Friday,

s A pril 28, 2000

Department of

qI Energy

Office of Energy Efficiency and

Renewable Energy

10 CFR Part 430

Energy Conservation Program for

Consumer Products: Energy Conservation

Standards for Water Heaters; Proposed

A r Rule

EE-RM-97-900 COMMENT 119A
25042 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

DEPARTMENT OF ENERGY Room 1E-245 at the U.S. Department of c. Design Options that Improve System

Energy, Forrestal Building, 1000 Efficiency

Office of Energy Efficiency and Independence Avenue, SW, 4. Results of Screening Analysis

Renewable Energy Washington, DC. You can find more a. Heat Pump Water Heater

b. Gas Condensing Water Heaters information concerning public c. Other Water Heater Design Options

10 CFR Part 430 participation in this rulemaking D. Engineering Analysis of Design Options

[Docket Number EE-RM-97-900] proceeding in Section VI, "Public 1. Other Federal Agencies' Initiatives

Comment Procedures," of this notice of 2. Maximum Technologically Feasible

RIN 1904-AA76 proposed rulemaking. Levels

Energy Energy Conservation Conservation Program Program forYou read copies of the public a. Energy Savings Potential for You may read copies of the public 3 Methodologv

Consumer Products: Energy comments, the Technical Support b. Comments on Design Options

Conservation Standards for Water Document for Energy Efficiency c. Manufacturing Costs

~Heoaterf~s ~Standards for Consumer Products: d. Installation Costs

Water Heaters (TSD) and the transcript e. Maintenance Costs

AGENCY: Office of Energy Efficiency and of the public hearing and previous f. Determination of Markups for Retail

Renewable Energy, Department of workshop transcripts at the DOE Prices

Energy (DOE). Freedom of Information (FOI) Reading E. Economic Analysis 1. Life-Cycle-Cost (LCCI and Payback ACTION: Notice of proposed rulemaking Room, U.S. Department of Energy, Analysis

and public workshop. Forrestal Building, Room 1E-190, 1000 a. Marginal Energy Price

Independence Avenue, SW, b. Future Energy Prices

SUMMARY: The Energy Policy and Washington, DC 20585, (202) 586-3142, c. Discount Rates

Conservation Act, as amended, between the hours of 9:00 a.m. and 4:00 d. Household Characteristics

prescribes energy conservation p.m., Monday through Friday, except e. Lifetime

standards for certain major household Federal holidays. You may obtain 2. LCC Spreadsheet Model

appliances, and requires the Departmentcopies of the TSD and Payback Module appliances, of the TSD and analb. Equipment Cost Module

of Energy (DOE) to administer an energy spreadsheets from the Office of Energy c. Operating Cost Module

conservation program for these Efficiency and Renewable Energy's d. Energy Analysis Module

products. In this notice we are (EERE) web site at http:// e. Hot Water Draw Module

proposing to amend the energy www.eren.doe.gov/buildings/ 3. Consumer Subgroup Analysis

conservation standards for water heaters codesstandards/applbrf/ 4. Payback Analysis for Rebuttable

to make them more efficient and waterheater.htm Presumption

announce a public hearing. F. National Impacts Analysis

FOR FURTHER INFORMATION CONTACT: 1. Net Present Value (NPV) and Energy

DATES: Comments must be received on Terry Logee, U.S. Department of Energy, Savings

or before July 12, 2000. DOE is EE-41, 1000 Independence Avenue, 2. National Energy Savings Spreadsheet

requesting a signed original, a computer Model ue signed original, computer SW, Washington, DC 20585-0121, (202) . Shipments disk (WordPerfect 8) and 10 copies of a. Shipments

the written comments. The Department 586-9127, email: terry.logee@ee.doe.gov b. Energy Prices

will also accept e-mailed comments but or Francine Pinto, Esq., U.S. Department 3. Comments

l accept also e-mailed com n, b of Energy, Office of General Counsel, G. Manufacturer Impact Analysis

you must also send a signed orignal be GC-72, 1000 Independence Avenue, 1. Economic Impact on Manufacturers

SW, Washington, DC 20585, (202) 586- 2. Product Specific

presented at the public workshop 7432, email: francine.pinto@hq.doe.gov 3 GRIM: Industry ash Flow

(hearing) in Washington, DC, beginning or Eugene Margolis, Esq., GC-74. Manufacturer Subgroup Analysis

at 9:00 a.m. on June 20, 2000. same address, (2025 586-9507, email: . Interview Process

The Department must receive requests same address, (202) 586-9507 emai H. Other Factors

to speak at the workshop and a copy of eugene.margolishq.doe.gov.. Utility Analysis

your statements no later than 4:00 p.m., SUPPLEMENTARY INFORMATION: . National Employment

June 6, 2000, and we request that you K. N N Epme June 6, 2000, and we request that you Table of Contents TV. Analytical Results

provide a computer diskette

(WordPerfect 8) of each statement at that I. Summary of Proposed Rule A. Trial Standard Levels

time. The DOE panel will read the n. Introduction . cnoc acts on Consumers

statements in advance of the workshop A. Authority b. Median Payback

and requests that speakers limit their B. Background c. Test Procedure Payback

oral presentations to a summary. 1. Current Standards 2. Economic Impact on Manufacturers

Attendees will have an opportunity to 2. History of Previous Rulemakings B. Significance of Energy Savings

ask questions. 3. Process Improvement C. Lessening of Utility or Performance of

ADDRESSES: Please submit written 4. Test Procedures Products

comments, oral statements, and requests m. Analysis and Methodology D. Impact of Lessening of Competition E. Need of the Nation to Save Energy and Net

to speak at the workshop to Brenda A. Market and Technology Assessment National Employment

Edwards-Jones, U.S. Department of 1. General 1. Environmental Impacts

Energy, Office of Energy Efficiency and 2. Product Specific 2. Net National Employment

Renewable Energy, Energy Conservation B. Technological Feasibility F. Conclusion

Program for Consumer Products: Water C. Screening Analysis 1. Comments on Standard Levels

Heaters, Docket Number EE-RM-97- 1. Product Classes 2. Proposed Standard

2. Baseline Units

900, 1000 Independence Avenue, SW, ng of V. Procedural Reviews

Rm 1J018, Washington, DC 20585-0121. a. Design Options that Reduce Standby A. Review under the National Environmental

You may send email to: Losses Policy Act

brenda.edwards-jones@ee.doe.gov. The b. Design Options that Improve B. Review under Executive Order 12866.

workshop will begin at 9:00 a.m., in Combustion Efficiency "Regulatory Planning and Review

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

C. Review under the Regulatory Flexibility than the rest of the population. Our determined that trial standard le

Act analyses showed no difference. three is technologically feasible. 

D. Review Under the Paperwork Reduction The national net present value (NPV) design options incorporated in t

Act of trial standard level three is $3.4 standard level three are commer

E. Review Under Executive Order 12988, billion from 2003-2030. This is the available on some models of ele

F "Takings" Assessment Review estimated total value of future savings gas-fired heaters sold in the U.S

G.. Federali Federalism Revieww sm discounted to 1998 minus the estimated H. Introduction

H. Review Under the Unfunded Mandates increased equipment costs also II. In

Reform Act discounted to 1998. The water heater A. Authority

I. Review Under the Plain Language industry net present value (INPV) today Prt B o o Directives is estimated to be $322 million. If we Par B of tl I of th n 

J. Assessment of Federal Regulations and adopt trial standard level three, we and Conservation Act, Pub.L. 94

Policies on Families Reviewexpect manufacturers may lose 5amended by the National Energy

VI. Public Comment Procedures percent of the INPV, which is Conservation Policy Act, Pub.L. 

A. Written Comment Procedures approximately $15 million. Other the National Appliance Energy

B. Public Workshop government actions that require the Conservation Act, Pub.L. 100-12

C. Issues for Public Comment phase out of HCFC-141b and the National Appliance Energy

Appendix A-Acronyms and Abbreviations prevention of ignition of flammable Conservation Amendments of 19

vapors by gas-fired water heaters will Pub.L. 100-357, and the Energy 

I. Summary of Proposed Rule result in losses of an estimated $28 Act of 1992, Pub.L. 102-486, cre

The Energy Policy and Conservation million in INPV. The cumulative effects Energy Conservation Program fo

Act, as amended (hereinafter referred to of all government actions is an Consumer Products other than

as EPCA or the Act), specifies that any estimated loss of $43 million of INPV, A u t o m o b i

le s . Water heaters are 

new or amended energy conservation or about 13 percent. However, the the osumer products subject to 

standard the Department of Energy present value of future energy savings program. Section 322(a)(4), 42 U

(DOE) prescribes shall be designed to for the U.S. are projected to be $3.4 6292(a)(4).

"achieve the maximum improvement in billion. These substantial energy savings Under the Act, the program co

energy efficiency ... which the exceed industry losses due to energy essentially of three parts: testing

Secretary determines is technologically efficiency standards by 227 times or, labeling, and Federal energy

feasible and economically justified." due to all Federal actions, by 79 times. conservation standards. The

Section 325(o)(2)(A), 42 U.S.C. Additionally, based on our interviews Department, with assistance from 

6295(o)(2)(A). Furthermore, the with four of the five major National Institute of Standards a

amended standard must "result in manufacturers, we do not expect any Technology (NIST), may amend 

significant conservation of energy." plant closings or loss of employment establish test procedures for each 

Section 325o)(2)(B)(3)(B), 42 U.S.C. because the manufacturers stated that covered products. Section 323(b)

6295(o)(2)(B)(3)(B). they would stay in business. During the (B), 42 U.S.C. 6293(b)(1)(A)-(B). 

In accordance with the statutory interviews, the manufacturers all stated procedures measure the energy

criteria discussed in this notice. DOE is that only trial standard level four efficiency, energy use, or estimat

proposing to amend the water heater (incorporating plastic tanks and side- annual operating cost of a covere

energy efficiency standards. The arm heaters) would severely impact product during a representative 

proposed standards represent employment levels and require new use cycle or period of use. They 

perform ance consistent wth facilities. not be unduly burdensome to co

electric water heaters with heat The proposed standard has significant Section 323(b)(3), 42 U.S.C. 6293

environmental benefits, addressing A test procedure is not required 

traps, 2.5 inches of insulation and an global climate change and reducing air determines by rule that one cann

insulated tank bottom;pollution. This proposed standard level developed. Section 323(d)(1), 42 

* gas-fired water heaters with heat would result in cumulative greenhouse 6293(d)(1). The water heater test

traps, flue baffles that achieve a 78% gas emission reductions of 83 million procedures appear at Title 10 Co

recovery efficiency (RE) and 2 inches of metric tons (Mt) of carbon equivalent. Federal Regulations (CFR) part 4

insulation; Additionally, air pollution would be subpart B, appendix E.

* no change from the current reduced by the elimination of 229 The Act prescribes an initial F

standard for oil-fired water heaters. thousand metric tons of nitrous oxides energy conservation standard for 

The proposed standard, trial standard (NOx) from 2003-2030. the listed covered products, exce

level three, is based on using HFC-245fa Trial standard level three has several television sets. The Department 

as a blowing agent in the insulation and other benefits. First, it maximizes the authorized to amend these stand

saves an estimated 4.75 quads of energy LCC savings to consumers, which means Section 325, 42 U.S.C. 6295. Any 

over 27 years, a significant amount. This that total consumers' benefits are higher or amended standard must be de

amount is more than the primary energy as a result of this standard level than to achieve the maximum improv

used for heating water in all U.S. any of the other standard levels in energy efficiency that is

buildings (residential, commercial and analyzed. Second, this trial standard technologically feasible and

industrial) in 1997 (3.82 quads). The level causes similar cost increases economically justified. Section

economic impacts on consumers (i.e., between gas-fired and electric water 325(o)(2)(A), 42 U.S.C. 6295(o)(2)

the average life-cycle cost (LCC) savings) heaters so the impacts in the market are The Department's current review 

are positive. We identified and fuel neutral. standards is for water heaters. Se

conducted analyses on two subgroups of Therefore, DOE has determined that 325(e), 42 U.S.C. 6295(e).

the population, senior-only and low the benefits to the nation outweigh the Section 325(o)(2)(B)(i), 42 U.S.

income consumers, because of concern burdens and we conclude that trial 6295(o)(2)(B)(i) provides that bef

that these groups might potentially be standard level three is economically DOE determines whether a stand

affected differently by the standards justified. Furthermore, DOE has economically justified, it must fi

EE-RM-97-900 COMMENT 119A
25044 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

for comments on a proposed standard. B. Background which DOE issued a NOPR prior to

After reviewing comments on the August 14, 1996, DOE will conduct a

proposal, DOE must determine that the Current anarreview to decide whether any of the

benefits of the standard exceed its The existing water heater efficiency analytical or procedural steps already

burdens, based, to the greatest extent standards have been in effect since completed should be repeated. (61 FR

practicable, on a weighing of the 1991. Energy efficiency is measured in 36982). DOE completed this review and

following seven factors: terms of an energy factor (EF), which decided to use the Process Rule, to the

(1) The economic impact of the measures overall water heater efficiency extent possible, in the development of

s(1) The eonomic impaacturers and the and is determined by the DOE test the revised water heater standards.

standard on the manufacturers and the procedure. 10 CFR part 430, subpart B, We developed an analytical

consumers of the products subject to the appendix E. The water heater efficiency framework for the water heater

standard; standards are as follows: standards rulemaking for our

(2) The savings in operating costs * electric, EF = 0.93-(0.00132 x rated stakeholders, which we presented

throughout the estimated average life of volume) during a water heater workshop on June

the covered product in the type (or * gas-fired, EF = 0.62-(0.0019 x rated 24, 1997. The analytical framework

class) compared to any increase in the volume) described the different analyses (e.g.,

price of, or in the initial charges for, or · oil-fired, EF = 0.59-(0.0019 x rated LCC payback and manufacturing

maintenance expenses of, the covered volume) impact analyses (MIA)) to be conducted,

products which are likely to result from where rated volume is the water storage the method for conducting them, the use

the imposition of the standard; capacity of a water heater in gallons, as of new LCC and national energ savings

(3) The total projected amount of specified by the manufacturer.(NES) spreadsheets, and the relationship

energy or water savings likely to result 2. History of Previous Rulemakings between the various analyses.

directly from the imposition of the On September 28, 1990, DOE 4. Test Procedures

standard; published an Advance Notice of

(4) Any lessening of the utility or the Proposed Rulemaking (ANOPR) he D test procedure determines

performance of the covered products announcing the Department's intention o e water heater EF, ic ien a Tme

likely to result from the imposition of to revise the existing water heaterer wa heater

the standard; efficiency standard. (55 FR 39624). On other water heater performance March 4, 1994, DOE proposed a rule to characteristics determined by the DOE

(5) The impact of any lessening of revise the energy conservation standards test procedures are the overall heat

competition, as determined in writing for water heaters well as as a variety of transfer coefficient (UA and the

by the Attorney General, that is likely to other consumer products. (59 FR recovery efficiency (RE) for gas and oilresult from the imposition of the 10464). On January 31, 1995, we fired water heaters. The UA is referred

standard; published a determination that we to as the standby heat loss coefficient of

(6) The need for national energy and would issue a revised notice of the storage tank. It is a measure of the

water conservation; and proposed rulemaking (NOPR) for water amount of heat n British thermal units

(7) Other factors the Secretary heaters. (60 FR 5880). This is the revised (Btus) lost from a water heater in one

considers relevant. proposal for amending the energy hour. The RE is defined as the ratio of

In addition, Section 325(o)(2)(B)(iii), efficiency standards for water heaters. energy delivered t the water to the

In addition, Section 325(o)(2)(B)(iii), energy content of the fuel consumed by

42 U.S.C. 6295(o)(2)(b)(iii), establishes a 3. Process Improvement the water heater.

rebuttable presumption of economic The fiscal year (FY) 1996 The Act does not allow DOE to set

justification in instances where the appropriations legislation imposed a energy standards for a product unless

Secretary determines that "the moratorium on proposed or final rules there is a test procedure. The

additional cost to the consumer of for appliance efficiency standards for Department published a test procedure

purchasing a product complying with FY 1996. Pub. L. 104-134. During the on May 11, 1998, that revised the firstan energy conservation standard level moratorium, the Department examined hour rating of storage-type water

will be less than three times the value the appliance standards program and heaters, added a new rating for electric

of the energy, and as applicable, water, how it was working. Congress advised and gas-fired instantaneous water

savings during the first year that the DOE to correct the standards-setting heaters and amended the definition of a

consumer will receive as a result of the process and to bring together heat pump water heater. (63 FR 25996).

standard, as calculated under the stakeholders (such as manufacturers and This revision did not change the test

applicable test procedure .. ." The environmentalists) for assistance. method for determining energy

rebuttable presumption test is an Therefore, we consulted with energy efficiency standards.

alternative path to establishing efficiency groups, manufacturers, trade III Analysis and Methodology

economic justification. associations, state agencies, utilities and

Section 327 of the Act, 42 U.S.C. other interested parties to provide input This section describes the analyses

6297, addresses the effect of Federal to the process used to develop appliance and methodologies to be used in this

rules on State laws or regulations efficiency standards. As a result, on July rulemaking. It includes a general

concerning testing, labeling, and 15, 1996, the Department published a introduction to each analysis section

standards. Generally, all such State laws Final Rule: Procedures for and provides a discussion of issues

or regulations are superseded by the Consideration of New or Revised Energy relative to the water heater rule (see

Act. unless specifically exempted in Conservation Standards for Consumer Chapter 2 of the TSD).

Section 327. The Department can grant Products (referred to as the Process A Market and Technology Assessment

a waiver of preemption in accordance Rule) (61 FR 36974), codified at 10 CFR

with the procedures and other part 430, subpart C, appendix A. The market and technology

provisions of Section 327(d) of the Act. The Process Rule states that for assessment characterizes the relevant

42 U.S.C. 6297(d). products, such as water heaters, for product markets and existing

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

technology options including prototype connections and it will fit in most information regarding all curren

designs. electric water heater closets. However, it technology options and prototyp

Ip~~. General ,still will not fit under counters or in designs. In consultation with int

spaces less than four feet tall. parties, the Department develops 

When initiating a standards In addition, the Federal Energy of design options for considerati

rulemaking, the Department develops Management Program's (FEMP) "Buying the rulemaking. All technologica

information on the present and past Energy Efficient Products Program" feasible design options are candi

industry structure and market identifies the upper 25% energy this initial assessment. We ident

characteristics of the product(s) efficient residential gas and electric heat pump water heaters and gas

concerned. This activity consists of both water heaters. These levels are condensing water heaters as the

quantitative and qualitative efforts to recommended to Federal agencies with maximum technologically feasib

assess the industry and products based the ultimate goal of moving the entire designs based on measured EF's 

on publicly available information. U.S. market toward higher energy than 2.0 and 0.9, respectively.

Issues to be addressed include: (1) efficiency. We are aware of a few gas The Department considers des

manufacturer market share and and electric utility programs that options technologically feasible 

characteristics; (2) trends in the number encourage the use of higher efficiency are already in use by the respect

of firms; (3) the financial situation of water heaters, including consumer industry or research has progres

manufacturers; (4) existing non- rebates or dealer incentive programs, the development of a working regulatory efficiency improvement financing, consumer education, and prototype. The Process Rule sets 

initiatives; and (5) trends in product rental/guarantee programs that often definition of technological feasib

characteristics and retail markets. The include installation and maintenance follows: "Technologies incorpor

information collected serves as resource costs. In the past decade, the number of commercial products or in work

material to be used throughout the these utility programs has diminished prototypes will be considered

rulemaking. considerably due to restructuring of the technologically feasible." 10 CFR 

2. Product Specific electric and gas utility industries. subpart C appendix A(4)(a)()(i) - The water heater market is largely a rt C. a n A()() 

There are five major manufacturers in replace ent rmarket, accotinargelor 8 The Department has determine

the residential water heater market. We 85% of sales. The remaining 15-20% ofall of the design options discusse

estimate they have the following market sales are for new installations Of the 9 today's notice are technologically

shares as of 1997: Bradford White 10%, million water heaters sold annually, we feasible as required by Section

American and AO Smith 16% each, estimate plumbing wholesalers sell 325(o)(2)(A) of EPCA, as amende

estimate plumbing wholesalers sell

Rheem 28% and State Industries 29%; approximately 4.3 million, while retail C. Screening Analysis

all others add up to 1%. Annual outlets such as Sears, Wards, Home

residential water heater shipments (i.e., Depot, and Lowes sell the majority of Screening identifies those desi

the total number of water heaters the remaining 4.8 million. options the Department will con

delivered to and installed in consumers' Characteristics of the replacement the engineering analysis. This in

homes) have gradually increased from market include: (1) consumers typically all technologically feasible desig

7.4 million units in 1987 to 9.1 million replace the existing water heater with options not eliminated in the scr

units per year in 1997. one of similar fuel and capacity; (2) analysis. The screening analysis

Financial information for most water consumers consider the ease of provides a basis for eliminating 

heater manufacturers is not publicly installation-it has to fit in the existing problematic design options from 

available, with only one publicly traded space; (3) consumers usually replace consideration early in the proces

water heater manufacturer in the United water heaters under emergency Initially, the candidate design op

States. Information from the U.S. Census conditions when they fail; and (4) encompass all those technologies

Bureau Current Industrial Reports for considered to be commercially a

1997 and other public sources shows the installers' recommendations. or in working prototypes. The Pr

industry shipments with a value of $1.3 Residential water heating uses about Rule establishes the factors DOE 

billion for 9.1 million water heaters. 2.6 quads per year of primary energy out screening design options. The fa

Typical industry profits are 6 percent of of 19 quads (year 1997) for all are as follows:

revenues. residential buildings, at a cost of $26.4 * Technological feasibility. DO

There is no current national non- billion. Where natural gas is available, only consider technologies that a

regulatory water heater efficiency 74% of households use gas to heat water incorporated in commercially av

improvement program. However, DOE is and 24% heat with electric. Where gas products or in working prototype

considering an Energy Stars water is not available, 84% of households use * Practicability to manufacture

heater program and currently is electric water heaters and the remaining install, and service. A technology 

supporting a program to demonstrate a households use oil-fired water heaters be able to be mass produced. ins

50 gallon, 6,000 Btu input heat pump or liquid petroleum gas (LPG). and serviced on a scale that will 

water heater and to develop a the relevant market at the time o

residential condensing gas-fired water B. Technological Feasibility effective date of the standard.

heater. If successful, the DOE heat pump Under the guidelines in the Process * Impacts on product utility to

water heater program will eliminate the Rule, DOE will eliminate from consumers. DOE must determine 

installation, service and some of the consideration, early in the process, any energy efficiency designs have

product utility issues that formed most design options that present significant adverse impacts on pr

of our basis for screening out heat pump unacceptable problems with respect to utility, including impacts on sign

water heaters. This DOE heat pump technological feasibility, practicability subgroups of consumers, or if a p

water heater is designed to be a "drop- to manufacture, install, and service, would become unavailable with

in" replacement for a standard electric product utility or unavailability, or performance characteristics that 

water heater. Therefore it requires only safety. In order to conduct the screening substantially the same as produc

standard plumbing and wiring analysis, the Department gathers presently available in the U.S.

EE-RM-97-900 COMMENT 119A
25046 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

* Adverse impacts on health and/or a. Design Options That Reduce Standby water vapor in the flue gas and extracts

safety. DOE will not consider any Losses more heat.

designs that have significant adverse Some designs that reduce standby * Third, an inverted U-shaped flue

impacts on health or safety. losses-heat traps and increased jacket increases recovery efficiency and impacts on health or safety. losses--heat traps and increased jacket ^^ ^ ^ o . reduces standby losses of oil-fired water

10 CFR part 430, subpart C, appendix insulation-are frequently applicable to heaters

A(4)(a)(4) and (5)(b). all fuel types. A heat trap is a device thermophotovoltaic or

that keeps hot water from circulating * Fourth, a thermophotovoltaic or 1. Product Classesthat keeps hot water from circulating thermoelectronic generator uses silicon

Classes Product ~. a piping distribution ~into system photovoltaic cells (energized by heat or

DOE divides water heaters into because of natural convection. l e burning fuel) to generate

classes based on the type of fuel used to Manufacturers insulate water heaters by lt fo t burnin and fan op erate th

heat water: electricity, natural gas/LPG, filling the cavity between the jacket and power to run a faition ad ontrols theon aate 

and oil. Different energy efficiency the tank with polyurethane foam gas-fired water heater. This is more

standards will apply to different insulation. Most water heaters on the efficient because it eliminates the

product classes. DOE defines residential market today have at least 1 inch thick standing pilot and does not require any

storage water heaters in the following foam insulation, while some models connection to an outside electric power

classes: have 2- or 3-inch thick insulation. An co co o ous crc or

An electric water heater has a alternate way to reduce jacket heat Fifth, the two-phase thermosiphon

storage capacity of 20-120 gallons and losses s to use advanced insulation is a heat pipe that transfers heat from

a heat input of 12 kilowa kW )matt oerials such asevacuated panels. the gas burner to the storage tank. a heat input of 12 kilowatt (kW) or less. The following design options reduce * Sixth, the air-atomized burner (oil-

* A gas-fired water heater has a standby losses, but usually are restricted fired only) uses a stream of air to

storage capacity of 20-100 gallons and to one type of fuel: atomize the oil. This improves a heat input of 75,000 Btu per hour or * Plastic water heater tanks reduce combustion efficiency and results in

less. conducted heat. This design option is less unburned fuel in the flue.

* An oil-fired water heater has a used with electric water heaters or with The heat pump is the only design

storage capacity of 50 gallons or less and indirect water heating techniques. option that improves the heating

a heat input of 105,000 Btu per hour or * A manufacturer can insulate the efficiency of an electric water heater. A

less. bottom of the tank, but this design heat pump water heater can double the

2. Baseline Units option can be used only with electric EF of an electric water heater compared

water heaters or with gas or oil-fired to a resistance type because it uses heat

In order to analyze design options for burners mounted beside the water tank from the air within the house. This can

energy efficiency improvements, the and using a heat exchanger to transfer cause beneficial dehumidification or

Department defines a baseline unit. For heat to the water. unwanted overcooling. During those

each product class, the baseline unit is * A damper installed either at the flue times when heat gains from normal

one that meets the existing standard. We exit or in the vent pipe of gas water household activities or from the

determined the following baseline units heaters minimizes off-cycle heat losses. environment are not large enough to

for each fuel type: * The side-arm heater design avoids keep the house comfortable, e.g., the

* The baseline electric water heater is flue losses by using a small, separate winter, the house heating system must

a 50-gallon glass-lined steel tank with heat exchanger to heat water and a small provide the makeup heat to the house.

1.5 inch polyurethane foam insulation circulation pump on gas-fired water

and two 4,500 watt heater elements. The heaters. c. Design Options That Improve System

baseline EF is 0.86. · An electronic ignition device can Efficiency

Te b e gs w r h r is a replace a standing pilot ignition system There are several system

40gThe baseline gas wter heater it a in gas-fired water heaters. improvement applications: 40-gallon glass-lined steel tank with a The timer design option limits the

nominal 4 inch center flue. The heat b. Design Options That Improve amot time d esign tin iit then an

input rate is 40,000 Btu/hr with a 450 Combustion Efficiency electric water heater may be energized.

Btu/hr pilot light. The tank is insulated DOE considered six design options * The solar pre-heat technique uses

with 1 inch of polyurethane foam. The that improve combustion efficiency. solar collectors as pre-heaters for a

energy factor is 0.54 and the recovery Four design options are applicable for standard electric or gas storage-type

efficiency is 76%. gas-fired and three for oil-fired water water heater.

* The baseline oil-fired water heater heaters: * The drain water heat recovery

is a 32 gallon glass-lined steel tank * First, increased heat exchange from system uses a heat exchanger to recover

insulated with 1 inch of polyurethane a flue baffle, multiple flues, or waste heat from the drain water.

foam. The heat input rate is 90.000 Btu/ submerged combustion improves heat * A tempering tank-an un-insulated

hr and it has a center flue. It has an EF transfer. The flue baffle is a twisted strip storage tank installed in a conditioned

of 0.53 and the RE is 75%. of metal inserted into the flue of a gas space- raises the inlet water

3. of Design or oil-fired water heater that improves temperature to the ambient temperature.

3. Screening of Desgn Options heat transfer to the flue. Increased heat * Dip-tubes that prevent the buildup

In the water heater rulemaking exchanger surface area, usually from of sediment on the bottom of the tank

analysis, DOE considered three multiple flues, improves the heat may reduce the degradation of

categories of design options: designs transfer from the flue gas to the water. efficiency and prolong the life of the

that reduce standby losses, designs that In submerged combustion or direct-fired water heater.

improve combustion efficiency, and combustion systems for gas-fired water While system improvement features

designs that improve system efficiency. heaters, water is heated by direct may save energy, they are typically a

For a complete description of these contact with the flue products. part of the water heater system, not the

design options, see Chapter 4.2 in the * Second, a condensing gas-fired water heater. For example, the

TSD. water heater condenses some of the tempering tank is a separate tank that is

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

plumbed to the water heater. Each of a. Heat Pump Water Heaters access to the same amount of h

these designs was eliminated in the Practicability to Manufacture. From heat any heat pump water heat

screening analysis because none is meetings with the water heater industry, require to serve the residence l

defined as a water heater in the Act. DOE has determined that water heater however, the lower heat extract

Section 321(27), 42 U.S.C. 6291(27). manufacturers would not have the lead of the DOE unit may allow for

4. Results of Screening Analysis time necessary to ramp up heat pump installation in locations with sm

water heater production to present sales surrounding air volume than is 

In accordance with the Process Rule, levels in the three-year time frame for existing designs.

the Department conducted a screening established by the NOPR. Since the late The unit is being developed 

analysis and published the results in 1970s, sales of heat pump water input from DOE, Arthur D. Littl

1970s, sales of heat pump water heaters Oak Ridge National Laboratory 

"Technology Assessment and Screening have not exceeded 10,000 per yearak designed been from te ote t t

Analysis," Appendix B: Supplement to (<0.33% of electric water heater sales, desine ro the otet t

the Water Heater Rulemaking <0.17% of all water heater sales) and address many of the known ma

Framework, January 1998. DOE notified presently sales of residential acing the adoption of

stakeholders of the availability of this water heaters are less than 4,000 residential heat p p water he

document in the Federal Register on residential w aters a she first b arrier is the high cost 

January 14, 1998. (63 FR 2186). residential wcater eers a year in pump water heaters due to the 

, categories covered byof the present pump motor, compressor and c

We received many comments on the rulemaking. None of the five major A second barrier is the more co

elimination of the heat pump water manufacturers of residential water (and more costly) installation fo

heater as a design option. Several heaters currently have a heat umpump water heaters. There are 

stakeholders commented that DOE design in their residential product line, flow, filter replacement and con

should consider all design options, and only two (State and Rheem) have removal considerations. Third, 

including heat pump water heater had a heat pump water heater in their reliability of many models has 

designs. (American Gas Association product lines in the last 10 years. lack of consumer confidence. F

(AGA), No. 28 at 4; Okaloosa, No. 29 at LaClede Gas commented that DOE heat pum water heaters requir

1; Clearwater, No. 30 at 1; Mesa, No. 34 should not screen heat pump water maintenance. Presently, no mas

at 1; Barley, No. 32 at 1; 13 Letters from heaters out as a design option because service infrastructure exists.

