### REGULATORY IMPACT ANALYSIS FOR PROPOSED ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL FURNACES AND BOILERS

September 2006



### U.S. Department of Energy Assistant Secretary Office of Energy Efficiency & Renewable Energy Building Technologies Program Appliances and Commercial Equipment Standards Washington, DC 20585 

## REGULATORY IMPACT ANALYSIS FOR PROPOSED ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL FURNACES AND BOILERS

September 2006



# u.s. Department ofEnergy Assistant Secretary Office ofEnergy Efficiency & 

### Renewable Energy Building Technologies Program Appliances and Commercial Equipment Standards Washington, DC 20585REGULATORY IMPACT ANALYSIS FOR PROPOSED ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL FURNACES AND BOILERS

TABLE OF CONTENTS 1.0 INTRODUCTION .................................................. RIA-1 2.0 NON-REGULATORY POLICIES ..................................... RIA-2 2.1 Methodology ................................................ RIA-2 2. 1.1 Modeling Method ....................................... RIA-2 2.1.2 Policy Assumptions ..................................... RIA-3 2.1.3 Policy Interactions ...................................... RIA-4 2.2 Non-Regulatory Policy Assumptions .............................. RIA-4 2.2.1 No New Regulatory Action ............................... RIA-4 2.2.2 Financial Incentives Policies .............................. RIA-5 2.2.3 Voluntary Energy-Efficiency Targets .......... RIA-10 2.2.4 Early Replacement ..................................... RIA-12 2.2.5 Bulk Government Purchases ............................. RIA-13 2.3 Non-Regulatory Policy Market Share Impacts ..................... RIA-14 2.4 Results Summary for Non-Regulatory Alternatives ................. RIA-16

LIST OF TABLES Table RIA.1 Policy Alternatives to Proposed National Furnace and Boiler Standards .. RIA-1 Table RIA.2 Trial Standard Levels for Residential Furnaces and Boilers ............ RIA-3 Table RIA.3 Benefit/Cost Ratios for Proposed Standard and Rebate Policy Cases ..... RIA-7 Table RIA.4 Increased Market Share Penetration Levels from Voluntary Furnace

and Boiler Programs .......................................... RIA-11 Table RIA.5 Non-Regulatory Alternatives with Target Levels at TSL 2 ............ RIA-16 Table RIA.6 Non-Regulatory Alternatives with Target Levels at TSL 2

(NWGF at TSL 3) ........................................... RIA-16

LIST OF FIGURES Figure RIA.1 Market Penetration Curve for Non-Weatherized Gas Furnaces

at 80 Percent AFUE Level ................................... RIA-8 Figure RIA.2 Market Penetration Curve for Non-Weatherized Gas Furnaces

at 81 Percent AFUE Level ...................................... RIA-8 Figure RIA.3 Market Penetration Curve for Gas Boilers .......................... RIA-9 Figure RIA.4 Early Replacement Shipments Projections for

Non-Weatherized Gas Furnaces ................................. RIA-13

RIA-i 

### REGULATORY IMPACT ANALYSIS FOR PROPOSED ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL FURNACES AND BOILERS TABLE OF CONTENTS 1.0 INTRODUCTION

.................................................. RIA-l 2.0 NON-REGULATORY POLICIES

..................................... RIA-2 2.1 Methodology

................................................ RIA-2 2.1.1 Modeling Method

....................................... RIA-2 2.1.2 Policy Assumptions

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. RIA-3 2.1.3 Policy Interactions

...................................... RIA-4 2.2 Non-Regulatory Policy Assumptions.

. . . . . . . . . . . . . . . . . . . . . . . . . . . .. RIA-4 2.2.1 No New Regulatory Action

............................... RIA-4 2.2.2 Financial Incentives Policies

.............................. RIA-5 2.2.3 Voluntary Energy-EfficiencyTargets

.......... RIA-lO 2.2.4 Early Replacement

..................................... RIA-12 2.2.5 Bulk Government Purchases

............................. RIA-13 2.3 Non-RegulatoryPolicyMarketShareImpacts

..................... RIA-14 2.4 Results Summary for Non-Regulatory Alternatives

................. RIA-16

LIST OF TABLES Table RIA. 1 Policy Alternatives to Proposed National Furnace and Boiler Standards RIA-I Table RIA.2 Trial Standard Levels for Residential Furnaces and Boilers

............ RIA-3 Table RIA.3 Benefit/Cost Ratios for Proposed Standard and Rebate Policy Cases.

. . .. RIA-7 Table RIA.4 Increased Market Share Penetration Levels from Voluntary Furnace and Boiler Programs.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. RIA-II Table RIA.5 Non-Regulatory Alternatives with Target Levels at TSL 2

............ RIA-16 Table RIA.6 Non-RegulatoryAlternatives with Target Levels at TSL 2 (NWGF at TSL 3)

........................................... RIA-16

LIST OF FIGURES Figure RIAl Market Penetration Curve for Non-Weatherized Gas Furnaces at 80 Percent AFUE Level

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. RIA-8 Figure RIA2 Market Penetration Curve for Non-Weatherized Gas Furnaces at 81 Percent AFUE Level

...................................... RIA-8 Figure RIA3 Market Penetration Curve for Gas Boilers.

. . . . . . . . . . . . . . . . . . . . . . . .. RIA-9 Figure RIA4 Early Replacement Shipments Projections for Non-Weatherized Gas Furnaces

................................. RIA-13

RIA-iFigure RIA.5 Penetration Rates for Nan-Weatherized Gas Furnaces at 80 Percent AFUE .......................................... RIA-14 Figure RIA.6 Penetration Rates for Non-Weatherized Gas Furnaces

at 81 Percent AFUE .......................................... RIA-15 Figure RIA.7 Penetration Rates for Gas Boilers at 84 Percent AFUE ............... RIA-15 

### Figure RIA5 Penetration Rates for Non-Weatherized Gas Furnaces at 80 Percent AFUE

.......................................... RIA-I4 Figure RIA6 Penetration Rates for Non-Weatherized Gas Furnaces at 81 Percent AFUE

.......................................... RIA-I5 Figure RIA7 Penetration Rates for Gas Boilers at 84 Percent AFUE

............... RIA-I5

RIA-iiREGULATORY IMPACT ANALYSIS FOR RESIDENTIAL FURNACES AND BOILERS

1.0 INTRODUCTIONThe Department of Energy has determined that residential furnace and boiler energyefficiency standards constitute an "economically significant regulatory action" under Executive Order (E.O.) 12866 "Regulatory Planning and Review." 58 FR 51735, October 4,1993. Therefore, the proposed energy conservation standards require a regulatory impact analysis (RIA), which involves an evaluation of non-regulatory alternatives to the proposed standards. This document evaluates several possible alternatives to the proposed standards, and compares the costs and benefits of each to the proposed standards. As described in section 2 of this report, the proposed standards are those in Trial Standard Level (TSL) 2. As an alternative in this RIA, the Department also conducted the analysis assuming that the proposed standard is TSL 2, except for non-weatherized gas furnaces which is TSL 3. (81 percent average fuel utilization efficiency (AFUE)).Under the Process Rule, the Department is committed to continually explore nonregulatory alternatives to standards. DOE has prepared this draft regulatory analysis pursuant to E.O. 12866, which is subject to review under the Executive Order by the Office of Information and Regulatory Affairs (OIRA). 58 FR 51735. The Department identified six major non-regulatory alternatives to standards as representing feasible policy options to achieve consumer product energy efficiency

