CHAPTER 1. INTRODUCTION

TABLE OF CONTENTS

1.1 PURPOSE OF THE DOCUMENT

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1.2 OVERVIEW OF STANDARDS FOR RESIDENTIAL DISHWASHERS, DEHUMIDIFIERS, AND COOKING PRODUCTS AND COMMERCIAL

CLOTHES WASHERS

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1.3 PROCESS FOR SETTING ENERGY CONERVATION STANDARDS

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1.4 STRUCTURE OF THE DOCUMENT

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LIST OF TABLES

Table 1.3.1 Analyses Under the Process Rule

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1-iCHAPTER 1. INTRODUCTION

1.1 PURPOSE OF THE DOCUMENT

This technical support document (TSD) is a stand-alone report that provides the technical analyses and results in support of the information presented in the notice of proposed rulemaking (NOPR) for residential dishwashers, dehumidifiers, cooking products and commercial clothes washers (also referred to as “the considered products”).

1.2 OVERVIEW OF STANDARDS FOR RESIDENTIAL DISHWASHERS,

DEHUMIDIFIERS, AND COOKING PRODUCTS AND COMMERCIAL

CLOTHES WASHERS

The Energy Policy and Conservation Act (EPCA) of 1975 (42 U.S.C. 6291–6309) established an energy conservation program for major household appliances. The National Energy Conservation Policy Act of 1978 (NECPA) amended EPCA to add Part C of Title III (42

U.S.C. 6311–6317), which established an energy conservation program for certain industrial equipment. Additional amendments to EPCA have given the Department of Energy (DOE) the authority to regulate the energy efficiency of several products, including residential dishwashers, dehumidifiers, and cooking products and commercial clothes washers—the products that are the focus of this document. The amendments to EPCA in the National Appliance Energy Conservation Act of 1987 (NAECA) established prescriptive energy conservation standards for dishwashers and cooking products, as well as requirements for determining whether these standards should be amended. (42 U.S.C. 6291–6309) The amendments to EPCA in the Energy Policy Act of 2005 (EPACT 2005), P.L. 109-58, included provisions that expanded DOE’s energy conservation program to include certain residential products and commercial equipment, including dehumidifiers and commercial clothes washers.

NAECA established prescriptive standards for gas cooking products, requiring gas ranges and ovens with an electrical supply cord not to be equipped with constant burning pilots, and directed DOE to conduct two cycles of rulemakings to determine if more stringent standards are justified. a (42 U.S.C. 6295 (h)(1)-(2)) DOE initially analyzed standards for cooking products as part of an eight-product standards rulemaking. It issued a notice of proposed rulemaking (NOPR) on March 4, 1994, proposing performance standards for gas and electric residential cooking products, including microwave ovens. 59 FR 10464. In accordance with the July 15, 1996, Procedures for Consideration of New or Revised Energy Conservation Standards for

Consumer Products (the “Process Rule”), 61 FR 36974 (July 15, 1996), DOE refined its standards analysis of cooking products. With regard to gas cooking products, DOE focused on

a DOE is required to conduct two cycles of rulemakings for both gas and electric cooking products.

1-1the economic justification for eliminating standing pilots. Partially due to the difficulty of conclusively demonstrating that elimination of standing pilots was economically justified, DOE issued a final rule on September 8, 1998, that covered only electric cooking products, including microwave ovens. 63 FR 48038. The final rule found that no standards were justified for electric cooking products. DOE never completed its standards rulemaking for gas cooking products.

NAECA also established prescriptive standards for dishwashers, requiring that they be equipped with an option to dry without heat, and further required that DOE conduct two cycles of rulemakings to determine if more stringent standards are justified. (42 U.S.C. 6295 (g)(1), (4), and (5)) On May 14, 1991, DOE issued a final rule establishing the first set of performance standards for dishwashers; the new standards became effective on May 14, 1994. 56 FR 22250. DOE initiated a second standards rulemaking for dishwashers by issuing an ANOPR on November 14, 1994. 59 FR 56423. As a result of the priority-setting process outlined in the Process Rule, DOE suspended the standards rulemaking for dishwashers. The Energy Independence and Security Act of 2007 (EISA 2007; Pub. L. No. 110-140) amended EPCA to establish revised energy conservation standards for residential dishwashers. (42 U.S.C. 6295(g)(9)) These EISA 2007 amendments set energy efficiency standards for these products; therefore, DOE is not proposing standards for residential dishwashers in the NOPR and instead will codify these statutory standards in a subsequent final rule.

