand. A more detailed discussion of this effect can be 

found in Appendix M of the TSD. 

3. Fuel Switching 

As discussed in the July 25 SNOPR, 

potential equipment switching from 

heat pumps to electric resistance 

heating due to high heat pump prices was cited as one of the reasons for not 

proposing a 13 SEER standard. The 

energy savings resulting from 13 SEER 

heat pumps would be eliminated if only 

a small fraction of heat pump owners (4 

percent) switched to electric resistance 

heating. See July 25 SNOPR, 66 FR 

38836. 

ACEEE, NRDC. and NWPPC all 

disagreed that more efficient heat pump 

standards would cause consumers to 

switch to electric resistance heating. 

Both ACEEE and NRDC stated that if 

equipment switching was truly a concern. DOE should prevent such 

action not by lowering heat pump 

efficiency standards. but by promoting 

revisions to building energy codes to 

minimize the use ofresistive heat. 

(ACEEE. No. 284 at p. 14; NRDC, No. 

250 at pp. 18-20). ACEEE adds that DOE 

failed to account for the impact that 

electric resistance heating has on consumer energy bills (nearly doubling 

average annual heating bills) in their 

assessment of the potential of 

equipment switching. NWPPC claims 

that DOE overstated the potential of 

equipment switching if split system heat 

pump SEER standards were set higher 

than those for split system air 

conditioners. NWPPC states that the 

price difference between a heat pump 

and an air conditioner at the same SEER 

level is already very high 

(approximately $1400). The extra price 

associated with a more efficient heat 

pump (approximately $150 between 13 
EE-RM/STD-98-440-.3.

36386 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

and 12 SEER) is not enough to alter this information in promulgating the 13 supplying the manufacturers with the

consumer purchase decisions. (NWPPC, SEER standard on January 22, 2001. The necessary pieces to assemble non-HCFCNo. 287 at p. 3). TSD shows that the burden on based heat pumps and air conditioners.

York agrees with DOE that there is manufacturers due to all other recent or With regard to the costs to be incurred

potential for equipment switching if the imminent Federal regulations exceeds by the industry to comply with Clean

standards for heat pumps are set too $479 million. DOE estimates the 13 Air Act amendments for coating large

high. York states that the higher price SEER amendments to the standards for appliances, ACEEE asserts that much

associated with more efficient heat central air conditioners and heat pumps more data are needed before any

pumps would force consumers to would contribute up to an additional definitive estimates can be made.

choose either resistance heat and the $303 million in manufacturer costs, (ACEEE, No. 284 at pp. 11-13; NRDC,

resulting higher utility bills, or fossil bringing the total cumulative regulatory No. 250 at pp. 13-14).

fuel furnaces that may have to operate burden to as high as $782 million. In Counter to the above arguments, ARI

on higher cost fuels with more volatile light of that heavy burden, the July 25 states that DOE is correct to give greater

prices such as oil or propane. (York, No. SNOPR proposed 12 SEER standards weight to cumulative burden. ARI

270 at pp. 3-4). that DOE estimates will reduce the asserts that the cost impacts due to

As stated in the January 22 final rule, expected financial burden on cumulative regulatory burdens will

a significant number of households use manufacturers from all new Federal and exceed DOE's estimate of $479 million.

electric resistance heat, indicating the State regulations by $144 million ARI notes that various additional

potential for equipment switching from compared to the 13 SEER final rule )f burdens to the industry were not

heat pumps to resistance heat. See 66 January 22. ,'uantified by DOE including: (1)

FR 7180. Based on data from the 1997 ACEEE, NRDC, and EPA all argue, I ecently revised DOE efficiency

RECS, a little over 14 percent of that DOE overestimated the impacts o standards for room air conditioners; (2)

households with room or central air the industry due to cumulative or-going DOE review of possible new

conditioning have either baseboard or regulatory burden. EPA focused on tl e iiiiimum efficiency standards for

forced air electric resistance heating impacts due to the phase out of HCFC- resdential furnaces; (3) DOE's adoption

compared to almost 10 percent of 22 (the hydrochlorofluorocarbon used a. oi' s'andard levels related to ASHRAE

households which have heat pumps. a refrigerant) and cited its own analysis 90.1 -1999 (American Society of

The fact that such a large percentage of as well as an estimate from Goodman Heat:ng, Refrigerating and Airhouseholds currently use a combination Manufacturing to claim that DOE's ConQitioning Engineers, Inc., Standard

of central or room air-conditioning with estimate of $50 million per company is 90.1 as revised in October 1999); (4)

resistance heat to meet their space- at least twice as high as warranted based F.PA's Metal Products and Machinery

conditioning needs supports DOE's on prior industry transitions and more (MP&M) effluent guidelines and

view that there is a real possibility that recent trends. Referring to the costs standards; and (5) EPA's allowance

some purchasers would choose to incurred by the refrigerator industry in system for controlling production,

switch to resistance heat from heat the mid-1980's to convert from CFCs to import, and export of HCFCs. ARI states

pumps rather than pay the consumer HCFCs, EPA suggests that a more that DOE's own estimate that a 12 SEER

prices associated with 13 SEER heat reasonable estimate to phase out HCFC- standard would have $144 million less

pumps. DOE has not attempted to 22 is $20 to $30 million per company. cumulative burden than a 13 SEER

estimate the number of consumers that EPA also cites Goodman's estimate that standard warrants adoption of a 12

might actually switch from heat pumps the combined cost of meeting a 13 SEER SEER standard. (ARI, No. 259 at pp. 10-

to resistance heating. Rather, DOE has standard and transitioning from HCFC- 13).

determined that a mere 4 percent of heat 22 is approximately $25 million per In reaching its conclusion on

pump households would need to switch company, half of DOE's $50 million manufacturer impacts, DOE considered

to central air conditioners and electric estimate for just converting to a new the cumulative regulatory cost imposed

resistance heating to negate the energy refrigerant. (EPA, No. 276 at pp. 2-4). on air conditioner manufacturers under

savings achieved from increasing the Because the industry has known for the various standards scenarios,

hsavings t tandad from 1increag t4 well over a decade of the impending including manufacturers' investment to

heat pump to staar7 fHSP. B E use 4 phase out of HCFC-22, both ACEEE and meet the new standard. As noted above, HSPF to 13 SEERl 7.7 HSF. Becausem NRDC claim that the costs for DOE estimated the cumulative

such a small fraction of pump heat such a small fraction of heat pumpe i converting to a new refrigerant should regulatory impacts on manufacturers to

owners would need to switch to electric be lower than DOE's estimate. ACEEE likely exceed $782 million if a 13 SEER

resistance heating to negate the energy states that DOE seems to treat the costs standard were adopted. This includes

savings realized from 13 SEER heat of redesign for efficiency and redesign the $303 million reduction in industry

pumps, DOE believes the possibility of

pumps, DOE believes the possibility o for refrigerants as additive, as though value due to a 13 SEER standard and

equipment switching is real enough to manufacturers would first redesign for $479 million in other regulatory

warrant its inclusion as a factor efficiency (2006) and then for burdens, including costs associated with

supporting a 12 SEER/7.4 HSPF replacement refrigerants (2010). ACEEE the HCFC phase out. It does not include

standard. believes this assumption would be other major Federal and State

D. Impact on Manufacturers demonstrably false as there is every regulations that we listed but did not

reason to accomplish the two goals with quantify. 1. Cumulative Regulatory Burden a single re-engineering effort, both The comments submitted by ACEEE,

DOE considers that a standard level is saving capital and improving time-to- NRDC, and, in particular, EPA do not

not economically justified if it market. ACEEE adds that since there is address the cumulative manufacturer

contributes to an unacceptable already fairly widespread use of an impacts. Rather, the comments were

cumulative regulatory burden. The TSD alternative refrigerant, R-410A, this limited to manufacturer's investment

contains information on cumulative strongly suggests that component required to transition away from HCFC

regulatory burden (section 8.6 of the manufacturers of compressors, coils, refrigerant. DOE's estimated $50 million

TSD), although as previously discussed, valves, lubricants, and all other critical per company investment to comply with

DOE did not explain how it considered components are already geared up and the HCFC phase out was based on

EE-RM-STD-98-440 COMMENT 304

EE.RM/STO.9S-44o-:3Dtf 

36386 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 

and 12 SEER) is not enough to alter 

consumer purchase decisions. (NWPPC, 

No. 287 at p. 3). 

York agrees with DOE that there is 

potential for equipment switching if the 

standards for heat pumps are set too 

high. York states that the higher price 

associated with more efficient heat 

pumps would force consumers to 

choose either resistance heat and the 

resulting higher utility bills, or fossil 

fuel furnaces that may have to operate 

on higher cost fuels with more volatile 

prices such as oil or propane. (York, No. 

270 at pp. 3-4). 

As stated in the January 22 final rule, a significant number of households use electric resistance heat, indicating the 

potential for equipment switching from 

heat pumps to resistance heat. See 66 

FR 7180. Based on data from the 1997 

RECS, a little over 14 percent of 

households with room or central air 

conditioning have either baseboard or 

forced air electric resistance heating 

compared to almost 10 percent of 

households which have heat pumps. 

The fact that such a large percentage of 

households currently use a combination 

of central or room air-conditioning with 

resistance heat to meet their spaceconditioning needs supports DOE's 

view that there is a real possibility that 

some purchasers would choose to 

switch to resistance heat from heat 

pumps rather than pay the consumer prices associated with 13 SEER heat 

pumps. DOE has not attempted to 

estimate the number of consumers that 

might actually switch from heat pumps 

to resistance heating. Rather, DOE has 

determined that a mere 4 percent of heat 

pump households would need to switch 

to central air conditioners and electric 

resistance heating to negate the energy 

savings achieved from increasing the 

heat pump standard from 12 SEERl7.4 

HSPF to 13 SEERl7.7 HSPF. Because 

such a small fraction of heat pump 

owners would need to switch to electric 

resistance heating to negate the energy 

savings realized from 13 SEER heat 

pumps, DOE believes the possibility of 

equipment switching is real enough to 

warrant its inclusion as a factor 

supporting a 12 SEER/7.4 HSPF 

standard. 

D. Impact on Manufacturers 

1. Cumulative Regulatory Burden 

DOE considers that a standard level is 

not economically justified if it 

contributes to an unacceptable 

cumulative regulatory burden. The TSD 

contains information on cumulative 

regulatory burden (section 8.6 of the 

TSD), although as previously discussed, 

DOE did not explain how it considered 

this information in promulgating the 13 

SEER standard on January 22, 2001. The 

TSD shows that the burden on manufacturers due to all other recent or imminent Federal regulations exceeds 

$479 million. DOE estimates the 13 

SEER amendments to the standards for 

central air conditioners and heat pumps 

would contribute up to an additional 

$303 million in manufacturer costs, 

bringing the total cumulative regulatory 

burden to as high as $782 million. In 

light of that heavy burden, the July 25 

SNOPR proposed 12 SEER standards 

that DOE estimates will reduce the 

expected financial burden on manufacturers from all new Federal and 

State regulations by $144 million 

compared to the 13 SEER final rule )f 

January 22. 

ACEEE, NRDC, and EPA all argue. l 

that DOE overestimated the impacts 0 

the industry due to cumulative 

regulatory burden. EPA focused on t1 e impacts due to the phase out of HCFC .... 22 (the hydrochlorofluorocarbon used a.l 

a refrigerant) and cited its own analysis 

as well as an estimate from Goodman 

Manufacturing to claim that DOE's 

estimate of $50 million per company is 

at least twice as high as warranted based on prior industry transitions and more recent trends. Referring to the costs 

incurred by the refrigerator industry in 

the mid-1980'S to convert from CFCs to 

HCFCs, EPA suggests that a more reasonable estimate to phase out HCFG22 is $20 to $30 million per company. 

EPA also cites Goodman's estimate that 

the combined cost of meeting a 13 SEER 

standard and transitioning from HCFG22 is approximately $25 million per 

company, half of DOE's $50 million 

estimate for just converting to a new refrigerant. (EPA, No. 276 at pp. 2-4). 

Because the industry has mown for 

well over a decade of the impending 

phase out of HCFG-22, both ACEEE and 

NRDC claim that the costs for 

converting to a new refrigerant should 

be lower than DOE's estimate. ACEEE 

states that DOE seems to treat the costs 

of redesign for efficiency and redesign 

for refrigerants as additive, as though 

manufacturers would first redesign for 

efficiency (2006) and then for 

replacement refrigerants (2010). ACEEE 

believes this assumption would be 

demonstrably false as there is every 

reason to accomplish the two goals with a single re-engineering effort, both 

saving capital and improving time-tomarket. ACEEE adds that since there is 

already fairly widespread use of an alternative refrigerant, R-410A, this 

strongly suggests that component 

manufacturers of compressors, coils, 

valves, lubricants, and all other critical 

components are already geared up and 

supplying the manufacturers with the 

necessary pieces to assemble non-HCFCbased heat pumps and air conditioners. 

With regard to the costs to be incurred 

by the industry to comply with Clean 

Air Act amendments for coating large 

appliances, ACEEE asserts that much more data are needed before any 

definitive estimates can be made. 

(ACEEE, No. 284 at pp. 11-13; NRDC, 

No. 250 at pp. 13-14). 

Counter to the above arguments, ARI 

states that DOE is correct to give greater 

weight to cumulative burden. ARI 

asserts that the cost impacts due to 

cumulative regulatory burdens will 

exceed DOE's estimate of $479 million. 

ARI notes that various additional 

ryurdens to the industry were not 

('uantified by DOE including: (1) 

F ecently revised DOE efficiency 

st:tndards for room air conditioners; (2) 

or.-going DOE review of possible new 

I.'ll 'limum efficiency standards for 

rus:dential furnaces; (3) DOE's adoption 

or s'andard levels related to ASHRAE 

90.1 -1999 (American Society of 

HeaLng, Refrigerating and AirConaitioning Engineers, Inc., Standard 

90.1 as revised in October 1999); (4) 

~PA'3 Metal Products and Machinery 

(MP&M) effluent guidelines and 

standards; and (5) EPA's allowance 

system for controlling production, 

import, and export of HCFCs. ARI states 

that DOE's own estimate that a 12 SEER 

standard would have $144 million less 

cumulative burden than a 13 SEER 

standard warrants adoption of a 12 

SEER standard. (ARI, No. 259 at pp. 10-

13). 

In reaching its conclusion on manufacturer impacts, DOE considered 

the cumulative regulatory cost imposed 

on air conditioner manufacturers under 

the various standards scenarios, 

including manufacturers' investment to 

meet the new standard. As noted above, 

DOE estimated the cumulative 

regulatory impacts on manufacturers to 

likely exceed $782 million if a 13 SEER 

standard were adopted. This includes 

the $303 million reduction in industry 

value due to a 13 SEER standard and 

$479 million in other regulatory 

burdens, including costs associated with 

the HCFC phase out. It does not include 

other major Federal and State 

regulations that we listed but did not 

quantify. 

The comments submitted by ACEEE, 

NRDC, and, in particular, EPA do not 

address the cumulative manufacturer 

impacts. Rather, the comments were limited to manufacturer's investment 

required to transition away from HCFC 

refrigerant. DOE's estimated $50 million 

per company investment to comply with 

the HCFC phase out was based on 
EE-RM/STD-98-440- 3 Lf

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36387

interviews with all seven major air conversion. In contrast, replacing air that manufacturers would already have

conditioner manufacturers during 1998 conditioner compressors, whose voluntarily converted. In fact, hardware

and 1999 when the firms were asked efficiencies are already close to cost increases are readily identifiable

specific questions regarding the costs of thermodynamic limits, with higher and the higher cost HFC refrigerant

replacing HCFCs in their equipment. In efficiency units to offset the impact of alone will add $20 to $30 to the direct

contrast, ICF Consulting, in its analysis refrigerant related efficiency loss is not manufacturing cost of each unit.

for the EPA, refers to mid-1980's a viable option. Finally, there are fewer Therefore, it is highly likely that one or

estimated costs associated with phasing models in a typical appliance more manufacturers will opt to use

CFCs out of the refrigerator industry, manufacturer's refrigerator product line HCFC-22 in the majority of their

without explaining the link between than the number of residential central product line between 2006 and 2009. In

those costs estimates and ICF's air conditioner and heat pump models that situation, the resulting cost

estimated $20 to $30 million per (multiple efficiency level products) advantage will force the other

company to phase HCFCs out of the air produced by a typical unitary air manufacturers to follow suit to remain

conditioner industry. conditioner manufacturer. As a result, competitive and avoid market share

DOE believes that the cost to convert significantly more redesign and product loss. While most manufacturers produce

from CFC refrigerants used in validation is necessary for the unitary 12 and 13 SEER HFC air conditioners,

residential refrigerators is substantially air conditioner manufacturers to convert they are typically low volume products

less than the cost to convert from their product lines and production from and the tr oling 'or full scale mass

HCFC-22 refrigerant used in central air R-22 to either of the HFC blends. productic n does not exist. To increase

conditioners and heat pumps. For ACEEE states that the rational production of 12 SEER or 13 SEER

example, compressor capacity and approach to meeting the two regulatory units, mai rfactr .rs will need

power input for central air conditioners requirements-new efficiency levels in expanded ooling ,o produce those

and heat pumps is an order of 2006 and the phase out of HCFCs in models. T( obtain -he least cost,

magnitude larger than compressor 2010-isto do so simultaneously, rather manufacturers will need to use designs

capacity and power input needed for than sequentially, 3 to 4 years apart. If that are betee; optimized for mass

home refrigerators (2 to 5 horsepower both changes could be accomplished production. C3nseqi ently, DOE believes

for central air conditioners versus one- simultaneously, the investment would that much of tie red1 sign, validation,

quarter horsepower for home indeed be less than the cost of making and retooling effort frced by the

refrigerators). For this reason alone, the two changes separately. Although industry is likely to happen once for

significantly higher conversion costs the characteristics of the new efficiency standards in 2006 and a

would be expected. Further, central air refrigerant, with significantly higher second time for ti, HCFC phase out in

conditioner or heat pump components operating pressures, will add to the 2010.

(compressors, coils and air handlers) scope and cost of the development effort 2. Financial Burdens Associated With

comprise almost the entire product cost. for the increased efficiency product New Efficiency Standards

In contrast, over 50 percent of the cost families, in principle, product

of a home refrigerator is embodied in validation testing and retooling would As explained in the July 25 SNOPR

such non-refrigerant components as the occur only once, saving substantial (66 FR 38829), the 13 SEER standards in

insulated cabinet, shelves and other resources. the January 22 final rule were projected

storage components, and other The difficulty with this scenario is the by the TSD to result in a negative cash

accessories such as icemakers and competitive reality of the industry. flow for the industry in the year

through the door ice and drink Competition in the U.S. air conditioning preceding the new standards'

dispensers. industry is especially vigorous, with enforcement. Moreover, DOE's analysis

DOE also believes refrigerant related seven major manufacturers competing shows that 13 SEER standards would

design changes will result in greater for business. Consumers have benefitted impose far greater financial burdens on

impact on the overall product cost and significantly from this, with real manufacturers whose operating costs

competitive position for air conditioner (inflation adjusted) prices having fallen exceed the industry average. Those

manufacturers than will be the case for steadily over the past 20 years, even manufacturers typically engage in more

refrigerator manufacturers. Since HFC- during periods of rapid market growth. research and development or provide

410A refrigerant operates at In addition, this level of competition in additional sales or service support than

substantially higher operating pressures the domestic industry has provided no do their lower operating cost

than HCFC-22 refrigerant, a major opportunity for foreign competition to competitors. Consequently, DOE

system redesign is necessary with HFC- displace main line HVAC products, proposed the 12 SEER standard to

410A refrigerant to take advantage of the preserving traditional manufacturing reduce the maldistribution of financial

beneficial aspects of the 40 to 50 percent jobs in the U.S. impacts on manufacturers and allow

higher pressure and to minimize any In 2006, in this environment of manufacturers to maintain a positive

deleterious effects. With the alternative vigorous competition, each cash flow.

replacement refrigerant HFC-407C, manufacturer will be faced with the Trane concurred with DOE's action to

system efficiency is reduced by 5 to 10 choice of producing a cost optimized reduce the maldistribution of financial

percent compared to use of HCFC-22 product line using HCFC-22 refrigerant impacts on manufacturers. Trane

refrigerant in the same system. or of also making the additional asserted that as efficiency is increased,

Significant resizing and reconfiguring of investment to convert to an HFC a larger commodity market is created.

components is required to restore refrigerant, combined with meeting the This in turn reduces the market

efficiency levels. increased efficiency standard level. It is opportunities for companies that focus

Replacing CFC-12 refrigerant in clear that either HFC blend (R-407C or on value-added systems and services.

refrigerators with HFC-134a refrigerant R-410A) will result in increased Thus, the "volume" manufacturers (i.e.,

reduces system efficiency by only 1 to product cost (at comparable efficiency lower operating cost manufacturers)

2 percent, which is easily offset by and performance level). If HFC benefit disproportionately. Trane also

higher the higher efficiency compressors refrigerant use would result in lower noted that under a 13 SEER standard,

available at the time of CFC to HFC cost compared to HCFC-22, it is likely manufacturers who invest heavily in

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440-?IJ'f 

Federal Register/Vol. 67. No. 100/Thursday. May 23. 2002 /Rules and Regulations 36387 

interviews with all seven major air 

conditioner manufacturers during 1998 

and 1999 when the firms were asked 

specific questions regarding the costs of 

replacing HCFCs in their equipment. In 

contrast. rCF Consulting. in its analysis 

for the EPA. refers to mid-1980's 

estimated costs associated with phasing 

CFCs out of the refrigerator industry, 

without explaining the link between 

those costs estimates and ICF's 

estimated $20 to $30 million per 

company to phase HCFCs out of the air 

conditioner industry. 

DOE believes that the cost to convert 

from CFC refrigerants used in 

residential refrigerators is substantially 

, less than the cost to convert from 

HCFC-22 refrigerant used in central air 

conditioners and heat pumps. For 

example, compressor capacity and 

power input for central air conditioners 

and heat pumps is an order of 

magnitude larger than compressor 

capacity and power input needed for 

home refrigerators (2 to 5 horsepower 

for central air conditioners versus onequarter horsepower for home 

refrigerators). For this reason alone. 

significantly higher conversion costs 

would be expected. Further, central air 

conditioner or heat pump components 

(compressors, coils and air handlers) 

comprise almost the entire product cost. 

In contrast, over 50 percent of the cost 

of a home refrigerator is embodied in 

such non-refrigerant components as the 

insulated cabinet, shelves and other 

storage components, and other 

accessories such as icemakers and 

through the door ice and drink 

dispensers. 

DOE also believes refrigerant related 

design changes will result in greater 

impact on the overall product cost and 

competitive position for air conditioner 

manufacturers than will be the case for 

refrigerator manufacturers. Since HFC410A refrigerant operates at 

substantially higher operating pressures 

than HCFC-22 refrigerant, a major 

system redesign is necessary with HFC410A refrigerant to take advantage of the 

beneficial aspects of the 40 to 50 percent 

higher pressure and to minimize any 

deleterious effects. With the alternative 

replacement refrigerant HFC-407C, 

system efficiency is reduced by 5 to 10 

percent compared to use of HCFC-22 

refrigerant in the same system. 

Significant resizing and reconfiguring of 

components is required to restore 

efficiency levels. 

Replacing CFC-12 refrigerant in 

refrigerators with HFC-134a refrigerant 

reduces system effiCiency by only 1 to 

2 percent, which is easily offset by 

higher the higher efficiency compressors 

available at the time of CFC to HFC 

conversion. In contrast, replacing air 

conditioner compressors, whose 

efficiencies are already close to 

thermodynamic limits, with higher 

efficiency units to offset the impact of 

refrigerant related efficiency loss is not 

a viable option. Finally, there are fewer 

models in a typical appliance 

manufacturer's refrigerator product line 

than the number ofresidential central 

air conditioner and heat pump models 

(multiple efficiency level products) 

produced by a typical unitary air 

conditioner manufacturer. As a result, 

significantly more redesign and product 

validation is necessary for the unitary 

air conditioner manufacturers to convert 

their product lines and production from 

R-22 to either of the HFC blends. 

ACEEE states that the rational 

approach to meeting the two regulatory 

requirements-new efficiency levels in 

2006 and the phase out of HCFCs in 

201D-is. to do so simultaneously, rather 

than sequentially, 3 to 4 years apart. If 

both changes could be accomplished 

simultaneously, the investment would 

indeed be less than the cost of making 

the two changes separately. Although 

the characteristics of the new 

refrigerant, with significantly higher 

operating pressures, will add to the 

scope and cost of the development effort 

for the increased efficiency product 

families, in principle, product 

validation testing and retooling would 

occur only once, saving substantial 

resources. 

The difficulty with this scenario is the 

competitive reality of the industry. 

Competition in the U.S. air conditioning 

industry is especially vigorous, with 

seven major manufacturers competing 

for business. Consumers have benefitted 

significantly from this, with real 

(inflation adjusted) prices having fallen 

steadily over the past 20 years, even 

during periods of rapid market growth. 

In addition, this level of competition in 

the domestic industry has provided no opportunity for foreign competition to 

displace main line HV AC products, 

preserving traditional manufacturing 

jobs in the U.S. 

In 2006, in this environment of 

vigorous competition, each 

manufacturer will be faced with the 

choice of producing a cost optimized 

product line using HCFC-22 refrigerant 

or of also making the additional 

investment to convert to an HFC 

refrigerant, combined with meeting the 

increased effiCiency standard level. It is 

clear that either HFC blend (R-407C or 

R-410A) will result in increased 

product cost (at comparable efficiency 

and performance level). If HFC 

refrigerant use would result in lower 

cost compared to HCFC-22, it is likely 

that manufacturers would already have 

voluntarily converted. In fact, hardware 

cost increases are readily identifiable 

and the higher cost HFC refrigerant 

alone will add $20 to $30 to the direct 

manufacturing cost of each unit. 

Therefore, it is highly likely that one or 

more manufacturers will opt to use 

HCFC-22 in the majority of their 

product line between 2006 and 2009. In 

that situation, the resulting cost 

advantage will force the other 

manufacturers to follow suit to remain 

competitive and avoid market share 

loss. While most manufacturers produce 

12 and 13 SEER HFC air conditioners, 

they are typically low volume products 

and the t( oling 'or full scale mass 

producti( n does not exist. To increase 

productio, of 12 3EER or 13 SEER 

units, mal dact.n ~rs will need 

expanded ooling ,0 produce those 

models. T( obtain -he least cost, 

manufactu,'e"s will need to use designs 

that are betie;' optimized for mass 

production. C'mse'll entiy, DOE believes 

that much oftne re~ksign, validation, 

and retooling effort frced by the 

industry is likelY to h'lppen once for 

efficiency stand(\rds in 2006 and a 

second time for U;.P. BCFC phase out in 

2010. 

2. Financial Burdens Associated With 

New Efficiency Standards 

As explained in the July 25 SNOPR 

(66 FR 38829), the 13 SEER standards in 

the January 22 final rule were projected 

by the TSD to result in a negative cash 

flow for the industry in the year 

preceding the new standards' 

enforcement. Moreover, DOE's analysis 

shows that 13 SEER standards would 

impose far greater financial burdens on 

manufacturers whose operating costs 

exceed the industry average. Those 

manufacturers typically engage in more 

research and development or provide 

additional sales or service support than 

do their lower operating cost 

competitors. Consequently, DOE 

proposed the 12 SEER standard to 

reduce the maldistribution of financial 

impacts on manufacturers and allow 

manufacturers to maintain a positive 

cash flow. 

Trane concurred with DOE's action to 

reduce the mal distribution of financial 

impacts on manufacturers. Trane 

asserted that as efficiency is increased, 

a larger commodity market is created. 

This in turn reduces the market 

opportunities for companies that focus 

on value-added systems and services. 

Thus, the "volume" manufacturers (i.e., 

lower operating cost manufacturers) 

benefit disproportionately. Trane also 

noted that under a 13 SEER standard, 

manufacturers who invest heavily in 
EE-RM/STD-98-440- 30

36388 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

research and development (R&D) would the technologies required to comply opportunity to unseat large but slowdedicate less funding to innovative with the standard are conventional and adapting competitors. (NRDC, No. 250 at

programs, resulting in the entire well known. (OOE, No. 275 at p. 3; p. 31).

industry focusing on the development of Goodman, No. 269 at p. 3; ACEEE, No. Both ARI and Rheem agree with the

designs that address the absolute lowest 284 at p. 7). Goodman specifically states Department of Justice's statements

commodity product. Trane's opinion that the only difference between a 10 regarding small manufacturers. Rheem

was shared by Equipment Distributors. SEER, 12 SEER, and 13 SEER units is a states that small manufacturers will

(Trane, No. 262 at pp. 2-4, 13-14; little more copper and aluminum used most likely not be able to afford the

Equipment Distributors, Inc., No. 266 at in manufacturing different sized coils. redesign and retooling of their

p. 1). DOE believes it is erroneous to equipment and manufacturing facilities

NRDC disputed DOE's interpretation conclude from the fact that technologies to meet the 13 SEER standard. ARI

of the financial impacts to required to comply with standards are quotes DOE's TSD in stating that "small

manufacturers by pointing out that conventional and well known that it is manufacturers engaged in the

DOE's own analysis undercuts the a trivial exercise to increase production production of conventional equipment

contention that the industry is impacted volumes to a level capable of satisfying would find it difficult to overcome the

more severely under a 13 SEER the entire U.S. demand for air financial and technical burdens

standard. Referring to the TSD, NRDC conditioners. Sales of 13 SEER associated with the transition, and

notes that under two different scenarios equipment and higher are only 3 could decide to exit the m rket." (ARI,

(NAECA and Roll-up) lowering the percent of all equipment sold and large No. 259 at pp. 10-11; Rhe m, Nc. 248

standard from 13 to 12 SEER actually investments would be required to at p. 3).

increases the burden to the industry (as convert all production to these levels. With regard to the main fatiure: s of

measured by the industry net present Furthermore, as previously described, equipment for the manufa, tured

value). (NRDC, No. 250 at pp. 20-22). much of the industry's financial health housing industry, both AR and

DOE disagrees with this comment. In today depends on sales of 12 SEER Goodman agree that produ -ts for

its interpretation of manufacturer equipment. markets like manufactured housing,

impacts, NRDC overlooks the important S l Mnufact s where space constraints limit efficieicy

role that the efficiency mix assumptions 3 Sma Manuacturersgains achieved with conventional

play in the financial projections. In The issue of how higher efficiency technology, should be granted an

Section 8.4.8 of the TSD, we described standards impact small manufacturers exemption from higher efficiency

the dynamics by which the profits of also drew several comments. The standards. (ARI, No. 259 at p. 8;

manufacturers with higher operating Department of Justice's April 5, 2001, Goodman, No. 269 at p. 3).

costs depend on the sale of premium letter to DOE regarding the potential The Department of Justice's concerns

products, and how those products are effect on competition of new central air relate to disproportionate impacts on

differentiable only at efficiency levels conditioner and heat pump efficiency small manufacturers. Most small

higher than the baseline. The closer the standards stated that some small manufacturers produce only indoor

baseline unit is to the technological manufacturers would be coils or niche product lines. For small

limit, the fewer consumers will "buy disproportionately impacted under a 13 manufacturers who produce coils only,

up" to a higher efficiency. For more and SEER standard, and noted that 100 there are no intensive incremental

more consumers, the baseline will be percent of their current product line technological or capital requirements for

the cost-effective option, and those would fail to comply with the new them to increase the efficiency of their

consumers who wish to "buy up" will efficiency requirement. The Department products and DOE does not expect them

have fewer options and less financial of Justice also stated that manufacturers to face any incremental burden as a

incentive to do so. For these reasons, of equipment for space-constrained result of the new standards. However,

DOE assumed the Roll-up efficiency installation sites (such as manufactured DOE has documented that

scenario to be the most probable for 13 housing) would also be manufacturers of niche air conditioning

SEER standard levels and the NAECA disproportionately impacted by a 13 products, such as through-the-wall

efficiency scenario most probable at 12 SEER standard (DOJ, No. 285 printed in equipment and small duct, high velocity

SEER standard levels. The resulting Appendix of this notice). systems, face special technological and

cumulative change in industry net Goodman asserted that moving to a 13 financial considerations compared to

present value (NPV) is negative $300 SEER would not be a hardship to small those faced by the major air conditioner

million at 13 SEER levels compared to manufacturers. Goodman claims that 13 producers. Consequently, new

negative $199 million at 12 SEER levels. SEER technology has been available to efficiency standards could be more

NRDC's interpretation of both large and small manufacturers for detrimental to the financial situation of

manufacturer impacts also overlooks approximately 15 years. Goodman also niche product manufacturers than of

short-run cash flow impacts of the points to the fact that Goettl Air major manufacturers. Technical

standards. While NPV is useful for Conditioning, a small manufacturer considerations are typically more

evaluating the long-term effects of new based in Arizona, supports the 13 SEER important for certain niche

standards, short-term changes in cash standard. (Goodman, No. 269 at p. 3). manufacturers than for major

flow are also important indicators of the PG&E concurs with Goodman's manufacturers and have more severe

industry's financial situation. The statements. (PG&E, No. 274 at p. 4). consequences related to increased

annual cash flow impacts at 13 SEER are NRDC asserts that higher efficiency production costs or loss of sales volume

$31 million more than at 12 SEER and standards encourage competition by due to increased price. Overall, if

turn the absolute cash flow negative. shaking up the cozy arrangements that provisions were not made in the

Depressed cash flow can strain the the bigger companies have drifted into, standard for niche products that face

industry's access to capital or cause requiring manufacturers either to invest severe technological constraints, we

investors to flee. in building new components or to would expect their impacts to be

OOE, Goodman, and ACEEE all claim purchase new components from other disproportionate to those on the

that the industry impacts due to 13 suppliers. They claim that this provides industry as a whole. In today's rule,

SEER standards cannot be too severe as smaller, nimble manufacturers an DOE is establishing separate product

EE-RM-STD-98-440 COMMENT 304

36388 

EE-RM/STD-98-440- 30 ~ 

Federal Register/Vol. 67, No. IOO/Thursday, May 23, 2002/Rules and Regulations 

research and development (R&D) would 

dedicate less funding to innovative 

programs, resulting in the entire 

industry focusing on the development of 

designs that address the absolute lowest 

commodity product. Trane's opinion 

was shared by Equipment Distributors. 

(Trane, No. 262 at pp. 2-4, 13-14; 

Equipment Distributors, Inc., No. 266 at 

p.l). 

NRDC disputed DOE's interpretation 

of the financial impacts to 

manufacturers by pointing out that 

OOE's own analysis undercuts the 

contention that the industry is impacted 

more severely under a 13 SEER 

standard. Referring to the TSD, NRDC 

notes that under two different scenarios 

(NAECA and Roll-up) lowering the 

standard from 13 to 12 SEER actually 

increases the burden to the industry (as 

measured by the industry net present 

value). (NRDC, No. 250 at pp. 20-22). 

DOE disagrees with this comment. In 

its interpretation of manufacturer 

impacts, NRDC overlooks the important 

role that the efficiency mix assumptions 

play in the financial projections. In 

Section 8.4.8 of the TSD, we described 

the dynamics by which the profits of 

manufacturers with higher operating 

costs depend on the sale of premium 

products, and how those products are 

differentiable only at efficiency levels 

higher than the baseline. The closer the 

baseline unit is to the technological 

limit, the fewer consumers will "buy 

up" to a higher efficiency. For more and 

more consumers, the baseline will be 

the cost-effective option, and those consumers who wish to "buy up" will 

have fewer options and less financial 

incentive to do so. For these reasons, 

DOE assumed the Roll-up efficiency 

scenario to be the most probable for 13 

SEER standard levels and the NAECA 

efficiency scenario most probable at 12 

SEER standard levels. The resulting 

cumulative change in industry net 

present value (NPVJ is negative $300 

million at 13 SEER levels compared to 

negative $199 million at 12 SEER levels. 

