## 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 Ar Rule25042 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

DEPARTMENT OF ENERGY Room 1E-245 at theU.S. Department of c.Design Options thatImprove System Energy, Forrestal Building, 1000 Efficiency Office of Energy Efficiency and Independence Avenue, SW, 4.Results ofScreening Analysis Renewable Energy Washington, DC. You can find more a.Heat Pump Water Heater b. GasCondensing Water Heaters information concerning public c. Other Water HeaterDesign Options 10 CFR Part430 participation in this rulemaking D. Engineering Analysis ofDesign Options [Docket Number EE-RM-97-900] proceeding in Section VI, "Public 1.Other FederalAgencies' Initiatives Comment Procedures," ofthis notice of 2.MaximumTechnologically Feasible RIN 1904-AA76 proposed rulemaking. Levels Energy Conservation Program forYou read copies ofthe public a.Energy Savings Potential Energy Conservation Program for You may read copies ofthe public 3 Methodologv Consumer Products: Energy comments, theTechnical Support b. Comments onDesign Options Conservation Standardsfor 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 ofEnergy Efficiency and ofthe public hearing and previous f.Determination ofMarkups for Retail Renewable Energy, Department of workshop transcripts at the DOE Prices Energy (DOE). Freedom ofInformation (FOI) Reading E.Economic Analysis 1.Life-Cycle-Cost (LCCI and Payback ACTION: Notice ofproposed rulemaking Room, U.S. Department ofEnergy, 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 of9:00 a.m. and4:00 d. Household Characteristics prescribes energy conservation p.m., Monday through Friday, except e.Lifetime standards for certain majorhousehold Federal holidays. You may obtain 2.LCC Spreadsheet Model appliances, and requires the Departmentcopies oftheTSD and Payback Module appliances, oftheTSDandanalb. Equipment CostModule ofEnergy (DOE)to administer an energy spreadsheets from the Office ofEnergy c. Operating CostModule 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 WaterDraw Module proposing to amend the energy www.eren.doe.gov/buildings/ 3.Consumer Subgroup Analysis conservation standards for water heaters codesstandards/applbrf/ 4. PaybackAnalysis forRebuttable to make them more efficient and waterheater.htm Presumption

announce apublic hearing. F. NationalImpacts Analysis FOR FURTHER INFORMATION CONTACT: 1.Net Present Value (NPV) and Energy DATES: Comments must be received on Terry Logee, U.S. Department ofEnergy, Savings
orbefore 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 also

accept e-mailed com n, b ofEnergy, Office ofGeneral Counsel, G.Manufacturer ImpactAnalysis 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, (2025586-9507, email:
. Interview Process

The Department must receive requests same address, (202) 586-9507 emai H.OtherFactors to speak at the workshop and a copy of eugene.margolishq.doe.gov.. Utility Analysis your statements no laterthan 4:00 p.m., SUPPLEMENTARY INFORMATION:

. NationalEmployment June 6, 2000, and we request that you K.N N Epme June 6, 2000, and we request that you Table ofContents 

### TV. Analytical Results provide a computer diskette (WordPerfect 8) ofeach statement at that I.Summary ofProposed Rule A. Trial Standard Levels time. The DOE panel will read the n.Introduction
. 

### cnoc actson Consumers statements in advance ofthe 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 onManufacturers Attendees will have anopportunity to 2.History ofPrevious Rulemakings B.Significance ofEnergy Savings ask questions. 3.Process Improvement C.Lessening ofUtility orPerformance of ADDRESSES: Please submit written 4.Test Procedures Products comments, oral statements, and requests m.Analysis andMethodology D.Impact ofLessening ofCompetition E.Need oftheNation to Save Energy and Net to speak at the workshop toBrenda A. Market and Technology Assessment National Employment Edwards-Jones, U.S. Department of 1.General 1.Environmental Impacts Energy, Office ofEnergy Efficiency and 2.Product Specific 2.NetNational 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 underExecutive Order 12866. workshop will begin at 9:00 a.m., in Combustion Efficiency "Regulatory Planning and Review

### Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25043

C.Review undertheRegulatory Flexibility than the rest ofthe population. Our determined that trial standard level Act analyses showed no difference. three is technologically feasible. The D. Review Underthe Paperwork Reduction Thenational net present value (NPV) design options incorporated in trial Act oftrial standard level three is $3.4 standard level three are commercially E.

Review UnderExecutive Order 12988, billion from 2003-2030. This is the available on some models ofelectric and F"Takings" Assessment Review estimated total value offuture savings gas-fired heaters sold in the U.S. G. Federali sm Review discounted to 1998 minus the estimated .Federalism w 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 PlainLanguage industry netpresent value (INPV) today Prt Bo o Directives is estimated to be $322 million. Ifwe Par B of tl I ofth n Po J.Assessment ofFederal Regulations and adopt trial standard level three, we and Conservation Act, Pub.L. 94-163, as Policies on Families Reviewexpect manufacturers may lose 5amended by the National Energy VI. Public Comment Procedures percent oftheINPV, which is Conservation Policy Act, Pub.L. 95-619, A. Written Comment Procedures approximately $15 million. Other the National Appliance Energy B.Public Workshop government actionsthat require the Conservation Act, Pub.L. 100-12, the C.Issues forPublic Comment phase out ofHCFC-141b and the National Appliance Energy Appendix A-Acronyms and Abbreviations prevention of ignition offlammable Conservation Amendments of 1988, vapors by gas-fired water heaters will Pub.L. 100-357, and the Energy Policy I. Summary ofProposed Rule result in losses ofanestimated $28 Act of1992, Pub.L. 102-486, created the

TheEnergy Policy and Conservation million in INPV. Thecumulative effects Energy Conservation Program for Act, as amended (hereinafter referred to ofall government actions isan Consumer Products other than
asEPCA orthe Act), specifies that any estimated loss of$43 millionof INPV, A u t o m o bile s

. Water heaters are one of
new or amended energy conservation or about 13 percent. However, the the osumer products subject to this standard the Department ofEnergy present value offuture energy savings program. Section 322(a)(4), 42 U.S.C. (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 Underthe Act, theprogram consists energy efficiency

... which the exceed industry losses dueto energy essentially ofthree 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 ourinterviews Department, with assistance fromthe 6295(o)(2)(A). Furthermore, the with fourofthe fivemajor National Institute ofStandards and amended standard must "result in manufacturers, we do not expect any Technology (NIST), may amend or significant conservation of energy." plant closings or loss ofemployment establish test procedures for each ofthe Section 325o)(2)(B)(3)(B), 42 U.S.C. because the manufacturers stated that covered products. Section 323(b)(1)(A)- 6295(o)(2)(B)(3)(B). they would stay in business. During the (B), 42 U.S.C. 6293(b)(1)(A)-(B). The test

In accordance with the statutory interviews, the manufacturers all stated procedures measure the energy criteria discussed in this notice. DOE is that onlytrial standard level four efficiency, energy use, or estimated proposing to amend the water heater (incorporating plastictanks and side- annual operating cost ofa covered energy efficiency standards. The arm heaters) would severely impact product during a representative average proposed standards represent employment levels and require new use cycle orperiod ofuse. They must performance consistent wth facilities. notbe unduly burdensome to conduct. electric water heaters with heat The proposed standard has significant Section 323(b)(3), 42 U.S.C. 6293(b)(3). environmental benefits, addressing Atest procedure isnot required ifDOE traps, 2.5 inches ofinsulation and an global climate change andreducing air determines by rule that one cannot be insulated tank bottom;pollution. This proposed standard level developed. Section 323(d)(1), 42 U.S.C.

* 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 of83 million procedures appear at Title 10 Code of recovery efficiency (RE) and 2inches of metrictons (Mt) ofcarbon equivalent. Federal Regulations (CFR) part430, insulation; Additionally, airpollution would be subpart B, appendix E.

* no change from the current reducedby the elimination of229 The Act prescribes an initial Federal standard for oil-fired water heaters. thousand metric tons ofnitrous oxides energy conservation standard for each of

The proposed standard, trial standard (NOx) from 2003-2030. the listed covered products, except level three, isbased on using HFC-245fa Trial standard level three has several television sets. The Department is
as ablowing agent in the insulation and otherbenefits. First, it maximizes the authorized to amend these standards.
saves an estimated 4.75 quads ofenergy LCC savings to consumers, which means Section 325, 42 U.S.C. 6295. Any new over 27 years, a significant amount. This that total consumers' benefits are higher or amended standard mustbe designed amount is more than the primary energy as aresult ofthis standard level than to achieve the maximum improvement used for heating water in all U.S. any ofthe other standard levels in energy efficiency that is buildings (residential, commercial and analyzed. Second, thistrial 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 andelectric water 325(o)(2)(A), 42 U.S.C. 6295(o)(2)(A). the average life-cycle cost (LCC) savings) heaters so the impacts in the market are The Department's current review of
are positive. We identified and fuel neutral. standards is for water heaters. Section conducted analyses on two subgroups of Therefore, DOE has determined that 325(e), 42U.S.C. 6295(e). thepopulation, senior-only and low the benefits tothe nation outweigh the Section 325(o)(2)(B)(i), 42 U.S.C. income consumers, because ofconcern burdens and we conclude that trial 6295(o)(2)(B)(i) provides thatbefore that these groups might potentially be standard level three is economically DOE determines whether a standard is affected differently by the standards justified. Furthermore, DOEhas economically justified, itmust first ask25044 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

for comments on aproposed standard. B. Background which DOE issued aNOPR priorto After reviewing comments on the August 14, 1996, DOE will conduct a proposal, DOE must determine that the Current anarreview to decide whether any ofthe benefits ofthe standard exceed its Theexisting 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 aweighing ofthe 1991. Energy efficiency ismeasured in 36982). DOE completed this review and following seven factors: terms ofan energy factor (EF), which decided to use the Process Rule, to the

(1)The economic impact ofthe measures overall water heater efficiency extent possible, in the development of s(1) Theeonomic impaacturers and the and isdetermined by theDOE test the revised water heater standards. standard on the manufacturers and the procedure. 10 CFR part 430, subpart B, We developed ananalytical
consumers ofthe products subject tothe 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 wepresented throughout the estimated average life of volume) during a water heater workshop onJune thecovered product in the type (or * gas-fired, EF= 0.62-(0.0019 x rated 24, 1997. The analytical framework class) compared to any increase inthe volume) described the different analyses (e.g., price of, orin the initial charges for, or · oil-fired, EF = 0.59-(0.0019 x rated LCC payback and manufacturing maintenance expenses of, thecovered volume) impact analyses (MIA)) to be conducted, products which are likely to result from where rated volume isthe water storage the method for conducting them, the use the imposition ofthe standard; capacity ofa water heater in gallons, as ofnew LCC and national energ savings

(3) The total projected amount of specified by the manufacturer.(NES) spreadsheets, and therelationship
energy or water savings likely to result 2. History ofPrevious Rulemakings between the various analyses. directly from the imposition ofthe On September 28, 1990, DOE 4. Test Procedures standard; published anAdvance Notice of

(4) Any lessening ofthe utility orthe Proposed Rulemaking (ANOPR) heD test procedure determines performance ofthe covered products announcing theDepartment'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 arule to characteristics determined by theDOE (5)The impact ofany lessening of revise the energy conservation standards test procedures are the overall heat competition, as determined in writing for water heaters as well as avariety of transfer coefficient (UA and the by the Attorney General, thatis likely to other consumer products. (59 FR recovery efficiency (RE) for gas and oilresult from theimposition ofthe 10464). On January 31, 1995, we fired water heaters. The UA isreferred standard; published a determination that we toas the standby heat loss coefficient of

(6) The need for national energy and would issue a revised notice of the storage tank. It isa measure ofthe
water conservation; and proposed rulemaking (NOPR) for water amount ofheat n Britishthermal units

(7)Other factors the Secretary heaters. (60FR 5880). This isthe 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 ofthe fuel consumed by 42 U.S.C. 6295(o)(2)(b)(iii), establishes a 3. Process Improvement thewater heater. rebuttable presumption ofeconomic 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 orfinal rules there is atest procedure. The additional cost to the consumer of for appliance efficiency standards for Department published atest procedure purchasing aproduct complying with FY 1996. Pub. L. 104-134. Duringthe on May 11, 1998, thatrevised the firstan energy conservation standard level moratorium, theDepartment examined hour rating ofstorage-type water will be less than three times the value theappliance standards program and heaters, added anew rating for electric oftheenergy, and as applicable, water, how itwas 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 ofthe process andto bring together heatpump water heater. (63 FR 25996). standard, as calculated under the stakeholders (such as manufacturers and Thisrevision 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 andMethodology economic justification. associations, stateagencies, utilities and

Section 327 oftheAct, 42U.S.C. other interested parties toprovide input This section describes the analyses 6297, addresses the effect ofFederal to the process used to develop appliance and methodologies to be used in this rules on State laws or regulations efficiency standards. As aresult, on July rulemaking. It includes a general concerning testing, labeling, and 15, 1996, theDepartment published a introduction to each analysis section standards. Generally, all such State laws Final Rule: Procedures for and provides a discussion ofissues

or regulations are superseded bythe Consideration ofNew or Revised Energy relative to the water heater rule (see Act. unless specifically exempted in Conservation Standards for Consumer Chapter 2 ofthe TSD). Section 327. The Department can grant Products (referred toas theProcess A MarketandTechnologyAssessment

a waiver ofpreemption 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 ofSection 327(d) ofthe Act. TheProcess Rule states that for assessment characterizes the relevant 42 U.S.C. 6297(d). products, such as water heaters, for product markets and existing

### Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25045

technology options including prototype connections and itwill fit in most information regarding all current designs. electric water heater closets. However, it technology options and prototype Ip~~. General ,still will notfit under counters or in designs. In consultation with interested spaces lessthan four feet tall. parties, the Department develops a list When initiating a standards In addition, the Federal Energy ofdesign options for consideration in rulemaking, the Department develops Management Program's (FEMP) "Buying the rulemaking. All technologically information on the present and past Energy Efficient Products Program" feasible design options are candidates in industry structure and market identifies the upper 25% energy this initial assessment. We identified characteristics ofthe product(s) efficient residential gas and electric heat pump water heaters and gas concerned. This activity consists ofboth water heaters. These levels are condensing water heaters as the quantitative and qualitative efforts to recommended to Federal agencies with maximum technologically feasible
assess the industry and products based the ultimate goal ofmoving the entire designs based on measured EF's greater on publicly available information. U.S. market toward higher energy than 2.0 and 0.9, respectively. Issues to beaddressed include: (1) efficiency. We are aware ofa few gas The Department considers design manufacturer market share and and electric utility programs that options technologically feasible ifthey characteristics; (2) trends in the number encourage theuse ofhigher efficiency are already in useby the respective of firms; (3)the financial situation of water heaters,including consumer industry orresearch has progressed to manufacturers; (4) existing non- rebates or dealer incentive programs, the development ofa working regulatory efficiency improvement financing, consumer education, and prototype. The Process Rule sets forth a initiatives; and (5)trends in product rental/guarantee programs that often definition oftechnological feasibility as characteristics and retail markets. The include installation and maintenance follows: "Technologies incorporated in information collected serves asresource costs. In the past decade, the number of commercial products or in working material to be used throughout the theseutility programs has diminished prototypes will be considered rulemaking. considerably due to restructuring ofthe technologically feasible." 10 CFR 430, 2. Product Specific electric andgas utility industries. subpart C appendix A(4)(a)()(i)

- The waterheater market is largely a rt C. a n A()() »),) There are five major manufacturers in replace r entmarket, accotinargelor 8 TheDepartment has determined that theresidential water heater market. We 85% ofsales. The remaining 15-20% ofall ofthe design options discussed in estimate theyhave the following market sales are for new installations Ofthe 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) ofEPCA, as amended. estimate plumbingwholesalers sell Rheem 28% and State Industries 29%; approximately 4.3 million, while retail C.ScreeningAnalysis all others add up to 1%. Annual outlets such as Sears, Wards, Home residential water heater shipments (i.e., Depot, and Lowes sellthe majority of Screening identifies those design thetotal number ofwater heaters the remaining 4.8 million. options theDepartment will consider in delivered to and installed in consumers' Characteristics ofthe replacement the engineering analysis. This includes homes) have gradually increased from market include: (1)consumers typically all technologically feasible design 7.4 million units in 1987 to 9.1 million replace the existing water heater with options not eliminated in the screening units per year in 1997. one ofsimilar fuel and capacity; (2) analysis. The screening analysis

Financial information for most water consumers consider the ease of provides abasis for eliminating certain heater manufacturers is not publicly installation-it has to fitin the existing problematic design options from further available, with only one publicly traded space; (3) consumers usually replace consideration early in the process. water heater manufacturer in theUnited water heaters underemergency Initially, the candidate design options States. Information fromthe U.S. Census conditions when they fail; and (4) encompass all those technologies Bureau Current Industrial Reports for considered to be commercially available 1997 and other public sources shows theinstallers' recommendations. or in working prototypes. The Process industry shipments with avalue of$1.3 Residential water heating uses about Rule establishes the factors DOE uses for billion for 9.1 million water heaters. 2.6 quads per year ofprimary energy out screening design options. The factors Typical industry profits are 6 percent of of 19 quads (year 1997) for all are as follows:
revenues. residential buildings, at a costof$26.4 * Technological feasibility. DOE will

There is no currentnational non- billion. Where natural gas isavailable, only considertechnologies that are regulatory water heater efficiency 74% ofhouseholds use gas toheat water incorporated in commercially available improvement program. However, DOE is and 24% heat with electric. Where gas products orin working prototypes. considering an Energy Stars water is not available, 84% ofhouseholds use * Practicability to manufacture, heaterprogram and currently is electric water heaters and the remaining install, and service. A technology must supporting aprogram to demonstrate a households use oil-fired water heaters be able to be massproduced. installed 50 gallon, 6,000 Btu input heat pump orliquid petroleum gas (LPG). and serviced on a scale that will serve water heater and to develop a the relevant market atthe time ofthe residential condensing gas-fired water B. Technological Feasibility effective date ofthe standard. heater. Ifsuccessful, the DOEheat pump Underthe guidelines in the Process * Impacts on product utility to water heater program will eliminate the Rule, DOE will eliminate from consumers. DOE must determine ifany installation, service and some ofthe consideration, early in theprocess, any energy efficiency designs have product utility issues that formed most design options thatpresent significant adverse impacts on product ofourbasis for screening out heat pump unacceptable problems with respect to utility, including impacts on significant water heaters. This DOEheat pump technological feasibility, practicability subgroups ofconsumers, or ifa product 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 are water heater.Therefore it requires only safety. In order toconduct the screening substantially the same as products standard plumbing and wiring analysis, the Department gathers presently available in the U.S.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 gasand extracts safety. DOE will not consider any Losses more heat. designs that have significant adverse Some designs thatreduce 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 ofoil-fired water 10 CFR part430, subpart C, appendix insulation-are frequently applicable to heaters A(4)(a)(4) and (5)(b). all fuel types. A heattrap is a device thermophotovoltaic or that keeps hot water from circulating * Fourth, athermophotovoltaic or 1.Product Classesthat keeps hotwater from circulating thermoelectronic generator uses silicon


## ~. Product Classes 

## ~into apiping distribution system photovoltaic cells (energized by heat or DOE divides water heaters into because ofnatural convection. l e burning fuel) to generate classes based onthe type offuel usedto Manufacturers insulate water heaters by lt fo t burnin fan and op erate th heat water: electricity, natural gas/LPG, filling the cavity between the jacket and power to run a faition ad ontrols on aate the and oil. Different energy efficiency thetank with polyurethane foam gas-fired water heater. This ismore 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 1inch thick standing pilot and does notrequire any storage water heaters inthe following foam insulation, while some models connection to an outsideelectric power classes: have 2- or 3-inch thick insulation.An co co o ous crc or An electric water heater has a alternate way toreduce jacket heat Fifth, the two-phase thermosiphon storage capacity of20-120 gallons and losses sto use advanced insulation is aheat pipe thattransfers heat from

aheat input of 12 kilowa )matt kW oerials such asevacuated panels. the gas burner to the storage tank. aheat 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 standbylosses, but usually are restricted fired only)uses a stream of air to storage capacity of20-100 gallons and to one type offuel: atomize theoil. This improves
aheat input of75,000 Btu per hour or * Plastic waterheater 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 usedwith electric water heaters or with The heat pump is the only design storage capacity of50 gallons or less and indirect water heating techniques. option that improves theheating

a heatinput of 105,000 Btu perhour or * Amanufacturer can insulate the efficiency ofan electric water heater. A less. bottom ofthe tank,butthis design heat pump water heater can double the 2. Baseline Units option canbe usedonly with electric EF ofan electric water heater compared water heaters orwith gas or oil-fired to aresistance 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, thebaseline unit is * A damper installed either atthe flue times when heat gains from normal

one that meetsthe existing standard. We exit orin the vent pipe ofgas water household activities or from the determined the following baseline units heaters minimizes off-cycle heatlosses. environment are not large enough to for each fuel type: * The side-arm heater design avoids keep the house comfortable, e.g., the

* Thebaseline 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 toheat water and a small provide the makeup heatto 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 is0.86. · 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 heaterit a in gas-fired waterheaters. improvement applications: 40-gallon glass-lined steel tankwith a The timer design option limitsthe nominal 4 inch center flue. Theheat b. Design Options That Improve amot time d esign tin iit then an input rate is40,000 Btu/hr with a450 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 1inch ofpolyurethane foam.The that improve combustion efficiency. solar collectors aspre-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 drainwater heat recovery is a 32 gallon glass-lined steel tank * First, increased heat exchange from system uses a heat exchanger to recover insulated with 1inch ofpolyurethane a fluebaffle, 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 centerflue. It has anEF transfer. The flue baffle isa twisted strip storage tank installed in a conditioned of0.53 and theRE is 75%. ofmetal inserted intothe flue ofa gas space- raises the inlet water 3. of Design or oil-fired water heater that improves temperature to the ambient temperature. 3.Screening ofDesgn Options heat transfer to the flue. Increased heat * Dip-tubesthat prevent thebuildup

In the water heaterrulemaking exchanger surface area, usually from of sediment on thebottom ofthetank analysis, DOE considered three multiple flues, improves the heat may reduce the degradation of categories ofdesign options: designs transfer from the flue gas to the water. efficiency and prolong the life ofthe thatreduce 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 bydirect may save energy, they are typically a For a complete description ofthese contact with the flue products. part ofthe water heater system, not the design options, see Chapter 4.2 inthe * Second, a condensing gas-fired water heater. Forexample, the TSD. water heater condenses some ofthe tempering tank is a separate tank that is

### Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25047

plumbed to the waterheater. Each of a. Heat Pump Water Heaters access to the same amount ofhousehold these designs was eliminated in the Practicability toManufacture.From heat any heat pump water heater would screening analysis because none is meetings with the water heater industry, require to serve theresidence load; defined as awater heater inthe Act. DOEhas determined that water heater however, the lower heat extraction rate Section 321(27), 42 U.S.C. 6291(27). manufacturers would not have the lead ofthe DOE unit may allow for 4. Results of Screening Analysis time necessary to ramp upheat pump installation in locations with smaller water heater production to present sales surrounding air volume than isrequired 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 Theunit is being developed with analysis and published theresults in 1970s, sales of heat pump water input from DOE,Arthur D. Little, and 1970s, sales ofheat pump water heaters 

### Oak Ridge National Laboratory and has "Technology Assessment and Screening have not exceeded 10,000 per yearak been designed f rom te ote t to Analysis," Appendix B: Supplement to (<0.33% ofelectric water heater sales, desine ro the otet to the Water Heater Rulemaking <0.17% ofall waterheater sales) and address many ofthe known market Framework, January 1998. DOE notified presently sales ofresidential acing the adoption of stakeholders oftheavailability ofthis water heaters are lessthan 4,000 residential heat p p water heaters. document in the Federal Register on residential w aters a she first barrier is thehigh cost ofheat January 14, 1998. (63 FR 2186). residential wcater eers ayear in pump water heaters due to the heat