. These are listed in Table RIA.1. The Department evaluated each alternative in terms of its ability to achieve significant energy savings at a reasonable cost, and compared the effectiveness of each one to the effectiveness of the proposed standards.
Table RIA.1 Policy Alternatives to Proposed National Furnace and Boiler Standards No New Regulatory Action Consumer Rebates Consumer Tax Credits Manufacturer Tax Credits Voluntary Energy-Efficiency Targets Early Replacement Bulk Government Purchases State Energy-Efficiency Standards

RIA-1 REGULATORY IMPACT ANALYSIS FOR RESIDENTIAL FURNACES AND BOILERS

1.0 INTRODUCTION The Department ofEnergy has determined thatresidential furnace and boiler energyefficiency standards constitute an "economically significant regulatory action" under Executive Order (E.O.) 12866 "RegulatoryPlanning and Review." 58 FR 51735, October 4,1993. Therefore, theproposedenergy conservation standards require a regulatory impact analysis (RIA), which involves an evaluation ofnon-regulatory alternatives to the proposed standards. This document evaluates several possible alternatives to the proposed standards, and compares the costs and benefits ofeach to the proposed standards. As described in section 2 ofthis report, the proposed standards are those in Trial Standard Level (TSL) 2. As an alternative in this RIA, the Department also conducted the analysis assuming that the proposed standard is TSL 2, except for non-weatherized gas furnaces which is TSL 3. (81 percent average fuel utilization efficiency (AFUE)). Under the Process Rule, the Department is committed to continually explore nonregulatory alternatives to standards. DOE has preparedthis draft regulatory analysis pursuant to E.O. 12866, which is subject to review under the Executive Orderbythe Office ofInformation and Regulatory Affairs (OrRA). 58 FR 51735. The Department identified six major non-regulatory alternatives to standards as representing feasible policy options to achieve consumerproduct energy efficiency. These are listed in Table RIA.l. The Department evaluated each alternative in terms ofits abilityto achieve significant energy savings at a reasonable cost, and compared the effectiveness ofeach one to the effectiveness ofthe proposed standards. 

### Table RIA.1 Policy Alternatives to Proposed National Furnace and Boiler Standards

No New Regulatory Action Consumer Rebates Consumer Tax Credits Manufacturer Tax Credits Voluntary Energy-Efficiency Targets Early Replacement Bulk Government Purchases State Energy-Efficiency Standards

RIA-l2.0 NON-REGULATORY POLICIES

2.1 Methodology This section describes the approach used to analyze non-regulatory policies for the most common furnace and the most common boiler product classes, which are non-weatherized gas furnaces and gas boilers

. DOE used a similar approach to estimate the impacts of the policy alternatives for the other furnace and boiler product classes. 2.1.1 Modeling Method To calculate the national energy savings (NES) and the net present value (NPV) corresponding to each policy alternative, the Department used the NES Spreadsheet Model (see Chapter 10 of the TSD for a description of the NES Spreadsheet Model). To compare each alternative to the proposed standards, the Department quantified the effect of each alternative on the purchase of furnace and boiler equipment meeting the target levels. Once it had made the quantitative assumptions for each, DOE made the appropriate revisions to the inputs in the NES Spreadsheet Model. The main model inputs that DOE revised were (1) market shares of equipment at target efficiencies, and (2) equipment replacement rates. The shipments for any given year are comprised of a distribution of efficiency levels. The Department assumed that standards would affect 100 percent of the shipments, while the non-regulatory policies affect a smaller percentage of the shipments. In each policy case, DOE made particular assumptions about the percentage of shipments impacted by the policy under analysis. The Department then calculated shipment

-weighted average energy consumption and cost using these market shares. A shift in market share to higher efficiency may increase the average installed cost of furnace and boiler equipment. Operating costs will generally decrease due to a decline in energy consumption

. Therefore, a NPV can be calculated for non-regulatory alternatives in the same way as for the proposed standard

. In some scenarios, total installed cost increases are partially mitigated by government rebates or tax credits

. The Department assumed that credits and rebates would be paid for by consumers in another form (such as additional taxes), and therefore did not include them as a benefit for the purposes of calculating the national NPV. The key measures of the impact of each alternative are: • National energy savings in quadrillion Btus (quads): Cumulative national primary energy savings for equipment bought in the period from the effective date of the policy case (2015) to the year 2038

. NES results account for a 15 percent rebound effect. • Net present value: The value of net monetary savings from equipment bought in the period from the effective date of the policy case (2015) to the year 2038. The Department calculated the NPV as the difference between the present value of equipment and
RIA-2 

### 2.0 NON-REGULATORY POLICIES 2.1 Methodology This section describes the approach used to analyze non-regulatory policies for the most common furnace and the most common boilerproduct classes, which are non-weatherized gas furnaces and gas boilers. DOE used a similar approach to estimate the impacts ofthe policy alternatives for the otherfurnace and boiler product classes. 

### 2.1.1 Modeling Method To calculate the national energy savings (NES) and the netpresent value (NPV) corresponding to each policy alternative, the Department used the NES Spreadsheet Model (see Chapter 10 ofthe TSD for a description ofthe NES Spreadsheet Model). To compare each alternative to the proposed standards, the Department quantified the effect ofeach alternative on the purchase offurnace and boiler equipment meeting the target levels. Once it had made the quantitative assumptions for each, DOE made the appropriate revisions to the inputs in the NES Spreadsheet Model. The main model inputs that DOE revised were (1) market shares of equipment at target efficiencies, and (2) equipment replacement rates. The shipments for any given year are comprised ofa distribution ofefficiency levels. The Department assumed that standards would affect 100 percent ofthe shipments, while the non-regulatorypolicies affect a smaller percentage ofthe shipments. In each policy case, DOE made particular assumptions about the percentage ofshipments impacted by the policyunder analysis. The Department then calculated shipment-weighted average energy consumption and cost using these market shares. A shift in market share to higher efficiency mayincrease the average installed cost of furnace and boiler equipment. Operating costs will generally decrease due to a decline in energy consumption. Therefore, a NPV can be calculated for non-regulatory alternatives in the same way as for the proposed standard. In some scenarios, total installed cost increases are partially mitigatedby government rebates or tax credits. The Department assumed that credits and rebates would be paid for by consumers in another form (such as additional taxes), and therefore did not include them as a benefit for the purposes ofcalculating the national NPV. The key measures ofthe impact ofeach alternative are: National energy savings in quadrillion Btus (quads): Cumulative national primary energy savings for equipment bought in the period from the effective date ofthe policycase (2015) to the year 2038. NES results account for a 15 percent rebound effect.