NRDC's interpretation of 

manufacturer impacts also overlooks 

short-run cash flow impacts of the 

standards. While NPV is useful for 

evaluating the long-term effects of new 

standards, short-term changes in cash 

flow are also important indicators of the 

industry's financial situation. The 

annual cash flow impacts at 13 SEER are 

$31 million more than at 12 SEER and 

turn the absolute cash flow negative. 

Depressed cash flow can strain the 

industry's access to capital or cause 

investors to flee. 

OOE, Goodman, and ACEEE all claim 

that the industry impacts due to 13 

SEER standards cannot be too severe as 

the technologies required to comply 

with the standard are conventional and 

well known. (OOE, No. 275 at p. 3; 

Goodman, No. 269 at p. 3; ACEEE, No. 

284 at p. 7). Goodman specifically states 

that the only difference between a 10 

SEER,12 SEER, and 13 SEER units is a 

little more copper and aluminum used 

in manufacturing different sized coils. 

DOE believes it is erroneous to 

conclude from the fact that technologies 

required to comply with standards are 

conventional and well known that it is 

a trivial exercise to increase production 

volumes to a level capable of satisfying 

the entire U.S. demand for air 

conditioners. Sales of 13 SEER 

equipment and higher are only 3 

percent of all equipment sold and large 

investments would be required to 

convert all production to these levels. 

Furthermore, as previously described, 

much of the industry's financial health 

today depends on sales of 12 SEER 

equipment. 

3. Small Manufacturers 

The issue of how higher efficiency 

standards impact small manufacturers 

also drew several comments. The 

Department of Justice's April 5, 2001, 

letter to DOE regarding the potential 

effect on competition of new central air 

conditioner and heat pump efficiency 

standards stated that some small 

manufacturers would be 

disproportionately impacted under a 13 

SEER standard, and noted that 100 

percent of their current product line 

would fail to comply with the new 

efficiency requirement. The Department 

of Justice also stated that manufacturers 

of equipment for space-constrained 

installation sites (such as manufactured 

housing) would also be 

disproportionately impacted by a 13 

SEER standard (DOJ, No. 285 printed in 

Appendix of this notice). 

Goodman asserted that moving to a 13 

SEER would not be a hardship to small 

manufacturers. Goodman claims that 13 

SEER technology has been available to 

both large and small manufacturers for 

approximately 15 years. Goodman also 

points to the fact that Goettl Air 

Conditioning, a small manufacturer 

based in Arizona, supports the 13 SEER 

standard. (Goodman, No. 269 at p. 3). 

PG&E concurs with Goodman's 

statements. (PG&E, No. 274 at p. 4). 

NRDC asserts that higher efficiency 

standards encourage competition by 

shaking up the cozy arrangements that 

the bigger companies have drifted into, 

requiring manufacturers either to invest 

in building new components or to 

purchase new components from other 

suppliers. They claim that this provides 

smaller, nimble manufacturers an 

opportunity to unseat large but slowadapting competitors. (NRDC, No. 250 at 

p.31). 

Both ARI and Rheem agree with the 

Department of Justice's statements 

regarding small manufacturers. Rheem 

states that small manufacturers will 

most likely not be able to afford the 

redesign and retooling of their 

equipment and manufacturing facilities 

to meet the 13 SEER standard. ARI 

quotes DOE's TSD in stating that "small 

manufacturers engaged in the 

production of conventional equipment 

would find it difficult to overcome the 

financial and technical burdens 

associated with the transition, and 

could decide to exit the m:rket." (ARl, 

No. 259 at pp. 10-11; Rhf3m, Nt. 248 

at p. 3). 

With regard to the mam fa~illre's of 

equipment for the manufa, tured 

housing industry, both AR and 

Goodman agree that produ :t.> for 

markets like manufactured housing, 

where space constraints limit effic'.e'1cy 

gains achieved with conven~ional 

technology, should be granted.m 

exemption from higher efficiency 

standards. (ARl, No. 259 at p. 8; 

Goodman, No. 269 at p. 3). 

The Department ofJustice's conc~rns 

relate to disproportionate impacts on small manufacturers. Most small 

manufacturers produce only indoor 

coils or niche product lines. For small 

manufacturers who produce coils only, 

there are no intensive incremental 

technological or capital requirements for 

them to increase the efficiency of their 

products and DOE does not expect them 

to face any incremental burden as a 

result of the new standards. However, 

DOE has documented that 

manufacturers of niche air conditioning 

products, such as through-the-wall 

equipment and small duct, high velocity 

systems, face special technological and 

financial considerations compared to 

those faced by the major air conditioner 

producers. Consequently, new efficiency standards could be more 

detrimental to the financial situation of 

niche product manufacturers than of 

major manufacturers. Technical 

considerations are typically more 

important for certain niche 

manufacturers than for major 

manufacturers and have more severe consequences related to increased 

production costs or loss of sales volume 

due to increased price. Overall, if 

provisions were not made in the 

standard for niche products that face 

severe technological constraints, we 

would expect their impacts to be 

disproportionate to those on the 

industry as a whole. In today's rule, 

DOE is establishing separate product 
EE-RM/STD-98-440- 30o

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36389

classes for through-the-wall equipment range of costs bounded by the ARI Product Attribute Database and

and small duct, high velocity systems, manufacturers' submission. Trane technical literature to describe the

which will be required to meet a lower nevertheless thinks that, despite its efficiency-related attributes of those

SEER. DOE believes this meets the shortcomings, the reverse engineering products. Additionally, from the group

Department of Justice's concern analysis essentially confirmed cost of manufacturer submittals, three units

regarding the impact of more stringent levels submitted by ARI. However, were purchased for extensive

standards on small manufacturers. Trane recommends that DOE utilize the disassembly and inspection. In their

DOE recognizes that products used for cost data submitted by ARI. EEI concurs comment ARI does not explain how it

manufactured housing and modular with this conclusion. (Trane, No. 262 at derived baseline costs (estimation

housing also face space constraints. In 9-10; EEI, No. 253 at p. 2). ARI states method, models included, product

its decision to propose 12 SEER that it surveyed its manufacturer features, etc.), making an assessment or

standards for conventional products, members after DOE issued its January 22 comparison to DOE's costs impossible.

DOE took into consideration the impacts final rule. The results of the survey In contrast, the reverse engineering

of higher efficiency standards on the indicate that: (1) DOE has derivation method and resulting

manufacturers of manufactured housing underestimated the baseline disaggregated baseline data are

and modular housing products. For manufacturer costs by approximately 30 transparent and have been reviewed

these applications, products at the 12 percent and (2) the additional cost of a extensively by stakeholders.

SEER level are currently on the market. 13 SEER split air conditioner over a 12 Several comments also focused on the

DOE has concluded that, at the 12 SEER SEER is not $122 as estimated by DOE, issue of productivity gains and asserted

level, there is no need for a separate but is at least approximately $305. ARI that these gains would lower

class for products used mainly in also refutes Goodman's claim that the manufacturing costs below the levels

manufactured or modular housing. amount of copper and aluminum estimated by DOE. ACEEE, ASE, and

4. Manufacturer Cost Estimates needed for a 13 SEER unit is OOE all refer to historic changes as

insignificant. In reviewing Goodman's shown by the U.S. Census Bureau's

Several comments asserted that DOEs current technicCurrent literature, ARI Industrial states and

manufacturing cost estimates derived that on average a Goodman 13 SEER state that air conditioner costs to the

from the reverse engineering analysis that on average c onditioner a weighs 44 pounds manufacturer have declined at a rate of

were too high. The comments stated that (18 more than a 12 SEER percent) 1.7 percent annually over the 1994-

economies of scale in production and (8 peret) more tspe cal, 1 G S mana 1998 period. They assert that DOE

competieforces will result in lower system. More specifically, Goodman's should include this rate of cost

competitive forces will result in lower 13 SEER condenser and evaporator coilsshould include this rate of cost

costs for the more efficient equipment as are av con eerage 2 percnt and 11.5 reductions in its analysis. They add that

compared to pre-implementation percent heavier than the condenser and t h e Census figures are probably

estimates. (ACEEE, No. 284 at p. 2; CFA, evaporator ci r ther conservative as they ignore the fact that

No. 246 at p. 1; NCLC, No. 241-NN atSEER manufacturers tend to find ways to

p. 21). OoE specificaly s s at the unt, respectively. (ARI, No. 259 at .te substantially increase productivity

cost of the commodity product at a 23-25). York states that the reverse when standards take effect in order to

minimum standard level cannot be engineering analysis is awed because it reduce the impact of standards-induced

appropriately characterized by looking focused on oney bie l eof teq ent, a 3 cost increases. In making this claim, the

at the mean or median manufacturer ton ut and they beeve that thewholecomments cite DOE's cost estimates

cost estimates from the reverse range of equipment should have been from the 1980's for meeting the 10 SEER

engineering analysis. (OOE, No. 275 at analyzed, as size becomes much more standards that took effect in 1992.

p. 3). Goodman states that their problematic and costly at higher Rather than having any cost impacts,

incremental cost for producing a 13 capacities. (York, No. 270 at p. 3). they assert that the 1992 standards

SEER unit is $100 and is comparable to DOE believes that the reverse resulted in essentially no change in

DOE's estimate. (Goodman, No. 269 at engineering analysis is based on a product costs. (ACEEE, No. 284 at pp.

pp. 3-4). sufficient equipment sample size to 4-8; OOE, No. 275 at p. 3; ASE, No. 282

The reverse engineering analysis does capture variability in design, at pp. 3-4).

in fact take into account economies of manufacturing practices and costs Although NRDC recognizes that the

scale by considering larger production across the range of products that would reverse engineering model accounts for

volumes for more efficient products be subject to new standards. The economies of scale, it states that it does

after implementation of the new equipment models were selected to be not account for any "learning-curve"

standards. In its production modeling, representative of the costs to effect. Thus, as cumulative production

DOE also considered that manufacturers manufacture existing baseline models of high efficiency units increases, the

would cost-optimize their production at and to capture the costs to manufacture reverse engineering model merely scales

the new level because of more intense products at potential new standards up the costs rather than factoring the

competition at that level. We expect this levels. To select representative downward effect that "learning" has on

competitive pressure to drive equipment samples for the reverse production costs. (NRDC, No. 250 at pp.

manufacturing costs and this is engineering analysis, DOE requested 31-32). Goodman also alludes to the

illustrated by the results of the reverse that manufacturers identify equipment "learning-curve" when it states that

engineering analysis which fall within in their product lines most appropriate when a unit meeting a new standard is

the ARI iange and nearer to the ARI for this purpose. Four major produced in volume, it allows the

minimum. manufacturers submitted design data for manufacturer to run its plant more

ARI, Trane, York, and EEI disagree split cooling-only equipment, and three efficiently and pass the resulting cost

with the above comments and assert of those submitted design data for the savings on to the consumer. (Goodman,

that DOE's manufacturing cost estimates other classes as well. This submission No. 269 at pp. 4-5). Trane, Rheem, and

are too low. Trane states that the reverse process yielded information on 62 Lennox International, Inc. (Lennox)) all

engineering analysis was based on too models. DOE selected an additional refute the contention that productivity

small of a sample of units and nine models from catalogs of those and gains will materialize. Trane asserts that

eliminated units which fell out of the other manufacturers and also used the earlier hard won productivity gains

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440- 30'1 

Federal Register/Vol. 67, No. IOO/Thursday, May 23, 2002/Rules and Regulations 36389 

classes for through-the-wall equipment 

and small duct, high velocity systems, 

which will be required to meet a lower 

SEER. DOE believes this meets the 

Department of Justice's concern regarding the impact of more stringent 

standards on small manufacturers. 

DOE recognizes that products used for 

manufactured housing and modular 

housing also face space constraints. In 

its decision to propose 12 SEER 

standards for conventional products, 

DOE took into consideration the impacts 

of higher efficiency standards on the 

manufacturers of manufactured housing 

and modular housing products. For 

these applications, products at the 12 

SEER level are currently on the market. 

DOE has concluded that, at the 12 SEER 

level, there is no need for a separate 

class for products used mainly in 

manufactured or modular housing. 

4. Manufacturer Cost Estimates 

Several comments asserted that DOE's 

manufacturing cost estimates derived 

from the reverse engineering analysis 

were too high. The comments stated that 

economies of scale in production and 

competitive forces will result in lower 

costs for the more efficient equipment as 

compared to pre-implementation 

estimates. (ACEEE, No. 284 at p. 2; CFA, 

No. 246 at p. 1; NCLC, No. 241-NN at 

p. 1). OOE specifically states that the 

cost of the commodity product at a minimum standard level cannot be 

appropriately characterized by looking 

at the mean or median manufacturer 

cost estimates from the reverse 

engineering analysis. (ODE, No. 275 at 

p. 3). Goodman states that their 

incremental cost for producing a 13 

SEER unit is $100 and is comparable to 

DOE's estimate. (Goodman, No. 269 at 

pp.3-4). 

The reverse engineering analysis does 

in fact take into account economies of 

scale by conSidering larger production 

volumes for more efficient products 

after implementation of the new 

standards. In its production modeling, 

DOE also considered that manufacturers 

would cost-optimize their production at 

the new level because of more intense 

competition at that level. We expect this 

competitive pressure to drive 

manufacturing costs and this is 

illustrated by the results of the reverse 

engineering analysis which fall within 

the ARl I ange and nearer to the ARl 

minimum. 

ARl, Trane, York, and EEl disagree 

with the above comments and assert 

that DOE's manufacturing cost estimates 

are too low. Trane states that the reverse engineering analysis was based on too 

small of a sample of units and 

eliminated units which fell out of the 

range of costs bounded by the 

manufacturers' submission. Trane 

nevertheless thinks that, despite its 

shortcomings, the reverse engineering 

analysis essentially confirmed cost 

levels submitted by ARl. However, 

Trane recommends that DOE utilize the 

cost data submitted by ARl. EEl concurs 

with this conclusion. (Trane, No. 262 at 

9-10; EEl, No. 253 at p. 2). ARl states 

that it surveyed its manufacturer 

members after DOE issued its January 22 

final rule. The results of the survey 

indicate that: (1) DOE has 

underestimated the baseline 

manufacturer costs by approximately 30 

percent and (2) the additional cost of a 

13 SEER split air conditioner over a 12 

SEER is not $122 as estimated by DOE, 

but is at least approximately $305. ARl 

also refutes Goodman's claim that the 

amount of copper and aluminum 

needed for a 13 SEER unit is 

insignificant. In reviewing Goodman's 

current technical literature, ARl states 

that on average a Goodman 13 SEER 

split air conditioner weighs 44 pounds 

(18 percent) more than a 12 SEER 

system. More specifically, Goodman's 

13 SEER condenser and evaporator coils 

are on average 20.2 percent and 11.5 

percent heavier than the condenser and 

evaporator coils from their 12 SEER 

unit, respectively. (ARl, No. 259 at pp. 

23-25). York states that the reverse 

engineering analysis is flawed because it 

focused on one size of equipment, a 3-

ton unit and they believe that the whole 

range of equipment should have been 

analyzed, as size becomes much more 

problematic and costly at higher 

capacities. (York, No. 270 at p. 3). 

DOE believes that the reverse 

engineering analysis is based on a 

sufficient equipment sample size to 

capture variability in design, 

manufacturing practices and costs 

across the range of products that would 

be subject to new standards. The 

equipment models were selected to be 

representative of the costs to 

manufacture existing baseline models 

and to capture the costs to manufacture 

products at potential new standards 

levels. To select representative 

equipment samples for the reverse 

engineering analysis, DOE requested 

that manufacturers identify equipment 

in their product lines most appropriate 

for this purpose. Four major 

manufacturers submitted design data for 

split cooling-only equipment, and three 

of those submitted design data for the 

other classes as well. This submission 

process yielded information on 62 

models. DOE selected an additional 

nine models from catalogs of those and 

other manufacturers and also used the 

ARl Product Attribute Database and 

technical literature to describe the 

efficiency-related attributes of those 

products. Additionally, from the group 

of manufacturer submittals, three units 

were purchased for extensive 

disassembly and inspection. In their 

comment ARl does not explain how it 

derived baseline costs (estimation 

method, models included, product 

features, etc.), making an assessment or 

comparison to DOE's costs impossible. 

In contrast, the reverse engineering 

derivation method and resulting 

disaggregated baseline data are 

transparent and have been reviewed 

extensively by stakeholders. 

Several comments also focused on the 

issue of productivity gains and asserted 

that these gains would lower . 

manufacturing costs below the levels 

estimated by DOE. ACEEE, ASE, and 

OOE all refer to historic changes as 

shown by the U.S. Census Bureau's 

Current Industrial Reports series and 

state that air conditioner costs to the 

manufacturer have declined at a rate of 

1.7 percent annually over the 1994-

1998 period. They assert that DOE 

should include this rate of cost 

reductions in its analysis. They add that 

the Census figures are probably 

conservative as they ignore the fact that 

manufacturers tend to find ways to 

substantially increase productivity 

when standards take effect in order to 

reduce the impact of standards-induced 

cost increases. In making this claim, the 

comments cite DOE's cost estimates 

from the 1980's for meeting the 10 SEER 

standards that took effect in 1992. ' 

Rather than having any cost impacts, 

they assert that the 1992 standards 

resulted in essentially no change in 

product costs. (ACEEE, No. 284 at pp. 

4-8; OOE, No. 275 at p. 3; ASE, No. 282 

at pp. 3-4). 

Although NRDC recognizes that the 

reverse engineering model accounts for 

economies of scale, it states that it does 

not account for any "learning-curve" 

effect. Thus, as cumulative production 

of high efficiency units increases, the 

reverse engineering model merely scales 

up the costs rather than factoring the 

downward effect that "learning" has on 

production costs. (NRDC, No. 250 at pp. 

31-32). Goodman also alludes to the 

"learning-curve" when it states that 

when a unit meeting a new standard is 

produced in volume, it allows the 

manufacturer to run its plant more 

efficiently and pass the resulting cost 

savings on to the consumer. (Goodman, 

No. 269 at pp. 4-5). Trane, Rheem, and 

Lennox International, Inc. (Lennox)) all 

refute the contention that productivity 

gains will materialize. Trane asserts that 

earlier hard won productivity gains 
EE-RM/STD-98-440- 30

36390 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

were produced by the industry through standards. By extension, PG&E asserts of separate product classes for products

untold millions spent on R&D. These that 13 SEER standards would foster used in space contained applications.

expenditures reduced the cost to manufacturing diversity by providing In arriving at today's decision to

produce the entire product line, but did the coil manufacturers more business. adopt a 12 SEER standard, DOE relied

little to reduce the material-driven (PG&E, No. 274 at p. 3). on the Department of Justice's expert

incremental costs of efficiency Countering the above claims, ARI, opinion that a 13 SEER air conditioner

upgrades. Likewise, any cost reductions Trane, and the U.S. Small Business and heat pump standard raises

likely to occur in the next decade will Administration (U.S. SBA) asserted that competitive concerns (April 5, 2001

have significantly greater impact on the a 12 SEER standard would have less of letter), and that a 12 SEER standard

overall consumer cost structure than on an anti-competitive impact than the 13 would not adversely affect competition

the cost and price increment between SEER standard. (ARI, No. 259 at pp. 3- (October 19, 2001 letter). DOE also

successively higher efficiency levels. 4, 25; Trane, No. 262 at pp. 2-4,13-14; factored into consideration the serious

Rheem states that under a 13 SEER U.S. SBA, No. 234 at p. 1). Both ARI and concerns regarding potential antistandard only industry profits will be Trane cited the Department of Justice's competitive effects at higher trial

reduced, lessening the money available April 5, 2001 letter to DOE regarding the stadard levels presented in the TSD.

for research and design of new products anti-competitive impacts of 13 SEER DOE's analysis demonstrates that both

to meet other upcoming standards, i.e., standards in claiming that the industry High and Low Operating Cost

HCFC phase-out, new commercial impacts due to 13 SEER standards are Manufacturer groups would experience

standards, new gas and oil furnace too severe. ARI additionally stated that negative cash flows in the years leading

standards. (Trane, No. 262 at pp. 10-11; DOE's failure to obtain a determination up to the new standard under TSL3 and

Rheem, No. 248 at p. 3; Lennox, No. 272 by the Attorney General of the anti- TSL4, but only the higher operating cost

at p. 2). competitive impact of the 13 SEER group is expected to suffer a long term

DOE has not included unspecified standard prior to issuing the January 22 deine ve ca o a return

productivity improvements or final rule is an appropriate basis to on ivested capital. Since Low

"learning-curve" cost reductions in its withdraw the 13 SEER decision. The Operating Cost Manufacturers would

analysis. DOE does not believe Department of Justice (DO) submitted likely benefit from 13 SEER standards,

historical price trends for unitary air co ts DOEmost of the total financial burden due to

conditioners, or other products, can be com men ch oncluded tat the 12 the standards would need to be borne by

applied to forecast equipment costs SEER proposal would not adversely High Operating Cost Manufacturers. The

where there are no data to indicate what S R p ro p i (o No differential impact between the

factors resulted in the observed trends affect competition. (DOJ, No. 285subgroups is $238 million at 12 SEER

or that the trends will continue.pri n te d in the Appenx to this n o t ce). and rises to $429 million at 13 SEER.

Furthermore without specific co st In establishing the new standards, Due to this probable maldistribution of

information, it is imposible to tell if DOE considered several factors which industry impacts at 13 SEER, DOE was

productivity improvements would have a potential bearing on industry particularly concerned that either

apply equally to baseline costs and competition and consolidation. For each accelerated industry consolidation (i.e.

standards induced incremental costs. trial standard level DOE considered: less competitive market) or the stifling

Therefore, without specific data on the Changes in manufacturer net present of innovation could occur.

nature and magnitude of cost impacts value; cumulative regulatory burden;

DOE will not apply a productivity and changes in annual cash flow. To F. Effect on Utility or Performnce

improvement factor in this rulemaking further capture competitive effects, DOE 1 Dehumidification

or other rulemakings. consred dfferentalmacts on three The only comments regarding product sub-groups of manufacturers, since

E. Effect on Competition higher efficiency standards will affect utility pertained to the mpacts hat

Several comments argued that DOE each group of manufacturers differently. mo stringent standards may have on

was unduly concerned that 13 SEER "Low Operating Cost Manufacturers" the ability of air-conditioning

standards would lead to industry observe a low cost, commodity-product equipment to properly dehumidify.

consolidation. NRDC claimed that the strategy and achieve a higher operating Ctr cm th te a er t atetus

13 SEER standards would actually profit margin on their baseline

enhance competition relative to the equipment. DOE's analysis indicates cooling capacity nherent i larger, more

existing 10 SEER standards because that this group of manufacturers will efenut in ehumidification roblems in

economic losses imposed on higher-cost likely benefit from higher standards. humid climates. (Southern Company,

producers would force them to be more "High Operating Cost manufacturers 257atpp 34 Mercatus Center, No.

competitive. (NRDC, No. 250 at pp. 20- typically place more of an emphasis on 242 at p

22). OOE adds that industry product differentiation than cost As stated in the October 5, 2000

consolidation occurs regularly in all leadership. For this group of NOPR, ARI research has demonstrated

sectors of the economy. In the context manufacturers, higher standards reduce for hundreds of systems that latent heat

of the various factors that influence opportunities for product differentiation removal is not obviously impacted by

industry consolidation, OOE asserts that and lower profitability. Finally "Small increases in equipment efficiency at

it is unreasonable for DOE to claim that Manufacturers" fall into two groups; rated conditions (i.e., 95°F outdoor

the incremental effects of efficiency manufacturers of equipment for niche temperature).l 5 See 65 FR 59611-59612.

standards can have any measurable markets and manufactures of indoor Nonetheless, DOE recognizes the

effect on the industry. (OOE, No. 275 at coils and fancoil units. As previously humidity control problems that exist in

pp. 3-4). PG&E cites third party coil stated in Section VI (D) (3), we do not the southern region of the U.S. For the

manufacturers' response to PG&E's high expect coil manufacturers to face any excessive humidity conditions

efficiency rebate programs as support incremental burden as a result of new commonly experienced in the South,

for the view that these small coil standards. Also we stated that impacts

manufacturers can supply the efficiency on niche manufacturers have been s D. Godwin. 1998. "Latent Capacity of Unitary

combinations needed to meet new largely addressed through the creation Equipment." ASHRAE Transactions 98(2).

EE-RM-STD-98-440 COMMENT 304

EE·RM/STD·98-440 ... 30 f 

36390 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 

were produced by the industry through 

untold millions spent on RBtD. These 

expenditures reduced the cost to 

produce the entire product line, but did 

little to reduce the material-driven 

incremental costs of efficiency 

upgrades. Likewise, any cost reductions 

likely to occur in the next decade will 

have significantly greater impact on the 

overall consumer cost structure than on 

the cost and price increment between 

successively higher efficiency levels. 

Rheem states that under a 13 SEER 

standard only industry profits will be 

reduced, lessening the money available 

for research and design of new products 

to meet other upcoming standards. i.e .• 

HCFC phase-out. new commercial 

standards. new gas and oil furnace 

standards. (Trane. No. 262 at pp. 10-11; 

Rheem. No. 248 at p. 3; Lennox. No. 272 

at p. 2). 

DOE has not included unspecified 

productivity improvements or 

"learning-curve" cost reductions in its 

analysis. DOE does not believe 

historical price trends for unitary air 

conditioners. or other products. can be 

applied to forecast equipment costs 

where there are no data to indicate what 

factors resulted in the observed trends or that the trends will continue. 

Furthermore. without specific cost 

information. it is impossible to tell if 

productivity improvements would 

apply equally to baseline costs and 

standards induced incremental costs. 

Therefore. without specific data on the 

nature and magnitude of cost impacts. 

DOE will not apply a productivity 

improvement factor in this rulemaking or other rulemakings. 

E. Effect on Competition 

Several comments argued that DOE 

was unduly concerned that 13 SEER 

standards would lead to industry 

consolidation. NRDC claimed that the 

13 SEER standards would actually 

enhance competition relative to the 

existing 10 SEER standards because 

economic losses imposed on higher-cost 

producers would force them to be more 

competitive. (NRDC. No. 250 at pp. 20-

22). ODE adds that industry 

consolidation occurs regularly in all 

sectors of the economy. In the context 

of the various factors that influence 

industry consolidation. ODE asserts that 

it is unreasonable for DOE to claim that 

the incremental effects of efficiency 

standards can have any measurable 

effect on the industry. (DOE. No. 275 at 

pp. 3-4). PG&E cites third party coil 

manufacturers' response to PG&E's high 

efficiency rebate programs as support 

for the view that these small coil 

manufacturers can supply the efficiency 

combinations needed to meet new 

standards. By extension. PG&E asserts 

that 13 SEER standards would foster 

manufacturing diversity by providing 

the coil manufacturers more business. 

(PG&E. No. 274 at p. 3). 

Countering the above claims. ARl. 

Trane. and the U.S. Small Business 

Administration (U.S. SBA) asserted that 

a 12 SEER standard would have less of 

an anti-competitive impact than the 13 

SEER standard. (ARl. No. 259 at pp. 3-

4.25; Trane. No. 262 at pp. 2-4. 13-14; 

U.S. SBA. No. 234 at p. 1). Both ARl and 

Trane cited the Department ofJustice's 

April 5. 2001 letter to DOE regarding the 

anti-competitive impacts of 13 SEER 

standards in claiming that the industry 

impacts due to 13 SEER standards are 

too severe. ARl additionally stated that 

DOE's failure to obtain a determination 

by the Attorney General of the anticompetitive impact of the 13 SEER 

standard prior to issuing the January 22 

final rule is an appropriate basis to 

withdraw the 13 SEER decision. The 

Department of Justice (DOJ) submitted 

comments on DOE's July 25. 2001 

SNOPR which concluded that the 12 

SEER proposal would not adversely 

affect competition. (DOJ. No. 285 

printed in the Appendix to this notice). 

In establishing the new standards. 

DOE considered several factors which 

have a potential bearing on industry 

competition and consolidation. For each 

trial standard level DOE considered: 

Changes in manufacturer net present 

value; cumulative regulatory burden; 

and changes in annual cash flow. To 

further capture competitive effects. DOE 

considered differential impacts on three 

sub-groups of manufacturers. since 

higher efficiency standards will affect 

each group of manufacturers differently. 

"Low Operating Cost Manufacturers" 

observe a low cost. commodity-product 

strategy and achieve a higher operating 

profit margin on their baseline 

equipment. DOE's analysis indicates 

that this group of manufacturers will 

likely benefit from higher standards. 

"High Operating Cost" manufacturers 

typically place more of an emphasis on product differentiation than cost 

leadership. For this group of 

manufacturers. higher standards reduce 

opportunities for product differentiation 

and lower profitability. Finally "Small 

Manufacturers" fall into two groups; 

manufacturers of equipment for niche 

markets and manufactures of indoor 

coils and fancoil units. As previously 

stated in Section VI (D) (3). we do not 

expect coil manufacturers to face any 

incremental burden as a result of new standards. Also we stated that impacts on niche manufacturers have been 

largely addressed through the creation 

of separate product classes for products 

used in space contained applications. 

In arriving at today's deCIsion to 

adopt a 12 SEER standard. DOE relied on the Department of Justice's expert 

opinion that a 13 SEER air conditioner 

and heat pump standard raises 

competitive concerns (April 5. 2001 

letter). and that a 12 SEER standard 

would not adversely affect competition 

(October 19. 2001 letter). DOE also 

factored into consideration the serious 

concerns regarding potential anticompetitive effects at higher trial 

standard levels presented in the TSD. 

DOE's analysis demonstrates that both 

High and Low Operating Cost 

Manufacturer groups would experience 

negative cash flows in the years leading 

up to the new standard under TSL3 and 

TSL4. but only the higher operating cost 

group is expected to suffer a long term 

decline in value. cash flow. and return 

on invested capital. Since Low 

Operating Cost Manufacturers would 

likely benefit from 13 SEER standards. 

most of the total financial burden due to 

the standards would need to be borne by 

High Operating Cost Manufacturers. The 

differential impact between the 

subgroups is $238 million at 12 SEER 

and rises to $429 million at 13 SEER. 

Due to this probable mal distribution of 

industry impacts at 13 SEER. DOE was particularly concerned that either 

accelerated industry consolidation (i.e., 

less competitive market) or the stifling 

of innovation could occur. 

F. Effect on Utility or Performance 

1. Dehumidification 

The only comments regarding product 

utility pertained to the impacts that more stringent standards may have on 

the ability of air-conditioning 

equipment to properly dehumidify. 

Both Southern Company and Mercatus 

Center claim that the lower latent 

cooling capacity inherent in larger. more 

efficient single speed equipment would 

result in dehumidification problems in 

humid climates. (Southern Company. 

No. 257 at pp. 3-4; Mercatus Center. No. 

242 at p. 8). 

As stated in the October 5. 2000 

NOPR. ARl research has demonstrated 

for hundreds of systems that latent heat 

removal is not obviously impacted by 

increases in equipment efficiency at 

rated conditions (j.e .• 95°F outdoor 

temperature).15 See 65 FR 59611-59612. 

Nonetheless. DOE recognizes the 

humidity control problems that exist in 

the southern region of the U.S. For the 

excessive humidity conditions 

commonly experienced in the South. 

15 D. Godwin. 1998. "Latent Capacity of Unitary 

Equipment." ASHRAE Transactions 98(2). 
EE-RM/STD-98-440- 30C

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36391

the equipment may very likely not residential central air conditioners have Company, DOE has demonstrated in its

provide adequate dehumidification. on peak power by a factor of more than technical analysis (See TSD, Chapter 4)

Equipment efficiency should not be two. To correct this problem, ACEEE that in the efficiency range of 10 to 13

viewed as the sole source of the recommends correcting NEMS-BRS SEER, the EER, on average, increases

problem, however. Proper installation with load shape data that is more proportionally to the SEER. Thus, DOE

and maintenance practices also likely nationally representative of central air maintains that higher standards of up

play a large role in the equipment's conditioner power consumption. ACEEE through 13 SEER will yield

performance, as well as other factors, specifically recommends load shape progressively greater peak demand

such as the duct system and the data that has a Conservation Load Factor reductions. Mercatus Center's claims

building shell characteristics. All these (CLF) of 0.104. (ACEEE, No. 284 at pp. regarding increased equipment sales

factors play a role in how a system 8-11). leading to higher overall air conditioner

dehumidifies. For these reasons, DOE Both EEI and Southern Company use are not substantiated. As presented

does not believe the 12 SEER standard assert that a 13 SEER standard could earlier in the shipments forecasts

adopted today will have an appreciable actually increase peak power demand. discussion, due to higher consumer

effect on the performance of central air EEI states that for units rated at 13 SEER purchase prices, DOE's shipments

conditioners, and any problem with and higher, there is no correlation model forecasts declining rather than

dehumidification can be dealt with in a between SEER and EER. 16 So if the increasing sales due to more efficient

variety of ways other than lowering the standard was raised to 13 SEER, EEI standards. Thus, DOE concludes that

energy efficiency standard. believes it is likely that the there is a very low probability that

G. Electric System Reliability/Peak manufacturers would use technologies increased standards could actually lead

EPower S e ek to raise SEER values and lower EER to an increase in peak demand.

values, assuming it would lower their As stated in the January 22 final rule

1. Peak Power production costs. Thus, the higher SEER regarding peak demand impacts, DOE

As part of its analysis to determine values could very easily lead to lower recognized that more research was

the impacts of amended efficiency EER values, resulting in reduced energy needed to resolve the issue of whether

standards, DOE quantified how savings in warmer climates, increased NEMS-BRS accurately estimates the

increased standards affected installed peak demands associated with peak demand reductions resulting from

generation capacity, i.e., reduction in residential systems in all climates, and air conditioner efficiency standards. See

electrical power demand. In response to increased need for peaking power 66 FR 7182. To resolve this outstanding

DOE's proposal to withdraw the January plants. (EEI, No. 253 at pp. 2-3). issue as well as address those comments

22 final rule, several comments Southern Company adds that the submitted by ACEEE in response to the

expressed concern that the 12 SEER reduction in peak demand from higher July 25 SNOPR, DOE conducted a

standard would have less of an impact efficiency standards is so long-term as to comprehensive review of the end-use

on peak power demand than the 13 have no bearing on current problems. load shapes used by NEMS-BRS, not

SEER standard. (Austin Energy, No. 243 Thus, it is entirely possible that the only for the residential sector, but for

at p. 1; State of Connecticut, No. 279 at higher efficiency levels could exacerbate the commercial, industrial, and

p. 1; Attorneys General of New York and a supply glut in the regions now transportation sectors as well.' 7 DOE

Massachusetts, No. 277 at pp. 15-16; experiencing shortages ten to fifteen discovered a number of problems

New York State Energy Research and years from now. (Southern Company, associated with the specific load shapes.