, categories covered byof the present pump motor, compressor and controls. We received many comments on the rulemaking. None ofthe five major A second barrier is the more complex elimination of theheat pump water manufacturers ofresidential water (andmore costly)installation for heat heater as a design option. Several heaters currently have aheat umpump water heaters. There are size, air stakeholders commented that DOE designin theirresidential product line, flow, filter replacement and condensate should consider all design options, and only two (State andRheem) have removal considerations. Third, poor including heat pump water heater had a heat pump water heater in their reliability ofmany models has caused a designs. (American GasAssociation product lines inthe last 10years. lack ofconsumer confidence. Fourth, (AGA), No. 28 at4; Okaloosa, No. 29 at LaClede Gas commented that DOE heat pum water heaters require more 1; Clearwater, No. 30 at 1; Mesa, No. 34 should not screen heat pump water maintenance. Presently, no mass market 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 ispresently supporting the Preliminary field tests ofthe DOE Laclede, No. 47 at 2). development ofaresidential heatpump design are likely to start in the spring of

DOEeliminated the heat pump water water heater product. (LaClede, No. 25 2000. Larger scale utility testing is heater due to issues concerning the at 3)The heat pump water heater design slated for late 2000 to 2001. Accelerated practicability to manufacture, install, being researched by DOE is an integral reliability testing is also scheduled and service on the scale necessary to heat pump water heater design which sometime after initial field testing has
serve the relevant market at thetime of uses a small compressor with 40% less resulted in a more or less stable product. the effective date ofthe standard and heating capacity than any used in Iffield and reliability testing are product utility ofthese units.DOE existing heat pump water heater positive, limited commercial production eliminated heat pump water heaters products (and has about 25% ofthe and sales are possible by 2003. Actual after careful consideration ofthe current heating capacity ofatypical electric production and sales would be through electric resistance and heat pump water resistance hot water heater). This should an existing air-conditioning equipment 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 existing factors to be considered in screening components (particularly the water heater manufacturer. Because of design options contained in the Process compressor and evaporator/fan system), the issues that haveplagued heat pump Rule. 10 CFR 430, subpart C, appendix and will likely be quieter in operation. water heaters in the past, DOE is A(4)(a)(4) and (5)(b). See Chapter Present designs ofthe DOE heat pump requiring its partners to introduce the 4.2.2.10 in the TSD for a discussion of re-inject condensate back into the airto product cautiously, correcting problems the heat pump water heater screening bere-condensed in theevaporator. DOE encountered during field testing and analysis. believes this may simplify installation, fully testingthe corrections. A market at some expenseto system capacity, study done by ArthurD. Little projected Several other stakeholders, including efficiency and dehumidification ofthe potential sales for theDOE design upto Gas Appliance Manufacturers residence. 300,000 units per year 10 years after Association (GAMA), Edison Electric The integral heat pump water heater commercial introduction, or 7.5% of Institute (EEI), Southern Company (SC), design proposed by DOE uses a 50- present electric water heater sales. (ADL 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 could water heaters. (GAMA, No. 51 at4; EEI, that design adds approximately a foot in develop, either alone or in partnership No. 36 at 2; SC,No. 12 at 2 and No. 42 height tothat tank. The attached 50- with others, a working heat pump water at 1; and VP, No. 45 at 3). gallon storage tank is sized to provide heater design in the next few years,

Similarly, the screening criteria were ample water for a typical day's use in there are significant difficulties in applied to condensing gas-fired water most residences. Smaller tank sizes are capitalizing and building heat pump heaters. DOE eliminated gascondensing not being proposed, as the cost water heater manufacturing facilities to water heaters because we determined effectiveness ofthe heat pump decreases provide for the present 4 million plus they are not technologically feasible. 10 rapidly with smallertank sizes and electric water heater sales annually. CFR 430, subpart C, appendix A(4)(a)(4) characteristic lower water usage. Manufacturers ofheat pump water and (5)(b). See Chapter 4.2.2.10 in the Presently, the smallest integral heat heaters would need to design a TSD for adiscussion ofthe condensing pump water heater design available in completely new product and build new gas-fired water heater screening theU.S. is an 80-gallon unit.The design production facilities to supply the analysis. proposed by DOE would still need current electric water heater market.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 ofall room air-conditioner top ofthe 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 ofhandling Report, EE-0009). In a 1994 A. D. Little Assuming no change in tank size from a large quantity ofheat 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 ofthe heat pump design will service and maintenance ofheat pump $750 million. Given the current levels of present installation problems where the water heaters have not changed since profitability ofthe water heater industry existingwater 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, ofplumbers. Topping and Shorey, August 31, 1994, shipments account for about 18 percent Heat pump water heaters are more ADL Report to GAMA, "Technical ofresidential electric waterheater complex in design and based on Analysis ofthe 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 ofthis, they require a

In addition, given thehigh initial cost About 18% ofelectric water heater broader range ofskills to service the for heatpump 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 orbackground in repair of heater designs, and anticipated impact into these locations. Perhaps 50% ofthe appliances like a failing heat pump
on consumer utility, initial sales of lowboy saleswould 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 maybe 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 peryear are installed in conditioners, and other "white" goods for shifting all production to heat pump residences of 1,000 ft2 or less. Perhaps (e.g., washing machines). According to water heaters and a shifting market size, as many as halfofthese installations theBureau ofLabor and Statistics, ofthe it is unclear how the electric water would alsorequire anadd-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 orhousehold 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 spacewith at least handbook, U.S. Dept. ofCommerce, sufficient production volume, DOE has 100 cubic feet per minute ofwarm air BLS) These storesrepresent a small concluded that the screening criterion of and wiring and plumbing connections fraction ofwater heater sales butmight practicability to manufacture, on the (probably through one ormore walls) for bepotential sales and service outlets for scale necessary to serve therelevant water pipes and a condensate drain. We heat pump water heaters. market atthe time oftheeffective date would characterize this installation as Presently, no mass-market servicing ofthe 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 ofcurrent heat pump water many ofthese 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 heaterprototype, we do not how many would result in loss of companyhas 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 noprecedent in the There are many replacement water million households could be affected history ofthe 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 ofseveral million units per under counters. An example ofsuch because ofproblems concerning year, in aroughly three-year time frame. small spaces are the approximately 27% practicability to install on the scale Therefore, DOE eliminated heatpump (10 million) ofall electric water heaters necessary to serve therelevant market at water heaters as a design option from installed in residences smaller than thetime ofthe effective date ofthe further consideration because of 1,000 ft 2 (average size: approximately standard. problems concerning practicability to 760 ft 2). In many ofthese installations, Practicability to Service.We are also service on the scale necessary to serve space restrictions would make it aware ofthe thousands ofcomments therelevant market atthe time ofthe impossible to simply replace the from interested consumers aboutheat effective date ofthe standard. existing electric resistance water heater pump water heaters in our 1994 NOPR. ProductUtility.Heat pumps need a with any ofthe existing heat pump These comments cited lack ofa good certain amount ofspace for proper water heater designs soldtoday. 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 heatfrom the candidate for someofthese 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 ofsmall reliability problems are still evident in volume ofat least 1,000 ft 3 ofheated air spaces or small sizes. some heatpump waterheater designs. toprovide adequate heat exchange and

Eventhe small (4,000-6,000 Btu/h) (NU, No. 4 at 1). minimize overcooling ofthe space, heat pump unit for the DOE "drop-in" Twohundred sixteen comments to which can impact performance. water heater mounted ontop ofatank the 1994 rulemaking process (docket Approximately 14% ofall householdsFederal Register /Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25049

are smaller than 1000 ft2 and presently portion ofthepopulation (10 million serious reliability or durability problems use electric water heaters. The volume households). Therefore, because ofthis and confirmed technical feasibility. ofheated air required for a heat pump significant adverse impact to significant (ASHRAE Transactions, 1987, 93(2) p. is equal to 12% ofthe floor space ofa subgroups ofconsumers, the 1485-1500.) However, DOE is not aware 1,000 ft 2home. Therefore, in smaller Department has eliminated heat pump ofany prototypes or commercially residences, current orprototype heat water heaters as a design option from available residential condensing gaspumpunits wouldhave to be located in further consideration. fired water heaters. Therefore, we have the living space, orhave vigorous (100 In summary, DOE has eliminated eliminated this design optionbased on cubic feet per minute) air exchange residential heat pump water heaters as a lack oftechnological feasibility. We withinthe living space. Such a location adesign option for this rulemaking discuss the details in Chapter 4.2.2 of can lead to significant homeowner because they fail to meet two ofthe the TSD. dissatisfaction due to loss ofspace three screening criteria listed earlier- c. OtherWater Heater Design Options occupied by the unit and related piping, namely, they are impracticable to
as well asthe potential for noise ofthe manufacture, install, and service and DOE haseliminated air-atomized oil fanand compressor. This isparticularly have adverse impacts on product utility. burners, power vents, and increased
aconcern in small, slab-on-grade There is no foreseeable means for the heat exchanger surface areas. Based on housing, mobile/manufactured homes or technology to advance enough inthe comments, DOE eliminated air-atomized apartments. short term toallow heat pump water burners on the basisthat they are not

Ifthere is no space to incorporate both heaters to fill market needs and to technologically feasible because the thewater tankand the refrigeration continue to provide areasonable level of prototype has notbeen applied to water subsystem in the same location, a consumer utility. heaters. We eliminated power vents reduced tank size may have to be As a result ofits screening analysis, becausethey require special venting installed. This could cause a 20% to 25 DOEhas determined thatheat pump systemsthat cannot be installed in % loss oftank volume on a standard 50 water heaters are not economically applications such as existing gallon water heater. Any substantial justified. Thisconclusion isbased on multifamily homes and some existing reduction in thetank size to the following factors: (1)a capital town homes and condos. However, the accommodate the heat pump would investment thatis 2.3 timesthe current Department is aware ofa new, low reduce the first hourrating, since first industry netpresent value; (2)adverse volume fan that may allow power hour rating depends on tank size and utility impacts on about 10million venting ofan oil-fired water heaterunit reheatcapacity. The first hour rating is, households living inhomes with less with conventional negative draft vent "an estimate ofthe maximum volume of than 1,000 square feet; and (3)adverse systems. Test results ofthis technology "hot" water that a storage-type water impacts on low income and seniors-only are not available. We eliminated the heatercan supply within anhour that households due to aprice increase increased heat exchanger surface areas beginswith the water heater fully about 3timesthe expected 2003 (for gas-fired water heaters) because heated." (10 CFR 430, subpart B, baseline price for electric water heaters. improved flue baffles can provide the appendix E). We interpret losses of first same efficiency improvement and are hour rating as a loss ofproduct utility. b. Gas Condensing Water Heaters preferred by manufacturers.

DOE believes heat pump water Although several manufacturers offer After considering theabove, the heaters should beeliminated from gascondensing water heaters, these are following are the design options further consideration because there only in commercial sizes. Results from considered for the rulemaking (see wouldbe a loss ofutility to a significant a GRI sponsored fieldtest showed no Table 1).
TABLE 1.-DESIGN OPTIONS USED INTHE ANALYSIS Design options-description Gas Electric Oil
H

eat traps

................................................................................................................................................ X X X P

lastic tank

........................................................................................................................... X X Increasedjacket insulation

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

................................................................................................ ............ X Im

proved flue baffle/forced draft

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

.................................................................................................. .................... X Flue damper (electro-mechanical)

........................................................................................................... X Side-arm heater

....................................................................................................................................... X

.................... Electronic (or interrupted) ignition

....................................................................................... X.................... . X used only inconjunction with the side-arm heater option.

D.Engineering Analysis of Design analytical tools and thecritical analyses. First, the U.S. Environmental Options assumptions DOE used in the water Protection Agency (EPA)is requiring a

The engineering analysis determines heater engineering analyses. We also phase out oftheblowing agent currently themaximum technologically feasible discuss two initiatives by other Federal usedby the water heater industry for energy efficiency level, calculates unit agencies that impact the rulemaking foam insulation (HCFC-141b). Second, energy savings and payback, and analyses. manufacturers havereached a voluntary estimates the retail price for each design 1.Other Federal Agencies' Initiatives agreement with the Consumer Product option and combination of design Safety Commission (CPSC), to produce options. It analyzes thedesign options Two actions by other Federal agencies gas-fired water heaters resistant to identified as aresult ofthe screening outside oftheDOE efficiency standards ignition offlammable vapors. Thefirst analysis. This section discusses DOE's process will affect our engineering will affect the efficiency ofwater25050 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

heaters, and the second will increase the 134a, and HFC-365mfc. All ofthese production andto perform the necessary price ofgas-fired water heaters. have zero ozone depletion potential and teststo measure results using the new

Mostresidential water heaters are thus will meet theMontreal 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 thejacket. usedin 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 ahydrochlorofluorocarbon, HCFC- manufacturers have been cautious about stakeholder comment on the cost and 141b, as a blowing agent for this itsuse. HFC-134a is currently available, availability of HFC-245fa and water insulation. HCFC-141b is an ozone- but itsthermal resistance islower 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 ofthe Montreal Protocol, the EPA has potential alternative blowing agent, but comments on approaches that would scheduled the phase-out ofthis blowing it alsohas a lower thermal resistance enhance the transition to a newblowing agent by January 1, 2003. Water heater than HFC-245fa and its price isnot agent for manufacturers, including, but manufacturers must use another available. Our decisionto analyze both not limited to, the timing needed for the blowing agent afterthat time. HFC-245fa and water/CO2 blowing transition ofHFC-245fa, water blown

A number ofalternative blowing agents allowed usto cover therange of foam, or any other alternative blowing agents are available. The industry is performance and costs ofthe 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 oftheTSD. alternative blowing agents. HFC-245fa. We based our decision on a Althoughwe have analyzed HFC- On September 13, 1999, we received number ofcriteria, including zero ozone 245fa as ablowing agent, there is updated information indicating that depletion potential, lowglobal warming continuing concern about its Honeywell had received EPA approval potential, availability by 2003, and availability. Representatives from for production ofHFC-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 ofthe 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 inreducing thermal 245fa blown insulation to our analysis. GAMA, anindividual, and an insulation losses than water blown insulation.

We used HFC-245fa and water blown supplier about the availability ofHFC- Therefore, since ourproposed 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 themarket. GAMA and the resultsbased on HFC-245fa blown manufacture HFC-245fa inthe U.S., manufacturers are concerned that insulation. However, the Department provided estimates ofHFC-245fa costs. Honeywell isthe only source for HFC- has completed an identical analysis For efficiency data, we used published 245fa. They are alsoconcerned that using waterblown foam in order to laboratory measurements ofphysical manufacturers need samples ofHFC- anticipate theunlikely event that HFCparameters. In order to keep thebaseline 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 tomake characteristics ofwater 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 offlammable 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 ofsteel used for the No. 91 at 2; andEnergy Market and the main burner. If flammable vapors water heaterjacket in addition to the Policy Analysis, Inc. (EMPA), No. 88 at are in theair near a water heater, there extra volume and cost ofinsulation. The 9). is thepossibility ofunintended ignition. analysis and test results using HFC- Several comments suggested waysto This is apotential safety problem 245fa and water blown foam to evaluate deal with issues concerning the because waterheaters are often installed design options can be found in Chapter availability ofHFC-245fa. The in garages andbasements, where 3.4.1 oftheTSD. 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 ofother alternatives. GRI HCFC-141b could be stockpiled, the staffrecommended publication ofan claimed other types ofinsulation may EPA could be petitioned to extend the advance notice ofproposed rulemaking be preferable to HFC-245fa blown phase outofHCFC-141b, or DOE could for the development ofa test procedure insulation. (GRI, No. 48at 2). The make thenew standard conditional on that would determine whether a Oregon Office ofEnergy (OOE) the availability ofHFC-245fa. (ACEEE, particular gas-fired water heater design requested that DOE provide a succinct No. 93 at 7). SC andEEI suggested DOE would ignite flammable vapors. and complete summary ofthe delay implementation ofthenew water However, before the notice was alternative insulations and why they heater standard ifHFC-245fa based published, the waterheater

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 atest procedure and newgas

In addition to the water/carbon DOE isconcerned aboutthe relatively burner designs. dioxide (C02) and HFC-245fa blowing short time themanufacturers have to The CPSCworked with GRI andthe agents, there are cyclopentane, HFC- incorporate a newblowing agent into water heater industry to develop atest

### Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25051

procedure for gas-fired water heater manufacturer cost of$35 is reasonable. heaters have been eliminated. Therefore, designs that willresist ignition of We discussed this during the the proposed standard for both electric flammable vapors. The American manufacturing interviews, and several and gas-fired water heaters will not National Standards Institute (ANSI) Z21 agreed with this cost estimate. achieve the max tech levels. The reasons Committee approved this test procedure Furthermore, the design does not for this decision are described in our inMay 1999,but final approval by the require electricity for thewater heater or discussion on screening, and in Chapter full ANSI committee is still pending. modifications ofthe venting system. 4.2.2 ofthe TSD. Accordingly, the Gas-fired water heaters designed tobe DOE also anticipates no changes in Department has satisfied the resistant to the ignition of flammable efficiency from flammable vapor requirements ofSection 325(p)(2), 42 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 design marketing gas-fired water heaters these assumptions orto update the option technologies that were not resistant to ignition offlammable vapors analysis, as designs meeting the ANSI screened out into successively more 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 levels for manufacturers ofthe transition to Levels each product class. We combined design designs resistant to flammable vapors. Amendments to a standard are options by using our payback analysis. The voluntary agreement between rt t n We define payback as thetime required manufacturers and the CPSC will be required to achieve the maximume efficiency implemented byApril 1, 2001, which technoimprovements throughenergy savings. will be close to theeffective date ofthis technologically feasible and improvements through energy savings. rwill be economically justified. Section We started with the design optionwith rule. 325(o)(2)(A),42 U.S.C. 6295(o)(2)(A). the shortest payback and continued to

The impact ofthis 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 shortestpayback at each higher increase in manufacturing cost. Based maximum technologically feasible level efficiency level. See Table 3for design
on discussions with the Water Heater (maxtech) for each type (or class) of option combinations. The highest IndustryJoint Research and covered product andthen, if the efficiency levels for this rulemaking are Development Consortium, DOE decided proposed standard isnot designed to approximately 0.91 EF for 50-gallon to add an extra $35 per unit of achieve the max tech levels, state the electric water heaters, 0.71 EF for 40- manufacturer cost for designsresistant reasons that itwill not meet those gallon gas-fired water heaters, and 0.61 to ignition offlammable vapors. Inthis levels. EF for 32-gallon oil-fired water heaters. analysis, the$35 is applied to the The Secretary has determined heat 3 Methodology manufacturing cost ofall design options pump water heaters for electric, and gas forgas-fired water heaters, including the condensing water heaters, are the max Table 2 summarizes the information baseline design.EEI stated that the cost tech design options. This means the we used in the engineering analysis and of$35 may be very conservative. (EEI, maxtech level for electric is 1.7 EF and the assumptions we made. We briefly No. 39 at 5). We believe until flammable for gas is 0.91 EF. The max tech level discuss many ofthe assumptions in this vapor ignition resistant designs are for oil is 0.61 EF. However, as aresult section. Forcomplete details about the widely available in the market, and a ofour screening analysis, the max tech engineering analysis, please see Chapter market price is established, a levels for electric and gas-fired water 8 in the TSD.
TABLE 2.-KEY ELEMENTS USED INTHE 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 gas, 78% &82% RE on oil, plastictank on electric,side-arm heater, &IID on gas, interrupted ignition on oil. Simulation models

.............................................. WATSIM for electric,TANK for gas, WHAM for oil. Basisfor 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, resistance to ignition of flammable vapors). Pricedata

............................................................ W ater heater price database. Insulation blowing agent

..................................... HFC-245fa (Water blown insulation analyzed inTSD). Insulation cost

................................................. Existing-HCFC-141b blown-$1/lb from Honeywell. New-HFC-245fa blown-$1.32/lb, from Honeywell. Insulation thicknesses

........................................ 2inch, 2.5 inch &3inch. W arranty on baseline

.......................................... 6yearsor less. Markup

................................................................ Average baseline price divided by average manufacturer baseline cost. Installation costs

................................................. $160 for doorjamb removal &replacement on 27% of all designs with 3-inch insulation. $114 for Type-B vent connectors in25% of homes innorthem states with 78% RE on gas-

fired. $433 for chimney relining and Type-B vent connectors in25% of homes innorthem states with

80% RE on gas-fired. Maintenance costs

........................................ None on electric, $14.73/yr forthe side-arm heater for gas-fired and a$97.14 yearly maintenance contractfor oil-fired.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 thehighest energy combinations ofdesign options. Table 3 model calculations and manufacturer efficiency levels for each product in this shows the design option combinations data to determine theefficiency levels rulemaking, the Department then for each fuel type at incremental levels corresponding to various design option estimates the energy savings potential of ofefficiency. (These do notrepresent combinations.
TABLE 3.-DESIGN OPTION COMBINATIONS
Design Design option for electric water Design options forgas-fired water Design options for oil-fired water levo n heaters heaters heaters

1

.............. Heat traps

...................................... Heat traps

........................................................ Heat 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 +3inch 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) +3inch Heat traps +3 inch insulation +interrupted iginsulation. nition + increased heat exchanger area (82% RE). 8.............. Heat traps +flue baffles (80% RE) +3inch insulation + side arm +electronic ignition + plastic tank._

2003 Baseline Model. As discussed comparative analysis throughout the inches ofHCFC-141b foam insulation. earlier, the Department defines a TSD. OOE, TheNorthwest Energy Efficiency baseline unitin order to analyze options ComputerSimulationModels.To Alliance (NEEA), The Northwest Power which increase energy efficiency over analyze theenergy efficiency ofwater 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 usedcomputer 1.5 inches offoam on electric water effect near the phase-out date (2003) of simulation models for electric heaters to adjust the model results ofEF HCFC-141b, we had to create a baseline (WATSIM) and gas-fired (TANK) water 0.83 to reach the minimum EF of0.86. 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 waterheaters. 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 resultsbecause modeling support thisbecause theGAMA choices, th. Department determined allowsthe use ofconsistent directory listed one model with 1inch that the most likely alternatives to assumptions across design options. ofinsulation. Manufacturers indicated replace HCFC-141b appears to be water (AGA, No. 49at 1). toDOE that 1.5 inches offoam and HFC-245fa. Consequently, we WATSIM ModelforElectricStorage insulation on electric water heaters is performed a complete analysis using WaterHeaters.WATSIM isa detailed thenorm to meet the minimum these two different blowing agents. After electric water heater simulation program efficiency of0.86 EF for a 50-gallon weighing the comparative benefits and developed by Electric PowerResearch electric water heater. Therefore DOE
costs ofHFC-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 ofthe WATSIM Honeywell's announcement on the simulation algorithms: one for the program is not currently available to the availability ofHFC-245fa, we ultimately detailed simulation ofwater 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. drawprofiles. The output ofWATSIM verified for use in tank and system

To model thebaseline electric water provides detailed temperature profiles design, equipment sizing, and heater under existing efficiency ofthe 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 EFand other consumption analysis." (EPRI, TRthickness to 1.55 inches for HFC-245fa. parameters ofthe water heater using the 101702. 10/92). The Department To model thegas-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, weincreased the foam insulation ofabaseline model (i.e., onethat is NIST tested four mid-efficiency 50- thickness to 1.0 inch for HFC-245fa. To currentlymarketed that achieves a gallon commercially available electric model the oil-fired water heater baseline minimum allowable efficiency of 0.86 waterheaters and reported an average for the alternative blowing agents, we EF). When simulating thetypical 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 theminimum compared theNIST EFs with WATSIM similar calculations for waterblown allowable efficiency of0.86 EFby simulations ofidentical water heater foam so wecould perform a simulating ajacket thickness of 1.5 models. The results agree within 0.01