Dehumidifiers are new products covered by EPACT 2005, which established standards for these products with an effective date of October 1, 2007. (Section 135(c)(4)) EPACT 2005 also required that DOE issue a final rule by October 1, 2009, to determine whether these standards should be amended. If amended standards were justified, EPACT 2005 required them to become effective by October 1, 2012. In the event that DOE failed to publish a final rule, EPACT 2005 specified a new set of amended standards with an effective date of October 1, 2012. EISA amended EPCA to establish revised energy conservation standards for dehumidifiers. (42 U.S.C. 6295(cc)) As with dishwashers, DOE is not proposing standards for dehumidifiers in the NOPR and instead will codify these statutory standards in a subsequent final

rule.

Like dehumidifiers, commercial clothes washers are new products covered by EPACT

2005. EPACT 2005 established standards for commercial clothes washers with an effective date of January 1, 2007. (Section 136(e)) EPACT 2005 also requires that DOE issue a final rule by January 1, 2010, to determine whether these standards should be amended.

1.3 PROCESS FOR SETTING ENERGY CONERVATION STANDARDS

Under EPCA, when DOE is studying new or amended standards, it must consider, to the greatest extent practicable, the following seven factors (42 U.S.C. 6295 (o)(2)(B)(i)):

1-21)	 the economic impact of the standard on the manufacturers and consumers of the affected products;

2)	 the savings in operating costs throughout the estimated average life of the product compared to any increases in the initial cost or maintenance expense;

3)	 the total projected amount of energy savings likely to result directly from the imposition of the standard;

4)	 any lessening of the utility or the performance of the products likely to result from the imposition of the standard;

5)	 the impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the imposition of the standard;

6)	 the need for national energy conservation; and

7)	 other factors the Secretary considers relevant.

Other statutory requirements are set forth in 42 U.S.C. 6295 (o)(1)–(2)(A), (2)(B)(ii)– (iii), and (3)–(4) and 42 U.S.C. 6316(e).

DOE considers stakeholder participation to be a very important part of the process for setting energy conservation standards. DOE actively encourages the participation and interaction of all stakeholders during the comment period in each stage of the rulemaking. Beginning with the Framework Document and during subsequent comment periods, interactions among stakeholders provide a balanced discussion of the information that is required for the standards rulemaking.

In conducting the test procedures rulemaking and the energy conservation standards rulemaking, DOE involves stakeholders through formal public notifications ( i.e., Federal Register notices). For this rulemaking, DOE employed the procedures set forth in the Process Rule to the extent they were appropriate for developing energy conservation standards for the considered products. The Process Rule greatly enhances opportunities for public input and improved analytic approaches, and encourages adoption of consensus-based standards. The Process Rule provides policies and guidelines for early public review and consultation with interested parties with regard to identifying and screening design options, selecting a proposed standard, and establishing the final standard. The factors for screening design options include: (1) technological feasibility; (2) practicability to manufacture, install, and service; (3) adverse impacts on product utility or product availability; and (4) adverse impacts on health or safety (Process Rule at section 4(a)(4)). 61 FR 36982.

The Process Rule requires DOE to evaluate uncertainty and variability through the use of scenario or probability analysis, and provides for review by experts and interested parties of the analyses used, including: (1) qualitative and quantitative analytical methods; (2) economic,

1-3engineering, and life-cycle cost (LCC) analyses; and (3) impacts on manufacturers and consumers, national energy savings, the economy, and the environment. Although the Process Rule specifically applies only to the development of energy-efficiency standards for consumer products, DOE has decided to apply its procedures to the development of energy conservation standards for commercial and industrial equipment as well. See appendix A to subpart C of Title 10 of the Code of Federal Regulations Part 430 (10 CFR Part 430).