Development Authority (NYSERDA), No. 257 at p. 3). Mercatus Center In the case of the residential airNo. 252 at p. 1; State of Vermont, No. believes that higher SEER standards conditioning end-use, DOE determined

268 at p. 3; PG&E, No. 274 at p. 3; State would cause more people to use their that a non-representative load shape

of Nevada, No. 271 at p. 2; National air conditioners more due to their lower was assigned to it. This nonGrid, No. 241-00 at p. 3). operating costs. The result during a heat representative load shape peaks in

Regardless of SEER level, ACEEE wave could increase overall air October and has a correspondingly high

asserted that DOE significantly conditioning usage, increasing peak CLF. As discussed in the January 22

underestimated the peak demand demand and the risk of a blackout, and final rule, the CLF was first introduced

impacts of more efficient air leaving everyone without air by researchers at Lawrence Berkeley

conditioners. Specifically, ACEEE states conditioning. (Mercatus Center, No. 242 National Laboratory to allow for the

that DOE's model to estimate peak at pp. 9-10). straightforward calculation of the peak

power impacts, NEMS-BRS, uses load First, in response to the comments demand avoided from a given amount of

shapes that underestimate the effect that submitted by EEI and Southern energy savings.'8 The CLF is defined as:

CLF Annual Site Energy Saving s (kWh)

Peak Load Savings (kW) 8760 hours

Thus, a conservation technology that Because air conditioning use occurs The lower the CLF, the greater the

saves a constant amount of power on a most often during times of peak amount of peak load savings achieved

continuous basis has a CLF of 1.0. demand, the CLF is significantly lower.

" EER, Energy Efficiency Ratio, is a steady-state when electricity use by air conditioners is at its Applications to Commercial Sector Conserva tion

measure of energy efficiency which determines peak. Programs, Lawrence Berkeley National Laboratory,

efficiency at a prescribed outdoor temperature " Alternative Sectoral Load Shapes for NEMS, Berkeley, CA, August 1990, published in the

(95°F), and is one of the test conditions in the DOE Department of Energy-Energy Information Proceedings of the 1990 ACEEE Summer Study on

test procedure used to develop the SEER. EER is Administration, Washington, D.C., August 2001. Energy Efficiency in Buildings, Authors: J. Koomey,

generally thought of as an efficiency descriptor that " Conservation Screening Curves to Compare A. Rosenfeld, and A. Gadgil.

indicates the level of performance during periods Efficiency Investments to Power Plants:

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440- 301-

Federal Register/Vol. 67, No. lOO/Thursday, May 23, 2002/Rules and Regulations 36391 

the equipment may very likely not 

provide adequate dehumidification. 

Equipment efficiency should not be 

viewed as the sole source of the 

problem. however. Proper installation 

and maintenance practices also likely 

playa large role in the equipment's 

performance. as well as other factors. 

such as the duct system and the 

building shell characteristics. All these 

factors playa role in how a system 

dehumidifies. For these reasons. DOE 

does not believe the 12 SEER standard 

adopted today will have an appreciable 

effect on the performance of central air 

conditioners. and any problem with 

dehumidification can be dealt with in a variety of ways other than lowering the 

energy efficiency standard. 

G. Electric System ReliabiJitylPeak 

Power 

1. Peak Power 

As part of its analysis to determine 

the impacts of amended efficiency 

standards. DOE quantified how 

increased standards affected installed 

generation capacity. i.e .• reduction in 

electrical power demand. In response to 

DOE's proposal to withdraw the January 

22 final rule. several comments 

expressed concern that the 12 SEER 

standard would have less of an impact 

on peak power demand than the 13 

SEER standard. (Austin Energy. No. 243 

at p. 1; State of Connecticut. No. 279 at 

p. 1; Attorneys General of New York and 

Massachusetts. No. 277 at pp. 15-16; 

New York State Energy Research and 

Development Authority (NYSERDA). 

No. 252 at p. 1; State of Vermont, No. 

268 at p. 3; PGBtE. No. 274 at p. 3; State 

of Nevada. No. 271 at p. 2; National 

Grid, No. 241-00 at p. 3). 

Regardless of SEER level. ACEEE 

asserted that DOE significantly 

underestimated the peak demand 

impacts of more efficient air 

conditioners. Specifically. ACEEE states 

that DOE's model to estimate peak 

power impacts. NEMS-BRS. uses load 

shapes that underestimate the effect that 

Thus, a conservation technology that 

saves a constant amount of power on a continuous basis has a CLF of 1.0. 

.. EER. Energy Efficiency Retio, is a steady-state 

measure of energy efficiency which determines 

efficiency at a prescribed outdoor temperature 

195·F), and is one of the test conditions in the DOE 

test procedure used to develop the SEER. EER is 

generally thought of as an efficiency descriptor that 

indicates the level of performance during periods 

residential central air conditioners have 

on peak power by a factor of more than 

two. To correct this problem. ACEEE 

recommends correcting NEMS-BRS 

with load shape data that is more 

nationally representative of central air 

conditioner power consumption. ACEEE 

specifically recommends load shape 

data that has a Conservation Load Factor 

(CLF) of 0.104. (ACEEE. No. 284 at pp. 

8-11). 

Both EEl and Southern Company 

assert that a 13 SEER standard could 

actualJy increase peak power demand. 

EEl states that for units rated at 13 SEER 

and higher. there is no correlation 

between SEER and EER.1fi So if the 

standard was raised to 13 SEER. EEl 

believes it is likely that the 

manufacturers would use technologies 

to raise SEER values and lower EER 

values, assuming it would lower their 

production costs. Thus. the higher SEER 

values could very easily lead to lower 

EER values. resulting in reduced energy 

savings in warmer climates. increased 

peak demands associated with 

residential systems in all climates. and 

increased need for peaking power 

plants. (EEl, No. 253 at pp. 2-3). 

Southern Company adds that the 

reduction in peak demand from higher 

effiCiency standards is so long-term as to 

have no bearing on current problems. 

Thus. it is entirely possible that the 

higher efficiency levels could exacerbate 

a supply glut in the regions now 

experiencing shortages ten to fifteen 

years from now. (Southern Company. 

No. 257 at p. 3). Mercatus Center 

believes that higher SEER standards 

would cause more people to use their 

air conditioners more due to their lower 

operating costs. The result during a heat 

wave could increase overall air 

conditioning usage. increasing peak 

demand and the risk of a blackout. and 

leaving everyone without air 

conditioning. (Mercatus Center. No. 242 

at pp. 9-10). 

First. in response to the comments 

submitted by EEl and Southern 

eLF = Annual Site Energy Savings (kWh) 

Peak Load Savings {kW)·8760 hours 

Because air conditioning use occurs 

most often during times of peak 

demand. the CLF is significantly lower. 

when electricity use by air conditioners is at its 

peak. 

17 AltemaUve Sectorol Load Shapes for NEMS. 

Department of Energy-Energy Information 

Administration, Washington, D.C .. August 2001. 

11 ConselVaUon Screening Curves to Compare 

Efficiency Investments to Power Plants: 

Company, DOE has demonstrated in its 

technical analysis (See TSD. Chapter 4) 

that in the efficiency range of 10 to 13 

SEER. the EER. on average. increases 

proportionally to the SEER. Thus. DOE 

maintains that higher standards of up 

through 13 SEER will yield 

progressively greater peak demand 

reductions. Mercatus Center's claims 

regarding increased equipment sales 

leading to higher overall air conditioner use are not substantiated. As presented 

earlier in the shipments forecasts 

discussion. due to higher consumer purchase prices. DOE's shipments 

model forecasts declining rather than 

increasing sales due to more efficient 

standards. Thus. DOE concludes that 

there is a very low probability that 

increased standards could actually lead 

to an increase in peak demand. 

As stated in the January 22 final rule 

regarding peak demand impacts. DOE 

recognized that more research was needed to resolve the issue of whether 

NEMS-BRS accurately estimates the 

peak demand reductions resulting from 

air conditioner efficiency standards. See 

66 FR 7182. To resolve this outstanding 

issue as well as address those comments 

submitted by ACEEE in response to the 

July 25 SNOPR. DOE conducted a comprehensive review of the end-use 

load shapes used by NEMS-BRS. not 

only for the residential sector. but for 

the commercial. industrial. and 

transportation sectors as well. 17 DOE 

discovered a number of problems 

associated with the specific load shapes. 

In the case of the residential airconditioning end-use. DOE determined 

that a non-representative load shape 

was assigned to it. This nonrepresentative load shape peaks in 

October and has a correspondingly high 

CLF. As discussed in the January 22 

final rule. the CLF was first introduced 

by researchers at Lawrence Berkeley 

National Laboratory to allow for the 

straightforward calculation of the peak 

demand avoided from a given amount of 

energy savings.18 The CLF is defined as: 

The lower the CLF. the greater the 

amount of peak load savings achieved 

Applications to Commercial Sector ConselVo tion 

Programs. Lawrence Berkeley National Laboratory. 

Berkeley. CA, August 1990, published in the 

Proceedings of the 1990 ACEEE Summer Stud y on 

Energy Efficiency in Buildings. Authors: J. Koomey. 

A. Rosenfeld. and A. Gadgil. 
EE-RM/STD-98-440- 30

36392 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

for a given amount of annual energy 2. Reliability the primary effect of energy efficiency

savings. See 66 FR 7181. As stated in the July 25 SNOPR, DOE standards is likely beyond the long-term

As a result of discovering several has considered as a benefit the potential planning horizon of most electric

problems with the load shapes within of the proposed standards to improve systems. This means that long term

NEMS-BRS, an alternative set of the reliability of the electric generation electric system reliability is determined

sectoral end-use load shapes were and distribution system by reducing the prmarily by how well system planners

assigned to the 2002 version of NEMS- need for installed generation capacity. (generators, utilities, regulators)

BRS that were distinctly different than See July 25 SNOPR, 66 FR 38841. anticipate future loads, not by how large

the load shapes used in prior versions Several comments, while not those loads will be. In other words,

of the model (including the 2000 and disputing DOE's conclusion that air planners in most areas of the country

2001 versions). For example, in the case conditioner standards would improve generally do not attempt to provide

of the residential air-conditioning end- electric system reliability, argued that enough generating capacity to satisfy

use, the arsi nsistsof the potential for improving reliability peak loads as the marginal cost for

use, the alternte version consistos on tito 2 N 3ative ofis generally

thirteen regional load shapes based on would be reduced by going forward satisfying peak loads is generally Athenregions e b d he awith d the proposed standards (12 SEER) cheaper usin means other than the

regions defined by the North American instead of those standards issued in the construction of large generating

Electric Reliability Council (NERC) as January 22 final rule (13 SEER). (ACEEE,facilities (e.g., the use of relatively small

compared to the single national lad No 284 at p. 2; NRDC, No. 250 at p. 23; "peaker" plants or the purchase of

shape used in prior versions. Depending NEEP, No. 273 at p. 1; ASE, No. 282 at supply from outside the planning

on the region of the country, the thirteen p. 2; CEC, No. 263 at p. 1; National region). DOE knows of no analysis

air-conditioning load shapes have CLFs Association of Regulatory Utility which has found a correlation between

ranging from 0.063 to 0.183 and Commissioners (NARUC), No. 260 at p. system load factor and system reliability

generally peak in either July or August. 2). over the long term. Nor is DOE aware of

Although the alternative load shapes Southern Company, which states that any analysis that found a correlation

specific to the residential air- raising the standard from 12 to 13 SEER between the long term rate of growth of

conditioning end-use are more will have minimal effect on peak electicity demand and system

representative (e.g., the loads peak demand growth, believes this efficiency reliability.

during the summer months), switching increase will have even less effect on Higher efficiency standards for central

to the entire set of alternative sectoral reliability, because there is not a direct air conditioners and heat pumps are

end-use load shapes results in smaller relationship between peak demand expected to reduce significantly the

peak-to-average system loads. As a growth and reduced electric system peak loads of electric systems in the

consequence, the overall built-up reliability. The Southern Company future, thus enabling a reduction in the

system load shapes using the alternative claims that the reduction in peak number of new power plants and

sectoral end-use load shapes have less demand from higher efficiency transmission lines required to meet

pronounced peaks than those that are standards is so long-term as to have no future demand. Electric system planners

used in prior versions of NEMS-BRS. bearing on current problems. It is will take these efficiency improvements

Because the built-up system loads entirely possible that the higher and other factors affecting future

within the 2002 version of NEMS-BRS efficiency levels could exacerbate a electricity demand into account when

have less pronounced peaks, the impact supply glut in the regions now estimating how many new plants and

of reducing the energy use on a experiencing shortages ten to fifteen transmission lines will be required to

relatively peaky end-use like residential years from now. (Southern Company, meet future demand, while maintaining

air-conditioning (such as through No. 257 at p. 3). For different reasons, or improving system reliability. Long

increased efficiency standards) will Mercatus Center also argues that higher term system reliability will be

have less of an affect on overall system efficiency standards would not improve determined by how accurately system

capacity. and could possibly reduce electric planners anticipate electricity demand

New NEMS-BRS standard case rus system reliability. As stated in their and whether they take steps to ensure

New NEMS-BRS standard case runsin peak demand the addition of sufficient electricity were conducted with the entire set of arguments pertaining to peak demand the addition of sufficient electricity

leretiv co sectorale w end tirset ofad impacts, they believe higher standards generating, transmission and

alternative sectoratl end-use ai shap, could lead to increased use of air- distribution capacity to meet this

including the updated residential air- conditioning products due their lower expected demand, while maintaining

conditioning load shapes, to determine operating costs. During periods of peak adequate reserve margins. For example,

their impact on system capacity. These demand this could lead to an overall EIA's Annual Energy Outlook 2001

new runs were conducted with the 2000 increase in air-conditioning. The forecast that the cumulative

version of NEMS-BRS by replacing the resulting increase in peak demand requirements for additional electricity

existing set of sectoral load shapes with heightens the risk of blackouts. generating capacity by 2020 might range

the alternative versions. As expected, (Mercatus Center, No. 242 at pp. 9-10). from roughly 350 gigawatts, assuming a

the installed generation capacity DOE agrees with the assertion of the low rate of economic growth, to nearly

reductions based on the new NEMS- Southern Company that the primary 500 gigawatts, assuming a

BRS runs are lower than those produced effects of the proposed efficiency comparatively high rate of economic

for the January 22 final rule. In the case standards are so long term (more than growth. This compares to a difference of

of today's final rule, the installed 10 years in the future) that they are very approximately 4 gigawatts between the

generation capacity reduction is now unlikely to have any significant effect estimated effects on capacity

estimated to be 8.7 GW as opposed to on electric system reliability. While requirements of a SEER 12 standard and

the 10.6 GW provided in the January 22 DOE still believes that near term those of a SEER 13 standard. The range

final rule. A complete set of updated improvements in energy efficiency can of estimated requirements for additional

installed generation capacity reduction help improve the reliability of systems electricity generating capacity that

impacts can be found in Appendix M of that now have inadequate generating or result from varying assumptions about

the TSD. transmission capacity (e.g., California), the rate of change in end-use technology

EE-RM-STD-98-440 COMMENT 304

36392 

EE-RM/STD-98-44G- 30q 

Federal Register/Vol. 67, No. lOO/Thursday, May 23, 2002/Rules and Regulations 

for a given amount of annual energy 

savings. See 66 FR 7181. 

As a result of discovering several 

problems with the load shapes within 

NEMS-BRS. an alternative set of 

sectoral end-use load shapes were 

assigned to the 2002 version of NEMSBRS that were distinctly different than 

the load shapes used in prior versions 

of the model (including the 2000 and 

2001 versions). For example. in the case 

of the residential air-conditioning enduse, the alternative version consists of 

thirteen regional load shapes based on 

regions defined by the North American 

Electric Reliability Council (NERC) as 

compared to the single national load 

shape used in prior versions. Depending 

on the region of the country. the thirteen 

air-conditioning load shapes have CLFs 

ranging from 0.063 to 0.183 and 

generally peak in either July or August. 

Although the alternative load shapes 

specific to the residential airconditioning end-use are more 

representative (e.g., the loads peak 

during the summer months), switching 

to the entire set of alternative sectoral 

end-use load shapes results in smaller 

peak-to-average system loads. As a 

consequence. the overall built-up 

system load shapes using the alternative 

sectoral end-use load shapes have less 

pronounced peaks than those that are 

used in prior versions of NEMS-BRS. 

Because the built-up system loads 

within the 2002 version ofNEMS-BRS 

have less pronounced peaks, the impact 

of reducing the energy use on a relatively peaky end-use like residential 

air-conditioning (such as through 

increased efficiency standards) will 

have less of an affect on overall system 

capacity. 

New NEMS-BRS standard case runs 

were conducted with the entire set of 

alternative sectoral end-use load shapes, 

including the updated residential airconditioning load shapes, to determine 

their impact on system capacity. These 

new runs were conducted with the 2000 

version of NEMS-BRS by replacing the 

existing set of sectoral load shapes with 

the alternative versions. As expected. 

the installed generation capacity 

reductions based on the new NEMSBRS runs are lower than those produced 

for the January 22 final rule. In the case of today's final rule, the installed 

generation capacity reduction is now 

estimated to be 8.7 GW as opposed to 

the 10.6 GW provided in the January 22 

final rule. A complete set of updated 

installed generation capacity reduction 

impacts can be found in Appendix M of 

the TSD. 

2. Reliability 

As stated in the July 25 SNOPR, DOE 

has considered as a benefit the potential 

of the proposed standards to improve 

the reliability of the electric generation 

and distribution system by reducing the 

need for installed generation capacity. 

See July 25 SNOPR, 66 FR 38841. 

Several comments, while not 

disputing DOE's conclusion that air 

conditioner standards would improve 

electric system reliability, argued that 

the potential for improving reliability 

would be reduced by going forward 

with the proposed standards (12 SEER) 

instead of those standards issued in the 

January 22 fmal rule (13 SEER). (ACEEE, 

No. 284 at p. 2; NRDC, No. 250 at p. 23; 

NEEP, No. 273 at p. 1; ASE. No. 282 at 

p. 2; CEC, No. 263 at p. 1; National 

Association of Regulatory Utility 

Commissioners (NARUC), No. 260 at p. 

2). 

Southern Company, which states that 

raising the standard from 12 to 13 SEER 

will have minimal effect on peak 

demand growth, believes this efficiency 

increase will have even less effect on 

reliability, because there is not a direct 

relationship between peak demand 

growth and reduced electric system 

reliability. The Southern Company 

claims that the reduction in peak 

demand from higher efficiency 

standards is so long-term as to have no 

bearing on current problems. It is 

entirely possible that the higher 

efficiency levels could exacerbate a 

supply glut in the regions now experiencing shortages ten to fifteen 

years from now. (Southern Company, 

No. 257 at p. 3). For different reasons, 

Mercatus Center also argues that higher 

efficiency standards would not improve 

and could possibly reduce electric 

system reliability. As stated in their 

arguments pertaining to peak demand 

impacts, they believe higher standards 

could lead to increased use of airconditioning products due their lower 

operating costs. During periods of peak 

demand this could lead to an overall 

increase in air-conditioning. The 

resulting increase in peak demand 

heightens the risk of blackouts. 

(Mercatus Center, No. 242 at pp. 9-10). 

DOE agrees with the assertion of the 

Southern Company that the primary 

effects of the proposed efficiency 

standards are so long term (more than 

10 years in the future) that they are very 

unlikely to have any significant effect on electric system reliability. While 

DOE still believes that near term 

improvements in energy efficiency can 

help improve the reliability of systems 

that now have inadequate generating or transmission capacity (e.g., California), 

the primary effect of energy efficiency 

standards is likely beyond the long-term 

planning horizon of most electric 

systems. This means that long term 

electric system reliability is determined 

primarily by how well system planners 

(generators, utilities, regulators) 

anticipate future loads, not by how large 

those loads will be. In other words, 

planners in most areas of the country 

generally do not attempt to provide 

enough generating capacity to satisfy 

peak loads as the marginal cost for 

satisfying peak loads is generally 

cheaper using means other than the 

construction of large generating 

facilities (e.g., the use of relatively small 

"peaker" plants or the purchase of 

supply from outside the planning 

region). DOE knows of no analysis 

which has found a correlation between 

system load factor and system reliability 

over the long term. Nor is DOE aware of 

any analysis that found a correlation 

between the long term rate of growth of 

electricity demand and system 

reliability . 

Higher efficiency standards for central 

air conditioners and heat pumps are 

expected to reduce significantly the 

peak loads of electric systems in the 

future, thus enabling a reduction in the 

number of new power plants and 

transmission lines required to meet 

future demand. Electric system planners 

will take these efficiency improvements 

and other factors affecting future 

electricity demand into account when 

estimating how many new plants and 

transmission lines will be required to 

meet future demand, while maintaining 

or improving system reliability. Long 

term system reliability will be 

determined by how accurately system 

planners antiCipate electricity demand 

and whether they take steps to ensure the addition of sufficient electricity 

generating, transmission and 

distribution capacity to meet this 

expected demand, while maintaining 

adequate reserve margins. For example. 

EIA's Annual Energy Outlook 2001 

forecast that the cumulative 

requirements for additional electricity 

generating capacity by 2020 might range 

from roughly 350 gigawatts, assuming a 

low rate of economic growth, to nearly 

500 gigawatts, assuming a 

comparatively high rate of economic 

growth. This compares to a difference of 

approximately 4 gigawatts between the 

estimated effects on capacity 

requirements of a SEER 12 standard and 

those of a SEER 13 standard. The range 

of estimated requirements for additional 

electricity generating capacity that 

result from varying assumptions about 

the rate of change in end-use technology 
EE-RM/STD-98-440- 30q

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36393

(in all sectors) and the rate of economic today's 10 SEER baseline equipment. requirement. York claims that imposing

growth is even greater. Furthermore, because variable speed a TXV requirement in this rule would

0H. Other Issues and modulating equipment mitigate the circumvent the test procedure. Also, it

H. ~Other Issues cyclic losses that are due to widespread asserts that key data for evaluating the

1. Minimum EER Requirement oversizing, the aggregated peak demand impacts of TXVs on system performance

Several comments were in support of of a group of modulating air have not been thoroughly reviewed by

a minimum EER requirement to ensure conditioners with lower EERs will likely all interested parties. (York, No. 270 at

more efficient operation at high outdoor be lower than that of a similar group of p. 4).

temperatures during periods when onon-modulating air conditioners with As stated in the January 22 final rule,

eletricity use by air conditioners is at higher EERs at the same SEER level, a performance-based approach is also

tricity a use co o at Also, utilities have the opportunity with our preference and is certainly in the

its peak. ACEEE, No. 284 at p. 3; Austin modulating equipment to offer spirit of EPCA. See 66 FR 7183-7184.

Energy, No. 243 at p. 1; PG&E, No. 274 customers the option to allow the utility As such, the SEER test procedure, not a at p. 1). NARUC passed a resolution into low- TXV requirement, appears to be the July, 2000, urging DOE to raise the to "lock" the equipment into low- TXV requirement, appears to be the

Ju urging 2000, DE to raise thcapacity operation in return for a lower most appropriate vehicle for assuring

standard by 30 percent (i.e., to 13 SEER) standard 30 percent by (e.,electricity price. that an equipment's efficiency rating is

with a minimum peak efficiency Although DOE is interested in based on its performance characteristics.

performance requirement. (NARUC, No. reducing peak demand, the primary In fact, TXVs already receive credit in

261 at p. 2). NEEP also supports a purpose of appliance efficiency the test procedure because of their

statndard of at least 13 SEER with a standards is to save energy. An EER superior cyclic performance. DOE is not

conr sponding minimum EER of 11.6. standard could be counterproductive by eager to circumvent the test procedure,

(NEi'P, No. ?73 at p. 2). NRDC believes discouraging variable speed and particularly when the key data either are

that DOE cannot set a standard at the modulation, which can save substantial not available or have not been

hig l.st level that is technologically amounts of energy over the cooling thoroughly reviewed by all interested

feasible and economically justified if it season while providing consumers with parties. That said, DOE favors a SEER

does n t include in that standard a additional benefits not found in single test procedure that fairly evaluates

minin im EER requirement. NRDC adds speed and non-modulating equipment. equipment performance under

that tUi; recommendation does not Finally, although DOE believes that conditions that represent those

r. ean tti at EER would drop as SEER EPCA permits adoption of an EER encountered in the field. DOE prefers to

increases; it simply reflects NRDC's standard, for the foregoing reasons, we encourage correct charging or proper

co.lcern that EER might not rise as do not believe that the Act requires or airflow but recognizes that practical

quickly without a separate regulation suggests that we establish such a barriers exist. Although no immediate

than it would with one. (NRDC, No. 250 standard under the circumstances here. action will be taken to address field

at p. 32). Given the adopted standard levels, a equipment performance in the test

York and Southern Company are both national EER standard is both procedure currently under revision,

opposed to a minimum EER unnecessary and undesirable. Most attempts may be made in future test

requirement. York asserts that an EER benefits accruing from an EER standard procedure revisions to evaluate whether

standard could be counter-productive will likely accrue from the SEER the SEER test procedure can and should

by discouraging variable speed and standards alone, without the associated be amended to better reflect equipment

modulating equipment, which could burdens on manufacturers and the performance under improper charge or

save consumers substantial amounts of disincentives to apply energy-saving airflow.

money over the cooling season. (York, modulating technologies. Therefore, we In sum, this rulemaking does not

No. 270 at p. 4). Southern Company have not adopted an EER standard in adopt a TXV requirement. Any

believes that, regardless of cost- this rule. alterations in the SEER test procedure

effectiveness, DOE does not possess further to encourage the use of TXVs

regulatory authority to specify 2. TXV Requirement may be undertaken in a separate

performance measures necessary to ACEEE and PG&E were both in rulemaking process after proposed

insure cost savings to consumers (SEER) support of a prescriptive requirement revisions to the test procedure have

and peak demand benefits to electricity for adaptive expansion devices such as been finalized. We also encourage

suppliers (EER). (Southern Company, thermostatic expansion valves (TXV). parties interested in encouraging the

No. 257 at p. 4). (ACEEE, No. 284 at p. 3; PG&E, No. 274 broader application of TXVs to pursue

As stated in the January 22 final rule, at p. 1). NEEP was more expansive on other avenues. These include voluntary

DOE is still convinced that the stringent the topic by stating that the evidence in programs like Energy Star, tax

physical relationship between EER and the record supports a TXV requirement. incentives, and other State and local

SEER in equipment rated through the NEEP claims that TXVs provide initiatives, which can all be tied to the

adopted standard of 12 SEER, which is additional efficiency benefits, over and presence of a device like a TXV. States

comprised exclusively of non- above the benefits captured in the SEER also have the opportunity to apply to us

modulating equipment, will remain rating procedure. They assert that for an exemption from preemption that

intact for the foreseeable future. Thus, central air conditioners with TXVs would allow them to implement their

there is no strong need for a minimum suffer lower efficiency degradation own requirements based on their own

EER requirement in addition to a when a unit is improperly installed. The unique circumstances.

minimum SEER standard. See January result is that TXVs can provide 12Exemption From DOE Standards

22 final rule, 66 FR 7183. percent energy savings over and above

With regard to the use of variable the energy savings associated with The Council of State Governments,

speed or modulating technologies, even increasing SEERs. (NEEP, No. 273 at pp. Eastern Regional Conference (ERC)

if these technologies eventually 2,4). states that if DOE fails to implement a

predominate, and thereby reduce EERs York agrees with DOE's decision in 13 SEER standard, then ERC member

in typical equipment, they would still the both the January 22 final rule and States will seek a waiver from the

reduce peak demand compared to the July 25 SNOPR not to impose a TXV Federal standard and implement the

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440- ~oq 

Federal Register/Vol. 67, No. IOO/Thursday, May 23, 2002/Rules and Regulations 36393 

(in all sectors) and the rate of economic 

growth is even greater. 

H. Other Issues 

1. Minimum EER Requirement 

Several comments were in support of 

a minimum EER requirement to ensure 

more efficient operation at high outdoor 

temperatures during periods when 

electricity use by air conditioners is at 

its peak. (ACEEE, No. 284 at p. 3; Austin 

Energy. No. 243 at p. 1; PG&E. No. 274 

at p. 1). NARUC passed a resolution in 

July. 2000. urging DOE to raise the 

stancb.rd by 30 percent (i.e .• to 13 SEER) 

with a minimum peak efficiency 

performance requirement. (NARUC. No. 

261 at p. 2). NEEP also supports a 

sta.> \dard of at least 13 SEER with a 

L~n gsponding minimum EER of 11.6. 

(N:Sl~P. No. ?73 at p. 2). NRDC believes 

that jJOE cannot set a standard at the 

hig.1t:.,t level that is technologically 

feas.\b1e and economically justified if it 

does n'Jt include in that standard a 

minLn \m EER requirement. NRDC adds 

t1at L1' ; recommendation does not 

rr.ean ttat EER would drop as SEER 

in>~reases: it simply reflects NRDC's 

COI:cern that EER might not rise as 

quickly without a separate regulation 

than it would with one. (NRDC, No. 250 

at p. 32). 

York and Southern Company are both 

opposed to a minimum EER 

requirement. York asserts that an EER 

standard could be counter-productive 

by discouraging variable speed and 

modulating equipment. which could 

save consumers substantial amounts of 

money over the cooling season. (York. 

No. 270 at p. 4). Southern Company 

believes that. regardless of costeffectiveness. DOE does not possess 

regulatory authority to specify 

performance measures necessary to 

insure cost savings to consumers (SEER) 

and peak demand benefits to electriCity 

suppliers (EER). (Southern Company. 

No. 257 at p. 4). 

As stated in the January 22 final rule. 

DOE is still convinced that the stringent 

physical relationship between EER and 

SEER in equipment rated through the 

adopted standard of 12 SEER. which is 

comprised exclusively of nonmodulating equipment, will remain 

intact for the foreseeable future. Thus. 

there is no strong need for a minimum 

EER requirement in addition to a minimum SEER standard. See January 

22 final rule. 66 FR 7183. 

With regard to the use of variable 

speed or modulating technologies. even 

if these technologies eventually 

predominate. and thereby reduce EERs 

in typical equipment. they would still 

reduce peak demand compared to 

today's 10 SEER baseline equipment. 

Furthermore, because variable speed 

and modulating equipment mitigate the 

cyclic losses that are due to widespread 

oversizing. the aggregated peak demand 

of a group of modulating air 

conditioners with lower EERs will likely 

be lower than that of a similar group of 

non-modulating air conditioners with 

higher EERs at the same SEER level. 

Also. utilities have the opportunity with 

modulating equipment to offer 

customers the option to allow the utility 

to "lock" the equipment into lowcapacity operation in return for a lower 

electricity price. 

Although DOE is interested in 

reducing peak demand. the primary 

purpose of appliance efficiency 

standards is to save energy. An EER 

standard could be counterproductive by 

discouraging variable speed and 

modulation. which can save substantial 

amounts of energy over the cooling 

season while providing consumers with 

additional benefits not found in single 

speed and non-modulating equipment. 

Finally, although DOE believes that 

EPCA permits adoption of an EER 

standard. for the foregoing reasons. we 

do not believe that the Act requires or 

suggests that we establish such a 

standard under the circumstances here. 

Given the adopted standard levels, a 

national EER standard is both 

unnecessary and undesirable. Most 

benefits accruing from an EER standard 

will likely accrue from the SEER 

standards alone. without the associated 

burdens on manufacturers and the 

disincentives to apply energy-saving 

modulating technologies. Therefore. we 

have not adopted an EER standard in 

this rule. 

2. TXV Requirement 

ACEEE and PG&E were both in 

support of a prescriptive requirement 

for adaptive expansion devices such as 

thermostatic expansion valves (TXV). 

(ACEEE, No. 284 at p. 3; PG&E, No. 274 

at p. 1). NEEP was more expansive on 

the topic by stating that the evidence in 

the record supports a TXV requirement. 

NEEP claims that TXVs provide 

additional efficiency benefits. over and 

above the benefits captured in the SEER 

rating procedure. They assert that 

central air conditioners with TXVs 

suffer lower efficiency degradation 

when a unit is improperly installed. The 

result is that TXVs can provide 12 

percent energy savings over and above 

the energy savings associated with 

increasing SEERs. (NEEP, No.2 73 at pp. 

2.4). 

York agrees with DOE's decision in 

the both the January 22 final rule and 

the July 25 SNOPR not to impose a TXV 

requirement. York claims that imposing 

a TXV requirement in this rule would 

circumvent the test procedure. Also. it 

asserts that key data for evaluating the 

impacts of TXVs on system performance 

have not been thoroughly reviewed by 

all interested parties. (York. No. 270 at 

p.4). 

As stated in the January 22 final rule. 

a performance-based approach is also 

our preference and is certainly in the 

spirit of EPCA. See 66 FR 7183-7184. 

As such. the SEER test procedure. not a 

TXV requirement, appears to be the 

most appropriate vehicle for assuring 

that an equipment's efficiency rating is 

based on its performance characteristics. 

In fact. TXVs already receive credit in 

the test procedure because of their 

superior cyclic performance. DOE is not 

eager to circumvent the test procedure. 

particularly when the key data either are 

not available or have not been 

thoroughly reviewed by all interested 

parties. That said. DOE favors a SEER 

test procedure that fairly evaluates 

equipment performance under 

conditions that represent those 

encountered in the field. DOE prefers to 

encourage correct charging or proper 

airflow but recognizes that practical 

barriers exist. Although no immediate 

action will be taken to address field 

equipment performance in the test 

procedure currently under revision. 

attempts may be made in future test 

procedure revisions to evaluate whether 

the SEER test procedure can and should 

be amended to better reflect equipment 

performance under improper charge or 

airflow. 

In sum. this rulemaking does not 

adopt a TXV requirement. Any 

alterations in the SEER test procedure 

further to encourage the use of TXV s 

may be undertaken in a separate 

rulemaking process after proposed 

revisions to the test procedure have 

been finalized. We also encourage 

parties interested in encouraging the 

broader application of TXVs to pursue 

other avenues. These include voluntary 

programs like Energy Star. tax 

incentives. and other State and local 

initiatives, which can all be tied to the 

presence of a device like a TXV. States 

also have the opportunity to apply to us 

for an exemption from preemption that 

would allow them to implement their 

own requirements based on their own 

unique circumstances. 

3. State Exemption From DOE Standards 

The Council of State Governments. 