### Federal Register/Vol. 65. No. 83/Friday, April 28, 2000/Proposed Rules 25053

EF. Subsequently, NIST tested five high that the difference between the existing WHAMEnergyCalculation forOilefficiency electric water heaters and we efficiency standard and anyproposed FiredStorage WaterHeaters.We used a validated the WATSIM model to the standard is within the accuracy ofthe simplified spread-sheet model (WHAM) highest ofthe five test results, 0.91 EF. test procedure. 'VP, No. 45 at 2). EPRI for our engineering analysis ofoil-fired The WATSIM modeled results were claimed that routine EF testing water heaters. WHAM is based on the within 0.002 EF ofthe NIST testresults. performed attesting laboratories is only 24-hour simulated use test portion of These validations are in Chapter 8.2.4.1 within 3percent accuracy. (EPRI, No. 41 the DOEtest procedure. The model ofthe TSD. Therefore, we believe at 1). DOE investigated this problem calculates energy consumption from a WATSIM is accurate over the range of with Intertek Testing Services (ITS), water heater's RE, UA, and rated input EFs considered in this rulemaking. NIST, and themanufacturers. ITS (Pon). (Lutz, J., et al, 1998, ACEEE

Based on ourselected design options, claimed that itstest repeatability is Summer Study on Energy Efficiency in the WATSIM model predicts a within 0.5%. NISThas demonstrated Buildings, pp. 1.171-1.183). The model maximum of0.91 EF for electric water accuracy better than 1percent. NIST assumes the water temperature remains heaters. Stakeholders raised concerns at and ITSrecently measured the EF on at the set point temperature throughout the November 1998 Workshop thatthe the same model oftwo electric water the tank. We also assume RE and UA are 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 compared the NEEA, NWPPC, VP, OOE, the National not believe there is aproblem in results ofthe WHAM equation to results Resources Defense Council (NRDC), and accurately measuring performance ofthe WATSIM and TANK simulation ACEEE claim DOE should investigate results that will adversely affect any models ofresidential electric and gasand 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 and and those listed in the GAMA directory. efficiency standard for electric, gas- WATSIM results are within 3% or less (NEEA, No. 53 at 1; NWPPC, No. 43 at fired, or oil-fired water heaters. and WHAM andTANK results are 1; VP, No. 45 at 1; OOE, No. 44 at 1; TANKModel forGas-Fired Storage within 5% for normal operating NRDC, No. 46 at 1; and ACEEE, No. 52 WaterHeaters.TANK is a detailed gas- conditions, tank sizes and design at 1). ACEEE stated the difference fired storage water heater computer po between computer simulation and simulation program developed by b. Comments on Design Options points fory listings is about 0.03 efficiency Battelle for GRI, (GRI-93/0186). TANK TankBottomInsulation.One design poinstated DOE must e xplain what it intACEEE calculates energy flows throughout a option considered for electric water statedDOE must explain water draws, flue to do to ensure thatEFratings atg er hee r at ater in udg water draws, flue heaters is insulation under thebottom of accurate. (ACEEE, No. 75 at 3). DOE is heat losses, acket heat losses, fittings thetank, referred to as tank bottom investigating the discrepancies in EF heat losses, and combustion chamber insulation. EPRI and Bradford White ratings between the GAMA directory heat losses. Unlike WATSIM outputs, commented that they do not observe the and the WATSIM modeled results. TANK ouputs include the EF, RE, and efficiency improvement from insulating

NISTmeasured one high efficiency UA from theDOE test procedure. thetank bottom thatWATSIM predicts. electric water heaterfrom each Tovalidate theanalytical models (EPRI, No. 70 at 2 and Bradford White, manufacturer and found an average comprising the TANK program, Battelle No. 89 at 3). Based on DOE's computer 0.036 EF lower on test results than in conducted actual water heater testing simulation results, and loss mechanisms the GAMA directory listing. DOE also and monitoring. Battelle performed a set NISTobserved by infrared photography. received data from GAMA on its oftests to investigate the impacts of DOE believes the improvement in 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 warmer and found thatfor the 26high efficiency light input rates on EFs. Battelle regions at thebase ofwater heaters and electric water heaters measured, results compared test results to theTANK around piping penetrations than any averaged 0.02 EF lower than published model results. Battellethen tested gas other tank surfaces. (Fannev, Zarr and EFs in the GAMA directory. The NIST water heaters under the assumptions of Ketay-Paprocki, 1999 American Society and GAMA certification program test the DOE test procedure tovalidate the for Heating, Refrigerating and Airresults were consistent with the analytical predictions ofTANK. Battelle Conditioning Engineers (ASHRAE) WATSIM simulationprogram results. reported the results in terms ofEF, RE, Summer Meeting). We have also Therefore, DOEwill base its analysis of UA, and total standby loss. Overall, the discussed this approach with a electric water heaterperformance on difference between the experimental manufacturer who uses molded WATSIM results. values (measured) and thepredicted insulation under its tanks. This

Some stakeholders raised concerns values (simulated by TANK) is lessthan manufacturer believes water heater about thetest procedure. EEI and SC 0.01 EF for all ofthe above parameters. performance is improved but did not claimed there maybe measurement With the TANK simulation model for provide any test data to confirm the problems when determining the electric gas-fired water heaters, we consulted observation. Therefore, we will continue water heaterEF, since electric water with Battelleto develop characteristics to use the WATSIM EF results in our heaters are close to their maximum similar to theBattelle baseline model analyses. potential thermodynamic efficiency with anominal insulation thickness of InsulationEffectiveness.Due to water levels. (EEI, No. 39 at 2and SC, No. 42 1inch.GAMA comments stated that the heater tank geometry and the method of at 2). Vaughn claimed the error factor in manufacturers use a 450 Btu/hrpilot pouring liquid insulation into thejacket the test equipment is greater than the light on gaswater 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 not be (Vaughn, No. 56at 1). VP recommended rate for pilot lights on gas-fired water consistent between the sides and top of DOE determine and report the heaters. See Chapter 8.2 oftheTSD for the tank.Bradford White recommended confidence level ofEF results fromthe details aboutthe simulation models and DOE limitthe foam cavities to 2.5 water heater test procedure to ensure the baseline characteristics. inches in electric, 1.5 inches in gas25054 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

fired, and 1inch in oil-fired water improve heat transfer, thereby gas-fired water heaters with existing heaters. Bradford White stated the improving RE. RE is thepercentage of venting systems not designed for insulation effectiveness offoam does energy transferred to the hot water increased RE gas-fired water heaters can not double for 2 inches ortriple 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 ofenergy lost ofthe vent system in certain climates.

as the foamrises vertically and spreads through the flue and other parts ofthe Studies conducted by GRI/Battelle have horizontally in thejacket 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 itis not account forthis, we derated the available to increase RE. Because ofthe uncommon for a vent to be wet effectiveness ofHFC-245fa blown lowcost, theDepartment 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

usto 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 ofthe tank in the stated recovery efficiencies higher-than occur during a long period ofwetness. simulation models. 78% cannot be attained by modifying While we have discussed RE for water

InsulationThickness.With water theflue baffle only. (GAMA, No 71 at 3). heaters, typically appliances are heaters, thethickness oftheinsulation ACEEE claimed there are other characterized for venting purposes by cavity helps determine the diameter and technologies that canbe 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 ofthe input heat

an important consideration in water fired water heaters. (ACEEE, No. 93 at does notgo upthe flue. TheDOE 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 toldDOE they could reach heaters does notmeasure flue-loss reduction oftank volume could reduce 80% REby modifying flue baffles alone. efficiency; it measures RE instead. the first hour rating. SC andEEI claimed Forthe July 1999 workshop, DOE Therefore, RE was used in this analysis water heaters can become too wideto fit assumed flue baffles could be modified for measuring the impact on the flue through residential interior doors ifthe to increase RE to 78% or 80% from the vent system, but in order toestimate the insulation istoo thick, and therefore the currentbaseline of76%. We will impact ofincreasing theRE ofa water thickness oftheinsulation should be analyze 78% and 80% REbased on heater, arelationship between RE and limited. (SC, No. 42 at 2 andEEI, No. modifying flue baffles as design options. flue loss efficiency was needed. Flue 39 at7). 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 3inches because replacement units efficiency in oil products is possible, efficiency istypically 2-4% higher than mustbe 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 ofmore 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 orless. internally finned fluesor 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 proxyto reduced vent system life. To ensure that New England Gas Association (NEGA) determine the performance ofthe condensation does not occur in theflue, 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 of80% were selected for multiple smaller units, or performance to be conservative, since analysis. However, the Department inconvenience consumers with a wewere not confident anon-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 ofelectric water area that are not proprietary, and we a galvanized steel outerwall. The heaters and product utility will be haveestimated retooling and materials special double wall construction keeps impaired, particularly for 20-50 gallon costsbased on theuse ofthese other flue gases hot while inside the vent, lowboys andtabletop models. (GAMA, approaches. Weused this design to providing a strong draft and minimizing No. 71 at 4 and Bradford White, No. 74 completethe list ofenergy factors and condensation. Additionally, the at 2). Wereviewed the application of costs for oil-fired water heaters since aluminum inner wall is more corrosion these water heaters in households in this is themaximum 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, andwe Venting forGas-firedWaterHeaters. A number ofcomments supported a estimate only a small percentage of Most water heaters sold today are for the maximum RE level of80% for an households maybe affected (see Chapter replacement market, where anexisting 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 ofawater heater, which in turn can at 1). Additionally, ACEEE claimed, those situations where a smaller reduce the temperature ofthe flue gases based on Table 3inthe GRI study (GRIcapacitv tank is required. leaving the waterheater. A reduction in 95/0198), the lowest flue-loss efficiency

FlueBaffles. The flue baffle, the temperature ofthe flue gases can for homes with Type-B vent connectors twisted strip ofmetal inserted into the increase the likelihood ofcondensation. and masonry chimneys is 84.5% and flue ofa 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 fluegases, use ofincreased RE needed for 80% RE. (ACEEE, No. 93 atFederal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25055

5). OOE claimedthere are no inherent to determine thecost to manufacturers our consultants provided. GAMA based safety issues associated with REs ofup and consumers to achieve increased its cost estimates on the production of to 80%. (OOE, No. 96 at4). efficiency. In the 1997 Rulemaking a 50-gallon electric or40-gallon gasOther comments raised concerns with Framework Workshop, DOE and fired water heater. GAMA separated the
a maximum level of80% RE. LaClede stakeholders discussed three methods costs into variable (material, labor, Gas and GAMA stated DOE should not used to generate the manufacturing transportation, overhead) and fixed exceed a 76% RE in order to maintain costs for theengineering analysis. These (capital, product design) costs on aper- an adequate margin ofsafety. (LaClede, methods included: (1)Thedesign- unitbasis and provided a distribution of No. 69 at 6 and GAMA, No. 71 at 3). option approach, reporting the fixed, variable, and total manufacturing CNG and NEGA claimed setting a incremental costs ofadding design costsfor several design options. We standard level at 78% RE could lead to options to abaseline model; (2)the usedGAMA's cost data and consultant condensation and chimney degradation. efficiency-level approach, reporting datato determine thewater heater (CNG, No. 85 at I and NEGA, No. 90 at relative costs ofachieving energy manufacturer costs for all combinations 2). Bradford White said 78% isthe efficiency improvements; and (3)the ofdesign options. OOEclaimed maximum REto avoid corrosion in the cost-assessment approach, which GAMA's manufacturing costs for gas vent, but 77% ismore realistic. requires a "bottom-up" manufacturing water heaters are too high. (OOE, No. 44 (Bradford White, No. 74 at 2-3 and No. cost assessment based on a detailed bill at 7). DOEcould not get independent 89at 2). ofmaterials. cost data directly from individual

The Department is very concerned In written comments, GAMA manufacturers, so we are unable to about public safety for venting ofgas- recommended DOEuse the design determine if the manufacturing costs for firedwater heaters. We appreciate the option approach in itseconomic gas-fired water heaters are toohigh. We analysis by OOE and GRI. We also analyses because "there are onlya few believe thedata best represents the costs discussed venting concerns with state identifiable discrete efficiency ofall water heater manufacturers, as experts and chimney installers. Asa improvement measures possible for well as the incremental costsbetween result ofthese discussions and residential water heaters." (GAMA, No. design options. comments, as well as the GRI study 5 at 4). There were no other comments. GMAbased its existing baseline (GRI-94/0193), we believe there are no At the water heater standards

- model cost estimates on an electric technological barriers to using either rulemaking workshop in June 1997, water heater with 1.5 inches offoamed 78% or 80% RE gas-fired water heaters GAMA suggested it could collect and jacket insulation using HCFC-141b as a in a replacement installation. aggregate manufacturer costs on the blowing agent. The existing baseline is Furthermore, in most replacement design options ofinterest to DOE for the starting point to construct the 2003 applications, vent systems and chimney this rulemaking. DOE accepted that offer baseline cost, to determine markup, to reliners are available on the market to and agreed to use the GAMA develop incremental costs for heattraps meet the venting requirements for water manufacturing cost data. and to build up incremental costs for a heaters with 78% or 80% RE. Innew Theuse ofa design-option approach unit thickness ofnew insulation. For construction, installers can follow provides useful information, such as the gas-fired water heaters, GAMA based its manufacturers recommendations so identification ofpotential technological existingbaseline model cost estimates there are no problems with either a 78% paths manufacturers could use to on 1inch offoamed jacket insulation
or 80% RE. achieve increased energy efficiency. It usingHCFC-141b as a blowing agent.

HeatTraps.In its analysis for theJuly also allows theuse of engineering To develop costs for thicker insulation, 1999 workshop, DOE used WATSIM models to simulate the energy weestimated thematerial costs for the and TANK default values for heat trap consumption ofdifferent design additional foam and blowing agent as performance. Manufacturers claimed configurations under various user well asthe cost for additional sheet they could not achieve performance for profiles and applications. However, the metal. We used Honeywell's estimate of heat traps when installed on actual Department recognizes thatthe $4per pound for the material costs of water heaters. In its comments on heat manufacturer cost information derived the HFC-245fa blowing agent and traps, GAMA claimed DOE should use in thedesign-option approach maynot Honeywell's estimate of 15% blowing
a 0.01 EF increase. (GAMA, No. 71 at 5). reflect the variability in design strategies agent in astandard insulation mixture. Bradford White provided heat trap data and cost structures thatcan exist among Since the blowing agent is only 15% of 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 pound for ACEEE stated DOE should onlychange manufacturing costestimates from other HFC-245fa compared to $1 per pound the heat trap effectiveness based on approaches based on consultant's for HCFC-141b. We also assumed a independent test data. (ACEEE, No. 93 estimates, component manufacturers' value of$35 additional incremental at 8). DOE has averaged the GAMA and prices, and occasionally from other manufacturing cost ($15 variable costs Bradford White heat trap data. This has interested parties. DOE had two retired and $20 fixed cost) for designs to resist not affected gas-fired water heaters' heat water heater manufacturing engineers as flammable vapor ignition in gas-fired trap results, but it hasreduced heat trap consultants provide costestimates and water heaters. We discuss the cost performance on electric water heaters by peer review our analysis results. We assumptions for each design option 0.005EF. 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 HeatTraps.GAMA provided of0.012 EF for electric, 0.09 EF for gas- for gas-fired and Chapter 8.5.3 for oil- manufacturer costs for electric and gas fired, and 0.006 EF for oil-fired. These fired water heaters. water heaters with heattraps. GAMA
are the improvement values used in the GAMA provided most ofthe didnot provide costs for the heat trap analysis. manufacturer costs withthe exception component. Vaughn stated the costs for ofall oil-fired water heaters, the tank heat traps should be the same for gas c. Manufacturing Costs bottom insulation, and theplastic tank and electric water heaters. (Vaughn, No.

After determining the design option costs for electric and side-arm heater 56 at 2). Vaughn is correct. Based on combinations, theDepartment also had costs for gas-fired water heaters, which component costs from the heat trap25056 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

manufacturer, we know heat trap costs insulation because it has tobe molded. construction. DOE also determined that

are the same for gas and electric. (GAMA, No. 71 at 5 andBradford 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 weneeded to include consultant's analysis and discussions New England states, costan 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, sowe did not change water heaters located in aconditioned costs. these costs after theJuly 1999 space have no special venting

IncreasedJacketInsulation.GAMA workshop. See Chapter 6.4 oftheTSD 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 PlasticTank. Our consultant provided claimed Type-B connectors should be HCFC-141b blown insulation from a the manufacturer costs for aplastic 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 1inch on gas-fired water heaters to 6.4 oftheTSD. Although GAMA did not additional vent connector or flue

a thickness of 2inches only. Since provide cost information, GAMA relining cost associated with higher HCFC-141b willbe phased out in 2003, believed the cost ofthe plastic tank water heater efficiencies. (OOE, No. 44

we had to develop costs for alternative option hasbeen significantly at 5). OOE claimed there is no need for insulation. Ourconsultant developed underestimated. (GAMA, No. 51 at 3). Type-B venting or relining ofchimneys the cost ofthe 2003 baseline by adding Since GAMA did not provide any data for a water heater with an 80% RE that incremental costsfor HFC-245fa and to substantiate its statement, DOE has would not alsobe required for one with sheet metal to the HCFC-141b baseline not changed its costestimate. a 76% RE. (OOE, No. 96 at2). In order provided by GAMA. Our consultant ImprovedFlueBaffle. GAMA to be conservative and provide a margin used the same approach, adding the provided manufacturer costs for the ofsafety, 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 costswere based on a flue baffle water heaters mayneed vent connectors 2inch insulation thickness. Then, our design thatincreased the RE to 78.5%. or relining ofchimneys 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 3inch 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 FlueDamper. multiplied GAMA's incremental costs entailed more risk ofventing system GAMA provided manufacturer costs to for 2inches ofinsulation by these ratios condensation. Our consultant estimated include an electro-mechanical flue to generate.cost data in 2.5 inches and that themanufacturing costs for tooling damper and electronic ignitionwith a 3inches ofinsulation. 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 isno change in costs in the analysis.

Increased insulation creates a larger material cost for aflue baffle achieving Side-Arm Heater andPlasticTank. water heater thanthose 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 agasinstallations require the water heaterto conventional furnace shares the flue fired water heater design because match the dimensions ofthe one it is with a waterheater, there should be no GAMA received aresponse 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 theJuly 23, 1999 estimated 1% ofhomes will need Type- reasons. We considered costs for six workshop, isto reduce the inner tank Bvent connectors and 17% will need types ofside-arm heater designs: 76%, diameter slightly. Manufacturing a flue relining. (ACEEE, No. 93 at4-5). 78%, and 80% RE designs using ametal smaller innertank diameter would NEGA stated many New England tank and electronic ignition, and 76%, require retooling for many consumers wouldhave 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 oftanks ifhigher 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 ofthe 78% or 80% RE (Bradford White, No. 89 at2). 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% ofthehouseholds with gas- to thecost ofthe improved flue baffle costs. From discussions with GAMA, we fired waterheaters 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 thetrial standard levels, ofthese homes need Type-B vent disagreed with DOE's cost estimate for including any potential design changes connectors and chimneyrelining. DOE the side-arm heater design option; to the inner tank diameter. based itsestimates on GRI data (GRI 91/ however it did not provide any specific

Insulatingthe TankBottom. 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 whichrequires replacement furnaces on this issue at our July 1999 workshop.

use similar techniques, and our with higher efficiencies to have better Oil-FiredWaterHeaters.GAMA did consultants' estimates, wedetermined vents in existing installations. Since not receive information from enough the costto be between $2 and $4. After 1992, the DOE furnace energy efficiency manufacturers to allow it to aggregate theJuly 1999 workshop, GAMA and standards placed gasfurnaces in a new cost data for oil-fired water heaters. Bradford White claimed DOE should category ofthe NFGC and consequently Therefore, DOE relied completely on its increase the $2-4 cost for tankbottom requires better vent systems in new consultants' cost data for each design

### Federal Register/Vol. 65, No. 83/Friday, April 28, 2000 /Proposed Rules 25057
optionconsidered for theoil-fired water should nothave to knock out walls and and heights, pressure and temperature heater analysis. See Chapter 6.4.3 ofthe ceilings or relocate awaterheater reliefvalves,relining masonry chimneys TSD fordetails. during replacement. (Rheem, No. 95at and forcondensate removal. (Bradford

Bradford White suggested DOE only 1

### and SC,No. 84at 2). White, No. 74 at3; LaClede, No. 69 at increase the performance ofoil-fired Fromthe Residential Energy 6; and CNG, No. 85 at 2). waterheaters byapplying heattraps Consumption Survey (RECS) 1993 DOEbelieves we have accounted for because theburner isusually not public use data, 54% ofwater heaters theinstallation costsassociated with supplied with the tank andwould are located ina conditioned space.We higherREgas-fired water heaters. We therefore need a conversion kit. assumed atleast 50% of those homes used installers' estimatestocalculate Bradford White also stated DOE'scost would needthe closet oran attic door the cost ofinstalling Type-B vent estimates foraconversion kit aretoo removed tofacilitate waterheater connectors and todetermine the costto low. (Bradford White, No. 89 at 3).DOE replacement installation for 3inch thick reline masonry chimneys.These considered twotrial standard levels insulation. Weestimated thiscost at estimates are slightly higherthan the using only heattraps for oil-fired water $160 usingresponses fromwater heater GRI estimates.Weestimated the number heaters. However, the oil burner installers andthe 1996 Craftsman ofhomes needingType-B vent manufacturer, who suppliesmost ofthe National Construction Estimator. This connectors for78% RE gas-fired water water heater oilburners, provided our installationcostis forthe removal and heaters from comments, and from an cost estimates forthe conversion kit. replacement ofdoorjambs for 50% of AGA surveyina GRI report. (GRI-91/ d. Installation Coss all waterheaters located ina 0298). We alsoused the AGA survey conditioned space.We assumed oil- datato determine,by region,the The installation costisthe costto the firedwaterheaters are not installed in numberof waterheaters connected to consumer ofinstalling the water heater conditioned spaces and therefore this masonry chimneys.In the same manner, and is separate from theretail price. The cost isnot applicable tooil-fired water we estimated installers would reline cost ofinstallation covers alllaborand heaters. 25% ofthe masonry chimneys in material costs associated with the We also donotbelieve people should climate regions exceeding 5,000heating simplereplacement ofanexistingwater have to knock out ceilings orwalls to degree days whenreplacing an existing heater. Delivery, removal, andpermit replace a water heater.Therefore, we gas-fired waterheater withan 80% RE feesare also included. investigated the impact ofreducingtank waterheater. DOE developed its

Weestablished the installation costs volume by20% onthe firsthourrating. installation costs forType-B vent ofbaseline 50-gallon electric,40-gallon The first hourrating isa measure ofhow connectors and masonry chimney gas-fired, and 32-gallon oil-fired water much usablehotwater can be supplied reliningbased onthe replacement heaters from the same sources as the by a water heaterin onehour starting market and installers' costestimates for retailprice data.DOE assumed onlythe from a fullyheated tank.It is a typicalinstallation, which would 3-inch insulation thickness would determinedbythe DOEtest procedure. include the pressure and temperature increase installation costs forgas-fired Webelieve thatincreasing the heating reliefvalve.See Appendix D-3 in the andelectric water heatersinstalled element from4.5-6 kW can adequately TSD. withina conditioned space based on compensate forthe 10gallons ofstorage Wedidnot raisethe REenough to stakeholder comments and discussions volume lostby a 20% reduction in a 50- create condensation nordo we atthemanufacturer interviews. Four gallon electric waterheater.We also anticipate higher installation costs for 2 design options increased the costof believe that a similarincrease in gas or 2.5 inch insulation thicknesses. installing agas-fired waterheater. They burner inputrate can achieve thesame Therefore, we added $160 forremoval
are theimproved fluebaffle, electronic effect withgas-fired waterheaters. and replacement ofdoorjambs for50% ignition, electro-mechanical flue VentingCosts.Ifpeoplereplace their ofgas-fired waterheaters with 3inch damper, and side-arm heater. gas-fired water heater located ina thickinsulation located inconditioned

Incomments, ACEEE and VP claimed conditioned space with onewhich has spaces. Fromthe GRI data, we estimate installation costs differ in new ahigherRE, then there maybe that25% ofhouseholds with gas-fired construction and inexisting homes. additional installation costs. In an waterheaters in regionswith over5,000 (ACEEE,No. 23 at 2and No. 52 at 6; and attempt toaccount forthese costs, DOE heating degree days would need TypeVP,No. 45 at2). GAMA suggested assumed a Type-B vent connector is Bvent connectors at acost of$114 for DOE's analysis ofrevised waterheater installed when replacing an existing 78% RE. We estimated that 25% of standards shouldbe based oninstalled gas-fired waterheater located ina households withgas-fired waterheaters costs ofreplacement water heaters only. conditioned space with awater heater inregions with over 5,000heating (GAMA, No. 51 at 3-4).DOE used the with an REof78%, in 25% ofhomes in degree days would need chimney
sameinstallation costs forbothmarkets. climate regions exceeding 5,000heating relining atacost of$433 for 80% RE Webased these costs onreplacement degree days.Note thatheating degree gas-fired waterheaters. This is about costsbecause thereare nocost days are the number ofdegrees the one-halfofthe households with gasinstallation data for newconstruction. average temperature isbelow 65°F. For fired water heaters common vented with New constructioncosts are combined waterheaters withflue baffles that gas furnaces. withtheplumbing and ventingcosts achieve 80% RE, weassumed a Type-B Cost

### toInstallElectricity.The three and we could not separate outthewater vent connector is installed and a remaining gas-fired water heaterdesign heater installation costs. masonry chimney is relined when options (electronic ignition,electroInstallationCost for3Inch Thick replacing an existinggas-fired water mechanical flue damper, and side-arm Insulation.Thicker insulation creates a heater located in a conditioned space in heater) allrequire electricity to operate. larger waterheater than thetypical unit 25% ofhomes inclimate regions We used data from GRItoestimate the sold today. VP claimedwe should exceeding 5,000heating degree days. In number ofhouseholds thatwould account for the impact ofincreasing unit comments, Bradford White, LaClede and require electricity. We also used GRI size oninstallation ease and cost in CNG stated we mustadd more data toestimate thecost oflabor and replacement applications. (VP,No.45 at installation costtogas-fired and oil- wiring and adjusted these estimates for 3).Rheem and SCclaimed customers fired waterheaters for larger diameters inflation toobtain 1998 cost estimates,25058 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

see Chapter 8.4.5 in theTSD for more We performed this calculation masonry chimneys, orinstalling 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 thatthe baseline claimed the database is not The electro-mechanical flue damper manufacturer cost-to-retail price markup representative ofall 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 thatincrease agas-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 theTSD water heater analysis for fuel class in the engineering analysis. and OOE claimed DOE's retail prices are the March 4, 1994, NOPRto estimate the In order to obtain theretail price, DOE too high or DOE's incremental costs are maintenance cost ofthe flue damper. created theWater Heater Price Data too large. They cited data from the (59 FR 10464, March 4, 1994) Inthis Base. This DataBase contains extensive Eugene, Oregon Water and LightBoard analysis, we assumed the flue damper data onretail prices for electric andgas- or the California Residential Contractors failed in the tenth year ofoperation. We fired water heaters and very limited Program. (NEEA, No. 53 at 2; NWPPC, discountedthe maintenance cost ofthe 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. Whilethe 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 thebasis ofthe Battelle, we included the maintenance vendors in many regions oftheU.S. markups. Forexample, the analysis only
cost to replace the side-arm heater (e., arge retailers, plumbin included water heaters sold through circulation pump. (Battelle, No. 66at 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 ofprice information was gathered from volume models used asloss leaders replacement ofthe circulation pump large retailers1 at 1); and plumbing o a the markup each year. We estimated the cost using wholesalers. Although the database results should bereasonably consistent
contractor estimates and the 1998/99 lacks information on thenumber of with prices found inthe Northwest. Grainger Catalog. specific models sold, it contains actual (OOE, No. 44 at 7).

