## FRO CM t e ( A ot d J 

## -l (MON) 12. 04'00 1:46/ST.. 16:45/NO. 3561242221 P I 

# ' rlntteb*tate!tg epartment o tr 7) Antitrust Division 950 Pennsylvania Avenue,NW EE-RM/STD-98-440 Room 3109 Wasbhigtou,DC 20530 FaxNumber: 202-616-2645 VoiceNumber: 202-514-2401 

## EE-fh/STO-q 9 -qyo

The infbrmation contained inthis facsimile isgovernmentprivileged and confidential information intendcd onlyfor the useofthe addressees)listedon tbi covejrheet Ifthereader ofthis message isnot theintended recipient(s), you arehereby notfied thatany dissemination, dislribution orcopying ofthe telecopy is strictly prohibited. Ifyou have received this facsimile inerror, please immediately notifythe sender atthe telephone number Listedon thiscoversheet and theoriginal facsimile must be returned viathe United States PostalService tothe address above. Thankyou.



## FAXCOVER SHEET

DATE: December 4, 2000 

## TO: EdLevy of: Department ofEnergy FaxNumber: 586-4116 FROM: Doug Melamed
Pages Sent (including this sheet): 4

Remarks: Please deliver immediately. 

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### 20530 faxNumber: 202-616-2645 VoiceNumber: 202-514-2401 

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TheinformaLioncontainedinthisfacsimile isgovernmentprivilegedandconfidentialinfonnation inlendedonlyformeuseofrhe adchetIsee(s) listedontruscoversbeet If**~he**rca4erorchismessageunollhcintendedrecipicnt(s),you areherebynotIfiedthatany dissemination, distribution orcopying ofthe telecopy is litrictlyprohibited. Ifyou bave received rhis fac.'iimile in error,**pJeiU~** immediatelynotifythe**~r** atthetelephonenumberListed On this covcrsheel and theoriginalfacsimile muSt**~** returned viathe UnitedStatesPostal. Service:to tbeaddress above. Thankyou.



## FAXCOVERSHEET

DATE: 

## TO: of: FaxNumber: FROM: 

### December4, 2000 Ed

## Levy Departmentof

## Energy 586-4116 

### DougMelamed

Pages Sent(includingthis sheet):

Remarks: Pleasedeliverimmediately. 

### 4

## FROM (MON)12.04'00 16:46/ST.16:45/NO. 3561242221 P 2
DEPAR ENT OF JUSTICE AntitrustDivision 

### EE-M/STD-l98-44a0//c 

## EE-RM/STD-98-440-i^-o( A.DOUGLAS MELAMED Acting AssistantAttorney General

MainJustice Building 

### EE-RM/STD-98-440 _>/ Of Washington,D.C. 20530-0001 (202)514-2401 /(202) 616-2645 (f)

~---- Bnjantitrust@justice.usdoj.gov (i_) http://ww.usdoj.gov (WorldWideWeb)

December 4, 2000

Mary 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(o)(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 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 Recister 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. 

## FROM

# EE.RM/STD-98~O_tt-/

# Ic:A (MON) 12. 04' 00 16:46/ST. 16:

### 45/NO. 3561242221 P 2
DEPARTMENTOFJUSTICE AntitrustDivision 

### EE-RM/STD-98-440

# 4F//c:( A.DOUGLASMELAMED ActingAssistantAttorneyGeneml


### MainJU9tice

### BuiJdin, 950PennsylvaniaAvenue,N.W. Washington,D.C. 20530-0001 (202) 

### 514-2401 1(202)

### 616-2645 (0 antitrust@justice.usdoj.gov (k*Jna) http://www.usdoj.gov(WorJdWideWeb)

December 4, 2000



### Mary Anne 

### Sullivan, General Counsel 

### Department of 

### Energy Washington, D.C. 20585

Dear General Counsel Sullivan: 

### I am responding to your October 

### 16, 2000 letter $eeking 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 ("EPCAW), 

### 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 responsibilicy 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). 

### WQ have 

### reviewed the proposed standards and the supplementary information published in the Federal Register notices and submicted 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.