Various Gas Utilities, No. 31 at 1; and DOE is presently supporting the Preliminary field tests of the 

Laclede, No. 47 at 2). development of a residential heat pump design are likely to start in the s

DOE eliminated the heat pump water water heater product. (LaClede, No. 25 2000. Larger scale utility testing 

heater due to issues concerning the at 3) The heat pump water heater design slated for late 2000 to 2001. Acc

practicability to manufacture, install, being researched by DOE is an integral reliability testing is also schedu

and service on the scale necessary to heat pump water heater design which sometime after initial field testi

serve the relevant market at the time of uses a small compressor with 40% less resulted in a more or less stable 

the effective date of the standard and heating capacity than any used in If field and reliability testing are

product utility of these units. DOE existing heat pump water heater positive, limited commercial pr

eliminated heat pump water heaters products (and has about 25% of the and sales are possible by 2003. 

after careful consideration of the current heating capacity of a typical electric production and sales would be 

electric resistance and heat pump water resistance hot water heater). This should an existing air-conditioning equ

heater markets and manufacturing assist in installation in smaller spaces as manufacturer who would likely

technology, and after applying the it will physically use smaller purchase storage tanks from an 

factors to be considered in screening components (particularly the water heater manufacturer. Beca

design options contained in the Process compressor and evaporator/fan system), the issues that have plagued hea

Rule. 10 CFR 430, subpart C, appendix and will likely be quieter in operation. water heaters in the past, DOE i

A(4)(a)(4) and (5)(b). See Chapter Present designs of the DOE heat pump requiring its partners to introdu

4.2.2.10 in the TSD for a discussion of re-inject condensate back into the air to product cautiously, correcting p

the heat pump water heater screening be re-condensed in the evaporator. DOE encountered during field testing 

analysis. believes this may simplify installation, fully testing the corrections. A m

at some expense to system capacity, study done by Arthur D. Little p

Several other stakeholders, including efficiency and dehumidification of the potential sales for the DOE desig

Gas Appliance Manufacturers residence. 300,000 units per year 10 years 

Association (GAMA), Edison Electric The integral heat pump water heater commercial introduction, or 7.5

Institute (EEI), Southern Company (SC), design proposed by DOE uses a 50- present electric water heater sal

and Virginia Power (VP) supported gallon tank, but even the small Report #46230 to DOE).

DOE's decision to screen out heat pump compressor and heat exchanger used in Although most manufacturers 

water heaters. (GAMA, No. 51 at 4; EEI, that design adds approximately a foot in develop, either alone or in partn

No. 36 at 2; SC, No. 12 at 2 and No. 42 height to that tank. The attached 50- with others, a working heat pum

at 1; and VP, No. 45 at 3). gallon storage tank is sized to provide heater design in the next few ye

Similarly, the screening criteria were ample water for a typical day's use in there are significant difficulties 

applied to condensing gas-fired water most residences. Smaller tank sizes are capitalizing and building heat p

heaters. DOE eliminated gas condensing not being proposed, as the cost water heater manufacturing faci

water heaters because we determined effectiveness of the heat pump decreases provide for the present 4 million 

they are not technologically feasible. 10 rapidly with smaller tank sizes and electric water heater sales annua

CFR 430, subpart C, appendix A(4)(a)(4) characteristic lower water usage. Manufacturers of heat pump w

and (5)(b). See Chapter 4.2.2.10 in the Presently, the smallest integral heat heaters would need to design a TSD for a discussion of the condensing pump water heater design available in completely new product and bu

gas-fired water heater screening the U.S. is an 80-gallon unit. The design production facilities to supply th

analysis. proposed by DOE would still need current electric water heater ma

EE-RM-97-900 COMMENT 119A
25048 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

This market has a market volume greater will add approximately 8-12 inches on EE-RM-90-201) claimed that "the

than that of all room air-conditioner top of the tank for compressor, infrastructure to service heat pump

shipments in the U.S. (1993 DOE evaporator coils, and evaporator fan. water heaters is not capable of handling

Report, EE-0009). In a 1994 A. D. Little Assuming no change in tank size from a large quantity of heat pump water

report, the estimated investment cost to the electric resistance model, the extra heater units." The issues faced in

convert to heat pump water heaters was height of the heat pump design will service and maintenance of heat pump

$750 million. Given the current levels of present installation problems where the water heaters have not changed since

profitability of the water heater industry existing water heater enclosure is height 1994. The present installation and

and the limited capital resources, some limited, such as many existing lowboy service infrastructure for electric

manufacturers will not be able to water heater installations. resistance water heaters consists, for the

finance these costs. (Dieckmann, GAMA reported that electric lowboy most part, of plumbers.

Topping and Shorey, August 31, 1994, shipments account for about 18 percent Heat pump water heaters are more

ADL Report to GAMA, "Technical of residential electric water heater complex in design and based on

Analysis of the Proposed DOE Heat shipments. (GAMA, No. 91 at 1). DOE fundamentally different technology

Pump Water Heater Energy Efficiency appreciates the electric lowboy from electric resistance water heater

Standard") shipment information from GAMA. designs. Because of this, they require a

In addition, given the high initial cost About 18% of electric water heater broader range of skills to service the

for heat pump water heaters, poor sales are lowboy models. An integral units. Plumbers generally do not have

reliability with past heat pump water heat pump water heater would not fit training or background in repair of

heater designs, and anticipated impact into these locations. Perhaps 50% of the appliances like a failing heat pump

on consumer utility, initial sales of lowboy sales would require an add-on water heater. Generally, this type of

electric water heaters after a heat pump heat pump unit. (The other 50% are for repair work is done by small appliance

water heater standard may be low as new construction.) Additionally, over repair personnel who repair

consumers look for other alternatives. one million standard sized electric refrigerators, freezers, room air

With a government imposed time frame water heaters per year are installed in conditioners, and other "white" goods

for shifting all production to heat pump residences of 1,000 ft 2 or less. Perhaps (e.g., washing machines). According to

water heaters and a shifting market size, as many as half of these installations the Bureau of Labor and Statistics, of the

it is unclear how the electric water would also require an add-on heat approximately 71,000 home appliance

heater industry could plan and secure pump unit. The lowboy and small repair workers in the U.S., two out of

investments to satisfy an unknown final residence replacements could equal three work directly for department

market volume. 850,000 add-on heat pump water stores or household appliance stores.

Considering these issues with regard heaters per year. These add-on heat (1998-1999 Occupational Outlook

to manufacturability and achieving pump units require a space with at least handbook, U.S. Dept. of Commerce,

sufficient production volume, DOE has 100 cubic feet per minute of warm air BLS) These stores represent a small

concluded that the screening criterion of and wiring and plumbing connections fraction of water heater sales but might

practicability to manufacture, on the (probably through one or more walls) for be potential sales and service outlets for

scale necessary to serve the relevant water pipes and a condensate drain. We heat pump water heaters.

market at the time of the effective date would characterize this installation as Presently, no mass-market servicing

of the standard, will not be met. "difficult." Without an extensive infrastructure for heat pump water

Practicability to Install. Based on our survey, we are unable to determine how heaters exists. While the air

analysis of current heat pump water many of these difficult installations conditioning industry could provide

heater designs and the DOE drop-in heat would be feasible, although costly, and servicing capabilities, only one

pump water heater prototype, we do not how many would result in loss of company has any relationship with

believe heat pump water heaters can be product utility as discussed later in this major water heater manufacturers or

used as direct replacements for electric section. with plumbers who install water

water heaters in many applications. We have determined that almost a heaters. There is no precedent in the

There are many replacement water million households could be affected history of the U.S. major appliance

heater applications where present each year. Therefore, DOE eliminated industries to suggest that a new service

electric resistance water heaters are heat pump water heaters as a design and repair infrastructure could develop,

installed in small spaces, in attics and option from further consideration on the scale of several million units per

under counters. An example of such because of problems concerning year, in a roughly three-year time frame.

small spaces are the approximately 27% practicability to install on the scale Therefore, DOE eliminated heat pump

(10 million) of all electric water heaters necessary to serve the relevant market at water heaters as a design option from

installed in residences smaller than the time of the effective date of the further consideration because of

1,000 ft 2 (average size: approximately standard. problems concerning practicability to

760 ft 2). In many of these installations, Practicability to Service. We are also service on the scale necessary to serve

space restrictions would make it aware of the thousands of comments the relevant market at the time of the

impossible to simply replace the from interested consumers about heat effective date of the standard.

existing electric resistance water heater pump water heaters in our 1994 NOPR. Product Utility. Heat pumps need a

with any of the existing heat pump These comments cited lack of a good certain amount of space for proper

water heater designs sold today. The service infrastructure, noise, and operation because a heat pump heats

DOE "drop-in" water heater is a reliability, among other factors. We have water by removing heat from the

candidate for some of these more recent comments from Northeast household air. Many heat pump water

applications, but its current design does Utilities (NU) that significant (10%) heaters currently available require a

not address the problems of small reliability problems are still evident in volume of at least 1,000 ft 3 of heated air

spaces or small sizes. some heat pump water heater designs. to provide adequate heat exchange and

Even the small (4,000-6,000 Btu/h) (NU, No. 4 at 1). minimize overcooling of the space,

heat pump unit for the DOE "drop-in" Two hundred sixteen comments to which can impact performance.

water heater mounted on top of a tank the 1994 rulemaking process (docket Approximately 14% of all households

EE-RM-97-900 COMMENT 119A
Federal Register / Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

are smaller than 1000 ft2 and presently portion of the population (10 million serious reliability or durability p

use electric water heaters. The volume households). Therefore, because of this and confirmed technical feasibil

of heated air required for a heat pump significant adverse impact to significant (ASHRAE Transactions, 1987, 93

is equal to 12% of the floor space of a subgroups of consumers, the 1485-1500.) However, DOE is n

1,000 ft 2 home. Therefore, in smaller Department has eliminated heat pump of any prototypes or commercial

residences, current or prototype heat water heaters as a design option from available residential condensing 

pump units would have to be located in further consideration. fired water heaters. Therefore, w

the living space, or have vigorous (100 In summary, DOE has eliminated eliminated this design option ba

cubic feet per minute) air exchange residential heat pump water heaters as a lack of technological feasibility

within the living space. Such a location a design option for this rulemaking discuss the details in Chapter 4.

can lead to significant homeowner because they fail to meet two of the the TSD.

dissatisfaction due to loss of space three screening criteria listed earlier- c. Other Water Heater Design Op

occupied by the unit and related piping, namely, they are impracticable to

as well as the potential for noise of the manufacture, install, and service and DOE has eliminated air-atomiz

fan and compressor. This is particularly have adverse impacts on product utility. burners, power vents, and increa

a concern in small, slab-on-grade There is no foreseeable means for the heat exchanger surface areas. Ba

housing, mobile/manufactured homes or technology to advance enough in the comments, DOE eliminated air-a

apartments. short term to allow heat pump water burners on the basis that they ar

If there is no space to incorporate both heaters to fill market needs and to technologically feasible because 

the water tank and the refrigeration continue to provide a reasonable level of prototype has not been applied t

subsystem in the same location, a consumer utility. heaters. We eliminated power ve

reduced tank size may have to be As a result of its screening analysis, because they require special ven

installed. This could cause a 20% to 25 DOE has determined that heat pump systems that cannot be installed 

% loss of tank volume on a standard 50 water heaters are not economically applications such as existing

gallon water heater. Any substantial justified. This conclusion is based on multifamily homes and some ex

reduction in the tank size to the following factors: (1) a capital town homes and condos. Howev

accommodate the heat pump would investment that is 2.3 times the current Department is aware of a new, lo

reduce the first hour rating, since first industry net present value; (2) adverse volume fan that may allow powe

hour rating depends on tank size and utility impacts on about 10 million venting of an oil-fired water heat

reheat capacity. The first hour rating is, households living in homes with less with conventional negative draft 

"an estimate of the maximum volume of than 1,000 square feet; and (3) adverse systems. Test results of this tech

"hot" water that a storage-type water impacts on low income and seniors-only are not available. We eliminated 

heater can supply within an hour that households due to a price increase increased heat exchanger surface 

begins with the water heater fully about 3 times the expected 2003 (for gas-fired water heaters) beca

heated." (10 CFR 430, subpart B, baseline price for electric water heaters. improved flue baffles can provid

appendix E). We interpret losses of first same efficiency improvement an

hour rating as a loss of product utility. b. Gas Condensing Water Heaters preferred by manufacturers.

DOE believes heat pump water Although several manufacturers offer After considering the above, th

heaters should be eliminated from gas condensing water heaters, these are following are the design options

further consideration because there only in commercial sizes. Results from considered for the rulemaking (s

would be a loss of utility to a significant a GRI sponsored field test showed no Table 1).

TABLE 1.-DESIGN OPTIONS USED IN THE ANALYSIS

Design options-description Gas Electric 

H eat traps ................................................................................................................................................ X X 

P lastic tank ........................................................................................................................... X X

Increased jacket insulation ...................................................................................................................... X X 

Insulating the tank bottom (electric only) ................................................................................................ ............ X

Im proved flue baffl e/forced draft .......................................................................................... .................... ...... 

Increased heat exchanger surface area .................................................................................................. .................... 

Flue dam per (electro-m echanical) ........................................................................................................... X

S ide-arm heater ....................................................................................................................................... X .................... Electronic (or interrupted) ignition ....................................................................................... X.................... . 

used only in conjunction with the side-arm heater option.

D. Engineering Analysis of Design analytical tools and the critical analyses. First, the U.S. Environm

Options assumptions DOE used in the water Protection Agency (EPA) is requi

The engineering analysis determines heater engineering analyses. We also phase out of the blowing agent cu

the maximum technologically feasible discuss two initiatives by other Federal used by the water heater industry 

energy efficiency level, calculates unit agencies that impact the rulemaking foam insulation (HCFC-141b). Se

energy savings and payback, and analyses. manufacturers have reached a vo

estimates the retail price for each design 1. Other Federal Agencies' Initiatives agreement with the Consumer Pr

option and combination of design Safety Commission (CPSC), to pr

options. It analyzes the design options Two actions by other Federal agencies gas-fired water heaters resistant t

identified as a result of the screening outside of the DOE efficiency standards ignition of flammable vapors. Th

analysis. This section discusses DOE's process will affect our engineering will affect the efficiency of water

EE-RM-97-900 COMMENT 119A
25050 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

heaters, and the second will increase the 134a, and HFC-365mfc. All of these production and to perform the necessary

price of gas-fired water heaters. have zero ozone depletion potential and tests to measure results using the new

Most residential water heaters are thus will meet the Montreal Protocol's blowing agent. Since the choice of

insulated with polyurethane foam in the requirements. Cyclopentane, widely insulation blowing agent has a

cavity between the tank and the jacket. used in Europe, is relatively significant impact on energy savings

Currently, water heater manufacturers inexpensive and highly flammable; U.S. and water heater cost, we request

use a hydrochlorofluorocarbon, HCFC- manufacturers have been cautious about stakeholder comment on the cost and

141b, as a blowing agent for this its use. HFC-134a is currently available, availability of HFC-245fa and water

insulation. HCFC-141b is an ozone- but its thermal resistance is lower than blown foam, and other alternative

depleting blowing agent and, as a result HFC-245fa. HFC-365mfc may be a good blowing agents. We also invite

of the Montreal Protocol, the EPA has potential alternative blowing agent, but comments on approaches that would

scheduled the phase-out of this blowing it also has a lower thermal resistance enhance the transition to a new blowing

agent by January 1, 2003. Water heater than HFC-245fa and its price is not agent for manufacturers, including, but

manufacturers must use another available. Our decision to analyze both not limited to, the timing needed for the

blowing agent after that time. HFC-245fa and water/CO2 blowing transition of HFC-245fa, water blown

A number of alternative blowing agents allowed us to cover the range of foam, or any other alternative blowing

agents are available. The industry is performance and costs of the suggested agent manufacturers suggest would be

considering HFC-245fa, HFC-356mfc, alternative blowing agents. We have appropriate to use in implementing a

HFC-134b, cyclopentane and water more detailed information about new standard. Manufacturers are

blown foam. DOE decided to analyze alternative blowing agents in Chapter requested to submit supporting data for

two blowing agents-water-based and 3.4 of the TSD. alternative blowing agents.

HFC-245fa. We based our decision on a Although we have analyzed HFC- On September 13, 1999, we received

number of criteria, including zero ozone 245fa as a blowing agent, there is updated information indicating that

depletion potential, low global warming continuing concern about its Honeywell had received EPA approval

potential, availability by 2003, and availability. Representatives from for production of HFC-245fa.

price. In our preliminary analysis, Honeywell, the licensee to manufacture Honeywell has since announced it

presented at the July 1999 Workshop, the material in the U.S., stated at the would start building a commercial plant

we only analyzed one of the July 1999 workshop that it would have for producing HFC-245fa in Geismar,

alternatives-water blown insulation. a commercial size plant ready to Louisiana. Based on Honeywell's

Some stakeholders raised concerns produce HFC-245fa by mid-2002. (July announcement, we have decided to base

about our failure to include HFC-245fa 22, 1999 Water Heater Workshop our decision on insulation blown with

blown insulation in our preliminary Transcript, pg. 105). We received HFC-245fa because such insulation is

analysis. Therefore, we added HFC- comments from several manufacturers, 42% more effective in reducing thermal

245fa blown insulation to our analysis. GAMA, an individual, and an insulation losses than water blown insulation.

We used HFC-245fa and water blown supplier about the availability of HFC- Therefore, since our proposed standard

foam in our analysis. For cost 245fa and Honeywell's capacity to uses HFC-245fa, this notice addresses

information, Honeywell, the licensee to supply the market. GAMA and the results based on HFC-245fa blown

manufacture HFC-245fa in the U.S., manufacturers are concerned that insulation. However, the Department

provided estimates of HFC-245fa costs. Honeywell is the only source for HFC- has completed an identical analysis

For efficiency data, we used published 245fa. They are also concerned that using water blown foam in order to

laboratory measurements of physical manufacturers need samples of HFC- anticipate the unlikely event that HFCparameters. In order to keep the baseline 245fa soon as it will take about six to 245fa does not become available.

efficiency (those with HCFC-141b nine months to replace existing low The other action affecting this

insulation) and the energy use pressure foaming equipment with high rulemaking is a CPSC initiative to make

characteristics of water heaters with pressure equipment and shrinkage tests gas-fired water heaters resistant to

HFC-245fa insulation the same, we will take 250 days. (Stepan, No. 86 at 1; ignition of flammable vapors. Most

modeled it with appropriately thicker Bradford White, No. 89 at 2; Vaughn, current designs for gas-fired water

insulation. We also increased the No. 56 at 1; Rheem, No. 95 at 1; GAMA, heaters rely on a standing pilot to ignite

amount and cost of steel used for the No. 91 at 2; and Energy Market and the main burner. If flammable vapors

water heater jacket in addition to the Policy Analysis, Inc. (EMPA), No. 88 at are in the air near a water heater, there

extra volume and cost of insulation. The 9). is the possibility of unintended ignition.

analysis and test results using HFC- Several comments suggested ways to This is a potential safety problem

245fa and water blown foam to evaluate deal with issues concerning the because water heaters are often installed

design options can be found in Chapter availability of HFC-245fa. The in garages and basements, where

3.4.1 of the TSD. American Council for an Energy- flammable liquids such as gasoline or

Many comments addressed the Efficient Economy (ACEEE) suggested paint thinners may be used. The CPSC

potential of other alternatives. GRI HCFC-141b could be stockpiled, the staff recommended publication of an

claimed other types of insulation may EPA could be petitioned to extend the advance notice of proposed rulemaking

be preferable to HFC-245fa blown phase out of HCFC-141b, or DOE could for the development of a test procedure

insulation. (GRI, No. 48 at 2). The make the new standard conditional on that would determine whether a

Oregon Office of Energy (OOE) the availability of HFC-245fa. (ACEEE, particular gas-fired water heater design

requested that DOE provide a succinct No. 93 at 7). SC and EEI suggested DOE would ignite flammable vapors.

and complete summary of the delay implementation of the new water However, before the notice was

alternative insulations and why they heater standard if HFC-245fa based published, the water heater

were not considered in the analysis. insulation materials are not available. manufacturers agreed to voluntarily

(OOE, No. 96 at 5). (SC, No. 42 at 2 and EEI, No. 39 at 2). develop a test procedure and new gas

In addition to the water/carbon DOE is concerned about the relatively burner designs.

dioxide (C02) and HFC-245fa blowing short time the manufacturers have to The CPSC worked with GRI and the

agents, there are cyclopentane, HFC- incorporate a new blowing agent into water heater industry to develop a test

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

procedure for gas-fired water heater manufacturer cost of $35 is reasonable. heaters have been eliminated. Th

designs that will resist ignition of We discussed this during the the proposed standard for both e

flammable vapors. The American manufacturing interviews, and several and gas-fired water heaters will 

National Standards Institute (ANSI) Z21 agreed with this cost estimate. achieve the max tech levels. The 

Committee approved this test procedure Furthermore, the design does not for this decision are described in 

in May 1999, but final approval by the require electricity for the water heater or discussion on screening, and in 

full ANSI committee is still pending. modifications of the venting system. 4.2.2 of the TSD. Accordingly, th

Gas-fired water heaters designed to be DOE also anticipates no changes in Department has satisfied the

resistant to the ignition of flammable efficiency from flammable vapor requirements of Section 325(p)(2

vapors are now on the market. ignition-resistant water heater designs. U.S.C. 6295(p)(2).

Manufacturers have agreed to begin DOE will monitor this situation to verify Therefore, we combined the d

marketing gas-fired water heaters these assumptions or to update the option technologies that were no

resistant to ignition of flammable vapors analysis, as designs meeting the ANSI screened out into successively m

by April 2001. DOE will consider those standard become available. efficient design options until we additional economic impacts on 2. Maximum Technologically Feasible reached the highest efficiency le

manufacturers of the transition to Levels each product class. We combine

designs resistant to flammable vapors. Amendments to a standard are options by using our payback an

The voluntary agreement between rt t n We define payback as the time re

manufacturers and the CPSC will be required to achieve the maximume efficiency

implemented by April 1, 2001, which technoimprovements through energy sa

will be close to the effective date of this technologically feasible and improvements through energy sa

rwill be economically justified. Section We started with the design optio

rule. 325(o)(2)(A),42 U.S.C. 6295(o)(2)(A). the shortest payback and continu

The impact of this initiative on the Furthermore, Section 325(p)(2) requires add design options with the next

water heater rulemaking analyses is an that the Secretary determine the shortest payback at each higher

increase in manufacturing cost. Based maximum technologically feasible level efficiency level. See Table 3 for d

on discussions with the Water Heater (max tech) for each type (or class) of option combinations. The highes

Industry Joint Research and covered product and then, if the efficiency levels for this rulemak

Development Consortium, DOE decided proposed standard is not designed to approximately 0.91 EF for 50-gal

to add an extra $35 per unit of achieve the max tech levels, state the electric water heaters, 0.71 EF fo

manufacturer cost for designs resistant reasons that it will not meet those gallon gas-fired water heaters, an

to ignition of flammable vapors. In this levels. EF for 32-gallon oil-fired water h

analysis, the $35 is applied to the The Secretary has determined heat 3 Methodology

manufacturing cost of all design options pump water heaters for electric, and gas

for gas-fired water heaters, including the condensing water heaters, are the max Table 2 summarizes the inform

baseline design. EEI stated that the cost tech design options. This means the we used in the engineering analy

of $35 may be very conservative. (EEI, max tech level for electric is 1.7 EF and the assumptions we made. We br

No. 39 at 5). We believe until flammable for gas is 0.91 EF. The max tech level discuss many of the assumptions 

vapor ignition resistant designs are for oil is 0.61 EF. However, as a result section. For complete details abo

widely available in the market, and a of our screening analysis, the max tech engineering analysis, please see 

market price is established, a levels for electric and gas-fired water 8 in the TSD.

TABLE 2.-KEY ELEMENTS USED IN THE ENGINEERING ANALYSIS

Description Elements

Product classes .................................................. Electric, gas (includes LPG) & oil.

Analysis approach .............................................. Design options.

Designs analyzed ............................................... Heat traps, thicker insulation, tank bottom insulation on electric, 78% & 80% RE on 

& 82% RE on oil, plastic tank on electric, side-arm heater, & IID on gas, interrupte

on oil.

Simulation models .............................................. WATSIM for electric, TANK for gas, WHAM for oil.

Basis for energy factor ....................................... DOE water heater test procedure, 64.3 gpd.

Baseline energy factor ........................................ Electric, 50 gallon =.86, gas, 40 gallon =.54, oil, 32 gallon =.53.

Cost data ............................................................ Provided by GAMA and consultants and the Water Heater Consortium ($35, resistanc

tion of flammable vapors).

Price data ............................................................ W ater heater price database.

Insulation blowing agent ..................................... HFC-245fa (Water blown insulation analyzed in TSD).

Insulation cost ................................................. Existing-HCFC-141b blown-$1/lb from Honeywell.

New-HFC-245fa blown-$1.32/lb, from Honeywell.

Insulation thicknesses ........................................ 2 inch, 2.5 inch & 3 inch.

W arranty on baseline .......................................... 6 years or less.

Markup ................................................................ Average baseline price divided by average manufacturer baseline cost.

Installation costs ................................................. $160 for door jamb removal & replacement on 27% of all designs with 3-inch insulatio

$114 for Type-B vent connectors in 25% of homes in northem states with 78% RE 

fired.

$433 for chimney relining and Type-B vent connectors in 25% of homes in northem st

80% RE on gas-fired.

Maintenance costs ........................................ None on electric, $14.73/yr for the side-arm heater for gas-fired and a $97.14 yearly 

nance contract for oil-fired.

EE-RM-97-900 COMMENT 119A
25052 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

a. Energy Savings Potential individual design options or trial standard levels.) We use simulation

Having determined the highest energy combinations of design options. Table 3 model calculations and manufacturer

efficiency levels for each product in this shows the design option combinations data to determine the efficiency levels

rulemaking, the Department then for each fuel type at incremental levels corresponding to various design option

estimates the energy savings potential of of efficiency. (These do not represent combinations.

TABLE 3.-DESIGN OPTION COMBINATIONS

Design Design option for electric water Design options for gas-fired water Design options for oil-fired water

levo n heaters heaters heaters

1 .............. H eat traps ...................................... H eat traps ........................................................ H eat traps.

2.............. Heat traps + tank bottom insula- Heat traps + flue baffles (78% RE) ................. Heat traps + 2 inch insulation.

ion.

3.............. Heat traps + tank bottom insula- Heat traps + flue baffles (78% RE) + 2 inch Heat traps + 2.5 inch insulation.

tion + 2 inch insulation. Insulation.

4.............. Heat traps + tank bottom insula- Heat traps + flue baffles (78% RE) + 2.5 inch Heat traps + 3 inch insulation.

ton + 2.5 inch insulation, insulation.

5.............. Heat traps + 2.5 inch insulation + Heat traps + flue baffles (80% RE) + 2 inch Heat traps + 3 inch insulation + flue baffles

plastic tank. insulation. (78% RE).

6.............. Heat traps + 3 inch insulation + Heat traps + flue baffles (80% RE) + 2.5 inch Heat traps + 3 inch insulation + flue baffles

plastic tank. insulation. (78% RE) + interrupted ignition.

7 .............. Heat traps + flue baffles (80% RE) + 3 inch Heat traps + 3 inch insulation + interrupted iginsulation. nition + increased heat exchanger area

(82% RE).