• Netpresent value: The value ofnet monetary savings from equipment bought in the period from the effective date ofthe policy case (2015) to the year 2038. The Department calculated the NPV as the difference between the present value ofequipment and
RIA-2operating expenditures (including energy) in the base case, and the present value of expenditures in each alternative policy case. The Department calculated operating expenses (including energy) for the life of the equipment. 2.1.2 Policy Assumptions The impacts of non-regulatory policies are by nature uncertain, since they depend on program implementation and marketing efforts and the subsequent consumer behavior response. The projected impacts depend on the assumptions for the consumer participation rate, and are therefore subject to more uncertainties than the impacts of mandatory standards, which the Department assumed will have full compliance. To increase the robustness of the analysis, the Department conducted a literature review on each non-regulatory policy and consulted with key experts to gather information on similar incentive programs that have been implemented in the U.S. By studying field experience with sample programs of each type, DOE sought to make credible assumptions of their potential market impacts. Section 2.2 below reports the conclusions from this research as they apply to the policy modeling assumptions and includes the corresponding literature citations. Each of the policy alternatives to the proposed standards that DOE considered improves the average efficiency of new furnace and boiler equipment relative to the base case (no new regulatory action). The analysis considers that each alternative policy would induce residential consumers to purchase units at the same efficiency levels as required by the proposed standards. This report refers to these levels as target levels. In contrast to the proposed standards, however, the penetration rate in the alternative policy cases may not be 100 percent. The proposed standards are those in TSL 2 as shown in Table RIA.2.
Table RIA.2 Trial Standard Levels for Residential Furnaces and Boilers T i l S d d NWGF WGF MHF OF GB OB r a tan ar Levels AFUE % AFUE % AFUE % AFUE % AFUE % AFUE % TSL 1 80 80 80 80 82 83 TSL 2 80 83 80 82 84 83 TSL 3 81 83 81 82 84 83 TSL 4 90 83 90 84 84 84 TSL 5 96 83 90 85 99 95 Product class list with current standard level in parentheses: • NWGF =Non-Weatherized Gas Furnace (78%) • WGF = Weatherized Gas Furnace (78%) • MHF = Mobile Home Gas Furnace (75%) • OF = Oil-fired Furnace (78%) • GB = Gas Boiler (80%) • OB = Oil-fired Boiler (80%) RIA-3 operating expenditures (including energy) in the base case, and the present value of expenditures in each alternative policy case. The Department calculated operating expenses (including energy) for the life ofthe equipment. 2.1.2 Policy Assumptions The impacts ofnon-regulatorypolicies are by nature uncertain, since they depend on program implementation and marketing efforts and the subsequent consumer behavior response. The projected impacts depend on the assumptions for the consumerparticipation rate, and are therefore subject to more uncertainties than the impacts ofmandatory standards, which the Department assumed will have full compliance. To increase the robustness ofthe analysis, the Department conducted a literature review on each non-regulatorypolicy and consulted with key experts to gather information on similar incentive programs that have been implemented in the 

## u.s. By studying field experience with sample programs ofeach type, DOE sought to make credible assumptions oftheir potential market impacts. Section 2.2 below reports the conclusions from this research as they apply to the policymodeling assumptions and includes the corresponding literature citations. Each ofthe policy alternatives to the proposed standards that DOE considered improves the average efficiency ofnew furnace and boiler equipment relative to the base case (no new regulatory action). The analysis considers that each alternative policy would induce residential consumers to purchase units at the same efficiencylevels as required bythe proposed standards. This report refers to these levels as 

### target levels. In contrast to the proposed standards, however, the penetration rate in the alternative policy cases maynot be 100 percent. The proposed standards are those in TSL 2 as shown in Table RIA.2. 

### Table RIA.2 Trial Standard Levels for Residential Furnaces and Boilers NWGF WGF MHF OF GB OB Trial Standard Levels AFUE% AFUE% AFUE% AFUE% AFUE% AFUE% TSL 1 80 80 80 80 82 83 

### TSL2 80 83 80 82 84 83 TSL3 81 83 81 82 84 83 TSL4 90 83 90 84 84 84 TSL5 96 83 90 85 99 95 Product class list with current standard level in parentheses: NWGF = Non-Weatherized Gas Furnace (78%) WGF = Weatherized Gas Furnace (78%) MHF = Mobile Home Gas Furnace (75%) OF = Oil-fired Furnace (78%) GB = Gas Boiler (80%) OB = Oil-fired Boiler (80%) RIA-3For non-weatherized gas furnaces the Department considered two scenarios

. In one, the

non-regulatory policy efficiency target (and the proposed standard) is 80 percent AFUE (per TSL 2); in the other, the non-regulatory policy efficiency target (and the proposed standard) is 81 percent AFUE (per TSL 3). The size of the eligible market for the policies varies among the product classes. The NES model projects that 1.7 percent of the non-weatherized gas furnace market in 2015 will be below 80 percent AFUE and 64 percent will be at 80 percent AFUE. Therefore, policies that target an 80 percent AFUE level will impact some portion of 1.7 percent of the non-weatherized gas furnace market, and those that target 81 percent AFUE will impact some portion of 64 percent of the market. For gas boilers, the NES model projects that 85 percent of the market will be below the target level of 84 percent AFUE. Non-regulatory policies would thus impact some fraction of this 85 percent portion of the market. The Department assumed that the non-regulatory policy impacts last from the effective date for proposed furnace and boiler standards, 2015, through the end of the analysis period, 2038. The Department did not consider administrative costs for any of the non-regulatory policies in its analysis. Inclusion of such costs would decrease their NPV by a small amount.
2.1.3 Policy Interactions The Department calculated the impacts of each regulatory policy separately from those of the other policies. In actual practice, certain policies are often most effective when implemented in combination to provide incentives, such as early replacement with consumer rebates, or early replacement with bulk government purchases. The Department attempted to make conservative assumptions to avoid double counting policy impacts. Therefore, the policy impacts reported below are not additive; the combined impact of several or all of the policies may not be inferred from adding the results together. Section 2.3 presents the resulting market penetration curves for non-weatherized gas furnaces and gas boilers.
2.2 Non-Regulatory Policy Assumptions 2.2.1 No New Regulatory Action The case in which no new regulatory action is taken with regard to residential furnace and boiler efficiency constitutes the base case scenario described in Chapter 10 of the Furnace and Boiler TSD. ` This case defines the basis of comparison for all other scenarios. By definition, no new regulatory action yields zero energy savings and a net present value of zero dollars.

RIA-4 For non-weatherized gas furnaces the Department considered two scenarios. In one, the non-regulatorypolicy efficiency target (and the proposed standard) is 80 percent AFUE (perTSL 2); in the other, the non-regulatorypolicy efficiency target (and the proposed standard) is 81 percent AFUE (per TSL 3). The size ofthe eligible market for the policies varies among the product classes. The NES model projects that 1.7 percent ofthe non-weatherized gas furnace market in 2015 will be below 80 percent AFUE and 64 percent will be at 80 percent AFUE. Therefore, policies that target an 80 percent AFUE level will impact some portion of 1.7 percent ofthe non-weatherized gas furnace market, and those that target 81 percent AFUE will impact some portion of64 percent ofthe market. For gas boilers, the NES model projects that 85 percent ofthe market will be below the target level of84 percent AFUE. Non-regulatory policies would thus impact some fraction ofthis 85 percent portion ofthe market. The Department assumed that the non-regulatory policyimpacts last from the effective date for proposed furnace and boiler standards, 2015, through the end ofthe analysis period, 2038. The Department did not consider administrative costs for any ofthe non-regulatory policies in its analysis. Inclusion ofsuch costs would decrease their NPVby a small amount. 

### 2.1.3 Policy Interactions The Department calculated the impacts ofeach regulatorypolicy separately from those of the other policies. In actual practice, certainpolicies are often most effective when implemented in combination to provide incentives, such as early replacement with consumer rebates, or early replacement with bulk government purchases. The Department attempted to make conservative assumptions to avoid double counting policy impacts. Therefore, the policy impacts reported below are not additive; the combined impact ofseveral or all ofthe policies may not be inferred from adding the results together. Section 2.3 presents the resulting market penetration curves for non-weatherized gas furnaces and gas boilers. 