Before DOE determines whether or not to adopt a proposed energy conservation standard, it must first solicit comments on the proposed standard. (42 U.S.C. 6313(a)(6)(B)(i)) Any new or amended standard must be designed to achieve significant additional conservation of energy and be technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)) To determine whether economic justification exists, DOE must review comments on the proposal and determine that the benefits of the proposed standard exceed its burdens to the greatest extent practicable, weighing the seven factors listed above. (42 U.S.C. 6295 (o)(2)(B)(i))

After the publication of the Framework Document, the standards rulemaking process involves three additional formal, major public notices, which DOE publishes in the Federal Register. The first of the rulemaking notices is an advance notice of proposed rulemaking (ANOPR), which is designed to publicly vet the models and tools used in the rulemaking, and to facilitate public participation before the proposed rule stage. The second notice is a NOPR, which presents a discussion of comments received in response to the ANOPR; analysis of the impacts of standards on consumers, manufacturers, and the nation; DOE’s weighting of these impacts; and the proposed standards. The third notice is the final rule, which presents a discussion of comments received in response to the NOPR; the revised analysis of the impacts of standards; DOE’s weighting of these impacts; the standards DOE is adopting; and the effective

dates of the standards.

In April, 2006, DOE published a Rulemaking Framework for Commercial Clothes Washers and Residential Dishwashers, Dehumidifiers, and Cooking Products , describing the procedural and analytical approaches DOE anticipated using to evaluate the establishment of energy conservation standards for these products. This document is available at http://www.eere.energy.gov/buildings/appliance_standards/

.

DOE held a public meeting on April 27, 2006, to discuss procedural and analytical approaches to the rulemaking, and to inform and facilitate stakeholders’ involvement in the rulemaking process. The analytical framework presented at the public meeting described different analyses, such as the engineering analysis and the LCC and payback period (PBP) analysis, the methods proposed for conducting them, and the relationships among the various analyses. Table 1.3.1 lists the analyses to be undertaken and reported in each of the formal public rulemaking documents.

1-4Table 1.3.1 Analyses Under the Process Rule

ANOPR NOPR Final Rule

Market and technology assessment

Screening analysis

Engineering analysis Revised ANOPR analyses

Life-cycle cost sub-group analysis

Manufacturer impact analysis Revised analyses

Energy and water use determination Utility impact analysis

Markups for equipment price

determination Environmental assessment

Life-cycle cost and payback period analysis Employment impact analysis

Shipments analysis

National impact analysis

Preliminary manufacturer impact analysis Regulatory impact analysis

During the April, 2006, public meeting, stakeholders commented about the following issues related to the rulemaking: the existing DOE test procedure for microwave ovens; baseline unit definitions for the considered products; number of product classes for the considered products; consideration of limiting standby power as a design option for all considered products; technology options for improving efficiency for all considered products; type of approach to employ for the engineering analysis; efficiency levels to consider for all of the considered products; implications of clothes container volume on commercial clothes washer efficiency; proposed approaches for specifying typical annual energy and water consumption for all considered products; potential data sources for characterizing variability in annual energy and water consumption; typical distribution channels and markups for the considered products; data sources for retail prices; type of approach to employ for the LCC and PBP analyses; variability of forecasted energy and water prices; repair, maintenance, and installation cost relationship to product efficiency; product lifetimes; development of consumer discount rates; purchase price impacts on product shipments; forecasted saturation rates of commercial clothes washers; consumer subgroups; water and wastewater utility impacts; and wastewater discharge impacts.

Stakeholder comments submitted during the Framework Document comment period elaborated on the issues raised at the public meeting. DOE worked with its contractors to address these issues in the analyses.

After the April, 2006, public meeting, as part of the information gathering and sharing process, DOE organized and held interviews with manufacturers of the considered products. DOE selected companies that represented production of all types of equipment, ranging from small to large manufacturers, and included both Association of Home Appliance Manufacturers (AHAM) member companies and non-AHAM member companies. DOE had four objectives for these interviews: (1) Solicit feedback on the draft engineering analysis (including methodology,

1-5production costs, manufacturing processes, and findings); (2) solicit feedback on topics related to the preliminary manufacturer impact analysis; (3) provide an opportunity, early in the rulemaking process, to express specific concerns to DOE; and (4) foster cooperation between the

manufacturers and DOE.

There were six general topics related to the preliminary manufacturer impact analysis discussed during each of the interviews: (1) general key issues; (2) shipment projections; (3) capital conversion costs; (4) product mix and profitability; (5) market shares and industry consolidation; and (6) cumulative regulatory burden.