Eastern Regional Conference (ERC) 

states that if DOE fails to implement a 

13 SEER standard. then ERC member 

States will seek a waiver from the 

Federal standard and implement the 
EE-RM/STD-98-440-:3D

36394 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

higher standard at the State level, as the practicable. (TNRCC, No. 286 at p. 2). At date of publication and the dates on

States of California and Oregon are the public hearing on the July 25 which the rule applies in the statutory

currently doing. ERC goes on to quote SNOPR, representatives of the California schedule is not needed for central air

42 U.S.C. 6297(d) "Waiver of Federal Energy Commission, PG&E, and conditioner and central air conditioning

Preemption" where it states that "Any Goodman also urged DOE to establish heat pump manufacturers to come into

state * * * which provides for any an earlier effective date if a 12 SEER compliance with a 12 SEER standard.

energy conservation standard for any standard was adopted. (Hearing Moreover, if, as a result of unforeseen

type of covered product for which there Transcript, at pp. 142-144 and 164- circumstances, a particular

is a Federal energy conservation 165). In initial written comments, ARI manufacturer can show hardship,

standard * * * may file a petition with stated a willingness to consent to the inequity, or unfair distributions of

the Secretary (of Energy) requesting that proposed 5-years-from-date-of- burdens, the standard would be subject

such State regulation become effective publication effective date for the to case-by-case exception pursuant to

with respect to such covered product." proposed 12 SEER standard. (ARI, No. the authority of the DOE Office of

(ERC, No. 241-JJ at p. 1). 259 at p. 36). In supplemental Hearing and Appeals under section 504

DOE will promptly act upon any comments submitted after the close of of the DOE Organization Act (42 U.S.C.

petition for waiver that may be the comment period, ARI responded to 7194), as implemented at subpart B of

submitted by a State pursuant to section the comments that requested an earlier 10 CFR part 1003. On the basis of the

327(d) of EPJA (4? U.S.C. 6297(d)). effective date by stating that ARI would foregoing, DOE has decided to fix

Section 327 d) pro 'ides that DOE must accept a compliance date of January 23, January 23, 2006, as the date on which

prescribe a lule graiiting a waiver from 2006, the same effective date as the amended standards set forth in

Federal pree r.ption if the State provided in the January 22 final rule today's final rule apply to the

establishes b i a preponderance of the (ARI, No. 289). ARI stated that any manufacture of central air conditioners

evidence tha ia State regulation is agreement on its part to an earlier and central air conditioning heat

needed to me it "unisual and effective date should not be deemed as pumps.

compelling State or local energy or a precedent by DOE or concession by 5. Environmental Impacts

water interests,' as the' phrase is ARI with respect to future rulemaking S c s

defined by the statute ( :2 U.S.C. proceedings. Several comments stated that there

6297(d)(1)(B)). Section 327(d) further proce . would be greater environmental benefits

provides that DOE may iot grant a Although section 325(d) of EPCA does under a 13 SEER standard. (Goodman,

waiver if interested persons establish by n ot pecifically state that initial No. 269 at p. 2; Austin Energy, No. 243

a preponderance of !he evidence that amended standards become applicable at p. 1; State of Connecticut, No. 279 at

the State regulation would significantly to the manufacture of covered products p. 2; State of Maine, No. 254 at pp. 1-

burden manufacturing, marketing, after a certain number of years elapse 2). The Attorneys General from the

distribution, sale, or servicing of the following publication of a notice of final States of New York and Massachusetts

covered product on a national basis (42 rulemaking, it provides a schedule of asserted that DOE's assessment of

U.S.C. 6297(d)(3)). Finally, section specific dates for the promulgation of a environmental impact used the wrong

327(d) establishes the timetable and final rule and of specific dates on which "no action" scenario; in their view, the

procedure that must be followed for an initial amended SEER and an initial correct "no action" scenario or baseline

acting upon petitions for waiver from amended HSPF established by a final for measuring impacts is the SEER 13

Federal preemption. rule would apply to the manufacture of standard in the January 22 rule

new central air conditioners and new (Attorneys General of New York and

4. Effective Date central air conditioning heat pumps. In Massachusetts, No. 277 at p. 11). In

DOE received written and oral the past, in circumstances where DOE addition to the carbon and NOx

comments with regard to DOE's was unable to publish a final rule by a emissions, the Attorneys General state

proposed effective date (i.e., the date deadline date established by a statute that coal-fired power plants are

when the covered products must with scheduled compliance dates, DOE dominant sources of mercury and

comply with the new standards for the has had a practice of adjusting the particulate pollution nationwide and

proposed amended standards contained statutorily scheduled date such a rule that by ignoring these impacts of its

in the July 25 SNOPR). In written becomes enforceable to allow for the SNOPR, DOE violated the National

comments, NRDC notes that the same amount of lead time as provided Environmental Policy Act (NEPA).

proposed effective date in the July 25 in the original statutory schedule. (Attorneys General of New York and

SNOPR is approximately six months However, the application of this Massachusetts, No. 277 at pp. 14-15).

later than that in the January 22 final practice in any particular rulemaking is DOE disagrees with the comment that

rule, and claims that any delay in the subject to public comment and to DOE failed to comply with NEPA in

effective date of new standards would exceptions in special circumstances. proposing 12 SEER standards in the July

reduce their benefits. NRDC adds that See, e.g., 61 FR 10622,10625 (March 14, 25 SNOPR. As previously discussed,

section 325(d) of EPCA (42 U.S.C. 1996) (final rule establishing the DOE does not believe the standards in

6295(d)) does not require DOE to Alternative Fuel Vehicle Acquisition the January 22 final rule constitute the

provide a five-year lead time for Program with a compliance schedule baseline for assessing the impact of

compliance by manufacturers after that varied from the statutory schedule today's final rule because those

publication of a final rule. (NRDC, No. established by the Energy Policy Act of standards never became effective. The

250 at p. 34). TNRCC recommends that 1992 and that was subject to case-by- correct baseline, and the one used for

rather than making the proposed case exceptions). In this rulemaking, all the "no action" alternative in the EA,

standards effective in 2006, DOE should interested persons who have an interest are the currently effective NAECA

accelerate the effective date of the in the date that the final rule becomes standards.

standards from the year 2006 to 2004, enforceable-including representatives DOE's environmental assessment (EA)

thereby providing improved energy of all of the manufacturers who would examined the environmental impacts of

efficiency and resultant air quality have to comply with that rule-agree all trial standard levels being

benefits as soon as reasonably that the full amount of time between considered. See Section VIII.A. of this

EE-RM-STD-98-440 COMMENT 304

36394 

EE-RM/STD-98-440-?OLIFederal Register / Vol. 67, No. 100/ Thursday, May 23, 2002/ Rules and Regulations 

higher standard at the State level, as the 

States of California and Oregon are currently doing. ERC goes on to quote 

42 U.S.C. 6297(d) "Waiver of Federal 

Preemption" where it states that "Any 

state * * * which provides for any 

energy conservation standard for any 

type of covered product for which there 

is a Federal energy conservation 

standard * * * may file a petition with 

the Secretary (of Energy) requesting that 

such State regulation become effective 

with respect to such covered product." 

(ERC. No. 241-D at p. 1). 

DOE will promptly act upon any 

petition for waiver that may be 

submitted by a State pursuant to section 

327(d) of EP':'A (4~ U.S.C. 6297(d)). 

Section 327 'd) pro' ides that DOE must 

prescribe a 1 ule grauting a waiver from 

Federal pree !l ption if the State 

establishes b T a pn.'p'lnderance of the 

evidence tha H State regulation is 

needed to me ~t "Un,l&ual and 

compelling State or local energy or water interests,' as the' phrase is 

defmed by the stltute (, ':2 U.S.C. 

6297(d)(1)(B)). Section .127(d) further 

provides that DOr may 'lot grant a waiver if interested persons establish by a preponderance of ~he ~vidence that 

the State regulation would significantly 

burden manufacturing. marketing. 

distribution, sale. or servicing of the 

covered product on a national basis (42 

U.S.C. 6297(d)(3». Finally. section 

327(d) establishes the timetable and 

procedure that must be followed for 

acting upon petitions for waiver from 

Federal preemption. 

4. Effective Date 

DOE received written and oral 

comments with regard to DOE's 

proposed effective date (i.e., the date 

when the covered products must 

comply with the new standards for the 

proposed amended standards contained 

in the July 25 SNOPR). In written 

comments. NRDC notes that the 

proposed effective date in the July 25 

SNOPR is approximately six months 

later than that in the January 22 final 

rule. and claims that any delay in the 

effective date of new standards would 

reduce their benefits. NRDC adds that 

section 325(d) ofEPCA (42 U.S.C. 

6295(d)) does not require DOE to 

provide a five-year lead time for 

compliance by manufacturers after 

publication of a fmal rule. (NRDC. No. 

250 at p. 34). TNRCC recommends that 

rather than making the proposed 

standards effective in 2006. DOE should 

accelerate the effective date of the 

standards from the year 2006 to 2004. 

thereby providing improved energy 

efficiency and resultant air quality 

benefits as soon as reasonably 

practicable. (TNRCC. No. 286 at p. 2). At 

the public hearing on the July 25 

SNOPR. representatives of the California 

Energy Commission, PG&E. and 

Goodman also urged DOE to establish an earlier effective date if a 12 SEER 

standard was adopted. (Hearing 

Transcript. at pp. 142-144 and 164-

165). In initial written comments. ARl 

stated a willingness to consent to the 

proposed 5-years-from-date-ofpublication effective date for the 

proposed 12 SEER standard. (ARI. No. 

259 at p. 36). In supplemental 

comments submitted after the close of 

the comment period. ARl responded to 

the comments that requested an earlier 

effective date by stating that ARl would 

accept a compliance date ofJanuary 23. 

2006. the same effective date as provided in the January 22 final rule 

(ARl. No. 289). ARI stated that any 

agreement on its part to an earlier 

effective date should not be deemed as 

a precedent by DOE or concession by 

ARI with respect to future rulemaking 

proceedings. 

Although section 325(d) of EPCA does 

not specifically state that initial 

amended standards become applicable 

to the manufacture of covered products 

after a certain number of years elapse 

following publication of a notice of final 

rulemaking. it provides a schedule of 

specific dates for the promulgation of a final rule and of specific dates on which 

an initial amended SEER and an initial 

amended HSPF established by a final 

rule would apply to the manufacture of 

new central air conditioners and new 

central air conditioning heat pumps. In 

the past. in circumstances where DOE 

was unable to publish a final rule by a 

deadline date established by a statute 

with scheduled compliance dates. DOE 

has had a practice of adjusting the 

statutorily scheduled date such a rule 

becomes enforceable to allow for the same amount of lead time as provided 

in the original statutory schedule. 

However. the application of this 

practice in any particular rulemaking is 

subject to public comment and to 

exceptions in special circumstances. 

See, e.g., 61 FR 10622. 10625 (March 14. 

1996) (final rule establishing the 

Alternative Fuel Vehicle Acquisition 

Program with a compliance schedule 

that varied from the statutory schedule 

established by the Energy Policy Act of 

1992 and that was subject to case-by- case exceptions). In this rulemaking. all 

interested persons who have an interest 

in the date that the final rule becomes 

enforceable-including representatives 

of all of the manufacturers who would 

have to comply with that rul&-agree 

that the full amount of time between 

date of publication and the dates on 

which the rule applies in ilie statutory 

schedule is not needed for central air 

conditioner and central air conditioning 

heat pump manufacturers to come into 

compliance with a 12 SEER standard. 

Moreover. if. as a result of unforeseen 

circumstances. a particular 

manufacturer can show hardship. 

inequity. or unfair distributions of 

burdens, the standard would be subject 

to case-by-case exception pursuant to 

the authority of ilie DOE Office of 

Hearing and Appeals under section 504 

of the DOE Organization Act (42 U.S.C. 

7194). as implemented at subpart B of 

10 CFR part 1003. On the basis ofilie 

foregoing, DOE has decided to fix 

January 23. 2006, as ilie date on which 

the amended standards set forth in 

today's final rule apply to the 

manufacture of central air conditioners 

and central air conditioning heat 

pumps. 

5. Environmental Impacts 

Several comments stated iliat there 

would be greater environmental benefits 

under a 13 SEER standard. (Goodman. 

No. 269 at p.2; Austin Energy. No. 243 

at p. 1; State of Connecticut. No. 279 at 

p. 2; State of Maine. No. 254 at pp. 1-

2). The Attorneys General from the 

States of New York and Massachusetts 

asserted that DOE's assessment of 

environmental impact used ilie wrong 

"no action" scenario; in ilieir view, the 

correct "no action" scenario or baseline 

for measuring impacts is ilie SEER 13 

standard in the January 22 rule 

(Attorneys General of New York and 

Massachusetts, No. 277 at p. 11). In 

addition to ilie carbon and NOx emissions, ilie Attorneys General state 

that coal-fired power plants are 

dominant sources of mercury and 

particulate pollution nationwide and 

that by ignoring these impacts of its 

SNOPR, DOE violated the National 

Environmental Policy Act (NEPA). 

(Attorneys General of New York and 

Massachusetts, No. 277 at pp. 14-15). 

DOE disagrees wiili the comment iliat 

DOE failed to comply wiili NEPA in 

proposing 12 SEER standards in the July 

25 SNOPR. As previously discussed, 

DOE does not believe the standards in 

the January 22 final rule constitute the 

baseline for assessing the impact of 

today's final rule because those 

standards never became effective. The 

correct baseline. and the one used for 

the "no action" alternative in the EA. are the currently effective NAECA 

standards. 

DOE's environmental assessment (EA) 

examined the environmental impacts of 

all trial standard levels being 

considered. See Section VIII.A. of this 
EE-RM/STD-98-440-30 f

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36395

Supplementary Information. All of the NOx and other environmental sector, which is less labor intensive than

alternatives considered in DOE's emissions. Appendix M of the TSD other sectors of the economy,' 9

analysis were found to have beneficial includes an updated set of power plant producing a gain of jobs in the

environmental impacts compared to the emission impacts. The changes resulting manufacturing sector that is less than

"no action" alternative. Under the "no- from this NEMS-BRS error correction the loss of jobs in other sectors of the

action" or base case alternative, the do not affect DOE's finding of no economy. Also, a loss of jobs results in

minimum efficiency requirements significant impact. the utility sector due to its loss of

would remain at their current levels: ament Imactsrevenues. As annual consumer energy

cooling efficiency of 10 SEER for split s savings begin to exceed annual new

system air conditioners and heat pumps, With regard to the impact that expenditures on air conditioners,

a cooling efficiency of 9.7 SEER for amended central air conditioner and eventually the new standards will

single package system air conditioners heat pump standards have on national produce a net gain in national

and heat pumps, a heating efficiency of employment, both ARI and Rheem are employment.

6.8 HSPF for split system heat pumps, concerned that high efficiency standards The increases or decreases in the net

and a heating efficiency of 6.6 HSPF for can lead to job losses in the air- demand for labor in the economy

single package system heat pumps. The conditioning industry's manufacturing estimated by the input/output model

primary focus of the EA is the effect of sector. Rheem states that fewer units due to air conditioner and heat pumps

alternative efficiency stand: rds or, air will be sold due to the higher purchase standards are likely to be very small

resources resulting from de, reased prices associated with more efficient relative to total national employment.

emissions from fossil-fuelec elcztricity equipment. Fewer equipment sales will The following reasons were given in the

generation. For each of the t ial sten lard in turn reduce the need for personnel in January 22 final rule for the conclusion

levels, DOE used the NEMS- ERS model manufacturing facilities and design that any modest changes in employment

to calculate total power sectc r emisi groups. (Rheem, No. 248 at p. 3). ARI were in doubt (66 FR 7192):

of nitrogen oxide, sulfur dioxice, and states that DOE' decision to issue 13 * Unemployment is now at the lowest

carbon. As explained in Sectionr VIII A SEER standards in its January 22 inal rate in 30 years. If unemployment

of this Supplementary Information, Gn rule was in part based on the fact that remains very low during the period

the basis of the EA, DOE determined unemployment was then at the lowest when the standards are put into effect,

rate in 30 years. Because the current

that the environmental effects rate in 30 years. Because the current it is unlikely that the standards alone

associated with the standard levels in state of the natonal economy is could result in any change in national

certainly worse than when DOE issued today's final rule are not significant. its anu 22 final rule ARI cla that employment levels;

DOE has corrected an error that DOE 13 SEER standard wouldav auch Neither the BLS data nor the inputdiscovered in the NEMS-BRS, the worse impact on the air-conditioning output model used by DOE include the

model used by DOE to estimate both industry than initially forecasted by quality or wage level of the jobs. The

peak power and power plant emission DOE. In any case, ARI points out that losses or gains from any potential

impacts due to appliance standards. As DOE's analysis demonstrates that 12 employment change may be offset if job

discussed earlier (see Peak Power), DOE SEER standards would have quality and pay also change; and

conducted a comprehensive review of approximately 50 percent fewer job * The net benefits or losses from

the end-use load shapes used by NEMS- losses compared to 13 SEER standards. potential employment changes are a

BRS, not only for the residential sector ARI asserts that this difference in job result of the estimated net present value

and, specifically, the air-conditioning losses is significant and demonstrates of benefits or losses likely to result from

end-use, but for the commercial, that the proposed 12 SEER standards are air conditioner and heat pump

industrial, and transportation sectors as a much better choice. (ARI, No. 259 at standards. It may not be appropriate to

well. Several problems were discovered pp. 11-12, 31-32). identify and consider separately any

with the load shapes and, as a result, an OOE has a much different perspective employment impacts beyond the

alternative set of sectoral end-use load on DOE's employment impact analysis. calculation of net present value.

shapes were assigned to NEMS-BRS. By OOE states that it is purely speculative Although, as noted by ARI,

implementing a new set of sectoral load to claim that there is a distinguishable unemployment is no longer as low as it

shapes, NEMS-BRS estimates greater difference between the impacts that 12 was at the time the January 22 final rule

power plant emission impacts (in the SEER and 13 SEER standards have on was issued, the annual unemployment

form of reduced CO2 and NOx the national economy. The accuracy of rate in 2001, (4.8 percent) is only

emissions) from increased central air the macroeconomic model used by DOE slightly higher than the annual rates for

conditioner and heat pump standards. to estimate employment impacts does 1998, 1999, and 2000 and still less than

With regard to NOx emissions, the not allow for such a distinction. (OOE, the annual rates for all other years in the

actual reductions that result from more No. 275 at pp. 3-4). 1990's. 2° Thus, after discounting the

stringent efficiency standards are likely As stated in the January 22 final rule, first factor cited above, and considering

to be less than the original DOE DOE estimated the impacts of the new the other two legitimate concerns

estimates because some provisions of standards on national labor demand regarding the interpretation and use of

the Clean Air Act (CAA) were not using an input/output model of the U.S. the employment impacts analysis, DOE

explicitly modeled in the version of economy. See 66 FR 7192. The model cannot conclude that the central air

NEMS-ERS used for this analysis characterizes the interconnections conditioner and heat pump standards

(AEO2000). Some of these provisions between 35 economic sectors using data issued in today's final rule are likely to

have been incorporated in subsequent from the Bureau of Labor Statistics. For

AEOs. In addition, EPA is expected to some years after the new standards go 19 Bureau of Economic Analysis. Regional

promulgate regulations during the into effect, new consumer expenditure Multipliers: A user Handbook for the Regional

analytic period in question that are on air conditioners and heat pumps Input-Output Modeling System (RIMS i).

likely to further constrain NOx each year outpaces their annual energy tatU.S. Department of Labor -Bureau of Labor Statistics (BLS), Labor Force Statistics from the

emissions and reduce the impact that savings. This activity redirects Current Population Survey. BLS Web site http://

efficiency standards would have on expenditures into the manufacturing stats.bls.gov:8O/cps/home.htm>.

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440-30 'l 

Federal Register / Vol. 67, No. 100/Thursday, May 23, 2002/ Rules and Regulations 36395 

Supplementary Information. All of the 

alternatives considered in DOE's 

analysis were found to have beneficial 

environmental impacts compared to the 

"no action" alternative. Under the "noaction" or base case alternative, the 

minimum efficiency requirements 

would remain at their current levels: a 

cooling efficiency of 10 SEER for split 

system air conditioners and heat pumps, 

a cooling efficiency of 9.7 SEER for 

single package system air conditioners 

and heat pumps, a heating efficiency of 

6.8 HSPF for split system heat pumps, 

and a heating efficiency of 6.6 HSPF (ar 

single package system heat pumps. The 

primary focus of the EA is the effect of 

alternative efficiency stand: Ids or, air 

resources resulting from del Teased 

emissions from fossil-fueleo ek~tridty 

generation. For each of the t ial stc niard 

levels, DOE used the NEMS- E,RS model 

to calculate total power secte r emis:;i )fiS 

of nitrogen oxide, sulfur dioxirie, and 

carbon. As explained in Secti'Jr. VIIIA. 

of this Supplementary Informatbn, on 

the basis of the EA, DOE determined 

that the environmental effects 

associated with the standard leve\<; in 

today's final rule are not significant. 

DOE has corrected an error that DUt: 

discovered in the NEM8-BRS, the 

model used by DOE to estimate both 

peak power and power plant emission 

impacts due to appliance standards. As 

discussed earlier (see Peak Power), DOE 

conducted a comprehensive review of 

the end-use load shapes used by NEM8-

BRS, not only for the residential sector 

and, specifically, the air-conditioning 

end-use, but for the commercial, 

industrial, and transportation sectors as 

well. Several problems were discovered 

with the load shapes and, as a result, an 

alternative set of sectoral end-use load 

shapes were assigned to NEMS-BRS. By 

implementing a new set of sectoral load 

shapes, NEM8-BRS estimates greater 

power plant emission impacts (in the 

form of reduced C02 and NOx 

emissions) from increased central air 

conditioner and heat pump standards. 

With regard to NOx emissions, the 

actual reductions that result from more 

stringent efficiency standards are likely 

to be less than the original DOE 

estimates because some provisions of 

the Clean Air Act (CAA) were not 

explicitly modeled in the version of 

NEM8-ERS used for this analysis 

(AE02000). Some of these provisions 

have been incorporated in subsequent 

AEOs. In addition, EPA is expected to 

promulgate regulations during the 

analytic period in question that are 

likely to further constrain NOx emissions and reduce the impact that 

efficiency standards would have on 

NOx and other environmental 

emissions. Appendix M of the TSD 

includes an updated set of power plant 

emission impacts. The changes resulting 

from this NEM8-BRS error correction 

do not affect DOE's finding of no 

significant impact. 

6. Employment Impacts 

With regard to the impact that 

amended central air conditioner and 

heat pump standards have on national 

employment, both ARI and Rheem are concerned that high efficiency standards 

can lead to job losses in the airconditioning industry's manufacturing 

sector. Rheem states that fewer units 

will be sold due to the higher purchase 

prices associated with more efficient 

equipment. Fewer equipment sales will 

in turn reduce the need for personnel in 

manufacturing facilities and design 

groups. (Rheem, No. 248 at p. 3). ARI 

states that DOE's decision to issue 13 

SEER standards in its January 22 final 

rule was in part based on the fact that 

unemployment was then at the lowest 

rate in 30 years. Because the current 

state of the national economy is 

certainly worse than when DOE issued 

its January 22 final rule, ARI claims that 

13 SEER standards would have a much 

worse impact on the air-conditioning 

industry than initially forecasted by 

DOE. In any case, ARI points out that 

DOE's analysis demonstrates that 12 

SEER standards would have 

approximately 50 percent fewer job 

losses compared to 13 SEER standards. 

ARI asserts that this difference in job 

losses is significant and demonstrates 

that the proposed 12 SEER standards are 

a much better choice. (ARI, No, 259 at 

pp. 11-12, 31-32). 

OOE has a much different perspective 

on DOE's employment impact analysis. 

OOE states that it is purely speculative 

to claim that there is a distinguishable 

difference between the impacts that 12 

SEER and 13 SEER standards have on 

the national economy. The accuracy of 

the macroeconomic model used by DOE 

to estimate employment impacts does 

not allow for such a distinction. (OOE, 

No. 275 at pp. 3-4). 

As stated m the January 22 final rule, 

DOE estimated the impacts of the new 

standards on national labor demand 

using an input/output model of the U.S. 

economy. See 66 FR 7192. The model 

characterizes the interconnections 

between 35 economic sectors using data 

from the Bureau of Labor Statistics. For 

some years after the new standards go 

into effect, new consumer expenditure 

on air conditioners and heat pumps 

each year outpaces their annual energy 

savings. This activity redirects 

expenditures into the manufacturing 

sector, which is less labor intensive than 

other sectors of the economy,19 

producing a gain of jobs in the 

manufacturing sector that is less than 

the loss of jobs in other sectors of the 

economy. Also, a loss of jobs results in 

the utility sector due to its loss of 

revenues. As annual consumer energy 

savings begin to exceed annual new 

expenditures on air conditioners, 

eventually the new standards will 

produce a net gain in national 

employment. 

The increases or decreases in the net 

demand for labor in the economy 

estimated by the input/output model 

due to air conditioner and heat pumps 

standards are likely to be very small 

relative to total national employment 

The following reasons were given in the 

January 22 final rule for the conclusion 

that any modest changes in employment 

were in doubt (66 FR 7192): 

• Unemployment is now at the lowest 

rate in 30 years. If unemployment 

remains very low during the period 

when the standards are put into effect, 

it is unlikely that the standards alone 

could result in any change in national 

employment levels; 

• Neither the BLS data nor the inputoutput model used by DOE include the 

quality or wage level of the jobs. The 

losses or gains from any potential 

employment change may be offset if job 

quality and pay also change; and 

• The net benefits or losses from 

potential employment changes are a 

result of the estimated net present value 

of benefits or losses likely to result from 

air conditioner and heat pump 

standards. It may not be appropriate to 

identify and consider separately any 

employment impacts beyond the 

calculation of net present value. 

Although, as noted by ARI, 

unemployment is no longer as low as it 

was at the time the January 22 final rule 

was issued, the annual unemployment 

rate in 2001, (4.8 percent) is only 

slightly higher than the annual rates for 

1998, 1999, and 2000 and still less than 

the annual rates for all other years in the 

1990'S,20 Thus, after discounting the 

first factor cited above, and considering 

the other two legitimate concerns 

regarding the interpretation and use of 

the employment impacts analysis, DOE 

cannot conclude that the central air 

conditioner and heat pump standards 

issued in today's final rule are likely to 

19 Bureau of Economic Analysis. Regional 

Multipliers: A user Handbook for the Regional 

Input-Output Modeling System (RIMS 11), 

20 U.S. Department of Labor-Bureau of Labor 

Statistics (BLS), Labor Force Statistics from the 

Current Population Survey, BLS Web site http:// 

stats.bls.ga,·:BO/cps/hame.htm> . 
EE-RM/STD-98-440 -30'

36396 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

result in appreciable job losses to the conditioners and heat pumps and will some regions of the country that could

nation. take the above comments into benefit from higher efficiency for unique

consideration when determining the climate or electrical supply reasons. In

7. Space-Constrained Products appropriate testing requirements for these instances, government agencies

a. Through-the-Wall Products SDHV systems. DOE has started the and utilities should provide incentives

All parties commenting on DOE's research needed to propose amended to encourage the use of higher efficiency

proposed standards for through-the-wall standards for SDHV systems and it equipment. (Carrier, No. 280 at p. 3).

products supported the proposed intends to initiate a rulemaking shortly Mercatus Center states that DOE does

standards-10.9 SEER and 7.1 HSPF for for this product class, not evaluate non-regulatory programs

split system air conditioners and heat 8. Basis for HSPF Level adequately because it assumes thei effects rather than estimating them

pumps and 10.6 SEER and 7.0 HSPF for ARI stated in its comments that if a 12 based on any credible data or evidence.

single package air conditioners and heat SEER standard is adopted for central air (Mercatus Center, No. 242 at p. 13).

pumps. (Austin Energy, No. 243 at p. 3; conditioning heat pumps, the HSPF DOE disagrees with this comment. In

OOE, No. 275 at p. 4; Lennox, No. 272 should be no higher than 7.3. ARI determining the base case for the

at p. 3; ASE, No. 282 at p. 4; ACEEE, No. believes th. HSPF should be based on analysis of the highest efficiency

284 at pp. 13-14). an analysis of the SEER-HSPF standards that are technologically

Thus, DOE is adopting as minimum relationships across equipment of feasible and economically justified (i.e.,

efficiency standards for the through-the- trying :apacity ratings. It faults DOE's the energy consumption likely to occur

wall products the standards proposed in a ialysis 'or relying on an analysis of in the absence of amended standards),

the July 25 SNOPR. o. dy 3-to: equipment to determine the DOE gave adequate consideration to all

b. Small Duct, High Velocity Systems H ;PF. (,UI, No. 259 at p. 4). non-regulatory market forces likely to

4 s DOE explained in the preamble to occur in the absence of amended

DOE received information in the th. ;anus r, 22 final rule, DOE standards. Additionally, the Regulatory

rulemaking that indicated that the established the SEER-HSPF pairings in Impact Analysis estimated the national

special characteristics of small duct, order to maintain the offset between the energy savings and net present value

high velocity (SDHV) air conditioner mirimum S. 'ER and the minimum that would result from non-regulatory

and heat pump systems make it unlikely HSPF .n the :urrent standards. Because approaches including: (1) Consumer

such systems could meet the 12 SEER/ heating energy is a large fraction of total product labeling, (2) public education,

7.4 HSPF standard established for heat pump energy consumption, DOE (3) prescriptive standards, (4) consumer

conventional products. Spacepak, stated it would not relax the HSPF level tax credits, (5) manufacturer tax credits,

Unico, and ARI all support the creation in the absence of sound evidence (6) consumer rebates, (7) low income

of a separate product class for SDHV regarding the burdens that would be subsidies, (8) voluntary efficiency

systems and the development of mitigated (66 FR 7184). DOE continues targets, and (9) mass government

technologically feasible and to think an HSPF of 7.4 is the purchases. The analysis found that none

economically justified standards for this appropriate level for 12 SEER, and today of them would save an equivalent

product. Although all three comments adopts that level. DOE's decision is amount of energy as energy

are in agreement with regard to the supported by data discussed in the TSD conservation standards.

establishment of a new product class for (Section 4.6.2.1) which shows that most

SDHV systems, Unico and ARI are in models of equipment below 3-tons meet 10 Energy Policy

disagreement over how these systems or exceed an HSPF of 7.4, and almost a On the issue of energy policy, several

should be tested. While ARI third of models available below 20,000 comments claimed that DOE's action of

recommends that no special BTU/hr meet or exceed an HSPF of 7.4. withdrawing the 13 SEER standards

consideration be given for SDHV issued in the January 22 final rule is not

systems and, therefore, no changes be 9 Non-Regulatory Approaches consistent with the current

made to the test procedures for central ARI, Carrier, and Mercatus Center Administration's own National Energy

air conditioners and heat pumps, Unico contended that DOE did not adequately Policy. ASAP, ASE, CEC, and NRDC all

proposes three options for amending the evaluate the national impacts of non- note that the Administration calls for

test procedure to rate SDHV systems. regulatory programs for improving the appliance standards as way to moderate

The three options include: (1) A coil- efficiency of central air conditioners and growth in electricity demand and limit

only test with a higher allowable coil heat pumps. ARI claimed that by consumer energy bills. (ASAP, No. 244

pressure drop and use of a default fan combining several non-regulatory at p. 1; ASE, No. 282 at p. 2; CEC, No.

power; (2) coil and blower tested with alternatives, such as consumer tax 263 at p. 2; NRDC, No. 250 at p. 28).

a 1.2 inch minimum external static credits, consumer rebates and low- NRDC also states that the relaxation of

pressure; and (3) coil-only testing with income subsidies, the amount of energy the 13 SEER standard is inconsistent

existing coil pressure drop allowance saved could increase to 3.5 quads while with the obligations of the United States

and default fan power without mention the net present value would remain under the United Nations Framework

of the blower. (Spacepak, No. 267 at p. relatively unchanged. (ARI, No. 259 at Convention on Climate Change

1; Unico, No. 251 at pp. 3-4; ARI, No. pp. 15-16). Carrier points out that DOE (UNFCCC), to which our country

259 at p. 35). overlooked the energy saving benefits became a Party with the advice and

While DOE agrees with public due to the proper installation and consent of the Senate in 1992. (NRDC,

comments stating that these systems maintenance of air-conditioning No. 250 at pp. 29-30).

should not be subject to the standards equipment. Carrier claims that the total DOE disagrees that its action to

set for conventional products, DOE does energy savings from these actions far finalize 12 SEER standards for central

not currently have an analytical basis exceed those limited to increasing the air conditioners and heat pumps is

for setting a new standard for SDHV SEER of the equipment. In stating the inconsistent with either the

systems. DOE is currently in the process proposed 12 SEER standards represent Administration's National Energy Policy

of amending the test procedure for an appropriate level for the entire or with the United States' obligations

rating the performance of central air nation, Carrier recognizes that there are under the UNFCCC. The 12 SEER

EE-RM-STD-98-440 COMMENT 304

36396 

EE-RM/STD-98-440 ~ 304-

Federal Register I Vol. 67, No. 100 I Thursday, May 23, 2002 I Rules and Regulations 

result in appreciable job losses to the 

nation. 

7. Space-Constrained Products 

a. Through-the-Wall Products 

All parties commenting on DOE's 

proposed standards for through-the-wall 

products supported the proposed 

standards-l0.9 SEER and 7.1 HSPF for 

split system air conditioners and heat 

pumps and 10.6 SEER and 7.0 HSPF for 

single package air conditioners and heat 

pumps. (Austin Energy, No. 243 at p. 3; 

ODE, No. 275 at p. 4; Lennox, No. 272 

at p. 3; ASE, No. 282 at p. 4; ACEEE, No. 

284 at pp. 13-14). 

Thus, DOE is adopting as minimum 

efficiency standards for the through-thewall products the standards proposed in 

the July 25 SNOPR. 

b. Small Duct, High Velocity Systems 

DOE received information in the 

rulemaking that indicated that the 

special characteristics of small duct, 

high velocity (SDHV) air conditioner 

and heat pump systems make it unlikely 

such systems could meet the 12 SEER/ 

7.4 HSPF standard established for 

conventional products. Spacepak, 

Unico, and ARI all support the creation 

of a separate product class for SDHV 

systems and the development of 

technologically feasible and 

economically justified standards for this 

product. Although all three comments 

are in agreement with regard to the 

establishment of a new product class for 

SDHV systems, Unico and ARl are in 

disagreement over how these systems 

should be tested. While ARI 

recommends that no special 

consideration be given for SDHV 

systems and, therefore, no changes be 

made to the test procedures for central 

air conditioners and heat pumps, Unico 

proposes three options for amending the 

test procedure to rate SDHV systems. 

The three options include: (1) A coilonly test with a higher allowable coil 

pressure drop and use of a default fan 

power; (2) coil and blower tested with 

a 1.2 inch minimum external static 

pressure; and (3) coil-only testing with 

existing coil pressure drop allowance 

and default fan power without mention 

of the blower. (Spacepak, No. 267 at p. 

1; Unico, No. 251 at pp. 3-4; ARl, No. 

259 at p. 35). 

While DOE agrees with public 

comments stating that these systems 

should not be subject to the standards 

set for conventional products, DOE does 

not currently have an analytical basis 

for setting a new standard for SDHV 

systems. DOE is currently in the process 

of amending the test procedure for 

rating the performance of central air 

conditioners and heat pumps and will 

take the above comments into 

consideration when determining the 

appropriate testing requirements for 

SDHV systems. DOE has started the 

research needed to propose amended 

standards for SDHV systems and it 

intends to initiate a rulemaking shortly 

for this product class. 

8. Basis for HSPF Level 

ARl stated in its comments that if a 12 

SEER standard is adopted for central air 

conditioning heat pumps, the HSPF 

should be no higher than 7.3. ARI 

believes lb." HSPF should be based on 

an analysis of the SEER-HSPF 

rp1ationships across equipment of 

\i ll}'ing ~apacity ratings. It faults DOE's 

a lalysis cor relying on an analysis of 

o. ll~' 3· to: \ equipment to determine the 

H ;PF. VuU, No. 259 at p. 4). ~ s DOE explained in the preamble to 

th, ' ;anue rJ 22 final rule, DOE 

establish~'d the SEER-HSPF pairings in 

order to IT.aintain the offset between the 

mirimum 5. 'ER and the minimum 

HSPF .in thP. ;urrent standards. Because 

heatin~ enerlSY is a large fraction of total 

heat pu.'np energy consumption, DOE 

stated it would not relax the HSPF level 

in the absence of sound evidence 

regarding the burdens that would be 

mitigated (66 FR 7184). DOE continues 

to think an HSPF of 7.4 is the 

appropriate level for 12 SEER, and today 

adopts that level. DOE's decision is 

supported by data discussed in the TSD 

(Section 4.6.2.1) which shows that most 

models of equipment below 3-tons meet 

or exceed an HSPF of 7.4, and almost a 

third of models available below 20,000 

BTU/hr meet or exceed an HSPF of 7.4. 