8.............. Heat traps + flue baffles (80% RE) + 3 inch

insulation + side arm + electronic ignition +

plastic tank._

2003 Baseline Model. As discussed comparative analysis throughout the inches of HCFC-141b foam insulation.

earlier, the Department defines a TSD. OOE, The Northwest Energy Efficiency

baseline unit in order to analyze options Computer Simulation Models. To Alliance (NEEA), The Northwest Power

which increase energy efficiency over analyze the energy efficiency of water Planning Council (NWPPC), and

the baseline. Because DOE expects new heaters with various combinations of ACEEE, did not support DOE's use of

energy-efficiency standards to take design options, DOE used computer 1.5 inches of foam on electric water

effect near the phase-out date (2003) of simulation models for electric heaters to adjust the model results of EF

HCFC-141b, we had to create a baseline (WATSIM) and gas-fired (TANK) water 0.83 to reach the minimum EF of 0.86.

model for this analysis which uses foam heaters, and a spreadsheet model (OOE, No. 44 at 3; NEEA, No. 53 at 2;

insulation blown with an acceptable (WHAM) for oil-fired water heaters. NWPPC, No. 43 at 1; and ACEEE, No.

alternative blowing agent. After AGA commented that it preferred 52 at 2). The commenters did not

considering all possible insulation modeling results because modeling support this because the GAMA

choices, th. Department determined allows the use of consistent directory listed one model with 1 inch

that the most likely alternatives to assumptions across design options. of insulation. Manufacturers indicated

replace HCFC-141b appears to be water (AGA, No. 49 at 1). to DOE that 1.5 inches of foam

and HFC-245fa. Consequently, we WATSIM Model for Electric Storage insulation on electric water heaters is

performed a complete analysis using Water Heaters. WATSIM is a detailed the norm to meet the minimum

these two different blowing agents. After electric water heater simulation program efficiency of 0.86 EF for a 50-gallon

weighing the comparative benefits and developed by Electric Power Research electric water heater. Therefore DOE

costs of HFC-245fa and water blown Institute (EPRI). (Report #TR-101702, chose to use 1.5 inches in its simulation.

foam and then taking into account 10/92). WATSIM contains two Complete verification of the WATSIM

Honeywell's announcement on the simulation algorithms: one for the program is not currently available to the

availability of HFC-245fa, we ultimately detailed simulation of water heater public. The WATSIM user's manual

selected HFC-245fa as the insulation for tanks and the other for controlling water states the model "has been vigorously

our proposed trial standard levels. draw profiles. The output of WATSIM verified for use in tank and system

To model the baseline electric water provides detailed temperature profiles design, equipment sizing, and

heater under existing efficiency of the water inside the water heater individual or diversified demand

standards with the alternative blowing tank. We use these temperature profiles analyses, as well as for energy

agents, we increased the foam insulation to determine the EF and other consumption analysis." (EPRI, TRthickness to 1.55 inches for HFC-245fa. parameters of the water heater using the 101702. 10/92). The Department

To model the gas-fired water heater test DOE procedure calculations. validated the WATSIM simulations by

baseline for the alternative blowing Our analysis began with a simulation comparing them to NIST measurements.

agents, we increased the foam insulation of a baseline model (i.e., one that is NIST tested four mid-efficiency 50-

thickness to 1.0 inch for HFC-245fa. To currently marketed that achieves a gallon commercially available electric

model the oil-fired water heater baseline minimum allowable efficiency of 0.86 water heaters and reported an average

for the alternative blowing agents, we EF). When simulating the typical 0.89 EF. (Fanney, 1999 ASHRAE

assumed a foam insulation thickness of existing electric water heater, WATSIM Summer Meeting). The Department

1.01 inches for HFC-245fa. We made was able to achieve the minimum compared the NIST EFs with WATSIM

similar calculations for water blown allowable efficiency of 0.86 EF by simulations of identical water heater

foam so we could perform a simulating a jacket thickness of 1.5 models. The results agree within 0.01

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65. No. 83/Friday, April 28, 2000/Proposed Rules 

EF. Subsequently, NIST tested five high that the difference between the existing WHAM Energy Calculation fo

efficiency electric water heaters and we efficiency standard and any proposed Fired Storage Water Heaters. W

validated the WATSIM model to the standard is within the accuracy of the simplified spread-sheet model 

highest of the five test results, 0.91 EF. test procedure. 'VP, No. 45 at 2). EPRI for our engineering analysis of 

The WATSIM modeled results were claimed that routine EF testing water heaters. WHAM is based 

within 0.002 EF of the NIST test results. performed at testing laboratories is only 24-hour simulated use test port

These validations are in Chapter 8.2.4.1 within 3 percent accuracy. (EPRI, No. 41 the DOE test procedure. The m

of the TSD. Therefore, we believe at 1). DOE investigated this problem calculates energy consumption 

WATSIM is accurate over the range of with Intertek Testing Services (ITS), water heater's RE, UA, and rate

EFs considered in this rulemaking. NIST, and the manufacturers. ITS (Pon). (Lutz, J., et al, 1998, ACEE

Based on our selected design options, claimed that its test repeatability is Summer Study on Energy Effic

the WATSIM model predicts a within 0.5%. NIST has demonstrated Buildings, pp. 1.171-1.183). Th

maximum of 0.91 EF for electric water accuracy better than 1 percent. NIST assumes the water temperature 

heaters. Stakeholders raised concerns at and ITS recently measured the EF on at the set point temperature thr

the November 1998 Workshop that the the same model of two electric water the tank. We also assume RE an

GAMA directory lists 0.93 EF and heaters. The results agreed within 0.008 constant.

higher EFs for electric water heaters. EF. Based on these responses, DOE does To validate WHAM, we comp

NEEA, NWPPC, VP, OOE, the National not believe there is a problem in results of the WHAM equation 

Resources Defense Council (NRDC), and accurately measuring performance of the WATSIM and TANK sim

ACEEE claim DOE should investigate results that will adversely affect any models of residential electric an

and reconcile the differences between manufacturers' ability to certify fired storage water heaters with

the EFs predicted by computer models compliance with the proposed energy excellent agreement. WHAM an

and those listed in the GAMA directory. efficiency standard for electric, gas- WATSIM results are within 3% 

(NEEA, No. 53 at 1; NWPPC, No. 43 at fired, or oil-fired water heaters. and WHAM and TANK results 

1; VP, No. 45 at 1; OOE, No. 44 at 1; TANK Model for Gas-Fired Storage within 5% for normal operating

NRDC, No. 46 at 1; and ACEEE, No. 52 Water Heaters. TANK is a detailed gas- conditions, tank sizes and desig

at 1). ACEEE stated the difference fired storage water heater computer po

between computer simulation and simulation program developed by b. Comments on Design Option

points fory listings is about 0.03 efficiency Battelle for GRI, (GRI-93/0186). TANK Tank Bottom Insulation. One 

poinstated DOE must e xplain what it intACEEE calculates energy flows throughout a option considered for electric w

stated DOE must explain water draws, flue

to do to ensure thatEF ratings atg er hee r ater at in udg water draws, flue heaters is insulation under the 

accurate. (ACEEE, No. 75 at 3). DOE is heat losses, acket heat losses, fittings the tank, referred to as tank bot

investigating the discrepancies in EF heat losses, and combustion chamber insulation. EPRI and Bradford W

ratings between the GAMA directory heat losses. Unlike WATSIM outputs, commented that they do not ob

and the WATSIM modeled results. TANK ouputs include the EF, RE, and efficiency improvement from in

NIST measured one high efficiency UA from the DOE test procedure. the tank bottom that WATSIM p

electric water heater from each To validate the analytical models (EPRI, No. 70 at 2 and Bradford 

manufacturer and found an average comprising the TANK program, Battelle No. 89 at 3). Based on DOE's co

0.036 EF lower on test results than in conducted actual water heater testing simulation results, and loss mec

the GAMA directory listing. DOE also and monitoring. Battelle performed a set NIST observed by infrared phot

received data from GAMA on its of tests to investigate the impacts of DOE believes the improvement 

certification testing program for 1994 different flue baffle designs, increased efficiency is real. The infrared

through 1998. We reviewed this data insulation thickness, and different pilot photography shows much warm

and found that for the 26 high efficiency light input rates on EFs. Battelle regions at the base of water hea

electric water heaters measured, results compared test results to the TANK around piping penetrations than 

averaged 0.02 EF lower than published model results. Battelle then tested gas other tank surfaces. (Fannev, Za

EFs in the GAMA directory. The NIST water heaters under the assumptions of Ketay-Paprocki, 1999 American 

and GAMA certification program test the DOE test procedure to validate the for Heating, Refrigerating and A

results were consistent with the analytical predictions of TANK. Battelle Conditioning Engineers (ASHRA

WATSIM simulation program results. reported the results in terms of EF, RE, Summer Meeting). We have also

Therefore, DOE will base its analysis of UA, and total standby loss. Overall, the discussed this approach with a

electric water heater performance on difference between the experimental manufacturer who uses molded

WATSIM results. values (measured) and the predicted insulation under its tanks. This

Some stakeholders raised concerns values (simulated by TANK) is less than manufacturer believes water he

about the test procedure. EEI and SC 0.01 EF for all of the above parameters. performance is improved but di

claimed there may be measurement With the TANK simulation model for provide any test data to confirm 

problems when determining the electric gas-fired water heaters, we consulted observation. Therefore, we will 

water heater EF, since electric water with Battelle to develop characteristics to use the WATSIM EF results i

heaters are close to their maximum similar to the Battelle baseline model analyses.

potential thermodynamic efficiency with a nominal insulation thickness of Insulation Effectiveness. Due 

levels. (EEI, No. 39 at 2 and SC, No. 42 1 inch. GAMA comments stated that the heater tank geometry and the m

at 2). Vaughn claimed the error factor in manufacturers use a 450 Btu/hr pilot pouring liquid insulation into th

the test equipment is greater than the light on gas water heaters. (GAMA, No. which then forms in place, the

obtainable increase in energy efficiency. 51 at 1). DOE used this new heat input insulation effectiveness may no

(Vaughn, No. 56 at 1). VP recommended rate for pilot lights on gas-fired water consistent between the sides an

DOE determine and report the heaters. See Chapter 8.2 of the TSD for the tank. Bradford White recom

confidence level of EF results from the details about the simulation models and DOE limit the foam cavities to 2

water heater test procedure to ensure the baseline characteristics. inches in electric, 1.5 inches in 

EE-RM-97-900 COMMENT 119A
25054 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

fired, and 1 inch in oil-fired water improve heat transfer, thereby gas-fired water heaters with existing

heaters. Bradford White stated the improving RE. RE is the percentage of venting systems not designed for

insulation effectiveness of foam does energy transferred to the hot water increased RE gas-fired water heaters can

not double for 2 inches or triple for 3 compared to input energy. It takes into lead to excessive corrosion and failure

inches due to variations in cell structure account the amount of energy lost of the vent system in certain climates.

as the foam rises vertically and spreads through the flue and other parts of the Studies conducted by GRI/Battelle have

horizontally in the jacket cavity. water heater. shown corrosion can occur when a vent

(Bradford White, No. 89 at 3). To There are many design options wall becomes wet. While it is not

account for this, we derated the available to increase RE. Because of the uncommon for a vent to be wet

effectiveness of HFC-245fa blown low cost, the Department has assumed immediately after the appliance starts,

insulation by about 10%. This allowed in its analysis the flue baffle alone the appliance must heat the vent system

us to assume a uniform thickness and would be the most cost effective method and dry the walls before turning off. If

constant insulation effectiveness on the for increasing RE up to 80%. GAMA the vent does not dry, corrosion may

sides and top of the tank in the stated recovery efficiencies higher-than occur during a long period of wetness.

simulation models. 78% cannot be attained by modifying While we have discussed RE for water

Insulation Thickness. With water the flue baffle only. (GAMA, No 71 at 3). heaters, typically appliances are

heaters, the thickness of the insulation ACEEE claimed there are other characterized for venting purposes by

cavity helps determine the diameter and technologies that can be combined with flue-loss efficiency. Flue-loss efficiency

height for a given tank volume. This is flue baffles to achieve 80% RE in gas- measures how much of the input heat

an important consideration in water fired water heaters. (ACEEE, No. 93 at does not go up the flue. The DOE test

heater product utility since some water 6). However, several manufacturers and procedure for rating residential water

heaters are installed in tight spaces and consultants told DOE they could reach heaters does not measure flue-loss

reduction of tank volume could reduce 80% RE by modifying flue baffles alone. efficiency; it measures RE instead.

the first hour rating. SC and EEI claimed For the July 1999 workshop, DOE Therefore, RE was used in this analysis

water heaters can become too wide to fit assumed flue baffles could be modified for measuring the impact on the flue

through residential interior doors if the to increase RE to 78% or 80% from the vent system, but in order to estimate the

insulation is too thick, and therefore the current baseline of 76%. We will impact of increasing the RE of a water

thickness of the insulation should be analyze 78% and 80% RE based on heater, a relationship between RE and

limited. (SC, No. 42 at 2 and EEI, No. modifying flue baffles as design options. flue loss efficiency was needed. Flue

39 at 7). GAMA stated DOE should not Bradford White claimed the flue baffle loss efficiency is not always directly

consider insulation thicknesses beyond improvement to increase the recovery proportional to RE, but flue loss

3 inches because replacement units efficiency in oil products is possible, efficiency is typically 2-4% higher than

must be able to fit through doorways. but only with a specific patented RE.

(GAMA, No. 33 at 3). DOE agrees with approach. (Bradford White, No. 74 at 3). RE of more than 80% is associated

the GAMA recommendation and has DOE's analysis assumes several designs with flue-loss efficiencies exceeding

limited insulation thicknesses to 3.0 are possible, such as multi-flues, 84%, resulting in excessive

inches or less. internally finned flues or a finned condensation within the vent system,

We also have comments from GAMA, combustion chamber. We used the which can lead to corrosion and a

Connecticut Natural Gas (CNG) and patented Bock Turboflue as a proxy to reduced vent system life. To ensure that

New England Gas Association (NEGA) determine the performance of the condensation does not occur in the flue,

that thicker insulation will raise increased heat exchanger area on oil- only design options that increase RE to

installation costs, cause installation of fired water heaters and reduced the a maximum of 80% were selected for

multiple smaller units, or performance to be conservative, since analysis. However, the Department

inconvenience consumers with a we were not confident a non-proprietary recognizes that potential venting

smaller sized, lower capacity unit. design would achieve the same level of problems may occur in the 78-80% RE

(GAMA, No. 91 at 1; CNG, No. 85 at 2; performance. To estimate the costs of range and could require Type-B vent

and NEGA, No. 90 at 3). GAMA and the increased heat exchanger area connectors and chimney relining. A

Bradford White claimed a 2.5 inch design, we examined other approaches Type-B vent connector is a double wall

insulation thickness will increase the for providing increased heat exchanger vent, with an aluminum inner wall and

diameter and height of electric water area that are not proprietary, and we a galvanized steel outer wall. The

heaters and product utility will be have estimated retooling and materials special double wall construction keeps

impaired, particularly for 20-50 gallon costs based on the use of these other flue gases hot while inside the vent,

lowboys and tabletop models. (GAMA, approaches. We used this design to providing a strong draft and minimizing

No. 71 at 4 and Bradford White, No. 74 complete the list of energy factors and condensation. Additionally, the

at 2). We reviewed the application of costs for oil-fired water heaters since aluminum inner wall is more corrosion

these water heaters in households in this is the maximum technologically resistant to condensation that may occur

multi-family buildings, mobile homes feasible level for oil-fired water heaters. in the vent.

and manufactured housing, and we Venting for Gas-fired Water Heaters. A number of comments supported a

estimate only a small percentage of Most water heaters sold today are for the maximum RE level of 80% for an

households may be affected (see Chapter replacement market, where an existing improved flue baffle design option.

3.4.4 in the TSD). Furthermore, we vent system is in use. Improving the flue (ACEEE, No. 52 at 4; OOE, No. 64 at 1-

believe a 6 kW heating element should baffle can significantly increase the RE 4; ACEEE, No. 75 at 2; and OOE, No. 76

eliminate any lost first hour rating in of a water heater, which in turn can at 1). Additionally, ACEEE claimed,

those situations where a smaller reduce the temperature of the flue gases based on Table 3 in the GRI study (GRIcapacitv tank is required. leaving the water heater. A reduction in 95/0198), the lowest flue-loss efficiency

Flue Baffles. The flue baffle, the temperature of the flue gases can for homes with Type-B vent connectors

twisted strip of metal inserted into the increase the likelihood of condensation. and masonry chimneys is 84.5% and

flue of a gas or oil-fired water heater, is Due to excessive moisture condensing therefore no chimney relining should be

the most commonly used method to from the flue gases, use of increased RE needed for 80% RE. (ACEEE, No. 93 at

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

5). OOE claimed there are no inherent to determine the cost to manufacturers our consultants provided. GAM

safety issues associated with REs of up and consumers to achieve increased its cost estimates on the produc

to 80%. (OOE, No. 96 at 4). efficiency. In the 1997 Rulemaking a 50-gallon electric or 40-gallon 

Other comments raised concerns with Framework Workshop, DOE and fired water heater. GAMA separ

a maximum level of 80% RE. LaClede stakeholders discussed three methods costs into variable (material, lab

Gas and GAMA stated DOE should not used to generate the manufacturing transportation, overhead) and fi

exceed a 76% RE in order to maintain costs for the engineering analysis. These (capital, product design) costs o

an adequate margin of safety. (LaClede, methods included: (1) The design- unit basis and provided a distrib

No. 69 at 6 and GAMA, No. 71 at 3). option approach, reporting the fixed, variable, and total manufa

CNG and NEGA claimed setting a incremental costs of adding design costs for several design options. 

standard level at 78% RE could lead to options to a baseline model; (2) the used GAMA's cost data and con

condensation and chimney degradation. efficiency-level approach, reporting data to determine the water heat

(CNG, No. 85 at I and NEGA, No. 90 at relative costs of achieving energy manufacturer costs for all comb

2). Bradford White said 78% is the efficiency improvements; and (3) the of design options. OOE claimed

maximum RE to avoid corrosion in the cost-assessment approach, which GAMA's manufacturing costs fo

vent, but 77% is more realistic. requires a "bottom-up" manufacturing water heaters are too high. (OOE

(Bradford White, No. 74 at 2-3 and No. cost assessment based on a detailed bill at 7). DOE could not get indepen

89 at 2). of materials. cost data directly from individua

The Department is very concerned In written comments, GAMA manufacturers, so we are unable 

about public safety for venting of gas- recommended DOE use the design determine if the manufacturing 

fired water heaters. We appreciate the option approach in its economic gas-fired water heaters are too h

analysis by OOE and GRI. We also analyses because "there are only a few believe the data best represents 

discussed venting concerns with state identifiable discrete efficiency of all water heater manufacturer

experts and chimney installers. As a improvement measures possible for well as the incremental costs be

result of these discussions and residential water heaters." (GAMA, No. design options.

comments, as well as the GRI study 5 at 4). There were no other comments. GMA based its existing base

(GRI-94/0193), we believe there are no At the water heater standards - model cost estimates on an elect

technological barriers to using either rulemaking workshop in June 1997, water heater with 1.5 inches of f

78% or 80% RE gas-fired water heaters GAMA suggested it could collect and jacket insulation using HCFC-14

in a replacement installation. aggregate manufacturer costs on the blowing agent. The existing base

Furthermore, in most replacement design options of interest to DOE for the starting point to construct th

applications, vent systems and chimney this rulemaking. DOE accepted that offer baseline cost, to determine mark

reliners are available on the market to and agreed to use the GAMA develop incremental costs for he

meet the venting requirements for water manufacturing cost data. and to build up incremental cos

heaters with 78% or 80% RE. In new The use of a design-option approach unit thickness of new insulation

construction, installers can follow provides useful information, such as the gas-fired water heaters, GAMA b

manufacturers recommendations so identification of potential technological existing baseline model cost esti

there are no problems with either a 78% paths manufacturers could use to on 1 inch of foamed jacket insul

or 80% RE. achieve increased energy efficiency. It using HCFC-141b as a blowing a

Heat Traps. In its analysis for the July also allows the use of engineering To develop costs for thicker insu

1999 workshop, DOE used WATSIM models to simulate the energy we estimated the material costs 

and TANK default values for heat trap consumption of different design additional foam and blowing ag

performance. Manufacturers claimed configurations under various user well as the cost for additional sh

they could not achieve performance for profiles and applications. However, the metal. We used Honeywell's esti

heat traps when installed on actual Department recognizes that the $4 per pound for the material co

water heaters. In its comments on heat manufacturer cost information derived the HFC-245fa blowing agent an

traps, GAMA claimed DOE should use in the design-option approach may not Honeywell's estimate of 15% blo

a 0.01 EF increase. (GAMA, No. 71 at 5). reflect the variability in design strategies agent in a standard insulation m

Bradford White provided heat trap data and cost structures that can exist among Since the blowing agent is only 

for oil-fired, gas-fired, and electric water manufacturers. Therefore, the the final foam insulation, total

heaters. (Bradford White, No. 74 at 1). Department derived additional insulation cost is $1.32 per poun

ACEEE stated DOE should only change manufacturing cost estimates from other HFC-245fa compared to $1 per p

the heat trap effectiveness based on approaches based on consultant's for HCFC-141b. We also assume

independent test data. (ACEEE, No. 93 estimates, component manufacturers' value of $35 additional incremen

at 8). DOE has averaged the GAMA and prices, and occasionally from other manufacturing cost ($15 variable 

Bradford White heat trap data. This has interested parties. DOE had two retired and $20 fixed cost) for designs to 

not affected gas-fired water heaters' heat water heater manufacturing engineers as flammable vapor ignition in gas-

trap results, but it has reduced heat trap consultants provide cost estimates and water heaters. We discuss the co

performance on electric water heaters by peer review our analysis results. We assumptions for each design opt

0.005 EF. Based on the above, heat traps describe these costs in the TSD in below.

are estimated to result in improvements Chapter 8.3.3 for electric, Chapter 8.4.3 Heat Traps. GAMA provided

of 0.012 EF for electric, 0.09 EF for gas- for gas-fired and Chapter 8.5.3 for oil- manufacturer costs for electric a

fired, and 0.006 EF for oil-fired. These fired water heaters. water heaters with heat traps. GA

are the improvement values used in the GAMA provided most of the did not provide costs for the hea

analysis. manufacturer costs with the exception component. Vaughn stated the c

of all oil-fired water heaters, the tank heat traps should be the same fo

c. Manufacturing Costs bottom insulation, and the plastic tank and electric water heaters. (Vaug

After determining the design option costs for electric and side-arm heater 56 at 2). Vaughn is correct. Based 

combinations, the Department also had costs for gas-fired water heaters, which component costs from the heat tr

EE-RM-97-900 COMMENT 119A
25056 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

manufacturer, we know heat trap costs insulation because it has to be molded. construction. DOE also determined that

are the same for gas and electric. (GAMA, No. 71 at 5 and Bradford Type-B vent connectors and chimney

However, we did not use the component White, No. 74 at 2). Based on our relining, which might be needed in the

costs because we needed to include consultant's analysis and discussions New England states, cost an average of

labor, overhead, and other costs. with manufacturers who use tank $508.

Therefore, we continue to use the bottom insulation, we believe the $2-4 OOE claimed the GRI report shows

combined water heater plus heat trap cost is reasonable, so we did not change water heaters located in a conditioned

costs. these costs after the July 1999 space have no special venting

Increased Jacket Insulation. GAMA workshop. See Chapter 6.4 of the TSD requirements and no requirement or

provided variable and fixed cost data for for more details. cost for a Type-B vent connector. OOE

jacket insulation increases based on Plastic Tank. Our consultant provided claimed Type-B connectors should be

HCFC-141b blown insulation from a the manufacturer costs for a plastic tank used when water heaters are installed in

baseline level of 1.5 inches on electric electric water heater design. See Chapter unheated spaces. Therefore, there is no

and 1 inch on gas-fired water heaters to 6.4 of the TSD. Although GAMA did not additional vent connector or flue

a thickness of 2 inches only. Since provide cost information, GAMA relining cost associated with higher

HCFC-141b will be phased out in 2003, believed the cost of the plastic tank water heater efficiencies. (OOE, No. 44

we had to develop costs for alternative option has been significantly at 5). OOE claimed there is no need for

insulation. Our consultant developed underestimated. (GAMA, No. 51 at 3). Type-B venting or relining of chimneys

the cost of the 2003 baseline by adding Since GAMA did not provide any data for a water heater with an 80% RE that

incremental costs for HFC-245fa and to substantiate its statement, DOE has would not also be required for one with

sheet metal to the HCFC-141b baseline not changed its cost estimate. a 76% RE. (OOE, No. 96 at 2). In order

provided by GAMA. Our consultant Improved Flue Baffle. GAMA to be conservative and provide a margin

used the same approach, adding the provided manufacturer costs for the of safety, DOE assumed up to 25% of

incremental costs for HFC-245fa and improved flue baffle design. Originally, homes in cold climates with gas-fired

sheet metal to the GAMA data, for the the costs were based on a flue baffle water heaters may need vent connectors

2 inch insulation thickness. Then, our design that increased the RE to 78.5%. or relining of chimneys for 80% RE. We

consultant developed cost ratios from After the November 1998 workshop, we included this assumption in both the

the incremental cost differences for 2.5 decided to use flue baffles that achieve LCC and NPV analyses. It effectively

and 3 inch insulation thicknesses for the 78% and 80% RE because we believed increases consumer costs.

HFC-245fa blowing agent. We 80% RE was feasible although it Electro-Mechanical Flue Damper.

multiplied GAMA's incremental costs entailed more risk of venting system GAMA provided manufacturer costs to

for 2 inches of insulation by these ratios condensation. Our consultant estimated include an electro-mechanical flue

to generate.cost data in 2.5 inches and that the manufacturing costs for tooling damper and electronic ignition with a

3 inches of insulation. For cost a flue baffle to achieve a 78% or 80% gas-fired water heater. We used these

information see Chapter 6.4 in the TSD. RE are identical. There is no change in costs in the analysis.

Increased insulation creates a larger material cost for a flue baffle achieving Side-Arm Heater and Plastic Tank.

water heater than those typically 78% or 80% RE. Our consultant provided manufacturer

installed today. Many replacement OOE claimed as long as a costs for the side-arm heater for a gasinstallations require the water heater to conventional furnace shares the flue fired water heater design because

match the dimensions of the one it is with a water heater, there should be no GAMA received a response from only

replacing. One approach that addresses need for relining the flue regardless of one manufacturer and could not provide

this issue was suggested in comments the water heater efficiency. ACEEE this information for confidential

and discussed at the July 23, 1999 estimated 1% of homes will need Type- reasons. We considered costs for six

workshop, is to reduce the inner tank B vent connectors and 17% will need types of side-arm heater designs: 76%,

diameter slightly. Manufacturing a flue relining. (ACEEE, No. 93 at 4-5). 78%, and 80% RE designs using a metal

smaller inner tank diameter would NEGA stated many New England tank and electronic ignition, and 76%,

require retooling for many consumers would have to install flue 78%, and 80% RE designs using a

manufacturers. Bradford White claimed liners and Type-B vents at a cost of $800 plastic tank and electronic ignition.

retooling for different diameters of tanks if higher flue-loss efficiency gas-fired Based on our analysis, we determined

cost $100,000 for each diameter. water heaters are mandated. (NEGA, No. the cost increase of the 78% or 80% RE

(Bradford White, No. 89 at 2). We agree 90 at 3). DOE estimates that at 78% RE, designs were the same and were equal

with Bradford White on the retooling about 10% of the households with gas- to the cost of the improved flue baffle

costs. From discussions with GAMA, we fired water heaters in homes with over design option. This means heat

determined that the GAMA data 5,000 heating degree days need Type-B exchanger costs for side-arm heaters

accounts for any retooling cost vent connectors; at 80% RE, about 25% with 78% or 80% RE are equal. GAMA

associated with the trial standard levels, of these homes need Type-B vent disagreed with DOE's cost estimate for

including any potential design changes connectors and chimney relining. DOE the side-arm heater design option;

to the inner tank diameter. based its estimates on GRI data (GRI 91/ however it did not provide any specific

Insulating the Tank Bottom. ACEEE 0298) modified for: gas-fired water information. (GAMA, No. 51 at 3).

claimed GAMA's $40 cost for bottom heaters in new homes (since 1994) that Therefore, we are using our cost

insulation on electric water heaters is use different venting systems; and the estimate, absent any other information.

excessive. (ACEEE, No. 52 at 6). Based current National Fuel Gas Code (NFGC), Furthermore, GAMA did not comment

on discussions with manufacturers who which requires replacement furnaces on this issue at our July 1999 workshop.

use similar techniques, and our with higher efficiencies to have better Oil-Fired Water Heaters. GAMA did

consultants' estimates, we determined vents in existing installations. Since not receive information from enough

the cost to be between $2 and $4. After 1992, the DOE furnace energy efficiency manufacturers to allow it to aggregate

the July 1999 workshop, GAMA and standards placed gas furnaces in a new cost data for oil-fired water heaters.