### 2.2 Non-Regulatory Policy Assumptions 2.2.1 No New 

### Regulatory Action The case in which no new regulatory action is taken with regard to residential furnace and boiler efficiency constitutes the base case scenario described in Chapter 10 ofthe Furnace and Boiler TSD.l This case defines the basis ofcomparison for all other scenarios. By definition, no new regulatory action yields zero energy savings and a net present value ofzero dollars.

RIA-42.2.2 Financial Incentives Policies

The Department considered scenarios in which the Federal government would provide two types of financial incentives: tax credits and rebates. Tax credits could be granted to consumers who purchased target-level furnace and boiler equipment, or the government could issue tax credits to manufacturers to offset costs associated with producing such equipment. The government also could provide consumers with a cash rebate at the time of purchase. DOE's evaluation of financial incentive policies utilized a comprehensive study of the potential for energy efficiency in California performed by Xenergy, Inc., which summarizesexperience with various utility rebate programs.' Xenergy developed a re-parameterized mixedsource information diffusion model to estimate market impacts induced by financial incentives for energy-efficient appliances. The basic premise of this mixed-source model is that information diffusion drives technology adoption. The model is formulated to characterize the influences of both internal and external sources of information on consumer behavior by superimposing two components in the equation, each capturing the effect of one of two different types of information source. The effects of these two types of information diffusion mechanisms are different. Internal sources of information influence consumers to purchase new products due mainly to word-of-mouth from early adopters, while external information sources influence consumers to change their adoption decisions as a result of marketing efforts and information coming from outside the consumer group. The mixed-source model describes a combined impact of the two information-source types, and specific parameterization determines consumer adoption behavior. (Appendix X contains further details.) Xenergy's model combined these two information diffusion mechanisms and generated a set of "implementation curves," which Xenergy calibrated using evaluation data from utility rebate programs conducted in the 1990s. Consumer response to rebate incentives appears to be a combination of the two information source types. The implementation curves illustrate the increased penetration of efficient equipment (i.e., increased market share) as a result of consumer response to benefit/cost (B/C) ratio changes induced by a specific rebate program. The implementation curves are used to depict various diffusion patterns based on perceived barriers to consumer purchase of high-efficiency equipment. There are implementation curves for varying levels of market barriers, from "no barriers" to "extremely high barriers." These curves provide a means to study the impact of changing the B/C ratio, by reducing the initial equipment cost through financial incentives, on the consumer participation rate. To further understand the impacts of financial incentives policies, the Department used studies on forecasting the impact of consumer tax credits.',' This research differentiated the impact of tax credits into the "direct price effect," which arises from the incremental equipment cost savings, and the "announcement effect," which is independent of the rebate amount. The announcement effect derives from the credibility that a particular technology receives from its inclusion in an incentive program, as well as changes in product marketing strategy, and the resulting modifications in markups and pricing. The Department assumed that the direct price effect and the announcement effect would also apply to rebate programs, and that half of the
RIA-5 

### 2.2.2 Financial Incentives Policies The Department considered scenarios in which the Federal government would provide two types offmancial incentives: tax credits and rebates. Tax credits could be granted to consumers who purchased target-level furnace and boiler equipment, or the government could issue tax credits to manufacturers to offset costs associated with producing such equipment. The government also could provide consumers with a cash rebate at the time ofpurchase. DOE's evaluation offinancial incentive policies utilized a comprehensive study ofthe potential for energy efficiencyin California performedbyXenergy, Inc., which summarizes experience with various utility rebate programs. 2 Xenergy developed are-parameterized mixedsource information diffusion model to estimate market impacts induced byfinancial incentives for energy-efficient appliances. The basic premise ofthis mixed-source model is that information diffusion drives technology adoption. The model is formulated to characterize the influences ofboth internal and external sources ofinformation on consumerbehavior by superimposing two components in the equation, each capturing the effect ofone oftwo different types ofinformation source. The effects ofthese two types ofinformation diffusion mechanisms are different. Internal sources ofinformation influence consumers to purchase new products due mainly to word-of-mouth from early adopters, while external information sources influence consumers to change their adoption decisions as a result ofmarketing efforts and information coming from outside the consumer group. The mixed-source model describes a combined impact ofthe two information-source types, and specific parameterization determines consumer adoption behavior. (Appendix X contains further details.) Xenergy's model combined these two information diffusion mechanisms and generated a set of"implementation curves," which Xenergy calibrated using evaluation data from utility rebate programs conducted in the 19908. Consumerresponse to rebate incentives appears to be a combination ofthe two information source types. The implementation curves illustrate the increased penetration ofefficient equipment (i.e., increased market share) as a result ofconsumer response to benefit/cost (B/C) ratio changes induced by a specific rebate program. The implementation curves are used to depict various diffusion patterns based on perceived barriers to consumer purchase ofhigh-efficiency equipment. There are implementation curves for varying levels ofmarketbarriers, from "no barriers" to "extremelyhigh barriers." These curves provide a means to study the impact ofchanging the B/C ratio, byreducing the initial equipment cost through financial incentives, on the consumer participation rate. To further understand the impacts offinancial incentives policies, the Department used studies onforecasting the impact ofconsumertax credits. 3, 4 This research differentiated the impact oftax credits into the "directprice effect," which arises from the incremental equipment cost savings, and the "announcement effect," which is independent ofthe rebate amount. The announcement effect derives from the credibilitythat a particulartechnology receives from its inclusion in an incentive program, as well as changes in product marketing strategy, and the resulting modifications in markups and pricing. The Department assumed that the direct price effect and the announcement effect would also apply to rebate programs, and that halfofthe
RIA-5increases in market penetration associated with rebates would be due to the direct price effect and

half to the announcement effect. Consumer Rebates The Department modeled the impact of the consumer rebate policy by determining the increase in market penetration of target-level equipment relative to the base case. For non-weatherized gas furnaces, the Department estimated the impact of increasing theB/C ratio via a rebate that paid 29 percent of the incremental installed cost between a nonweatherized gas furnace meeting the base case efficiency levela and a unit meeting the target efficiency

. The Department based the 29 percent rebate amount on rebate programs for condensing gas furnaces throughout the nation.',',',', 9, 10, 11, 12, 13 , 14 The average rebate in these programs amounted to about 29 percent of the incremental installed cost for condensing furnaces'. For gas boilers, the Department assumed that the rebate would cover 79 percent of the incremental installed cost between a boiler meeting the base case efficiency level and a unit meeting the target efficiency

. This amount was based on the average rebate level in programs for 85 percent AFUE gas boilers,' which amounted to about 79 percent of incremental installed cost.5, 7, 8, 9, 10, 11, 15 The Department assumed the rebates would remain in effect until they had transformed the market so that the market shift in efficiency shares seen in the first year of the program would be maintained throughout the forecast period (2015-2038). The Department first calculated the B/C ratio for the unit meeting the target level relative to the base case with no rebate

. It then calculated another B/C ratio for the unit meeting the target level, with a rebate, relative to the base case unit. Because of the incremental cost reduction due to the rebate, the B/C ratio for the rebate policy unit is larger (see Table RIA.3).

a The base case is a market weighted

-average of units at several AFUE levels. b While the target level (80 percent or 81 percent) is lower than the condensing furnace efficiency used for these rebate programs , DOE assumed that a rebate program could be designed to pay an equivalent percentage of the incremental installed costs of the targeted non-condensing gas furnaces. While the target level (84 percent) is lower than 85 percent AFUE for these rebate programs , DOE assumed that a rebate program could be designed to pay an equivalent percentage of the incremental installed costs of the targeted gas boilers. RIA-6 increases in market penetration associated with rebates would be due to the direct price effect and halfto the announcement effect. ConsumerRebates The Department modeled the impact ofthe consumer rebate policy bydetermining the increase in market penetration oftarget-level equipment relative to the base case. For non-weatherized gas furnaces, the Department estimated the impact ofincreasing the 