9. Non-Regulatory Approaches 

ARI, Carrier, and Mercatus Center 

contended that DOE did not adequately 

evaluate the national impacts of nonregulatory programs for improving the 

efficiency of central air conditioners and 

heat pumps. ARl claimed that by 

combining several non-regulatory 

alternatives, such as consumer tax 

credits, consumer rebates and lowincome subsidies, the amount of energy 

saved could increase to 3.5 quads while 

the net present value would remain 

relatively unchanged. (ARl, No. 259 at 

pp. 15-16). Carrier points out that DOE 

overlooked the energy saving benefits 

due to the proper installation and 

maintenance of air-conditioning 

equipment. Carrier claims that the total 

energy savings from these actions far 

exceed those limited to increasing the 

SEER of the equipment. In stating the 

proposed 12 SEER standards represent 

an appropriate level for the entire 

nation, Carrier recognizes that there are 

some regions of the country that could 

benefit from higher efficiency for unique 

climate or electrical supply reasons. In 

these instances, government agencies 

and utilities should provide incentives 

to encourage the use of higher efficiency 

equipment. (Carrier, No. 280 at p. 3). 

Mercatus Center states that DOE does 

not evaluate non-regulatory programs 

adequately because it assumes their 

effects rather than estimating them 

based on any credible data or evidence. 

(Mercatus Center, No. 242 at p. 13). 

DOE disagrees with this comment. In 

determining the base case for the 

analysis of the highest efficiency 

standards that are technologically 

feasible and economically justified (Le., 

the energy consumption likely to occur 

in the absence of amended standards), 

DOE gave adequate consideration to all 

non-regulatory market forces likely to 

occur in the absence of amended 

standards. Additionally, the Regulatory 

Impact Analysis estimated the national 

energy savings and net present value 

that would result from non-regulatory 

approaches including: (1) Consumer 

product labeling, (2) public education, 

(3) prescriptive standards, (4) consumer 

tax credits, (5) manufacturer tax credits, 

(6) consumer rebates, (7) low income 

subsidies, (8) voluntary efficiency 

targets, and (9) mass government 

purchases. The analysis found that none 

of them would save an equivalent 

amount of energy as energy 

conservation standards. 

10. Energy Policy 

On the issue of energy policy, several 

comments claimed that DOE's action of 

withdrawing the 13 SEER standards 

issued in the Januarv 22 final rule is not 

consistent with the current 

Administration's own National Energy 

Policy. ASAP, ASE, CEC, and NRDC all 

note that the Administration calls for 

appliance standards as way to moderate 

growth in electricity demand and limit 

consumer energy bills. (ASAP, No. 244 

at p. 1; ASE, No. 282 at p. 2; CEC, No. 

263 at p. 2; NRDC, No. 250 at p. 28). 

NRDC also states that the relaxation of 

the 13 SEER standard is inconsistent 

with the obligations of the United States 

under the United Nations Framework 

Convention on Climate Change 

(UNFCCC), to which our country 

became a Party with the advice and 

consent of the Senate in 1992. (NRDC, 

No. 250 at pp. 29-30). 

DOE disagrees that its action to 

finalize 12 SEER standards for central 

air conditioners and heat pumps is 

inconsistent with either the 

Administration's National Energy Policy 

or with the United States' obligations 

under the UNFCCC. The 12 SEER 
EE-RM/STD-98-440 - 3

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36397

standards being finalized today VII. Analytical Results and Conclusions to the TSD. Briefly, DOE examined five

significantly increase the minimum Aw of A l R s standard levels. Table 3 presents the

efficiency requirements for central air of nalytctrial standards levels analyzed and the

conditioners and heat pumps. Thus, the 1. General corresponding efficiency level for each

policy to amend the standards is class of product. Trial Standard Level 5

consistent with the Administration's Although DOE reassessed the benefits is the Max Tech Level for each class of

call to use appliance standards as a and burdens of the trial standard levels product. Trial Standard Level 4 was the

method to moderate growth in in arriving at the determinations in one DOE adopted for the standards set

electricity demand and limit consumer today's rule, the underlying analyses are forth in the January 22 final rule. Trial

energy bills, unchanged from those presented in the Standard Level 2 is the one DOE today January 22 final rule except for determines to be the maximum

additional analysis of through-the-wall efficiency that is technologically

product classes included as Appendix L feasible and economically justified.

TABLE 3.-TRIAL STANDARDS LEVELS FOR CENTRAL AIR CONDITIONERS AND HEAT PUMPS (SEER)

Trial levelSplit standard air condi- Packaged air Split heat Packaged heat

Trinal standard level tioners conditioners pumps pumps

1 . ............................................... 11 11 11 11

2 ....................................................... 12 12 12 12

3 ........................................ ............................................................ 12 12 13 13

4 ..... .................................. ................................... 13 13 13 13

5 ................................................................................. .. 18 18 18

For each trial standard examined, of Management and BL dget's 'OMB) with actual performance data and

several different scenarios were Guidelines to Standardize Me isures of engineering guidelines.

analyzed consisting of variations on: (1) Costs and Benefits and the Fo.nat of The analysis concluded that utilizing

Electricity price and housing Accounting Statements. commonly applied technologies and

projections; (2) equipment efficiency 2 Throhth Wall Prod ct designs, the most constrained throughdistributions; (3) manufacturer cost the-wall split-system analysis could

estimates; and (4) societal discount rate. In response to comments on the increase its SEER rating from 10.0 SEER

Electricity price and housing projections October 5, 2000 NOPR, DOE conducted to as high as 11.4 SEER, and the

were based on three different forecasts additional analysis on the cost and packaged system analysis could increase

from the Energy Information Agency's technical issues related to through-the- its SEER rating from 9.7 SEER to 10.6

2000 Annual Energy Outlook (AEO): (1) wall air conditioner and heat pump SEER. Employing all improvements

Reference Case, (2) High Growth Case, products. The analysis is described in would add $106 and $129 to the retail

and (3) Low Growth Case. DOE analyzed detail in Appendix L of the TSD and is price of the equipment, respectively,

three efficiency scenarios, each of which summarized here. comparable to the increases expected in

assumed a different efficiency DOE performed a design assessment conventional equipment moving to a 12

distribution after new standards would on two split through-the-wall systems SEER standard.

take effect: (1) NAECA scenario, (2) and one packaged through-the-wall To explore the effects that more

Roll-up scenario, and (3) Shift scenario. system. All systems are designed stringent standards for through-the-wall

See October 5, 2000 NOPR for an primarily for the replacement market products would have on consumers,

explanation of the three scenarios (65 and fit the physical definition of DOE performed a life-cycle cost

FR 59596, notes 10 through 12 and through-the-wall equipment proposed analysis. The life-cycle cost analysis for

accompanying text). Under the standard in the October 5, 2000 NOPR and July through-the-wall consumers used a

levels in today's rule, DOE believes that 25 SNOPR. The design assessment subset of consumers identified as living

the NAECA scenario most closely sought to identify the cost and in multi-family dwellings, which are the

represents the likeliest impact of the efficiency impacts of employing predominate application for throughnew standards, as explained in Chapter commonly applied techniques to the-wall products.

8 of the TSD. DOE analyzed two improve efficiency including reduction In the July 25 SNOPR, DOE proposed,

manufacturer cost scenarios: (1) Based of air leakage and improvement in based on its analysis, a 10.9 SEER/7.1

on reverse engineering estimates, and airflow, utilizing more efficient HSPF standard for through-the-wall

(2) based on ARI-provided mean cost compression and fan motors, and split systems and a 10.6 SEER/7.0 HSPF

estimates. For the reasons given in the increasing heat exchanger surface area. standard for through-the-wall single

preamble to the January 22 final rule (66 Emerging technologies and modulating package system products. After

FR 7177-78), DOE expects manufacturer technologies were not considered since considering public comments, all of

costs under the amended standards will they are not likely to be applied in which supported the proposed levels,

lie closer to the estimates produced conventional baseline equipment. DOE today adopts those levels as final

through DOE's reverse engineering The cost estimation for the analysis standards for through-the-wall products.

analysis, which lie between ARI's was based on a modified version of the

minimum and ARI's mean cost values. reverse engineering cost models3. Small Duct, High Velocity Systems

DOE assumed a societal discount rate of developed as part of this rulemaking for In response to comments on the July

7 percent for calculating net present conventional products. The 25, 2001 SNOPR, DOE has determined

value (NPV). However, a 3 percent value performance impacts of employing that additional analysis on the cost and

was investigated as an alternative various design options were estimated technical issues related to SDHV air

scenario in accordance with the Office utilizing a spreadsheet model populated conditioner and heat pump products are

EE-RM-STD-98-440 COMMENT 304

EE·RM/STD·98·440 -:3"'" 

Federal R.egister/Vol. 67, No. lOa/Thursday, May 23, 2002/Rules and Regulations 36397 

standards being finalized today 

significantly increase the minimum 

efficiency requirements for central air 

conditioners and heat pumps. Thus, the 

policy to amend the standards is 

consistent with the Administration's 

call to use appliance standards as a 

method to moderate growth in 

electricity demand and limit consumer 

energy bills. 

vn. Analytical Results and Conclusions 

A. Overview of Analytical Results 

1. General 

Although DOE reassessed the benefits 

and burdens of the trial standard levels 

in arriving at the determinations in 

today's rule, the underlying analyses are 

unchanged from those presented in the 

January 22 final rule except for 

additional analysis of through-the-wall 

product classes included as Appendix L 

to the TSD. Briefly, DOE examined five 

standard levels. Table 3 presents the 

trial standards levels analyzed and the 

corresponding efficiency level for each 

class of product. Trial Standard Level 5 

is the Max Tech Level for each class of 

product. Trial Standard Level 4 was the 

one DOE adopted for the standards set 

forth in the January 22 final rule. Trial 

Standard Level 2 is the one DOE today 

determines to be the maximum 

efficiency that is technologically 

feasible and economically justified. 

TABLE 3.-TRlAL STANDARDS LevELS FOR CENTRAL AIR CONDITIONERS AND HEAT PUMPS (SEER) 

Trial standard level I Split. air condi- Packa(1Eld air Split heat Packaged heat 

tloners conditioners pumps pumps 

~ :::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::.·::::·::·I----~-i-t-----~-~-t-----~2-1 +-----~~ 

~ ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: :~:::: I _. ___ ~:_3..1..-____ ~_~..I...-____ ~_!...J.... ____ ~! 

For each trial standard examined, 

several different scenarios were 

analyzed consisting ofvariations on: (1) 

Electricity price and housing 

projections; (2) equipment efficiency 

distributions; (3) manufacturer cost 

estimates; and (4) societal discount rate. 

Electricity price and housing projections 

were based on three different forecasts 

from the Energy Information Agency's 

2000 Annual Energy Outlook (AEO): (1) 

Reference Case, (2) High Growth Case, 

and (3) Low Growth Case. DOE analyzed 

three efficiency scenarios, each of which 

assumed a different efficiency 

distribution after new standards would 

take effect: (1) NAECA scenario, (2) 

Roll-up scenario, and (3) Shift scenario. 

See October 5, 2000 NOPR for an 

explanation of the three scenarios (65 

FR 59596, notes 10 through 12 and 

accompanying text). Under the standard 

levels in today's rule, DOE believes that 

the NAECA scenario most closely 

represents the likeliest impact of the 

new standards, as explained in Chapter 

8 of the TSD. DOE analyzed two 

manufacturer cost scenarios: (1) Based 

on reverse engineering estimates, and 

(2) based on ARl-provided mean cost 

estimates. For the reasons given in the 

preamble to the January 22 final rule (66 

FR 7177-78). DOE expects manufacturer 

costs under the amended standards will 

lie closer to the estimates produced 

through DOE's reverse engineering 

analysis, which lie between ARl's 

minimum and ARl's mean cost values. 

DOE assumed a societal discount rate of 

7 percent for calculating net present 

value (NPV). However, a 3 percent value 

was investigated as an alternative 

scenario in accordance with the Office 

of Management and "Budget's 'OMB) 

Guidelines to Standardize Me Jsures of 

Costs and Benefits and I'he Fo.mat of 

Accounting Statements. 

2. Through-the-Wall PrOd,lctj; 

In response to comments on the 

October 5,2000 NOPR, DOE conducted 

additional analysis on the cost and 

technical issues related to through-thewall air conditioner and heat pump 

products. The analysis is described in 

detail in Appendix L of the TSD and is 

summarized here. 

DOE performed a design assessment 

on two split through-the-wall systems 

and one packaged through-the-wall 

system. All systems are designed 

primarily for the replacement market 

and fit the physical definition of 

through-the-wall equipment proposed 

in the October 5,2000 NOPR and July 

25 SNOPR. The design assessment 

sought to identify the cost and 

efficiency impacts of employing 

commonly applied techniques to 

improve efficiency including reduction 

of air leakage and improvement in 

airflow, utilizing more efficient 

compression and fan motors, and 

increasing heat exchanger surface area. 

Emerging technologies and modulating 

technologies were not considered since 

they are not likely to be applied in 

conventional baseline equipment. 

The cost estimation for the analysis was based on a modified version of the reverse engineering cost models 

developed as part of this rulemaking for 

conventional products. The 

performance impacts of employing 

various design options were estimated 

utilizing a spreadsheet model populated 

with actual performance data and 

engineering guidelines. 

The analysis concluded that utilizing 

commonly applied technologies and 

designs, the most constrained throughthe-wall split-system analysis could 

increase its SEER rating from 10.0 SEER 

to as high as 11.4 SEER, and the 

packaged system analysis could increase 

its SEER rating from 9.7 SEER to 10.6 

SEER. Employing all improvements 

would add $106 and $129 to the retail 

price of the equipment, respectively. 

comparable to the increases expected in 

conventional equipment moving to a 12 

SEER standard. 

To explore the effects that more 

stringent standards for through-the-wall 

products would have on consumers, 

DOE performed a life-cycle cost 

analysis. The life-cycle cost analysis for 

through-the-wall consumers used a 

subset of consumers identified as living 

in multi-family dwellings, which are the 

predominate application for throughthe-wall products. 

In the July 25 SNOPR, DOE proposed, 

based on its analysis. a 10.9 SEER/7.1 

HSPF standard for through-the-wall 

split systems and a 10.6 SEERI7.0 HSPF 

standard for through-the-wall single 

package system products. After 

considering public comments, all of 

which supported the proposed levels, 

DOE today adopts those levels as final 

standards for through-the-wall products. 

3. Small Duct, High Velocity Systems 

In response to comments on the July 

25, 2001 SNOPR, DOE has determined 

that additional analysis on the cost and 

technical issues related to SDHV air 

conditioner and heat pump products are 
EE-RM/STD-98-440-30o

36398 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

needed to determine appropriate standards covering all product types significant conservation of energy" (42

minimum efficiency standards for this (e.g., 10 SEER/6.8 HSPF for split system U.S.C. 6295(o)(3)(B)).

class of product. The analysis plan for air conditioners) will remain applicable In conducting its analysis, DOE

establishing the manufacturing cost and to SDHV systems. DOE intends to considers the impacts of standards

efficiency relationship for SDHV conduct a separate rulemaking for beginning with the Max Tech Level, i.e.,

systems has yet to be developed, but SDHV systems to establish appropriate Trial Standard Level 5 in this

DOE intends to involve the minimum efficiency standards for this rulemaking. DOE then considers less

manufacturers that produce these class of product. efficient levels until it reaches the level

products (Spacepak and Unico) in the which is both technologically feasible

planning process. B. Conclusions Regarding Conventional and economically justified.

To explore the effects that more Productstif

stringent standards for SDHV systems To aid the reader in the discussion of

have on consumers, DOE intends to EPCA specifies that any new or the benefits and burdens of the trial

perform a life-cycle cost analysis. The amended energy conservation standard standard levels, DOE includes a

life-cycle cost analysis for SDHV for any type (or class) of covered summary of the analysis results for all

consumers will use a subset of product shall be designed to achieve the jf the levels in Table 4.21 Table 4

consumers identified as probable maximum improvement in energy presents a summary of quantitative

candidates for the application of SDHV efficiency which the Secretary analysis results for each trial standard

products. determines is technologically feas ible level based on the assumptions DOE

Although DOE has concluded that and economically justified (42 U.: .C. considers most plausible. These include

SDHV systems warrant their own 6295(o)(2)(A)). In determining whi ther a manufacturing cost estimates from the

product class, it has yet to determine an standard is economically justified, the reverse engineering, an 18.4-year

appropriate minimum efficiency Secretary must determine whether lie equipment lifetime with one compressor

standard for them. Therefore, this final benefits of the standard exceed its i -placement at 14 years, and electricity

rule provides that the NAECA- burdens (42 U.S.C. 6295(o)(2)(B)(i)). The prices based on the AEO2000 Reference

prescribed minimum efficiency amended standard must "result in C 'se.

TABLE 4.-SUMMARY OF QUANTITATIVE RESULTS

Trial Std Trial Std Trial Std Trial Std Trial Std

1_J 2 3 4 5

SEER levels for m ost products ............................................................................................ 11 ... 12 ......... 12 for 13 ......... 18

CAC/

13 for

HP.

Prim ary Energy Saved (quads) ........................................................................................... 1.7 ........ 3.0 ........ 3.5 ........ 4.2 ........ 8.8

Generation Capacity Offset (GW ) ................................................. 44 . . .......... ...... 4.4 ...... 21.9

NPV (Sbillion)

7% D iscount R ate ................................................................................................................ 2 7% Discount Rate .................... . 2 2 (10)

Industry Impacts (million S)2

Cumulative Change in Industry NPV ................................................................................... (30) ....... (159) ..... (171) ..... (303) ..... -

Differential impact between Industry Sub-groups 3 ............................................................. 75 ......... 238 ....... 261 ....... 429 .......

Cumulative Regulatory Burden on Industry ......................................................................... (>509) .. (>638) .. (>650) .. (>782) ..

Minimum net cash flow ................ ............................................. 62 ......... 31 ......... 18 ......... (3) ......... _

Llfe-Cycle Cost Savings ()4

Split AC ............................................................................... 75 ......... 113 ....... 113 ....... 113 ....... (137)

Packaged AC ............................................................ ... ...................................... ..... 78 163 ....... 163 ....... 29 ......... (276)

Split H P ...................................... ................................................................. 209 ....... 365 ....... 372 ....... 372 ....... (41)

Packaged H P ....................................................................................................................... 207 ....... 421 ....... 353 ....... 353 ....... 166

Equipment Price Increase (S)

Split AC ................................................................... 91 ..... 21 3 ....... 335 ....... 754

Packaged A C .............................. ....... ............... .... ... ............... ............................................ 425 859

Split HP .................................................................. 55 ......... 144 ...... 2 ....... .. 1039

Packaged H eat Pum p .................................................................................... 9.......85

Fraction of all Consumers with Net LCC Losses >2% (%)

Split AC . .................................. ................................ 2 25 ......... 25 ......... 39 ......... 68

Packaged A C ....................................................................................................................... 9 9 ........... 52 ......... 73

Split H P ....................... ................ .............................................................................. ........... ........... 6 ........... 6 ........... 57

21 All cumulative effects that are not monetary are

not discounted. Monetary effectgs are discounted to

1998 dollars.

EE-RM-STD-98-440 COMMENT 304

36398 

EE-RM/STD-9S-440-?O'f 

Federal Register/Vol. 67, No. lOO/Thursday, May 23, 2002 I Rules and Regulations 

needed to determine appropriate 

minimum. efficiency standards for this 

class of product. The analysis plan for 

establishing the manufacturing cost and 

efficiency relationship for SDHV 

systems has yet to be developed, but 

DOE intends to involve the 

manufacturers that produce these 

products (Spacepak and Unico) in the 

planning process. 

To expfore the effects that more stringent standards for SDHV systems 

have on consumers, DOE intends to 

perform a life-cycle cost analysis. The 

life-cycle cost analysis for SDHV consumers will use a subset of 

consumers identified as probable 

candidates for the application of SDHV 

products. 

Although DOE has concluded that 

SDHV systems warrant their own product class, it has yet to determine an 

appropriate minimum efficiency 

standard for them. Therefore. this fmal 

rule provides that the NAECAprescribed minimum efficiency 

standards covering all product types 

(e.g .• 10 SEER/6.8 HSPF for split system 

air conditioners) will remain applicable 

to SDHV systems. DOE intends to 

conduct a separate rulemaking for 

SDHV systems to establish appropriate 

minimum efficiency standards for this 

class of product. 

B. Conclusions Regarding Conventional 

Products 

EPCA specifies that any new or 

amended energy conservation standard 

for any type (or class) of covered 

product shall be designed to achieve the 

maximum improvement in energy 

efficiency which the Secretary 

determines is technologically feae I.ble 

and economically justified (42 U.!.C. 

6295(0)(2)(A)). In determining whl tt.er .:I 

standard is economically justified. the 

Secretary must determine whether lie 

benefits of the standard exceed its 

burdens (42 U.S.C. 6295(0)(2)(B)(i)). The 

amended standard must "result in 

significant conservation of energy" (42 

U.S.C.6295(0)(3)(B)). 

In conducting its analysis. DOE 

considers the impacts of standards 

beginning with the Max Tech Level. i.e .• Trial Standard Level 5 in this 

rulemaking. DOE then considers less 

efficient levels until it reaches the level 

which is both technologically feasible 

and economically justified. 

To aid the reader in the discussion of 

the benefits and burdens of the trial 

standard levels. DOE includes a 

summary of the analysis results for all 

\.If the levels in Table 4. 21 Table 4 

presents a summary of quantitative 

analysis results for each trial standard 

level based on the assumptions DOE 

considers most plausible. These include 

manufacturing cost estimates from the 

reverse engineering, an 18.4-year 

uquipment lifetime with one compressor I ~placement at 14 years. and electricity 

ppices based on the AE02000 Reference 

G·se. 

TABLE 4.-SUMMARY OF QUANTITATIVE RE:,UL1S 

TrialB. Trial Std Trial Std Trial Std Trial Std 

1 2 3 4 5 

SEER levels for most products ........................................................................................... . 11 ......... 12 ......... 12 for 13 ......... 18 

CACI 

13 for 

HP. 

Primary Energy Saved (quads) .......................................................................................... . 1.7 ........ 3.0 ........ 3.5 ........ 4.2 ........ 8.8 

Generation Capacity Offset (GW) ...................................................................................... .. 4.4 ........ 8.7 ........ 10.1 . ..... 12.6 ...... 21.9 

NPV (Sbllllon) 

7% Discount Rate ................................................................................................................ 12 ........... 12 .......... ·11 .......... ·11 .......... ·1 (10) 

Industry Impacts (million S) 2 

Cumulative Change in Industry NPV .................................................................................. . (30) ....... (159) ..... 

Differential impact between Industry Sutrgroups 3 ............................................................ . 75 ......... 238 ....... Cumulative Regulatory Burden on Industry ....................................................................... .. (>509) .. (>638) .. 

Minimum net cash flow ....................................................................................................... . 62 ......... 31 ......... 

Llfe-Cycle Co.t Saving. ($) 4 

Split AC ............................................................................................................................... . 75 ......... 113 ....... Packaged AC ...................................................................................................................... . 78 ......... 163 ....... Split HP ............................................................................................................................... . 209 ....... 365 ....... 

Packaged HP ..................................................................................................................... .. 207 ....... 421 ....... 

Equipment Price Incr .... (S) 

Split AC ............................................................................................................................... . 91 ......... 213 ....... Packaged AC ...................................................................................................................... . 89 ......... 158 ....... Split HP .............................................................................................................................. .. 55 ......... 144 ....... Packaged Heat Pump ......................................................................................................... . 92 ......... 149 ....... 

Fraction of all Con.umers with Net LCC Lo .... >2"10 ("10) 

Split AC ............................................................................................................................... . 

Packaged AC ...................................................................................................................... . 

SplitHP ............................................................................................................................... . 

21 All cumulative effects that are not monetary are 

not discounted. Monetary effectgs are discounted to 

1998 dollars. 

(171) ..... 

261 ....... (>650) .. 18 . ........ 

113 ....... 163 ....... 372 ....... 

353 ....... 

213 . ...... 158 . ...... 

332 .. ..... 435 . ...... 

(303) ..... 

429 . ...... (>782) .. (3) ......... 

113 . ...... 29 .. ....... 372 .. ..... 353 . ...... 

335 .. ..... 425 .. ..... 332 . ...... 435 .. ..... 

(137) 

(276) 

(41) 

166 

754 

859 

1039 

985 

68 

73 

57 
EE-RM/STD-98-440- 3o4

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36399

TABLE 4.-SUMMARY OF QUANTITATIVE RESULTS 1

-Continued

Trial Std Trial Std TalStd Trial Std Trial Std

.1 2 3 4 5

P ackaged H eat P um p .......................................................................................................... ........... 0 .......... 12 ......... 12 ......... 48

Fraction of Low Income Consumers with Net LCC Losses >2% (%)

S p lit A C ................................................................................................................................ ........... 34 ......... 34 ......... 5 0 ......... 7 7

Packaged A C ...................................................................................................................... 2 ........... 14 ......... 14 ......... 61 ......... 80

S p lit H P ................................................................................................................................ ........... ........... 12 ......... 12 ......... 7 5

P ackaged H eat P um p .......................................................................................................... ........... ........... 20 ......... 20 ......... 66

Parentheses indicate negative (-) values. Unless otherwise noted, Trial Standard Levels 1-3 refer to the NAECA efficiency scenario, and

Trial Standard Levels 4 and 5 refer to the Roll-up efficiency scenario.

2 Not calculated at Trial Standard Level 5.

3 The benefit accruing to the Higher Operating Cost subgroup compared to the Lower Operating Cost subgroup.

4 Negative values indicate LCC increases.

In addition to the quantitative results, installing the new baseline products estimat 3s repr:sent lower bounds to the

DOE also considers other burdens and into replacement applications, actual c :sts because they do not include

benefits that might affect the economic First DOE considered Trial Standard the add tonai price the consumer

justification. Level 5, the Max Tech Level for each of would r iy over the price of a 15 SEER

The potential to improve the four classes of products, representing product, whicih \ ould increase the lifereliability of the electricity system is uniform 18 SEER requirements. The cycle coFt -onsi d rably.

considered by some to be the major manufacturing cost DOE assumes for DOE contludes that at Trial Standard

benefit that DOE had not quantified Trial Standard Level 5 is equal to the Level 5, the benefi s of energy and

explicitly. In areas where the occurrence cost of 15 SEER equipment, rather than energy cost saving , and emission

of blackouts (and brownouts) can be the cost of 18 SEER equipment, since reductions would Le outweighed by the

reduced through expansion of system manufacturer cost data were not negative economic impacts to the

capacity, the economic value of avoided available for the 18 SEER efficiency nation, to the vast majority of

blackouts associated with reductions in levels. Because of that assumption, DOE consumers and to the manufacturers.

peak load cannot exceed the value of the expects that its estimate of the cost and Consequently, DOE has determined that

avoided capacity expansion. That value price of the product at Trial Standard Trial Standard Level 5, the Max Tech

is already captured in DOE's analysis as Level 5 are understated. Trial Standard Level, is not economically justified.

savings in consumer utility bills. Level 5 would likely save 8.8 quads of Next, DOE considered Trial Standard

However, in areas that are unable to energy between 2006 and 2030 which Level 4, the level that the previous

maintain adequate capacity reserves, the DOE considers significant. The energy Administration determined to be

value of avoided blackouts associated savings through 2020 would result in economically justified in the January 22

with reductions in peak demand often the avoidance of approximately 22 final rule. This level specifies 13 SEER

far exceed the normal costs of capacity gigawatts (GW) of installed generation equipment for all product classes. In

expansion. 22 DOE has reexamined capacity in 2020. For comparison, the considering Trial Standard Level 4, DOE

claims that the energy efficiency generating capacity is equivalent to assumed the Roll-up efficiency scenario

standards under consideration could roughly 55 large, 400 megawatt, power and reverse engineering cost estimates

improve significantly electric system plants, and reduced emissions would to be the most probable. Under the Rollreliability over the long term (see range up to 73 Mt of carbon equivalent up scenario, equipment that in the base

discussion at Section VI.G.2). and up to 279 kt of NOx. 23 Furthermore, case was forecast to be less efficient

DOE also recognizes that the adopted for the nation as a whole, Trial Standard than the trial standard level is assumed

standards could result in additional Level 5 is estimated to result in a net to move up to the standard level, and

unquantifiable benefits and burdens. cost in excess of $10 billion. DOE did equipment forecasted to be at or above

These include the avoidance of not calculate manufacturer impacts at the trial standard level is assumed not

environmental impacts associated with this trial standard level, determining to increase in efficiency. (See Section

the siting of some powerplants, a based on preliminary evaluation that 8.4.8 of the TSD for the reasons DOE

possible increase in health problems they would be severe and unacceptable. considers the Roll-up efficiency

caused by consumers foregoing air At Trial Standard Level 5, the average scenario most probable above Trial

conditioner purchases, a possible consumer would experience an increase Standard Level 3 and the NAECA

reduction in the ability of the product in life-cycle cost. Compared to today's efficiency scenario most probable at

to dehumidify, a possible lessening of standards, purchasers of split central efficiency scenard Levels 1, 2, and 3; see

competition, and possible difficulty in air-conditioners, the predominate class Section 7.2.2.5 of the TSD for the

of 

--- of central central air conditioner with 65 air conditioner with 65 current efficiency distribution for each

" For instance, if capacity-related blackouts cost percent of the sales of central air current efficiency distribution for each

a region $1 billion, society would be willing to pay conditioners and heat pumps, would product class and for the assumed

up to $1 billion to prevent them. If those blackouts most likely lose excess of$137 over efficiency distributions after new

can be prevented through either a capacity mot l y le in e s of $ 7

expansion or a reduction in peak demand, and the the life of the appliance. Purchasers of standards.)

new capacity would cost S100 million, the value of split heat pumps, the predominant class Primary energy savings between 2006

the reduction in peak demand can be no more than of heat pump, would most likely lose in and 2030 is estimated to be 4.2 quads,

$100 million. If the region is short on capacity and excess of $41 These life cost which DOE considers significant. The

cannot add new capacity quickly, however, the excess of $41. These life-cycle cost estimated energy savings through 2020

same reduction in peak demand then can equal the

value of the avoided blackout ($1 billion) since 23 Generating capacity, carbon, and NOx would result in avoidance of

there is no feasible alternative. reductions are based on Roll-up efficiency scenario. approximately 12.6 GW in installed

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440-304 

Federal Register/Vol. 67, No. lOO/Thursday, May 23, 2002/Rules and Regulations 36399 

TABLE 4.-SUMMARY OF QUANTITATIVE RESULTS'-Continued 

Trial Std Trial Std Trial Std Trial Std Trial Std 

. 1 234 5 

Packaged Heat Pump .......................................................................................................... 0 ........... 0 ........... 12 ......... 12 ......... 48 

Fraction of Low Income Consumers with Net LCC Losses >2% (%) 

Split AC ................. ..................... ........................................ .......... ........................................ 5........... 34......... 34......... 50......... 77 

Packaged AC ..................................... .................................................................................. 2 ........... 14 ......... 14 ......... 61 ......... 80 

Split HP ................................................................................................................................ 0 ........... 0 ........... 12 ......... 12 ......... 75 

Packaged Heat Pump .............................. .......................................................... ............ ...... 0......... .. 0........... 20......... 20......... 66 

1 Parentheses indicate negative (-) values. Unless otherwise noted, Trial Standard Levels 1-3 refer to the NAECA efficiency scenario. and 

Trial Standard Levels 4 and 5 refer to the Roll-up efficiency scenario. 2 Not calculated at Trial Standard Level 5. 3 The benefit accruin9 to the Higher Operating Cost subgroup compared to the Lower Operating Cost subgroup. 4 Negative values indicate Lee increases. 

In addition to the quantitative results, 

DOE also considers other burdens and 

benefits that might affect the economic 

justification. 

The potential to improve the 

reliability of the electricity system is 

considered by some to be the major 

benefit that DOE had not quantified 

explicitly. In areas where the occurrence 

of blackouts (and brownouts) can be 

reduced through expansion of system 

capacity, the economic value of avoided 

blackouts associated with reductions in 

peak load cannot exceed the value of the 

avoided capacity expansion. That value 

is already captured in DOE's analysis as 

savings in consumer utility bills. 

However, in areas that are unable to 

maintain adequate capacity reserves, the 

value of avoided blackouts associated 

with reductions in peak demand often 

far exceed the normal costs of capacity 

expansion.22 DOE has reexamined 

claims that the energy efficiency 

standards under consideration could 

improve significantly electric system 

reliability over the long term (see 

discussion at Section VI.G.2). 

DOE also recognizes that the adopted 

stf'ndards could result in additional 

unquantifiable benefits and burdens. 

These include the avoidance of 

environmental impacts associated with 

the siting of some powerplants, a 

possible increase in health problems 

caused by consumers foregoing air 

conditioner purchases, a possible 

reduction in the ability of the product 

to dehumidify, a possible lessening of 

competition, and possible difficulty in 

22 For instance. if capacity-related blackouts cost 

a region $1 billion. society would be willing to pay 

up to $1 billion to prevent them. If those blackouts 

can be prevented through either a capacity 

expansion or a reduction in peak demand. and the 

new capacity would cost $100 million. the value of 

the reduction in peak demand can be no more than 

$100 million. If the region is short on capacity and 

cannot add new capacity quickly. however. the 

same reduction in peak demand then can equal the 

value of the avoided blackout ($1 hill ion) since 

there is no feasible alternative. 

installing the new baseline products 

into replacement applications. 

First DOE considered Trial Standard 

Level 5, the Max Tech Level for each of 

four classes of products, representing 

uniform IB SEER requirements. The 

manufacturing cost DOE assumes for 

Trial Standard Level 5 is equal to the 

cost of 15 SEER equipment, rather than 

the cost of IB SEER equipment, since 

manufacturer cost data were not 

available for the IB SEER efficiency 

levels. Because of that assumption, DOE 

expects that its estimate of the cost and 

price of the product at Trial Standard 

Level 5 are understated. Trial Standard 

Level 5 would likely save B.B quads of 

energy between 2006 and 2030 which 

DOE considers significant. The energy 

savings through 2020 would result in 

the avoidance of approximately 22 

gigawatts (GW) of installed generation 

capacity in 2020. For comparison, the 

generating capacity is equivalent to 

roughly 55 large, 400 megawatt, power 

plants. and reduced emissions would 

range up to 73 Mt of carbon equivalent 

and up to 279 kt of NOx.23 Furthermore. 

for the nation as a whole. Trial Standard 

Level 5 is estimated to result in a net 

cost in excess of $10 billion. DOE did 

not calculate manufacturer impacts at 

this trial standard level, determining 

based on preliminary evaluation that 

they would be severe and unacceptable. 

At Trial Standard Level 5. the average 

consumer would experience an increase 

in life-cycle cost. Compared to today's 

standards, purchasers of split central 

air-conditioners, the predominate class 

of central air conditioner with 65 

percent of the sales of central air 

conditioners and heat pumps, would 

most likely lose in excess of $137 over 

the life of the appliance. Purchasers of 

split heat pumps, the predominant class 

of heat pump, would most likely lose in 

excess of $41. These life-cycle cost 

23 Generating capacity. carbon, and NOx reductions are based on Roll-up efficiency scenario. 

estima13s repre'sent lower bounds to the 

actual ( )S~~ r.ecause they do not include 

the add I"onal {-rice the consumer 

would Fly OVfT 'he price of a 15 SEER 

product, whicl' \ 'ould increase the lifecycle COft ,~onsid ~rably. 