The intermittent ignition device (IID) e c ifi c mo d el s so ld i t n ta i n s In response to these comments DOE price s representative ofmany models. miiptpr mnrp data to make the ofgas-fired waterheaters may incur pric reresentative ofmany heater collected more data to make the maintenance costs due to the failure of retl pced te oi-faroximatel 25 oil database more representative. DOE thecontrol module orthe sensor. We retail prices from approximately added more retail price data from assumed the lD maintenance costto 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 theEugene replacing the standing pilotlight 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 ostto it not include the cost oftheburner, these prices so that itsdatabase would With e exception oftheelectro- w hich i typically purchased separately continue to be representative ofregional mechanical flue damper, theHD and the We determined an average price for populations in the entire U.S. side-arm circulation pump, information an existingbaseline 50-gallon electric, Nevertheless, the addition ofthese data gathered to date suggests there is 40-gallon gas-fired, or 32-gallon oil-fired didnot significantly change the average virtually no maintenance ofresidential water heater with HCFC-141b foam retail price ofgas-fired or electric water electric or gas-fired water heaters. insulation

. Sincethe length ofthe heaters. DOE believes itsprice database, However, there were some suggestions manufacturer's warranty affects the from more than 130 retail distributors from themanufacturer interviews that price ofthe water heater, we originally and plumbing wholesalers (representing side-arm gas-fired water heater designs considered onlywater heaters with a all 12 Census divisions and all five
may incur increased maintenance costs five yearor lesswarranty as baseline major manufacturers), provides an due to clogging ofthe heat exchanger models. However, attheNovember 1998 accurate representation ofprices with from scaling associated with hard water, workshop, water heater manufacturers good regional representation. but no data were identified orprovided provided information that six-year OOE claimed a constant price should
to confirm this. warranties are typical ofthose models notbe used for theentire analysis

We included atypical 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 ofthe 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 onthe final engineering normally found in baseline models. appreciate theprice data provided by analysis ofthedesign options. Based on this information, we have OOE andwe have used aportion ofthe changed the analysis to include water data in our national Water Heater Price f.Determination ofMarkups for Retail heaters with warranties ofsix-years or Database. However, wekept the prices Prices less in our baseline models. representative ofeach region in theU.S.

Theretail price is the consumer cost The Water Heater PriceDatabase by maintaining a fixed relationship ofthe water heating equipment. We includes installation costs that are part between the number ofwater heater determined the retail price for any ofthe total costto consumer. This price prices and the population ofeach design option simply by multiplying the includes miscellaneous fees such as the region. See Chapter 5.2 in theTSD. 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 priceby the manufacturer cost. replacing vent connectors, relining average markups for each product class

### Federal Register/ Vol. 65, No. 83 /Friday, April 28, 2000/Proposed Rules 25059

(i.e., 1.49 for electric, 1.22 for gas-fired, establishes a rebuttable presumption adversely affected. The Department has and 3.2 for oil-fired water heaters). that a standard is economically justified decided to consider theLCC impacts on

Since oil-fired waterheaters are if the additional productcosts attributed low income and seniors-only consumer essentially a niche product, the large tothe standard are less than three times subgroups in this rulemaking. We chose markupwas not surprising. However, the value ofthe first year energy cost the low-income subgroup because several commenters believed that the savings. EPCA, § 325(o)(2)(B)(iii), 42 higherwater heater prices might affect gas-fired water heater markup should be U.S.C. 6295 (o)(2)(B)(iii). that subgroup more than the general nearly identical or identical to the The payback, for purposes ofthe population. We chose the seniors-only electric water heater markup. ACEEE rebuttable presumption test, attempts to subgroupbecause many ofthem may be commented thatDOE's retail costs capture the payback to consumers in the low-income subgroup and showed inconsistent markups between affected ifa new standard is because they tend to use less hot water electric, gas-fired, and oil-fired water promulgated. It compares the cost and than the general population. Lower heaters. (ACEEE, No. 52 at 6). GAMA energy use ofwater heaters consumers water usage could increase the payback claimed the markup value for gas-fired would buy in theyear the standard ofsome efficiency improvements. water heaters was too low because DOE becomes effective with what they would only sampled the retailmarket and buy without a newefficiency standard. The LCC and one ofthepayback some ofthe models are direct vent DOE calculates a simplepayback which periods (median payback) are calculated models. (GAMA, No. 51 at4). GAMA, is the ratio oftheincrease inpurchase 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 Crystal markup to electric and gas-fired water (including maintenance). Ball (a commercially available software heaters. (GAMA, No. 51 at 4;AGA, No. In considering this factor, the program) based on actual distributions 49 at 5; EPRI, No. 70 at 3; SC, No. 72 Department calculates changes in LCCs ofinputvariables. The LCC outputs at2; CNG, No. 85 at3; and Bradford to the consumers that are likely toresult fromthis program are a range ofvalues White,No. 74 at 3). VPclaimed there is fromthe proposed standard and two thatallow usto determine what fraction no justification forusing one average different simple payback periods: the ofthepopulation will benefit from markup. (VP,No. 45 at2). Battelle medianpayback period andthe test energy efficiency standards. claimed the gas-fired water heater procedure payback period. The Based on the results ofthe LCC markup is too low. (Battelle, No. 83 at difference between these payback analysis, DOE selects candidate 8). SC didnot believe retail markups for calculations is due to the way we standard levels for a more detailed electric water heaters are twice as high calculate energy savings. Themedian analysis. The range ofcandidate

asthose for gas-fired water heaters. (SC, payback isbased on the LCC analysis standard levels typically includes: (1) No. 84 at 1). EPRI disagreed with DOE's using a derived amount ofhot water the most energy-efficient combination of markup approach because it raises the dependent on characteristics ofeach design options or most energy-efficient price ofheat traps differently for each household. The test procedure payback level; (2)the combination ofdesign fuel and tank size. (EPRI, No. 41 at 4). is based on hot water usage of64.3 options or efficiency level with the

We derived the markups by gallons per day, the estimate ofhot lowest LCC; and (3)the combination of comparing retail prices to the baseline water usage used inthe DOE test design options or efficiency levels with costs provided by GAMA. We believe procedure. apayback period ofnot more than three The effect of standards onindividual these prices are representative ofthe T h e ef ect o f standards on indyears. Additionally, candidate standard national market forresidential water consumers ilevels that incorporate noteworthy heaters. Additionally, we applied our operating expense (usually decreased) technologies orfill in large gaps and achange in the purchase price approach uniformly to all fuel types. usually increased). The neteffect is between efficiency levels ofother Chapter 5 ofthe TSD provides a analyzed bycalculating the change in candidate standards levels may be discussion on retail prices. LCC as compared tothe basecase. electe d

. 10CFR Part430, Subpart C, E.EconomicAnalysis Inputs to theLCC 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 DOEused in the water Analysis expenses (energyand maintenance heaterLCC analysis for the HFC-245fa

In determining economicjustification, costs),lifetime ofthe appliance, and a blowing agent. We also completed an the Act directs the Department to discount rate. analysis for water blown insulation in consider anumber ofdifferent factors, In addition to analyzing price and theTSD. We discuss many ofthese including theeconomic impact of energy cost effects on each household in assumptions briefly in this section. For potential standards on consumers. a national database, DOE also more details on the LCC analysis for Section 325(o)(2)(B)(i)(I), 42 U.S.C. determines which segments and what both blowing agents, please see Chapter 6295(o)(2)(B)(i)(I). The Act also size ofthe population, ifany,may be 9 in the TSD.
TABLE 4.-INPUT DISTRIBUTION USED INTHE 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 base line costs. Future energy prices

........................................... AE099 reference case to the year 2020 with extrapolations tothe year 2030. Discount rates

..................................................... 0-15% with an average about 6%. Water heater prices

............................................. From the engineering analysis. Installation costs &baseline retail prices

............ LBNLwater heater price database. Design option combinations

................................ From the engineering analysis.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 foreach house inRECS '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 likely9 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 ofpeople, tank size and type ofappliances from RECS, and thermostat settings and location imputed from the RECS data; climate data from NOAA 30year averages; inlet water temperature and airtemperature based on climate data.

To get data representative ofall U.S. because these prices did notrepresent a the average prices inherent in those residential households we used DOE's consumer's true savings. For theLCC bills, as reported in the RECS public use Energy Information Administration analyses, the Advisory Committee on data, as being equivalent to marginal (EIA) ResidentialEnergyConsumption Appliance EnergyEfficiency Standards prices for the purposes oftheLCC price Survey (RECS) for 1993. The RECS recommended DOE use the full range of analysis. publicuse data survey weights each consumer marginal energy prices Several stakeholders commented on household sothat the data properly instead ofnational 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 theDistrict of prices consumers pay (orsave) fortheir from the RECS public use data didnot Columbia. The 1993 RECS public use last units ofenergy used (or saved). The agree with EEI orAGA 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 theLCC analysis and estimated electric costs by 12.8% due to the use complete set ofdata for water heater marginal rates for electricity andnatural ofInflator93. (Inflator93 is a scaling analysis than any other survey reviewed gas from the 1993 RECS database. factor DOEused 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 thatDOE did not account for interview questionnaire and annual fuel information on rate schedules, fixed the sampling and non-sampling errors consumption and expenditures charges, ormarginal prices. DOE in theRECS public use data andthat (excluding transportation fuel) derived estimated consumer marginal electricity DOE included fixed costs. (EMPA, No. fromthe records offuel suppliers. It also and natural gasprices directly from 88 at 6-7). includes weather data (in theform of household data in the 1993 RECSpublic We discovered that the Inflator93 heating and cooling degree days) anda use data survey as the change in coefficient inthe July 1999 Workshop weighting variable. The households household monthly energy bills divided Analysis was incorrect andwe removed included in the analysis (75% ofthe bythe 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 thechange in monthly bill method. This method and EEl's and AGA's method of heater using one offour fuels: provides a precise marginal energy rate subtracting fixed costsbecause of electricity, oil, natural gas, or LPG. based on actual household bills. differences in the level ofaggregation Households without these features, For electricity, DOE calculated the (rate class vs. individual households), which did not report theirwater heater slopes ofthe regression lines for four sample set, and time period. size, orfor which a marginal energy summer months (une-September) and, Furthermore, DOE believes a marginal price could not be calculated, are not separately, for thewinter (October-May) energy price based on subtraction of used in the analysis. months. DOE derivedthe 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 theRECS data. average ofthetwo seasonal prices, change in monthly bill method can and EMPA claimed the 1993 RECS public where the weightingused was the does account for variable rates and

use data is not valid, reliable, or relative energy consumption ofthe 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 ofthe analysis inputs,
costs is from only a portion ofthe and 72% winter. For natural gas, DOE use ofmarginal energy prices, and households. (EMPA, No. 88 at 6). The calculated the slopes ofthe regression accurate conversion efficiencies provide RECS public use data isthe most lines atthe annual levelbecause 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 orderto 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 offuel 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 offuel oil which change during theanalysis based and LPG. We learned that bills paidby on EIA forecasts.
a. Marginal Energy Price residential consumers for both fuel oil We recognize there are sampling and

DOE formerly used average energy andLPG are essentially volume-driven, non-sampling errors in theRECS public prices, but stakeholders objected with a single block rate. We interpreted use data. However, these errors areFederal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25061

small and we expect they will have very c. Discount Rates rates, based on historical data and little impact on marginal energy rates. The Process Rule states thatDOE will judgments offuture trends, for different Forexample, EIA compared the results establish real (adjusted for federal taxes) tyes ofconsumer savings orfinancing. fromRECS with the American Housing discount rates for residential consumers For new housing, the estimated Survey results and foundthe maximum y considering arange of three differentnominal mortgage rateranges from 5- by considering arange of three differ-tax rate is b td difference between the two surveys was 8%, the derived after-tax rate is based 3.2%. EIA also compared resultsto s onconumers n on atax of28%, and a 2% inflation rate 3.2%. EIA als compared resurate, a rate based on consumers having issubtracted from the total. The result Consumer Expenditures (CE) estimates substantial savings, and a mid-range is s u b t ra c t e d f om t h e t o t a T h e r esult by the Bureau ofLabor Statistics and rate.is a range ofreal mortgagerates from found fuel expenditures for the CEwere 1.60%-3.76%. Example: 5%*(100%- A13(d). The mid-range discountrate 28%)-2% =1.6%. 2% higher for gas and 6% higher for will represent DOEs approximation of Forcash, theminimum interestrate is electricity. For cash, the minimum interest rate is

DOEused projected future trends in the average financing cost (or 0%. This rate applies to consumers average energy prices to derive opportunity cost ofreduced savings) making cashpurchases without estimates offuture consumer marginal experienced by typical consumers. withdrawing from savings accounts or Based on theguidelines from the energy prices for the economic analysis B ased o n egu es om e i n t e re s t bearing checking accounts. For energy prioposed sta rds. We crete ana Process Rule, we derived a distribution he maximum rate, theopportunity cost index (scaling factor) om e treted in ofdiscount rates to reflectthe variability is the interest that could havebeen index (scaling factor) from the trend in in finaninng methaods consumers can incould have beenmutual average prices (by fuel and sector) and use in ancing m ethods consumers can earned in a savings account or mutual applied it to the 1993 marginal prices u s e purchasing water heaters. The fund. The historical nominal maximum calculated from the RECS public use real mterest rate associated with savings rate ranged from 4.5-5.5% from database. The index accounts forboth financing an appliance purchase is a 1970-1986 (real rates of-8.27 to inflation and real energy price changes good indicator ofthe 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 cost example, the average residential higher first cost,but enjoy future represented by the interest earned in a electricity price declined by 20% from savings, although it is not the only typical mutual fund (assumed to be 6% 1993-1998, so weassume the marg inal dicator ofsuch costs. While the real). DOE selected areal rate of3% as 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 ofuncertain DOE assumed the interest rates for eperiod

o assumptions regarding the financing retail loans and credit cards have the b. Future EnergyPrices methods used by consumers, DOE same range. The minimum credit card

Given the uncertainty ofprojections believes the resulting distribution of rate is6% real. Introductory rates on offuture energy prices, DOE used discount rates encompasses the full some credit cards today are 5.9% scenario analysis to examine the range ofdiscount rates that are nominal, but after the introductory robustness ofproposed energy appropriate to consider in evaluating period (often six months), the rate can efficiency standards under different the impacts ofstandards on consumers increase sharply. Maximum rates are energy price conditions. TheLCC (i.e., values represented by themid- more than 20% nominal. However, if calculations used these scenarios. Each range financing cost, consumers with no the consumer pays with a credit card scenario integrates energy supply and savings, and consumers with substantial and the balance is paid in less than the demand into itsenergy price. The savings), as well as all the discount rates life ofthe water heater, then the scenarios differ in the energy prices that that fall between the high and low effective interest rate is lower than the result. TheAdvisory Committee on extreme values. nominal credit card rate. Thecurrent Appliance Energy Efficiency Standards DOE assumes themethod ofpurchase assumption is arange of6-15% real. suggested the use of three scenarios used by consumers is indicative ofthe Combining the assumed shares of withhigh, low, and middle levels of source ofthe funds and thetype of each financing method, the above real energy prices because three scenarios financing used, although DOE is not interestrates result in a weightedshouldbe sufficient to bound therange aware ofdetailed research into this average (mean) value of6% and a ofenergy prices. This isalso the relationship. Whirlpool Corporation distribution that varies from 0-15%. guidance provided in the Process Rule, indicated that approximately 40% of Sensitivity studies show thatwhile the 10 CFR 430 subpart C, appendix A white goods are purchased in cash, 35% LCC results are sensitive to the value 13(b). with credit cards, and 25% with retailer chosen for themean discount rate, the

TheEIA's 1999 Annual Energy loans. (1994 Eight Product Notice of LCC results are not sensitive to the Outlook (AEO99) reference case Proposed Rulemaking, 59 FR 10464, distribution ofdiscount rates. provides a middle scenario. Forthe high March 4, 1994.) The same manufacturer DOE believes the methods described and low energy price scenarios, DOE indicated that 25% ofappliance above are valid for establishing a used the scenarios with the highest and purchases are for new homes. However, distribution ofdiscount ratesrelevant to lowest energy prices inthe economic we know consumers purchase 20% of most purchasers ofthe products covered sector and the fuel ofinterest from water heaters with new homes, i.e., in bythis rulemaking. However, the AEO99. DOE also used thereference mortgages, and 80% asreplacements for Department acknowledges that different
case from the GRI projection, 1998 GRI existing water heaters in separate retail assumptions could be made about likely Baseline Projection: Residential Natural purchases. Consumers pay for retail interest, inflation and marginal tax rates, Gas, Electricity, and Distillate Fuel Oil purchases by cash, credit cards, or or about consumer financing methods, Prices Tables. The future trend in loans. Inthe case of water heating and that different approaches to energy prices assumed in each ofthe equipment, weassumed consumers identifying consumer discount rates four scenarios is clearly labeled and would usually use credit cards because might also be valid. Forexample, it is accessible in each spreadsheet. most water heater purchases are possible to base consumer discount Stakeholders can substitute alternative emergency replacements. In order to rates on the average real rates ofreturn assumptions in the spreadsheets to derive a full distribution ofdiscount on consumer investment or other examine additional scenarios as needed. rates, DOE estimated arange ofinterest measures ofthe opportunity costs25062 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 thecovered products. DOE does not average financing costs (or opportunity an opportunity to analyze the impact at believe, however, such alternative cost ofreduced savings) experienced by this time. We will, however, determine assumptions or alternative approaches typical consumers. the impacts ofthis updated information would significantly alterthe range of d Household Characteristics for the final rule. We have accounted for discount rates used by the Department the age ofthe 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 of7,111 households 1998 prices. We did this by multiplying discount rates. from the population ofall primary, the 1993 data by theratio ofthe average

TheDepartment i<s seeking any occupied residential housing units in annual energy prices from theEIA AEO informThe Departmen that is seeking anyport the U.S. Ofthe 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 andwe assume these Table 5 provides some information distribution ofthe discount rates households are representative of about households in the 1993 RECS derived from itsanalysis. Alternatively, housing on a national scale. The public use data used in the LCC DOEis soliciting comment on the households included in the analysis (see analysis. The weighted number of possible use ofa standardized Table 5) have four defining features: households are thetotal households distribution ofdiscount 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 fromRECS

mean of 6%. The use ofsuch a 3. One offour fuels: electricity, oil, but is determined from the results ofa standardized distribution would natural gas, LP gas California Energy Commission (CEC) explicitly recognize the many 4. Billing data for electric and gas-fired study ofhot water usage. We have uncertainties associated with DOE's water heaters and gallons of fuel oil included theaverage water heater set current analysis and, based on orLPG used point and average inlet water sensitivity analyses already performed Ofthe households not included, temperature, which are not part ofthe 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 waterheaters are not from the location ofthehousehold using alter the conclusions ofDOE's life cycle subject tothis rulemaking. Ofthe 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 ofaverage air claimed the discount rates in the LCC and 8.2% had insufficient billing data temperatures to estimate average annual appear tobe very low for consumers. for energy price analysis. outdoor and inlet water temperatures (EEI,No. 39at 7 and EMPA, No. 50 at EEI commented that theRECS public (NOAA database: www.ncdc.noaa.gov/ 2). They do not reflect theactual use data are more than fiveyears old. ol/climate/online/ccd). A more

consumer purchasing behavior as (EEI, No. 39 at 3 and No. 67 at 1). The complete discussion ofthedata not measured by an implicit discount rate. detailed 1997 RECS public use data from RECS is found in sectionIII.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 ofpeople)

................................ 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 InletWater (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 oftotal)

.................................... 5.68 5.69 0.64 0.12 12.13 Senior-Only Households (percent oftotal)

.................................... 8.13 7.66 0.72 0.39 16.90 Senior-Only and/or Low income (percent oftotal)

........................ 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. theRECS data. Battelle commented that for electric). (Battelle, No. 83 at 2 and We derived cold water inlet

some fraction ofhouseholds inthe AGA, No. 92 at 3). temperatures based on the average RECS database incorrectly identifies Set point temperature, air annual airtemperature. (NOAA fuel type ofwater 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 studyby

Battelle and AGA claimed DOE database. To obtain the set point, airand theCEC (CEC, 1990, Report No. P400- "fabricated data not in the database." entering watertemperatures, the 90-009), DOE has inferred the set point They believe this has ledto higher Department used the following temperature based on the cold water average set point temperatures for gas approach. DOE used heating degree inlet temperature. Thismethodology is water heaters (134.5°F for gas vs. days to determine an approximate applied equally to all oftheRECS 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 theresults among installed (55.1°F for gasvs. 56.7°F for are confidential. Based on the location, fuels isdue to regional differences of electric), and colder entering water we used the 30-year NOAA data to

### Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25063

saturations ofwater heater fuel types households having a particular LCC and Database, which is described in Section and not to the data thatDOE uses. payback. III.D.3.e. See Chapter 5.3 ofthe TSD.