### B/C ratio via a rebate thatpaid 29 percent ofthe incremental installed cost between a nonweatherized gas furnace meeting the base case efficiency levela and a unit meeting the target efficiency. The Department based the 29 percent rebate amount on rebate programs for condensing gas furnaces throughout the nation.5 ,6, 7, 8, 9,10,11,12,13,14 The average rebate inthese programs amounted to about 29 percent ofthe incremental installed cost for condensing furnacesb• For gas boilers, the Department assumed that the rebate would cover 79 percent ofthe incremental installed cost between a boilermeetingthe base case efficiency level and a unit meeting the target efficiency. This amount was based onthe average rebate level in programs for 85 percent AFUE gas boilers,c which amounted to about 79 percent ofincremental installed cost.5, 7, 8,9,10,11,15
The Department assumed the rebates would remain in effect until they had transformed the market so that the market shift in efficiency shares seen in the first year ofthe program would be maintained throughout the forecast period (2015-2038). The Department first calculated the 

### B/C ratio for the unit meeting the target level relative to the base case with no rebate. It then calculated another 

### B/C ratio for the unit meetingthe target level, with a rebate, relative to the base case unit. Because ofthe incremental cost reduction due to the rebate, the 

### B/C ratio for the rebate policy unit is larger (see Table RIA.3).

a The base case is a market weighted-average ofunits at several AFUE levels.

b While the target level (80 percent or 81 percent) is lower than the condensing furnace efficiency used for these rebate programs, DOE assumed that a rebate program could be designed to pay an equivalent percentage ofthe incremental installed costs ofthe targeted non-condensing gas furnaces.

C While the target level (84 percent) is lower than 85 percent AFUE for these rebate programs, DOE assumed that a rebate program could be designed to pay an equivalent percentage ofthe incremental installed costs ofthe targeted gas boilers. RIA-6Table RIA.3 Benefit/Cost Ratios for Proposed Standard and Rebate Policy Cases NWGF at 80 % AFUE NWGF

at 8l %AFUE GB

Standard at 84% AFUE Benefit (Lifetime Operating Cost Savings) $95 $59 $374 Incremental Installed Cost (Increased Installed Cost) $55 $68 $220 B/C Ratio with no rebate 1.7 0.9 1.7 Rebate Amount Adjusted Incremental Installed Cost (Increased Installed Cost after Rebate) $16 $39 $20

$48 $174

$46
B/C Ratio for Rebate Policy Case 2.5 1.2 8.1 The Department then used the curves shown in Figures RIA.1, RIA.2 and RIA.3 to estimate the increased percentage of consumers who would purchase the units that meet the policy target levels if given a rebate incentive. For non-weatherized gas furnaces at the 80 percent standard level, DOE chose the "no barriers" curve since the bulk of the market is already at 80 percent AFUE. For non-weatherized gas furnaces at the 81 percent standard level, DOE chose the "moderate barriers" curve since 81 percent AFUE represented a small market in 2004 and there are considerations with regard to installation and safety. For gas boilers at the 84 percent standard level, DOE chose the "low barriers" curve since 84 percent is a common product AFUE (albeit with relatively low market share in 2004). DOE also used the "low barriers" curve for the other product classes. Figures RIA.1 through RIA.3 show the penetration rates of target-level units as a function of B/C ratios. Using this method, the Department estimated, that for the non-weatherized gas furnace product class, the market share of equipment meeting the policy target due to a rebate policy would increase by 8 percent at a target level of 80 percent AFUE and by 2 percent at a target level of 81 percent AFUE. For the gas boiler product class, DOE estimated that the market share of equipment meeting the policy target due to a rebate policy would increase by 33 percent. To calculate the impacts of this policy, DOE adjusted the base case shipments projection in the NES model to reflect these percentage increases in market share of efficient furnace and boiler models. 

### T 

### bi RIA 3 B fit/C t 

### R f 

### £ P

a e 

# . ene I os a lOS or ropose an ar an e ae ole 

### d St d d d R b t P 

## r Cases NWGF NWGF GB at 80% AFUE at 81 % AFUE Standard at 84% AFUE Benefit (Lifetime Operating Cost Savings) $95 $59 $374 Incremental Installed Cost (Increased Installed Cost) $55 $68 $220 B/C Ratio with no rebate 1.7 0.9 1.7 Rebate Amount $16 $20 $174 Adjusted Incremental Installed Cost (Increased Installed $39 $48 $46 Cost after Rebate) B/C Ratio for Rebate Policy Case 2.5 1.2 8.1 The Department then used the curves shown in Figures RIA. I, RIA.2 and RIA.3 to estimate the increased percentage ofconsumers who would purchase the units that meet the policy target levels ifgiven a rebate incentive. For non-weatherized gas furnaces at the 80 percent standard level, DOE chose the "no barriers" curve since the bulk ofthe market is already at 80 percent AFUE. For non-weatherized gas furnaces at the 81 percent standard level, DOE chose the "moderate barriers" curve since 81 percent AFUE represented a small market in 2004 and there are considerations with regard to installation and safety. For gas boilers at the 84 percent standard level, DOE chose the "low barriers" curve since 84 percent is a common product AFUE (albeit with relatively low market share in 2004). DOE also used the "low barriers" curve for the otherproduct classes. Figures RIA. 1through RIA.3 show the penetration rates oftarget-level units as a function ofB/C ratios. Using this method, the Department estimated, that for the non-weatherized gas furnace product class, the market share ofequipment meetingthe policy target due to a rebate policy would increase by 8 percent at a target level of80 percent AFUE and by2 percent at a target level of81 percent AFUE. For the gas boilerproduct class, DOE estimated that the market share ofequipment meeting the policy target due to a rebate policywould increase by 33 percent. To calculate the impacts ofthis policy, DOE adjusted the base case shipments projection in the NES model to reflect these percentage increases in market share ofefficient furnace and boiler models.

RIA-71w%

' . r3 --- --- -=------------------------------------------------- 6^ or I ----------------------- 414D iuief&-----------------

Penetration Rate S 62 & at BBC ratio of 1.7

------ - a ---^^--------------------------------------------------------- d E 7 40 E
m m Aw++______________________________________________________________
2jtra,F______________________________________________________________

yj% -______________________________________________________________

+ 6 S 10 D 1+

Participant Benefit-Cost Ratio Change of Penetration Rate=8`&

Figure RIA.1 Market Penetration Curve for Non-Weatherized Gas

Furnaces at 80 Percent AFUE Level

100%
Q'O% ------------------------------------------------------------

00% ------------------------------------------------------------ Nbderle B arriers Ct rue

------------------------------------------------------------ I 0%t -----------

50%- -------------------------------

- +03'- ----------------------` ----------------------------------- Penetration Rate=1.5% at BIC ratio of 0.86 399_ _______________ ______________-------_____________________ i 203: --- ---------------------------------------------- Penetration Rate = 3 J5 % 10 9: I - - j - - - f at- ------- Qc- ratioof 1. --- - 2

- 2

-----------------------------------
0% 4 0 Participant Bandit-Cost Ratio Change of Penetration Rate = 2 %
Figure RIA.2 Market Penetration Curve for Non-Weatherized Gas

Furnaces at 81 Percent AFUE Level

+ t S 10 12 1+

RIA-8 100¥. 9);+
iO¥+



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### Figure RIA.1 Market Penetration Curve for Non-Weatherized Gas Furnaces at 80 Percent AFUE Level

100'. 