DOE con ~ludtls that at Trial Standard 

Level 5. t~e bendis of energy and 

energy cost raving' . and emission 

reductions would le outweighed by the 

negative economic Impacts to the 

nation. to the vast majority of 

consumers and to the manufacturers. 

Consequently, DOE has determined that 

Trial Standard Level 5, the Max Tech 

Level. is not economically justified. 

Next, DOE considered Trial Standard 

Level 4, the level that the previous 

Administration determined to be 

economically justified in the January 22 

final rule. This level specifies 13 SEER 

equipment for all product classes. In 

considering Trial Standard Level 4, DOE 

assumed the Roll-up efficiency scenario 

and reverse engineering cost estimates 

to be the most probable. Under the Rollup scenario, equipment that in the base 

case was forecast to be less efficient 

than the trial standard level is assumed 

to move up to the standard level, and 

equipment forecasted to be at or above 

the trial standard level is assumed not 

to increase in efficiency. (See Section 

B.4.B of the TSD for the reasons DOE 

considers the Roll-up efficiency 

scenario most probable above Trial 

Standard Level 3 and the NAECA 

efficiency scenario most probable at 

Trial Standard Levels I, 2. and 3; see 

Section 7.2.2.5 of the TSD for the 

current efficiency distribution for each 

product class and for the assumed 

efficiency distributions after new 

standards.) 

Primary energy savings between 2006 

and 2030 is estimated to be 4.2 quads. 

which DOE considers significant. The 

estimated energy savings through 2020 

would result in avoidance of 

approximately 12.6 GW in installed 
EE-RM/STD-98-440-30t.

36400 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

generating capacity in 2020. For present value of $29 over the 18.4 year potentially larger equipment, and the

comparison, the generating capacity is life of the product. cost to manufacturers taking into

equivalent to avoiding the need for 32 The average purchaser of a split account the cumulative regulatory

large 400 megawatt power plants, and system heat pump, which represents 22 burden. Trial Standard Level 4

reduced emissions would range up to 33 percent of all shipments, would see the introduces the serious concern that

Mt of carbon equivalent and up to 111 average installed price of $3668 rise to prospective owners of air conditioning

kt of NOx.24 Trial Standard Level 4 $4000, an increase of $332. Lower heat pump systems would instead

would lower peak electricity demand utility bills from the energy savings purchase less costly air conditioner

compared to the base case. That would would repay this increase in 6.4 years resistance heater combinations because

allow utility service areas to build less and produce a total saving with a net of the substantial purchase price

new capacity, with attendant present value of $372 over the 18.4 year differential between heat pumps and air

environmental benefits. life of the product. The average conditioners. As discussed in the

A measure of an efficiency standard's purchaser of a single package heat January 22 notice of final rulemaking

economic benefit to the nation is the pump, which represents 4 percent of all (66 FR 7196), the energy savings from

increase in net present value, which is shipments, would see the average the more efficient heat pumps would be

the difference in total cost, both initial installed price of $3599 rise to $4034, an eliminated if only a small fraction of

the difference in total cost, both iitia increase of $435. Lower utility bills heat pump owners (4 percent) switched

cost and discounted operating cost, from the energy savings would repay to resistance heating. T.ose households

between the base case (without a new this increase in 8.4 years and produce residing in manufactur !d hou. ing,

standard) and the case with a new a total saving with a net present value which is often shipped from th e factory

standard. For Trial Standard Leve 4, the of $353 over the 18.4 year life of the without an air conditiol ing svs em but

increase in national net present value isproduct. While the average consumer with a resistance furnac , might be

estimated to be $1 billion.25 purchasing a 13 SEER air conditioner or inclined to simply add a lower cost air

Since DOE expects the Roll-up heat pump would experience a net conditioner and retain tl e resistance

efficiency scenario to result from saving over the lifetime of the product, furnace instead of replacing the

standards adopted at Trial Standard a substantial fraction of all households resistance furnace with a htat pur ip. In

Level 4, the burdens of Trial Standard would experience net costs exceeding 2 short, the large financial buidens ( f

Level 4 on manufacturers are likely to percent of the total life-cycle cost of Trial Standard Level 4 are not

be severe. Not only does DOE expect the today's baseline units. Thirty-nine outweighed by the expected financial

average loss in industry NPV to be percent of the households with split benefits. Other potential burdens

around 20 percent, but impacts on most system air conditioners, 52 percent with include possible health effects caused

manufacturers would reach almost 30 single package air conditioners, 6 indirectly by foregone air conditioning

percent. Their long term drop in return percent with split system heat pumps purchases and possible lessening of

on investment and short term drop in and 12 percent with single package heat competition, as determined by DOJ in

cash flow suggest that standards pumps would experience a net cost. The its letter of April 5, 2001 to DOE

adopted at Trial Standard Level 4 could percentage of low-income consumers regarding the January 2001 final rule.

accelerate the consolidation trend, who would experience net costs Consequently, DOE determines that

possibly resulting in fewer choices for exceeding 2 percent of the total life- Trial Standard Level 4 is not

consumers and in a slowing of the pace cycle cost of today's baseline units is economically justified.

of innovation well into the future. greater than that of the average Next, DOE considered Trial Standard

Furthermore, the cumulative impact on household; 50 percent of low-income Level 3. This level specifies 12 SEER

the industry of all new Federal and households with split system air equipment for air conditioners and 13

State regulations is estimated to exceed conditioners, 61 percent with single SEER equipment for heat pumps. In

$782 million. package air conditioners, 12 percent considering Trial Standard Level 3, DOE

For Trial Standard level 4, the average with split system heat pumps and 20 assumed the NAECA efficiency scenario

purchaser of a split system air percent with single package heat and reverse engineering cost estimates

conditioner, the predominant class with pumps. Also, the possibility that many to be the most probable. (See Section

65 percent of all shipments, would see consumers would incur substantial 8.4.8 of the TSD for the reasons DOE

the installed price of $2236 rise to installation costs is great because 13 considers the Roll-up efficiency

$2571, an increase of $335. Lower SEER equipment often will not fit in the scenario most probable at Trial Standard

utility bills from the energy savings same space as current 10 SEER Levels 4 and 5 and the NAECA

would repay this increase in 11.3 years equipment. In light of the higher efficiency scenario most probable at

and produce a total saving with a net purchase cost increase experienced by Trial Standard Levels 1, 2 and 3.)

sand produce a t otl savig withe 14 year all consumers and the percentage of For Trial Standard Level 3, primary

resent value of $113 over the 18.4 yearhouseholds that experience life-cycle energy savings between 2006 and 2030

lifpurchaser th of product. Thsingle avrckage cost increases, in particular low-income are estimated to be 3.5 quads, which

purchasoer of a single package air which ahouseholds, experience life-cycle DOE considers significant. The energy conditioner, which represents 10 h . hi

conditioner which rpsents 1 cost increases, consumer burdens are savings through 2020 would result in

percent of all shipments, would see the apveraeinst alle priens of $2607risee to particularly acute under Trial Standard avoidance of approximately 10.1 GW in

average installed price of $2607 rise to Level 4. installed generating capacity in 2020.

$3032, an increase of $425. Lower DOE concludes that at Trial Standard For comparison, the generating capacity

utility bills from the energy savings Level 4, the benefits of energy savings, is equivalent to avoiding the need for 25

would repay this increase in 14.5 years generating capacity and emission large 400 megawatt power plants, and

and produce a total saving with a net avoidance, and net benefit to the reduced emissions would range up to 28

nation's consumers would be Mt of carbon equivalent and up to 97 kt 2" Generating capacity, carbon. and NOx outweighed by the maldistribution of of NOX 26 Trial Standard Level 3 would

reductions are based on Roll-up efficiency scenario. consumer benefits, Lpotenti the 

25 Under the NAECA efficiency scenario, the consume the potentia r teneaits, 

increase in national net present value would be increase in installation costs for some 2

, Generating capacity, carbon, and NOx

zero. consumers related to installing reductions are based on NAECA efficiency scenario.

EE-RM-STD-98-440 COMMENT 304

36400 

EE·R M/STD·98-44()... 30,," 

Federal Register/Vol. 67. No. lOO/Thursday. May 23. 2002 I Rules and Regulations 

generating capacity in 2020. For 

comparison. the generating capacity is 

equivalent to avoiding the need for 32 

large 400 megawatt powerplants. and 

reduced emissions would range up to 33 

Mt of carbon equivalent and up to 111 

kt of NOx.Z4 Trial Standard Level 4 

would lower peak electricity demand 

compared to the base case. That would 

allow utility service areas to build less 

new capacity. with attendant 

environmental benefits. 

A measure of an efficiency standard's 

economic benefit to the nation is the 

increase in net present value. which is 

the difference in total cost. both initial 

cost and discounted operating cost, 

between the base case (without a new 

standard) and the case with a new 

standard. For Trial Standard Level 4. the 

increase in national net present value is 

estimated to be $1 billion.25 

Since DOE expects the Roll-up 

efficiency scenario to result from 

standards adopted at Trial Standard 

Level 4. the burdens of Trial Standard 

Level 4 on manufacturers are likely to 

be severe. Not only does DOE expect the 

average loss in industry NPV to be 

around 20 percent. but impacts on most 

manufacturers would reach almost 30 

percent. Their long term drop in return 

on investment and short term drop in 

cash flow suggest that standards 

adopted at Trial Standard Level 4 could 

accelerate the consolidation trend. 

possibly resulting in fewer choices for 

consumers and in a slowing of the pace 

of innovation well into the future. 

Furthermore. the cumulative impact on 

the industry of all new Federal and 

State regulations is estimated to exceed 

$782 million. 

For Trial Standard level 4. the average 

purchaser of a split system air 

conditioner. the predominant class with 

65 percent of all shipments. would see 

the installed price of $2236 rise to 

$2571. an increase of$335. Lower 

utility bills from the energy savings 

would repay this increase in 11.3 years 

and produce a total saving with a net 

present value of $113 over the 18.4 year 

life of the product. The average 

purchaser of a single package air 

conditioner. which represents 10 

percent of all shipments. would see the 

average installed price of $2607 rise to 

$3032. an increase of $425. Lower 

utility bills from the energy savings 

would repay this increase in 14.5 years 

and produce a total saving with a net 

.. Generating capacity. carbon. and NOx reductions are based on Roll-up efficiency scenario. 

25 Under the NAECA efficiency scenario. the 

increase in national net present value would be 

zero. 

present value of $29 over the 18.4 year 

life of the product. 

The average purchaser of a split 

system heat pump. which represents 22 

percent of all shipments. would see the 

average installed price of $3668 rise to 

$4000. an increase of $332. Lower 

utility bills from the energy savings 

would repay this increase in 6.4 years 

and produce a total saving with a net 

present value of $3 72 over the 18.4 year 

life of the product. The average 

purchaser of a single package heat 

pump. which represents 4 percent of all 

shipments. would see the average 

installed price of $3599 rise to $4034. an 

increase of $435. Lower utility bills 

from the energy savings would repay 

this increase in 8.4 years and produce 

a total saving with a net present value 

of $353 over the 18.4 year life of the 

product. While the average consumer 

purchasing a 13 SEER air conditioner or 

heat pump would experience a net 

saving over the lifetime of the product. 

a substantial fraction of all households 

would eXferience net costs exceeding 2 

percent 0 the totallife-cycle cost of 

today's baseline units. Thirty-nine 

percent of the households with split 

system air conditioners. 52 percent with 

single package air conditioners. 6 

percent with split system heat pumps 

and 12 percent with single package heat 

pumps would experience a net cost. The 

percentage of low-income consumers 

who would experience net costs 

exceeding 2 percent of the total lifecycle cost of today's baseline units is 

greater than that of the average 

household; 50 percent of low-income 

households with split system air 

conditioners. 61 percent with single 

package air conditioners. 12 percent 

with split system heat pumps and 20 

percent with single package heat 

pumps. Also. the possibility that many 

consumers would incur substantial 

installation costs is great because 13 

SEER equipment often will not fit in the 

same space as current 10 SEER 

equipment. In light of the higher 

purchase cost increase experienced by 

all consumers and the percentage of 

households that experience life-cycle 

cost increases. in particular low-income 

households. which experience life-cycle 

cost increases. consumer burdens are 

particularly acute under Trial Standard 

Level 4. 

DOE concludes that at Trial Standard 

Level 4. the benefits of energy savings. 

generating capacity and emission 

avoidance. and net benefit to the 

nation's consumers would be 

outweighed by the mal distribution of 

consumer benefits. the potential 

increase in installation costs for some 

consumers related to installing 

potentially larger equipment. and the 

cost to manufacturers taking into 

account the cumulative regulatory 

burden. Trial Standard Level 4 

introduces the serious concern that 

prospective owners of air conditioning 

heat pump systems would instead 

purchase less costly air conditioner 

resistance heater combinations because 

of the substantial purchase price 

differential between heat pumps and air 

conditioners. As discussed in the 

January 22 notice of final rulemaking 

(66 FR 7196). the energy savings from 

the more efficient heat pumps would be 

eliminated if only a small fracticd of 

heat pump owners (4 percent) switched 

to resistance heating. Tl-.ose households 

residing in manufactur·!d hou. ing. 

which is often shipped from tb factory 

without an air conditiOl ing !;Yio 'em but 

with a resistance furnac. migM be 

inclined to simply add & lower c.)st air 

conditioner and retain tl e resh.tance 

furnace instead ofreplac;n,1 the 

resistance furnace with a ht'at pur 'p. In 

short. the large financial bmdem ( f 

Trial Standard Level 4 are mIt 

outweighed by the expected i1nanclal 

benefits. Other potential burd!~ns 

include possible health effects r:auf'ed 

indirectly by foregone air conditioning 

purchases and possible lessening of 

competition. as determined by DOJ in 

its letter of April 5. 2001 to DOE 

regarding the January 2001 final rule. 

Consequently. DOE determines that 

Trial Standard Level 4 is not 

economically justified. 

Next. DOE considered Trial Standard 

Level 3. This level specifies 12 SEER 

equipment for air conditioners and 13 

SEER equipment for heat pumps. In 

considering Trial Standard Level 3. DOE 

assumed the NAECA efficiency scenario 

and reverse engineering cost estimates 

to be the most probable. (See Section 

8.4.8 of the TSD for the reasons DOE 

considers the Roll-up efficiency 

scenario most probable at Trial Standard 

Levels 4 and 5 and the NAECA 

efficiency scenario most probable at 

Trial Standard Levels 1. 2 and 3.) 

For Trial Standard Level 3. primary 

energy savings between 2006 and 2030 

are estimated to be 3.5 quads. which 

DOE considers significant. The energy 

savings through 2020 would result in 

avoidance of approximately 10.1 GW in 

installed generating capacity in 2020. 

For comparison. the generating capacity 

is equivalent to avoiding the need for 25 

large 400 megawatt power plants. and 

reduced emissions would range up to 28 

Mt of carbon equivalent and up to 97 kt 

of NOX .26 Trial Standard Level 3 would 

2. Generating capacity. carbon. and NOx reductions are based on NAECA efficiency scenario. 
EE-RM/STD-98-440- 304

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36401

lower peak electricity demand this increase in 8.4 years and produce large 400 megawatt power plants, and

compared to the base case. That would a total saving with a net present value reduced emissions would range up to 24

allow utility service areas to build less of $353 over the 18.4 year life of the Mt of carbon equivalent and up to 83 kt

new capacity, with attendant product. of NOx.28 Trial Standard Level 2 would

environmental benefits. Like Trial Standard Level 4, Trial lower peak electricity demand

For Trial Standard Level 3, the Standard Level 3 raises the serious compared to the base case. That would

increase in national net present value is concern that prospective owners of air allow utility service areas to either

estimated to be $1 billion.z7Since DOE conditioning heat pump systems would avoid build less new capacity, with

expects the NAECA efficiency scenario purchase less costly air conditioner attendant environmental benefits. For

to result from standards adopted at Trial resistance heater combinations. In this Trial Standard level 2, the increase in

Standard Level 3, the burdens of Trial case there is a potential loss of energy national net present value is estimated

Standard Level 3 on manufacturers are savings because of the lower standards to be $2 billion, which represents the

likely to be less severe than at Trial for air conditioners compared to heat highest level for all the standard levels

Standard Level 4. DOE expects the pumps, which could eliminate all considered. 29

average loss in industry NPV to be energy savings from the more efficient Since DOE expects the NAECA

around 11 percent, but impacts on most heat pumps if only a small fraction of efficiency scenario to result from

manufacturers would be around 17 heat pump owners (4 percent) switched standards adopted at Trial Standard

percent. Their long term drop in return to resistance heating. Trial Standard Level 2, the burdens of Trial Standard

on investment and short term drop in Level 3 poses a serious concern Level 2 on manufacturers are likely to

cash flow suggest that standards regarding potential anti-competitive be moderate. DOE expects the average

adopted at Trial Standard Level 3 could effects because the size and cost of the loss in industry NPV to be around 10

accelerate the consolidation trend, higher efficiency heat pumps could percent, with impacts on most

possibly resulting in fewer choices for reduce competition between manufacturers around 16 percent. Their

consumers and in a slowing of the pace manufacturers of heat pumps and long term drop in return on investment

of innovation well into the future. manufacturers of resistance heating and and short term drop in cash flow are

Furthermore, the cumulative impact of other lower cost heating systems. moderate, suggesting that standards

all new Federal and State regulations DOE concludes that, at Trial Standard adopted at Trial Standard Level 2 would

would exceed $650 million. Level 3, the benefits of energy savings, not accelerate the consolidation trend,

At Trial Standard Level 3, the average generating capacity and emission and could result in more choices for

purchaser of a split system air avoidance, and net benefit to the consumers and raise the pace of

conditioner, the predominant class with nation's consumers would be innovation. Furthermore, the

65 percent of all shipments, would see outweighed by the maldistribution of cumulative impact of all new Federal

the installed price of $2236 rise to consumer benefits and manufacturer and State regulations is estimated to

$2449, an increase of $213. Lower costs, the likelihood of higher exceed $638 million

utility bills from the energy savings installation costs resulting fromFor Trial Standard Level 2, the

would repay this increase in 9.8 years potentially larger equipment, and the average purchaser of a split system air

and produce a total saving with a net net impact on the industry in light of conditioner, the predominant class with

present value of $113 over the 18.4 year the cumulative regulatory burden. The 65 percent of all shipments, would see

life of the product. The average most serious concern is the possibility the installed price of $2236 rise to

purchaser of a single package air of equipment switching that would $2449, an increase of $213. Lower

conditioner, which represents 10 likely substantially reduce the utility bills from the energy savings

percent of all shipments, would see the calculated energy savings, drastically utiy bs fro th inee in 9.8ears

average installed price of $2607 rise to reducing the potential benefits. Other would repay this increase in .8 years

$2765, an increase of $158. Lower possible burdens nclude lessening of and produce a toal avg th

utility bills from the energy savings competition, as determined by DOJ in pesent value of $113 over the 18.4 year

would repay this increase in 7.5 years its April 5, 2001 letter to DOE regarding life of the product. The average

and produce a total saving with a net the January 2001 final rule, and adverse purchaser of a single package air

present value of $163 over the 18.4 year health effetscaused byforgone air conditiof shich represents 1see the

life of the product. conditioner purchases. Consequently, percent of all shipments, would see the

The thage averof producthaser of a split DOE determines that Trial Standard average installed price of $2607 rise to The average purchaser of a splito,$2765 an increase of $158. Lower

system heat pump, which represents 22 Level 3 is not economically justified. $2765, an inse of $158. Lower

percent of all shipments, would see the Next. DOE considered Trial Standard utility bills from the energy savings Pergeinstaed price of $ rise to Level 2. This level specifies 12 SEER would repay this increase in 7.5 years average installed price of $3668 rise to and produce a total saving with a net

$4000, an increase of $332. Lower equipment for all product classes, and ad total saving with a net

utiit00sfrom irp the energy savings this is the level that DOE has present value of $163 over the 18.4 year

utility bills from the energy savings determined is the maximum efficiency life of the product. would repay this increase in 6.4 years level that is economically justified. In The average purchaser of a split

and produce a total saving with a net considering Trial Standard Level 2, DOE system heat pump, which represents 22

present value of $372 over the 18.4 yearassumed the NAECA efficiency scenario percent of all shipments, would see the

ulife of the producti The averageand reverse engineering cost estimates average installed price of $3668 rise to

pumpcrchaser of a single package heat ll to be the most probable. Primary energy $3812, an increase of $144. Lower

pump, which represents 4 percent of all 2utility bills from the energy savings would see the average sigs nshipments, between 2006 and 2030 is utility bills from the energy savings

installed price of $3599 rise to $4034rag , an estimated to be 3 quads, which DOE would repay this increase in 3.9 years

installcrease of $43599. Lower utility billsto $4034, considers significant. The energy and produce a total saving with a net

incfrom the energy savings would repay savings through 2020 would result in

avoidance of approximately 8.7 GW in Z8 Generating capacity, carbon, and NOx

Under the Roll-up efficiency scenario, th installed generating capacity in 2020. Under the Roll-up efficiency scenario, the

increase in national net present value would e $2 For comparison, the generating capacity increase in national net present value would be $3

billion. is equivalent to avoiding the need for 22 billion.

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440-3oc+ 

Federal Register/Vol. 67, No. tOO/Thursday, May 23, 2002/Rules and Regulations 36401 

lower peak electricity demand 

compared to the base case. That would 

allow utility service areas to build less new capacity, with attendant 

environmental benefits. 

For Trial Standard Level 3, the 

increase in national net present value is 

estimated to be $1 billionP Since DOE 

expects the NAECA efficiency scenario 

to result from standards adopted at Trial 

Standard Level 3, the burdens of Trial 

Standard Level 3 on manufacturers are 

likely to be less severe than at Trial 

Standard Level 4. DOE expects the 

average loss in industry NPV to be 

around 11 percent, but impacts on most 

manufacturers would be around 17 

percent. Their long term drop in return 

on investment and short term drop in 

cash flow suggest that standards 

adopted at Trial Standard Level 3 could 

accelerate the consolidation trend, 

possibly resulting in fewer choices for consumers and in a slowing of the pace 

of innovation well into the future. 

Furthermore, the cumulative impact of 

all new Federal and State regulations 

would exceed $650 million. 

At Trial Standard Level 3, the average 

purchaser of a split system air 

conditioner, the predominant class with 

65 percent of all shipments, would see the installed price of $2236 rise to 

$2449, an increase of $213. Lower 

utility bills from the energy savings 

would repay this increase in 9.8 years 

and produce a total saving with a net 

present value of $113 over the 18.4 year 

life of the product. The average 

purchaser of a Single package air 

conditioner, which represents 10 

percent of all shipments, would see the 

average installed price of $2607 rise to 

$2765, an increase of $158. Lower 

utility bills from the energy savings 

would repay this increase in 7.5 years 

and produce a total saving with a net 

present value of $163 over the 18.4 year 

life of the product. 

The average purchaser of a split 

system heat pump, which represents 22 

percent of all shipments, would see the 

average installed price of $3668 rise to 

$4000, an increase of $332. Lower 

utility bills from the energy savings 

would repay this increase in 6.4 years 

and produce a total saving with a net 

present value of $372 over the 18.4 year 

life of the product. The average 

purchaser of a single package heat 

pump, which represents 4 percent of all 

shipments, would see the average 

installed price of $3599 rise to $4034, an 

increase of $435. Lower utility bills 

from the energy savings would repay 

27 Under the Roll-up efficiency scenario. the 

increase in national net preSBnt value would be $2 

billion. 

this increase in 8.4 years and produce a total saving with a net present value 

of $353 over the 18.4 year life of the 

product. 

Like Trial Standard Level 4, Trial 

Standard Level 3 raises the serious concern that prospective owners of air 

conditioning heat pump systems would 

purchase less costly air conditioner 

resistance heater combinations. In this case there is a potential loss of energy 

savings because of the lower standards 

for air conditioners compared to heat 

pumps, which could eliminate all 

energy savings from the more efficient 

heat pumps if only a small fraction of 

heat pump owners (4 percent) switched 

to resistance heating. Trial Standard 

Level 3 poses a serious concern regarding potential anti-competitive 

effects because the size and cost of the 

hiJdler efficiency heat pumps could reauce competition between 

manufacturers of heat pumps and 

manufacturers of resistance heating and 

other lower cost heating systems. 

DOE concludes that, at Trial Standard 

Level 3, the benefits of energy savings, 

generating capacity and emission 

avoidance, and net benefit to the 

nation's consumers would be 

outweighed by the mal distribution of consumer benefits and manufacturer 

costs, the likelihood of higher 

installation costs resulting from 

potentially larger equipment, and the 

net impact on the industry in light of 

the cumulative regulatory burden. The 

most serious concern is the possibility 

of equipment switching that would 

likely substantially reduce the 

calculated energy savings, drastically 

reducing the potential benefits. Other 

pOSSible burdens include lessening of 

competition, as determined by DO] in 

its April 5, 2001 letter to DOE regarding 

the January 2001 final rule, and adverse 

health effects caused by forgone air 

conditioner purchases. Consequently, 

DOE determines that Trial Standard 

Level 3 is not economically justified. 

Next, DOE considered Trial Standard 

Level 2. This level specifies 12 SEER 

equipment for all product classes, and 

this is the level that DOE has 

determined is the maximum efficiency 

level that is economically justified. In 

considering Trial Standard Level 2, DOE 

assumed the NAECA efficiency scenario 

and reverse engineering cost estimates 

to be the most probable. Primary energy 

savings between 2006 and 2030 is 

estimated to be 3 quads, which DOE 

considers significant. The energy 

savings through 2020 would result in 

avoidance of approximately 8.7 GW in 

installed generating capacity in 2020. 

For comparison, the generating capacity 

is equivalent to avoiding the need for 22 

large 400 megawatt power plants, and 

reduced emissions would range up to 24 

Mt of carbon equivalent and up to 83 kt 

ofNOx.28 Trial Standard Level 2 would 

lower peak electricity demand 

compared to the base case. That would 

allow utility service areas to either 

avoid build less new capacity, with 

attendant environmental benefits. For 

Trial Standard level 2, the increase in 

national net present value is estimated 

to be $2 billion, which represents the 

highest level for all the standard levels 

considered. 2 9 

Since DOE expects the NAECA 

efficiency scenario to result from 

standards adopted at Trial Standard 

Level 2, the burdens of Trial Standard 

Level 2 on manufacturers are likely to 

be moderate. DOE expects the average 

loss in industry NPV to be around 10 

percent, with impacts on most 

manufacturers around 16 percent. Their 

long term drop in return on investment 

and short term drop in cash flow are 

moderate, suggesting that standards 

adopted at Trial Standard Level 2 would 

not accelerate the consolidation trend, 

and could result in more choices for consumers and raise the pace of 

innovation. Furthermore, the 

cumulative impact of all new Federal 

and State regulations is estimated to 

exceed $638 million. 

For Trial Standard Level 2, the 

average purchaser of a split system air 

conditioner, the predominant class with 

65 percent of all shipments, would see the installed price of $2236 rise to 

$2449, an increase of $213. Lower 

utility bills from the energy savings 

would repay this increase in 9.8 years 

and produce a total saving with a net 

present value oU113 over the 18.4 year 

life of the product. The average 

purchaser of a single package air 

conditioner, which represents 10 

percent of all shipments, would see the 

average installed price of $2607 rise to 

$2765, an increase of $158. Lower 

utility bills from the energy savings 

would repay this increase in 7.5 years 

and produce a total saving with a net 

present value of$163 over the 18.4 year 

life of the product. 

The average purchaser of a split 

system heat pump, which represents 22 

percent of all shipments, would see the 

average installed price of $3668 rise to 

$3812, an increase of $144. Lower 

utility bills from the energy savings 

would repay this increase in 3.9 years 

and produce a total saving with a net 

"Generating capacity. carbon, and NO, 

reductions are based on NAECA efficiency scenario. 

•• Under the Roll-up efficiency scenario, the 

increase in national net present value would be $3 

billion. 
EE-RM/STD-98-440-30,

36402 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

present value of $365 over the 18.4 year present value increase, and emission through-the-wall equipment would not

life of the product. The average reductions resulting from the standards incur an increase in life-cycle cost, and

purchaser of a single package heat outweigh the burdens. The burdens that consumers of packaged throughpump, which represents 4 percent of all include the loss of manufacturer net the-wall equipment would incur an

shipments, would see the average present value, taking into account the increase of $52 over the life of the

installed price of $3599 rise to $3748, an cumulative regulatory burden and equipment. In no case would any

increase of $149. Lower utility bills annual cash flow, increases in life-cycle consumer of split through-the-wall

from the energy savings would repay cost for some users of products covered products be expected to incur life-cycle

this increase in 4 years and produce a by today's rule, any possible increase in costs greater than 2 percent of the total

total saving with a net present value of health problems caused by consumers life-cycle cost, and only 17 percent of

$421 over the 18.4 year life of the foregoing air conditioner purchases, any consumers of packaged through-the-wall

product. possible reduction in the ability of the equipment would be expected to incur

While the average consumer product to dehumidify, any possible cost increases greater than 2 percent of

purchasing a 12 SEER air conditioner or effect on competition (addressed by DOJ the total life-cycle cost.

heat pump would experience a net in its October 19, 2001 letter to DOE), DOE concludes that standard levels

saving over the lifetime of the product, and any possible difficulty in installing higher than 10.9 SEER (split throughsome households would experience net the new baseline products into the-wall) and 10.6 SEER (packaged

costs exceeding 2 percent of the total replacement applications. through-the-wall) are technologically

life-cycle cost of today's baseline units. Concl s R g S - feasible, but are not economically

Thus, 25 percent of the households with C Conlusions egardg Space- justified. DOE's analysis on three

split system air conditioners and 9 Constrained Productsthrough-the-wall models suggests that

percent with single package air If a 12 SEER minimum requirement those products could attain efficiencies

conditioners would experience a net for air conditioners and heat pumps is as high as 11.4 SEER, but the results are

cost. No households with heat pumps implemented, DOE's analysis shows not conclusive and cannot be

would experience a net cost. The that of all potential space-constrained confidently applied to all through-thepercentage of low-income consumers products, only those with through-the- wall products. DOE's analysis does not

who would experience net costs wall condensers and small duct, high provide enough evidence to convince us

exceeding 2 percent of the total life- velocity systems need special that levels higher than 10.9 SEER (10.6

cycle cost of today's baseline units is consideration. SEER for packaged through-the-wall)

greater than that for an average1 Through-the-Wall Productswill be technologically feasible during

household. Thus, 34 percent of low- the five year period during which

income households with split system air The TSD contains a new Appendix L manufacturers would prepare to meet

conditioners and 14 percent with single describing the results of our recent re- the new requirements. DOE's analysis

package air conditioners would evaluation of those products. They does indicate that opportunities for

experience a net cost. No low-income demonstrate that split through-the-wall efficiency improvement do exist, and

households with heat pumps would equipment can attain 10.9 SEER using that manufacturers of those products

experience a net cost. Also, the designs and technologies that are should continue to investigate those

possibility that consumers would incur commonly applied or available, with opportunities.

substantial installation costs is less than price impacts similar to those that A serious concern that DOE has

that with a 13 SEER standard because 12 conventional equipment would considered is that the lower throughSEER equipment is more likely to fit in experience in meeting the proposed 12 the-wall standards might encourage

the same space as current 10 SEER SEER standard. The packaged purchasers of conventional equipment

equipment. In light of the moderate equipment analyzed was demonstrated to shift to through-the-wall products,

purchase cost increase experienced by to be capable of attaining only a 10.6 undermining the benefits of the 12 SEER

all consumers, the percentage of SEER rating, although comments standard for conventional products.

households, in particular low-income received indicate that one manufacturer DOE is therefore limiting the new

households, which experience life-cycle of packaged through-the-wall through-the-wall classes to products

cost increases, consumer burdens are equipment, Armstrong, expects their manufactured before January 23, 2010.

substantially less severe under Trial equipment to be capable of attaining 11 See definition of "through-the-wall air

Standard Level 2 than Trial Standard SEER. conditioner and heat pump." Thus,

Level 4. Based on this evaluation, DOE adopts these classes will exist only for a period

After carefully reconsidering the new product classes for products that of four years following the compliance

analyses and comments, and giving have through-the-wall condensers and date established for the new standards

appropriate weight to consumer impacts are intended for replacement for conventional products. During that

and cumulative regulatory burden in the applications. The new classes are time, the availability of suitable highassessment of the benefits and burdens, required to meet minimum efficiencies efficiency components will likely

DOE today amends the energy lower than those of the other classes: increase and the manufacturers of

conservation standards for central air 10.9 SEER and 7.1 HSPF for through- through-the-wall products will be able

conditioners and central air the-wall air conditioner and heat pump to investigate options for meeting the

conditioning heat pumps at Trial split-systems, and 10.6 SEER and 7.0 more stringent 12 SEER level. Both will

Standard Level 2. DOE concludes this HSPF for through-the-wall air make it easier for through-the-wall

standard saves a significant amount of conditioner single-package systems. products to attain the 12 SEER

energy and is technologically feasible DOE's analysis suggests those products minimum efficiency required of other

and economically justified. In can attain these levels without products, thereby making 12 SEER a

determining economic justification, substantial redesign or price increases technologically feasible and

DOE concludes that the benefits of that would result in a loss of market economically justified level. The sunset

energy savings, the projected amount of share to conventional products. Also, provision will help to ensure that other

avoided power plant capacity, consumer the life-cycle cost analysis confirms manufacturers will not make the

life-cycle cost savings, national net that, on average, consumers of split investment required to market throughEE-RM-STD-98-440 COMMENT 304

36402 

EE-RM/STO-9S-44o--3OLI 

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 

present value of $365 over the 18.4 year 

life of the product. The average 

purchaser of a single package heat 

pump, which represents 4 percent of all 

shipments, would see the average 

installed price of $3599 rise to $3748, an increase of $149. Lower utility bills 

from the energy savings would repay 

this increase in 4 years and produce a total saving with a net present value of 

$421 over the 18.4 year life of the 

product. 

While the average consumer purchasing a 12 SEER air conditioner or 

heat pump would experience a net 

saving over the lifetime of the product, some households would experience net 

costs exceeding 2 percent of the total 

life-cycle cost of today's baseline units. 

Thus, 25 percent of the households with 

split system air conditioners and 9 

percent with single package air 

conditioners would experience a net 

cost. No households with heat pumps 

would experience a net cost. The 

percentage of low-income consumers 

who would experience net costs 

exceeding 2 percent of the total lifecycle cost oftoday's baseline units is 

greater than that for an average 

household. Thus. 34 percent of lowincome households with split system air 

conditioners and 14 percent with single 

package air conditioners would 

experience a net cost. No low-income 

households with heat pumps would 

experience a net cost. Also. the 

possibility that consumers would incur 

substantial installation costs is less than 

that with a 13 SEER standard because 12 

SEER equipment is more likely to fit in 

the same space as current 10 SEER 

equipment. In light of the moderate 

purchase cost increase experienced by 

all consumers. the percentage of 

households. in particular low-income 

households. which experience life-cycle 

cost increases, consumer burdens are substantially less severe under Trial 

Standard Level 2 than Trial Standard 

Level 4. 