Bradford White claimed DOE should category of the NFGC and consequently Therefore, DOE relied completely on its

increase the $2-4 cost for tank bottom requires better vent systems in new consultants' cost data for each design

EE-RM-97-900 COMMENT 119A
Federal Register / Vol. 65, No. 83 / Friday, April 28, 2000 / Proposed Rules 

option considered for the oil-fired water should not have to knock out walls and and heights, pressure and tempe

heater analysis. See Chapter 6.4.3 of the ceilings or relocate a water heater relief valves, relining masonry c

TSD for details. during replacement. (Rheem, No. 95 at and for condensate removal. (Br

Bradford White suggested DOE only 1 and SC, No. 84 at 2). White, No. 74 at 3; LaClede, No. 

increase the performance of oil-fired From the Residential Energy 6; and CNG, No. 85 at 2).

water heaters by applying heat traps Consumption Survey (RECS) 1993 DOE believes we have accoun

because the burner is usually not public use data, 54% of water heaters the installation costs associated 

supplied with the tank and would are located in a conditioned space. We higher RE gas-fired water heater

therefore need a conversion kit. assumed at least 50% of those homes used installers' estimates to calc

Bradford White also stated DOE's cost would need the closet or an attic door the cost of installing Type-B ven

estimates for a conversion kit are too removed to facilitate water heater connectors and to determine the 

low. (Bradford White, No. 89 at 3). DOE replacement installation for 3 inch thick reline masonry chimneys. These

considered two trial standard levels insulation. We estimated this cost at estimates are slightly higher than 

using only heat traps for oil-fired water $160 using responses from water heater GRI estimates. We estimated the 

heaters. However, the oil burner installers and the 1996 Craftsman of homes needing Type-B vent

manufacturer, who supplies most of the National Construction Estimator. This connectors for 78% RE gas-fired 

water heater oil burners, provided our installation cost is for the removal and heaters from comments, and from 

cost estimates for the conversion kit. replacement of door jambs for 50% of AGA survey in a GRI report. (GR

d. Installation Coss all water heaters located in a 0298). We also used the AGA su

conditioned space. We assumed oil- data to determine, by region, the

The installation cost is the cost to the fired water heaters are not installed in number of water heaters connect

consumer of installing the water heater conditioned spaces and therefore this masonry chimneys. In the same 

and is separate from the retail price. The cost is not applicable to oil-fired water we estimated installers would re

cost of installation covers all labor and heaters. 25% of the masonry chimneys in

material costs associated with the We also do not believe people should climate regions exceeding 5,000 

simple replacement of an existing water have to knock out ceilings or walls to degree days when replacing an e

heater. Delivery, removal, and permit replace a water heater. Therefore, we gas-fired water heater with an 80

fees are also included. investigated the impact of reducing tank water heater. DOE developed its

We established the installation costs volume by 20% on the first hour rating. installation costs for Type-B ven

of baseline 50-gallon electric, 40-gallon The first hour rating is a measure of how connectors and masonry chimne

gas-fired, and 32-gallon oil-fired water much usable hot water can be supplied relining based on the replacemen

heaters from the same sources as the by a water heater in one hour starting market and installers' cost estim

retail price data. DOE assumed only the from a fully heated tank. It is a typical installation, which wou

3-inch insulation thickness would determined by the DOE test procedure. include the pressure and temper

increase installation costs for gas-fired We believe that increasing the heating relief valve. See Appendix D-3 i

and electric water heaters installed element from 4.5-6 kW can adequately TSD.

within a conditioned space based on compensate for the 10 gallons of storage We did not raise the RE enoug

stakeholder comments and discussions volume lost by a 20% reduction in a 50- create condensation nor do we

at the manufacturer interviews. Four gallon electric water heater. We also anticipate higher installation cos

design options increased the cost of believe that a similar increase in gas or 2.5 inch insulation thicknesse

installing a gas-fired water heater. They burner input rate can achieve the same Therefore, we added $160 for rem

are the improved flue baffle, electronic effect with gas-fired water heaters. and replacement of door jambs f

ignition, electro-mechanical flue Venting Costs. If people replace their of gas-fired water heaters with 3 

damper, and side-arm heater. gas-fired water heater located in a thick insulation located in condi

In comments, ACEEE and VP claimed conditioned space with one which has spaces. From the GRI data, we es

installation costs differ in new a higher RE, then there may be that 25% of households with gas

construction and in existing homes. additional installation costs. In an water heaters in regions with ove

(ACEEE, No. 23 at 2 and No. 52 at 6; and attempt to account for these costs, DOE heating degree days would need 

VP, No. 45 at 2). GAMA suggested assumed a Type-B vent connector is B vent connectors at a cost of $11

DOE's analysis of revised water heater installed when replacing an existing 78% RE. We estimated that 25% 

standards should be based on installed gas-fired water heater located in a households with gas-fired water 

costs of replacement water heaters only. conditioned space with a water heater in regions with over 5,000 heatin

(GAMA, No. 51 at 3-4). DOE used the with an RE of 78%, in 25% of homes in degree days would need chimney

same installation costs for both markets. climate regions exceeding 5,000 heating relining at a cost of $433 for 80% 

We based these costs on replacement degree days. Note that heating degree gas-fired water heaters. This is ab

costs because there are no cost days are the number of degrees the one-half of the households with 

installation data for new construction. average temperature is below 65°F. For fired water heaters common vent

New construction costs are combined water heaters with flue baffles that gas furnaces.

with the plumbing and venting costs achieve 80% RE, we assumed a Type-B Cost to Install Electricity. The 

and we could not separate out the water vent connector is installed and a remaining gas-fired water heater 

heater installation costs. masonry chimney is relined when options (electronic ignition, elec

Installation Cost for 3 Inch Thick replacing an existing gas-fired water mechanical flue damper, and sid

Insulation. Thicker insulation creates a heater located in a conditioned space in heater) all require electricity to o

larger water heater than the typical unit 25% of homes in climate regions We used data from GRI to estima

sold today. VP claimed we should exceeding 5,000 heating degree days. In number of households that woul

account for the impact of increasing unit comments, Bradford White, LaClede and require electricity. We also used 

size on installation ease and cost in CNG stated we must add more data to estimate the cost of labor 

replacement applications. (VP, No. 45 at installation cost to gas-fired and oil- wiring and adjusted these estima

3). Rheem and SC claimed customers fired water heaters for larger diameters inflation to obtain 1998 cost estim

EE-RM-97-900 COMMENT 119A
25058 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

see Chapter 8.4.5 in the TSD for more We performed this calculation masonry chimneys, or installing larger

details. separately for electric, gas-fired, and oil- water heaters in small spaces.

e. Maintenance Costs fired water heaters. In the engineering In their comments, AGA and EMPA

analysis, we assumed that the baseline claimed the database is not

The electro-mechanical flue damper manufacturer cost-to-retail price markup representative of all manufacturers or

and the side-arm heater are the only was constant for all design options states. (AGA, No. 49 at 5; EMPA, No. 50

design options that increase a gas-fired within a fuel class. Our approach results at 3; and No. 88 at 4-6). NEEA, NWPPC,

water heater's maintenance cost. We in different average markups for each ACEEE, Pacific Gas and Electric (PG&E)

used the TSD water heater analysis for fuel class in the engineering analysis. and OOE claimed DOE's retail prices are

the March 4, 1994, NOPR to estimate the In order to obtain the retail price, DOE too high or DOE's incremental costs are

maintenance cost of the flue damper. created the Water Heater Price Data too large. They cited data from the

(59 FR 10464, March 4, 1994) In this Base. This Data Base contains extensive Eugene, Oregon Water and Light Board

analysis, we assumed the flue damper data on retail prices for electric and gas- or the California Residential Contractors

failed in the tenth year of operation. We fired water heaters and very limited Program. (NEEA, No. 53 at 2; NWPPC,

discounted the maintenance cost of the information regarding retail prices of No. 43 at 2; ACEEE, No. 52 at 6 and No.

flue damper at a 6 percent rate to get its oil-fired water heaters. While the data in 93 at 4; PG&E, No. 94 at 4; and OOE, No.

present value in 1998 dollars. the Water Heater Price Database are 44 at 6; and No. 76 at 10). We received

In response to a comment from based on information from water heater comments regarding the basis of the

Battelle, we included the maintenance vendors in many regions of the U.S. markups. For example, the analysis only

cost to replace the side-arm heater (e., arge retailers, plumbin included water heaters sold through

circulation pump. (Battelle, No. 66 at 9 wholesalers, small suppliers, web-sales stores (ACEE, No. 52 at 6); the data

and No. 83 at 11). We assumed 10% of and utility representatives), the majority may have been skewed by high sales

the installations would require a of price information was gathered from volume models used asloss leaders

replacement of the circulation pump large retailers1 and plumbing o at 1); a the markup

each year. We estimated the cost using wholesalers. Although the database results should be reasonably consistent

contractor estimates and the 1998/99 lacks information on the number of with prices found in the Northwest.

Grainger Catalog. specific models sold, it contains actual (OOE, No. 44 at 7). The intermittent ignition device (IID) e c ifi c m o d e l s s o ld i t n t a i n s In response to these comments DOE

price s representative of many models. miiptpr mnrp data to make the of gas-fired water heaters may incur pric reresentative of many heater collected more data to make the

maintenance costs due to the failure of retl p ced te oi-faroximatel 25 oil database more representative. DOE

the control module or the sensor. We retail prices from approximately added more retail price data from

assumed the lD maintenance cost to be equipment installers who buy water wholesalers and plumbing distributors.

equivalent to the maintenance cost of heaters from manufacturers and sell DOE added price data from the Eugene

replacing the standing pilot light and directlyto consumersIn the case of - Water and Light Board's database but

therefore did not assign any incremental fired water heaters, the retail price does DOE added only a limited number of

ost to it not include the cost of the burner, these prices so that its database would

With e exception of the electro- w h i

c h i typically purchased separately continue to be representative of regional

mechanical flue damper, the HD and the We determined an average price for populations in the entire U.S.

side-arm circulation pump, information an existing baseline 50-gallon electric, Nevertheless, the addition of these data

gathered to date suggests there is 40-gallon gas-fired, or 32-gallon oil-fired did not significantly change the average

virtually no maintenance of residential water heater with HCFC-141b foam retail price of gas-fired or electric water

electric or gas-fired water heaters. insulation . Since the length of the heaters. DOE believes its price database,

However, there were some suggestions manufacturer's warranty affects the from more than 130 retail distributors

from the manufacturer interviews that price of the water heater, we originally and plumbing wholesalers (representing

side-arm gas-fired water heater designs considered only water heaters with a all 12 Census divisions and all five

may incur increased maintenance costs five year or less warranty as baseline major manufacturers), provides an

due to clogging of the heat exchanger models. However, at the November 1998 accurate representation of prices with

from scaling associated with hard water, workshop, water heater manufacturers good regional representation.

but no data were identified or provided provided information that six-year OOE claimed a constant price should

to confirm this. warranties are typical of those models not be used for the entire analysis

We included a typical annual that are produced in large quantities period because water heater prices

maintenance charge for oil-fired water (i.e., baseline models). A longer should match today's prices in the

heaters. Since we anticipate that none of warranty period, in addition to raising mature market of the Pacific Northwest

the oil-fired water heater design options the price, also may indicate the within 5-7 years after the imposition of

will affect maintenance, this charge has presence of some design features not a standard. (OOE, No. 96 at 6). We

no bearing on the final engineering normally found in baseline models. appreciate the price data provided by

analysis of the design options. Based on this information, we have OOE and we have used a portion of the

changed the analysis to include water data in our national Water Heater Price

f. Determination of Markups for Retail heaters with warranties of six-years or Database. However, we kept the prices

Prices less in our baseline models. representative of each region in the U.S.

The retail price is the consumer cost The Water Heater Price Database by maintaining a fixed relationship

of the water heating equipment. We includes installation costs that are part between the number of water heater

determined the retail price for any of the total cost to consumer. This price prices and the population of each

design option simply by multiplying the includes miscellaneous fees such as the region. See Chapter 5.2 in the TSD.

manufacturer cost by the derived delivery fee, removal fee, permit fee, We obtained a manufacturer cost-tomarkup for the particular product class. and parts fee. We applied additional retail price markup by dividing the

We obtained a manufacturer cost-to- installation costs to some design retail price by the manufacturer cost.

retail price markup by dividing the options'for example, to account for Our approach results in different

retail price by the manufacturer cost. replacing vent connectors, relining average markups for each product class

EE-RM-97-900 COMMENT 119A
Federal Register / Vol. 65, No. 83 /Friday, April 28, 2000/Proposed Rules 

(i.e., 1.49 for electric, 1.22 for gas-fired, establishes a rebuttable presumption adversely affected. The Departme

and 3.2 for oil-fired water heaters). that a standard is economically justified decided to consider the LCC imp

Since oil-fired water heaters are if the additional product costs attributed low income and seniors-only con

essentially a niche product, the large to the standard are less than three times subgroups in this rulemaking. W

markup was not surprising. However, the value of the first year energy cost the low-income subgroup becaus

several commenters believed that the savings. EPCA, § 325(o)(2)(B)(iii), 42 higher water heater prices might 

gas-fired water heater markup should be U.S.C. 6295 (o)(2)(B)(iii). that subgroup more than the gene

nearly identical or identical to the The payback, for purposes of the population. We chose the seniors

electric water heater markup. ACEEE rebuttable presumption test, attempts to subgroup because many of them 

commented that DOE's retail costs capture the payback to consumers in the low-income subgroup and

showed inconsistent markups between affected if a new standard is because they tend to use less hot 

electric, gas-fired, and oil-fired water promulgated. It compares the cost and than the general population. Low

heaters. (ACEEE, No. 52 at 6). GAMA energy use of water heaters consumers water usage could increase the p

claimed the markup value for gas-fired would buy in the year the standard of some efficiency improvements

water heaters was too low because DOE becomes effective with what they would

only sampled the retail market and buy without a new efficiency standard. The LCC and one of the paybac

some of the models are direct vent DOE calculates a simple payback which periods (median payback) are cal

models. (GAMA, No. 51 at 4). GAMA, is the ratio of the increase in purchase using the LCC spreadsheet model

AGA, EPRI, SC, CNG, and Bradford price (including installation) to the developed in Microsoft Excel for

White suggested DOE apply the same decrease in annual operating expense Windows 95, combined with Cry

markup to electric and gas-fired water (including maintenance). Ball (a commercially available so

heaters. (GAMA, No. 51 at 4; AGA, No. In considering this factor, the program) based on actual distribu

49 at 5; EPRI, No. 70 at 3; SC, No. 72 Department calculates changes in LCCs of input variables. The LCC outpu

at 2; CNG, No. 85 at 3; and Bradford to the consumers that are likely to result from this program are a range of v

White, No. 74 at 3). VP claimed there is from the proposed standard and two that allow us to determine what f

no justification for using one average different simple payback periods: the of the population will benefit from

markup. (VP, No. 45 at 2). Battelle median payback period and the test energy efficiency standards.

claimed the gas-fired water heater procedure payback period. The Based on the results of the LCC

markup is too low. (Battelle, No. 83 at difference between these payback analysis, DOE selects candidate

8). SC did not believe retail markups for calculations is due to the way we standard levels for a more detaile

electric water heaters are twice as high calculate energy savings. The median analysis. The range of candidate

as those for gas-fired water heaters. (SC, payback is based on the LCC analysis standard levels typically includes

No. 84 at 1). EPRI disagreed with DOE's using a derived amount of hot water the most energy-efficient combin

markup approach because it raises the dependent on characteristics of each design options or most energy-eff

price of heat traps differently for each household. The test procedure payback level; (2) the combination of desig

fuel and tank size. (EPRI, No. 41 at 4). is based on hot water usage of 64.3 options or efficiency level with th

We derived the markups by gallons per day, the estimate of hot lowest LCC; and (3) the combinat

comparing retail prices to the baseline water usage used in the DOE test design options or efficiency level

costs provided by GAMA. We believe procedure. a payback period of not more than 

The effect of standards on individual these prices are representative of the T h e ef ect o f standards on indyears. Additionally, candidate sta

national market for residential water consumers ilevels that incorporate noteworth

heaters. Additionally, we applied our operating expense (usually decreased) technologies or fill in large gaps and a change in the purchase price approach uniformly to all fuel types. usually increased). The net effect is between efficiency levels of other

Chapter 5 of the TSD provides a analyzed by calculating the change in candidate standards levels may b

discussion on retail prices. LCC as compared to the base case. electe d . 10 CFR Part 430, Subpar

E. Economic Analysis Inputs to the LCC calculation include Appendix A(5)(c)(3).

the installed consumer cost (purchase Table 4 lists the major input 1. Life-Cycle-Cost (LCC) and Payback price plus installation cost), operating distributions DOE used in the wa

Analysis expenses (energy and maintenance heater LCC analysis for the HFC-2

In determining economic justification, costs), lifetime of the appliance, and a blowing agent. We also completed 

the Act directs the Department to discount rate. analysis for water blown insulatio

consider a number of different factors, In addition to analyzing price and the TSD. We discuss many of the

including the economic impact of energy cost effects on each household in assumptions briefly in this sectio

potential standards on consumers. a national database, DOE also more details on the LCC analysis 

Section 325(o)(2)(B)(i)(I), 42 U.S.C. determines which segments and what both blowing agents, please see C

6295(o)(2)(B)(i)(I). The Act also size of the population, if any, may be 9 in the TSD.

TABLE 4.-INPUT DISTRIBUTION USED IN THE LCC ANALYSIS

LCC analysis assumptions

Description Assumption

Blowing agent ...................................................... HFC-245fa blowing agent.

Energy prices ..................................................... Marginal energy prices for incremental cost savings; average energy prices for b

costs.

Future energy prices ........................................... AE099 reference case to the year 2020 with extrapolations to the year 2030.

Discount rates ..................................................... 0-15% with an average about 6%.

Water heater prices ............................................. From the engineering analysis.

Installation costs & baseline retail prices ............ LBNL water heater price database.

Design option combinations ................................ From the engineering analysis.

EE-RM-97-900 COMMENT 119A
25060 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

LCC Analysis Assumptions

Description Assumption

Markup ................................................................ Retail prices divided by GAMA's manufacturing costs, calculated for each house in RECS '93.

Household characteristics ................................... 1993 RECS public use database, 5222 households.

Lifetime ................................................................ Electric, 4-19 years, most likely 12 years; gas and oil, 3-15 years, most likely 9 years.

Energy consumption ......................................... Using RE, standby losses and input heating rates from the engineering analysis and calculated with WHAM.

Daily hot water use ............................................. Based on number of people, tank size and type of appliances from RECS, and thermostat settings and location imputed from the RECS data; climate data from NOAA 30 year averages;

inlet water temperature and air temperature based on climate data.

To get data representative of all U.S. because these prices did not represent a the average prices inherent in those

residential households we used DOE's consumer's true savings. For the LCC bills, as reported in the RECS public use

Energy Information Administration analyses, the Advisory Committee on data, as being equivalent to marginal

(EIA) Residential Energy Consumption Appliance Energy Efficiency Standards prices for the purposes of the LCC price

Survey (RECS) for 1993. The RECS recommended DOE use the full range of analysis.

public use data survey weights each consumer marginal energy prices Several stakeholders commented on

household so that the data properly instead of national average energy DOE's marginal energy prices. EEI and

represent the 96.1 million households in prices. Marginal energy prices are those LaClede commented that marginal rates

the 50 states and the District of prices consumers pay (or save) for their from the RECS public use data did not

Columbia. The 1993 RECS public use last units of energy used (or saved). The agree with EEI or AGA estimates. (EEI,

data survey provides information Department agreed that marginal energy No. 67 at 1-2; and LaClede, No. 82 at

concerning energy consumption in the prices would improve the accuracy of 2). EEI claimed DOE overstates actual

residential sector and contains a more the LCC analysis and estimated electric costs by 12.8% due to the use

complete set of data for water heater marginal rates for electricity and natural of Inflator93. (Inflator93 is a scaling

analysis than any other survey reviewed gas from the 1993 RECS database. factor DOE used in an earlier analysis to

and available for this study. The survey EIA gathered monthly energy bills adjust electricity prices from 1993-

contains basic data concerning and energy consumption data for the 1998.) (EEI, No. 67 at 1-2). EMPA

household characteristics from an RECS public use data. It did not gather claimed that DOE did not account for

interview questionnaire and annual fuel information on rate schedules, fixed the sampling and non-sampling errors

consumption and expenditures charges, or marginal prices. DOE in the RECS public use data and that

(excluding transportation fuel) derived estimated consumer marginal electricity DOE included fixed costs. (EMPA, No.

from the records of fuel suppliers. It also and natural gas prices directly from 88 at 6-7).

includes weather data (in the form of household data in the 1993 RECS public We discovered that the Inflator93

heating and cooling degree days) and a use data survey as the change in coefficient in the July 1999 Workshop

weighting variable. The households household monthly energy bills divided Analysis was incorrect and we removed

included in the analysis (75% of the by the change in monthly energy it. There is no direct comparison

RECS public use data) all have running consumption for each fuel, referred to as between DOE's change in monthly bill

hot water, and an individual water the change in monthly bill method. This method and EEl's and AGA's method of

heater using one of four fuels: provides a precise marginal energy rate subtracting fixed costs because of

electricity, oil, natural gas, or LPG. based on actual household bills. differences in the level of aggregation

Households without these features, For electricity, DOE calculated the (rate class vs. individual households),

which did not report their water heater slopes of the regression lines for four sample set, and time period.

size, or for which a marginal energy summer months (une-September) and, Furthermore, DOE believes a marginal

price could not be calculated, are not separately, for the winter (October-May) energy price based on subtraction of

used in the analysis. months. DOE derived the annual fixed costs is not correct due to variable

The Department has received marginal price by taking the weighted rate schedules and seasonal rates. DOE's

comments concerning the RECS data. average of the two seasonal prices, change in monthly bill method can and

EMPA claimed the 1993 RECS public where the weighting used was the does account for variable rates and

use data is not valid, reliable, or relative energy consumption of the seasonal rates.

representative because the useable data appliance in each season. For water VP stated that statistical probability

on electricity and gas consumption and heaters, the weighting was 28% summer analysis on many of the analysis inputs,

costs is from only a portion of the and 72% winter. For natural gas, DOE use of marginal energy prices, and

households. (EMPA, No. 88 at 6). The calculated the slopes of the regression accurate conversion efficiencies provide

RECS public use data is the most lines at the annual level because there greater assurance that the final rule will

comprehensive national data set was no seasonal difference in marginal be appropriate and not overly

concerning residential water heating gas prices, burdensome. (VP, No. 45 at 3). DOE

energy use. DOE used the entire data set In order to understand and believes this is true. Our analysis

that pertains to the types and sizes of characterize regional variations in methodology uses distributions on

water heaters in this rulemaking. We pricing and distribution of fuel oil and many analysis inputs, marginal energy

believe this subset is nationally LPG, we collected information relating prices and conversion efficiencies

representative and thus a valid data set. to pricing and distribution of fuel oil which change during the analysis based

and LPG. We learned that bills paid by on EIA forecasts.

a. Marginal Energy Price residential consumers for both fuel oil We recognize there are sampling and

DOE formerly used average energy and LPG are essentially volume-driven, non-sampling errors in the RECS public

prices, but stakeholders objected with a single block rate. We interpreted use data. However, these errors are

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

small and we expect they will have very c. Discount Rates rates, based on historical data a

little impact on marginal energy rates. The Process Rule states that DOE will judgments of future trends, for 

For example, EIA compared the results establish real (adjusted for federal taxes) tyes of consumer savings or fin

from RECS with the American Housing discount rates for residential consumers For new housing, the estimate

Survey results and found the maximum y considering a range of three differentnominal mortgage rate ranges fr

by considering a range of three differ-tax rate is 

difference between the two surveys was 8%, the derived after-tax rate is 

3.2%. EIA also compared 3.2%. EIA als compared results resurate, to a rate based on s onconumers consumers having n on is subtracted a tax of 28%, from and the a total. The 2% infla

Consumer Expenditures (CE) estimates substantial savings, and a mid-range is s u b t r a c t e d f om t h e t o t a T h e 

by the Bureau of Labor Statistics and rate.is a range of real mortgage rates 

found fuel expenditures for the CE were 1.60%-3.76%. Example: 5%*(1

A13(d). The mid-range discount rate 28%)-2% =1.6%.

2% higher for gas and 6% higher for will represent DOEs approximation of For cash, the minimum intere

electricity. For cash, the minimum intere

DOE used project ed future trends in the average financing cost (or 0%. This rate applies to consum

average energy prices to derive opportunity cost of reduced savings) making cash purchases without

estimates of future consumer marginal experienced by typical consumers. withdrawing from savings accou

Based on the guidelines from the energy prices for the economic analysis B as

e d o n e gu es om e i n t e re s t bearing checking accou

energy prioposed sta rds. We crete ana Process Rule, we derived a distribution he maximum rate, the opportun

index (scaling factor) om e treted in of discount rates to reflect the variability is the interest that could have be

index (scaling factor) from the trend in in finaninng methaods consumers can incould have be

average prices (by fuel and sector) and use in ancing m ethods consumers can earned in a savings account or m

applied it to the 1993 marginal prices u s e purchasing water heaters. The fund. The historical nominal ma

calculated from the RECS public use real m terest rate associated with savings rate ranged from 4.5-5.5

database. The index accounts for both financing an appliance purchase is a 1970-1986 (real rates of-8.27 to

inflation and real energy price changes good indicator of the additional costs +3.58%). We believe the current

and it is different than Inflator93. For icurred by consumers who pay a maximum is the opportunity co

example, the average residential higher first cost, but enjoy future represented by the interest earne

electricity price declined by 20% from savings, although it is not the only typical mutual fund (assumed to 

1993-1998, so we assume the marg inal dicator of such costs. While the real). DOE selected a real rate of 

price for each household declines by method used to derive this distribution the mean. 20% over the same period of time. relies on a number of uncertain DOE assumed the interest rate

eperiod o assumptions regarding the financing retail loans and credit cards hav

b. Future Energy Prices methods used by consumers, DOE same range. The minimum cred

Given the uncertainty of projections believes the resulting distribution of rate is 6% real. Introductory rate

of future energy prices, DOE used discount rates encompasses the full some credit cards today are 5.9%

scenario analysis to examine the range of discount rates that are nominal, but after the introducto

robustness of proposed energy appropriate to consider in evaluating period (often six months), the ra

efficiency standards under different the impacts of standards on consumers increase sharply. Maximum rate

energy price conditions. The LCC (i.e., values represented by the mid- more than 20% nominal. Howev

calculations used these scenarios. Each range financing cost, consumers with no the consumer pays with a credit 

scenario integrates energy supply and savings, and consumers with substantial and the balance is paid in less th

demand into its energy price. The savings), as well as all the discount rates life of the water heater, then the

scenarios differ in the energy prices that that fall between the high and low effective interest rate is lower th

result. The Advisory Committee on extreme values. nominal credit card rate. The cu

Appliance Energy Efficiency Standards DOE assumes the method of purchase assumption is a range of 6-15% 

suggested the use of three scenarios used by consumers is indicative of the Combining the assumed share

with high, low, and middle levels of source of the funds and the type of each financing method, the abov

energy prices because three scenarios financing used, although DOE is not interest rates result in a weighte

should be sufficient to bound the range aware of detailed research into this average (mean) value of 6% and 

of energy prices. This is also the relationship. Whirlpool Corporation distribution that varies from 0-1

guidance provided in the Process Rule, indicated that approximately 40% of Sensitivity studies show that wh

10 CFR 430 subpart C, appendix A white goods are purchased in cash, 35% LCC results are sensitive to the v

13(b). with credit cards, and 25% with retailer chosen for the mean discount ra

The EIA's 1999 Annual Energy loans. (1994 Eight Product Notice of LCC results are not sensitive to t

Outlook (AEO99) reference case Proposed Rulemaking, 59 FR 10464, distribution of discount rates.

provides a middle scenario. For the high March 4, 1994.) The same manufacturer DOE believes the methods des

and low energy price scenarios, DOE indicated that 25% of appliance above are valid for establishing 

used the scenarios with the highest and purchases are for new homes. However, distribution of discount rates rel

lowest energy prices in the economic we know consumers purchase 20% of most purchasers of the products 

sector and the fuel of interest from water heaters with new homes, i.e., in by this rulemaking. However, th

AEO99. DOE also used the reference mortgages, and 80% as replacements for Department acknowledges that d

case from the GRI projection, 1998 GRI existing water heaters in separate retail assumptions could be made abo

Baseline Projection: Residential Natural purchases. Consumers pay for retail interest, inflation and marginal t

Gas, Electricity, and Distillate Fuel Oil purchases by cash, credit cards, or or about consumer financing me

Prices Tables. The future trend in loans. In the case of water heating and that different approaches to

energy prices assumed in each of the equipment, we assumed consumers identifying consumer discount r

four scenarios is clearly labeled and would usually use credit cards because might also be valid. For example

accessible in each spreadsheet. most water heater purchases are possible to base consumer disco

Stakeholders can substitute alternative emergency replacements. In order to rates on the average real rates of 

assumptions in the spreadsheets to derive a full distribution of discount on consumer investment or othe

examine additional scenarios as needed. rates, DOE estimated a range of interest measures of the opportunity cos

EE-RM-97-900 COMMENT 119A
25062 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

incurred by consumers who purchase DOE policy is to base discount rates on However, the Department has not had

the covered products. DOE does not average financing costs (or opportunity an opportunity to analyze the impact at

believe, however, such alternative cost of reduced savings) experienced by this time. We will, however, determine

assumptions or alternative approaches typical consumers. the impacts of this updated information

would significantly alter the range of d Household Characteristics for the final rule. We have accounted for

discount rates used by the Department the age of the energy price data by

or the conclusions drawn from the LCC The 1993 RECS public use data adjusting the 1993 data to represent

analyses conducted using these provide a sample of 7,111 households 1998 prices. We did this by multiplying

discount rates. from the population of all primary, the 1993 data by the ratio of the average

The Department i<s seeking any occupied residential housing units in annual energy prices from the EIA AEO

informThe Departmen that is seeking anyport the U.S. Of the 7,111 households, we between 1993 and 1998. information that would support use 5,222 household records in the

significant alterations in the range or analysis and we assume these Table 5 provides some information

distribution of the discount rates households are representative of about households in the 1993 RECS

derived from its analysis. Alternatively, housing on a national scale. The public use data used in the LCC

DOE is soliciting comment on the households included in the analysis (see analysis. The weighted number of

possible use of a standardized Table 5) have four defining features: households are the total households

distribution of discount rates ranging 1. Water heater size represented by the RECS data. The

from approximately 4-12%, with a 2. An individual water heater average hot water use is not from RECS

mean of 6%. The use of such a 3. One of four fuels: electricity, oil, but is determined from the results of a

standardized distribution would natural gas, LP gas California Energy Commission (CEC)

explicitly recognize the many 4. Billing data for electric and gas-fired study of hot water usage. We have

uncertainties associated with DOE's water heaters and gallons of fuel oil included the average water heater set

current analysis and, based on or LPG used point and average inlet water

sensitivity analyses already performed Of the households not included, temperature, which are not part of the

by DOE, such a standardized 11.8% shared water heaters or used RECS public use data. These are derived

distribution would not significantly other fuels; these water heaters are not from the location of the household using

alter the conclusions of DOE's life cycle subject to this rulemaking. Of the the National Oceanic and Atmospheric

cost analyses. remaining households not included, Administration's (NOAA) 30-year

Two stakeholders, EEI and EMPA, 6.2% had no water heater size indicated (1961-1990) database of average air

claimed the discount rates in the LCC and 8.2% had insufficient billing data temperatures to estimate average annual

appear to be very low for consumers. for energy price analysis. outdoor and inlet water temperatures

(EEI, No. 39 at 7 and EMPA, No. 50 at EEI commented that the RECS public (NOAA database: www.ncdc.noaa.gov/

2). They do not reflect the actual use data are more than five years old. ol/climate/online/ccd). A more

consumer purchasing behavior as (EEI, No. 39 at 3 and No. 67 at 1). The complete discussion of the data not

measured by an implicit discount rate. detailed 1997 RECS public use data from RECS is found in section III.E.2.d.,

Such discount rates are often higher. were released in mid-January 2000. Energy Analysis Module.