Battelle disagreed with DOE's For the LCC calculations, we Inits analysis forthe November 1998 preliminary results showing average randomly sampled the set ofhouseholds 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 forhouseholds with gas-fired water LCC spreadsheets for each fuel type standard size existing baseline water heaters versus 45.4 gallons per day for (electricity, natural gas, and fuel oil) and heaters based on the manufacturing cost households with electric water heaters. blowing agent (water and HFC-245fa). forthe typical water heater plus (or Battelle claimed DOE's resultswill Chapter 9.1 oftheTSD describes the minus) incremental costs for extra foam increase the energy used by 3.3% and sampling methodology and contents of insulation, sheet metal, and other will cause 3.2% more standby losses for the RECS public use data. components. We determined the retail gas waterheaters. (Battelle, No. 83 at 3). In comments, EMPA claimed 10,000 price of each combination ofdesign DOE believes the differences in average Monte Carlo runs are not enough, and options by multiplying the energy use and standby lossesbetween consumers' actual savings depend on manufacturing costtimes the markup. gas and electric water heaters are due to their specific energy prices and amount See Chapter 7 on markups and Chapter regional differences innumbers ofwater ofusage ofthe appliance. (EMPA, No. 9.5 in the TSD for a complete discussion heaters by fuel typeand household size, 88 at 2-7). AGA claimed manufacturers' ofthis. among other factors. These differences costs and consumer prices are correlated AGA claimed DOE used average are not caused by inadequate drata.e so DOE should use a correlated Monte markups in the LCC. (AGA, No. 92 at 5). Carlo approach. (AGA, No. 92 at 5). DOE does not use average markups in e. Lifetime We believe 10,000 Monte Carlo runs the LCC. As described above, we Apliance

Magazinewas the src are sufficient because, when tested at calculate an overall markup for each ofp inf ation fowater heater lfeties. 20,000 runs, there was less than 1% RECS household by dividing a We created atriangular distribution difference in the results. The randomly chosenretail price from the usigWe rated atriangular distribution emanufacturers' cost data is not Water Heater Price Database bya tusing 4-9 years as the base for electc connected with a specific model but is randomly chosen manufacturing cost water heaters and the most likely value only provided as a cost distribution from the cost distribution data for each of12 years as the peak. Similarly, for Therefore, manufacturers' costs and the standard-size existing baseline model. gas-fired water heaters thebase is 3-15 years with themostlikely value at9 prices in the Lawrence Berkeley We apply this markup to all ofthe years w ith the most likely value ater 9 National Laboratory (LBNL)price subsequent design options for that years. We assumed that oil-fired water database cannot be correlated. There is household. We limited themarkup heaters have the same lifetime as gas- no one-to-one correlation between the algorithm to ensure the retail price was fir water heaters. cost ofa specific model tothe price for never lower than the manufacturing 2. LCC Spreadsheet Model that same model because GAMA only cost.

In order to simplify handling large provided cost distribution c. Operating CostModule aonsoinudaathwaeh r We analyzed all design options for

. Operating CostModule amounts ofinput data, the waer heae water heaters as ifthey were at Operating a water heater involves two LCC analysis spreadsheet has five production levels equivalent tothe costs: Fuelto operate thewater heater modules. The modules are LCC and typical existing baseline models, i.e., and maintenance to keep the water Payback, Equipment Cost, Operating possessing similar economies ofscale. heater running properly. Fuel costs Cost, Energy Analysis, and Hot Water We performed theLCC analysis depend on the water heater's energy Draw. Chapter 9 inthe TSDcontains a separately for each energy source: usage and the per-unit cost offuel. detailed discussion ofthe spreadsheet electric, gas (including LPG) and oil. We Maintenance costs depend on water and the individual modules. calculated the analysis twice, once for heater design and were determined from

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 calculate the model developed in Microsoft Excel this is addressed in Section F,National operating cost for the baseline product combined with Crystal Ball (a Energy Savings and Shipments. See class (fueltype) for each household in commercially available software Section IV.A.l.a ofthis notice for the the RECS database using average annual program). The model uses aMonte Carlo results ofthe LCC analysis. energy prices. Foreach design option or simulation to perform the analysis while The Department calculates payback combination ofdesign options. we considering uncertainty and variability and LCC for each design option multiply the energy savingsby the ofmany input values. Crystal Ball is a combination and compares itto the marginal energy price. The operating program that provides risk analysis 2003 baseline model for every sample cost is thebaseline operating cost minus capabilities to help analyze the household. the operating cost savings for the variability and uncertainties associated particular design option or combination with the data. We organized the b.Equipment Cost Module ofdesign options. Therefore, we apply spreadsheet so ranges (distributions) are Equipment costrepresents the sum of marginal energy prices to only the entered for each input variable needed theretail price, sales tax, and portion oftotal operating cost resulting to perform the calculations. installation costs.We calculated the from improved energy efficiency.

Recognizing that each household is retail price fromthemanufacturer's cost To account for future uncertainties, unique, we accounted for variability in multiplied by an overall markup. we apply various scenarios ofprojected themodel by performingthe LCC GAMA provided estimates ofwater future energy prices (trends bynational calculation for a large number of heater manufacturing costs for typical average) to each household's marginal individual households. The Monte Carlo existingbaseline models. The source of energy price. After we adjusted for simulation samples individual theretail price, the salestax, and the inflation and energy price changes, we households from the RECS public use installation cost ofexistingbaseline adjusted energy prices for the RECS data. The results show the fraction of models is the Water Heater Price public use data from the starting year by25064 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

the projected average future energy derived an equation from a CECstudy TheConsumer Subgroup Analysis for prices. Thus, each sample house from that measured delivered water water heaters estimates the variation in the RECS public use datahas four temperature and cold water energy consumption and LCC for different future annual energy price temperatures. (CEC, 1990, Report No. different subgroups ofconsumers under series associated with it.We estimated P400-90-009) Theequation derived different trial standard levels. Of future annual operating costs as annual from the CEC dataindicates that the particular interest isthe potential effect energy usemultiplied bythe annual water heater set point varies inversely of standards on households with low energy price series for each ofthe 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 fromamong 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 oftheCEC data. How manyhouseholds ofthis type are inputhis or her own price forecast. better offwith standards and byhow d. Energy Analyss M e e. Hot Water Draw Module much? How many households are worse d.Energy Analysis Module byhow much? Hot water use varies widely among offandby how much? Since we can write WHAM as an households because itis dependent on By comparing theLCC ofall equation, DOE used it in the LCC household and water heater consumers to the LCC ofthe specific spreadsheets to quickly and reliably characteristics, including thenumber consumer subgroups referenced above, estimate residential water heater energy and age ofthe people who live in the we determine ifthe standards will affect consumption. We validated WHAM home, the presence ofappliances using those subgroups differently. DOE made with the TANK and WATSIM hot water, the tank size andthermostat these determinations for each trial simulation programs for gas-fired and setting ofthe water heater, and the standard level for low income and electric water heaters for many water climate in whichthe home is situated. seniors-only households. heater characteristics. The WHAM By accounting for these five AGA stated DOE mustprovide results were within 3% ofpredicted characteristics, thehot water draw statistical support for the way theRECS energy consumption for electric, and model estimates average daily hot water data areused in the Consumer Subgroup within 5% ofpredicted energy used. Analysis. (AGA, No. 68 at 6).There are consumption for gas-fired water heaters. atotal of484 records for low income Three parameters-RE, UA and rated There a degree ofuncertamty households and 779 records for seniorinput power-describe theefficiency estimating hot water usebecause ofthe onlyhouseholds in theRECS database. characteristics ofthe water heater. The lmted dataon measured actual hot Most ofthe low income or senior-only operating conditions ofthe 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 databecause it isthe 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 theRE and standby heat loss Heating for Single-Family Residences: coefficient values from computer Group LoadResearch and Analysis," 4. Payback Analysis for Rebuttable simulations developed for the LBNL developed values for dailyhot Presumption Engineering Analysis and rated input water used forthe number and age of TheAct establishes a rebuttable power frommanufacturers' product people livingin thehome and for the presumption that a standard is literature to describe the energy presence ofappliances. (1996. LBNL economically justified ifthe additional performance ofwater heaters. 37805) product costs attributed to the standard

WHAM uses the average daily hot RECS provides data on the number are less thanthree times thevalue ofthe water consumption for each household and age ofhousehold occupants, first year energy savings. Section calculated by the Hot Water Draw presence ofa clothes washer or 325(o)(2)(B)(iii), 42 U.S.C. 6295 Module, discussed below. We dishwasher, and three ranges ofwater (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. Forthis analysis, however, we amount oftime needed to recover the from the outdoor airtemperature and needed specific water heater sizes. By additional money theconsumer invests the location ofthewater heater in the matching thethree RECS ranges (small, in increased efficiency through lower house. The RECS public use database medium, andlarge) with the standard operating costs. Numerically, the provides data on heating and cooling water heater sizes, we assigned an exact payback period is theratio ofthe degree days, but not air or water water heater size to each RECShouse. 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 itsreported to 50 gallons or larger. maintenance) from replacing the 2003 Census division with theclosest number nsumer Subrou Analysisbaseline water heater with a water ofheating and cooling degree days for onsumer ubgrou heater incorporating another more 1993. Once each household was In theProcess Rule, DOE committed efficient design option. associated with aclimate zone, wemade to considering the LCC impacts on Forpurposes ofthe rebuttable other temperature assignments from consumer subgroups who might be presumption test, DOE identifies the NOAA's 30-year average annual uniquely affected by arulemaking. design options with the highest temperatures. (NOAA database: Process Rule, Appendix A (11)(d). DOE efficiency thathave apayback ofno www.ncdc.noaa.gov/ol/climate/online/ used LCC as themetric to determine morethan three years. Since theAct ccd). consumer impacts. See Chapter 10 in requires that the rebuttable presumption

To assign hot water outlet the TSD for consumer subgroup be based onthe DOE test procedure, it temperatures for households, we analysis. is determined in theengineeringFederal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25065
analysis. See section IV.A.1.c. ofthis standards. National annual energy and Each ofthe above are determined for notice for these results. water savings are calculated as the selected trial standard levels. These F.NationalImpactsAnalysis difference between two projections: a calculations are done by the use ofa base case and a standards case. spreadsheet tool called theNES 1.Net Present Value (NPV) and Energy Analysis begins with estimated energy spreadsheet model, which has been 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 tailored to
assesses the NPV oftotal consumer LCC energy consumption and savings based each specific appliance rulemaking. and energy (and water, ifappropriate) on "site energy" (kWh ofelectricity, Inthe water heater rulemaking, the savings. A preliminary assessment of million Btu ofnatural gas, LPG or oil NES spreadsheet model also forecasts the aggregate impacts atthe national used inthe home). TheAct defines fuel type market shares to newhousing level is conducted forthe NOPR. "energy use" as the "quantity ofenergy completions Fuel switching may be Analyzing impacts ofFederal energy- directly consumed by a consumer caused byprice increases ofgas-fired efficiency standards requires a product atthe point of use, determined andor e ric e heaes de comparison ofprojected U.S. residential in accordance with test procedures andardsor other government agency energy consumption with and without under Section 323." Section 321(4), 42 tadards or othergovernment agency standards. The base case, which is the U.S.C. 6291(4). This isgenerally called actions DOE examines several scenarios projected U.S. residential energy "site" energy as opposed to "source" in order to include therange of consumption without standards energ, which includes transportation possibilities ordfferent market shares includes the mix ofefficiencies being and generation losses. of electric and gas-fired water heaters sold at thetime the standard becomes The energy savings to the nation are (see Chapter 11.3 ofthe TSD). effective. Sales projections together with expressed in quadrillions ofBtu's of 2. National Energy Savings (NES) efficiency levels ofthe 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 assumptions water heaters underboth base case and energy, kWh or Btu, and then uses a thatDOE used in the water heaterNES standards case scenarios. The time series ofconversion factors to analysis. We discuss many ofthese differences between the base case and convert site energy to source energy. assumptions briefly in this section. We standards case provides the energy and Thiswas arecommendation bythe discuss inmore detail below our cost savings. Depending on the analysis ApplianceEfficiency Advisory shipment analysis because shipments method used, the sales under a Committee that theDepartment are an important input tothe NES standards case projection may differ implemented recently. The conversion analysis. The shipment model predicts from those ofa basecase projection. factors are derived from theAEO99 the number ofwater heaters expected to

The Department estimates national (DOE/EIA-0383). be sold each year between 2003 and energy and water, if applicable, Measures ofimpact reported include 2030. For more details on theNES consumption foreach year beginning theNPV ofthe energy savings in dollars analysis, please see Chapter 12 in the withthe expected effective dateof the andthe energy savings atthe source. TSD.

TABLE 6.-ASSUMPTIONS USED INTHE 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 Projectionsto 2020 ............................................................. AE099. Extrapolation of Energy Prices to 2030

................................................ For petroleum, we use the average world oil price with markups from 2020; for gas, we use the average growth rates from 1997-2020 with margins from 2020; electricity prices are constant at 2020 levels. Electric Source to Site Conversion Factors

............................................. Time variant values from AE099. Gas Sourceto 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 by shipments forecasts. Base Case

................................................................................................ Electric: 80% lowefficiency, 20% high efficiency. Gas-fired: 70% low efficiency, 12% medium efficiency, 18% high efficiency. Oil-fired: 80% low efficiency, 15% medium efficiency, 5% high efficiency.

The NES spreadsheet model year as the difference between total in maintenance costs. NPV greater than determines thetotal source energy operating cost savings andtotal zero indicates net savings (i.e.,that the savings and the NPV ofthese savings. equipment cost increases. The NPV standard reduces consumer The model calculates net savings each calculations also capture any differences expenditures in the standards case25066 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

relative to the base case). NPV less than energy consumption for ayear. We levels to bethe 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 ofthe NPV also between the total energy consumption operating expenditures are the same for

can be expressed as abenefit/cost ratio. for thetrial standard level and thebase the two trial standards levels, however, The benefit isthe savings in decreased case. We summedthe 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 theperiod 2003-2030. Then using heaters. These different shipment standards relative to thebase case. energy conversion rates from the EIA's forecasts causethe aggregate equipment When the NPV isgreater than zero, the AEO99 orfrom AGA, we can calculate expenditures and operating costs to benefit/cost ratio is greaterthan one and the source energy consumption and differ for the twotrial standards levels. benefits exceed costs. savings. Energy conversion rates Because ofthe higher cost ofelectric

We determine equipment costs from account for generation and distribution water heaters in trial standard level 3, the increased purchase price associated losses ofelectricity and transportation the market share ofelectric water with the higher energy efficiency of and pumping losses ofnatural gas. heaters ispredicted to decrease. In the appliances purchased in the standards DOE'sproposed standard is onlybased 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 asthe forecasts, although we considerthe high million fewer electric water heater difference in the purchase price and low economic forecast. shipments intrial standard level 3than between the base case and trial standard NPVina Saturated Market intrial standard level 1. This loss in levels for newwater heaters purchased discounted difference in shipments ofelectric units is (roughly) NPV isthe (discounted) difference in compensated by an equivalent gainin each year, multiplied by water heater national wated by an equivalent gain in sales. We accounted for thenumber 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 ofnewwater heaters and the operating cost ofappliances, but includes the effect ofmarket share average lifetime ofeach 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 ofthe baseline design and consumers to make different purchase water heaters, this accounts forthe the hiher efficiency design options decisions, either choosing another effects on the nation ofstandards. from theLCC Analysis. Purchase price product, e.g., room air conditioner Considering NPV separately by fuel type includes thewater heater installation instead ofcentral airconditioners, 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 dueto price increases) can associated with the higher energy Water heaters constitute a saturated obscure the expected national energy efficiency ofwater heaters purchased in market (96% ofhouseholds)-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 ofhouseholds using a waterheater. complete discussion ofthis topic, see operating cost savings are the product of However, standards may affect the fuel sections 12.2 and 12.5 ofChapter 12 in savings per unit and thenumber ofunits type mixture ofthe water heater market. theTSD. 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 ofthemore important using anaverage annual unit energy price ofthe moreefficient water heaters. components ofany estimate offuture consumption weighted by the The shipments model, an input to the economic impact is shipments. percentage ofwater heaters in the NES, forecasts the change in market Forecasts of shipments for the base case market. share ofthe various fuel types in and the standard case need tobe

DOE calculates national energy response to the different standards. obtained as aninput tothe NES. Table consumption for thebase case and each These shipment changes, due to 7lists the major assumptions that DOE trial standard levelby multiplying the purchase price, are reflected in theNES used in the water heater shipments average energy consumption bywater calculation ofNPV. analysis. We discuss many ofthese heater age times the number ofwater Sincetrial standard levels 1and 3 are assumptions briefly in this section. For heaters ofthat age still inthe stock. This the same for gas water heaters, one more details on the shipments analysis, yields an estimate ofthenational total would expect the NPV forthese two please see Chapter 11 in theTSD.

TABLE 7.-ASSUMPTIONS USED INTHE 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 ofthe 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 ofhousing 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.

### Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25067

TABLE 7.-ASSUMPTIONS USED INTHE SHIPMENTS ANALYSIS-Continued Shipments analysis assumptions Descrption Assumption Equipment Cost .................................................. From the LCC analysis. Household Income

........................................ RECS93.

The Water Heater Shipments forecast We useimplicit discount rates to Voluntary programs typically have a spreadsheet is used primarily as an calculate equipment cost elasticities, smallbut important effect in raisingthe input into estimates ofnational impacts which are about 2-5 times higher than future efficiency ofthe average from standards implementation and into operating cost elasticities. Based on the appliance in the market. In the water the manufacturer's impact analysis. The operating costelasticities derived by the heater market, utilityprograms and state model predicts the total number of Oak Ridge National Laboratory (ORNL), building codes have created regional water heaters expected to be soldby we assume consumers are more markets forhigh efficiency gas-fired and manufacturers in each yearbetween sensitive to first cost thanto operating electric water heaters. See Section V.B 2003 and 2030. In addition, it describes cost. Usingthese calculations in the ofthis notice forresults ofenhanced the change in fuel type market shipments model and the NES voluntary programs. FEMP also saturation due to implementing spreadsheet, we can assessthe impact of provides government purchasers with standards and other macroeconomic fuel switching. The complete information about higherefficiency factors. The basic assumption ofour explanation and derivation ofterms are water heaters and their life-cycle costs. analysis is that nearly all homes in Chapter 11.3.2 ofthe TSD. We included the effects ofthese currently have a water heaterwith one As partofits analysis to determine programs in the base case by modeling ofthe four major fuel types, and that energy savings, theDepartment the currentmarket for each fuel type by this trend will continue throughout the develops a base case forecast. The base efficiency level. DOE also isresearching forecast period. Furthermore, we case shipments is a forecast ofannual electric heat pump water heaters and consider only water heaters serving a shipments in the absence ofnew hopesto increase their market single housing unit. (We know from the standards and their weighted average penetration in the future by reducing RECS public use data that 4% of energy efficiency to theyear 2030. This the firstcost to consumers. We have not housing units builtwill either have no forecast requires an assessment ofthe included any impact from these efforts hot water, share ahotwater heater with impacts ofpast and current non- to increase heat pump water heater otherunits, orbe fueled by a source regulatory effortsby manufacturers, market penetration in ourforecast since otherthan the four fuel types, but we utilities and other interested parties. weare still doing research. have excluded these from ouranalysis.) DOE considers information on the Since 1980, the U.S. has built about actual impacts ofsuch initiatives to 1.3-2.1 million new housing units each In its comments, AGA askedwhy the date, and also considers information year, including mobile home consumer implicit discount rates are presented regarding thepossible placements. From 1990-1993, about different for gas,electric, and oil (AGA, impacts thatany current initiatives 96% ofnew housing units installed No. 68 at 6). We use animplicit might have in the future. Such residential storage water heaters ofthe discount rate to model a consumer's information could include theactions type and size considered under the behavior and thetendency to purchase manufacturers, distribution channels, standards. The remaining 4% ofnew the least expensive water heater. We utilities, or others willtake torealize housing units are not considered in the
assume consumers are strongly such voluntary efficiency shipments forecast because the water influenced by first cost and future improvements. heaters are shared among more than one savings are much less important. The o develop abase case forecast of housing unit or renewable energy implicit discount rates are different for shipments,we used totalwater 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 million the increase in consumer price from the and market share data from consultants residential storage water heaters baseline to the first design option. Inthe to calibrate the model so it correctly installed in new housing each year. shipment analysis, we use the implicit estimates historical data. DOE Since 1990, these installations have discount rate to determine the value of calculated annual waterheater accounted for 15-20% ofannual water future operating cost savings forgas- 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 newhousing heaters. housing andreplacement units. We construction, the remaining 80-85% of

ACEEE claimed DOE's analysis account forthe energy saving impacts of shipments are replacements. We
assumes purchasers are quite sensitive non-regulatory efforts by manufacturers, determined the number ofreplacements to operating costs and suggested DOE utilities, and government (e.g., the by using the number shipped in the past reduce the sensitivity to operating costs FEMP), inthe base case and we forecast and a distribution ofwater heater life in the water heater shipment model their effects inthe future. DOE expectancies, which varies by fuel type. similarly to theadjustments made to the considered information onthe actual The choice among competing fuels for clothes washer shipments model. impacts ofsuch initiativesto date,and water heating ishighly correlated with (ACEEE, No. 93 at 5). We could not also considered information regarding the choice offuel for space heating. make any adjustments to our shipments possible impacts that any existing Most homes use the same fuel for water model similar to the adjustments made initiatives might have in the future. See heating as for space heating. In this for clothes washers because we do not Chapter 11.3.1 in theTSD for our analysis, we assume that when water have any consumer preference surveys estimates oftherelative market share heaters need tobe replaced, they are for water heaters. efficiencies for thebase case. replaced by water heaters ofthe same25068 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 ofinstallation trends in new housing. and higher prices. The change in price 1990s. Since space heating fuel and Natural gas andelectric 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 ofdifferent 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 theresults of than 1% ofwater heater shipments. shown periods offlat or declining theAmerican Housing Survey. U.S.