### 90'.
so;.



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### '0." • . Q 1!**~** 50."+ 

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Penetratim Rate = 1.5% "''' at B/Cratio of0.86 /' 

### ---------------;r-------------------------------------------



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s 10 12 Partid pant BenEfit-Cost Ratio Change of Penetration ')- Rate =2%


### Figure RIA.2 Market Penetration Curve for Non-Weatherized Gas Furnaces at 81 Percent AFUE Level

RIA-81009

+'« --------------------------La waaoiem
------------------------- Curve ------------------------------f ------------------^ -
40% ________________________ _---- _______________________________

N
+o% ______ Renatotion Rata-67%atD/Cr

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iatio of 1.1 10% ---------------------------------------------------------------

0 # i S 10 1? 1# Participant Benefit-Cost Ratio Figure RIA.3 Market Penetration Curve for Gas Boilers Consumer Tax Credits Change of Penetration Rate = 33 %

The Department assumed a consumer tax credit equivalent to the amount covered by rebates (i.e., 29 percent of the incremental cost between non-weatherized gas furnace base case equipment and equipment meeting the policy target levels and 79 percent of the incremental cost for gas boilers). The Department estimated that the consumer participation rate would be lower than that for consumer rebates. Research on tax credits has shown that the time delay to the consumer in receiving a reimbursement via tax credit, plus the added transaction costs in tax return preparation, make the tax credit incentive less effective than a rebate received at purchase time. Based on previous analysis," DOE assumed that only 60 percent as many consumers would take advantage of the tax credit as would take advantage of a rebate. Using a similar approach for the rebate policy, DOE estimated that the market share of target efficiency gas furnace units would increase due to consumer tax credits by 5 percent over the base case at the 80 percent AFUE level and by 1 percent at the 81 percent AFUE level. For gas boilers, the market share would increase by 20 percent. The Department assumed the impact of this policy would be to permanently transform the market so that the shipment-weighted efficiency gain seen in the first year of the program would be maintained throughout the forecast period.

RIA-9**100~.** 90"+**~~'+** _________________________**JLQ~a~s.**_________________________ Curve

oJ)**'!(J~:+** 

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### -----;(------------------------------------------------------- 

# /.- lO'!'t.**----------P~R~K-~~iM8--------------------------------** ratio of 1.1 lOt.**O~·**

,+ 10 H Partioip<nt Benefit· Cost Rati 0 Figure RIA.3 Market Penetration Curve for Gas Boilers Consumer Tax Credits Chal"Qe of Penetratim**R~=** 33"%

The Department assumed a consumer tax credit equivalent to the amount covered by rebates (i.e., 29 percent ofthe incremental costbetween non-weatherized gas furnace base case equipment and equipment meeting the policytarget levels and 79 percent ofthe incremental cost for gas boilers). The Department estimated that the consumerparticipation rate would be lower than that for consumer rebates. Research on tax credits has shown that the time delay to the consumer in receiving a reimbursement via tax credit, plus the added transaction costs in tax returnpreparation, make the tax credit incentive less effective than a rebate received atpurchase time. Based onprevious analysis,16 DOE assumed that only 60 percent as many consumers would take advantage ofthe tax credit as would take advantage ofa rebate. Using a similar approach for the rebate policy, DOE estimated that the market share of target efficiency gas furnace units would increase due to consumertax credits by 5 percent over the base case at the 80 percent AFUE level and by I percent at the 81 percent AFUE level. For gas boilers, the market share would increase by 20 percent. The Department assumed the impact ofthis policy would be to permanently transform the market so that the shipment-weighted efficiency gain seen in the first year ofthe program wouldbe maintained throughout the forecast period.

RIA-9Manufacturer Tax Credits The Department assumed that a manufacturer tax credit program would effectively result in a lower price to the consumer by an amount equivalent to that provided by rebates (i.e., 30 percent of the incremental price difference for furnaces meeting base case efficiency levels and those meeting the policy targets and 79 percent of the incremental price difference for boilers). Because these tax credits would go to manufacturers instead of consumers, the Department assumed that manufacturers would pass on the reduced costs, causing the direct price effect. However, DOE assumed that the announcement effect would not occur because the program would not be visible to the consumers. Since the direct price effect is approximately equivalent to the announcement effect,3 the Department assumed that half of the consumers assumed to take advantage of consumer tax credits would purchase more-efficient products with a manufacturertax credit program. As a result, DOE estimated that the market share of efficient nonweatherized gas furnaces would increase due to manufacturer tax credits by 2 percent over the base case for at the 80 percent AFUE standard level, by 0.5 percent at the 81 percent AFUE standard level, and by 10 percent for gas boilers. The Department assumed the impact of this policy would be to permanently transform the market so that the shipment-weighted efficiency gain seen in the first year of the program would be maintained throughout the forecast period. 2.2.3 Voluntary Energy-Efficiency Targets For a non-weatherized gas furnace target level of 80 percent AFUE, DOE assumed that the voluntary target would be achieved through manufacturer participation in a gradual phase-out of production of units below 80 percent AFUE. It assumed that this phase

-out would increase linearly from 2015, reaching 75 percent of the eligible market in the tenth year of the program (2024)d. For a non-weatherized gas furnace target level of 81 percent AFUE and for gas boilers, DOE modeled the voluntary efficiency target policy assuming expansion of existing ENERGY STAR programs conducted by the Environmental Protection Agency and DOE for these two products." The ENERGY STAR program sets minimum energy-efficiency specifications for various products, including furnace and boiler equipment. ENERGY STAR encourages consumer adoption of these products through marketing to promote consumer label recognition, adoption of the specifications by various efficiency incentive programs, and manufacturer production and promotion of ENERGY STAR-compliant appliances. For the voluntary policy at the 81 percent AFUE target level, DOE assumed that ENERGY STAR would conduct a parallel program that targeted 81 percent AFUE within the non-condensing non-weatherized gas furnace market. It assumed that the program targeting 81 percent AFUE would cause a small increase in market penetration of efficient non-condensing furnaces since furnace manufacturers have some concerns regarding the safety of 81 percent AFUE units. For gas boilers , the Department estimated that an expanded ENERGY STAR

d DOE used an upper limit of 75 percent because there are some replacement situations in which installation of an 80 percent AFUE furnace is not easily accomplished. RIA-10 Manufacturer Tax Credits The Department assumed that a manufacturer tax credit program would effectivelyresult in a lowerprice to the consumer byan amount equivalent to that provided byrebates (i.e., 30 percent ofthe incremental price difference for furnaces meeting base case efficiency levels and those meeting the policytargets and 79 percent ofthe incremental price difference for boilers). Because these tax credits would go to manufacturers instead ofconsumers, the Department assumed that manufacturers would pass on the reduced costs, causing the direct price effect. However, DOE assumed that the announcement effect would not occurbecause the program would not be visible to the consumers. Since the direct price effect is approximately equivalent to the announcement effect,3 the Department assumed that halfofthe consumers assumed to take advantage ofconsumer tax credits would purchase more-efficient products with a manufacturer tax credit program. As a result, DOE estimated that the market share ofefficient nonweatherized gas furnaces would increase due to manufacturer tax credits by2 percent over the base case for at the 80 percent AFUE standard level, by 0.5 percent at the 81 percent AFUE standard level, and by 10 percent for gas boilers. The Department assumedthe impact ofthis policy would be to permanently transform the market so that the shipment-weighted efficiency gain seen in the first year ofthe program would be maintained throughout the forecast period. 