After carefully reconsidering the 

analyses and comments. and giving 

appropriate weight to consumer impacts 

and cumulative regulatory burden in the 

assessment of the benefits and burdens. 

DOE today amends the energy 

conservation standards for central air 

conditioners and central air 

conditioning heat pumps at Trial 

Standard Level 2. DOE concludes this 

standard saves a significant amount of 

energy and is technologically feasible 

and economically justified. In 

determining economic justification. 

DOE concludes that the benefits of 

energy savings. the projected amount of 

avoided power plant capacity. consumer life-cycle cost savings. national net 

present value increase. and emission 

reductions resulting from the standards 

outweigh the burdens. The burdens 

include the loss of manufacturer net 

present value. taking into account the 

cumulative regulatory burden and 

annual cash flow. increases in life-cycle 

cost for some users of products covered 

by today's rule, any possible increase in 

health problems caused by consumers 

foregoing air conditioner purchases. any 

possible reduction in the ability of the 

product to dehumidify, any possible 

effect on competition (addressed by DOJ 

in its October 19. 2001 letter to DOE), 

and any possible difficulty in installing 

the new baseline products into 

replacement applications. 

C. Conclusions Regarding SpaceConstrained Products 

If a 12 SEER minimum requirement 

for air conditioners and heat pumps is 

implemented, DOE's analysis shows 

that of all potential space-constrained 

products. only those with through-thewall condensers and small duct. high 

velocity systems need special 

consideration. 

1. Through-the-Wall Products 

The TSD contains a new Appendix L 

describing the results of our recent re- evaluation of those products. They 

demonstrate that split through-the-wall 

equipment can attain 10.9 SEER using 

designs and technologies that are commonly applied or available, with 

price impacts similar to those that 

conventional equipment would 

experience in meeting the proposed 12 

SEER standard. The packaged 

equipment analyzed was demonstrated 

to be capable of attaining only a 10.6 

SEER rating. although comments 

received indicate that one manufacturer 

of packaged through-the-wall 

equipment. Armstrong. expects their 

equipment to be capable of attaining 11 

SEER. 

Based on this evaluation. DOE adopts 

new product classes for products that 

have through-the-wall condensers and 

are intended for replacement 

applications. The new classes are required to meet minimum efficiencies 

lower than those of the other classes: 

10.9 SEER and 7.1 HSPF for throughtha-wall air conditioner and heat pump 

split-systems. and 10.6 SEER and 7.0 

HSPF for through-tha-wall air 

conditioner single-package systems. 

DOE's analysis suggests those products can attain these levels without 

substantial redesign or price increases 

that would result in a loss of market 

share to conventional products. Also. 

the life-cycle cost analysis confirms 

that, on average. consumers of split 

through-the-wall equipment would not 

incur an increase in life-cycle cost, and 

that consumers of packaged throughthe-wall equipment would incur an increase of $52 over the life of the 

equipment. In no case would any consumer of split through-the-wall 

products be expected to incur life-cycle 

costs greater than 2 percent of the total 

life-cycle cost. and only 17 percent of consumers of packaged through-the-wall 

equipment would be expected to incur 

cost increases greater than 2 percent of 

the total life-cycle cost. 

DOE concludes that standard levels 

higher than 10.9 SEER (split throughthe-wall) and 10.6 SEER (packaged 

through-the-wall) are technologically 

feasible, but are not economically 

justified. DOE's analysis on three 

through-the-wall models suggests that 

those products could attain efficiencies as high as 11.4 SEER. but the results are not conclusive and cannot be 

confidently applied to all through-thewall products. DOE's analysis does not 

provide enough evidence to convince us that levels higher than 10.9 SEER (10.6 

SEER for packaged through-the-wall) 

will be technologically feasible during 

the five year period during which 

manufacturers would prepare to meet 

the new requirements. DOE's analysis 

does indicate that opportunities for 

efficiency improvement do exist. and 

that manufacturers of those products 

should continue to investigate those 

opportunities. 

A serious concern that DOE has 

considered is that the lower throughthe-wall standards might encourage 

purchasers of conventional equipment 

to shift to through-the-wall products, 

undermining the benefits of the 12 SEER 

standard for conventional products. 

DOE is therefore limiting the new through-the-wall classes to products 

manufactured before January 23, 2010. 

See definition of "through-the-wall air 

conditioner and heat pump." Thus, 

these classes will exist only for a period 

of four years following the compliance 

date established for the new standards 

for conventional products. During that 

time, the availability of suitable highefficiency components will likely 

increase and the manufacturers of 

through-the-wall products will be able 

to investigate options for meeting the 

more stringent 12 SEER level. Both will 

make it easier for through-the-wall 

products to attain the 12 SEER 

minimum efficiency required of other 

products. thereby making 12 SEER a technologically feasible and 

economically justified level. The sunset 

provision will help to ensure that other 

manufacturers will not make the 

investment required to market through-
EE-RM/STD-98-440- 30'

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36403

the-wall products heavily for As previously discussed (Section through Friday, telephone (202) 586-

conventional applications during the VI.G.1, "Peak Power"), the model used 3142.

four year period. It will also limit the by DOE to estimate both peak power The October 5, 2000 NOPR contained

time during which lower efficiency and power plant emission impacts due a summary of the Regulatory Analysis

through-the-wall equipment is installed, to appliance standards was updated to which focused on the major alternatives

ensuring that additional energy savings include a more representative set of considered in arriving at the approach

associated with the 12 SEER level are end-use load shapes for the residential, to improving the energy efficiency of

realized in a certain time period. commercial, industrial, and consumer products. 65 FR 59627-29.

To further limit the application of the transportation sectors. As a result of this The alternatives considered in DOE's

through-the-wall class, products in update, NEMS-BRS estimates somewhat analysis are consumer product labeling,

these classes may not exceed 30,000 greater power plant emission impacts consumer education, prescriptive

BTU/hr in cooling capacity, may not (in the form of reduced CO2 and NOx standards, consumer tax credits,

conBTU/in specia weatherization featurs emissions) from increased central air consumer rebates, manufacturer tax

contain special weatherization features conditioner and heat pump standards. credits, voluntary efficiency targets, low

that would allow them to be installed conditioner and heat pump standards.

totally outdoors, and must be marked Appendix M of the TSD includes an income subsidy, mass government

for installation only through an exterior pdated set of power plant emission purchases, and performance standards.

wall. DOE also limits the size of the area impacts. These changes, which are The reader is referred to the complete O s h . i e i discussed in the FONSI, do not affect "Regulatory Impact Analysis," which is

used for condenser air exchange in DOE's finding of no significant impact. contained in the TSD, available as

order to limit these classes to those The comments of some environmental indicated at the beginning of this notice

products intended primarily for advocates argue that DOE is required to or from the contact person named at the

replacement applications. prepare an environmental impact beginning of this notice. The TSD

2. Small Duct, High Velocity Systems statement for today's final rule because, provides: (1) A statement of the problem

in their view, DOE is "rolling back" 13 addressed by this regulation, and the

In today's final rule, DOE establishes SEER standards, and that constitutes a mandate for government action; (2) a

a separate product class for SDHV major agency action significantly description and analysis of the feasible

systems and retains the NAECA affecting the quality of the environment. policy alternatives to this regulation; (3)

standards for these products pending As explained in Section VI.H.5 of this a quantitative comparison of the

further study to establish appropriate Supplementary Information, DOE impacts of the alternatives; and (4) the

higher standard levels. DOE intends to believes these comments are based on national economic impacts of the

publish a final rule for the test an erroneous premise, namely, that the proposed standard.

procedure in the near future. Any future January 22 final rule attained permanent Review Under the Regulatory

work to establish appropriate minimum status even though the rule never Flexibility Act

efficiency standards for SDHV systems became effective. Instead, the correct

will be based on the testing baseline for assessing the impacts of The Regulatory Flexibility Act, 5

requirements developed for SDHV today's rule, in DOE's view, are the U.S.C. 601 et seq., requires that a

systems in the test procedure revision existing energy conservation standards Federal agency prepare a regulatory

currently being finalized, or in a future established by NAECA (i.e, SEER of 10.0 flexibility analysis for any rule for

revision specifically aimed at SDHV and HSPF of 6.8 for split systems which the agency is required to publish

products. manufactured after January 1, 1992, a general notice of proposed

SEER of 9.7 and HSPF of 6.6 for single rulemaking. Such an assessment of the

VI. Procedural Issues and Regulatory package systems manufactured after impact of regulations on small

Review January 1, 1993). The 12 SEER standard businesses is not required if the agency

A. Review Under the National in today's rule will increase the energy certifies that the rule would not, if

Environmental Policy Act efficiency of the most common type of promulgated, have a significant

central air conditioners by economic impact on a substantial

DOE prepared an Environmental approximately 20 percent. number of small entities (5 U.S.C.

Assessment (EA) (DOE/EA-1352) 605(b)). To be categorized as a "small"

available from: U.S. Department of B. Review Under Executive Order 12866 air conditioning and warm air heating

Energy, Office of Energy Efficiency and Today's regulatory action has been equipment manufacturer, a firm must

Renewable Energy, Forrestal Building, determined to be an "economically employ no more than 750 employees.

Mail Station EE-41, 1000 Independence significant regulatory action" under In the October 5, 2000 NOPR, DOE

Avenue, SW, Washington, DC 20585- Executive Order 12866, "Regulatory discussed the potential impacts on

0121, (202) 586-0854. DOE found the Planning and Review." 58 FR 51735 small businesses of the October 5

environmental effects associated with (October 4, 1993). Accordingly, today's proposed rule (corresponding to Trial

various standard efficiency levels for action was subject to review under the Standard Level 3), and certified that the

central air conditioners and heat pumps, Executive Order by the Office of proposed standard levels would not

including 12 SEER, to be not significant. Information and Regulatory Affairs have a significant economic impact on

Therefore DOE is publishing, elsewhere (OIRA) of the Office of Management and a substantial number of small entities.

in this issue of the Federal Register a Budget. 65 FR 59629-30. DOE reported that

Finding of No Significant Impact The draft submitted to OIRA and nearly all small businesses engaged in

(FONSI) pursuant to the National other documents submitted to OIRA for the manufacture of central air

Environmental Policy Act of 1969 review have been made a part of the conditioners and heat pumps produce

(NEPA), 42 U.S.C. 4321 et seq., the rulemaking record and are available for products that DOE has called "niche"

regulations of the Council on public review in DOE's Freedom of products. To avoid adversely impacting

Environmental Quality (40 CFR Parts Information Reading Room, 1000 manufacturers of niche products, DOE

1500-1508), and DOE's regulations for Independence Avenue, SW., proposed a separate product class for

compliance with NEPA (10 CFR Part Washington, DC 20585, between the through-the-wall equipment, much of

1021). hours of 9 a.m. and 4 p.m., Monday which is manufactured by small

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440-WI 

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36403 

the-wall products heavily for 

conventional applications during the 

four year period. It will also limit the 

time during which lower efficiency 

through-the-wall equipment is installed, 

ensuring that additional energy savings 

associated with the 12 SEER level are 

realized in a certain time period. 

To further limit the application of the 

through-tha-wall class, products in 

these classes may not exceed 30,000 

BTU/hr in cooling capacity, may not 

contain special weatherization features 

that would allow them to be installed 

totally outdoors, and must be marked 

for installation only through an exterior 

wall. DOE also limits the size of the area 

used for condenser air exchange in 

order to limit these classes to those 

products intended primarily for 

replacement applications. 

2. Small Duct, High Velocity Systems 

In today's final rule. DOE establishes 

a separate product class for SDHV 

systems and retains the NAECA 

standards for these products pending 

further study to establish appropriate 

higher standard levels. DOE intends to 

publish a final rule for the test 

procedure in the near future. Any future 

work to establish appropriate minimum 

efficiency standards for SDHV systems 

wil1 be based on the testing 

requirements developed for SDHV 

systems in the test procedure revision 

currently being finalized. or in a future 

revision specifically aimed at SDHV 

products.· 

vm. Procedural Issues and Regulatory 

Review 

A. Review Under the National 

Environmental Policy Act 

DOE prepared an Environmental 

Assessment (EA) (DOEIEA-1352) 

available from: U.S. Department of 

Energy, Office of Energy Efficiency and 

Renewable Energy, Forrestal Building. 

Mail Station EE-41. 1000 Independence 

Avenue. SW, Washington. DC 20585-

0121, (202) 586-0854. DOE found the 

environmental effects associated with 

various standard efficiency levels for 

central air conditioners and heat pumps. 

including 12 SEER. to be not significant. 

Therefore DOE is publishing. elsewhere 

in this issue of the Federal Register a 

Finding of No Significant Impact 

(FONSI) pursuant to the National 

Environmental Policy Act of 1969 

(NEPA). 42 U.S.C. 4321 et seq., the 

regulations of the Council on Environmental Quality (40 CFR Parts 

1500-1508), and DOE's regulations for 

compliance with NEPA (10 CFR Part 

1021). 

As previously discussed (Section 

V1.G.l. "Peak Power"), the model used 

by DOE to estimate both peak power 

and power plant emission impacts due 

to appliance standards was updated to 

include a more representative set of 

end-use load shapes for the residential, 

commercial, industrial. and 

transportation sectors. As a result of this 

update. NEM8-BRS estimates somewhat 

greater power plant emission impacts 

(in the form of reduced CCh and NOx emissions) from increased central air 

conditioner and heat pump standards. 

Appendix M of the TSD includes an updated set of power plant emission 

impacts. These changes, which are 

discussed in the FONSI, do not affect 

DOE's finding of no significant impact. 

The comments of some environmental 

advocates argue that DOE is required to 

prepare an environmental impact 

statement for today's final rule because, 

in their view. DOE is "rolling back" 13 

SEER standards, and that constitutes a 

major agency action significantly 

affecting the quality of the environment. 

As explained in Section V1.H.5 of this 

Supplementary Information. DOE 

believes these comments are based on 

an erroneous premise. namely. that the 

January 22 final rule attained permanent 

status even though the rule never 

became effective. Instead. the correct 

baseline for assessing the impacts of 

today's rule. in DOE's view. are the 

existing energy conservation standards 

established by NAECA (i.e, SEER ofl0.0 

and HSPF of 6.8 for split systems 

manufactured after January 1, 1992, 

SEER of 9.7 and HSPF of 6.6 for single 

package systems manufactured after 

January 1, 1993). The 12 SEER standard 

in today's rule will increase the energy 

effiCiency of the most common type of 

central air conditioners by 

approximately 20 percent. 

B. Review Under Executive Order 12866 

Today's regulatory action has been 

determined to be an "economically 

significant regulatory action" under 

Executive Order 12866. "Regulatory 

Planning and Review." 58 FR 51735 

(October 4,1993). Accordingly. today's 

action was subject to review under the 

Executive Order by the Office of 

Information and Regulatory Affairs 

(OIRA) of the Office of Management and 

Budget. 

The draft submitted to OIRA and 

other documents submitted to OIRA for 

review have been made a part of the 

rulemaking record and are available for 

public review in DOE's Freedom of 

Information Reading Room. 1000 

Independence Avenue, SW .• 

Washington. DC 20585. between the 

hours of 9 a.m. and 4 p.m., Monday 

through Friday. telephone (202) 586-

3142. 

The October 5, 2000 NOPR contained 

a summary of the Regulatory Analysis 

which focused on the major alternatives 

considered in arriving at the approach 

to improving the energy efficiency of 

consumer products. 65 FR 59627-29. 

The alternatives considered in DOE's 

analysis are consumer product labeling, 

consumer education, prescriptive 

standards, consumer tax credits, 

consumer rebates, manufacturer tax 

credits, voluntary efficiency targets, low 

income subsidy, mass government 

purchases, and performance standards. 

The reader is referred to the complete 

"Regulatory Impact Analysis," which is 

contained in the TSD, available as 

indicated at the beginning of this notice 

or from the contact person named at the 

beginning of this notice. The TSD 

provides: (1) A statement of the problem 

addressed by this regulation. and the 

mandate for government action; (2) a 

description and analysis of the feasible 

policy alternatives to this regulation; (3) 

a quantitative comparison of the 

impacts of the alternatives; and (4) the 

national economic impacts of the 

proposed standard. 

C. Review Under the Regulatory 

Flexibility Act 

The Regulatory Flexibility Act. 5 

U.S.C. 601 et seq., requires that a 

Federal agency prepare a regulatory 

flexibility analysis for any rule for 

which the agency is required to publish 

a general notice of proposed 

rulemaking. Such an assessment of the 

impact of regulations on small 

businesses is not required if the agency 

certifies that the rule would not, if 

promulgated. have a significant 

economic impact on a substantial 

number of small entities (5 U.S.C. 

605(b)). To be categorized as a "small" 

air conditioning and warm air heating 

equipment manufacturer, a firm must 

employ no more than 750 employees. 

In ilie October 5,2000 NOPR, DOE 

discussed the potential impacts on 

small businesses of the October 5 

proposed rule (corresponding to Trial 

Standard Level 3). and certified that the 

proposed standard levels would not 

have a significant economic impact on 

a substantial number of small entities. 

65 FR 59629-30. DOE reported that 

nearly all small businesses engaged in 

the manufacture of central air 

conditioners and heat pumps produce 

products that DOE has called "niche" 

products. To avoid adversely impacting 

manufacturers of niche products, DOE 

proposed a separate product class for 

through-the-wall equipment. much of 

which is manufactured by small 
EE-RM/STD-98-440..OLj

36404 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

manufacturers. See 65 FR 59609-11. In D. Review Under the Paperwork or regulations that preempt State law or

the preamble to the January 22 final Reduction Act that have federalism implications.

rule, DOE addressed comments No new information or record keeping Agencies are required to examine the

regarding the impacts more stringent requirements are imposed by this constitutional and statutory authority

standards might have on the availability rulemaking. Accordingly, no Office of supporting any action that would limit

of niche products, and although the Management and Budget clearance is the policymaking discretion of the

final rule adopted the higher Trial required under the Paperwork States an ssess the necessity

Standard Level 4 standards, DOE Reduction Act. 44 U.S.C. 3501 et seq. for such actions. Agencies also must

deferred setting an amended standard EReiwUdrxcuveOer198 have an accountable process to ensure

deferred setting atsn6 FR 7175,7196- E. Review Under Executive Order 12988 meaningful and timely input by State

97. The omission of niche products from With respect to the review of existing and local officials in the development of

he n in e ao ddeed regulations and the promulgation of regulatory policies that have federalism

the coJanuary 22 final rule alsoaressed new regulations, Section 3(a) of implications. DOE published its

pthe concern expressed by the v Executive Order 12988, "Civil Justice intergovernmental consultation policy

Department of Justice about the impact Reform," 61 FR 4729 (February 7, 1996), on March 14, 2000. 65 FR 13735. DOE

of the October 5, 2000, proposed rule on imposes on Executive agencies the has examined today's rule and has

small manufacturers (see preamble to general duty to adhere to the following determined that it would not have a

January 22 final rule at 66 FR 7192). requirements: (1) Eliminate drafting substantial direct effect on the States, on

Because the final rule excluded most errors and ambiguity; (2) write the relationship between the national

products made by small manufacturers, regulations to minimize litigation; and government and the States, or on the

DOE affirmed its certification. (3) provide a clear legal standard for distribution of power and

Today DOE publishes energy affected conduct rather than a general responsibilities among the various

conservation standards for central air standard and promote simplification levels of government. State regulations

conditioners and heat pumps that and burden reduction. With regard to that may have existed on the products

correspond to Trial Standard Level 2. the review required by section 3(a), that are the subject of today's rule were

Primarily because of severe size section 3(b) of Executive Order 12988 preempted by the Federal standards

constraints, DOE is establishing separate specifically requires that Executive established in NAECA. As discussed in

product classes for through-the-wall agencies make every reasonable effort to Section VI.H.3, States can petition DOE

duct classes fr through-theensure that the regulation: (1) Clearly for exemption from such preemption to

equipment and small duct, high velocity specifies the preemptive effect, if any; the extent, and based on criteria, set

systems, which will be required to meet (2) clearly specifies any effect on forth in section 327 of EPCA (42 U.S.C.

a lower SEER and HSPF. In light of existing Federal law or regulation; (3) 6297).

these product class exceptions and after provides a clear legal standard for H. Review Under the Unfunded

considering the information in the TSD affected conduct while promoting Mandates Reform Act of 1995

and public comments, including the simplification and burden reduction; (4)r co roo regulatr

views of the Department of Justice (see specifies the retroactive effect, if any; (5) With respect to a proposed regulatory

October 19, 2001, letter in the Appendix adequately defines key terms; and (6) action that may result in the

to this notice), DOE has concluded that addresses other important issues expenditure by State, local and tribal

the 12 SEER standards in today's final affecting clarity and general governments, in the aggregate, or by the

rule will not have a disproportionate draftsmanship under any guidelines private sector of $100 million or more,

adverse impact on a substantial number issued by the Attorney General. Section section 202 of the Unfunded Mandates

of small entities. In its comments, the 3(c) of Executive Order 12988 requires Reform Act of 1995 (UMRA) requires

Office of Advocacy of the U.S. Small Executive agencies to review regulations Federal agency to publish estimates of

Business Administration stated that the in light of applicable standards in the resulting costs, benefits and other

proposed 12 SEER standard would section 3(a) and section 3(b) to effes on te natnal nomy.

substantially improve energy efficiency determine whether they are met or it is U.S.C.1532(a), (b) UMRA also requires

whinnovatina job de for, them. DOE reviewed today's rule under effective process to permit timely input

innovation and jobs, and, therefore, it the standards of section 3 of te by state, local, and tribal governments

strongly supports the 12 SEER standard. Executive Order and determined that, to on a proposed significant

On this basis, DOE certifies that today's the extent permitted by law, this rule intergovernmental mandate. DOE's

rule will not have a significant impact meets the relevant standards. consultation process is described in a

on a substantial number of small notice published in the Federal Register

entities. Accordingly, DOE has not F. Review Under Executive Order 12630 on March 18,1997. 62 FR 12820.

prepared a regulatory flexibility DOE has determined pursuant to Today's rule will impose expenditures

analysis. Executive Order 12630, "Governmental of $100 million or more on the private

DOE's certification is based on an Actions and Interference with sector. It does not contain a Federal

assessment of the impact the standards Constitutionally Protected Property intergovernmental mandate.

will have on small entities that would Rights," 52 FR 8859 (March 18, 1988), Section 202 of UMRA authorizes an

be directly affected by their u that this rule will not result in any agency to respond to the content

be dimplementation, which is the takings that might require compensation requirements of UMRA in any other

implementation, which is all the under the Fifth Amendment to the statement or analysis that accompanies

Regulatory Flexibilit Act requires. The United States Constitution. the proposed rule. 2 U.S.C. 1532(c). The

assertion by ARI, in its petition for content requirements of section 202(b)

consideration (ARI, No. 138, at section G. Review Under Executive Order 13132 of UMRA relevant to a private sector

m), that DOE is required to assess the Executive Order 13132, "Federalism," mandate substantially overlap the

indirect effects of proposed standards is 64 FR 43255 (August 4, 1999) imposes economic analysis requirements that

contrary to established case law certain requirements on agencies apply under section 325(o) of EPCA and

interpreting the Act. formulating and implementing policies Executive Order 12866. The "Regulatory

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-98-440-~Lf 

36404 Federal Register/Vol. 67, No. lOO/Thursday, May 23, 2002/Rules and Regulations 

manufacturers. See 65 FR 59609-11. In 

the preamble to the January 22 final 

rule, DOE addressed comments 

regarding the impacts more stringent 

standards might have on the availability 

of niche products, and although the 

final rule adopted the higher Trial 

Standard Level 4 standards, DOE 

deferred setting an amended standard 

for niche products. 66 FR 7175, 7196-

97. The omission of niche products from 

the January 22 final rule also addressed 

the concern expressed by the 

Department of Justice about the impact 

of the October 5,2000, proposed rule on 

small manufacturers (see preamble to 

January 22 final rule at 66 FR 7192). 

Because the final rule excluded most 

products made by small manufacturers, 

DOE affirmed its certification. 

Today DOE publishes energy 

conservation standards for central air 

conditioners and heat pumps that 

correspond to Trial Standard Level 2. 

Primarily because of severe size 

constraints, DOE is establishing separate 

product classes for through-the-wall 

equipment and small duct, high velocity 

systems, which will be required to meet 

a lower SEER and HSPF. In light of 

these product class exceptions and after 

considering the information in the TSD 

and public comments, including the 

views of the Department of Justice (see 

October 19, 2001, letter in the Appendix 

to this notice), DOE has concluded that 

the 12 SEER standards in today's final 

rule will not have a disproportionate 

adverse impact on a substantial number 

of small entities. In its comments, the 

Office of Advocacy of the U.S. Small 

Business Administration stated that the 

proposed 12 SEER standard would 

substantially improve energy efficiency 

while preserving competition, 

innovation and jobs, and, therefore, it 

strongly supports the 12 SEER standard. 

On this basis, DOE certifies that today's 

rule will not have a significant impact 

on a substantial number of small 

entities. Accordingly, DOE has not 

prepared a regulatory flexibility 

analysis. 

DOE's certification is based on an 

assessment of the impact the standards 

will have on small entities that would 

be directly affected by their 

implementation, which is all the 

Regulatory Flexibility Act requires. The 

assertion by ARl, in its petition for 

consideration (ARl, No. 138, at section 

m), that DOE is required to assess the 

indirect effects of proposed standards is 

contrary to established case law 

interpreting the Act. 

D. Review Under the Paperwork 

Reduction Act 

No new information or record keeping 

requirements are imposed by this 

rulemaking. Accordingly, no Office of 

Management and Budget clearance is 

required under the Paperwork 

Reduction Act. 44 U.S.C. 3501 et seq. 

E. Review Under Executive Order 12988 

With respect to the review of existing 

regulations and the promulgation of 

new regulations, Section 3(a) of 

Executive Order 12988, "Civil Justice 

Reform," 61 FR 4729 (February 7,1996), 

imposes on Executive agencies the 

general duty to adhere to the follOWing 

requirements: (1) Eliminate drafting 

errors and ambiguity; (2) write 

regulations to minimize litigation; and 

(3) provide a clear legal standard for 

affected conduct rather than a general 

standard and promote Simplification 

and burden reduction. With regard to 

the review required by section 3(a), 

section 3(b) of Executive Order 12988 

speCifically requires that Executive 

agencies·make every reasonable effort to ensure that the regulation: (1) Clearly 

specifies the preemptive effect, if any; 

(2) clearly specifies any effect on existing Federal law or regulation; (3) 

provides a clear legal standard for 

affected conduct while promoting 

Simplification and burden reduction; (4) 

specifies the retroactive effect, if any; (5) 

adequately defines key terms; and (6) 

addresses other important issues 

affecting clarity and general 

draftsmanship under any guidelines 

issued by the Attorney General. Section 

3(c) of Executive Order 12988 requires 

Executive agencies to review regulations 

in light of applicable standards in 

section 3(a) and section 3(b) to 

determine whether they are met or it is 

unreasonable to meet one or more of 

them. DOE reviewed today's rule under 

the standards of section 3 of the 

Executive Order and determined that, to 

the extent permitted by law, this rule 

meets the relevant standards. 

F. Review Under Executive Order 12630 

DOE has determined pursuant to 

Executive Order 12630, "Governmental 

Actions and Interference with 

Constitutionally Protected Property 

Rights," 52 FR 8859 (March 18,1988), 

that this rule will not result in any 

takings that might require compensation 

under the Fifth Amendment to the 

United States Constitution. 

G. Review Under Executive Order 13132 

Executive Order 13132, "Federalism," 

64 FR 43255 (August 4, 1999) imposes 

certain requirements on agencies 

formulating and implementing policies 

or regulations that preempt State law or that have federalism implications. 

Agencies are required to examine the 

constitutional and statutory authority 

supporting any action that would limit 

the policymaking discretion of the 

States and carefully assess the necessity 

for such actions. Agencies also must 

have an accountable process to ensure 

meaningful and timely input by State 

and local officials in the development of 

regulatory policies that have federalism 

implications. DOE published its 

intergovernmental consultation policy 

on March 14, 2000. 65 FR 13735. DOE 

has examined today's rule and has 

determined that it would not have a 

substantial direct effect on the States, on the relationship between the national 

government and the States. or on the 

distribution of power and 

responsibilities among the various 

levels of government. State regulations 

that may have existed on the products 

that are the subject ohoday's rule were 

preempted by the Federal standards 

established in NAECA. As discussed in 

Section VI.H.3, States can petition DOE 

for exemption from such preemption to 

the extent, and based on criteria. set 

forth in section 327 of EPCA (42 U.S.C. 

6297). 

H. Review Under the Unfunded 

Mandates Reform Act of 1995 

With respect to a proposed regulatory 

action that may result in the 

expenditure by State, local and tribal 

governments. in the aggregate. or by the 

private sector of $100 million or more, 

section 202 of the Unfunded Mandates 

Reform Act of 1995 (UMRA) requires a 

Federal agency to publish estimates of 

the resulting costs, benefits and other 

effects on the national economy. 2 

U.S.C. 1532(a), (b). UMRA also requires 

each Federal agency to develop an 

effective process to permit timely input 

by state, local, and tribal governments 

on a proposed significant 

intergovernmental mandate. DOE's 

consultation process is described in a 

notice published in the Federal R.egister 

on March 18. 1997. 62 FR 12820. 

Today's rule will impose expenditures 

of $100 million or more on the private 

sector. It does not contain a Federal 

intergovernmental mandate. 

Section 202 of UMRA authorizes an 

agency to respond to the content 

requirements of UMRA in any other 

statement or analysis that accompanies 

the proposed rule. 2 U.S.C. 1532(c). The 

content requirements of section 202(b) 

of UMRA relevant to a private sector 

mandate substantially overlap the 

economic analysis requirements that 

apply under section 325(0) of EPCA and 

Executive Order 12866. The "Regulatory 
EE-RM/STD-98-440-3oq

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36405

Impact Analysis" section of the TSD for any proposed significant energy action, considered and not just avoided

this rule responds to those the agency must give a detailed electricity costs. DOE has set forth its

requirements. statement of any adverse effects on evaluation of costs and benefits

Under section 205 of UMRA, DOE is energy supply, distribution, or use elsewhere in this notice (see Section

obligated to identify and consider a should the proposed action be VII). DOE has also considered various

reasonable number of regulatory implemented, and of reasonable regulatory and non-regulatory

alternatives before promulgating a rule alternatives to the action and their alternatives to today's proposed

for which a written statement under expected benefits on energy supply, standard (see Section VIII.B., "Review

section 202 is required. DOE is required distribution, and use. Under Executive Order 12866," and the

to select from those alternatives the Today's rule would not have any Regulatory Impact Analysis portion of

most cost-effective and least adverse effects on the supply, the TSD). DOE has concluded that the

burdensome alternative that achieves distribution, or use of energy in the near costs associated with elevating the

the objectives of the rule unless DOE term because it would not have any current standard to the standard level

publishes an explanation for doing effect on the manufacture of central air set forth in the January 22, 2001, final

otherwise or the selection of such an conditioners and heat pumps until rule exceed the associated benefits,

alternative is inconsistent with law. As 2006. In the longer term, beginning in including the benefit of avoided

required by section 325(o) of the Energy 2006, the standards in this rule would electricity consumption.

Policy and Conservation Act (42 U.S.C. have a small positive impact on the

l 295(o)), today's rule would establish electricity supply in the United States. K. Congressional Notification

e lergy conservation standards for The standards that DOE is adopting As required by 5 U.S.C. 801, DOE will

ct ntral air conditioners and heat pumps would represent a 20 percent submit to Congress a report regarding

that are designed to achieve the improvement in the energy efficiency of the issuance of today's final rule prior

maximum improvement in energy split-system central air conditioners, to the effective date set forth at the

effi,:iency that DOE has determined to and a 9 percent improvement in heating outset of this notice. DOE also will

be both technologically feasible and efficiency for heat pumps. The submit the supporting analyses to the

ecor omically justified. A full discussion standards would improve the cooling Comptroller General (GAO) and make

of th,. alternatives considered by DOE is efficiency of single-package heat pumps them available to each House of

pres..nted in the "Regulatory Impact by 24 percent and the heating efficiency Congress. The report will state that it

Anal) sis" section of the TSD for today's of single-package heat pumps by 12 has been determined that the rule is a

.:ule. percent. . ul e Unde theTrasyandAs explained in Section VII of this major rule" as defined by 5 U.S.C.

I. arview Under the Treasury and Supplementary Information, DOE 804(2).

General Government Appropriations estimates the standards would save List of Subjects in 10 CFR Part 430

Act, 1999 approximately 3 quads of energy over 25

Section 654 of the Treasury and years (2006 through 2030). Also, in Administrative practice and

General Government Appropriations determining whether these standards procedure, Energy conservation,

Act, 1999 (Pub. L. No. 105-277) requires are economically justified, DOE Household appliances.

Federal agencies to issue a Family considered as a benefit the potential of Issued in Washington, D.C., on May 14,

Policymaking Assessment for any the standards to improve the reliability 2002.

proposed rule or policy that may affect of the electric generation and David K. Garman,

family well-being. Today's rule would distribution system or to reduce the Assistant Secretary, Energy Efficiency and

not have any impact on the autonomy environmental impacts associated with Renewable Energy.

or integrity of the family as an new power plants and transmission

institution. Accordingly, DOE did not lines. See Section VI.G. of this For the reasons set forth in the

prepare a Family Policymaking Supplementary Information. DOE's preamble, Part 430 of Chapter II of Title

Assessment. analysis predicts today's standards 10, Code of Federal Regulations is

would result in an estimated reduction amended, as set forth below.

J. Review UnderExecutive Order 13211 in installed generation capacity in the PART 430-ENERGY CONSERVAON

Executive Order 13211, "Actions year ^l 2020 of approximately 8.7 PR G CONS ER

Concerning Regulations That gigawatts. This would be the equivalent PROGRAM FOR CONSUME

Significantly Affect Energy Supply, of three 400 megawatt coal-fired plants PRODUCTS

Distribution, or Use," (66 FR 28355, and nineteen 400 megawatt gas-fired athrititatin fr Part 430

May 22, 2001) requires Federal agencies plants1.utorit itationfor t

to prepare and submit to the Office of DOE disagrees with the NRDC's view continues to read as follows:

Information and Regulatory Affairs that the levels in the January 22 final Authority: 42 U.S.C. 6291-6309; 28 U.S.C.

(OIRA), Office of Management and rule are the appropriate baseline for 2461 note.

Budget, a Statement of Energy Effects for determining whether today's rule is 2. The final rule amendg 10 CFR

any significant energy action. A likely to have a significant adverse effect published January 22 2001 (66

"significant energy action" is defined as on the supply, distribution, or use of pt 40 ishedanar(66

any action by an agency that energy and, thus, subject to the

promulgates or is expected to lead to the Executive Order's analysis requirement. 3. Section 430.2 is amended by

promulgation of a final rule, and that: (NRDC, No. 250 at p. 9). For reasons adding definitions for "effective date,"

(1) Is a significant regulatory action stated in Section HI, we think the proper "maximum allowable energy use,"

under Executive Order 12866, or any baseline is the currently effective "maximum allowable water use,"

successor order; and (2) is likely to have standards (i.e., the standards prescribed "minimum required energy efficiency,"

a significant adverse effect on the by NAECA). In any case, section 325 of "small duct, high velocity system," and

supply, distribution, or use of energy; or EPCA requires DOE to weigh all of the "through-the-wall air conditioner and

(3) is designated by the Administrator of significant costs and benefits associated heat pump" in alphabetical order to

OIRA as a significant energy action. For with standard levels that are being read as follows:

EE-RM-STD-98-440 COMMENT 304

EE.RM/STD.98.440-~q 

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36405 

Impact Analysis" section of the TSD for 

this rule responds to those 

requirements. 