TABLE 5.-1993 RECS HOUSEHOLD CHARACTERISTICS

Gas Electricity LPG Fuel Oil All Fuels

Number of Households (records) .................................................. 2475 2323 248 176 5222

Number of Households (weighted) ............................................... 35,959,707 30,279,600 2,540,960 1,807,350 70,587,617

Household Size (average number of people) ................................ 2.79 2.58 2.70 2.87 2.70

Clothes W asher (percent saturation) ............................................. 89.2 82.0 89.1 96.6 86.3

Dishwasher (percent saturation) .................................................... 52.4 49.1 32.5 56.8 50.4

Average Thermostat Set point (deg F) .......................................... 134.6 133.5 135.0 137.5 134.2

Average Inlet Water (deg F) ................................. ......... 57.1 59.1 56.3 51.8 57.8

Average Hot Water Use (gallons per day) .................................... 48.6 45.4 47.3 47.3 47.1

Low Income Households (percent of total) .................................... 5.68 5.69 0.64 0.12 12.13

Senior-Only Households (percent of total) .................................... 8.13 7.66 0.72 0.39 16.90

Senior-Only and/or Low income (percent of total) ........................ 12.59 12.17 1.17 0.492 6.42

Stakeholders raised concerns about temperatures (57.3°F for gas and 58.7°F determine the average air temperature.

the RECS data. Battelle commented that for electric). (Battelle, No. 83 at 2 and We derived cold water inlet

some fraction of households in the AGA, No. 92 at 3). temperatures based on the average

RECS database incorrectly identifies Set point temperature, air annual air temperature. (NOAA

fuel type of water heaters. (Battelle, No. temperatures and entering water database: www.ncdc.noaa.gov/ol/

66 at 5). temperatures are not in the RECS climate/online/ccd). From a study by

Battelle and AGA claimed DOE database. To obtain the set point, air and the CEC (CEC, 1990, Report No. P400-

"fabricated data not in the database." entering water temperatures, the 90-009), DOE has inferred the set point

They believe this has led to higher Department used the following temperature based on the cold water

average set point temperatures for gas approach. DOE used heating degree inlet temperature. This methodology is

water heaters (134.5°F for gas vs. days to determine an approximate applied equally to all of the RECS

133.7°F for electric), cooler air location for each household. This is public use data-gas, oil and electric.

temperatures where the water heater is necessary because household locations Any difference in the results among

installed (55.1°F for gas vs. 56.7°F for are confidential. Based on the location, fuels is due to regional differences of

electric), and colder entering water we used the 30-year NOAA data to

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

saturations of water heater fuel types households having a particular LCC and Database, which is described in 

and not to the data that DOE uses. payback. III.D.3.e. See Chapter 5.3 of the T

Battelle disagreed with DOE's For the LCC calculations, we In its analysis for the Novembe

preliminary results showing average randomly sampled the set of households workshop, we estimated the

daily water use of 48.5 gallons per day 10,000 times. The analysis used separate manufacturing costs for all other

for households with gas-fired water LCC spreadsheets for each fuel type standard size existing baseline w

heaters versus 45.4 gallons per day for (electricity, natural gas, and fuel oil) and heaters based on the manufacturi

households with electric water heaters. blowing agent (water and HFC-245fa). for the typical water heater plus 

Battelle claimed DOE's results will Chapter 9.1 of the TSD describes the minus) incremental costs for extr

increase the energy used by 3.3% and sampling methodology and contents of insulation, sheet metal, and othe

will cause 3.2% more standby losses for the RECS public use data. components. We determined the 

gas water heaters. (Battelle, No. 83 at 3). In comments, EMPA claimed 10,000 price of each combination of desi

DOE believes the differences in average Monte Carlo runs are not enough, and options by multiplying the

energy use and standby losses between consumers' actual savings depend on manufacturing cost times the ma

gas and electric water heaters are due to their specific energy prices and amount See Chapter 7 on markups and C

regional differences in numbers of water of usage of the appliance. (EMPA, No. 9.5 in the TSD for a complete dis

heaters by fuel type and household size, 88 at 2-7). AGA claimed manufacturers' of this.

among other factors. These differences costs and consumer prices are correlated AGA claimed DOE used averag

are not caused by inadequate drata.e so DOE should use a correlated Monte markups in the LCC. (AGA, No. 9

Carlo approach. (AGA, No. 92 at 5). DOE does not use average marku

e. Lifetime We believe 10,000 Monte Carlo runs the LCC. As described above, we

Apliance Magazine was the src are sufficient because, when tested at calculate an overall markup for e

ofp inf ation fowater heater lfeties. 20,000 runs, there was less than 1% RECS household by dividing a

We created a triangular distribution difference in the results. The randomly chosen retail price from 

usigWe rated a triangular distribution emanufacturers' cost data is not Water Heater Price Database by a

tusing 4-9 years as the base for electc connected with a specific model but is randomly chosen manufacturing 

water heaters and the most likely value only provided as a cost distribution from the cost distribution data fo

of 12 years as the peak. Similarly, for Therefore, manufacturers' costs and the standard-size existing baseline m

gas-fired water heaters the base is 3-15

years with the most likely value at 9 prices in the Lawrence Berkeley We apply this markup to all of th

years w the most ith likely value ater 9 National Laboratory (LBNL) price subsequent design options for tha

years. We assumed that oil-fired water database cannot be correlated. There is household. We limited the marku

heaters have the same lifetime as gas- no one-to-one correlation between the algorithm to ensure the retail pric

fir water heaters. cost of a specific model to the price for never lower than the manufacturi

2. LCC Spreadsheet Model that same model because GAMA only cost.

In order to simplify handling large provided cost distribution c. Operating Cost Module aonsoinudaathwaeh r We analyzed all design options for . Operating Cost Module amounts of input data, the waer heae water heaters as if they were at Operating a water heater involv

LCC analysis spreadsheet has five production levels equivalent to the costs: Fuel to operate the water h

modules. The modules are LCC and typical existing baseline models, i.e., and maintenance to keep the wat

Payback, Equipment Cost, Operating possessing similar economies of scale. heater running properly. Fuel cos

Cost, Energy Analysis, and Hot Water We performed the LCC analysis depend on the water heater's ene

Draw. Chapter 9 in the TSD contains a separately for each energy source: usage and the per-unit cost of fue

detailed discussion of the spreadsheet electric, gas (including LPG) and oil. We Maintenance costs depend on wa

and the individual modules. calculated the analysis twice, once for heater design and were determine

a. LCC and Payback Module water-blown insulation and again for consultants' discussions with

HFC-245fa blown insulation. The LCC manufacturers and installers. The LCC analysis uses a spreadsheet analysis does not address fuel choice; In the LCC analysis, we calcula

model developed in Microsoft Excel this is addressed in Section F, National operating cost for the baseline pro

combined with Crystal Ball (a Energy Savings and Shipments. See class (fuel type) for each househo

commercially available software Section IV.A.l.a of this notice for the the RECS database using average 

program). The model uses a Monte Carlo results of the LCC analysis. energy prices. For each design op

simulation to perform the analysis while The Department calculates payback combination of design options. w

considering uncertainty and variability and LCC for each design option multiply the energy savings by th

of many input values. Crystal Ball is a combination and compares it to the marginal energy price. The operat

program that provides risk analysis 2003 baseline model for every sample cost is the baseline operating cost 

capabilities to help analyze the household. the operating cost savings for the

variability and uncertainties associated particular design option or combi

with the data. We organized the b. Equipment Cost Module of design options. Therefore, we a

spreadsheet so ranges (distributions) are Equipment cost represents the sum of marginal energy prices to only the

entered for each input variable needed the retail price, sales tax, and portion of total operating cost res

to perform the calculations. installation costs. We calculated the from improved energy efficiency.

Recognizing that each household is retail price from the manufacturer's cost To account for future uncertain

unique, we accounted for variability in multiplied by an overall markup. we apply various scenarios of pro

the model by performing the LCC GAMA provided estimates of water future energy prices (trends by na

calculation for a large number of heater manufacturing costs for typical average) to each household's marg

individual households. The Monte Carlo existing baseline models. The source of energy price. After we adjusted fo

simulation samples individual the retail price, the sales tax, and the inflation and energy price change

households from the RECS public use installation cost of existing baseline adjusted energy prices for the REC

data. The results show the fraction of models is the Water Heater Price public use data from the starting y

EE-RM-97-900 COMMENT 119A
25064 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

the projected average future energy derived an equation from a CEC study The Consumer Subgroup Analysis for

prices. Thus, each sample house from that measured delivered water water heaters estimates the variation in

the RECS public use data has four temperature and cold water energy consumption and LCC for

different future annual energy price temperatures. (CEC, 1990, Report No. different subgroups of consumers under

series associated with it. We estimated P400-90-009) The equation derived different trial standard levels. Of

future annual operating costs as annual from the CEC data indicates that the particular interest is the potential effect

energy use multiplied by the annual water heater set point varies inversely of standards on households with low

energy price series for each of the four with inlet water temperature. For every incomes and on seniors over 65. DOE

scenarios: AEO99 High Growth, AEO99 degree the average inlet water identified these two subgroups from

Reference Case, AEO99 Low Growth, temperature increases, the hot water set stakeholder input at the water heater

and the 1998 GRI Baseline Projection. point temperature decreases about half workshop on November 11, 1998. The

The user can choose from among these a degree. See Chapter 9.3.4 in the TSD analysis answers questions such as:

four scenarios in the spreadsheets or can for a discussion of the CEC data. How many households of this type are

input his or her own price forecast. better off with standards and by how

d. Energy Analyss M e e. Hot Water Draw Module much? How many households are worse d. Energy Analysis Module by how much? Hot water use varies widely among off and by how much?

Since we can write WHAM as an households because it is dependent on By comparing the LCC of all

equation, DOE used it in the LCC household and water heater consumers to the LCC of the specific

spreadsheets to quickly and reliably characteristics, including the number consumer subgroups referenced above,

estimate residential water heater energy and age of the people who live in the we determine if the standards will affect

consumption. We validated WHAM home, the presence of appliances using those subgroups differently. DOE made

with the TANK and WATSIM hot water, the tank size and thermostat these determinations for each trial

simulation programs for gas-fired and setting of the water heater, and the standard level for low income and

electric water heaters for many water climate in which the home is situated. seniors-only households.

heater characteristics. The WHAM By accounting for these five AGA stated DOE must provide

results were within 3% of predicted characteristics, the hot water draw statistical support for the way the RECS

energy consumption for electric, and model estimates average daily hot water data are used in the Consumer Subgroup

within 5% of predicted energy used. Analysis. (AGA, No. 68 at 6). There are

consumption for gas-fired water heaters. a total of 484 records for low income

Three parameters-RE, UA and rated There a degree of uncertamty households and 779 records for seniorinput power-describe the efficiency estimating hot water use because of the only households in the RECS database.

characteristics of the water heater. The lmted dataon measured actual hot Most of the low income or senior-only

operating conditions of the water heaterwateruse. We estimate uncertaity households have either a gas-fired or

are the average daily hot water used, attached to the weighting factors using electric water heater. DOE used the

inlet water temperature, hot water outlet normal distributions for parameters RECS data because it is the most

temperature, and air temperature provided n the 1985 EPRI study. Based complete and largest database publicly

around the water heater. on the 1985 EPRI study, "Electric Wateravailable.

We used the RE and standby heat loss Heating for Single-Family Residences:

coefficient values from computer Group Load Research and Analysis," 4. Payback Analysis for Rebuttable

simulations developed for the LBNL developed values for daily hot Presumption

Engineering Analysis and rated input water used for the number and age of The Act establishes a rebuttable

power from manufacturers' product people living in the home and for the presumption that a standard is

literature to describe the energy presence of appliances. (1996. LBNL economically justified if the additional

performance of water heaters. 37805) product costs attributed to the standard

WHAM uses the average daily hot RECS provides data on the number are less than three times the value of the

water consumption for each household and age of household occupants, first year energy savings. Section

calculated by the Hot Water Draw presence of a clothes washer or 325(o)(2)(B)(iii), 42 U.S.C. 6295

Module, discussed below. We dishwasher, and three ranges of water (o)(2)(B)(iii).

calculated temperatures for inlet water heater tank size: small, medium, and The payback period measures the

and the air surrounding the water heater large. For this analysis, however, we amount of time needed to recover the

from the outdoor air temperature and needed specific water heater sizes. By additional money the consumer invests

the location of the water heater in the matching the three RECS ranges (small, in increased efficiency through lower

house. The RECS public use database medium, and large) with the standard operating costs. Numerically, the

provides data on heating and cooling water heater sizes, we assigned an exact payback period is the ratio of the

degree days, but not air or water water heater size to each RECS house. increase in purchase (and installation)

temperatures, for each household in the Generally, small is equivalent to 30 price to the decrease in annual

sample. Each household was assigned to gallons, medium to 40 gallons, and large operating expenditures (including

the climate zone within its reported to 50 gallons or larger. maintenance) from replacing the 2003

Census division with the closest number nsumer Subrou Analysisbaseline water heater with a water

of heating and cooling degree days for onsumer ubgrou heater incorporating another more

1993. Once each household was In the Process Rule, DOE committed efficient design option.

associated with a climate zone, we made to considering the LCC impacts on For purposes of the rebuttable

other temperature assignments from consumer subgroups who might be presumption test, DOE identifies the

NOAA's 30-year average annual uniquely affected by a rulemaking. design options with the highest

temperatures. (NOAA database: Process Rule, Appendix A (11)(d). DOE efficiency that have a payback of no

www.ncdc.noaa.gov/ol/climate/online/ used LCC as the metric to determine more than three years. Since the Act

ccd). consumer impacts. See Chapter 10 in requires that the rebuttable presumption

To assign hot water outlet the TSD for consumer subgroup be based on the DOE test procedure, it

temperatures for households, we analysis. is determined in the engineering

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

analysis. See section IV.A.1.c. of this standards. National annual energy and Each of the above are determine

notice for these results. water savings are calculated as the selected trial standard levels. Th

F. National Impacts Analysis difference between two projections: a calculations are done by the use 

base case and a standards case. spreadsheet tool called the NES

1. Net Present Value (NPV) and Energy Analysis begins with estimated energy spreadsheet model, which has b

Savings savings by fuel type for electricity, developed for all the appliance

The national impacts analysis natural gas, LPG, and oil. DOE estimates standards rulemakings and tailo

assesses the NPV of total consumer LCC energy consumption and savings based each specific appliance rulemak

and energy (and water, if appropriate) on "site energy" (kWh of electricity, In the water heater rulemaking

savings. A preliminary assessment of million Btu of natural gas, LPG or oil NES spreadsheet model also for

the aggregate impacts at the national used in the home). The Act defines fuel type market shares to new h

level is conducted for the NOPR. "energy use" as the "quantity of energy completions Fuel switching ma

Analyzing impacts of Federal energy- directly consumed by a consumer caused by price increases of gas

efficiency standards requires a product at the point of use, determined andor e ric e heaes de

comparison of projected U.S. residential in accordance with test procedures andards or other government a

energy consumption with and without under Section 323." Section 321(4), 42 tadards or other government a

standards. The base case, which is the U.S.C. 6291(4). This is generally called actions DOE examines several s

projected U.S. residential energy "site" energy as opposed to "source" in order to include the range of

consumption without standards energ, which includes transportation possibilities or dfferent market 

includes the mix of efficiencies being and generation losses. of electric and gas-fired water he

sold at the time the standard becomes The energy savings to the nation are (see Chapter 11.3 of the TSD).

effective. Sales projections together with expressed in quadrillions of Btu's of 2. National Energy Savings (NES

efficiency levels of the water heaters "source" energy. The National Energy Spreadsheet Model

sold, are important inputs to determine Savings (NES) spreadsheet model first

the total energy consumption due to calculates the energy savings in site Table 6 lists the major assump

water heaters under both base case and energy, kWh or Btu, and then uses a that DOE used in the water heat

standards case scenarios. The time series of conversion factors to analysis. We discuss many of the

differences between the base case and convert site energy to source energy. assumptions briefly in this secti

standards case provides the energy and This was a recommendation by the discuss in more detail below our

cost savings. Depending on the analysis Appliance Efficiency Advisory shipment analysis because shipm

method used, the sales under a Committee that the Department are an important input to the NE

standards case projection may differ implemented recently. The conversion analysis. The shipment model p

from those of a base case projection. factors are derived from the AEO99 the number of water heaters exp

The Department estimates national (DOE/EIA-0383). be sold each year between 2003 

energy and water, if applicable, Measures of impact reported include 2030. For more details on the NE

consumption for each year beginning the NPV of the energy savings in dollars analysis, please see Chapter 12 i

with the expected effective date of the and the energy savings at the source. TSD.

TABLE 6.-ASSUMPTIONS USED IN THE NATIONAL ENERGY SAVING ANALYSIS

National energy savings assumptions

Description Assumption

Real Discount Rate and Year of the NPV ............................................... 7% discounted to the year 1998.

Start Year of New Standards ................................................................... 2003.

Energy Savings ........................................................................................ Source Consumption.

Average Marginal Energy Price ................................................ From the LCC analysis adjusted to 1998$.

Average Retail Prices and Installation Costs ........................................... From the LCC analysis.

Energy Price Projections to 2020 ............................................................. AE099.

Extrapolation of Energy Prices to 2030 ................................................ For petroleum, we use the average world oil price with mark

2020; for gas, we use the average growth rates from 1

with margins from 2020; electricity prices are constant at 

els.

Electric Source to Site Conversion Factors ............................................. Time variant values from AE099.

Gas Source to Site Conversion Factors ................................................. 0.9 from AGA.

Voluntary Programs .................................................................................. Included in the base case via historical shipments data.

Annual Unit Energy Consumption ................................................ Values from the engineering analysis are market weighted 

ments forecasts.

Base Case ................................................................................................ Electric: 80% low efficiency, 20% high efficiency.

Gas-fired: 70% low efficiency, 12% medium efficiency, 18% 

ciency.

Oil-fired: 80% low efficiency, 15% medium efficiency, 5% 

ciency.

The NES spreadsheet model year as the difference between total in maintenance costs. NPV great

determines the total source energy operating cost savings and total zero indicates net savings (i.e., th

savings and the NPV of these savings. equipment cost increases. The NPV standard reduces consumer

The model calculates net savings each calculations also capture any differences expenditures in the standards ca

EE-RM-97-900 COMMENT 119A
25066 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

relative to the base case). NPV less than energy consumption for a year. We levels to be the same. The individual, or

zero indicates that the standard incurs calculated annual NES as the difference unit, change in purchase price and

net costs. The elements of the NPV also between the total energy consumption operating expenditures are the same for

can be expressed as a benefit/cost ratio. for the trial standard level and the base the two trial standards levels, however,

The benefit is the savings in decreased case. We summed the annual NES to the shipment model forecasts are

energy expense, while the cost is the obtain cumulative energy savings over different for gas and electric water

increase in the purchase price due to the period 2003-2030. Then using heaters. These different shipment

standards relative to the base case. energy conversion rates from the EIA's forecasts cause the aggregate equipment

When the NPV is greater than zero, the AEO99 or from AGA, we can calculate expenditures and operating costs to

benefit/cost ratio is greater than one and the source energy consumption and differ for the two trial standards levels.

benefits exceed costs. savings. Energy conversion rates Because of the higher cost of electric

We determine equipment costs from account for generation and distribution water heaters in trial standard level 3,

the increased purchase price associated losses of electricity and transportation the market share of electric water

with the higher energy efficiency of and pumping losses of natural gas. heaters is predicted to decrease. In the

appliances purchased in the standards DOE's proposed standard is only based period between 2003 and 2030, the

case compared to the base case. We on the AEO99 reference energy price shipment model predicts about five

calculate equipment costs as the forecasts, although we consider the high million fewer electric water heater

difference in the purchase price and low economic forecast. shipments in trial standard level 3 than

between the base case and trial standard NPV in a Saturated Market in trial standard level 1. This loss in

levels for new water heaters purchased discounted difference in shipments of electric units is (roughly) NPV is the (discounted) difference in compensated by an equivalent gain in each year, multiplied by water heater national wated an equivalent by gain in

sales. We accounted for the number of natona wathe s ate pndunit shipments.

water heaters sold each year by tracking tandards generally lower the average NPV, combined across fuel types,

shipments of new water heaters and the operating cost of appliances, but includes the effect of market share

average lifetime of each market share by increase the average first (equipment) changes caused by standards. For a

trial standard levels. We determine the cost. Also, standards can cause saturated market, which is the case with

retail prices of the baseline design and consumers to make different purchase water heaters, this accounts for the

the hiher efficiency design options decisions, either choosing another effects on the nation of standards.

from the LCC Analysis. Purchase price product, e.g., room air conditioner Considering NPV separately by fuel type

includes the water heater installation instead of central air conditioners, or can be misleading because changes in

cost. another fuel type, e.g., electric to gas. shipments among fuel types (market

Reductions in operating costs NPV accounts for these shifts. effects due to price increases) can

associated with the higher energy Water heaters constitute a saturated obscure the expected national energy

efficiency of water heaters purchased in market (96% of households)-standards savings due to improved efficiency

the standards case-compared to the are not expected to affect the percentage across all product classes. For a

base case-create savings. Total of households using a water heater. complete discussion of this topic, see

operating cost savings are the product of However, standards may affect the fuel sections 12.2 and 12.5 of Chapter 12 in

savings per unit and the number of units type mixture of the water heater market. the TSD.

of each age that continue to operate in In calculating the NPV, the NES model Shipments

a particular year. We accounted for the accounts for two effects, the operating

mix of different efficiencies each year expenditures and increase in purchase One of the more important

using an average annual unit energy price of the more efficient water heaters. components of any estimate of future

consumption weighted by the The shipments model, an input to the economic impact is shipments.

percentage of water heaters in the NES, forecasts the change in market Forecasts of shipments for the base case

market. share of the various fuel types in and the standard case need to be

DOE calculates national energy response to the different standards. obtained as an input to the NES. Table

consumption for the base case and each These shipment changes, due to 7 lists the major assumptions that DOE

trial standard level by multiplying the purchase price, are reflected in the NES used in the water heater shipments

average energy consumption by water calculation of NPV. analysis. We discuss many of these

heater age times the number of water Since trial standard levels 1 and 3 are assumptions briefly in this section. For

heaters of that age still in the stock. This the same for gas water heaters, one more details on the shipments analysis,

yields an estimate of the national total would expect the NPV for these two please see Chapter 11 in the TSD.

TABLE 7.-ASSUMPTIONS USED IN THE SHIPMENTS ANALYSIS

Shipments analysis assumptions

Description Assumption

Base Case ....................................... Based on historic data and new housing starts, projected to 2030.

Existing Homes ....................................... . Replace water heaters with units of the same fuel type. 96% of housing units have water heaters of the type analyzed here.

New Construction ............................................... Have a fuel choice, 96% of homes have a residential water heater of one of the four major

fuel types. Number of housing units based on Census data and EIA forecasts.

Market Saturation in New Construction .............. Based on fuel price, equipment price and household income.

Implicit Discount Rates ....................................... Electric 191%, Gas-fired 83%, Oil-fired 124%, LPG 83%.

Cost Elasticities ........................................ From a 1979 Oak Ridge National Laboratory study, see Table 11.3 in the TSD.

Fuel Prices .............. .......................... AEO99 and GRI98.

Lifetime ...................................... Appliance Magazine 1998: Electric 4-19 yrs., most likely is 12 yrs; gas, oil and LPG, 3-15 yr.,

most likely is 9 yrs.

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TABLE 7.-ASSUMPTIONS USED IN THE SHIPMENTS ANALYSIS-Continued

Shipments analysis assumptions

Descrption Assumption

Equipment Cost .................................................. From the LCC analysis.

Household Income ........................................ RECS93.

The Water Heater Shipments forecast We use implicit discount rates to Voluntary programs typically h

spreadsheet is used primarily as an calculate equipment cost elasticities, small but important effect in raisi

input into estimates of national impacts which are about 2-5 times higher than future efficiency of the average

from standards implementation and into operating cost elasticities. Based on the appliance in the market. In the w

the manufacturer's impact analysis. The operating cost elasticities derived by the heater market, utility programs an

model predicts the total number of Oak Ridge National Laboratory (ORNL), building codes have created regio

water heaters expected to be sold by we assume consumers are more markets for high efficiency gas-fir

manufacturers in each year between sensitive to first cost than to operating electric water heaters. See Section 

2003 and 2030. In addition, it describes cost. Using these calculations in the of this notice for results of enhanc

the change in fuel type market shipments model and the NES voluntary programs. FEMP also

saturation due to implementing spreadsheet, we can assess the impact of provides government purchasers 

standards and other macroeconomic fuel switching. The complete information about higher efficienc

factors. The basic assumption of our explanation and derivation of terms are water heaters and their life-cycle 

analysis is that nearly all homes in Chapter 11.3.2 of the TSD. We included the effects of these

currently have a water heater with one As part of its analysis to determine programs in the base case by mod

of the four major fuel types, and that energy savings, the Department the current market for each fuel ty

this trend will continue throughout the develops a base case forecast. The base efficiency level. DOE also is resea

forecast period. Furthermore, we case shipments is a forecast of annual electric heat pump water heaters 

consider only water heaters serving a shipments in the absence of new hopes to increase their market

single housing unit. (We know from the standards and their weighted average penetration in the future by reduc

RECS public use data that 4% of energy efficiency to the year 2030. This the first cost to consumers. We ha

housing units built will either have no forecast requires an assessment of the included any impact from these e

hot water, share a hot water heater with impacts of past and current non- to increase heat pump water heate

other units, or be fueled by a source regulatory efforts by manufacturers, market penetration in our forecast 

other than the four fuel types, but we utilities and other interested parties. we are still doing research.

have excluded these from our analysis.) DOE considers information on the Since 1980, the U.S. has built a

actual impacts of such initiatives to 1.3-2.1 million new housing units 

In its comments, AGA asked why the date, and also considers information year, including mobile home consumer implicit discount rates are presented regarding the possible placements. From 1990-1993, abo

different for gas, electric, and oil (AGA, impacts that any current initiatives 96% of new housing units installe

No. 68 at 6). We use an implicit might have in the future. Such residential storage water heaters o

discount rate to model a consumer's information could include the actions type and size considered under th

behavior and the tendency to purchase manufacturers, distribution channels, standards. The remaining 4% of n

the least expensive water heater. We utilities, or others will take to realize housing units are not considered 

assume consumers are strongly such voluntary efficiency shipments forecast because the w

influenced by first cost and future improvements. heaters are shared among more th

savings are much less important. The o develop a base case forecast of housing unit or renewable energy

implicit discount rates are different for shipments, we used total water heater sources are used for water heating

each fuel class because they depend on shipments from GAMA through 1993 Thus, there are about 1.2-2.0 mill

the increase in consumer price from the and market share data from consultants residential storage water heaters

baseline to the first design option. In the to calibrate the model so it correctly installed in new housing each yea

shipment analysis, we use the implicit estimates historical data. DOE Since 1990, these installations hav

discount rate to determine the value of calculated annual water heater accounted for 15-20% of annual w

future operating cost savings for gas- shipments by fuel type as the sum of heater shipments. fired, electric, oil-fired and LPG water water heater installations in new After accounting for new housin

heaters. housing and replacement units. We construction, the remaining 80-85

ACEEE claimed DOE's analysis account for the energy saving impacts of shipments are replacements. We

assumes purchasers are quite sensitive non-regulatory efforts by manufacturers, determined the number of replace

to operating costs and suggested DOE utilities, and government (e.g., the by using the number shipped in th

reduce the sensitivity to operating costs FEMP), in the base case and we forecast and a distribution of water heater 

in the water heater shipment model their effects in the future. DOE expectancies, which varies by fuel 

similarly to the adjustments made to the considered information on the actual The choice among competing fu

clothes washer shipments model. impacts of such initiatives to date, and water heating is highly correlated 

(ACEEE, No. 93 at 5). We could not also considered information regarding the choice of fuel for space heating

make any adjustments to our shipments possible impacts that any existing Most homes use the same fuel for 

model similar to the adjustments made initiatives might have in the future. See heating as for space heating. In thi

for clothes washers because we do not Chapter 11.3.1 in the TSD for our analysis, we assume that when wa

have any consumer preference surveys estimates of the relative market share heaters need to be replaced, they a

for water heaters. efficiencies for the base case. replaced by water heaters of the s

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25068 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

fuel type as the original; changes in effective, all the baseline water heaters saturations shows no decline in gas

market share occur primarily as a result immediately have improved efficiency heating fuel installations during the

of installation trends in new housing. and higher prices. The change in price 1990s. Since space heating fuel and

Natural gas and electric water heaters among fuel types causes the sudden water heating fuels are highly correlated

account for the major shares of shift in shipments. in households, we decided to conduct a

shipments. As of 1997, electric water EEI claimed the water heater sensitivity analysis to understand the

heaters account for about 47%, and shipment forecast seemed to be impact of different shipment scenarios.

natural gas (including LPG) water optimistic, with sales increasing for gas- We investigated several alternative

heaters account for almost 53%. Sales of fired and electric units every year from scenarios based on constant market

oil-fired water heaters account for less 2000-2030 (30 years). Past history has share. This scenario fits the results of

than 1% of water heater shipments. shown periods of flat or declining the American Housing Survey. U.S.

DOE estimates shipments based on shipments. (EEI, No. 39 at 9). Our Census Bureau, Current Housing

two markets: new housing construction shipment forecast reflects the EIA's Reports, Series H150/97, September

and water heater replacements in forecast of continued strong demand for 1999.

existing housing. We assume new housing construction. Shipments of We conducted the NES analysis to

replacements in existing housing equal each fuel type may differ slightly, due determine energy savings and NPV

retirements; that is, everyone replaces to changes in market saturation using a constant market shipment

his or her worn-out water heater. We occurring as a result of installation scenario and two scenarios based on a

further assume consumers replace their trends in new housing. 10% change in the constant market

water heaters with the same fuel type; Fuel Switching and Market Share. The shipments. Note that a constant market

that is, we assume no fuel switching in Department decided to study the shipment fixes fuel shares so there is no

the replacement market. For each fuel potential impacts of different trial fuel switching. For each of these

type, the number of retirements is equal standard levels on fuel type market scenarios, we forecast all four trial

to the total stock of each vintage, share using the shipment model. A large standard levels. In all cases, we held

multiplied by a retirement probability shift from one fuel to another may affect market shares of shipments constant

for that vintage contained in the lifetime consumer costs and national energy throughout the forecast period. In the

function for that fuel type. Electric consumption and environmental first scenario, we held market shares of

water heaters have a life expectancy of impacts. We created an Ad Hoc Water shipments at 1992 values; that is,

4-19 years and gas-fired water heaters Heater Fuel Switching Working Group electric 47% and natural gas 44%. In the

last from 3-15 years, with average to assist us in investigating fuel second scenario, we shift market shares

lifetimes of 12 and 9 years, respectively, switching concerns. The Working Group of shipments 10%, to electric 57% and

as published in the September 1998 was made up of representatives from natural gas 34%. In the third scenario,

issue of Appliance Magazine. We expect GAMA, gas and electric utilities and we shift market shares of shipments to

water heater replacements to constitute energy advocates. The Working Group 37% electric and 54% natural gas.