### 2.2.3 Voluntary Energy-Efficiency Targets For a non-weatherized gas furnace target level of80 percent AFUE, DOE assumed that the voluntary target would be achieved through manufacturer participation in a gradual phase-out ofproduction ofunits below 80 percent AFUE. It assumedthat this phase-outwould increase linearly from 2015, reaching 75 percent ofthe eligible market in the tenth year ofthe program (2024)d. For a non-weatherized gas furnace target level of81 percent AFUE and for gas boilers, DOE modeled the voluntary efficiencytarget policy assuming expansion ofexisting ENERGY STARprograms conducted bythe Environmental Protection Agency and DOE for these two products. 17 The ENERGY STARprogram sets minimum energy-efficiency specifications for various products, including furnace andboiler equipment. ENERGY STAR encourages consumer adoption ofthese products through marketingto promote consumer label recognition, adoption ofthe specifications byvarious efficiencyincentive programs, and manufacturer production and promotion ofENERGY STAR-compliant appliances. For the voluntarypolicy at the 81 percent AFUE target level, DOE assumed that ENERGY STAR would conduct a parallel program that targeted 81 percent AFUE within the non-condensing non-weatherized gas furnace market. It assumed that the program targeting 81 percent AFUE would cause a small increase in market penetration ofefficient non-condensing furnaces since furnace manufacturers have some concems regarding the safety of81 percent AFUE units. For gas boilers, the Department estimated that an expanded ENERGY STAR

d DOE used an upper limit of 75 percent because there are some replacement situations in which installation ofan 80 percent AFUE furnace is not easily accomplished. RIA-IOprogram that targeted 84 percent AFUE could moderately increase the market share at this level.

In both cases, the Department utilized estimates of the market impact of the existing ENERGY STAR programs.1 , " The Department assumed that the programs resulting from this voluntary efficiency targets policy would increase projected market share of the targeted units above thepenetration increases estimated by the ENERGY STAR program by 20 percent for nonweatherized gas furnaces at the 81 percent AFUE target level and by 50 percent for gas boilers. Current ENERGY STAR efficiency specifications of 90 percent AFUE for gas furnaces target condensing furnaces. The ENERGY STAR level for gas boilers is 85 percent. Table RIA.4 shows the estimated market share increases from the voluntary efficiency target policy. Table RIA.4 Increased Market Share Penetration Levels from Voluntary Furnace and Non-Weatherized Gas Furnaces Gas Boilers Year of Efficiency Target, Efficiency Target, Efficiency Target, Program 80% AFUE 81% AFUE 84% AFUE 2015 8% 0% 0% 2016 15% 0% 2% 2017 23% 0% 3% 2018 30% 0% 5% 2019 38% 0% 7% 2020 45% 1% 9% 2021 53% 1% 10% 2022 60% 1% 12% 2023 68% 1% 14% 2024 75% 1% 15% 2025 75% 1% 17% 2026 75% 1% 17% 2027 75% 1% 17% 2028 75% 1% 17% 2029 75% 1% 17% 2030 75% 1% 17% 2031 75% 1% 18% 2032 75% 1% 18% 2033 75% 1% 18% 2034 75% 2% 18% 2035 75% 2% 18% 2036 75% 2% 18% 2037 75% 2% 18% 2038 75% 2% 18% * The percentages in each column refer to shares of the eligible market in each case.

Boiler Programs*

RIA-1 1 program that targeted 84 percent AFUE could moderatelyincrease the market share at this level. In both cases, the Department utilized estimates ofthe market impact ofthe existing ENERGY STARprograms. IS
, 19 The Department assumed that the programs resulting from this voluntary efficiency targets policy would increase projected market share ofthe targeted units above the penetration increases estimated bythe ENERGY STARprogram by 20 percent for nonweatherized gas furnaces at the 81 percent AFUE target level and by 50 percent for gas boilers. Current ENERGY STAR efficiency specifications of90 percent AFUE for gas furnaces target condensing furnaces. The ENERGY STAR level for gas boilers is 85 percent. Table RIA.4 shows the estimated market share increases from the voluntary efficiency target policy. 

### Table RIA.4 Increased Market Share Penetration Levels from Voluntary Furnace and B"l P

01 

### er rograms* Non-Weatherized Gas Furnaces Gas Boilers Year of Efficiency Target, Efficiency Target, Efficiency Target,**Pro~ram** 

### 80%AFUE 81%AFUE 84%AFUE

2015 8% 0% 0% 2016 15% 0% 2% 2017 23% 0% 3% 2018 30% 0% 5% 2019 38% 0% 7% 2020 45% 1% 9% 2021 53% 1% 10% 2022 60% 1% 12% 2023 68% 1% 14% 2024 75% 1% 15% 2025 75% 1% 17% 2026 75% 1% 17% 2027 75% 1% 17% 2028 75% 1% 17% 2029 75% 1% 17% 2030 75% 1% 17% 2031 75% 1% 18% 2032 75% 1% 18% 2033 75% 1% 18% 2034 75% 2% 18% 2035 75% 2% 18% 2036 75% 2% 18% 2037 75% 2% 18% 2038 75% 2% 18%

. . 

### * The percentages III each column refer to shares ofthe eltglble market III each case.

RIA-II2.2.4 Early Replacement

Early replacement refers to the replacement of furnace and boiler units before the end oftheir useful lives. The purpose of this policy is to replace old, inefficient equipment with higherefficiency units. In the 1990s, the Department studied the feasibility of a Federal program to promote early replacement of appliances under the Energy Policy Act of 1992.20 This study identified policy options for early replacement that included a direct national early replacement program, replacement of federally owned appliances, promotion through equipment manufacturers, consumer incentives, incentives to utilities, and building regulations. For this analysis, the Department considered a program that targets the units in the stock that have efficiency levels lower than the policy target level and encourages their early replacement with products at the target efficiency level. Shipments not affected by the early replacement program have base case efficiency levels. Shipments to new construction in 2015 and beyond are not affected by this program. (Chapter 9 of the TSD describes the general approach for estimating replacements in each year; the NES model uses a retirement function that tracks the percentage of units retiring and surviving for each vintage.) The Department assumed that a portion of the furnace and boiler units in the existing stock in 2015, the first year of the analysis period, would be replaced by models meeting the target levels. It modeled this policy by assuming an increase of 20 percent (over the natural replacement rate based on units being replaced at the end of their useful lives) in the number of replaced units in the first year. It based this level on one of the cases in the report described above. The Department assumed that the program would last as long as it took to completely replace all of the eligible furnaces and boilers in the stock in the year that the program began (2015). The policy would create a jump in shipments relative to the base case in the early years of the program (see Figure RIA.4). As a result, more higher-efficiency units that meet the policy targets would be quickly brought into the equipment stock, leading to an immediate gain in the weighted-average equipment efficiency compared to the base case. However, unlike the other policy cases discussed, the weighted-average efficiency would drop back down to meet the levels in the base case as the eligible stock of equipment for early replacement became depleted.