Under section 205 of UMRA, DOE is 

obligated to identify and consider a reasonable number of regulatory 

alternatives before promulgating a rule 

for which a written statement under 

section 202 is required. DOE is required 

to select from those alternatives the 

most cost-effective and least 

burdensome alternative that achieves 

the objectives of the rule unless DOE 

publishes an explanation for doing 

otherwise or the selection of such an 

alternative is inconsistent with law. As 

required by section 325(0) of the Energy 

Policy and Conservation Act (42 U.S.C. 

l 295(0)), today's rule would establish 

e.lergy conservation standards for 

Ct ntral air conditioners and heat pumps th~\t are desi.sned to achieve the 

maximum improvement in energy el'fi,~iency that DOE has determined to 

be both technologically feasible and ecm ')mically justified. A full discussion 

of th.' alternatives considered by DOE is 

prest-.Gted in the "Regulatory Impact 

Anal)sis" section of the TSD for today's 

~"Ule. 

1. nalliew Under the Treasury and 

General Government Appropriations 

Act, 1999 

Section 654 of the Treasury and 

General Government Appropriations 

Act, 1999 (Pub. L. No. 105-277) requires 

Federal agencies to issue a Family 

Policymaking Assessment for any 

proposed rule or policy that may affect 

family well-being. Today's rule would 

not have any impact on the autonomy 

or integrity of the family as an institution. Accordingly, DOE did not 

prepare a Family Policymaking 

Assessment. 

J. Review Under Executive Order 13211 

Executive Order 13211, "Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use," (66 FR 28355, 

May 22, 2001) requires Federal agencies 

to prepare and submit to the Office of 

Infornlation and Regulatory Affairs 

(OIRA), Office of Management and 

Budget, a Statement of Energy Effects for 

any significant energy action. A 

"significant energy action" is defined as 

any action by an agency that 

promulgates or is expected to lead to the 

promulgation of a final rule, and that: 

(1) Is a significant regulatory action 

under Executive Order 12866, or any successor order; and (2) is likely to have 

a significant adverse effect on the 

supply, distribution, or use of energy; or 

(3) is designated by the Administrator of 

OIRA as a significant energy action. For 

any proposed significant energy action, 

the agency must give a detailed 

statement of any adverse effects on energy supply, distribution, or use 

should the proposed action be 

implemented, and of reasonable 

alternatives to the action and their 

expected benefits on energy supply, 

distribution, and use. Today's rule would not have any 

adverse effects on the supply, 

distribution, or use of energy in the near 

term because it would not have any 

effect on the manufacture of central air 

conditioners and heat pumps until 

2006. In the longer term, beginning in 

2006, the standards in this rule would 

have a small positive impact on the 

electricity supply in the United States. 

The standards that DOE is adopting 

would represent a 20 percent 

improvement in the energy efficiency of 

split-system central air conditioners, 

and a 9 percent improvement in heating 

effiCiency for heat pumps. The 

standards would improve the cooling 

efficiency of single-package heat pumps 

by 24 percent and the heating efficiency 

of single-package heat pumps by 12 

percent. 

As explained in Section vn of this 

Supplementary Information, DOE 

estimates the standards would save approximately 3 quads of energy over 25 

years (2006 through 2030). Also, in 

determining whether these standards 

are economically justified, DOE 

considered as a benefit the potential of 

the standards to improve the reliability 

of the electric generation and 

distribution system or to reduce the 

environmental impacts associated with 

new power plants and transmission 

lines. See Section VI.G. of this 

Supplementary Information. DOE's 

analysis predicts today's standards 

would result in an estimated reduction 

in installed generation capacity in the 

year 2020 of approximately 8.7 

gigawatts. This would be the equivalent 

of three 400 megawatt coal-fired plants 

and nineteen 400 megawatt gas-fired 

plants. 

DOE disagrees with the NRDC's view 

that the levels in the January 22 final 

rule are the appropriate baseline for 

determining whether today's rule is 

likely to have a significant adverse effect on the supply, distribution, or use of 

energy and, thus, subject to the 

Executive Order's analysis requirement. 

(NRDC, No. 250 at p. 9). For reasons stated in Section m, we think the proper 

baseline is the currently effective 

standards (i.e., the standards prescribed 

by NAECA). In any case, section 325 of 

EPCA requires DOE to weigh all of the 

significant costs and benefits associated 

with standard levels that are being 

considered and not just avoided 

electricity costs. DOE has set forth its 

evaluation of costs and benefits 

elsewhere in this notice (see Section 

vn). DOE has also considered various 

regulatory and non-regulatory 

alternatives to today's proposed 

standard (see Section VIII.B., "Review 

Under Executive Order 12866," and the 

Regulatory Impact Analysis portion of 

the TSD). DOE has concluded that the 

costs associated with elevating the 

current standard to the standard level 

set forth in the January 22, 2001, final 

rule exceed the associated benefits, 

including the benefit of avoided 

electricity consumption. 

K. Congressional Notification 

As required by 5 U.S.C. 801, DOE will 

submit to Congress a report regarding 

the issuance of today's final rule prior 

to the effective date set forth at the 

outset of this notice. DOE also will 

submit the supporting analyses to the 

Comptroller General (GAO) and make 

them available to each House of 

Congress. The report will state that it 

has been determined that the rule is a 

"major rule" as defined by 5 U.S.C. 

804(2). 

List of Subjects in 10 CFR Part 430 

Administrative practice and 

procedure, Energy conservation. 

Household appliances. 

Issued in Washington. D.C .• on May 14. 

2002. 

David K. Garman. 

Assistant Secretary. Energy Efficiency and 

Renewable Energy. 

For the reasons set forth in the 

preamble. Part 430 of Chapter II of Title 

10. Code of Federal Regulations is 

amended, as set forth below. 

PART 43O-ENERGY CONSERVATION 

PROGRAM FOR CONSUMER 

PRODUCTS 

1. The authority citation for Part 430 

continues to read as follows: 

Authority: 42 U.S.C. 6291-6309; 28 U.S.C. 

2461 note. 

2. The final rule amending 10 CFR 

part 430 published January 22, 2001 (66 

FR 7170) is withdrawn. 

3. Section 430.2 is amended by 

adding definitions for "effective date." 

"maximum allowable energy use." 

"maximum allowable water use." 

"minimum required energy efficiency." 

"small duct, high velocity system," and 

"through-the-wall air conditioner and 

heat pump" in alphabetical order to 

read as follows: 
EE-R M/STD-98-440' 50 L

36406 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

§430.2 Definitions. conditioner or heat pump that is Seasonal Heating

* * * * * designed to be installed totally or energy effi- seasonal

Effective date means the date on and partially within a fixed-size opening in Product class ciency perform- ratio ance factor

after which a manufacturer must an exterior wall, and:(SEER) (HSPF)

comply with an energy conservation (1) Is manufactured prior to January

standard in the manufacture of a 23, 2010; (iv) Single package

covered product. (2) Is not weatherized; heat pumps ....... 12 7.4

* * * * * (3) Is clearly and permanently marked (v)(A) Through-theMaximum allowable energy use for installation only through an exterior wall air condimeans an energy conservation standard wall; tioners and heat

for a covered product, expressed in (4) Has a rated cooling capacity no pumps-split

terms of a maximum amount of energy greater than 30,000 Btu/hr; system10.9 7.1 (v)(B) Through-thethat may be consumed, which is (5) Exchanges all of its outdoor air wall air condiestablished by statute or by a final rule across a single surface of the equipment tioners and heat

that has modified this part pursuant to cabinet; and pumps-single

a date DOE has selected consistent with (6) Has a combined outdoor air package ............. 10.6 7.0

the Congressional Review Act (5 U.S.C. exchange area of less than 800 square (vi) Small duct,

801-804) ,nd any other applicable law, inches (split systems) or less than 1,210 high velocity sysor the date on w] ich DOE completes square inches (single packaged systems) tems ............ 100 6.8

action on ny tim.ly-initiated as measured on the surface described in NAECA-prescribed value subject to

administra ive rec rnsideration, paragraph (5) of this definition. amendment.

whichever ' later. * * * * * * *

~~~~* * * * ~6. Section 430.32 of Subpart C is 5. Section 430.34 is added to Subpart

Maximum allowale water use means amended by revising paragraph (c) to C to read as follows:

an energy conservetion standard for a read as follows:

covered product, ext -essed in terms of 430.34 Energyandwateronservation

a maximum amount c f water that may §430.32 Energy and water conservation standards amendments

be consumed, which s established by standards and effective dates. The Department of Energy may not

statute or by a final rule that has * * prescribe any amended standard which

modified this pait pursuant to a date (c) Central air conditioners and increases the maximum allowable

DOE has selected consistent with the central air conditioning heat pumps. (1) energy use or, in the case of

Congressional Review Act (5 U.S.C. Split system central air conditioners and showerheads, faucets, water closets or

801-804) and any other applicable law, central air conditioning heat pumps urinals, the maximum allowable water

or the date on which DOE completes manufactured after January 1, 1992, and use, or which decreases the minimum

action on any timely-initiated before January 23, 2006 , and single required energy efficiency of a covered

administrative reconsideration, package central air conditioners and product.

whichever is later. central air conditioning heat pumps Appendix

* * * * * manufactured after January 1, 1993, and

Minimum required energy efficiency before January 23, 2006 , shall have [The following letters from Department of

means an energy conservation standard Seasonal Energy Efficiency Ratio and ustice will not appear the Code of Fedeal

for a covered product, expressed in Heating Seasonal Performance Factor no Regatons.]

terms of a minimum efficiency quotient, less than: Department of Justice

which is established by statute or by a Antitrust Division

final rule that has modified this part Seasonal Heating A. Douglas Melamed

pursuant to a date DOE has selected Product class energy effi- seasonal Acting Assistant Attorney General. Main clency perform- Justice Building, 950 Pennsylvania

consistent with the Congressional ratio ance factor Avenue NW., Washington, DC 20530-

Review Act (5 U.S.C. 801-804) and any 000, (202) 514-2401/ (202) 616-2645 (f),

other applicable law, or the date on (i) Split systems .... 10.0 6.8 antitrust@justice.usdoj.gov (internet),

which DOE completes action on any (ii) Single package http://www.usdoj.gov (World Wide Web)

timely-initiated administrative systems ............. 6.6 December 4, 2000.

reconsideration, whichever whichever is later. is later.()entral air conditioners and Mary Anne Sullivan, General Counsel

*Small duct, high velocity systm central air conditioning heat pumps Department of Energy

Small duct, high velocity system manufactured on or after January 23, Washington, D.C. 20585

means a heating and cooling product 2006 , shall have Seasonal Energy Dear General Counsel Sullivan: I am

that contains a blower and indoor coil Efficiency Ratio and Heating Seasonal responding to your October 16, 2000 letter

combination that: Perfrmance Factor no less than:seeking the views of the Attorney General

(1) Is designed for, and produces, at about the potential impact on competition of

least 1.2 inches of external staticSeasonal Heatin two proposed energy efficiency standards:

pressure when operated at the certified energy effi- seasonal one for clothes washers and the other for

air volume rate of 220-350 CFM per Product class ciency perform- residential central air conditioners and heat

rated ton of cooling; and ratio ance factor pumps. Your request was submitted pursuant

(2) When applied in the field, uses (SEER) (HSPF) to Section 325(o)(2)(B)(i) of the Energy Policy high velocity generally ues-----and room outlets Conservation Act, 42 U.S.C. 6291, 6295

high velocity room outwelets generally (i) Split system air ("EPCA"), which requires the Attorney

greater than 1000 fpm which have less conditioners....... 12 - General to make a determination of the

than 6.0 square inches of free area. (ii) Split system impact of any lessening of competition that

* * * * * heat pumps ....... 12 7.4 is likely to result from the imposition of

Through-the-wall air conditioner and (iii) Single package proposed energy efficiency standards. The

heat pump means a central air air conditioners .. 12 - Attorney General's responsibility for

EE-RM-STD-98-440 COMMENT 304

36406 

EE-RM/STD-98·44().-~Lf 

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 

§430.2 Definitions. 

* * * * * 

Effective date means the date on and 

after which a manufacturer must 

comply with an energy conservation 

standard in the manufacture of a 

covered product. 

* * * * 

Maximum allowable energy use 

means an energy conservation standard 

for a covered product, expressed in 

terms of a maximum amount of energy 

that may be consumed, which is 

established by statute or by a final rule 

that has modified this part pursuant to 

a date DOE has selected consistent with 

the Congressional Review Act (5 U.S.C. 

801-804) :.nd any other applicable law. 

or the dati on wi ich DOE completes 

action on , ny timAy-initiated 

administrai ve fl'C msideration, 

whichever 'f. late.". 

* * * 

MaximUI.1 '1llowa;Jle water use means 

an energy c()merv~'tloJn standard for a 

covered produ :t, ex£. -essed in terms of 

a maximum amoum l r water that may 

be consumed, which 1, established by 

statute or by a fbal rule that has 

modified this PaIt purl;uant to a date 

DOE has selected (;c;"lsistent with the 

Congressional Review Act (5 U.S.C. 

801-804) and any other applicable law, 

or the date on which DOE completes 

action on any timely-initiated 

administrative reconsideration, 

whichever is later. 

* * * * * 

Minimum required energy efficiency 

means an energy conservation standard 

for a covered product, expressed in 

terms of a minimum efficiency quotient, 

which is established by statute or by a 

final rule that has modified this part 

pursuant to a date DOE has selected 

consistent with the Congressional 

Review Act (5 U.S.c. 801-804) and any 

other applicable law, or the date on 

which DOE completes action on any 

timely-initiated administrative 

reconsideration, whichever is later. 

* * * * * 

Small duct, high velocity system 

means a heating and cooling product 

that contains a blower and indoor coil 

combination that: 

(1) Is designed for, and produces, at 

least 1.2 inches of external static 

pressure when operated at the certified 

air volume rate of 220-350 CFM per 

rated ton of cooling; and 

(2) When applied in the field, uses 

high velocity room outlets generally 

greater than 1000 fpm which have less 

than 6.0 square inches of free area. 

* * * * * 

Through-the-wall air conditioner and 

heat pump means a central air 

conditioner or heat pump that is 

designed to be installed totally or 

partially within a fixed-size opening in 

an exterior wall, and: 

(1) Is manufactured prior to January 

23,2010; 

(2) Is not weatherized; 

(3) Is clearly and permanently marked 

for installation only through an exterior 

wall; 

(4) Has a rated cooling capacity no 

greater than 30,000 Btu/hr; 

(5) Exchanges all of its outdoor air 

across a single surface of the equipment 

cabinet; and 

(6) Has a combined outdoor air 

exchange area of less than 800 square 

inches (split systems) or less than 1,210 

square inches (single packaged systems) 

as measured on the surface described in 

paragraph (5) of this definition. 

* * * * * 

6. Section 430.32 of Subpart C is 

amended by revising paragraph (c) to 

read as follows: 

§ 430.32 Energy and water conservation 

standards and effective dates. 

* * * * * 

(c) Central air conditioners and 

central air conditioning heat pumps. (1) 

Split system central air conditioners and 

central air conditioning heat pumps 

manufactured after January 1,1992, and 

before January 23, 2006 , and single 

package central air conditioners and 

central air conditioning heat pumps 

manufactured after January 1, 1993, and 

before January 23, 2006 , shall have 

Seasonal Energy Efficiency Ratio and 

Heating Seasonal Performance Factor no 

less than: 

Product class 

(i) Split systems .... (ii) Single package 

systems ............ . 

Seasonal 

energyeffi- ciency 

ratio 

10.0 

9.7 

Heating 

seasonal 

performance factor 

6.8 

6.6 

(2) Central air conditioners and 

central air conditioning heat pumps 

manufactured on or after January 23, 

2006 , shall have Seasonal Energy 

Efficiency Ratio and Heating Seasonal 

Performance Factor no less than: 

Product class 

(i) Split system air 

conditioners ....... (ii) Split system 

heat pumps ....... (iii) Single package 

air conditioners .. 

Seasonal 

energyeffi- ciency 

ratio 

(SEER) 

12 

12 

12 

Heating 

seasonal 

performance factor 

(HSPF) 

7.4 

Product class 

(iv) Single package 

heat pumps ....... (v)(A) Through-thewall air conditioners and heat 

pumps-split 

system .............. . (v)(B) Through-thewall air conditioners and heat 

pumps-single 

package ............ . (vi) Small duct, 

high velocity systems ................ .. 

Seasonal 

energyeffi- ciency 

ratio 

(SEER) 

12 

10.9 

10.6 

10.0 

, NAECA-prescribed amendment. 

value 

* * * * * 

Heating 

seasonal 

performance factor 

(HSPF) 

7.4 

7.1 

7.0 

'6.8 

subject to 

5. Section 430.34 is added to Subpart 

C to read as follows: 

§ 430.34 Energy and water conservation 

standards amendments 

The Department of Energy may not 

prescribe any amended standard which 

increases the maximum allowable 

energy use or, in the case of 

showerheads, faucets, water closets or 

urinals, the maximum allowable water 

use, or which decreases the minimum 

required energy efficiency of a covered 

product. 

Appendix 

[The following letters from Department of 

Justice will not appear in the Code of Federal 

Regulations. J 

Department of Justice 

Antitrust Division 

A. Douglas Melamed 

Acting Assistant Attorney General, Main 

Justice Building, 950 Pennsylvania 

Avenue NW., Washington, DC 20530-

0001, (202) 514-2401/ (202) 616-2645 (j), 

antitrust@justice.usdoj.gov (internet), 

http://www.usdoj.gol'(World Wide Web) 

December 4, 2000. 

Marv Anne Sullivan, General Counsel 

Department of Energy 

Washington, D.C. 20585 

Dear General Counsel Sullivan: I am 

responding to your October 16, 2000 letter 

seeking the views of the Attorney General 

about the potential impact on competition of 

two proposed energy efficiency standards: 

one for clothes washers and the other for 

residential central air conditioners and heat 

pumps. Your request was submitted pursuant 

to Section 325(0)(2)(B)(i) of the Energy Policy 

and Conservation Act, 42 U.S.c. 6291,6295 

("EPCA"), which requires the Attorney 

General to make a determination of the 

impact of any lessening of competition that 

is likely to result from the imposition of 

proposed energy efficiency standards. The 

Attorney General's responsibility for 
EE-RM/STD-98-440-~4

Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 36407

responding to requests from other Second, the proposed standard for heat a 12 SEER standard for heat pumps. We

departments about the effect of a program on pumps, and in some instances for air noted only minor concerns about the

competition has been delegated to the conditioners, would have an adverse impact proposed 12 SEER standard for air

Assistant Attorney General for the Antitrust on some manufacturers of these products conditioners.

Division in 28 CFR § 0.40(g). (including those products referred to in the We have reviewed the final rule and

We have reviewed the proposed standards Federal Register notice as "niche products") determined that the 13 SEER heat pump

and the supplementary information used to retrofit existing housing and used in standard still raises competitive problems.

published in the Federal Register notices and manufactured housing. These manufacturers We have further determined that the 13 SEER

submitted to the Attorney General, which could not make units that comply with the standard for air conditioners also raises

include information provided to the rule and fit into the available space. competitive concerns.

Department of Energy by manufacturers. We Third, the proposed heat pump standard of In our earlier letter, we identified and

have additionally conducted interviews with 13 SEER could make heat pumps less described three competitive problems

members of the industries. competitive with alternative heating and resulting from the proposed 13 SEER

We have concluded that the proposed cooling systems. Because the standard will standard for heat pumps, including a

clothes washer standard would not adversely result in increases in the size and cost of heat disproportionate impact on smaller

affect competition. In reaching this pumps, it is possible that purchasers will manufacturers Z and an adverse effect on

conclusion, we note that the proposed shift away from heat pumps to other systems manufacturers of specialized equipment (the

standard is based on a joint recommendation that include electric resistance heat, reducing niche product manufacturers) and

submitted to the Department of Energy by the competition that presently exists between manufacturers of equipment for spacemanufacturers and energy co-.servat;on heat pumps and those other systems. constrained installation sites (such as

advocates. That recommends ion sta. 9s that Department of Justice urges the Department manufactured housing, which accounts for a

virtually all manufacturers oi clothes rashers of Energy to take into account these possible significant percentage of the country's

who sell in the United States a- iiL.ipE ted in impacts on competition in determining its housing starts). The exception made in the

arriving at the recommendatic a through their final energy efficiency standard for air final rule for niche product manufacturers

trade association, that the rec( mimenda -ion conditioners and heat pumps. The may alleviate competitive problems for their

was developed in consultation vrith sin: 11 Department of Energy should consider setting products, but the exception does not

manufacturers, and that the mhn. factir rs a lower SEER standard for heat pumps, such eliminate the difficulties for manufacturers of

believe the new standard would sot lileiy as the standard included in Trial Standard standard equipment who could not make

reduce competition. We note furt. er that as Level 2, and a lower SEER standard for air equipment that complied with the 13 SEER

the industry recommended, the proposed conditioners for retrofit markets where there standard and still fit into space-constrained

standard will be phased in over six years, are space constraints (such as markets served sites. The final rule also continues to have a

which will allow companies that dc not by niche products) and for manufactured disproportionate impact on smaller

already have products that meet the oroposed housing. manufacturers of heat pumps. The 13 SEER

standard sufficient time to redesign their Sincerely, standard for air conditioners raises the same

product lines. A. Douglas Melamed kinds of competitive problems as the 13

With respect to the proposed residential SEER standard does for heat pumps.

central air conditioner and heat pump Department of Justice We urge the Department of Energy to

standard, we have concluded that there could Antitrust Division consider the impact on competition and to

be an adverse impact on competition. The John M. Nannes adopt a 12 SEER standard for all products

proposed standard, Trial Standard Level 3, is Acting Assistant Attorney General, covered by the rule.

expressed in terms of two industry Main Justice Building, 950 Pennsylvania Sincerely,

measurements: SEER (Seasonal Energy Avenue NW., Washington, DC 20530- John M. Nannes

Efficiency Ratio) and HSPF (Heating Seasonal 0001, (202) 514-2401/ (202) 616-2645 Department of Justice

Performance Factor).' These standards would (f), antitrust@justice.usdoj.gov (internet)

change from the current central air http://www.usdoj.gov (World Wide Web)Antitrust Division

conditioner and heat pump efficiency A pril 5, 2001. Charles A. James

standards of 10 SEER/6.8 HSPF for split April 5, 2001. Assistant Attorney General,

system air conditioners and heat pumps and Eric J. Fygi, Main Justice Building, 950 Pennsylvania

9.7 SEER/6.6 HPSF for single package air Acting General Counsel, Department of Avenue, NW., Washington, DC 20530-

conditioners and heat pumps to 12 SEER for Energy, Washington, DC 20585 0001, (202) 514-2401 / (202) 616-2645

air conditioners and 13 SEER/7.7 HPSF for Dear Acting General Counsel Fygi: I am (f) antitrust@justice.usdoj.gov (internet)

heat pumps. responding to your letter dated March 20, http://www.usdoj.gov (World Wide Web)

We have identified three possible 2001, seeking the views of the Attorney October 19, 2001

competitive problems presented by the General about the potential effect on Liberman Otis

proposed standards. First, the proposed 13 competition of the final rule published onDepartment ofEnergy,

SEER heat pump standard would have a January 22, 2001, setting forth new energy Washington, DC20585

disproportionate impact on smaller efficiency standards for central aireneral Counsel Otis: I am

manufacturers. Currently less than 20 percent conditioners and heat pumps. You

of the total current product lines meet the specifically asked for our views about the responding to your August 15, 2001 letter

proposed standards, but for some small impact on competition of the rule's seeking the views of the Attorney General

manufacturers, 100 percent of their product prescription of a 13 SEER (Seasonal Energy about the potential impact on competition of

lines fail to satisfy the proposed standard. E proposed energy efficiency standards for

classes, except for niche products, and the residential central air con heat ditioning pumps. Your

'The Federal Register notice also requested desirability of reducing the standard to a 12 central air conditioning heat pumps. Your

comments on a proposal to adopt a standard for SEER level for all subcategories. Your letter request was submitted pursuant to Section

steady-state cooling efficiency (EER) and discussed requested our views by March 30, but your 325()(2)(B)(i) of the Energy Plicy and

several options the Department of Energy is ed extend the respConservation Act, 42 U.S.C. 6291, 6295

considering. The proposed rule set forth in the staff agreed to extend the response date to ("EPCA"), which requires the Attorney

notice does not. however, include a p Aprovisil 6. General to make a determination of the

regarding an EER standard, and the views of As you noted in your letter to the Attorney impact of any lessening of competition that

Department of Justice expressed in this letter are General, the Antitrust Division had earlier

limited to the impact of any lessening of expressed its views on the proposed rule,

competition ' * * that is likely to result from the which provided for a 12 SEER standard for t We noted in our previous letter that less than

imposition of the [proposed] standard," as required 20 percent of the total current heat pump product lines meet the new standard, but for some small by EPCA. If the Department of Energy proposes a heat pumps. The Division had concluded manufacturers, 100 percent of their product lines

rule in the future incorporating an EER standard

DOE will then evaluate that proposed rule and that the 13 SEER standard for heat pumps failed to satisfy the standard. The same is true for

express its views about the competitive impact of could have an adverse effect on competition air conditioner manufacturers when the standard is

that standard. and urged the Department of Energy to adopt 13 SEER.

EE-RM-STD-98-440 COMMENT 304

EE-RM/STO-9S-440-?Ptf 

Federal Register / VoL 67, No. 100/ Thursday, May 23, 2002/ Rules and Regulations 36407 

responding to requests from other 

departments about the effect of a program on 

competition has been delegated to the 

Assistant Attorney General for the Antitrust 

Division in 28 CFR § 0.40(g). 

We have reviewed the proposed standards 

and the supplementary information 

published in the Federal Register notices and 

submitted to the Attorney General. which 

include information provided to the 

Department of Energy by manufacturers. We 

have additionally conducted interviews with 

members of the industries. 

We have concluded that the proposed 

clothes washer standard would not adversely 

affect competition. In reaching this 

conclusion. we note that the proposed 

standard is based on a joint recommendation 

submitted to the Department of Energy by 

manufacturers and energy co' ,servat;on 

advocates. That recommend, ion sta. gS that 

virtually all manufacturers 01 clothes lVashers 

who sell in the United States la:LiI..!jlned in 

arriving at the recommendatil :l throug.'! their 

trade association. that the reel Ilmemla 'ion 

was developed in consultation vTith sm: II 

manufacturers. and that the m&.n.lfactl'nrs 

believe the new standard would IIOt likely 

reduce competition. We note furtl.er th.lt as 

the industry recommended. the prnposed 

standard will be phased in over six years. 

which will allow companies that dc not 

already have products that meet the oroposed 

standard sufficient time to redesign L,eir 

product lines. 

With respect to the proposed residential 

central air conditioner and heat pump 

standard. we have concluded that there could 

be an adverse impact on competition. The 

proposed standard. Trial Standard Level 3. is 

expressed in terms of two industry 

measurements: SEER (Seasonal Energy 

Efficiency Ratio) and HSPF (Heating Seasonal 

Performance Factor).' These standards would 

change from the current central air 

conditioner and heat pump efficiency 

standards of 10 SEER/6.8 HSPF for split 

system air conditioners and heat pumps and 

9.7 SEERi6.6 HPSF for single package air 

conditioners and heat pumps to 12 SEER for 

air conditioners and 13 SEERI7.7 HPSF for 

heat pumps. 

We have identified three possible 

competitive problems presented by the 

proposed standards. First. the proposed 13 

SEER heat pump standard would have a 

disproportionate impact on smaller 

manufacturers. Currently less.than 20 percent 

of the total current product lines meet the 

proposed standards. but for some small 

manufacturers. 100 percent of their product 

lines fail to satisfy the proposed standard. 

, The Federal Register notice also requested 

comments on a proposal to adopt a standard for 

steady-state cooling efficiency lEER) and discussed 

several options the Department of Energy is 

considering. The proposed rule set forth in the 

notice does not. however. include a provision 

regarding an EER standard. and the views of 

Department of Justice expressed in this I eHer are limited to the impact of any lessening of 

competition' • • that is likely to result from the 

imposition of the [proposed] standard." as required 

by EPCA. If the Department of Energy proposes a rule in the future incorporating an EER standard. 

DOE will then evaluate that proposed rule and 

express its views about the competitive impact of 

that standard. 

Second. the proposed standard for heat 

pumps. and in some instances for air 

conditioners. would have an adverse impact 

on some manufacturers of these products 

(including those products referred to in the 

Federal Register notice as "niche products") 

used to retrofit existing housing and used in 

manufactured housing. These manufacturers 

could not make units that comply with the 

rule and fit into the available space. 

Third. the proposed heat pump standard of 

13 SEER could make heat pumps less 

competitive with alternative heating and 

cooling systems. Because the standard will 

result in increases in the size and cost of heat 

pumps. it is possible that purchasers will 

shift away from heat pumps to other systems 

that include electric resistance heat. reducing 

the competition that presently exists between 

heat pumps and those other systems. 

Department of Justice urges the Department 

of Energy to take into account these possible 

impacts on competition in determining its 

fmal energy efficiency standard for air 

conditioners and heat pumps. The 

Department of Energy should consider setting 

a lower SEER standard for heat pumps. such 

as the standard included in Trial Standard 

Level 2. and a lower SEER standard for air 

conditioners for retrofit markets where there 

are space constraints (such as markets served 

by niche products) and for manufactured 

housing. 

Sincerely. 

A. Douglas Melamed 

Department of Justice 

Antitrust Division 

John M. Nannes 

Acting Assistant Attorney General. 

Main Justice Building. 950 Pennsylvania 

Avenue NW .. Washington. DC 20530-

0001. (202) 514-2401/(202)616-2645 

(0. antitrust@justice.usdoj.gov (internet) 

http://www.usdoj.gov (World Wide Web) 

April 5. 2001. 

Eric J. Fygi, 

Acting General Counsel. Department of 

Energy. Washington. DC 20585 

Dear Acting General Counsel Fygi: I am 

responding to your letter dated March 20. 

2001. seeking the views of the Attorney 

General about the potential effect on 

competition of the final rule published on 

January 22. 2001. setting forth new energy 

effiCiency standards for central air 

conditioners and heat pumps. You 

specifically asked for our views about the 

impact on competition of the rule's 

prescription of a 13 SEER (Seasonal Energy 

Efficiency Rating) standard for all product 

classes. except for niche products. and the 

desirability ofreducing the standard to a 12 

SEER level for all subcategOries. Your letter 

requested our views by March 30. but your 

staff agreed to extend the response date to 

Apri16. 

As you noted in your letter to the Attorney 

General. the Antitrust Division had earlier 

expressed its views on the proposed rule. 

which provided for a 12 SEER standard for 

air conditioners and a 13 SEER standard for 

heat pumps. The Division had concluded 

that the 13 SEER standard for heat pumps 

could have an adverse effect on competition 

and urged the Department of Energy to adopt 

a 12 SEER standard for heat pumps. We 

noted only minor concerns about the 

proposed 12 SEER standard for air 

conditioners. 

We have reviewed the final rule and 

determined that the 13 SEER heat pump 

standard still raises competitive problems. 

We have further determined that the 13 SEER 

standard for air conditioners also raises 

competitive concerns. 

In our earlier letter. we identified and 

described three competitive problems 

resulting from the proposed 13 SEER 

standard for heat pumps. including a 

disproportionate impact on smaller 

manufacturers 2 and an adverse effect on 

manufacturers of specialized equipment (the 

niche product manufacturers) and 

manufacturers of equipment for spaceconstrained installation sites (such as 

manufactured housing. which accounts for a 

significant percentage of the country's 

housing starts). The exception made in the 

final rule for niche product manufacturers 

may alleviate competitive problems for their 

products. but the exception does not 

eliminate the difficulties for manufacturers of 

standard equipment who could not make 

equipment that complied with the 13 SEER 

standard and still fit into space-constrained 

sites. The final rule also continues to have a 

disproportionate impact on smaller 

manufacturers of heat pumps. The 13 SEER 

standard for air conditioners raises the same 

kinds of competitive problems as the 13 

SEER standard does for heat pumps. 

We urge the Department of Energy to 

consider the impact on competition and to 

adopt a 12 SEER standard for all products 

covered by the rule. 

Sincerely. 

John M. Nannes 

Department of Justice 

Antitrust Division 

Charles A. James 

Assistant Attorney General, 

Main Justice Building, 950 Pennsylvania 

Avenue. NW .. Washington. DC 20530-

0001. (202) 514-2401 1 (202) 616-2645 

(0 antitrust@justice.usdoj.gov (internet) 

http://www.usdoj.gov (World Wide Web) 

October 19. 2001 

Lee Liberman Otis. 

General Counsel. Department of Energy. 

Washington. DC 20585 

Dear General Counsel Otis: I am 

responding to your August 15. 2001 letter 

seeking the views of the Attorney General 

about the potential impact on competition of 

proposed energy efficiency standards for 

residential central air conditioners and 

central air conditioning heat pumps. Your 

request was submitted pursuant to Section 

325(0)(2)(BHi) of the Energy Policy and 

Conservation Act. 42 U.S.c. 6291. 6295 

("EPCA"J. which requires the Attorney 

General to make a determination of the 

impact of any lessening of competition that 

, We noted in our previous letter that less than 20 percent of the total current heat pump product 

lines meet the new standard. but for some small 

manufacturers. 100 percent of their product lines 

failed to satisfy the standard. The same is true for 

air conditioner manufacturers when the standard is 

13 SEER. 
EE-RM/STD-98-440-314

36408 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations

is likely to result from the imposition of The proposal provides for 12 SEER DOE, as well as the results of our industry

proposed energy efficiency standards. The standards for all types of residential central interviews. Based on that review, we have

Attorney General's responsibility for air conditioners and central air conditioning concluded that the proposal would not

responding to requests from other heat pumps, except those that are installed adversely affect competition.

departments about the effect of a program on through an exterior wall. We have reviewed Sincerely,

competition has been delegated to the the materials that accompanied your August Chares A James

Assistant Attorney General for the Antitrust 15 letter, the materials that you previously [FR Doc. 02-12680 Filed 5-22-02; 8:45 am]

Division in 28 CFR 0.40(g). provided, and the comments submitted to BILUNG CODE 6450--01-P

EE-RM-STD-98-440 COMMENT 304

EE-RM/STD-9S-440-joLf 

36408 Federal Register/Vol. 67, No. 100/Thursday, May 23, 2002/Rules and Regulations 

is likely to result from the imposition of 

proposed energy efficiency standards. The 

Attorney General's responsibility for 

responding to requests from other 

departments about the effect of a program on 

competition has been delegated to the 

Assistant Attorney General for the Antitrust 

Division in 28 CFR 0.40(g). 

The proposal provides for 12 SEER 

standards for all types ofresidential central 

air conditioners and central air conditioning 

heat pumps, except those that are installed 

through an exterior wall. We have reviewed 

the materials that accompanied your August 

15 letter, the materials that you previously 

provided, and the comments submitted to 

DOE. as well as the results of our industry 

interviews. Based on that review. we have 

concluded that the proposal would not 

adversely affect competition. 

Sincerely, 

Charles A. James 

[FR Doc. 02-12680 Filed 5-22-02; 8:45 am) 

BILUNG CODE 6450-01~