DOE estimates shipments based on shipments. (EEI, No. 39 at9). Our Census Bureau, Current Housing
two markets: new housing construction shipment forecast reflects the EIA's Reports, Series H150/97, September and water heaterreplacements in forecast ofcontinued strong demand for 1999. existing housing. We assume newhousing 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 aresult ofinstallation 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; FuelSwitchingandMarketShare.The shipments. Note that a constant market that is, we assume no fuel switching in Department decided to study the shipment fixes fuel shares sothere isno the replacement market. For each fuel potential impacts ofdifferent trial fuel switching. Foreach ofthese type, the number ofretirements isequal standard levels on fuel type market scenarios, we forecast all fourtrial
to thetotal stock ofeach vintage, share using the shipment model. A large standard levels. In all cases, weheld multiplied by aretirement probability shift from one fuel to another may affect market shares ofshipments constant forthat 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; thatis, 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 assistus in investigating fuel second scenario,we shift market shares lifetimes of 12 and 9years, respectively, switching concerns. The Working Group of shipments 10%, to electric 57% and

as published in the September 1998 was made upofrepresentatives from natural gas 34%. In the third scenario, issue ofAppliance Magazine. We expect GAMA, gas and electric utilities and we shift market shares ofshipments to
water heaterreplacements to constitute energy advocates. The Working Group 37% electric and 54% natural gas. 85 percent oftotal water heater decided that since most water heater Results from theNES 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 thethree scenarios 0.06-0.11 quads agreement with historical shipment data the same fuel type. Therefore, in our compared to themodel result of4.75 provided by GAMA, during the period analysis weassume no fuel switching in quads. Amongthe three scenarios, NPV from 1967 to the present. the replacement market; all shifts in fuel is at its highest level attrial standard

Theremainder ofshipments comes type market share are assumedto occur level three although it is about 15% from new housing construction. We in new construction. lower than the model forecast. Sincewe took housing completions, including The Department determined fuel type only changed the shipment model inthe mobile home shipments, from census market share in new construction in three scenarios and our shipment historic data and EIA forecasts. response toeconomic conditions. The forecast falls within the range ofthe Currently, 96% ofnew homes generate three components contributing tothe scenarios, weconclude the energy

a shipment ofawater heater that isnot type ofwater heater a consumer will savings and economic benefitsto shared andthat is fired by one ofthe buy are: equipment (initial) cost, consumers are not sensitive to a 10% four major fuel types.We assumethis operating (fuel) expense, and household increase or decrease in new percentage remains constant throughout income. The shipment model that we construction market share ofelectric or the forecast period. used takes income and fuel price gas-fired waterheaters. Therefore, we

The projected shipments for each fuel projections through 2030 from EIA. have continued to use themodel results type consist ofthewater heaters retired Equipment costs and unit energy in our analysis. We present the results and replaced, plus the number ofnew consumption arethose calculated in the for the sensitivity analysis in Chapter homes multiplied by thenew-home Engineering and LCC analyses. Each of 11.3.3 oftheTSD. market saturation ofthe fuel type. Total these variables isrelated to consumer Ene Prices modeled shipments agree with actual behavior bya set ofcostelasticities from b. rgy Pr shipment data from 1980-1997. a 1978 study bythe ORNL (ORNL/CON- Because theAEO99 forecasts onlyto

In itscomments, Battelle requested an 24 1978). Formore details on shipments theyear 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 theTSD. are forecast to 2030, weextrapolated analysis. (Battelle, No. 83 at7). 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 EIAuses shipments among fuel types, we expect 47% electric; 44% natural gas; 1% oil; to forecast fuel prices for FEMP. To the total number ofwater heaters and4% 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 maynot be supported by average growth rate for the world oil

same under different trial standard data.Data from theAmerican Housing price in combination with refinery and levels. When standards become Survey on space heating fuel market distribution markups from 2020.

### Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25069

Similarly, we derived natural gas prices uses the U.S. annual electricity well as emissions and energy costs. In from the average growth rate over the conversion factors fromAEO99, Table this manner, the analysis captures the years 1997-2020 in combination with A4 (DOE/EIA 1998). The source total impact ofthe 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 ImpactAnalysis at 2020 levels because we assume the divided by 0.9 (Natural Gas Council 1. Economic Impact on Manufacturers transition to arestructured utility (NGC), 1998). industry will be completed by then. In comments on the November 1998 The economic impact ofthe standard 

## ~3.~ Comments analysis, AGA claimed the gas source- on manufacturers isa criterion that to-site conversion should be 90%, but must beconsidered under EPCA, as LaClede stated the spreadsheet only the spreadsheet for theJuly workshop amended. Section 325(o)(2)(B)(i), 42 allows the EIA price,heat rate, used 78% in 2003 and 81% in 2030. U.S.C. 6295(o)(2)(B)(i). The Process Rule emissions, and economic forecasts. (AGA, No. 68 at 4). We have corrected provides guidance on how to assess (LaClede, No. 69 at 4). EMPA stated this error in the baseline case ofthe NES these potential impacts on DOE's analyses appear to be biased spreadsheet and the conversion is now manufacturers. 10 CFR 430, subpart C, toward EIA's high economic scenario. 90%. However, for thenatural gas appendix A 10. First, the Department (EMPA, No. 88at 2). The EIA high and savings fromthe trial standard levels we will utilize an annual cash flow low economic forecasts bound the GRI use a marginal siteto source gas approach in determining the and AGA forecasts, with one exception. conversion factor from NEMS-BRS quantitative impacts on manufacturers. From 2016-2020, theEIA low growth model (see Section m1.I ofthis notice) This includes a short-term assessment 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 oftheTSD. requirements during the periodbetween Appendix E-4 ofthe TSD for the results NGC stated thatin thecase ofnatural the announcement ofaregulation and ofalternate energy price forecasts. The gas, approximately 10% ofthe total the time when the regulation comes into spreadsheets can produce output based energy islost inthejourney from the effect. We will examine critial
on any ofthe four economic scenarios. wellhead to the burner tip. NGC variables affecting manufacturers, such Webased our decision on the reference compared this loss to losses of73% for as i ndustry NV,cash flowsby year, case in theAEO99 energy price electricity generation and distribution. Itas m dusty NP, cash flows y year, forecasts. This isthe middle range ofthe claims atotal energy efficiency analysis changes in ru re a icome,ts the energy price forecast and there is no will show gas-fired water heaters to be changes product price as itfects the bias toward the high economic scenario. more efficient andcost effective than fuel type ofwater heaters shipped, and

AGA commented that the national their electric counterparts. (NGC,No. 59othervarables as appropriate. Second, energy analysis spreadsheet does not at 1). theDepartment will analyze and report permit alternative inputs for electricity The Department has alwaysbelieved theimpacts on different types of generation efficiency. (AGA, No. 68 at that, in evaluating the impacts of manufacturers, with particular attention 4). The NES spreadsheet models include appliance standards, one must consider to impacts on small manufacturers.
a clearly defined column of conversion the full range ofimpacts, including Third,the Department will consider the factors, one for each year ofthe consumer and national impacts. Inthe impact ofstandards on domestic projection. DOE and stakeholders can analysis ofconsumer impacts, the manufacturer employment, examine the effects ofalternative Department considers the energy manufacturing capacity, plantclosures assumptions by substituting different directly consumed bythe product atthe and loss ofcapital investment. Finally, values in this column. point ofuse. The measures ofenergy theDepartment will consider the

The model calculates national energy efficiency and energy use are, for cumulative impacts ofother DOE and consumption atthe site (i.e., electricity example, all based onthe energy otherFederal agencies' regulations on in kWh, natural gas, LPG, and oilin consumed at thepoint ofuse and these manufacturers. MMBtu, consumed in the household). are the measures ofenergy 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 ofthis notice. See Themanufacturing impact analysis factors to calculate the primary energy Section 321(4) ofEPCA, as amended, 42 (MIA) estimates the financial impact of consumed. The conversion factors are U.S.C. 6291(4), which defines energy standards on manufacturers, as well as 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 itcan be directly related to capacity. Table 8 lists the major distribution ofelectricity, or information readily available, i.e., utility assumptions that DOE used in thewater distribution losses fornatural gas. This bills. In examining the impacts of heater MIA. We discuss each ofthese analysis assumes that the source standards on the nation, however, the assumptions briefly in this section. For conversion factor changes over time, Department considers the total energy more details on the MIA, please see and applies annual values. The model consumed overthe entire fuel cycle as Chapter 13 inthe TSD.

TABLE 8.-ASSUMPTIONS USED IN THE MANUFACTURING IMPACT ANALYSIS (MIA) Assumptions inthe manufacturer impact analysis Description Assumption
Manufacturer Costsand Investments ...................................................... GAMA & consultants' estimates. Financial Information

................................................................................ SEC-10K Reports, Moody's Company Data Reports, Standard & Poor's Stock Reports, and Robert Morris Associates Reports. Shipments

..................................................................................... From the shipments forecast.25070 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

TABLE 8.-ASSUMPTIONS USED INTHE MANUFACTURING IMPACT ANALYSIS (MIA)-Continued Assumptions inthe manufacturer impact analysis Description Assumption
Business Scenarios

.................................................................................. 1 Fullrecovery ofinvestment, 2.Loss ofall 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 offlammable vapors ongas-fired water heaters. Q

ualitative Impacts

................................................................................... From interviews.

We conducted the MIA in three continuing explicitly for several years specific financial information-SECphases.Phase one consisted ofthe afterimplementation. DOE obtained 10K Reports, Moody's Company Data preparation ofan 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 periodbefore Government Regulatory Impact Model implementation ofstandards to some Using industry "average" cost values (GRIM) to perform an industry cash flow future point in time provide the isnot adequate for assessing the analysis. Phase three entailed measure ofindustry netpresent values. variation in impacts among subgroups documenting additional impacts on Given therelatively small number of ofmanufacturers. Standards could more competition, employment, and firms in the industry, the Department negatively affect smaller manufacturers, manufacturing capacity based on created anindustry cash flow analysis niche players, or manufacturers comments during themanufacturer's using a combination oftop-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, theDepartment 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 ofstandards. During

There aretwo othergovernment financial information (top-down). these interviews, theDepartment 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 andt 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 ofHCFC's will require an alternative modified inputs to the GRIM to develop burde requested participation insulation blowing agent. Second, the anindustry 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 ofthe five flammable vapors on gas-fired water economic burden on manufacturers for nufcturers re heaters willrequire design, energy efficiency standards as well as large manufacturers responded to development, testing and production of otherregulations currently facing the DOE's request for interviews, so
a radically new gasburner. We account industry.examination ofthe small manufacturers for thesetwo actions in the MIA as The Departmentreceived was not possible at the quantitative cumulative effects along with energy manufacturing cost data forthe various level carried out for the large efficiency standards. design options for typically-sized gas- manufacturers.

. G I C F fired and electric waterheaters from 3. GRIM: Industry Cash Flowmanufacturers; GAMA had compiled 5.Interview Process A change in energy efficiency and reported these data. DOE The interview process played akey standards affects manufacturers in three consultants provided manufacturer role in theMIA, 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 waterheaters. privately express theirviews on production costs, and affect revenue DOE usedthe 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. Toquantify 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 theindustry cash flow process. GRIM. The GRIM analysis uses a analysis, the Department used the same The Department developed a detailed number offactors-annual expected shipment scenarios in the GRIM andthe and focused questionnaire, using
revenues, manufacturer cost ofsales, 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 extentto industry and market publications, to depreciation, new standards, and which individual firms maybe 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 TheDepartment ofJustice (DOJ) implementation ofstandards and analyzed publicly available, firm- reviewed and commented on theFederal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25071

interview questionnaire. The interview not placed any confidential information -Installation concerns due to thicker questionnaire solicited information on from the manufacturer interviews in the insulation. the possible impacts oftrial standard public record. However, DOE H.OtherFctors levels on manufacturing costs, product considered all oftheinformation prices, and sales. The questionnaire collected by interviews in itsdecision This provision allows the Secretary of solicited both qualitative and making process. Energy, in determining whether a quantitative information. Evaluation of DOE collated the completed interview standard is economically justified, to the possible impacts on direct questionnaires and prepared a consider any other factors that the employment, capital assets, and summary. Chapter 13.3.2 oftheTSD Secretary deems to berelevant. Section 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 Secretary has interviews. process. Also, Appendix H-1 ofthe TSD decided that no other factors need tobe

The questions on competitive impacts contains acopy ofthe manufacturer's considered in this rulemaking. pertained to the assessment ofthe interview guide. UtilityAnalysis likelihood ofincreases in market Themanufacturer interviews allowed concentration levels and othermarket a free exchange ofinformation between Theutility analysis estimates the conditions that could lead to anti- DOErepresentatives and manufacturer effects ofthereduced energy competitive pricing behavior. The representatives, in a manner that does consumption dueto improved manufacturer interviews also gathered not occur in public meetings. From this appliance efficiency on the utility 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, it is no increases to some manufacturers, financial impacts ofthe trial standard longer valid to assume a cost recovery whether any increased proportion of levels for each particular company. mechanism under public utility fixed costspotentially increases During the interviews, DOE and regulation, which wasthe basis of 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 consists (e.g., proprietary technologies). ofa comparison between forecast results

DOE conducted face-to-face -The requirements for anew blowing for a case comparable to theAEO99 interviews with fourofthe five major agent, Reference Case and forecasts for policy water heater manufacturers in the -Design options that are particularly cases incorporating each ofthe water winter and spring of 1999. During these costly or difficult to manufacture or heatertrial standard levels. interviews, the Department solicited the market, Table 9 lists the major assumptions information necessary to evaluate cash -Marketing and distribution issues, DOEused inthe water heater utility flows and to assess competitive, -Impacts ofdeveloping and analysis. We discuss each ofthese employment, and capacity impacts. manufacturing gas-fired water heaters assumptions briefly in this section. For DOE also discussed firm-specific thatprevent ignition of flammable more details on theutility analysis, cumulative regulatory burdens. DOE has vapors, and please seeChapter 14 inthe TSD.
TABLE 9.-ASSUMPTIONS USED INTHE UTILITY IMPACT ANALYSIS Utility impact analysis assumptions Description Assumption
E

nergy Prices

.................................................................................................................... AE099. Energy Savings

.................................................................................................................. From the NES spreadsheet as site energy savings. Interpolation of Scaling Factors

......................................................................................... Linear.

The Department uses a variant of produces abaseline forecast forthe U.S. because it explicitly simulates the EIA's widely recognized National energy economy through 2020. The impact on the industry, NEMS-BRS Energy Modeling System-Building NEMS-BRS model used for this analysis provides an accurate estimate of Research and Standards called NEMS- isbased on theAEO99 version ofNEMS marginal effects, which yield better BRS for the utility analysis, together with minor modifications. indicators ofactual effects than with somescaling and interpolation NEMS-BRS has several advantages estimates based on industry-wide calculations.' EIA uses NEMSprimarily that have led to its adoption as the average values. Marginal rates show forthe purpose ofpreparing the Annual source for basic forecasting in the onlythe effects ofstandards. Average Energy Outlook.Using NEMS, EIA appliance energy efficiency analyses. rates show the effects ofstandards as NEMS-BRS relies on the AE099 well as what is happening in the market. 'For moreinformation onNEMS, please referto assumptions, which are well-known and To analyze the effects ofstandards, the National Energy Modeling System: An accepted due to the exposure and weevaluate the trial standard levelsby Overview 1998. DOE/EIA-0581 (98),February. scrutiny each AEO receives. In addition, entering the changes in electricity, gas, 1998. DOEIA approvesuseof the nameNEMSto the comprehensiveness ofNEMS-BRS LPG, and oil consumption values into describe only an official version ofthe model without anymodification to code ordata. Because permitsthe modeling ofinteractions theNEMS-BRS Residential Demand ouranalysis entails some minor code modifications among thevarious energy supply and Module. We took the energy savings and themodel isrunundervariouspolicy scenarios demand sectors andthe 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 use, name NEMS-BRS refers tothe model as used here. BRS isDOE's BuildingResearch andStandards picture ofthe effects ofappliance and allocated it appropriately among office. standards. Perhaps most importantly, census divisions. In the TSD, wereport25072 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

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 majorassumptions including the fuel mix that isused for calculates thereduction in carbon DOE used in the water heater generation. See Chapter 14 ofthe TSD dioxide (CO2,nitrous oxide (NOx) and environmental analysis. We discuss formore details. sulfur dioxide (SO2)emissions with the each ofthese assumptions briefly inthis 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 ofeach standard BRS is amodification ofthe National Chapter 14 in theTSD. 

### TABLE 10.-ASSUMPTIONS USED IN THE ENVIRONMENTAL ANALYSIS

Environmental analysis assumptions Description Assumption
Energy Prices

................................................................................................................... A EO 99. Energy Savings .................................................................................................................. From the NES spreadsheet as site energy savings. Interpolation ofScaling Factors ......................................................................................... Linear Household Emissions

........................................................................................................ CO2, NOx & SO2 estimated from general factors.

We analyze the environmental effects reporthousehold emissions savings the point ofextraction to the point of ofproposed 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. SeeAppendix EA-1 in the losses from natural gas production are plus some scaling and interpolation TSDfor 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 tothose used for the AEO99 combustion. They affect thenatural 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 ofenergy savings for NEMS-BRS, accounted for in the model. As amount ofenergy (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 netbenefits of result in lessnatural gasgeneration, less trial standard levels. the standard as the difference between gas isextracted fromwellheads emissions estimated by the reference resulting in less transportation losses The environmental analysis considers case version of NEMS-BRS andthe from point ofextraction 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. Seethe 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 theTSD for details. carbon is incorporated from both coal the AEO99 version ofNEMS, the May We received several comments from and natural gasproduction. However, 25, 1999 EPA rule (64 FR 28249) on stakeholders about theenvironmental since NOx and SO2 emissions are only trading ofNOx 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 ofNOx emissions are renewable sourcesthe 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 estimatehousehold emissions. benefit to "saving" hydroelectric, wind, NEMS-BRS. For electric end-uses, all Household emissions result from the geothermal generation, orbiomass Btus. energy losses associated with combustion offossil 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, orLPG contribute to NOx savingsresult in differences in fossil 2 was included in theTSD to quantify emissions, DOE's analysis includes a fuel generation and not the fuels listed the relative contribution ofthese separate household NOx emissions by SCbecause fossil fuels tend to be upstream emissionsto those reported in estimation, based on simple emissions displaced first.The emissions NEMS-BRS. DOE does not includethe factors derived from the general reductions reported in this rulemaking estimates ofupstream coal mining literature. NEMS-BRS tracks CO2 are thenet result ofchanges in the mix emissions in its emissions reduction emissions based on the total offuels ofelectricity generating fuels used. estimates. consumed. NEMS-BRS also produces Changes in equipment and any VP commented DOE should use comprehensive estimates ofthe benefits construction program adjustments that marginal electric generating plant ofthe trial standard levels, sono result from proposed standards are also emission rates in the analysis tobe more additional analysis isnecessary. accounted for. For example, DOE will accurate and consistent with the energy Because SO 2emissions frompower only record CO2 emissions savings to costs. (VP, No. 45 at 3). Reported plants are capped by clean air theextent thatelectricity generators emissions are calculated from legislation, physical emissions ofthis 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 NetNationalEmployment 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

### Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25073

DOE considers in selecting aproposed this same economic activity. BLS data appropriate interpretation and use ofthe standard; 10 CFR 430 subpart C, indicates that expenditures in the results ofthis analysis. appendix A(4)(d)(7)(vi). The Department electric sector generally create fewer estimates the impacts ofstandards on jobs (both directly and indirectly) than IV. Analytical Results employment for appliance expenditures in other sectors ofthe A. TrialStandardLevels manufacturers, relevant service economy. There are many reasons for industries, energy suppliers, and the these differences, including the capital- Based on the combination of design economy in general. We estimate two intensity ofthe utility sector and wage options that representthe most energy employment impacts: total and direct differences. Based on the BLS data efficient level and the results ofthe 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 dueto shifts selected the following trial standard the national economy, including the in economic activity resulting fromthe levels (see Table 12). In selecting trial 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 Rule, result ifstandards led to achange in the Department attempted a more precise 10 CFR 430, Subpart C, Appendix A, number ofemployees atmanufacturing analysis ofnational employment 5(c)(3), to identify and select candidate plants and related supply and service impacts using an input/output model of standard levels at the lowest LCC, a firms. The MIA only discusses the direct the U.S. economy. The model three year or less payback period, and employment impacts. characterizes the interconnections themost energy efficient combination of

We define net national employment among 35 economic sectors using the design options. impacts from water heater standards as data from the Bureau ofLabor Statistics. Wehave established four trial

eneral economy. We exlect th e Since the electric utility sector is more standard levels. Each level is made up proposed energy efficiency standards for capital-intensive and less labor- ofacombination ofdesign options for

water heaters to save consumers money, intensive than other sectors (see Bureau each ofthethree fuel classes (electric, although these savings will bepartially ofEconomic Analysis, Regional gas and oil). Several ofthe trial standard offset by increased costs for water Multipliers: A User Handbook for the levels have the same efficiency within a heaters. The resulting net savings are Regional Input-Output Modeling System particular fuel type (i.e., gas-fired trial expected to beredirected to other forms (RIMS II), Washington, DC, U.S. standard level one and three have the ofeconomic activity. We expect these Department ofCommerce, 1992), a shift same efficiency, but theelectric and oilshifts in spending and economic activity in spending away from energy bills into fired efficiencies are different). This to affectthe demand for labor,but there other sectors would be expected to allows us to evaluate different design is no generally accepted method for increase overall employment. Formore option combinations of fuel classes for estimating these effects. details on the netnational employment subsequent analysis, permitting us to

One method to assess the possible analysis, please see Chapter 15 in the make an informed decision on the effects on thedemand for labor of such TSD. This analysis also concludedthat merits ofdifferent trial standard levels. shifts in economic activityis to compare the shifts in sectoral expenditures likely We repeated some energy efficient, cost sectoral employment statistics to result fromthe proposed ballast effective design options for electric and developed by the LaborDepartment's standard would likely increase the net gas-fired water heaters in the selected Bureau of Labor Statistics (BLS). The national demand for labor. trial standard levels to reduce the BLS regularly publishes itsestimates of Because this is a new analysis for an potential for fuel switching between the number ofjobs 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 and ofthe economy, as well as thejobs comments on the validity ofthe associated design options for each fuel created elsewhere inthe economy by analytical methods used and the class ofwater heater.
TABLE 11.-TRIAL STANDARD LEVELS FOR WATER HEATERS WITH HFC-245FA BLOWING AGENT

Trialevel Design options Energy factor

Basecase

......... Electric: Baseline

....................................................................................................................... .93- .00132V Gas: Baseline

.......... .............................. ..................................... .62-.0019V Oil: Baseline

........................................ .................................................................................. .59-.0019V 1

...................... Electric: HeatTraps +Tank Bottom Insulation

.................................................................................................... .95- .00132V Gas: Heat Traps +Flue Baffles (78% RE) +2Inch Insulation

........................................................................... 67-.0019V Oil: HeatTrapsOil: Heat Traps

..................................................................................................................................................... Traps.60-.0019V 2 ...................... Electric: HeatTraps +Tank Bottom Insulation +2 Inch Insulation

................................................ 96-.00132V Gas: Heat Traps +Flue Baffles (78% RE) +2.5 Inch Insulation

........................................................................ .68-.0019V Oil: Heat Traps.VOil: Traps

..................................................................................................................................................... .60-.0019V 3

...................... Electric: Heat Traps +Tank Bottom Insulation +2.5 Inch Insulation

.................................................................. .97-.00132V Gas: HeatTraps +Flue Baffles (78% RE) +2Inch Insulation

........................................................................... .67-.0019V O il: Baseline

......................................................................................................................................... .59-.00 19V 4 ...................... Electric: Heat Traps +3Inch Insulation +PlasticTank

....................................................................... .98-.00132V Gas: Heat Traps +Flue Baffles (80% RE) +3Inch Insulation +SideArm Heater +Plastic Tank +IID

............ .79-.0019V Oil: Heat Traps +3Inch Insulation +Interrupted Ignition +Increased Heat Exchanger Area (82% RE) ......... .67-.0019V *V isthe Rated Storage Volume, which equals the water storage capacity of awater heater, ingallons, as specified by the manufacturer.25074 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

Based on Honeywell's September 13, Waterheater energy conservation LCC savings for trial standard levels 1999, public announcement that it will standards vary as a function ofthe water one, two and three are positive for gasproduce HFC-245fa, the proposed heater volume. Section 325(e) ofEPCA fired and electric water heaters with the standard levelsare based on insulation as amended, 42 U.S.C. 6295(e). DOE HFC-245fablowing agent. Only trial blown with HFC-245fa. We considered defines this volume asthe rated volume standard level three is not negative for insulation thicknesses of2inches, 2.5 based on manufacturers' labeling. See oil-fired water heaters, and it is the inches, and 3inches. Although we do 10 CFR 430, subpart B, appendix E. For baseline. None ofthe othertrial not report the results ofthe 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 ofefficiency because energy savings are small for each trial standard level. We chose under consideration in the analysis. compared tothe increase in consumer HFC-245fa over water blown insulation 1.Economic Impacts on Consumers price. because of0.7 to 1.7quads 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 andgas-fired water heaters, the four.We request comments on the use consumers, we conducted a LCC percent ofhouseholds benefitting ranges ofwater blown insulation since DOE analysis for each ofthefuel types and from 74-91% for thetrial standard has analyzed both options. Results from trial standard levels including levels analyzed. For oil-fired water thewater blown insulation analyses are estimatingthe percent ofthe population heaters, themaximum ofhouseholds found in theTSD. Chapter 9.7 in the thatbenefits at each trial standard level. benefitting is 25% at trial standard level TSDhas tables for HFC-245fa and Table 12 shows the average LCC savings two. However, even attrial standard water-blown insulation and the and percent ofhouseholds benefitting level four, 20-31% ofhouseholds with associated design options for each fuel for each ofthetrial standard levels for electric orgas-fired water heaters will class ofwater heater. each ofthe 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: Heat Traps ............................................................................................................................... 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: HeatTraps