### FROM (MON)12. 04' 00 16:47/ST. 16:45NO. 3561242221 P 3

EE-RM/STD-98-440

- / Page 2

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 conservation advocates. That recommendation states that virtually all manufacturers of clothes washers who sell in the United States participated in arriving at the recommendation through their trade association, that the recommendation was developed in consultation with small manufacturers, and that the manufacturers believe the new standard would not likely reduce competition. We note further that, as the industry recommended, the proposed standard will be phased in over six years, which will allow companies that do not already have products that meet the proposed standard sufficient time to redesign their 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). 1 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 beat pumps and 9.7 SEER/6.6 HPSF for single package air conditioners and heat pumps to 12 SEER for air conditioners and 13 SEER/7.7 HPSP for heat pumps.
We have identified three possible competitive problems presented by the proposed standards. First, the proposed 13 SEER

The Federal Register notice also requested comments on a proposal to adopt a standard for steady-state cooling efficiency

(EER)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 the Department of Justice expressed in this letter 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, the Department will then evaluate that proposed rule and express its views about the competitive impact of that standard. 

### FROM



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EE-RM/STO-9B-440

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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 

### UIaIlufacturers and energy conservation advocates. That recommendation states that virtually all manufacturers of clothes washers who sell in the United'States participated in arriving at the recommendation through their trade association, that the recommendation was developed in consultation with small manufacturers, and that the manufacturers believe the new standard would not tikely reduce competition. We note further that, as the industry recommended, the proposed standard will be phased in over six years, which will allow companies that do not already have products that meet the proposed standard sufficient time to redesign their product lines.
With**re~pect** 

### to the proposed residential**centra~** 

### 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).l These standards would change from the current central air conditioner and heat pump efficiency standards of 10 

### SEER/6.B HSPF for split system air conditioners and beat pumps and 9.7 SEER/6.6 HPSF for single package air conditioners and heat pumps to 12 

### SEER for air conditioners and 13 

### SEER/7.7 HPSF for heat pumps. We 

### have identified three possible competitive problems presented by 

### the proposed standards. First, the proposed 13 

### SEER

The Federal Register notice also requested comments on a proposal to adopt a standard for steady-state cooling efficiency (BER)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 the Department of Justice expressed in this letter are limited to Wthe impact of any lessening of competition .'. that is likely to result from the imposition of the (proposed1 standard," as required by EPCA. If the Department of Energy proposes a rule in the future incorporating an EER standard, the Department will then evaluate that proposed rule and express its views about the eompetitive impact of that standard.

## FROM (MON) 12.04'00 16:47/ST. 16:45/NO. 3561242221 P 4
EE-RM/STD-98-440- 

## //

. Page 3
heat pump Standard would have a disproportionate impact on smaller manufacturers. Currently less than 20% of the total current product lines meet the proposed standards, but for some small manufacturers, 100% of their product lines fail to satisfy the proposed 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 increased 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.

The Department of Justice urges the Department of Energy to take into account these possible impacts on competition in determining its final 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 A. Douglas Melamed page 3 

### (MON) 12. 04' 00 16:47/8T. 16:45/NO. 

### 3561242221 P 4

EE·RM/STD·98-440

- 

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.

heat pump standard would 

### have a disproportionate impact on smaller**manufa~turers.** 

### Currently less than 20% 

### of the total 

### current product 

### lines meet**~he** 

### proposed standards,**bu~** 

### for some small 

### manufacturers, 100% of their product lines fail 

### to satisfy the proposed standard. 

### second, the proposed standard for heat 

### pumps, 

### and in some instances for 

### air conditioners, would 

### have 

### an**ad~erse** 

### impact on some 

### manufacturers of these products 

### (including those 

### products referred to·in the 

### Federal Register notice as 

### uniche 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. 

### TbeDepartment of Justice urges the 

### Department of 

### Energy to 

### take into account these possible impacts on competition in determining 

### its tinal 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.1n 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,



### . C' l. ' .,

A. Douglas Melamed 

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