85 percent of total water heater decided that since most water heater Results from the NES analysis show

shipments by 2003. Total retirements replacements are usually emergencies, only slight differences in NES among

calculated in this way show rough water heaters are always replaced with the three scenarios 0.06-0.11 quads

agreement with historical shipment data the same fuel type. Therefore, in our compared to the model result of 4.75

provided by GAMA, during the period analysis we assume no fuel switching in quads. Among the three scenarios, NPV

from 1967 to the present. the replacement market; all shifts in fuel is at its highest level at trial standard

The remainder of shipments comes type market share are assumed to occur level three although it is about 15%

from new housing construction. We in new construction. lower than the model forecast. Since we

took housing completions, including The Department determined fuel type only changed the shipment model in the

mobile home shipments, from census market share in new construction in three scenarios and our shipment

historic data and EIA forecasts. response to economic conditions. The forecast falls within the range of the

Currently, 96% of new homes generate three components contributing to the scenarios, we conclude the energy

a shipment of a water heater that is not type of water heater a consumer will savings and economic benefits to

shared and that is fired by one of the buy are: equipment (initial) cost, consumers are not sensitive to a 10%

four major fuel types. We assume this operating (fuel) expense, and household increase or decrease in new

percentage remains constant throughout income. The shipment model that we construction market share of electric or

the forecast period. used takes income and fuel price gas-fired water heaters. Therefore, we

The projected shipments for each fuel projections through 2030 from EIA. have continued to use the model results

type consist of the water heaters retired Equipment costs and unit energy in our analysis. We present the results

and replaced, plus the number of new consumption are those calculated in the for the sensitivity analysis in Chapter

homes multiplied by the new-home Engineering and LCC analyses. Each of 11.3.3 of the TSD.

market saturation of the fuel type. Total these variables is related to consumer Ene Prices

modeled shipments agree with actual behavior by a set of cost elasticities from b. rgy Pr

shipment data from 1980-1997. a 1978 study by the ORNL (ORNL/CON- Because the AEO99 forecasts only to

In its comments, Battelle requested an 24 1978). For more details on shipments the year 2020 while other analyses

explanation for the sudden shifts in and fuel switching, see Chapter 11.3 in related to appliance energy efficiency

shipments among fuel types in the the TSD. are forecast to 2030, we extrapolated

analysis. (Battelle, No. 83 at 7). Water heater market shares in new energy price data to 2030 using a

Although there may be shifts in construction by fuel type in 1992 were: method similar to the one that EIA uses

shipments among fuel types, we expect 47% electric; 44% natural gas; 1% oil; to forecast fuel prices for FEMP. To

the total number of water heaters and 4% LPG. The shipments model determine the regional price forecasts

shipped to, and installed in, consumers' shows a drop in gas market shares in the for petroleum products, we used the

homes (shipments) to be nearly the 1990s that may not be supported by average growth rate for the world oil

same under different trial standard data. Data from the American Housing price in combination with refinery and

levels. When standards become Survey on space heating fuel market distribution markups from 2020.

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

Similarly, we derived natural gas prices uses the U.S. annual electricity well as emissions and energy co

from the average growth rate over the conversion factors from AEO99, Table this manner, the analysis captur

years 1997-2020 in combination with A4 (DOE/EIA 1998). The source total impact of the standards.

regional price margins from the year conversion factor applied to site natural

2020. We kept electricity prices constant gas consumption is the site energy G Manufacturer Impact Analys

at 2020 levels because we assume the divided by 0.9 (Natural Gas Council 1. Economic Impact on Manufac

transition to a restructured utility (NGC), 1998).

industry will be completed by then. In comments on the November 1998 The economic impact of the s

~3.~ Comments analysis, AGA claimed the gas source- on manufacturers is a criterion 

to-site conversion should be 90%, but must be considered under EPCA

LaClede stated the spreadsheet only the spreadsheet for the July workshop amended. Section 325(o)(2)(B)(i

allows the EIA price, heat rate, used 78% in 2003 and 81% in 2030. U.S.C. 6295(o)(2)(B)(i). The Proc

emissions, and economic forecasts. (AGA, No. 68 at 4). We have corrected provides guidance on how to as

(LaClede, No. 69 at 4). EMPA stated this error in the baseline case of the NES these potential impacts on DOE's analyses appear to be biased spreadsheet and the conversion is now manufacturers. 10 CFR 430, sub

toward EIA's high economic scenario. 90%. However, for the natural gas appendix A 10. First, the Depar

(EMPA, No. 88 at 2). The EIA high and savings from the trial standard levels we will utilize an annual cash flow

low economic forecasts bound the GRI use a marginal site to source gas approach in determining the

and AGA forecasts, with one exception. conversion factor from NEMS-BRS quantitative impacts on manufa

From 2016-2020, the EIA low growth model (see Section m1.I of this notice) This includes a short-term asses

scenario forecasts fuel prices that are that is approximately 91%. See Chapter based on the cost and capital

higher than the GRI forecast. See 12 of the TSD. requirements during the period 

Appendix E-4 of the TSD for the results NGC stated that in the case of natural the announcement of a regulatio

of alternate energy price forecasts. The gas, approximately 10% of the total the time when the regulation co

spreadsheets can produce output based energy is lost in the journey from the effect. We will examine critial on any of the four economic scenarios. wellhead to the burner tip. NGC variables affecting manufacturer

We based our decision on the reference compared this loss to losses of 73% for as i ndustry NV, cash flows by 

case in the AEO99 energy price electricity generation and distribution. Itas m dusty NP, cash flows y 

forecasts. This is the middle range of the claims a total energy efficiency analysis changes in ru re a icom 

energy price forecast and there is no will show gas-fired water heaters to be changes product price as itfe

bias toward the high economic scenario. more efficient and cost effective than fuel type of water heaters shippe

AGA commented that the national their electric counterparts. (NGC, No. 59other varables as appropriate. S

energy analysis spreadsheet does not at 1). the Department will analyze and 

permit alternative inputs for electricity The Department has always believed the impacts on different types of

generation efficiency. (AGA, No. 68 at that, in evaluating the impacts of manufacturers, with particular a

4). The NES spreadsheet models include appliance standards, one must consider to impacts on small manufacture

a clearly defined column of conversion the full range of impacts, including Third, the Department will cons

factors, one for each year of the consumer and national impacts. In the impact of standards on domestic

projection. DOE and stakeholders can analysis of consumer impacts, the manufacturer employment,

examine the effects of alternative Department considers the energy manufacturing capacity, plant cl

assumptions by substituting different directly consumed by the product at the and loss of capital investment. F

values in this column. point of use. The measures of energy the Department will consider the

The model calculates national energy efficiency and energy use are, for cumulative impacts of other DO

consumption at the site (i.e., electricity example, all based on the energy other Federal agencies' regulatio

in kWh, natural gas, LPG, and oil in consumed at the point of use and these manufacturers.

MMBtu, consumed in the household). are the measures of energy use that are 2. Product Specific Based on this site energy consumption, used in the consumer analyses, e.g., LCC

DOE applied site-to-source conversion in Section II.E of this notice. See The manufacturing impact ana

factors to calculate the primary energy Section 321(4) of EPCA, as amended, 42 (MIA) estimates the financial im

consumed. The conversion factors are U.S.C. 6291(4), which defines energy standards on manufacturers, as w

different for natural gas and electricity use in this manner. This, DOE believes, the impacts on competition,

and account for losses, such as losses in provides useful measures to consumers employment, and manufacturing

generation, transmission, and since it can be directly related to capacity. Table 8 lists the major

distribution of electricity, or information readily available, i.e., utility assumptions that DOE used in th

distribution losses for natural gas. This bills. In examining the impacts of heater MIA. We discuss each of 

analysis assumes that the source standards on the nation, however, the assumptions briefly in this sectio

conversion factor changes over time, Department considers the total energy more details on the MIA, please 

and applies annual values. The model consumed over the entire fuel cycle as Chapter 13 in the TSD.

TABLE 8.-ASSUMPTIONS USED IN THE MANUFACTURING IMPACT ANALYSIS (MIA)

Assumptions in the manufacturer impact analysis

Description Assumption

Manufacturer Costs and Investments ...................................................... GAMA & consultants' estimates.

Financial Information ................................................................................ SEC-10K Reports, Moody's Company Data Reports, Sta

Poor's Stock Reports, and Robert Morris Associates Report

Shipments ..................................................................................... From the shipments forecast.

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25070 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

TABLE 8.-ASSUMPTIONS USED IN THE MANUFACTURING IMPACT ANALYSIS (MIA)-Continued

Assumptions in the manufacturer impact analysis

Description Assumption

Business Scenarios .................................................................................. 1 Full recovery of investment,

2. Loss of all investment,

3. Recovery of 75% of investment.

Other Federal Regulatory Actions ............................................................ Phase out of HCFC-141b on January 1, 2003 and the CPSC initiative

to prevent ignition of flammable vapors on gas-fired water heaters.

Q ualitative Im pacts ................................................................................... From interviews.

We conducted the MIA in three continuing explicitly for several years specific financial information-SECphases. Phase one consisted of the after implementation. DOE obtained 10K Reports, Moody's Company Data

preparation of an industry financial information, also required as Reports, Standard & Poor's Stock

characterization as well as individual an input to GRIM, from publicly Reports, and Robert Morris Associates

meetings with manufacturers to identify available data and aggregated values of Reports-for major water heater

issues facing the water heater industry. confidentially submitted manufacturer manufacturers.

Phase two focused on-the larger information. Discounted annual cash 4. Manufacturer Subgroup Analysis

industry. In this phase, DOE used the flows from the period before

Government Regulatory Impact Model implementation of standards to some Using industry "average" cost values

(GRIM) to perform an industry cash flow future point in time provide the is not adequate for assessing the

analysis. Phase three entailed measure of industry net present values. variation in impacts among subgroups

documenting additional impacts on Given the relatively small number of of manufacturers. Standards could more

competition, employment, and firms in the industry, the Department negatively affect smaller manufacturers,

manufacturing capacity based on created an industry cash flow analysis niche players, or manufacturers

comments during the manufacturer's using a combination of top-down and exhibiting a cost structure largely

interviews. Below, we describe the three bottom-up approaches. In order to different from industry averages. The

analytical tools used to accomplish facilitate individual manufacturer Department conducted detailed

these three phases: GRIM modeling, analyses, the Department prepared interviews with as many manufacturers

manufacturer subgroup analysis, and baseline scenarios for a "strawman" as possible to gain insight into the

interviews. manufacturer using publicly available potential impacts of standards. During

There are two other government financial information (top-down). these interviews, the Department

regulatory actions that water heater Manufacturers were able to modify solicited the information necessary to

manufacturers must incorporate into relevant parameters to meet their own evlow and t a

their manufacturing process by January situation (price, cost, financial, etc.) competitive, employment, and capacity

1, 2003, or sooner. First, the EPA phase (bottom-up). DOE aggregated the impacts. The Department also considered firm-specific cumulative

out of HCFC's will require an alternative modified inputs to the GRIM to develop burde requested participation

insulation blowing agent. Second, the an industry cash flow. DOE then used om both large and small

CPSC initiative to prevent ignition of this industry cash flow to determine the manufacturers, but only four of the five

flammable vapors on gas-fired water economic burden on manufacturers for nufcturers re

heaters will require design, energy efficiency standards as well as large manufacturers responded to

development, testing and production of other regulations currently facing the DOE's request for interviews, so

a radically new gas burner. We account industry.examination of the small manufacturers

for these two actions in the MIA as The Department received was not possible at the quantitative

cumulative effects along with energy manufacturing cost data for the various level carried out for the large

efficiency standards. design options for typically-sized gas- manufacturers.

. G I C F fired and electric water heaters from

3. GRIM: Cash Industry Flowmanufacturers; GAMA had compiled 5. Interview Process

A change in energy efficiency and reported these data. DOE The interview process played a key

standards affects manufacturers in three consultants provided manufacturer role in the MIA, because it provided an

distinct ways. More stringent standards costs for the various design options for opportunity for interested parties to

require additional investment, raise typically-sized oil-fired water heaters. privately express their views on

production costs, and affect revenue DOE used the initial GAMA data, important issues. A key characteristic of

through higher prices and, possibly, coupled with publicly available the interview process is that it allows

lower quantities sold. To quantify these financial information, to develop a DOE to consider confidential

changes, the Department performed an "strawman" industry cash flow. information in its decision making

industry cash flow analysis using the In preparing the industry cash flow process.

GRIM. The GRIM analysis uses a analysis, the Department used the same The Department developed a detailed

number of factors-annual expected shipment scenarios in the GRIM and the and focused questionnaire, using

revenues, manufacturer cost of sales, NES spreadsheets. The other GRIM information collected during the

selling and general administration costs, inputs are firm-level financial industry characterization process from

taxes, and capital expenditures related information that indicates the extent to industry and market publications,

to depreciation, new standards, and which individual firms may be industry trade organizations, company

maintenance-to arrive at a series of adversely impacted by new standards. financial reports, and product literature.

annual cash flows beginning before To obtain estimates for these inputs we The Department of Justice (DOJ)

implementation of standards and analyzed publicly available, firm- reviewed and commented on the

EE-RM-97-900 COMMENT 119A
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interview questionnaire. The interview not placed any confidential information -Installation concerns due to th

questionnaire solicited information on from the manufacturer interviews in the insulation.

the possible impacts of trial standard public record. However, DOE H. Other Fctors

levels on manufacturing costs, product considered all of the information

prices, and sales. The questionnaire collected by interviews in its decision This provision allows the Secr

solicited both qualitative and making process. Energy, in determining whether 

quantitative information. Evaluation of DOE collated the completed interview standard is economically justifie

the possible impacts on direct questionnaires and prepared a consider any other factors that th

employment, capital assets, and summary. Chapter 13.3.2 of the TSD Secretary deems to be relevant. S

industry competitiveness drew heavily discusses the major issues identified by 325(o)(2)(B)(i)(VI), 42 U.S.C.

on the information gathered during the the manufacturers during the interview 6295(o)(2)(B)(i)(VI). The Secretar

interviews. process. Also, Appendix H-1 of the TSD decided that no other factors nee

The questions on competitive impacts contains a copy of the manufacturer's considered in this rulemaking.

pertained to the assessment of the interview guide. UtilityAnalysis

likelihood of increases in market The manufacturer interviews allowed

concentration levels and other market a free exchange of information between The utility analysis estimates 

conditions that could lead to anti- DOE representatives and manufacturer effects of the reduced energy

competitive pricing behavior. The representatives, in a manner that does consumption due to improved

manufacturer interviews also gathered not occur in public meetings. From this appliance efficiency on the utilit

information that helped in assessing exchange, the Department gained much industry. Because electric utility

whether there may be asymmetrical cost more than quantitative data on the restructuring is well underway, 

increases to some manufacturers, financial impacts of the trial standard longer valid to assume a cost rec

whether any increased proportion of levels for each particular company. mechanism under public utility

fixed costs potentially increases During the interviews, DOE and regulation, which was the basis 

business risks, and whether there are manufacturers discussed rulemaking previous utility impact analyses.

any potential barriers to market entry issues such as: Therefore, this utility analysis co

(e.g., proprietary technologies). of a comparison between forecas

DOE conducted face-to-face -The requirements for a new blowing for a case comparable to the AEO

interviews with four of the five major agent, Reference Case and forecasts for 

water heater manufacturers in the -Design options that are particularly cases incorporating each of the w

winter and spring of 1999. During these costly or difficult to manufacture or heater trial standard levels.

interviews, the Department solicited the market, Table 9 lists the major assump

information necessary to evaluate cash -Marketing and distribution issues, DOE used in the water heater uti

flows and to assess competitive, -Impacts of developing and analysis. We discuss each of thes

employment, and capacity impacts. manufacturing gas-fired water heaters assumptions briefly in this sectio

DOE also discussed firm-specific that prevent ignition of flammable more details on the utility analys

cumulative regulatory burdens. DOE has vapors, and please see Chapter 14 in the TSD

TABLE 9.-ASSUMPTIONS USED IN THE UTILITY IMPACT ANALYSIS

Utility impact analysis assumptions

Description Assumption

E nergy Prices .................................................................................................................... A E0 99.

Energy Savings .................................................................................................................. From the NES spreadsheet as site energy sav

Interpolation of Scaling Factors ......................................................................................... Linear.

The Department uses a variant of produces a baseline forecast for the U.S. because it explicitly simulates th

EIA's widely recognized National energy economy through 2020. The impact on the industry, NEMS-B

Energy Modeling System-Building NEMS-BRS model used for this analysis provides an accurate estimate of

Research and Standards called NEMS- is based on the AEO99 version of NEMS marginal effects, which yield bet

BRS for the utility analysis, together with minor modifications. indicators of actual effects than

with some scaling and interpolation NEMS-BRS has several advantages estimates based on industry-wide

calculations.' EIA uses NEMS primarily that have led to its adoption as the average values. Marginal rates sh

for the purpose of preparing the Annual source for basic forecasting in the only the effects of standards. Ave

Energy Outlook. Using NEMS, EIA appliance energy efficiency analyses. rates show the effects of standard

NEMS-BRS relies on the AE099 well as what is happening in the 

'For more information on NEMS, please refer to assumptions, which are well-known and To analyze the effects of standa

the National Energy Modeling System: An accepted due to the exposure and we evaluate the trial standard lev

Overview 1998. DOE/EIA-0581 (98), February. scrutiny each AEO receives. In addition, entering the changes in electricit

1998. DOEIA approves use of the name NEMS to the comprehensiveness of NEMS-BRS LPG, and oil consumption values 

describe only an official version of the model

without any modification to code or data. Because permits the modeling of interactions the NEMS-BRS Residential Dem

our analysis entails some minor code modifications among the various energy supply and Module. We took the energy savi

and the model is run under various policy scenarios demand sectors and the economy as a input from the NES spreadsheet,

that are variations on DOEEIA assumptions the whole, so it produces a sophisticated applied it to the water heater end 

name NEMS-BRS refers to the model as used here.

BRS is DOE's Building Research and Standards picture of the effects of appliance and allocated it appropriately am

office. standards. Perhaps most importantly, census divisions. In the TSD, we 

EE-RM-97-900 COMMENT 119A
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results for several key industry level as required in Section Energy Modeling System used by DOE/

parameters, notably residential energy 325(o)(2)(B)(i)[VI), 42 U.S.C. EIA.

sales, generation, and installed capacity, 6295(o)(2)(B)(i)(VI). Specifically, DOE Table 10 lists the major assumptions

including the fuel mix that is used for calculates the reduction in carbon DOE used in the water heater

generation. See Chapter 14 of the TSD dioxide (CO2 , nitrous oxide (NOx) and environmental analysis. We discuss

for more details. sulfur dioxide (SO2 ) emissions with the each of these assumptions briefly in this

J. Environmental Analysis NEMS-BRS computer model, together section. For more details on the

The Department determines the with some external calculations. NEMS- environmental analysis, please see

environmental impacts of each standard BRS is a modification of the National Chapter 14 in the TSD.

TABLE 10.-ASSUMPTIONS USED IN THE ENVIRONMENTAL ANALYSIS

Environmental analysis assumptions

Description Assumption

E nergy Prices ................................................................................................................... A EO 99.

Energy Savings .................................................................................................................. From the NES spreadsheet as site energy savings.

Interpolation of Scaling Factors ......................................................................................... Linear

Household Emissions ........................................................................................................ CO2, NOx & SO2 estimated from general factors.

We analyze the environmental effects report household emissions savings the point of extraction to the point of

of proposed water heater energy- using a method similar to that described end-use. (LaClede, No. 47 at 2). All

efficiency standards using NEMS-BRS for NOx. See Appendix EA-1 in the losses from natural gas production are

plus some scaling and interpolation TSD for the methodology used to derive accounted for in NEMS-BRS. NES

calculations. Inputs to NEMS-BRS are emission factors for residential estimates are inputs to NEMS-BRS.

similar to those used for the AEO99 combustion. They affect the natural gas supply

reference case, except residential energy The NES spreadsheet provides the system and are therefore completely

usage for water heaters is reduced by the input of energy savings for NEMS-BRS, accounted for in the model. As

amount of energy (gas, oil, LPG, and which then produces the emissions reductions in end-use consumption

electricity) saved due to the water heater forecast. We calculate the net benefits of result in less natural gas generation, less

trial standard levels. the standard as the difference between gas is extracted from wellheads

emissions estimated by the reference resulting in less transportation losses

The environmental analysis considers case version of NEMS-BRS and the from point of extraction through

two pollutants, SO2 and NOx, and one emissions estimated with the trial water pipelines. emission, CO2. NEMS-BRS has an heater standard in place. See the NEMS-BRS accounts for total C 2

algorithm for estimating NOx emissions Environmental Assessment (EA) bound emissions, so the full fuel cycle of

from power generation. Since we use into the TSD for details. carbon is incorporated from both coal

the AEO99 version of NEMS, the May We received several comments from and natural gas production. However,

25, 1999 EPA rule (64 FR 28249) on stakeholders about the environmental since NOx and SO2 emissions are only

trading of NOx is fully incorporated in analysis in NEMS-BRS. SC commented treated in the power sector, emissions of our analysis. However, NEMS-BRS that the EIA treats electricity from these pollutants caused by mining and

estimates of NOx emissions are renewable sources the same as fossil- transporting fuel for power plants

incomplete because NEMS-BRS does fired generation. SC believes there is no ("upstream emissions") are ignored in

not estimate household emissions. benefit to "saving" hydroelectric, wind, NEMS-BRS. For electric end-uses, all

Household emissions result from the geothermal generation, or biomass Btus. energy losses associated with

combustion of fossil fuels, primarily (SC, No. 42 at 3). However, DOE transmission and distribution from

natural gas, within individual homes. believes there are benefits from end-use electric generators to residential

Because households that use natural electricity savings. Usually end-use appliances are included. Appendix EAgas, fuel oil, or LPG contribute to NOx savings result in differences in fossil 2 was included in the TSD to quantify

emissions, DOE's analysis includes a fuel generation and not the fuels listed the relative contribution of these

separate household NOx emissions by SC because fossil fuels tend to be upstream emissions to those reported in

estimation, based on simple emissions displaced first. The emissions NEMS-BRS. DOE does not include the

factors derived from the general reductions reported in this rulemaking estimates of upstream coal mining

literature. NEMS-BRS tracks CO 2 are the net result of changes in the mix emissions in its emissions reduction

emissions based on the total of fuels of electricity generating fuels used. estimates.

consumed. NEMS-BRS also produces Changes in equipment and any VP commented DOE should use

comprehensive estimates of the benefits construction program adjustments that marginal electric generating plant

of the trial standard levels, so no result from proposed standards are also emission rates in the analysis to be more

additional analysis is necessary. accounted for. For example, DOE will accurate and consistent with the energy

Because SO 2 emissions from power only record CO2 emissions savings to costs. (VP, No. 45 at 3). Reported

plants are capped by clean air the extent that electricity generators emissions are calculated from

legislation, physical emissions of this burn less fuels emitting CO2. marginally displaced electric generation

pollutant from electricity generation LaClede commented that DOE's as simulated in NEMS-BRS.

will be only minimally affected by emissions models appear to severely

possible water heater standards. underestimate electric losses fromK Net National Employment

Therefore, we do not consider power extraction to generation, whereas The Process Rule includes national

plant S02 emissions here, although we natural gas losses are accounted for from employment impacts among the factors

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

DOE considers in selecting a proposed this same economic activity. BLS data appropriate interpretation and u

standard; 10 CFR 430 subpart C, indicates that expenditures in the results of this analysis.

appendix A(4)(d)(7)(vi). The Department electric sector generally create fewer

estimates the impacts of standards on jobs (both directly and indirectly) than IV. Analytical Results

employment for appliance expenditures in other sectors of the A. Trial Standard Levels

manufacturers, relevant service economy. There are many reasons for

industries, energy suppliers, and the these differences, including the capital- Based on the combination of d

economy in general. We estimate two intensity of the utility sector and wage options that represent the most e

employment impacts: total and direct differences. Based on the BLS data efficient level and the results of 

impacts. Total impacts-or net national alone, we believe net national LCC, MIA and NES analyses, we

employment impacts-are impacts on employment will increase due to shifts selected the following trial stand

the national economy, including the in economic activity resulting from the levels (see Table 12). In selecting 

manufacturing sector being regulated. water heater standards. standard levels, we followed the

Direct employment impacts would In developing this proposed rule, the guidance set forth in the Process 

result if standards led to a change in the Department attempted a more precise 10 CFR 430, Subpart C, Appendi

number of employees at manufacturing analysis of national employment 5(c)(3), to identify and select can

plants and related supply and service impacts using an input/output model of standard levels at the lowest LCC

firms. The MIA only discusses the direct the U.S. economy. The model three year or less payback period

employment impacts. characterizes the interconnections the most energy efficient combin

We define net national employment among 35 economic sectors using the design options.

impacts from water heater standards as data from the Bureau of Labor Statistics. We have established four trial

eneral economy. We exlect th e Since the electric utility sector is more standard levels. Each level is ma

proposed energy efficiency standards for capital-intensive and less labor- of a combination of design optio

water heaters to save consumers money, intensive than other sectors (see Bureau each of the three fuel classes (ele

although these savings will be partially of Economic Analysis, Regional gas and oil). Several of the trial s

offset by increased costs for water Multipliers: A User Handbook for the levels have the same efficiency w

heaters. The resulting net savings are Regional Input-Output Modeling System particular fuel type (i.e., gas-fired 

expected to be redirected to other forms (RIMS II), Washington, DC, U.S. standard level one and three hav

of economic activity. We expect these Department of Commerce, 1992), a shift same efficiency, but the electric 

shifts in spending and economic activity in spending away from energy bills into fired efficiencies are different). T

to affect the demand for labor, but there other sectors would be expected to allows us to evaluate different d

is no generally accepted method for increase overall employment. For more option combinations of fuel clas

estimating these effects. details on the net national employment subsequent analysis, permitting 

One method to assess the possible analysis, please see Chapter 15 in the make an informed decision on th

effects on the demand for labor of such TSD. This analysis also concluded that merits of different trial standard 

shifts in economic activity is to compare the shifts in sectoral expenditures likely We repeated some energy efficie

sectoral employment statistics to result from the proposed ballast effective design options for elect

developed by the Labor Department's standard would likely increase the net gas-fired water heaters in the sel

Bureau of Labor Statistics (BLS). The national demand for labor. trial standard levels to reduce th

BLS regularly publishes its estimates of Because this is a new analysis for an potential for fuel switching betw

the number of jobs per million dollars energy conservation standard these fuels. Table 11 presents the

of economic activity in different sectors rulemaking, we are requesting public baseline and trial standard levels 

of the economy, as well as the jobs comments on the validity of the associated design options for eac

created elsewhere in the economy by analytical methods used and the class of water heater.

TABLE 1 1.-TRIAL STANDARD LEVELS FOR WATER HEATERS WITH HFC-245FA BLOWING AGENT

Trialevel Design options Energ

Basecase ......... Electric: Baseline ....................................................................................................................... .93- .0

Gas: Baseline .......... .............................. ..................................... .62-.0

Oil: Baseline ........................................ .................................................................................. .59-.0 

1 ...................... Electric: Heat Traps + Tank Bottom Insulation .................................................................................................... .95- .

Gas: Heat Traps + Flue Baffles (78% RE) + 2 Inch Insulation ........................................................................... 67-.00

Oil: H Heateat TrapsOil: Traps Traps.60-.0019V .....................................................................................................................................................

2 ...................... Electric: Heat Traps + Tank Bottom Insulation + 2 Inch Insulation ................................................ 96-.00

Gas: Heat Traps + Flue Baffles (78% RE) + 2.5 Inch Insulation ........................................................................ .68-.0

Oil: Heat Traps.VOil: Traps ..................................................................................................................................................... .60-.00

3 ...................... Electric: Heat Traps + Tank Bottom Insulation + 2.5 Inch Insulation .................................................................. .97-.0

Gas: Heat Traps + Flue Baffles (78% RE) + 2 Inch Insulation ........................................................................... .67-.0

O il: B aseline ......................................................................................................................................... .59-.0

4 ...................... Electric: Heat Traps + 3 Inch Insulation + Plastic Tank ....................................................................... .98-.0

Gas: Heat Traps + Flue Baffles (80% RE) + 3 Inch Insulation + Side Arm Heater +Plastic Tank + IID ............ .79-.0

Oil: Heat Traps + 3 Inch Insulation + Interrupted Ignition + Increased Heat Exchanger Area (82% RE) ......... .67-.0

* V is the Rated Storage Volume, which equals the water storage capacity of a water heater, in gallons, as specified by the manufactu

EE-RM-97-900 COMMENT 119A
25074 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

Based on Honeywell's September 13, Water heater energy conservation LCC savings for trial standard levels

1999, public announcement that it will standards vary as a function of the water one, two and three are positive for gasproduce HFC-245fa, the proposed heater volume. Section 325(e) of EPCA fired and electric water heaters with the

standard levels are based on insulation as amended, 42 U.S.C. 6295(e). DOE HFC-245fa blowing agent. Only trial

blown with HFC-245fa. We considered defines this volume as the rated volume standard level three is not negative for

insulation thicknesses of 2 inches, 2.5 based on manufacturers' labeling. See oil-fired water heaters, and it is the

inches, and 3 inches. Although we do 10 CFR 430, subpart B, appendix E. For baseline. None of the other trial

not report the results of the water blown this rulemaking, DOE verified that these standard levels has positive average LCC

insulation analyses here, we completed volumetric coefficients were consistent savings for oil-fired water heaters

a full analysis using water blown foam for the increased levels of efficiency because energy savings are small

for each trial standard level. We chose under consideration in the analysis. compared to the increase in consumer

HFC-245fa over water blown insulation 1. Economic Impacts on Consumers price.

because of 0.7 to 1.7 quads more energy a. Life-Cycle-Cost Where LCC savings are positive for

savings for trial standard levels one to To evaluate the economic impact on electric and gas-fired water heaters, the

four. We request comments on the use consumers, we conducted a LCC percent of households benefitting ranges

of water blown insulation since DOE analysis for each of the fuel types and from 74-91% for the trial standard

has analyzed both options. Results from trial standard levels including levels analyzed. For oil-fired water

the water blown insulation analyses are estimating the percent of the population heaters, the maximum of households

found in the TSD. Chapter 9.7 in the that benefits at each trial standard level. benefitting is 25% at trial standard level

TSD has tables for HFC-245fa and Table 12 shows the average LCC savings two. However, even at trial standard

water-blown insulation and the and percent of households benefitting level four, 20-31% of households with

associated design options for each fuel for each of the trial standard levels for electric or gas-fired water heaters will

class of water heater. each of the fuel classes. The average benefit.

TABLE 12.-LIFE-CYCLE-COST SAVINGS AND PERCENT BENEFITTING

[HFC-245fa Blown Insulation]

Trial Percent Life-cycle cost standard Design options benefitinvgs level benefitting savings

1 .................. Electric: Heat Traps + Tank Bottom Insulation .............................................................................. 91 32

Gas Heat Traps + Flue Baffles (78% RE) + 2 Inch Insulation ...................................................... 87 43

O il: H eat T raps ............................................................................................................................... 25 - 15

2 .................. Electric: Heat Traps + Tank Bottom Insulation + 2 Inch Insulation ............................................... 79 36

Gas: Heat Traps + Flue Baffles (78% RE) + 2.5 Inch Insulation .................................................. 79 34

O il: H eat T raps .............................................................................................................................. 25 -1 5

3 .................. Electric: Heat Traps + Tank Bottom Insulation + 2.5 Inch Insulation ............................................ 74 40

Gas: Heat Traps + Flue Baffles (78% RE) + 2 Inch Insulation ..................................................... 87 43

O il: B aseline ................................................................................................................................... N A 0

4 .................. Electric: Heat Traps + 3 Inch Insulation + Plastic Tank .............................................................. 31 -55

Gas: Heat Traps + Flue Baffles (80% RE) + 3 Inch Insulation + Side Arm Heater + Plastic 20 -214

Tank + IID.