.............................................................................................................................. 25 -15 3

.................. Electric: Heat Traps +Tank Bottom Insulation +2.5 Inch Insulation

............................................ 74 40 Gas: Heat Traps +Flue Baffles (78% RE) +2Inch Insulation

..................................................... 87 43 O

il: Baseline ................................................................................................................................... N A 0 4

.................. Electric: Heat Traps +3Inch 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 isthe Consumer Subgroup analysis. fraction ofhouseholds 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 ofstandards forhouseholds with low the results ofthe 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 WaterHeaters, 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

### Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25075

TABLE 13.-CONSUMER SUBGROUP LCC SAVINGS AND PERCENT OF HOUSEHOLDS BENEFITTING-Continued

Trial std levels Total Senior-only Low income Total Senior-only Low income
Oil-Fired WaterHeaters, HFC-245fa blown Insulation
1

............................................................... 25 20 25

- 15

- 11 - 6 2

............................................................... 25 20 25

- 15

- 11 - 6 3

.............................................. 0 0 0 0 0 0 4 ............................................................... 0 0 0 -459 -512 -461

The two consumer subgroups show households with oil-fired water heaters would expect the distribution ofLCC the same trend in average LCC savings show 25% orless ofhouseholds impacts for theelderly to be similar to and percent of sample households benefitting fromany ofthetrial standard the general population. benefitting as the total sample of levels. households. Inthe case ofelectric water We have noted theLCC savings for b. Median Payback heaters, both senior-only and low the senior-only subgroup are similar to fth LCC analysis isth income consumergroups appear to those ofthegeneral population. Since A park analysise Tanysis s a benefit more from trial standard levels the elderly use 30 percent less hot waterpayback anasis. The LC payback two through fourthan the total sample on average than the general population, anaysi considers all ofthe design ofhouseholds. In households with gas- one would expecttheir costs to belower option combinations for each fuel type fired water heaters, low income and as a result, theLCC effect to be and calculates a payback for each RECS households have greater savings of different. However, the standbylosses of household. We report the median average LCC for trial standard levels one water heaters, which are not affected by payback fromthe distribution of through three. None ofthe oil-fired hot water usage, are the same for the paybacks for each trial standard level in water heater trial standard levels show elderly and thegeneral population. Table 14. The median payback is the positive LCC savings, butlevel three Therefore, since most ofthe design median number ofyears required to shows zero LCC savings because it isthe options considered affect standby losses recover, in energy savings, the increased
same asthe baseline. Low income and not water heating efficiency, we costs ofthe efficiency improvements.
TABLE 14.-MEDIAN AND TEST PROCEDURE PAYBACK (YEARS) [HFC-245fa Blown Insulation]
Trial Test standard Design options 

### aian procedure

level payback payback
1

.................. Electric: HeatTraps +Tank Botton Insulation

.................................................................. 2.5 1.9 Gas: Heat Traps +Flue Baffles (78% RE) +2Inch Insulation

..................................................... 2.9 3.3 O

il: HeatTraps

............................................................................................................................... 8 .2 6.1 2

.................. Electric: Heat Traps +Tank Bottom Insulation +2Inch Insulation

............................................... 4.8 3.3 Gas: Heat Traps +Flue Baffles (78% RE) +2.5 Inch Insulation

.................................................. 3.9 4.1 Oil: HeatTraps

....... ....................................................................................................................... 8.2 6.1 3

.................. Electric: Heat Traps +Tank Bottom Insulation +2.5 Inch Insulation

.......................................... 5.4 3.7 Gas: Heat Traps +Flue Baffles (78% RE) +2 Inch Insulation

.................................................... 2.9 3.3 Oil: Baseline ................................................................................................................................... 0.0 4

................ Electric: HeatTraps +3Inch Insulation +PlasticTank

..................................... .............. 11.7 8.2 Gas: Heat Traps +Flue Baffles (80% RE) + 3 Inch Insulation + Side Arm Heater +Plastic 11.3 10.3

Tank +IID. Oil: Heat Traps + 3 Inch Insulation +Interrupted Ignition +Increased Heat Exchanger Area 24.6 15.5

(82% RE). 1Electric-50 Gallon: Gas-40 Gallon; Oil-32 Gallon.

c. Test Procedure Payback whether a standard is economically 2.Economic Impact on Manufacturers justified. Section 325(o)(2)(B)(iii), 42 The Act states that ifthe Department jui. Se6295io(2 ( ((B(iii 4 We performed aMIA to determine the determines that the payback period is impact ofstandards on manufacturers. less than three years as calculated under Only electric water heaters at trial The complete analysis is in Chapter 13 the water heater procedure, there shall standard level one satisfy the rebuttable ofthe TSD. In general, manufacturers be arebuttable presumption that such presumption. Electric water heaters stated they would be able to trial standard level is economically with heattraps and insulated tank manufacture any ofthe design options justified. InTable 14, we list the bottoms have a 1.9 year payback with heat traps, thicker insulation, tank payback periods by fuel type (product calculated under thetest 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 water 245fa blown insulation. The Act further gas-fired or oil-fired water heaters that heaters. None ofthemanufacturers states that ifthis three year payback is have a payback ofthree years or less. indicated they would leave theindustry not met, this determination shall not be or go out ofbusiness as aresult of taken into consideration inthe deciding standard levels that would require25076 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

energy factors below plastic tanks or The cumulative scenario includes the terms ofmanufacturer'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 newblowing agentand the development the dealer/distributor of$156 to a range with four ofthe five major water heater and manufacture ofa gas-fired water of$188-299 for trial standard levels one manufacturers. Thefive together supply heater resistant to ignition offlammable through four. Based on comments from

more than 99% ofthe U.S. residential vapors. Additionally, weexamined the the interviews, weassume water heater market. The interviews ability ofmanufacturers to recover the manufacturers will raise prices enough provided valuable information used to investments required for each ofthe to recover the costs ofmaterials, labor evaluate the impacts ofan amended scenarios and trial standard levels. and transportation and 75% oftheir standard on manufacturers' cash flows, The potential value ofthe water investment. Ifmanufacturers increased manufacturing capacities and heater industry, represented bythe 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 oftheir The standards scenario represents the five ofthemajor manufacturers produce investment. Table 15 shows the results investments needed to meet the energy both gas-fired and electric water heaters, ofthe cash flow analysis with these efficiency level ofa trial standard level. the industry is highly competitive in assumptions.
TABLE 15.-MANUFACTURER IMPACT ANALYSIS

TaStl1 INPV | Change inINPV Investment Trial Stdlevel^

- IN required i ll ($millions)ions) ($millions)

StandardScenario, 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

............................................................................................................... 279

- 13 -43 172 3.279 ******************************************g_,- 3 -43 4

............................................................................................................... 237

-27

-85 340

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 ofthe and limit costs. losses ofindustry net present value from water heater industry, estimated to be We alsoused the manufacturers' about $8 million to 57 million (3-18%), $41 million (1998) onrevenues 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 ofnewblowing standards, other Federal regulatory manufacturing capacity and expect to agents and flammable vapor resistant actions that will take effect on orbefore 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 afew employees. loss exceeds any ofDOE's trial standard are not mandated. Currently, the U.S. Unless efficiency levelsrequiring the levels except level four. As requested by industry has farmore manufacturing adoption of side arm heaters or plastic GRI andthan the SC and asrequired by domestic market can tanks aremandated, 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% oftotal employment levels or training the cumulative impacts ofother Feder capacity. Dueto the phase-out ofHCFC- requirements. Additionally, webelieve regulatory actions onthetrial standard leregula y actions on the thase out of 141b insulation blowing agent and a market growth of2.5% per year fornew H l eCFC,incudin the CPSC iiatve to requirement for a gas-fired water heater homes and modest productivity gains prevent the ignition offlammable resistant to ignition offlammable ensure current employment levels for vapors on gas-fired water heaters. (GR, vapors, itis likely that nearly every the foreseeable future. In our analysis, No. 11 at 1and 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, areplacement marketthat to prevent ignition offlammable vapors preference to retool for newblowing increases by about 1/10th ofthe new and for newblowing agents are $111 agents, energy-efficiency standards and home market each yearensures future million. The investments for cumulative flammable vapor-resistant designs at the demand.Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25077

B. Significanceof EnergySavings savings to be savings that were not energy consumption ofwater heaters The Act prohibits the Department "genuinely trivial." The energy savings complying with thetrial standard levels. from adopting a standard for a product for all ofthetrial standard levels DOE calculates these energy savings at ifthat standard would not result in considered in this rulemaking are non- the sourceusing the NEMS-BRS "significant" energy savings. Section trivial and therefore weconsider them distribution and generation losses. This 325(o)(3)(B), 42 U.S.C. 6295(o)(3)(B). "significant" within the meaning of addresses stakeholders' comments that a While the term "significant" isnot Section 325 oftheAct. source-based analysis is a more accurate defined inthe Act,the U.S. Court of NationalEnergySavings.To estimate measurement ofthe total energy being Appeals, in Natural ResourcesDefense the energy savings through the year used. (Clearwater, No. 30 at 1 and NGC, Councilv. Herrington,768 F.2d 1355, 2030 due to amended standards, we No. 59 at 1). Table 16 shows these 1373 (D.C. Cir. 1985), ruled that compared the energy consumption of results for water heaters with HFCCongress 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 Trial Std4
Total Q uads Saved

.......................................................................................... 3.4 4.3 4.8 13.1 Total Exajoules Saved

..................................................................................... 3.6 4.5 5.0 13.8

All ofthe trial standard levels changes improve energy andwater most ofthe installation situations considered in this rulemaking have heating performance and mayincrease encountered. (ACEEE, No. 93 at 8). OOE significant energy savings, rangingfrom the amount ofwater available in one stated the industry can find the 3.4 quads (3.6Exajoules (EJ)) to 13.1 hour, i.e., thefirst hour rating. additional space for insulation by quads (13.8 EJ), depending on the trial However, to reduce heat losses, it is reducing the storagetank diameter. This standard level. necessary to use thicker insulation. The will only reducetank volume by 2-3

NationalNetPresentValue. trial standard levels contemplate thicker gallons,according to OOE. (OOE,No. 96 Additionally, we analyzed the economic insulation of2.5-3 inches versus the 1- at5). In another approach, Battelle impact on the nation to year 2030. This 2 inches in common use today. This suggested manufacturers could increase is a NPV analysis using theAEO99 extra thickness ofinsulation will make thefiring rate, set point, and heat reference energy prices. Table 17 lists water heaters larger andmore difficult transfer rate ofgas-fired water heaters so the NPV for HFC-245fa blown to squeeze into tight spaces when they could reduce tank size without insulation. The NPVconsiders the replacing a water heater. DOE does not sacrificing any first-hour rating. combined discounted energy savings believe any model ofwater heater will (Battelle, No. 66 at 8 and No. 83 at 11). minus increased consumer costs ofthe become unavailable as aresult ofthicker Weestimate external dimensions for four fuel types ofequipment at a insulation. Inthose applications where electric water heaters could be particular trial standard level.We base thicker insulation could cause maintained at approximately current this calculation on all expenses and problems, we believe possible solutions sizes, iftankvolume were reduced savings occurring between 2003 and include smaller tanks with larger about 20%, coupled with a 1.35 kW 2030. heating elements, taller tanks, more increase in the heating rate, from 4.5-

TABLE 17.-NATIONAL NET PRESENT effective insulation, e.g., space blanket, 5.85 kW. This would restore the first BLE 1 IONAL NET RESENT orperhaps instantaneous water heaters. hour rating and a 6 kWheating element VALUE Instantaneous water heaters generally as a common size, see Chapter 3.4.4 in

--- NPV-HFC- have characteristics such as, initiating theTSD. We recognize the increased Trial standard level 245fa water heating based on sensing water heating element wattage may overload ($billions) flow, a higher heatingrate and storage some existing electrical circuits. We capacities less thantwo gallons. request comments on these suggestions 1

...................................... 2.3 However, anumber ofmanufacturers and theextent that product utility might 2

........................................ 1.5 and other stakeholders believe that be affected. 3........................................ 3.3 thicker insulation will reduce product Further, DOErequests engineering

...............................- .4... utilityor adversely impact consumers. data or other information that will The national NPV is positive fortrial (Bradford White, No. 74 at 2: GAMA, substantiate claims ofreduced product standard levels onethrough three. In No. 71 at 4 and No. 91 at 1; CNG, No. utility and an explanation ofthe specific this analysis, a positive NPV means that 85 at2; NEGA, No. 90 at 3; Rheem, No. impact that would be anticipated. We the estimated energy savings are greater 95 at 1;SC, No. 84 at 2; and AGA, No. are particularly interested in comments than the increased costs dueto 92 at 9). There may be replacement on the number ofhouseholds that may 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 aparticular three has the highestNPV. water heaters with a slightly smaller geographic region orincome strata. tank. DOE has investigated this with D Impact ofLesseningofCompetition C.LesseningofUtilityorPerformanceof water heater manufacturers and home Im ct of LesseningofCompetition Products builders and is aware that some The Act directs theDepartment to

None ofthetrial standard levels replacement applications may be unable consider any lessening ofcompetition reduces theperformance ofwater to accommodate the tank size currently that islikely to result from standards. It heaters. Generally, the trial standard used. further directs theAttorney General to levels reduce heat losses and improve ACEEE claimed manufacturers can determine theimpact, ifany, of heat exchanger effectiveness. These make water heaters taller or wider to fit competition likely to result from such25078 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 ofthe effect on cumulative emission reductions to 2030 after the publication ofaproposed 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 ofthe nature and extent ofsuch 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 2and U.S.C. 6295(o)(2)(B)(i)(V). However, theDOJ added they would NOx at all standard levels are apositive

In orderto assistthe Attorney General focus onthe effect ofstandards "on the benefit to the nation. We show in making such a determination, the overall level ofmarket competition, not cumulative emissions savings from Department has provided the on individual fuel suppliers or on shifts 2003-2030 in Table 18. Department ofJustice (DOJ) with copies in consumer usage among alternate S a V cim i ofthis notice and theTSD forreview. 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.NeedoftheNation To SaveEnergy monoxide (CO), particulates, and questionnaire to ensure thatit would andNetNationalEmployment volatile organic compounds (VOCs), yet provide insight concerning any 1.Environmental Impacts they are not included in the lessening ofcompetition due to any environmental analysis. (EEI, No. 39 at proposed trial standard levels. Enhanced energy efficiency improves 4and No. 79 at 1; SC, No. 84 at2; and

Inresponse 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 ofenergy 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 ofC02, 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, theDOJ 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 NOx (kt)

................................................................................................................. 141 208 229 599 SO2 (kt)

....................................................... 4 <1 -6 54

"Results only include household SO 2 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 thejobs being lost. The benefits from comments on what standard might be

In the Process Rule, DOE committed any potential employment gains would supported by theresults. Below is a to develop estimates ofthe employment be reduced ifjob quality and pay are short summary ofthe type ofcomments impacts ofproposed standards inthe reduced. we received on ourpreliminary economy in general. Theresults ofthe * The netbenefits from potential analysis. Wehave considered these Department's analysis are shown in employment changes are aresult ofthe comments when selecting the proposed Chapter 15 ofthe TSD. estimated net present value ofbenefits standard level. Many ofthe comments

While both this input/output model orlosses likely to result from the suggest actions that are already apart of and the direct use ofBLS employment proposed standards, itmay notbe 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 shouldbe set sothat the majority of demand for labor in the economy, the beyond the calculation ofnet present consumers benefit fromthe new gainswould most likely be very small value. standards. SC suggested ifatleast 85% relative to total national employment. Taking into consideration these ofthe population benefitted, it would be For several reasons, however, even these legitimate concernsregarding the unlikely that any particular subgroup of modest benefits for national interpretation anduse ofthe customers would suffer substantial loss employment are in doubt: employment impacts analysis, the from the proposed standard. (SC, No. 42

* Unemployment isnow atthe lowest Department concludes only that the at 3). CNGand NEGA stated any rate in 30years. Ifunemployment 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 JulyWorkshop) istoo 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 inthe safety. (CNG, No. 85 at 1and 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 ofthe quality or wage level ofthejobs. One In order to inform interested population thatbenefits.
reason that the demand for labor stakeholders, we released our Several comments claimed DOE increases in the modelmay 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 ElectricFederal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25079

Power, No. 87 at 1). The National Rural our revised analysis, the lowestLCC for technologically feasible level for oilElectric Cooperative Association a gas-fired water heater is a 78% flue fired water heaters. See Section III.D.2 (NRECA) claimed gas-fired and electric baffle with 2inches ofinsulation and ofthis notice. All ofthe design options water heaters should have the same 0.03 heat traps. To verify that we did not included in ouranalysis are increase in energy factorusing thicker overlook any economically justified trial technologically feasible since they are insulation and heat traps. (NRECA, No. standard, we analyzed agas-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 ofinsulation. This standard level As discussed n section IVA, we neutral by raising energy factors for all resulted in anegative LCC savings, consider the impacts ofstandards at fuel types. negative manufacturers' impact and each of four standards levels, beginning

Other comments made specific negative NPV sowe concluded it is not withthe most efficient level, i.e., recommendations for gas-fired and economically justified. standard level four. We then consider electric water heaters.PG&E claimed less efficient levels. Standard levels 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 thehighest levels thatcan be achieved 6295(o)(2)(A), oftheAct specifies that different classes. For gas-fired water with conventional technologies, e.g., any new or amended energy heaters, standard levelsthree and one 0.60 EF for gas-fired water heaters that conservation standard for any type (or are thesame, though lower efficiency
are common in southern California. class) of covered product shall be than that found in standard level two. (PG&E, No. 94 at 3). ACEEE claimed that designed to achieve themaximum For electric water heaters, no standard according to DOE's July 1997 analysis, improvement in energy efficiency which levels are repeated and the efficiency of the minimum LCC point is 0.91 EF for the Secretary determines is each lower standard level is lower than
a 50-gallon electric and 0.61 EF for a 40- technologically feasible and that found in higher standard levels. 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 the Furthermore, ACEEE believes this is justified, the Secretary must determine sameand level three is no change from what DOE should propose asthe new whether the benefits ofthe standard the current standard.By combining standard in the NOPR. (ACEEE, No. 93 exceed itsburdens. Section efficiency levels in this wa the at 9). Bradford White recommended that 325(o)(2)(B)(i), 42 U.S.C. efficiency levels inthisway, the electric and oil standards should remain 6295(o)(2)(B)(i). The amended standard Department isable to evaluate the the same and gas-fired water heater must "result in significant conservation ipacts ofdifferent combinations of standards should beraised by 0.02 EF. ofenergy." Sectionstanard levelstomake an iformed (Bradford White, No. 89 at 5). 325(o)(2)(B)(iii)(3)(B), 42 U.S.C. decision onthe merits ofdifferent

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 aidthereader as wediscuss the flue baffle, 2 inches ofinsulation and technologically feasible levels for benefits orburdens ofthe trial levels we heat traps because it appears to be the electric and gas-fired water heaters, but have included a summary ofthe minimum LCC. (ACEEE, No. 93 at2). In we are analyzing themaximum analysis results in Table 19.
TABLE 19.-SUMMARY ANALYSIS RESULTS BASED ON HFC-245FA BLOWN INSULATION
Trial Std 1 Trial Std2 Trial Std 3 Trial Std 4 Total Quads Saved

.................................................................................. 3.4 4.3 4.8 13.1 NPV ($Billion)

.................................................................................. 2.2 1.5 3.4 -17.4 Emissions: Carbon Equivalent (Mt)

........................................ ...... 48 74 83 219 NOx (kt)

........ ............................................................................... 141 208 229 599 S02 (kt)

........ ..................................................... 4 <1 -6 54 Cumulative Change inINPV ($Million)

........................................... -8 -15 -15 -57 Life Cycle Cost ($): Electric

........ ................................................................................ 32 36 40 -55 Gas-Fired

......... ......................................................................... 43 34 43 -215 Oil-Fired

........................................................................................... -20 -20 0 -447 -Results only include household SO2 emissions reductions because SO2 emissions from power plants are capped by clean air legislation. Thus, SO2 emissions will only be negligibly affected bypossible water heater standards.

We first considered trial standard (with oil-fired water heaters). Next, we considered trial standard level four,the most efficient level for Furthermore, the water heater industry level three. This trial standard level each ofthethree classes. Trial standard would lose 27% ofits value and the saves about 4.8 quads ofenergy, 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 of emissions reductions of219 Mt of concludes the resulting energy savings carbon equivalent and 229 kt ofNOx. carbon equivalent, 599 kt ofNOx, and and emission reductions at this level are There is a small increase in household 54 kt ofSO2 are significant. However, at outweighed by thenegative economic emissions ofSO2 (6 kt)due to a slight this level, consumers experience impacts on the nation, consumers and increase in shipments ofoil-fired water negative LCC impacts. They would lose manufacturers. Consequently, the heaters. The national NPV oftrial $55 (with electric water heaters), $193 Department concludes trial standard standard level three is $3.4 billion from (with gas-fired water heaters) and $459 level four is noteconomically justified. 2003-2030.25080 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

Theeconomic 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 ofcosts 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 ofoil-fired water heaters. In trial are affected by higher costs. EE-0009, November 1993). The standard level three, 87% ofhouseholds The industry will lose about 5% ($15 environmental effects associated with with gas-fired water heaters have LCC million) ofitsINPV due to energy various standard levels for water savings, for anaverage savings of$57, efficiency standards. These losses are heaters, as well as the other seven while 13% experience LCC losses,for more than balanced byNPV gains tothe products, were found notto be

an average loss of$52. Forhouseholds nation of$3.3 billion, or 220 times the significant, and a Finding ofNo withelectric 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 ofits INPV, or $43 million. Eventhis Proposed Rule, the DOE evaluated loss of$27. level oflosses isoffset by gains tothe several design options suggested in

Forelectric water heaters, the analysis nation that are 77 times theindustry comments to the screening document. predicts that 26 percent ofall losses. 2 Based on themanufacturer As aresult, 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 fromrevised 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 theeconomic differ somewhat from those presented

near thepoint of zero change in LCC justification oftrial 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 ofenergy savings, reduced effects expected from the energy have chosen ±2 percent ofaverage average consumer LCC, significant and efficiency standards considered forthis baseline LCC as the band ofno positive NPV, and emissions reductions Proposed Rule fall within theranges of

consumer impact. We believe this small andthe burdens ofa loss in environmental impacts from therevised percentage, regardless oftheactual 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 notto be significant. spread over monthly utilitybillsfor the the results ofthe analysis,DOE has B Review UnderExecutive Order12866, life ofthewater heater. By applying a determined the benefits oftrial standard 2% band of average LCC, we can clearly level three outweigh its burdens and is gulatoryPlanning andReview" show the significant net savings and net economically justified. The Department The Department has determined costs associated with atrial standard also concludes trial standard level three today's regulatory action is a significant level. This permits a more informed saves a significant amount ofenergy and regulatory action within the scope of decision based on weighing the is technologically feasible.3 Therefore, Section 3(f)(1) ofExecutive Order significant benefits andburdens in the Department today proposes to adopt 12866, "Regulatory Planning and terms ofconsumer 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 attrial standard level 1993). Therefore, this proposal requires TSD. three. a regulatory analysis. Such an analysis

We will use ±2 percent ofbaseline presents major alternatives tothe LCC to indicate no impact, positively or V ro c edu ralR e v ew s proposed regulation that could achieve negatively, on consumers. Therefore, A. Review UndertheNational substantially the same goal, as well as only 4 percent ofconsumers in the case EnvironmentalPolicy Act a description ofthe cost andbenefits ofelectric water heaters or 6 percent of In issuingthe March 4, 1994, (including potential net benefits) ofthe

consumers in the case ofgas water Proposed Rule for energy efficiency proposed rule. Accordingly, the Office heaters sustain any significant net costs standards for eight products, one of ofInformation and Regulatory Affairs under the proposed standard level for (OIRA) reviewed today's action under water heaters. Similarly, 35 percent of 2 AsDOE has determined, thebenefits of today's the Executive Order.