DOE incorporated the information gathered at the interviews into its engineering analysis (see Chapter 5) and the preliminary manufacturer impact analysis (see Chapter 13). Following the publication of the ANOPR and the ANOPR public meeting, DOE held additional meetings with manufacturers as part of the consultative process for the manufacturer impact analysis conducted during the NOPR phase of the rulemaking.

DOE developed spreadsheets for the LCC, PBP, and national impact analyses for each of the considered products in an effort to meet the objectives of the Process Rule. For each product,DOE developed an LCC spreadsheet that calculates the LCC and PBP at various energyefficiency levels. DOE also developed a national impact analysis spreadsheet that calculates thenational energy savings (NES) and national net present values (NPVs) at various energyefficiency levels. This spreadsheet includes a model that forecasts the impacts of energyefficiency standards at various levels on product shipments. All of these spreadsheets are available on the DOE website ( http://www.eere.energy.gov/buildings/appliance_standards ), within the specific pages for each of the considered products.

In November 2007, DOE published an Advanced Notice of Proposed Rulemaking for Commercial Clothes Washers and Residential Dishwashers, Dehumidifiers, and Cooking

Products , to consider establishing new or revised energy conservation standards for the covered products, and to announce a public meeting to receive comments on a variety of issues. This

document is available at http://www.eere.energy.gov/buildings/appliance_standards/

.

DOE held a public meeting on December 13, 2007, to provide interested stakeholders the opportunity to comment on the proposed product classes DOE is considering; the analytical framework, models, and tools ( e.g. , LCC and national energy savings (NES) spreadsheets) that DOE has been using to perform analyses of the impacts of energy conservation standards; the results of the preliminary analyses; and the candidate energy conservation standard levels.

After the publication of the ANOPR and the presentation of the ANOPR to stakeholders at the public meeting, DOE conducted interviews with manufacturers of the covered products as part of the manufacturer impact analysis for the NOPR. There were thirteen general topics discussed during each of the interviews: (1) general key issues, (2) company overview and organizational characteristics, (3) company financial parameters, (4) production cost breakdown, (5) shipment projections and market shares, (6) equipment mixes, (7) conversion costs, (8) markups and profitability, (9) cumulative regulatory burden, (10) exports, foreign competition,

1-6and outsourcing, (11) direct employment impact assessment, (12) market consolidation, and (13) baseline products and different design options.

Subsequent to the ANOPR, the Department revised its preliminary analyses to address public comments it had received on its ANOPR. In addition, the Department conducted all of the analyses identified in Table 1.3.1 that are required for the notice of proposed rulemaking (NOPR) phase of the rulemaking. Taking into consideration the seven factors under 42 U.S.C. 6313(a)(6)(B)(i), and comments received from interested parties during the rulemaking process, the Department analyzed four trial standard levels, including the levels named in the Joint Stakeholders’ proposal. As a result, DOE is adopting through a Direct Final Rule the energy efficiency standards recommended by the Joint Stakeholders.

This NOPR TSD outlines the analytical approaches used in this rulemaking.

1.4 STRUCTURE OF THE DOCUMENT

This NOPR TSD outlines the analytical approaches used in this rulemaking. The TSD consists of seventeen chapters and appendices.

Chapter 1	 Introduction: provides an overview of the appliance standards program and how it applies to this rulemaking, and outlines the structure of the

document.

Chapter 2	 Analytical Framework: describes the rulemaking process.

Chapter 3	 Market and Technology Assessment: characterizes the market for the considered products and the technologies available for increasing equipment efficiency.

Chapter 4	 Screening Analysis: identifies all the design options that improve efficiency of the considered products, and determines which technology design options are viable for consideration in the engineering analysis.

Chapter 5	 Engineering Analysis: discusses the methods used for developing the relationship between increased manufacturer price and increased efficiency.

Chapter 6	 Energy and Water Use Determination: discusses the process used for generating energy- and water-use estimates for the considered products

as a function of standard levels.

1-7Chapter 7 Markups for Equipment Price Determination: discusses the methods used for establishing markups for converting manufacturer prices to customer equipment prices.

Chapter 8 Life-Cycle Cost and Payback Period Analysis: discusses the effects of standards on individual customers and users of the equipment and compares the LCC and PBP of equipment with and without higher efficiency standards.