Oil: Heat Traps + 3 Inch Insulation + Interrupted Ignition + Increased Heat Exchanger Area 0 -459

(82% RE).

Another LCC analysis we conducted change in LCC and by calculating the households, two consumer subgroups of

is the Consumer Subgroup analysis. fraction of households that would interest identified by DOE and

This analysis examines the economic benefit. We analyzed the potential effect supported by stakeholders. We present

impacts on different groups of of standards for households with low the results of the analysis in Table 13. consumers by estimating the average income levels and senior-only

TABLE 13.-CONSUMER SUBGROUP LCC SAVINGS AND PERCENT OF HOUSEHOLDS BENEFITTING

Sample households benefitting (%) Average LCC Savings (S) Trial std levels

Total Senior-only Low income Total Senior-only Low income

Electric Water Heaters, HFC-245fa blown insulation

1 ........................................ 91 94 92 32 34 29

2 ................ ........................ 79 83 80 36 48 43

3 ........................................ 74 77 76 40 53 48

4 ............................................................... 31 34 28 - 55 - 46 - 66

Gas-fired Water Heaters, HFC-245fa blown Insulation

1 ........................................ 87 90 91 43 42 46

2 ........................................ 79 80 82 34 34 38

3 ................. .............. 87 90 91 43 42 46

4 ............................................................... 20 20 19 -214 -193 -206

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

TABLE 13.-CONSUMER SUBGROUP LCC SAVINGS AND PERCENT OF HOUSEHOLDS BENEFITTING-Continue

Trial std levels

Total Senior-only Low income Total Senior-only Low 

Oil-Fired Water Heaters, HFC-245fa blown Insulation

1 ............................................................... 25 20 25 - 15 - 11 

2 ............................................................... 25 20 25 - 15 - 11 

3 .............................................. 0 0 0 0 0 

4 ............................................................... 0 0 0 -459 -512 

The two consumer subgroups show households with oil-fired water heaters would expect the distribution of 

the same trend in average LCC savings show 25% or less of households impacts for the elderly to be sim

and percent of sample households benefitting from any of the trial standard the general population.

benefitting as the total sample of levels.

households. In the case of electric water We have noted the LCC savings for b. Median Payback

heaters, both senior-only and low the senior-only subgroup are similar to f th LCC analysis is th

income consumer groups appear to those of the general population. Since A park analysise Tanysis as 

benefit more from trial standard levels the elderly use 30 percent less hot waterpayback anasis. The LC payba

two through four than the total sample on average than the general population, anaysi considers all of the desig

of households. In households with gas- one would expect their costs to be lower option combinations for each fue

fired water heaters, low income and as a result, the LCC effect to be and calculates a payback for each 

households have greater savings of different. However, the standby losses of household. We report the median

average LCC for trial standard levels one water heaters, which are not affected by payback from the distribution of

through three. None of the oil-fired hot water usage, are the same for the paybacks for each trial standard 

water heater trial standard levels show elderly and the general population. Table 14. The median payback is 

positive LCC savings, but level three Therefore, since most of the design median number of years required 

shows zero LCC savings because it is the options considered affect standby losses recover, in energy savings, the in

same as the baseline. Low income and not water heating efficiency, we costs of the efficiency improveme

TABLE 14.-MEDIAN AND TEST PROCEDURE PAYBACK (YEARS)

[HFC-245fa Blown Insulation]

Trial T

standard Design options aian pro

level payback pay

1 .................. Electric: Heat Traps + Tank Botton Insulation .................................................................. 2.5 

Gas: Heat Traps + Flue Baffles (78% RE) + 2 Inch Insulation ..................................................... 2.9 

O il: H eat T raps ............................................................................................................................... 8 .2 

2 .................. Electric: Heat Traps + Tank Bottom Insulation + 2 Inch Insulation ............................................... 4.8 

Gas: Heat Traps + Flue Baffles (78% RE) + 2.5 Inch Insulation .................................................. 3.9 

O il: H eat T raps ....... ....................................................................................................................... 8.2 

3 .................. Electric: Heat Traps + Tank Bottom Insulation + 2.5 Inch Insulation .......................................... 5.4 

Gas: Heat Traps + Flue Baffles (78% RE) + 2 Inch Insulation .................................................... 2.9 

O il: B aseline ................................................................................................................................... 0.0

4 ................ Electric: Heat Traps + 3 Inch Insulation + Plastic Tank ..................................... .............. 11.7 

Gas: Heat Traps + Flue Baffles (80% RE) + 3 Inch Insulation + Side Arm Heater + Plastic 11.3 

Tank + IID.

Oil: Heat Traps + 3 Inch Insulation + Interrupted Ignition + Increased Heat Exchanger Area 24.6 

(82% RE).

1Electric-50 Gallon: Gas-40 Gallon; Oil-32 Gallon.

c. Test Procedure Payback whether a standard is economically 2. Economic Impact on Manufact

justified. Section 325(o)(2)(B)(iii), 42 The Act states that if the Department jui. Se6295io(2 ( ((B(iii 4 We performed a MIA to determ

determines that the payback period is impact of standards on manufactu

less than three years as calculated under Only electric water heaters at trial The complete analysis is in Chap

the water heater procedure, there shall standard level one satisfy the rebuttable of the TSD. In general, manufactu

be a rebuttable presumption that such presumption. Electric water heaters stated they would be able to

trial standard level is economically with heat traps and insulated tank manufacture any of the design op

justified. In Table 14, we list the bottoms have a 1.9 year payback with heat traps, thicker insulation

payback periods by fuel type (product calculated under the test procedure. bottom insulation on electric and

class) and trial standard levels for HFC- There are no trial standard levels for improved flue baffles on gas-fired 

245fa blown insulation. The Act further gas-fired or oil-fired water heaters that heaters. None of the manufacturer

states that if this three year payback is have a payback of three years or less. indicated they would leave the in

not met, this determination shall not be or go out of business as a result o

taken into consideration in the deciding standard levels that would requir

EE-RM-97-900 COMMENT 119A
25076 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

energy factors below plastic tanks or The cumulative scenario includes the terms of manufacturer's pricing.

side-arm heaters (i.e., trial standard investments required for energy Manufacturer prices are expected to

levels one through three). efficiency improvement, changes to a increase from the current average cost to

We conducted detailed interviews new blowing agent and the development the dealer/distributor of $156 to a range

with four of the five major water heater and manufacture of a gas-fired water of $188-299 for trial standard levels one

manufacturers. The five together supply heater resistant to ignition of flammable through four. Based on comments from

more than 99% of the U.S. residential vapors. Additionally, we examined the the interviews, we assume

water heater market. The interviews ability of manufacturers to recover the manufacturers will raise prices enough

provided valuable information used to investments required for each of the to recover the costs of materials, labor

evaluate the impacts of an amended scenarios and trial standard levels. and transportation and 75% of their

standard on manufacturers' cash flows, The potential value of the water investment. If manufacturers increased

manufacturing capacities and heater industry, represented by the water heater distributor prices slightly

employment levels. INPV, ($322 million in 1998 dollars) is more, from $0.13 for trial standard level

We analyzed the water heater directly related to the manufacturers' one to $2.00 for trial standard level four,

industry using two business scenarios. price to the dealer/distributor. Since all they would recover all of their

The standards scenario represents the five of the major manufacturers produce investment. Table 15 shows the results

investments needed to meet the energy both gas-fired and electric water heaters, of the cash flow analysis with these

efficiency level of a trial standard level. the industry is highly competitive in assumptions.

TABLE 15.-MANUFACTURER IMPACT ANALYSIS

TaStl1 INPV | Change in INPV Investment

Trial Std level^ - IN required i ($ millions)ions) ll ($ millions)

Standard Scenario, HFC-5fa blown Insulation

Base Case ........ ................................................................................. 322 0 0 0

1 ................................... .................. 314 -3 -8 32

2 ..................................................... 307 -5 -15 61

3 .......................... ........................... 307 -5 -15 61

4 ........... ............................................................................... 265 -18 -57 229

Cumulative Scenario, HFC-245fa blown Insulation

Base Case ..... ..................................................................................... 322 0 0 0

1 ..................................................................... 287 -11 - 35 142

2 ..................................................... 280 -13 -42 172

3 3.279 ............................................................................................................... ******************************************g_,- 279 - 13 3 -4 -43 3 172

4 ............................................................................................................... 237 - 2 7 - 8 5 340

From Table 15, we note energy regulations are potentially large given same time, to avoid redundant efforts

efficiency standards could result in the current after tax profitability of the and limit costs.

losses of industry net present value from water heater industry, estimated to be We also used the manufacturers'

about $8 million to 57 million (3-18%), $41 million (1998) on revenues of $1.3 interviews to assess employment

while requiring investments of $32 billion. impacts due to an amended energy

million to 229 million. However, even if Based on DOE's interviews, efficiency standard. Manufacturers

DOE did not revise energy efficiency manufacturers expect little impact on expected the impact of new blowing

standards, other Federal regulatory manufacturing capacity and expect to agents and flammable vapor resistant

actions that will take effect on or before meet future demand as long as standard designs on labor to be minimal, neither

January 1, 2003, will result in a $27 levels based on side-arm gas-fired water increasing nor reducing employment

million loss (8%) in industry NPV. This heaters and plastic tank electric units levels by more than a few employees.

loss exceeds any of DOE's trial standard are not mandated. Currently, the U.S. Unless efficiency levels requiring the

levels except level four. As requested by industry has far more manufacturing adoption of side arm heaters or plastic

GRI andthan SC and as required by the domestic market can tanks are mandated, manufacturers do

Process Rule, 10 CFR part 430, subpart absorb. Manufacturers estimated the not anticipate significant changes in

C, appendix A 10(g)(1), DOE considered industry is operating at 60-80% of total employment levels or training

the cumulative impacts of other Feder capacity. Due to the phase-out of HCFC- requirements. Additionally, we believe

regulatory actions on the trial standard leregula y actions on the thase out of 141b insulation blowing agent and a market growth of 2.5% per year for new

H

l eCFC, incudin the CPSC iiatve to requirement for a gas-fired water heater homes and modest productivity gains

prevent the ignition of flammable resistant to ignition of flammable ensure current employment levels for

vapors on gas-fired water heaters. (GR, vapors, it is likely that nearly every the foreseeable future. In our analysis,

No. 11 at 1 and SC, No. 42 at 2). These product line would have to be yearly water heater shipments range

cumulative losses range from $35 redesigned, retested and re-certified. from 9.7 million in 1999 to 19.5 in 2030.

million to $85 million. The investments Several manufacturers indicated a Furthermore, a replacement market that

to prevent ignition of flammable vapors preference to retool for new blowing increases by about 1/10th of the new

and for new blowing agents are $111 agents, energy-efficiency standards and home market each year ensures future

million. The investments for cumulative flammable vapor-resistant designs at the demand.

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

B. Significance of Energy Savings savings to be savings that were not energy consumption of water he

The Act prohibits the Department "genuinely trivial." The energy savings complying with the trial standar

from adopting a standard for a product for all of the trial standard levels DOE calculates these energy savi

if that standard would not result in considered in this rulemaking are non- the source using the NEMS-BRS

"significant" energy savings. Section trivial and therefore we consider them distribution and generation losse

325(o)(3)(B), 42 U.S.C. 6295(o)(3)(B). "significant" within the meaning of addresses stakeholders' commen

While the term "significant" is not Section 325 of the Act. source-based analysis is a more a

defined in the Act, the U.S. Court of National Energy Savings. To estimate measurement of the total energy 

Appeals, in Natural Resources Defense the energy savings through the year used. (Clearwater, No. 30 at 1 an

Council v. Herrington, 768 F.2d 1355, 2030 due to amended standards, we No. 59 at 1). Table 16 shows thes

1373 (D.C. Cir. 1985), ruled that compared the energy consumption of results for water heaters with HF

Congress intended "significant" energy water heaters in the 2003 baseline to the 245fa blown insulation.

TABLE 16.-SOURCE ENERGY SAVINGS WITH HFC-245FA BLOWN INSULATION (QUADS)

Trial Std 1 Trial Std 2 Trial Std 3 Tria

Total Q uads Saved .......................................................................................... 3.4 4.3 4.8 

Total Exajoules Saved ..................................................................................... 3.6 4.5 5.0 

All of the trial standard levels changes improve energy and water most of the installation situation

considered in this rulemaking have heating performance and may increase encountered. (ACEEE, No. 93 at 

significant energy savings, ranging from the amount of water available in one stated the industry can find the

3.4 quads (3.6 Exajoules (EJ)) to 13.1 hour, i.e., the first hour rating. additional space for insulation by

quads (13.8 EJ), depending on the trial However, to reduce heat losses, it is reducing the storage tank diamet

standard level. necessary to use thicker insulation. The will only reduce tank volume by 

National Net Present Value. trial standard levels contemplate thicker gallons, according to OOE. (OOE

Additionally, we analyzed the economic insulation of 2.5-3 inches versus the 1- at 5). In another approach, Battel

impact on the nation to year 2030. This 2 inches in common use today. This suggested manufacturers could i

is a NPV analysis using the AEO99 extra thickness of insulation will make the firing rate, set point, and heat

reference energy prices. Table 17 lists water heaters larger and more difficult transfer rate of gas-fired water he

the NPV for HFC-245fa blown to squeeze into tight spaces when they could reduce tank size witho

insulation. The NPV considers the replacing a water heater. DOE does not sacrificing any first-hour rating.

combined discounted energy savings believe any model of water heater will (Battelle, No. 66 at 8 and No. 83 a

minus increased consumer costs of the become unavailable as a result of thicker We estimate external dimensions 

four fuel types of equipment at a insulation. In those applications where electric water heaters could be

particular trial standard level. We base thicker insulation could cause maintained at approximately cur

this calculation on all expenses and problems, we believe possible solutions sizes, if tank volume were reduce

savings occurring between 2003 and include smaller tanks with larger about 20%, coupled with a 1.35 k

2030. heating elements, taller tanks, more increase in the heating rate, from 

TABLE 17.-NATIONAL NET PRESENT effective insulation, e.g., space blanket, 5.85 kW. This would restore the 

BLE 1 IONAL NET RESENT or perhaps instantaneous water heaters. hour rating and a 6 kW heating e

VALUE Instantaneous water heaters generally as a common size, see Chapter 3.

--- NPV-HFC- have characteristics such as, initiating the TSD. We recognize the increa

Trial standard level 245fa water heating based on sensing water heating element wattage may ove

($ billions) flow, a higher heating rate and storage some existing electrical circuits. 

capacities less than two gallons. request comments on these sugge

1 ...................................... 2.3 However, a number of manufacturers and the extent that product utility 

2 ........................................ 1.5 and other stakeholders believe that be affected.

3........................................ 3.3 thicker insulation will reduce product Further, DOE requests engineer

...............................- .4... utility or adversely impact consumers. data or other information that wi

The national NPV is positive for trial (Bradford White, No. 74 at 2: GAMA, substantiate claims of reduced pr

standard levels one through three. In No. 71 at 4 and No. 91 at 1; CNG, No. utility and an explanation of the 

this analysis, a positive NPV means that 85 at 2; NEGA, No. 90 at 3; Rheem, No. impact that would be anticipated. 

the estimated energy savings are greater 95 at 1; SC, No. 84 at 2; and AGA, No. are particularly interested in com

than the increased costs due to 92 at 9). There may be replacement on the number of households tha

standards. Among the trial standard applications where manufacturers can be affected and whether these

levels analyzed, trial standard level only meet the demand for replacement households are in a particular

three has the highest NPV. water heaters with a slightly smaller geographic region or income strat

tank. DOE has investigated this with D Impact of Lessening of Compe

C. Lessening of Utility or Performance of water heater manufacturers and home Im ct of Lessening of Compe

Products builders and is aware that some The Act directs the Department 

None of the trial standard levels replacement applications may be unable consider any lessening of compet

reduces the performance of water to accommodate the tank size currently that is likely to result from standa

heaters. Generally, the trial standard used. further directs the Attorney Gene

levels reduce heat losses and improve ACEEE claimed manufacturers can determine the impact, if any, of

heat exchanger effectiveness. These make water heaters taller or wider to fit competition likely to result from 

EE-RM-97-900 COMMENT 119A
25078 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

standard and transmit such replied that "we would consider not on the standard level chosen, the

determination, not later than 60 days only evidence of the effect on cumulative emission reductions to 2030

after the publication of a proposed rule competition among water heater range from 48-219 Mt for carbon

to the Secretary, together with an manufacturers, but also information equivalent, 141-599 thousand metric

analysis of the nature and extent of such relating to the likely effect on tons (kt) for NOx, and - 6 to 54 kt for

impact. Section 325(o)(2)(B)(i)(V), 42 competition among energy suppliers." SO 2. The large reductions in CO 2 and

U.S.C. 6295(o)(2)(B)(i)(V). However, the DOJ added they would NOx at all standard levels are a positive

In order to assist the Attorney General focus on the effect of standards "on the benefit to the nation. We show

in making such a determination, the overall level of market competition, not cumulative emissions savings from

Department has provided the on individual fuel suppliers or on shifts 2003-2030 in Table 18.

Department of Justice (DOJ) with copies in consumer usage among alternate S a V cim i

of this notice and the TSD for review. fuels." EEI, SC and VP claimed m-house

At DOE's request, the DOJ reviewed the combustion also will produce carbon

manufacturer impact analysis interview E. Need of the Nation To Save Energy monoxide (CO), particulates, and

questionnaire to ensure that it would and Net National Employment volatile organic compounds (VOCs), yet

provide insight concerning any 1. Environmental Impacts they are not included in the

lessening of competition due to any environmental analysis. (EEI, No. 39 at

proposed trial standard levels. Enhanced energy efficiency improves 4 and No. 79 at 1; SC, No. 84 at 2; and

In response to a comment from the the Nation's energy security, strengthens VP, No. 45 at 3). Properly functioning

AGA, DOE requested the DOJ's view as the economy and reduces the appliances should not emit CO.

to whether the "lessening of environmental impacts of energy Additionally, particulates and

competition" language in Section production. The energy savings from hydrocarbon emissions from appliances

325(o)(2)(B)(i)(V), 42 U.S.C. water heater standards result in reduced are very, very small. Therefore, we

6295(o)(2)(B)(i)(V) applies to energy emissions of C02, SO2 and NOx and assumed CO and particulate emissions

suppliers. (AGA, No. 49 at 6). In its aids in addressing global climate change reductions resulting from proposed

letter dated June 25, 1999, the DOJ and reducing air pollution. Depending energy standards are negligible.

TABLE 18.-CUMULATIVE EMISSIONS REDUCTIONS THROUGH 2030

Emission Trial Std Trial Std Trial Std Trial Std level I level 2 level 3 level 4

Carbon (M t) ............................................................................................................ 48 74 83 219

NO x (kt) ................................................................................................................. 141 208 229 599

SO2 (kt) ....................................................... 4 <1 -6 54

"Results only include household SO2 emissions reductions because SO2 emissions from power plants are capped by clean air legislation. Thus, S02 emissions will only be negligibly affected by possible water heater standards.

2. Net National Employment the jobs being lost. The benefits from comments on what standard might be

In the Process Rule, DOE committed any potential employment gains would supported by the results. Below is a

to develop estimates of the employment be reduced if job quality and pay are short summary of the type of comments

impacts of proposed standards in the reduced. we received on our preliminary

economy in general. The results of the * The net benefits from potential analysis. We have considered these

Department's analysis are shown in employment changes are a result of the comments when selecting the proposed

Chapter 15 of the TSD. estimated net present value of benefits standard level. Many of the comments

While both this input/output model or losses likely to result from the suggest actions that are already a part of

and the direct use of BLS employment proposed standards, it may not be the process we use to select a standard.

data suggest the proposed water heater appropriate to separately identify and SC stated minimum efficiency levels

standards could increase the net consider any employment impacts should be set so that the majority of

demand for labor in the economy, the beyond the calculation of net present consumers benefit from the new

gains would most likely be very small value. standards. SC suggested if at least 85%

relative to total national employment. Taking into consideration these of the population benefitted, it would be

For several reasons, however, even these legitimate concerns regarding the unlikely that any particular subgroup of

modest benefits for national interpretation and use of the customers would suffer substantial loss

employment are in doubt: employment impacts analysis, the from the proposed standard. (SC, No. 42

* Unemployment is now at the lowest Department concludes only that the at 3). CNG and NEGA stated any

rate in 30 years. If unemployment proposed water heater standards are standard above trial standard level one

remains very low during the period likely to produce employment benefits (use EFs from July Workshop) is too

when the proposed standards are put that are sufficient to offset fully any costly for consumers and may affect

into effect, it is unlikely that the adverse impacts on employment in the safety. (CNG, No. 85 at 1 and NEGA, No.

standards could result in any net water heater or energy industries. 90 at 1). When we select a standard

increase in national employment levels. F. Conclusion level, we weigh the overall benefits and

* Neither the BLS data nor the input- burdens. We do not base our decision

output model used by DOE include the 1 Comments on Standard Levels on any particular fraction of the

quality or wage level of the jobs. One In order to inform interested population that benefits.

reason that the demand for labor stakeholders, we released our Several comments claimed DOE

increases in the model may be that the preliminary analysis results and should keep new standards fuel neutral

jobs expected to be created pay less than convened a workshop to receive (EEI, No. 79 at 2 and American Electric

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

Power, No. 87 at 1). The National Rural our revised analysis, the lowest LCC for technologically feasible level for o

Electric Cooperative Association a gas-fired water heater is a 78% flue fired water heaters. See Section II

(NRECA) claimed gas-fired and electric baffle with 2 inches of insulation and of this notice. All of the design op

water heaters should have the same 0.03 heat traps. To verify that we did not included in our analysis are

increase in energy factor using thicker overlook any economically justified trial technologically feasible since they 

insulation and heat traps. (NRECA, No. standard, we analyzed a gas-fired water commercially available.

2 at 2). EEI and American Electric Power heater with an 80% flue baffle and 2

wanted DOE to keep new standards fuel inches of insulation. This standard level As discussed n section IV A, w

neutral by raising energy factors for all resulted in a negative LCC savings, consider the impacts of standards 

fuel types. negative manufacturers' impact and each of four standards levels, beg

Other comments made specific negative NPV so we concluded it is not with the most efficient level, i.e.,

recommendations for gas-fired and economically justified. standard level four. We then cons

electric water heaters. PG&E claimed less efficient levels. Standard leve

DOE should set the new standards for 2. Proposed Standard three and two are combinations of

electric and gas-fired water heaters at Section 325(o)(2)(A), 42 U.S.C. different efficiency levels for the

the highest levels that can be achieved 6295(o)(2)(A), of the Act specifies that different classes. For gas-fired wa

with conventional technologies, e.g., any new or amended energy heaters, standard levels three and 

0.60 EF for gas-fired water heaters that conservation standard for any type (or are the same, though lower efficie

are common in southern California. class) of covered product shall be than that found in standard level 

(PG&E, No. 94 at 3). ACEEE claimed that designed to achieve the maximum For electric water heaters, no stan

according to DOE's July 1997 analysis, improvement in energy efficiency which levels are repeated and the efficien

the minimum LCC point is 0.91 EF for the Secretary determines is each lower standard level is lower 

a 50-gallon electric and 0.61 EF for a 40- technologically feasible and that found in higher standard leve

gallon gas-fired water heater when using economically justified. In determining Finally, for oil-fired water heaters

HFC-245fa blown insulation. whether a standard is economically standard levels two and one are th

Furthermore, ACEEE believes this is justified, the Secretary must determine same and level three is no change 

what DOE should propose as the new whether the benefits of the standard the current standard. By combinin

standard in the NOPR. (ACEEE, No. 93 exceed its burdens. Section efficiency levels in this wa the

at 9). Bradford White recommended that 325(o)(2)(B)(i), 42 U.S.C. efficiency levels in this way, the

electric and oil standards should remain 6295(o)(2)(B)(i). The amended standard Department is able to evaluate the

the same and gas-fired water heater must "result in significant conservation ipacts of different combinations 

standards should be raised by 0.02 EF. of energy." Sectionstanard levels to make an iform

(Bradford White, No. 89 at 5). 325(o)(2)(B)(iii)(3)(B), 42 U.S.C. decision on the merits of different

ACEEE claimed DOE should consider 6295(o)(B)(iii)(3)(B). The Secretary has efficiency combinations.

a gas-fired water heater with an 80% eliminated the maximum To aid the reader as we discuss 

flue baffle, 2 inches of insulation and technologically feasible levels for benefits or burdens of the trial lev

heat traps because it appears to be the electric and gas-fired water heaters, but have included a summary of the

minimum LCC. (ACEEE, No. 93 at 2). In we are analyzing the maximum analysis results in Table 19.

TABLE 19.-SUMMARY ANALYSIS RESULTS BASED ON HFC-245FA BLOWN INSULATION

Trial Std 1 Trial Std 2 Trial Std 3 Trial S

Total Q uads Saved .................................................................................. 3.4 4.3 4.8 

NPV ($Billion) .................................................................................. 2.2 1.5 3.4 

Emissions:

Carbon Equivalent (Mt) ........................................ ...... 48 74 83 

NOx (kt) ........ ............................................................................... 141 208 229 

S02 (kt) ........ ..................................................... 4 <1 -6 

Cumulative Change in INPV ($ Million) ........................................... -8 -15 -15 

Life Cycle Cost ($):

Electric ........ ................................................................................ 32 36 40 

Gas-Fired ......... ......................................................................... 43 34 43 

Oil-Fired ........................................................................................... -20 -20 0 

-Results only include household SO2 emissions reductions because SO2 emissions from power plants are capped by clean air leg

Thus, SO2 emissions will only be negligibly affected by possible water heater standards.

We first considered trial standard (with oil-fired water heaters). Next, we considered trial standa

level four, the most efficient level for Furthermore, the water heater industry level three. This trial standard leve

each of the three classes. Trial standard would lose 27% of its value and the saves about 4.8 quads of energy, a

level four saves about 13.1 quads of nation would have a loss in NPV of significant amount. The emissions

energy, a significant amount. The more than $17 billion. The Department reductions are significant: 83 Mt o

emissions reductions of 219 Mt of concludes the resulting energy savings carbon equivalent and 229 kt of NO

carbon equivalent, 599 kt of NOx, and and emission reductions at this level are There is a small increase in househ

54 kt of SO2 are significant. However, at outweighed by the negative economic emissions of SO2 (6 kt) due to a sli

this level, consumers experience impacts on the nation, consumers and increase in shipments of oil-fired w

negative LCC impacts. They would lose manufacturers. Consequently, the heaters. The national NPV of trial

$55 (with electric water heaters), $193 Department concludes trial standard standard level three is $3.4 billion 

(with gas-fired water heaters) and $459 level four is not economically justified. 2003-2030.

EE-RM-97-900 COMMENT 119A
25080 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

The economic benefits to consumers Additionally, low-income and senior- which was water heaters, the

are significant. The average LCC savings only consumer subgroups exhibit Department prepared an Environmental

for consumers with electric and gas- similar distributions of costs and Assessment (DOE/EA-0819) that was

fired water heaters are $40 and $43 savings. A similar small percentage of published within the Technical Support

respectively and there are no impacts on low-income or senior only consumers Document for that Proposed Rule. (DOE/

users of oil-fired water heaters. In trial are affected by higher costs. EE-0009, November 1993). The

standard level three, 87% of households The industry will lose about 5% ($15 environmental effects associated with

with gas-fired water heaters have LCC million) of its INPV due to energy various standard levels for water

savings, for an average savings of $57, efficiency standards. These losses are heaters, as well as the other seven

while 13% experience LCC losses, for more than balanced by NPV gains to the products, were found not to be

an average loss of $52. For households nation of $3.3 billion, or 220 times the significant, and a Finding of No

with electric water heaters, 74% of industry losses. Industry losses for trial Significant Impact (FONSI) was

households have LCC savings, for an standard level three due to all Federal published. (59 FR 15868, April 5, 1994).

average savings of $64, while 26% actions (CPSC, EPA and DOE) are 13% In conducting the analysis for this

experience LCC losses, for an average of its INPV, or $43 million. Even this Proposed Rule, the DOE evaluated

loss of $27. level of losses is offset by gains to the several design options suggested in

For electric water heaters, the analysis nation that are 77 times the industry comments to the screening document.

predicts that 26 percent of all losses. 2 Based on the manufacturer As a result, the energy savings estimates

consumers would experience no change interviews, DOE believes there will not and resulting environmental effects

or some net cost with more efficient be any plant closures or employee from revised energy efficiency standards

electric water heaters. However, we layoffs. for water heaters in this Proposed Rule

believe that there are costs or savings In determining the economic differ somewhat from those presented

near the point of zero change in LCC justification of trial standard level three, for water heaters in the 1994 Proposed

that consumers would be unable to the Department has weighed the Rule. Nevertheless, the environmental

distinguish in their yearly expenses. We benefits of energy savings, reduced effects expected from the energy

have chosen ±2 percent of average average consumer LCC, significant and efficiency standards considered for this

baseline LCC as the band of no positive NPV, and emissions reductions Proposed Rule fall within the ranges of

consumer impact. We believe this small and the burdens of a loss in environmental impacts from the revised

percentage, regardless of the actual total manufacturer net present value, and energy efficiency standards for water

LCC, is insignificant to the consumer consumer LCC increases for some heaters that DOE found in the 1994

because these LCC costs or savings are households. After carefully considering FONSI not to be significant.

spread over monthly utility bills for the the results of the analysis, DOE has B Review Under Executive Order 12866,

life of the water heater. By applying a determined the benefits of trial standard

2% band of average LCC, we can clearly level three outweigh its burdens and is gulatory Planning and Review"

show the significant net savings and net economically justified. The Department The Department has determined

costs associated with a trial standard also concludes trial standard level three today's regulatory action is a significant

level. This permits a more informed saves a significant amount of energy and regulatory action within the scope of

decision based on weighing the is technologically feasible.3 Therefore, Section 3(f)(1) of Executive Order

significant benefits and burdens in the Department today proposes to adopt 12866, "Regulatory Planning and

terms of consumer impact. The resulting the energy conservation standards for Review." (58 FR 51735, October 4,

ranges are shown in Figure 9.6.2a in the water heaters at trial standard level 1993). Therefore, this proposal requires

TSD. three. a regulatory analysis. Such an analysis

We will use ±2 percent of baseline presents major alternatives to the

LCC to indicate no impact, positively or V ro c edu ral Re v e w s proposed regulation that could achieve

negatively, on consumers. Therefore, A. Review Under the National substantially the same goal, as well as

only 4 percent of consumers in the case Environmental Policy Act a description of the cost and benefits

of electric water heaters or 6 percent of In issuing the March 4, 1994, (including potential net benefits) of the

consumers in the case of gas water Proposed Rule for energy efficiency proposed rule. Accordingly, the Office

heaters sustain any significant net costs standards for eight products, one of of Information and Regulatory Affairs

under the proposed standard level for (OIRA) reviewed today's action under

water heaters. Similarly, 35 percent of 2 As DOE has determined, the benefits of today's the Executive Order.

consumers in the case of electric water proposal outweigh the $15 million loss to the There were no substantive changes

heaters or 62 percent of consumers in industry. To review the support for this between the draft we submitted to OIRA

the case of gas water heaters have determination, see the TSD at Chapters 12.5 and and today's action. The draft and other

Table 12.1a. 13.3.3.5 and Table 13.8a, 13.3.4, and documents we submitted to OIRA for significant net savings. 13.3.5.d o we uments subm to itted IKA or

Two percent of average baseline LCC 3 The proposed standard is based on insulation review are a part of the rulemaking

equals $51 for electric water heaters. blown with HFC-245fa. We also analyzed the record and are available for public

Over the average life of 12 years for an impact of using water-blown insulation. We found review in the Department's Freedom of

electric water heater, this is less than the benefits of LCC savings, emission reductions, Information Reading Room, 1000

and NPV are lower, and manufacturers' losses are

$4.50 per year. For consumers with gas- higher using water blown insulation compared to Independence Avenue, SW,

fired water heaters, two percent of using HFC-245fa blown insulation. The energy Washington, DC 20585, between the

average baseline LCC is $30. Over the savings and water heater performance are also hours of 9:00 a.m. and 4:00 p.m., lower because water blown insulation is 42% less Monday through Friday, except Federal

average life of 9 years for a gas water effective than HFC-245fa blown insulation.

heater, this is less than $3.50 per year. If. based on comments on today's proposed rule, holidays, telephone (202) 586-3142.

