16

- i CHAPTER 16. REGULATORY IMPACT AN ALYSIS

TABLE OF CONTENTS

16.1 INTRODUCTION

................................ ................................ ................................ ......... 16

- 1

16.2 METHODOLOGY

................................ ................................ ................................ ........ 16

- 1

LIST OF TABLES

Table 16.1.1 Non

- Regulatory Alternatives to Standards

................................ ........................... 16

- 116

- 1 CHAPTER 16. REGULATORY IMPACT ANALYSIS

16.1 INTRODUCTION

Under the Process Rule ( Procedures for Consideration of New or Revised Energy Conservation Standards for Consumer Products , 61 FR 36974 (July 15, 1996)), the U.S. Department of Energy (DOE) is committed to continually explore non

- regulatory alternatives to standards. DOE will prepare a draft regulatory impact analysis pursuant to Executive Order 12866, “Regulatory Planning and Review,” which will be subjec t to review under the Executive Order by the Office of Management and Budget’s Office of Information and Regulatory Affairs.

58 FR 51735. DOE has identified six major alternatives to standards as representing feasible policy options to reduce commercial eq uipment energy consumption. It will evaluate each alternative in terms of its ability to achieve significant energy savings at a reasonable cost, and will compare the effectiveness of each one to the effectiveness of the proposed standards rule.

The non

- r egulatory means of achieving energy savings that DOE proposes to analyze are

listed in Table 16.1

. 1 . The technical support document (TSD) in support of DOE’s notice of proposed rulemaking will include a complete quantitative analysis of each alternative, the methodology for which is discuss ed briefly below.

Table 16.1

. 1 Non

- Regulatory Alternatives to Standards

No new regulatory action

Business tax credits

Manufacturer tax credits

Performance Standards

Rebates
Voluntary energy efficiency targets Early replacement

16.2 METHODOLOGY

DOE will use the national impact analysis (NIA) spreadsheet models to calculate the national energy savings and the net present value (NPV) corresponding to each alternative to the proposed standards. The NIA model i s discussed in chapter 10 of the TSD. To compare each alternative quantitatively to the proposed energy conservation standards, DOE will need to quantify the effect of each alternative on the purchase and use of energy efficient commercial refrigeration eq uipment . Once it has quantified each alternative, DOE will make the appropriate revisions to the inputs in the NIA models. Key inputs that DOE may revise in these models are:

**•** Energy prices and escalation factors;

**•** Implicit market discount rates for trading off purchase price against operating expense when choosing product efficiency;

**•** Business purchase price s , operating cost s , and income elasticities;

**•** Purchase price

- versus

- efficiency relationships; and

**•** Product stock data (purchase of new products or turnover rates for inventories).16

- 2 The key measures of the impact of each alternative will be:

**•** Energy use: Cumulative energy use of the product from the effective date of the new

standar d to the year 2045 . DOE will report energy

.

**•** National energy savings: Cumulative national energy use from the base case projection minus the alternative policy case projection.

**•** Net present value: The value of future operating cost savings from products bought in the period from the effective date of the ne w standard 201 5 to the year 204 5 . DOE will calculate the NPV as the difference between the present value of product and operating expenditures (including energy) in the base case, and the present value of expenditures in each alternative policy case. DOE will discount future operating a nd product expenditures to 201 0 using a 7

- percent and 3

- percent real discount rate. It will calculate operating expenses (including energy costs) for the life of the products.