Chapter 9 Trial Standard Levels: discusses the trial standard levels and methods used to derive the energy-efficiency equations corresponding to the proposed energy conservation standards.

Chapter 10 Shipments Analysis: discusses the methods used for forecasting shipments with and without higher efficiency standards, including how equipment purchase decisions are economically influenced and how DOE models this relationship with econometric equations.

Chapter 11 National Impact Analysis: discusses the methods used for forecasting national energy consumption and national economic impacts based on estimates of future equipment efficiency, new construction and building starts, and annual equipment sales in the absence and presence of higher efficiency standards.

Chapter 12 Life-Cycle Cost Subgroup Analysis: discusses the effects of standards on different subgroups of consumers and compares the LCC and PBP of equipment with and without higher efficiency standards for these

consumers.

Chapter 13 Manufacturer Impact Analysis: discusses the effects of standards on the finances and profitability of equipment manufacturers.

Chapter 14 Utility Impact Analysis: discusses the effects of standards on electric and gas utilities.

Chapter 15 Employment Impact Analysis: discusses the effects of standards on national employment.

Chapter 16 Environmental Assessment for Residential Cooking Products and Commercial Clothes Washers: discusses the effects of amended energy conservation standards on three pollutants—sulfur dioxide (SO 2 ), nitrogen oxides (NO

x ), and mercury—as well as carbon emissions.

Chapter 17 Regulatory Impact Analysis for Residential Cooking Products and Commercial Clothes Washers: discusses the present regulatory actions

1-8as well as the impact of non-regulatory alternatives to setting new energy conservation standards.

Appendix 5A AHAM Data Submittal: presents the data provided by AHAM to DOE for aggregated data collection of shipments, market share, incremental cost, and one-time manufacturer cost information as a function of efficiency level. This appendix also presents the AHAM microwave oven standby power data submittal.

Appendix 5B Microwave Oven Standby Power Testing Regression Methodology: discusses regression analysis to determine a representative standby power measurement period.

Appendix 5C Microwave Oven Display Configurations: discusses the characteristics of different display configurations.

Appendix 6A Cooktops and Ovens: Determination of Energy-Using Components: discusses the method for determining the energy use by energy-usingcomponents of cooktops and ovens including cooking, ignition, selfcleaning, and clock energy.

Appendix 8A User Instructions for LCC and PBP Spreadsheets: briefly describes the LCC and PBP spreadsheets for each of the considered products and provides brief user instructions on how to operate the spreadsheets.

Appendix 8B Uncertainty and Variability: discusses how DOE uses uncertainty and variability to characterize the inputs to the LCC and PBP analysis.

Appendix 8C Lifetime Distributions: discusses how product lifetimes are characterized with Weibull probability distributions.

Appendix 8D Household Discount Rate Distributions: provides the probability distributions for various household debt classes and asset holdings used to develop discount rates for household appliances in the LCC analysis.

Appendix 10A Relative Price Elasticity of Demand for Appliances: describes the analysis that DOE conducted to determine the consumer sensitivity to appliance purchase price changes as well as operating cost changes and

household income.

Appendix 11A User Instructions for Shipments and NIA Spreadsheets: briefly describes the shipments and national impact analysis (NIA) spreadsheets for each of the considered products and provides brief user instructions on how to operate the spreadsheets.

1-9Appendix 11B National Equipment and Operating Costs: provides the components to the NPV for each of the considered products, namely, the present value of the equipment costs and the present value of the operating costs.

Appendix 13A The Low-Volume Manufacturer: discusses the method for estimating the revenue and product mix impact on a low-production-volume

commercial clothes washer.

Appendix 13B Manufacturer Interview Guides: presents questionnaires used to guide DOE interviews with residential cooking products and commercial

clothes washer manufacturers.

Appendix 13C Government Regulatory Impact Model (GRIM): discusses the method to estimate the change in value of an industry or manufacturers(s) following a regulation or a series of regulations.

Appendix 14A Interpolation of Utility and Environmental Results from NEMS-BT Output: describes the methodology for using output from NEMS-BT to estimate the utility impact and environmental impact results for product

standards.

Appendix 17A Regulatory Impact Analysis Supporting Material: provides more detailed information on the data used to conduct the Regulatory Impact Analysis.

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