We believe this is a small amount in DOE were to conclude that insulation with energy The following summary of the

terms of yearly expenditures and will conservation characteristics similar to HFC-245fa Regulatory Impact Analysis (RIA)

not adversely impact consumers' blown insulation will not be available at the focuses on the major alternatives

not adversely impact consabo umtwaterhsea effective date of the standard, DOE would use the nsidered in arriving at the proposed purchase decisions about water heaters, water blown insulation analysis as a basis for its considered in arriving at the proposed

or their financial positions. final decision. approach to improving the energy

EE-RM-97-900 COMMENT 119A
Federal Register / Vol. 65, No. 83/ Friday, April 28, 2000/ Proposed Rules 

efficiency of consumer products. The evaluate each alternative in terms of its * Product Labeling

reader is referred to the complete RIA, ability to achieve significant energy * Consumer Education

which is contained in the TSD, available savings at reasonable costs, and we * Prescriptive Standards

as indicated at the beginning of this compare it to the effectiveness of the * Financial Incentives

NOPR. It consists of: (1) A statement of proposed rule. -Tax credits

the problem addressed by this We created the RIA using a series of -Rebates

regulation, and the mandate for regulatory scenarios (with various -Low income and seniors su

government action; (2) a description and assumptions), which we used as input

analysis of the feasible policy to the shipments model for water Voluntary Energy Efficiency T

alternatives to this regulation; (3) a heaters. We used the results from the (5 Years, 10 Years)

quantitative comparison of the impacts shipments model as inputs to the NES * Mass Government Purchases

of the alternatives; and (4) the economic spreadsheet calculations. * The Proposed Approach (Perf

impact of the proposed standard. DOE identified the following seven Standards)

The RIA calculates the effects of major policy alternatives for achieving We have evaluated each altern

feasible policy alternatives to water consumer product energy efficiency. terms of its ability to achieve sig

heater energy efficiency standards, and These alternatives include: energy savings at reasonable cos

provides a quantitative comparison of * No New Regulatory Action (Table 20), and have compared 

the impacts of the alternatives. We * Informational Action effectiveness of the proposed ru

TABLE 20.-ALTERNATIVES CONSIDERED

Policy Alternatives NPV Energy 

~Po~~licy Al~mati~es~ ~(S in billions) Q

Consumer Product Labeling ................................................................................................. ........................... -0.009 

Consum er Education ....................................................................................................................................... 0.439 

Prescriptive Standards . ....................................................................................................... 1.149 

Consum er Tax Credits ..................................................................................................................................... 0.333 

Consumer Rebates High Efficiency ............................................................................ 0.349 

Consumer Rebates Heat Pump .................................................................... 1.164 

Low Income and Seniors Subsidy ............................................................................. 1.011 

M anufacturer Tax Credits ................................................................................................................................ 0.074 

Voluntary Efficiency Target (5 year delay) ...................................................................................................... 1.47 

Voluntary Efficiency Target (10 year delay) .................................................................................................... 0.882 

M ass Gove ment Purchases ......................................................................................................................... 0.012 

Performance Standards .............................................................................................................................. 3.433 

NPV = Net Present Value (2003-2030, in billion 1998 $) (does not include government expenses). Savings = Energy Savings (Source Quads).

If we imposed no new regulatory quad (0.081 EJ) of energy savings with performance standard level, i.e., 

action, then we would implement no a negative $0.009 billion NPV. would implement a prescriptive

new standards for this product. This is Another approach, called consumer standard at trial standard level t

essentially the "base case" for water education, is to consider an Energy reduced flexibility afforded to

heaters. In this case, between the years Star* program for heat pump water manufacturers of a prescriptive 

2003 and 2030, there would be an heaters. We assume, under this program, would make it difficult for

expected energy use of 120.91 Quads sales would jump to 150,000 units per manufacturers to achieve the hig

(127.56 Exajoules (EJ)) of primary year in 2008 and continue to be constant level. The lower standard level e

energy, with no energy savings and a after that. This estimate is based on an slightly smaller expenditures for

zero NPV. Arthur D. Little (ADL) report from retooling and purchasing parts. October 20, 1997, "Low Cost Heat Pump Consequently, the economic imp

We grouped several alternatives to the Water Heater Status Report." We expect before the implementatio

base case under the heading of calculated the fraction that this should be slightly smaller for

informational action. They include represents of the baseline electric water prescriptive standards. This resu

consumer product labeling and DOE heater market share in 2008, and energy savings of 0.78 Quad (0.8

public education and information subtracted this fraction from the next and $1.15 billion NPV.

programs. Both of these alternatives are lowest design option with any market We tested various financial in

already mandated by, and are being share. This consumer education alternatives. These included tax 

implemented under EPCA, as amended, program would perform somewhat and rebates to consumers, as we

Sections 324 and 337,42 U.S.C. 6294, better than product labeling with energy credits to manufacturers. We ass

6297. One base case alternative would savings equal to 0.539 Quad (0.57 EJ) the tax credits to consumers wer

be to estimate the energy conservation and $0.439 billion NPV. of the incremental purchase exp

potential of enhancing consumer Another method of setting standards higher energy-efficiency water h

product labeling. To model this would entail requiring that certain The incremental cost is based on 

possibility, the Department estimated design options be used on each product, difference between the 2003 bas

that 5 percent of consumers change their i.e., for DOE to impose prescriptive cost and the cost of a 50-gallon 0

decisions on which water heater to buy standards. For this approach, we assume electric, a 40-gallon 0.60 EF gas-

based on a consumer product labeling that a prescriptive standard is and a 32-gallon 0.61 EF oil-fired 

program. The consumer product implemented as a standard at the next heater. We estimate the impact o

labeling alternative resulted in 0.077 lower trial standard level than the policy is to move 5% of the mark

EE-RM-97-900 COMMENT 119A
25082 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

share from the 2003 baseline to the more 0.415 Quad (0.44 EJ) with $1.011 billion savings of 0.057 Quad (0.06 EJ) and

efficient models. These tax credits start NPV. $0.012 billion NPV.

in 2003 and run for six years. We Another financial incentive we Lastly, all of these alternatives must

assume people stop buying these more considered was a tax credit to be gauged against the performance

efficient and more expensive water manufacturers for the production of standards we are proposing in this

heaters when the tax credits stop. The energy-efficient models of water heaters. NOPR. Such performance standards

tax credits to consumers showed a We assumed an investment tax credit of would result in energy savings of 4.746

change from the base case, saving 0.163 20%, applicable to the tooling and Quads (5.00 EJ), and the NPV would be

Quad (0.17 EJ) with $0.333 billion NPV. machinery costs of the manufacturers. an expected $3.443 billion.

To estimate the impact of consumer These are tooling costs as they relate to As indicated in the paragraphs above,

rebates, DOE assumed rebates of 35% of producing a 0.91 EF on a 50-gallon none of the alternatives we examined

the incremental retail prices for more electric, a 0.60 EF on a 40-gallon gas- for these products would save as much

energy-efficient water heaters. The fired, and a 0.61 EF on a 32-gallon oil- energy as the Proposed Rule. Also,

incremental cost is based on the fired water heater. We estimate the several of the alternatives would require

difference between the 2003 baseline impact of this policy is to move 1% of new enabling legislation, since authority

cost and the cost of a 50-gallon 0.91 EF the market share from the 2003 baseline to carry out those alternatives does not

electric, a 40-gallon 0.60 EF gas-fired, to the more efficient models. These tax presently exist.

and a 32-gallon 0.61 EF oil-fired water credits start in 2003 and run for six C. Review Under the Regulatory

heater. We estimate the impact of this years. We assume no persistence in the Flexibility Act

policy is to move 5% of market share market once they stop. Tax credits to

from the 2003 baseline to the more manufacturers would save 0.039 Quad The Regulatory Flexibility Act of

efficient models. These rebates start in (0.41 EJ) and produce $0.074 billion 1980, 5 U.S.C. 601-612 (Pub. L. 96-354)

ars NPV. and we requires an assessment of the impact of

2003 and run for six years and whee me The impact of this scenario produces regulations on small businesses. The

efficient and more expensive water small savings because the investment Small Business Administration's

heaters when the rebates stop r tax credit was applicable only to the definition for small business in the

Consumer rebates would save 0.174 tooling and machinery costs of the water heater industry is one that

Q sud (0 18 EJ)b with $0.349 billion N . firms. The firms' fixed costs and some employs 500 or fewer employees.

Qua (0.18 d E) with $0.3onsumer rebate of the design improvements that would The water heater industry is

We also considered a consumer rebate likely be adopted to manufacture more characterized by five firms accounting

alternative that was equal to the efficient versions of this product would for nearly 99% of sales. Smaller

difference between the retail cost of a involve purchased parts. Expenses for businesses and firms, which make

heat pump water heater and a 0.91 EF purchased parts would not be eligible specialty water heaters and supply

electric resistance water heater. This for an investment tax credit. niche markets, share 1% of the market.

rebate is only applied to new We examined two scenarios of We are aware of three small firms: Bock

construction because heat pumps may voluntary energy efficiency targets. In Water Heaters, Heat Transfer Products,

require more closet space and more air the first one, we assumed all the and Vaughn.

space from which to remove heat. We relevant manufacturers voluntarily Of the three small firms, Bock

estimated the installed costs of heat adopted the proposed energy manufactures oil-fired water heaters that

pump water heaters ($875) and market conservation standards in five years. In have not been affected by this proposed

penetration levels (300,000 units per the second scenario, we assumed the rule. Therefore, we do not think that

year) based on ADL data on drop-in heat proposed standards were adopted in 10 this firm will suffer any adverse impacts

pump water heaters. We assumed these years. In these scenarios, voluntary to the rule. The other two firms, Heat

rebates run for six years and we assume improvements having a five-year delay, Transfer and Vaughn, both make electric

people stop buying these more efficient compared to implementation of water heaters that are considered in this

and more expensive water heaters when mandatory standards, would result in rule. In the GAMA directory, these firms

the rebates stop. We estimated this energy savings of 2.887 Quads (3.05 EJ) only list electric water heaters that meet

rebate alternative would save 0.586 and $1.469 billion NPV; voluntary or exceed the standard level

Quad (0.62 EJ) and produce $1.164 improvements having a 10-year delay contemplated in this rule. The proposed

billion NPV. would result in 2.211 Quads (2.33 EJ) rule may raise the standard level enough

One of the market barriers to higher being saved and $0.882 billion NPV. to impact their niche market for high

efficiency gas-fired water heaters is the These scenarios assume that there efficiency electric water heaters.

expense to upgrade venting systems. would be universal voluntary adoption However, these manufacturers also

Another market barrier for electric and of the energy conservation standards by manufacture very long life products that

gas-fired water heaters is the expense to these appliance manufacturers, an incorporate other features which will

enlarge small closets or to relocate water assumption for which there is no help them preserve their niche market.

heaters with thicker insulation when assurance. The Department has taken this into

they will not fit into an existing space. Another policy alternative we consideration in this rulemaking.

Since these expenses can be a particular reviewed was that of large purchases of The Department prepared a

burden on low income and seniors-only high efficiency electric and gas-fired manufacturing impact analysis that it

households, we considered a low water heaters by Federal, State, and shared with all the water heater

income and seniors-only subsidy of local governments. We modeled this manufacturers. The smaller

$100 to make higher efficiency water policy by assuming these governmental manufacturers did not choose to discuss

heaters available and cost effective for entities (i.e., U.S. Department of the impacts of the trial standard levels

these households. We determined the Housing and Urban Development and on their firms.

number of low income and seniors only DOE at the Federal level) purchased In view of the information discussed

households from the RECS public use high efficiency water heaters for 5% of above, the Department has determined

data. The program starts in 2003 and the low income, rented housing. This and hereby certifies pursuant to Section

runs for six years. This subsidy saved policy alternative resulted in energy 605(b) of the Regulatory Flexibility Act

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

that, for this particular industry, the that this regulation would not result in levels of government. No further 

proposed standard levels in today's any takings that might require is required by Executive Order 1

Proposed Rule will not "have a compensation under the Fifth H. Review Under the Unfunded

significant economic impact on a Amendment to the United States Mandates Reform Act of 1 substantial number of small entities," Constitution.Mandates Reform Act of 1995

and it is not necessary to prepare a With respect to a proposed reg

regulatory flexibility analysis. G. Review Under Executive Order action that may result in the

13132, "Federalism" expenditure by State, local, and 

eD. Rview Und th P or Executive Order 13132 (64 FR 43255, governments, in the aggregate, o

August 10, 1999) requires agencies to private sector, of $100 million or 

No new information or record keeping develop an accountable process to (adjusted annually for inflation) 

requirements are imposed by this ensure meaningful and timely input by one year, Section 202(a) of the

rulemaking that would require Office of State and local officials in the Unfunded Mandates Reform Act 

Management and Budget clearance development of regulatory policies that (UMRA), 2 U.S.C. 1531 et seq. re

under the Paperwork Reduction Act. 44 have "federalism implications." Policies a Federal agency to publish a wr

U.S.C. 3501 et seq. that have federalism implications are statement concerning estimates o

E. Review Under Executive Order 12988, defined in the Executive Order to resulting costs, benefits and othe

"Civil Justice Reform" include regulations that have on the national economy. 2 U.S.C

Executive Order 12988, "Civil Justice distribution of power and Section 202 of UMRA authoriz

Reform," 61 FR 4729 (February 7, 1996), responsibilities among the various level Refrm" 1 R 72 (ebuay , 99 ,of government." Under Executive Order agency to respond to the content imposes on Executive agencies the 13132 DOE may not issue a regulation requirements of UMRA in any ot

general duty to adhere to the following that has federalism implications, that statement or analysis that accom

requirements: (1) Eliminate drafting fed s se als im ctos, a the proposed rule. 2 U.S.C. 1532

errors and ambiguity; (2) write mposes substantial direct costs, and content requirements of Section 

regulations to minimize litigation; and that is not required by statute, unless of UMRA relevant to the private 

(3) provide a clear legal standard for the Federal government provides the mandate substantially overlap th

affected conduct rather than a general funds necessary to pay the direct economic analysis requirements 

standard and (4) promote simplification compliance costs nmcurred DE byor c lt apply under Section 325(o) of EP

and burden reduction. and loca governments or DOE consuts amended, and Executive Order 1

With regard to the review required by wth tate and local officials early theThe Supplementary Information 

Section 3(a), Section 3(b) of Executive process of developing the propod in this NOPR and the analysis co

Order 12988 specifically requires that regulation. DOE also may not issue aD for this proposed rul

Executive agencies make every regulation that has federalism resionds to those requirements. responds to 

reasonable effort to ensure that the implications and that preempts State OE is obligated by Section 20

regulation: (1) Clearly specifies the law unless it consults with State and UMRA, 2 U.S.C. 1535, to identify 

preemptive effect, if any; (2) clearly local officials early in the process of consider a reasonable number of

specifies any effect on existing Federal developing the proposed regulations regulatory alternatives before

law or regulation; (3) provides a clear The statutory authority under which promulgating a rule for which a w

legal standard for affected conduct this proposed standard is being statement under Section 202 is re

while promoting simplification and promulgated specifically addresses the From those alternatives, DOE mu

burden reduction; (4) specifies the effect of Federal rules on State laws or select the least costly, most costretroactive effect, if any; (5) adequately regulations concerning testing, labeling effective or least burdensome alt

defines key terms; and (6) addresses and standards. Section 327 of EPCA, as that achieves the objectives of the 

other important issues affecting clarity amended, 42 U.S.C. 6297. Generally all unless DOE publishes an explana

and general draftsmanship under any such State laws or regulations are why a different alternative is sele

guidelines issued by the Attorney superseded by EPCA, unless specifically As required by Section 325(o) of 

General. Section 3(c) of Executive Order exempted in Section 327. The EPCA, as amended, 42 U.S.C. 629

12988 requires Executive agencies to Department can grant a waiver of this proposed rule would establis

review regulations in light of applicable preemption in accordance with the energy conservation standards fo

standards in Section 3(a) and Section procedures and other provisions of heaters that are designed to achie

3(b) to determine whether they are met Section 327(d) of the Act, as amended. maximum improvement in energ

or it is unreasonable to meet one or 42 U.S.C. 6297(d). States can file efficiency which DOE has determ

more of them. DOE reviewed today's petitions for exemption fromtechnologically feasible and

proposed rule under the standards of preemption with the Secretary and have economically justified. A full dis

Section 3 of the Executive Order and their request reviewed on a case-by-case of the regulatory and non-regulat

determined that, to the extent permitted basis. alternatives considered by DOE i

by law, these proposed regulations meet DOE has examined today's rule and presented in the TSD for this pro

the relevant standards. has determined that although final rule.

standards would preempt State laws in

F. "Takings" Assessment Reviewthis area, they would not have a . Review Under the Plain Langu

The Department has determined substantial direct effect on the States, on Directives

pursuant to Executive Order 12630, the relationship between the national Section 1(b)(12) of Executive O

"Governmental Actions and Interference government and the States, or on the 12866 requires that each agency 

with Constitutionally Protected Property distribution of power and regulations so that they are simp

Rights," 53 FR 8859 (March 18,1988) responsibilities among the various easy to understand, with the goal 

EE-RM-97-900 COMMENT 119A
25084 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

minimizing the potential for uncertainty confidential information that has been 2. Conduct of Workshop

and litigation arising from such submitted include: (1) A description of The workshop (hearing) will be

uncertainty. Similarly, the Presidential the items; (2) an indication as to conducted in an informal, conference

memorandum of June 1, 1998 (63 FR whether and why such items are style. The Department may use a

31883) directs the heads of executive customarily treated as confidential professional facilitator to facilitate

departments and agencies to use, by within the industry; (3) whether the discussion, and a court reporter will be

January 1, 1999, plain language in all information is generally known by or present to record the transcript of the

proposed and final rulemaking available from other sources; (4) meeting. We will present summaries of

documents published in the Federal whether the information has previously comments received before the

Register, unless the rule was proposed been made available to others without workshop, allow time for presentations

before that date. obligation concerning its by workshop participants, and

Today's proposed rule uses the confidentiality; (5) an explanation of the encourage all interested parties to share

following general techniques to abide by competitive injury to the submitting their views on issues affecting this

Sect1on 1(b)(12) of Executiv e O r d e r person which would result from public rulemaking. Following the workshop,

12866 and the JPresid6entia3l disclosure: (6) an indication as to when we will provide an additional comment

memorandum of June , 1998 (63 FR such information might lose its period, during which interested parties

* Organization of the material to confidential character due to the will have an opportunity to comment on

serve the needs of the readers passage of time; and (7) why disclosure the proceedings at the workshop, as

(stakeholders). of the information would be contrary to well as on any aspect of the rulemaking

* Use of common, everyday words. the public interest. proceeding.

* Shorter sentences and sections. B. Public WorkshoThe Department will arrange for a

We invite your comments on how to transcript of the workshop and will

make this proposed rule easier to 1. Procedures for Submitting Requests make the entire record of this

understand. To Speak rulemaking, including the transcript,

available for inspection in the

J. Assessment of Federal Regulations You will find the time and place of Department's Freedom of Information

and Policies on Families Review the public workshop listed at the Reading Room. Any person may

Section 654 of the Treasury and beginning of this notice of proposed purchase a copy of the transcript from

General Government Appropriations rulemaking. The Department invites any the transcribing reporter. You can also

Act, 1999 (Pub. L. No. 105-277) requires person who has an interest in today's download the TSD and other analyses

Federal agencies to issue a Family notice of proposed rulemaking, or who from the Internet at: http://

Policymaking Assessment for any is a representative of a group or class of www.eren.doe.gov/buildings/

proposed rule or policy that may affect persons that has an interest in these codes_standards/applbrf/

family well-being. Today's proposal proposed issues, to make a request for waterheater.htm

would not have any impact on the an opportunity to make an oral Is

autonomy or integrity of the family as presentation. If you would like to attend ssues for Publc Comment

an institution. Accordingly, DOE has the public workshop, please notify Ms. We are interested in receiving

concluded it is not necessary to prepare Brenda Edwards-Jones at (202) 586- comments and data to improve our

a Family Policymaking Assessment. 2945. You may hand deliver requests to analyses. In particular, we are interested

VI. Public Comment Procedures speak to the address indicated at the in seeking responses to the following

beginning of this notice between the questions and/or concerns: A. Written Comment Procedures hours of 8:00 a.m. and 4:00 p.m., 1. Gas-fired water heater venting

The Department invites interested Monday through Friday, except Federal studies or data on venting problems.

persons to participate in the proposed holidays, or send them by mail. Data or studies on the use of 80% RE

rulemaking by submitting data, The person making the request shouldgas-fired water heaters in natural draft

comments, or information with respect state why he or she, either individually venting systes. Data on the number of

to the proposed issues set forth in or as a representative of a group or class 78 % or 80% RE gas-fired watr ters

today's proposed rule to Ms. Brenda of persons, is an appropriate installations type of venting systems

Edwards-Jones, at the address indicated spokesperson, briefly describe the employed and the length of time

at the beginning of this notice. We will nature of the interest in the rulemaking, henumber or te of size

consider all submittals received by the and2. The number or type of "size ~~considr subittls al r y and provide a telephone number for constrained" replacement water heater date specified at the beginning of this contact. constraned replacement water heater

notice in developing the final rule.. ,installations. Data on the cost impact of notice in developing the final rule.

According to 10 CFR 1004.11, any The Department requests each person installing a 3-4 inch larger diameter

person submitting information that he wishing to speak to submit an advance water heater in existing manufactured

or she believes to be confidential and copy of his or her statement at least ten homes, mobile homes, attics, and

exempt by law from public disclosure days prior to the date of this workshop applications where water heaters are

should submit one complete copy of the as indicated at the beginning of this located in the living space. Also,

document and ten (10) copies, if notice. The Department, at its comments on the number of water

possible, from which the information discretion, may permit any person heaters affected. Suggestions for

believed to be confidential has been wishing to speak who cannot meet this alternative technologies such as, higher

deleted. The Department of Energy will requirement to participate if that person input gas burners or larger electric

make its own determination with regard has made alternative arrangements with heating elements, that may reduce the

to the confidential status of the the Office of Building Research and impact of thicker insulation on "size

information and treat it according to its Standards in advance. The letter making constrained" replacement water heater

determination. a request to give an oral presentation applications.

Factors of interest to the Department must ask for such alternative 3. Additives or blowing agents with

when evaluating requests to treat as arrangements. zero ozone depletion potential that will

EE-RM-97-900 COMMENT 119A
Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 

provide lower conductivity or cost than EA Environmental Assessment ORNL Oak Ridge National Laborato

HFC-245fa blown insulation at EE I Edison Electric Institute PG&E Pacific Gas and Electric

temperatures between 1200 F and 1400F. EIA DOE's Energy Information PNNL Pacific Northwest National

We also request comment on our choice Administration Laboratory

of insulation blowing agent, among the EERE DOE's Office of Energy Efficiency and Pon Rated input power alternativs we a d. We w e Renewable Energy RE Recovery efficiency alternatives we anayzed We welcome EF Energy factor RECS Residential Energy Consump

other suggestions of appropriate EJ Exajoule Survey

blowing agents. EMPA Energy Market and Policy Analysis RIA Regulatory impact analysis

4. Approaches that will reduce the EPA Environmental Protection Agency SC Southern Company

impact on manufacturers of the EPCA Energy Policy and Conservation Act S02 Sulfur dioxide

relatively short time between the EPRI Electric Power Research Institute TANK Computer simulation model 

availability of HFC-245fa in commercial FEMP Federal Energy Management Program fired water heaters

quantities, the phase-out of HCFC-141b FOI Freedom of Information TSD Technical Support Document

and a proposed effective date of FONSI Finding of No Significant Impact UA Heat transfer coefficient

September 2003 for DOE's amended FR Federal Register UMRA Unfunded Mandates Reform 

water heater energy conservation GAMA Gas Appliance Manufacturers 1995

astandard. eeg osraiAssociation VOC Volatile organic compound 5.DEisconsn. a c e GRI Gas Research Institute VP Virginia Power

5. DOE is considering a consistent GRIM Government Regulatory Impact WATSIM Computer simulation mo

distribution of consumer discounts Model electric storage water heaters

ranging from 4-12% with a mean of 6% HCFC Hydrochlorofluorocarbon WHAM Water Heater Analysis Mod

for all the appliance products. We HFC Hydrofluorocarbon oil-fired water heaters

would like comments on this approach IID Intermittent ignition device

as it applies to water heaters. ImBuild Impact of Building Energy List of Subjects in 10 CFR Part 4

6. We request comments on the Efficiency Programs modeldministrativ rati and

validity of the analytical methods used INPV Industry net present value n

to develop the direct effects of water ITS Intertek Testing Services procedure, Energy Conservation, heater standards on national kt Thousand metric tons Household appliances.

employment and the appropriate kWh kilowatt hours Issued in Washington, DC, on Mar

employment and the appropriate LBNL Lawrence Berkeley National 2000. interpretation and use of the results of Laboratory Dan W. Re

this analysis approach. LCC Life-cycle costDan W. Reicher,

Appendix A-Acronyms and Abbreviations LPG Liquid petroleum gas Assistant Secrety, EnergyEfficiency 

C l fr an E y MIA Manufacturer impact analysisRenewable Energy.

fficiency Economy M M Btu Million Btus For the reasons set forth in the

ADL Arthur D. Little Mt Million metric tons preamble, Part 430 of Chapter II 

AEO EIA's Annual Energy Outlook NEEA Northwest Energy Efficiency 10, Code of Federal Regulations i

AE099 AEO99 EIA's ElA's 1999 1999 Annual Annual Energy Energy Outlook Outlook Alliance Ap 1

c i A l proposed to be amended as set fo

AGA America Gas Association NEGA New England Gas Association

ANOPR Advance Notice of Proposed NEMS National Energy Modeling System below.

Rulemaking NEMS-BRS National Energy Modeling PART 43ENERGY CONSERVA

ANSI American National Standards System-Building Research and Standards PR R C ER

Institute NEPA National Environmental Policy Act PROGRAM FOR CONSUMER

ASHRAE American Society for Heating, NES National energy savings PRODUCTS

Refrigerating and Air-Conditioning NFGC National Fuel Gas Code

Engineers NGC Natural Gas Council 1. The authority citation for P

BRS DOE's Office of Building Research and NIST National Institute of Standards and continues to read as follows:

Standards Technology Authority: 42 U.S.C. 6291-6309.

Btu British thermal unit NOx Oxides of nitrogen

C Elemental carbon NOAA National Oceanic and Atmospheric 2. Section 430.32(d) of Subpa

CE Consumer Expenditures Administration revised to read as follows:

CEC California Energy Commission NOPR Notice of Proposed Rulemaking

CFR Code of Federal Regulations NPV Net present value 430.32 Energy conservation stan

CNG Connecticut Natural Gas NRDC Natural Resources Defense Council and effective dates.

CO Carbon monoxide NRECA National Rural Electric Cooperative * * * * *

C02 Carbon dioxide Association (d) Water Heaters

CPSC Consumer Product Safety NU Northeast Utilities

Commission NWPPC Northwest Power Planning Council The energy factor of water heat

DOE U.S. Department of Energy (also the OIRA Office of Information and Regulatory shall not be less than the followin

Department) Affairs products manufactured on or afte

DOJ U.S. Department of Justice OOE Oregon Office of Energy indicated dates.

EE-RM-97-900 COMMENT 119A
25086 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules i ' '

Product class Energy factor as of Energy factor as of Energy factor as of [date 3 years January 1, 1990 April 15, 1991 from publication of final rule]

1. Gas-fired Water Heater ............. 0.62-(.0019 x Rated Storage 0.62-(.0019 x Rated Storage 0.67-(0.0019 x Rated Storage

Volume in gallons). Volume in gallons). Volume in gallons).

2. Oil-fired Water Heater ................ 0.59-(.0019 x Rated Storage 0.59-(.0019 x Rated Storage 0.59-(0.0019 x Rated Storage

Volume in gallons). Volume in gallons). Volume in gallons).

3. Electric Water Heater ................ 0.95-(.00132 x Rated Storage 0.93-(.00132 x Rated Storage 0.97-(0.00132 x Rated Storage

Volume in gallons). Volume in gallons). Volume in gallons).

Note: The Rated Storage Volume equals the water storage capacity of a water heater, in gallons, as specified by the manufacturer.

[FR Doc. 00-9847 Filed 4-17-00; 11:57 am]

BILUNG CODE 6450-1-P

EE-RM-97-900 COMMENT 119A