consumers in the case ofelectric water proposal outweigh the$15 million losstothe There were no substantive changes heaters or 62 percent ofconsumers in industry.To review the support forthis between the draft we submitted to OIRA the case ofgas water heaters have determination, see theTSD at Chapters 12.5 and and today's action. The draft and other Table 12.1a. 13.3.3.5 andTable 13.8a, 13.3.4, and documents we submitted to OIRA for significant net savings. 13.3.5.d o uments we subm itted to IKA or Two percent of average baseline LCC 3The proposed standard is based oninsulation review are apart of the rulemaking equals $51 for electric water heaters. blown withHFC-245fa. We alsoanalyzed the record and are available for public Over the average life of 12 years for an impactofusingwater-blown insulation. We found review in the Department's Freedom of electric water heater, this is less than the benefits ofLCC savings,emission reductions, Information Reading Room, 1000 and NPV are lower, and manufacturers' lossesare $4.50 per year. For consumers with gas- higherusingwaterblown insulation compared to Independence Avenue, SW, fired water heaters, two percent of usingHFC-245fa blown insulation. Theenergy Washington, DC 20585, between the average baseline LCCis $30. Over the savings and water heater performance are also hours of 9:00 a.m. and 4:00 p.m., lower becausewater blown insulationis 42% less Monday through Friday, except Federal average life of9 years for a gas water effective than HFC-245fa blowninsulation. heater, this is less than $3.50 per year. If.based oncomments ontoday's proposed rule, holidays, telephone (202) 586-3142. We believe this is a small amount in DOE wereto conclude that insulation withenergy 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' blowninsulation willnot beavailable atthe focuses on the major alternatives not adversely impact consabo umtwaterhsea effective date ofthe standard, DOE would use the nsidered in arriving atthe proposed purchase decisions about water heaters, waterblown insulation analysis as abasisfor its considered in arriving at the proposed

or their financial positions. finaldecision. approach to improving the energy

### Federal Register/Vol. 65, No. 83/ Friday, April 28, 2000/ Proposed Rules 25081
efficiency ofconsumer products. The evaluate each alternative in terms ofits * Product Labeling reader isreferred to thecomplete RIA, abilityto achieve significant energy * Consumer Education which is contained in theTSD, available savings at reasonable costs, and we * Prescriptive Standards as indicated atthebeginning ofthis compare ittothe effectiveness ofthe * Financial Incentives NOPR. Itconsists of: (1)A statement of proposed rule. -Tax credits theproblem addressed bythis We created theRIA usinga series of -Rebates regulation, andthe mandatefor regulatory scenarios (withvarious -Low income and seniors subsidy government action; (2)a description and assumptions), which we usedas input analysis ofthe feasible policy tothe shipments model forwater Voluntary Energy Efficiency Targets alternatives tothisregulation; (3)a heaters. We usedthe results fromthe (5Years, 10Years) quantitative comparison oftheimpacts shipments model as inputs to theNES * Mass Government Purchases ofthe alternatives; and (4)the economic spreadsheet calculations. * The Proposed Approach (Performance impact ofthe proposed standard. DOE identifiedthe following seven Standards)

The RIA calculates the effects of major policy alternatives for achieving Wehave evaluated each alternative in feasiblepolicy alternatives towater consumer product energy efficiency. terms ofitsability to achieve significant heater energy efficiency standards,and These alternatives include: energy savings at reasonable costs provides aquantitative comparison of * NoNew Regulatory Action (Table20), and have compared it tothe the impacts ofthe alternatives. We * Informational Action effectiveness ofthe proposed rule.
TABLE 20.-ALTERNATIVES CONSIDERED
Policy Alternatives NPV Energy Savings 

## ~Po~~licy Al~mati~es~



## ~(S inbillions) Quads
Consumer Product Labeling

................................................................................................. ........................... -0.009 0.077 ConsumerEducation

....................................................................................................................................... 0.439 0.539 Prescriptive Standards

. ....................................................................................................... 1.149 0.78 ConsumerTax Credits ..................................................................................................................................... 0.333 0.163 Consumer Rebates High Efficiency

............................................................................ 0.349 0.174 Consumer Rebates Heat Pump

.................................................................... 1.164 0.586 Low Income and Seniors Subsidy

............................................................................. 1.011 0.415 Manufacturer Tax Credits

................................................................................................................................ 0.074 0.039 Voluntary Efficiency Target (5yeardelay)

...................................................................................................... 1.47 2.887 Voluntary Efficiency Target (10 year delay)

.................................................................................................... 0.882 2.211 Mass Gove ment Purchases

......................................................................................................................... 0.012 0.057 Performance Standards

.............................................................................................................................. 3.433 4.746

NPV =NetPresent Value (2003-2030, inbillion 1998 $)(does not include government expenses). Savings= Energy Savings (Source Quads).



### Ifwe imposed nonewregulatory quad (0.081 EJ) of energy savings with performance standard level, i.e., we action, then we would implement no anegative $0.009 billion NPV. would implement aprescriptive
new standards for this product. This is Another approach, called consumer standard attrial standard level two. The 

### essentiallythe "base case" for water education, isto consider anEnergy reduced flexibility afforded to heaters. Inthis case, between the years Star*program forheat pump water manufacturers ofa prescriptive standard 2003 and 2030, there wouldbe an heaters.We assume, under thisprogram, would make it difficult for expected energy useof 120.91 Quads sales wouldjump to 150,000 unitsper manufacturers to achieve the higher (127.56 Exajoules (EJ)) of primary year in2008 and continue tobe constant level. The lower standard level entails energy, withno energy savings and a after that.This estimate is basedon an slightly smaller expenditures for
zero NPV. Arthur D.Little (ADL)report from retooling and purchasingparts. October 20, 1997, "Low Cost Heat Pump Consequently, the economic impacts we Wegrouped several alternatives to the WaterHeater Status Report." We expect beforethe implementation date base case under the headingof calculated the fraction thatthis should be slightlysmaller for informational action. Theyinclude represents ofthebaseline electric water prescriptive standards. This resulted in consumer product labeling andDOE heatermarket sharein 2008, and energy savings of0.78Quad (0.82 EJ) publiceducation and information subtracted this fraction from the next and $1.15 billion NPV. programs. Both ofthese alternatives are lowest design option with anymarket Wetested various financial incentive already mandated by, and arebeing share. This consumer education alternatives. These included tax credits implemented underEPCA, asamended, program wouldperform somewhat and rebates to consumers, as well astax Sections 324 and 337,42 U.S.C. 6294, betterthanproduct labeling with energy creditsto manufacturers. We assumed 6297. Onebase casealternative would savings equal to0.539Quad (0.57EJ) thetax creditsto consumers were 50% betoestimate the energyconservation and $0.439 billionNPV. oftheincremental purchase expense for potential ofenhancing consumer Another method ofsettingstandards higherenergy-efficiency water heaters. product labeling. To model this would entailrequiring that certain Theincremental cost is based onthe possibility, the Department estimated design optionsbeused on each product, difference between the 2003 baseline that 5percent ofconsumers change their i.e., forDOE to imposeprescriptive cost andthe cost ofa50-gallon 0.91 EF decisions onwhich waterheaterto buy standards. Forthis approach, we assume electric, a 40-gallon 0.60EF gas-fired, based ona consumerproduct labeling thata prescriptive standard is and a 32-gallon 0.61 EF oil-fired water program.The consumer product implemented asa standard atthe next heater. We estimatethe impact ofthis labeling alternative resulted in0.077 lowertrial standard level thanthe policy is to move 5%of the market25082 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

share from the 2003 baseline to themore 0.415 Quad (0.44 EJ) with $1.011 billion savings of0.057 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 ofthese alternatives must

assume people stop buying these more considered was atax credit to be gauged against the performance efficient and more expensive water manufacturers for theproduction of standards we are proposing in this heaters when the tax credits stop. The energy-efficient models ofwater heaters. NOPR. Such performance standards tax credits to consumers showed a We assumed an investment tax credit of would result in energy savings of4.746 change from thebase case, saving 0.163 20%, applicable tothe tooling and Quads (5.00 EJ), and the NPV would be Quad (0.17 EJ) with $0.333 billion NPV. machinery costs ofthe manufacturers. an expected $3.443 billion.

To estimatethe impact ofconsumer These are toolingcosts as they relate to As indicated in the paragraphs above, rebates, DOE assumed rebates of35% of producing a0.91 EF on a 50-gallon none ofthe alternatives we examined the incremental retail prices for more electric, a 0.60EF on a40-gallon gas- for these products would save as much energy-efficient water heaters. The fired, and a 0.61 EF ona 32-gallon oil- energy as the Proposed Rule. Also, incremental cost is based on the fired water heater. We estimate the several ofthe alternatives would require difference between the 2003 baseline impact ofthis policy is to move 1% of new enabling legislation, since authority
cost and the cost ofa 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 EFgas-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 UndertheRegulatory heater. We estimate the impact ofthis years. We assume no persistence in the Flexibility Act policy is to move 5% ofmarket share market once they stop. Tax credits to fromthe 2003baseline 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 and we NPV. requires an assessment ofthe impact of 2003 and run for sixyears andwhee me The impact ofthis scenario produces regulations on smallbusinesses. The efficient andmore 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 ofthe 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 d (0.18E) with$0.3onsumer rebate ofthe 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 wasequal to the efficient versions ofthis product would for nearly 99% ofsales. Smaller difference between the retail cost ofa 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% ofthe market. rebate is only applied to new We examined two scenarios of We are aware ofthree 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 Ofthe three small firms, Bock estimated the installed costs ofheat adopted the proposed energy manufactures oil-fired water heaters that pump water heaters ($875) and market conservation standards in fiveyears. In have not been affected bythis proposed penetration levels (300,000units 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 waterheaters that are considered inthis 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 of2.887 Quads (3.05 EJ) onlylist electric water heaters thatmeet 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 billionNPV. would result in 2.211 Quads (2.33 EJ) rule mayraise the standard level enough

One ofthe market barriers to higher being saved and $0.882 billion NPV. to impact theirniche market for high efficiency gas-fired waterheaters 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 ofthe energy conservation standards by manufacture very long life products that gas-fired water heaters isthe expense to these appliance manufacturers, an incorporate other features which will enlarge small closets orto relocate water assumption for which there is no help them preserve their niche market. heaters with thicker insulation when assurance. TheDepartment 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 aparticular reviewed was that oflarge 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 sharedwith all the water heater income and seniors-only subsidy of local governments. Wemodeled this manufacturers. The smaller $100 to make higher efficiency water policy by assumingthese governmental manufacturers did not choose to discuss heaters available and cost effective for entities (i.e., U.S. Department of the impacts ofthe trial standard levels these households. We determined the Housing and Urban Development and on theirfirms. number oflow income and seniors only DOE at the Federal level) purchased In view ofthe information discussed households from theRECS public use high efficiency water heaters for 5% of above, theDepartment has determined data. Theprogram starts in 2003 and the low income, rented housing. This and hereby certifies pursuant to Section

runs for sixyears. This subsidy saved policy alternative resulted in energy 605(b) ofthe Regulatory Flexibility Act

### Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25083

that, for this particular industry, the that this regulation would not result in levels ofgovernment. No further action proposed standard levels intoday's any takings thatmight require is required by Executive Order 13132. Proposed Rulewill not "have a compensation underthe Fifth H.Review Underthe Unfunded significant economic impact on a Amendment to the United States MandatesReformAct of 1 substantial number ofsmall entities," Constitution.Mandates ReformAct of1995 and it is not necessary to prepare a With respect to aproposed regulatory regulatory flexibility analysis. G.Review UnderExecutive Order action that may result in the 13132, "Federalism" expenditure by State, local, and tribal eD.

Rview Und th P or Executive Order 13132 (64 FR 43255, governments, in the aggregate, or by the August 10, 1999) requires agencies to private sector, of$100 million ormore No new information orrecord keeping develop an accountable process to (adjusted annually for inflation) in any requirements are imposed by this ensure meaningful and timely inputby one year, Section 202(a) ofthe rulemaking that wouldrequire Office of State and local officials in the Unfunded Mandates Reform Act of 1995 Management and Budget clearance development of regulatory policiesthat (UMRA), 2 U.S.C. 1531 etseq.requires under the Paperwork Reduction Act. 44 have "federalism implications." Policies a Federal agency to publish a written U.S.C. 3501 etseq. thathave federalism implications are statement concerning estimates ofthe E.Review UnderExecutive Order12988, defined inthe Executive Order to resulting costs, benefits and other effects "CivilJusticeReform" include regulations thathave on the national economy. 2U.S.C.

Executive Order 12988, "Civil Justice distribution ofpowerand Section 202 ofUMRA authorizes an 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 notissue aregulation requirements ofUMRA in any other general duty to adhereto thefollowing thathas federalism implications, that statement or analysis that accompanies requirements: (1)Eliminate drafting fed s se als im ctos, a the proposedrule. 2U.S.C. 1532(c). The errors and ambiguity; (2) write mposes substantial direct costs, and content requirements of Section 202(a) regulations to minimize litigation; and that isnot required by statute, unless ofUMRA relevant to the private sector (3)provide a clear legal standard for the Federal government provides the mandate substantially overlap the affected conduct ratherthan a general funds necessary to pay thedirect economic analysis requirements that standard and (4) promote simplification compliance costs nmcurred byor DE c lt apply under Section 325(o) ofEPCA, as and burden reduction. and loca governments orDOE consuts amended, and Executive Order 12866.

Withregard to the review required by wth tate and local officials early theThe Supplementary Information section Section 3(a), Section 3(b) of Executive process ofdeveloping thepropod in this NOPR and the analysis contained Order 12988 specifically requires that regulation. DOE also may not issue aD for this proposed rul Executive agencies make every regulation thathas federalism resionds to those requirements. responds to reasonable effort to ensure that the implications and that preempts State OE is obligated by Section 205 of regulation: (1) Clearly specifies the lawunless it consults with State and UMRA, 2 U.S.C. 1535, to identify and preemptive effect, ifany; (2)clearly local officials early inthe process of consider a reasonable number of specifies any effect on existing Federal developing the proposed regulations regulatory alternatives before law orregulation; (3) provides a clear The statutory authority under which promulgating a rule for which awritten legal standard for affected conduct this proposed standard isbeing statement under Section 202 is required. while promoting simplification and promulgated specifically addresses the From those alternatives, DOE must burden reduction; (4) specifies the effect of Federal rules on State laws or select the least costly, most costretroactive effect, ifany; (5) adequately regulations concerning testing, labeling effective orleast burdensome alternative defines key terms; and (6) addresses and standards. Section 327 ofEPCA, as that achieves theobjectives ofthe rule, other important issues affecting clarity amended, 42 U.S.C. 6297. Generally all unless DOE publishes an explanation of and general draftsmanship under any such State laws orregulations are why a different alternative is selected. guidelines issued bythe Attorney superseded by EPCA, unless specifically As required by Section 325(o) of the General. Section 3(c) of Executive Order exempted in Section 327. The EPCA, as amended, 42 U.S.C. 6295(o), 12988 requires Executive agencies to Department can grant a waiver of this proposed rule would establish review regulations in light ofapplicable preemption in accordance with the energy conservation standards for water standards in Section 3(a) and Section procedures and other provisions of heaters that are designed to achieve the 3(b) to determine whether they are met Section 327(d) oftheAct, as amended. maximum improvement in energy orit is unreasonable to meet one or 42 U.S.C. 6297(d). States can file efficiency whichDOE has determined is
more ofthem. DOEreviewed today's petitions for exemption fromtechnologically feasible and proposed rule underthe standards of preemption with the Secretary andhave economically justified.A full discussion Section 3 ofthe Executive Order and their requestreviewed on a case-by-case oftheregulatory and non-regulatory determined that, to the extent permitted basis. alternatives considered by DOEis by law,these proposed regulations meet DOE has examined today's rule and presented in theTSD for this proposed the relevant standards. has determined that although final rule. standards would preempt State laws in F. "Takings"AssessmentReviewthis area,they would not havea

.Review UnderthePlainLanguage

The Department has determined substantial direct effect on the States, on Directives pursuant to Executive Order 12630, therelationship between the national Section 1(b)(12) ofExecutive Order "Governmental Actions and Interference government and the States, or on the 12866 requires that each agency draft its with Constitutionally Protected Property distribution ofpower and regulations sothat they are simple and Rights," 53 FR 8859 (March 18,1988) responsibilities among the various easy to understand, with the goal of25084 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules
minimizing the potential foruncertainty confidential information that has been 2. Conduct ofWorkshop and litigation arising from such submitted include: (1)A description of The workshop (hearing) will be uncertainty. Similarly, the Presidential the items; (2) anindication as to conducted in an informal, conference memorandum ofJune 1, 1998 (63 FR whether and why such items are style. The Department may use a 31883) directs the heads ofexecutive customarily treated as confidential professional facilitator to facilitate departments and agencies to use, by within the industry; (3) whether the discussion, and acourt reporter willbe January 1, 1999, plain language in all information is generally known by or present to record thetranscript ofthe 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 therule 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 ofthe 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) ofExecutiv e O r d e r person which would result from public rulemaking. Following the workshop, 12866 andthe JPresid6entia3l disclosure: (6) an indication as to when wewill provide an additional comment memorandum ofJune , 1998 (63 FR such information might loseits period, during which interested parties

* Organization ofthematerial to confidential character due to the will have an opportunity to comment on

serve the needs ofthereaders passage oftime; and (7)why disclosure the proceedings at the workshop, as (stakeholders). ofthe information would be contrary to well as on any aspect ofthe rulemaking

* Use ofcommon, everyday words. the public interest. proceeding. * Shorter sentences and sections. B. PublicWorkshoThe Department will arrange fora We invite your comments on how to transcript oftheworkshop and will make this proposed rule easier to 1.Procedures for Submitting Requests make the entire record ofthis 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 ofInformation andPolicieson FamiliesReview the public workshop listed at the Reading Room. Any person may

Section 654 oftheTreasury and beginning ofthis notice ofproposed purchase acopy ofthe transcript from General Government Appropriations rulemaking. The Department invites any thetranscribing 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 ofproposed rulemaking, orwho fromthe Internet at: http:// Policymaking Assessment for any is arepresentative ofa group or class of www.eren.doe.gov/buildings/ proposed rule or policythat 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 ofthe family as presentation. Ifyou would like to attend ssues forPublcComment

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
aFamily Policymaking Assessment. 2945. You may hand deliver requests to analyses. Inparticular, we are interested VI. Public Comment Procedures speak tothe address indicated at the in seeking responses to the following beginning ofthis notice between the questions and/or concerns: A. Written CommentProcedures hours of8:00a.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 ventingproblems. persons to participate in the proposed holidays, or send them by mail. Data or studies on theuse of80% RE rulemaking by submitting data, Theperson making therequest shouldgas-fired water heaters in natural draft comments, orinformation withrespect statewhy he or she, eitherindividually venting systes. Data on the numberof to the proposed issues set forth in or as a representative ofagroup or class 78% or 80% RE gas-fired watr ters today's proposed rule to Ms. Brenda ofpersons, is an appropriate installations type ofventing systems Edwards-Jones, atthe address indicated spokesperson, briefly describe the employed and the length oftime at the beginning ofthis notice. We will nature ofthe interest in the rulemaking, henumber or te of size consider all submittals received by the and2. The number or type of "size 

## ~~considr al subittls r y and provide atelephone number for constrained" replacement waterheater date specified at thebeginning ofthis contact. constraned replacement waterheater notice in developing the final rule.. ,installations. Data on the cost impact of notice indeveloping the final rule.

According to 10 CFR 1004.11, any The Departmentrequests each person installing a 3-4 inchlarger diameter person submitting information thathe wishing to speak to submit an advance waterheater in existing manufactured

or she believes to beconfidential and copy ofhis or her statement at least ten homes, mobile homes, attics, and exempt by law frompublic disclosure days prior to the date ofthis workshop applications where water heaters are should submit one complete copy ofthe as indicated at thebeginning ofthis located in the living space. Also, document and ten (10) copies, if notice. TheDepartment, at its comments on the number ofwater 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. TheDepartment ofEnergy will requirement to participate ifthat person input gas burners or larger electric make its own determination with regard has made alternative arrangements with heating elements, that mayreduce the to the confidential status ofthe theOffice ofBuilding Research and impact ofthicker insulation on "size information and treat it according to its Standards in advance. The letter making constrained" replacement water heater determination. arequest to give an oral presentation applications.

Factors ofinterest tothe Department must ask for such alternative 3.Additives or blowing agents with when evaluating requests to treat as arrangements. zero ozone depletion potential thatwill

### Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules 25085

provide lowerconductivity orcost than EA Environmental Assessment ORNL Oak Ridge National Laboratory HFC-245fa blown insulation at EEI Edison Electric Institute PG&E Pacific Gasand Electric temperatures between 1200Fand 1400F. EIA DOE's Energy Information PNNL Pacific Northwest National We also request comment on our choice Administration Laboratory ofinsulation blowing agent, among the EERE DOE's Office ofEnergyEfficiency 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 Consumption other suggestions ofappropriate 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 ofthe EPCA Energy Policy and Conservation Act S02 Sulfur dioxide relatively short time between the EPRI Electric Power Research Institute TANK Computer simulation model forgasavailability ofHFC-245fa in commercial FEMP Federal Energy Management Program fired water heaters quantities, the phase-out of HCFC-141b FOI Freedom ofInformation TSD Technical Support Document and aproposed effective date of FONSI Finding ofNo Significant Impact UA Heat transfer coefficient September 2003 for DOE's amended FR Federal Register UMRA Unfunded Mandates Reform Act of 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 model for distribution ofconsumer discounts Model electric storage water heaters ranging from 4-12% with a mean of6% HCFC Hydrochlorofluorocarbon WHAM Water HeaterAnalysis Model for 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 ofBuilding Energy List ofSubjects in 10 CFRPart430

6. We request comments on the Efficiency Programs modeldministrativ rati and validity ofthe analytical methods used INPV Industry netpresentvalue n to develop the direct effects ofwater ITS Intertek Testing Services procedure, Energy Conservation, heater standardson national kt Thousand metric tons Household appliances. employment and the appropriate kWh kilowatt hours Issued in Washington, DC, on March 8, employment and the appropriate LBNL Lawrence Berkeley National 2000. interpretation and use ofthe results of Laboratory Dan W. Re this analysis approach. LCC Life-cycle costDan W. Reicher, Appendix A-Acronyms andAbbreviations LPG Liquid petroleum gas AssistantSecrety,EnergyEfficiencyand 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 ofChapter II ofTitle AEO EIA's Annual Energy Outlook NEEA Northwest Energy Efficiency 10, Code ofFederal Regulations is AE099 EIA's 1999 Annual Energy Outlook 

### Alliance AEO99 ElA's 1999 Annual Energy Outlook Ap 1 c i A l proposed to be amended as set forth AGA America Gas Association NEGA New England GasAssociation ANOPR Advance Notice ofProposed NEMS National Energy Modeling System below.

Rulemaking NEMS-BRS National Energy Modeling PART 43ENERGY CONSERVATION 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 GasCouncil 1. The authority citation for Part 430 BRS DOE's Office ofBuildingResearch 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) ofSubpart C is CE Consumer Expenditures Administration revised to read as follows: CEC California Energy Commission NOPR Notice ofProposed Rulemaking CFR Code ofFederal Regulations NPV Net present value 430.32 Energyconservation standards 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 ConsumerProduct Safety NU Northeast Utilities

Commission NWPPC Northwest PowerPlanning Council The energy factor ofwater heaters DOE U.S. Department ofEnergy (also the OIRA Office of Information and Regulatory shall not be less than the following for

Department) Affairs products manufactured on or after the DOJ U.S.Department ofJustice OOE Oregon Office ofEnergy indicated dates.

### 25086 Federal Register/Vol. 65, No. 83/Friday, April 28, 2000/Proposed Rules

i ' '
Product class Energy factoras 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.

[FRDoc. 00-9847 Filed 4-17-00; 11:57 am] BILUNG CODE 6450-1-P