e The analysis concluded that while cost-effective opportunities for early replacement exist, a widespread federal early replacement program was not economically justified. Because premature retirement means that a unit may be replaced by an appliance less efficient than the eventual replacement would probably have been, energy savings would be smaller than anticipated. Early replacement programs could increase sales volatility in the long run by encouraging a temporary increase in production followed by a lull in demand. Early replacement could be economical in localities with high energy cost conditions or environmental constraints, when replacement appliances are much more efficient than existing stock, or when a major technology breakthrough has recently occurred, creating the need for a ready market. RIA-12 

### 2.2.4 Early Replacement Early replacement refers to the replacement offurnace and boiler units before the end of their useful lives. The purpose ofthis policy is to replace old, inefficient equipment with higherefficiencyunits. In the 1990s, the Department studied the feasibility ofa Federal program to promote early replacement ofappliances under the Energy Policy Act of 1992?O This study identified policy options for earlyreplacement that included a direct national earlyreplacement program, replacement offederally owned appliances, promotion through equipment manufacturers, consumer incentives, incentives to utilities, and building regulationsc• For this analysis, the Department considered a program that targets the units in the stock that have efficiency levels lower than the policytarget level and encourages their early replacement with products at the target efficiency level. Shipments not affected bythe early replacement program havebase case efficiency levels. Shipments to new construction in 2015 and beyond are not affected bythis program. (Chapter 9 ofthe TSD describes the general approach for estimating replacements in each year; the NES model uses a retirement function that tracks the percentage ofunits retiring and surviving for each vintage.) The Department assumed that a portion ofthe furnace and boilerunits in the existing stock in 2015, the first yearofthe analysis period, would be replaced bymodels meeting the target levels. Itmodeled this policy byassuming an increase of20 percent (over the natural replacementrate based on units being replaced at the end oftheir useful lives) in the number of replaced units in the first year. Itbased this level on one ofthe cases in the report described above. The Department assumed that the program wouldlast as long as it took to completely replace all ofthe eligible furnaces and boilers in the stock in the year that the program began (2015).The policy would create ajump in shipments relative to the base case in the early years of the program (see Figure RIA.4). As a result, more higher-efficiencyunits that meet the policy targets would be quicklybrought into the equipment stock, leading to an immediate gain in the weighted-average equipment efficiency compared to the base case. However, unlike the other policy cases discussed, the weighted-average efficiencywould drop back down to meetthe levels in the base case as the eligible stock ofequipment for earlyreplacement became depleted.

e The analysis concluded that while cost-effective opportunities for early replacement exist, a widespread federal early replacement program was not economicallyjustified. Because premature retirement means that a unit may be replaced by an appliance less efficient than the eventual replacement would probably have been, energy savings would be smaller than anticipated. Early replacement programs could increase sales volatility in the long run by encouraging a temporary increase in production followed by a lull in demand. Early replacement could be economical in localities with high energy cost conditions or environmental constraints, when replacement appliances are much more efficient than existing stock, or when a major technology breakthrough has recently occurred, creating the need for a ready market. RIA-124 5
. 4 0 Base base

. -, Early Replacement 3.5 Scenario 3.0 0 2 5
. E 2.0 r a L U] 1.5 4 H 1.0
0 5
. 

### 0 0

. - 1985 1990 1995 2044 2005 2410 2415 2020 2025 2030 2035 Figure RIA.4 Early Replacement Shipments Projections for Non

-Weatherized Gas

Furnaces 2.2.5 Bulk Government Purchases The Department assumed that a bulk government purchase policy would encourage Federal, State, and local governments to purchase equipment meeting the target levels. Aggregating public sector demand could provide a market signal to manufacturers and vendors that some of their largest customers seek suppliers with products that meet an efficiency target at good prices. This program also could induce "market pull" impacts through the effects of manufacturers and vendors achieving economies of scale for high-efficiency products. The Department assumed that government agencies, such as the Department of Housing and Urban Development (HUD), would administer such a program. At the Federal level, this would be an enhancement to the existing Federal Energy Management Program (FEMP). The FEMP program has procurement guidelines for Federal government equipment purchasing, and Federal construction requirements include these guidelines for installing or replacing equipment.' The Department assumed that this policy would impact a subset of housing units for which government agencies purchase or influence the purchase of furnaces and boilers. This subset would mainly consist of public housing and housing on military bases. To represent this subset, DOE considered low-income households identified in the Residential Energy RIA-13**4.5~----------------------------------------------------~** 4.0 3.5 --+- Base Case Eat1y Replacement Scenario**W3.0+------------------------------+--~~----------------~** o**~2.5t-----------~~~-+L~~~~~------------------------~** VI**~** E**2.0+-------~~-+------------------------------------------~** 0. E (j)**~ 1.5++~~~----------------------------------------------~**  oI**1.0+-----------------------------------------------------~ 0.5+-----------------------------------------------------~** 

1985 1990 199s 2000 2005 2010 2015 2020 2025 2033 2035 

### Figure RIA.4 Early Replacement Shipments Projections for Non-Weatherized Gas Furnaces 2.2.5 Bulk Government Purchases The Department assumed that a bulk governmentpurchase policy would encourage Federal, State, and local governments to purchase equipment meeting the target levels. Aggregating public sector demand could provide a market signal to manufacturers and vendors that some oftheir largest customers seek suppliers with products that meet an efficiency target at good prices. This program also could induce "market pull" impacts through the effects of manufacturers and vendors achieving economies ofscale for high-efficiency products. The Department assumed that government agencies, such as the Department ofHousing and Urban Development (HUD), would administer such a program. At the Federal level, this would be an enhancement to the existing Federal EnergyManagement Program (FEMP). The FEMP program has procurement guidelines for Federal government equipment purchasing, and Federal construction requirements include these guidelines for installing or replacing equipment.21 The Department assumed that this policy would impact a subset ofhousing units for which government agencies purchase orinfluence the purchase offurnaces and boilers. This subset would mainly consist ofpublic housing andhousing on military bases. To representthis subset, DOE considered low-income households identified in the Residential Energy RIA-13Consumption Survey (RECS) 2001 (see Chapter 11 of the TSD for description of the low-income

household sample). According to RECS 2001, 7.8 percent of the households with gas furnaces and 17.5 percent of those with gas boilers were classified as low-income. DOE assumed that these same percentages of furnace and boiler shipments would go to low-income households in each year. To estimate the market impact, the Department considered previous analysis of the bulk government purchasing policy in the residential air conditioner RIAZZ, where it assumed a 5 percent increase in market share of higher-efficiency units over the base case due to the policy. Since DOE envisions that the policy for furnaces and boilers would build on the existing FEMP program for gas furnaces, DOE assumed that the government purchase policy would likely cause a 10 percent increase in market share in each year. Thus, an additional 10 percent (above the base case) of shipments to eligible low-income households would meet the target levels through this policy. The result is an additional penetration of equipment meeting the target efficiency levels of 0.8 percent and 1.8 percent (10 percent respectively). 2.3 Non-Regulatory Policy Market Share Impacts Figures RIA.5 through RIA.7 show the market share (penetration rate) impacts for each of the non-regulatory policy cases for non-weatherized gas furnaces and gas boilers. In each case, the market penetration refers to the eligible market for the particular product. For each product class, the proposed standard (not shown in the figures) would result in a 100 percent penetration.

70%

5rj%

10% - ohrtiroTar!..t -e- Om s ime r Nbatz ^T- Coi s Arne r Tx Credit -A-- MmIt" rerTxtCie<Rt - 6ifGoenmeit Pi riaes - EarIVRepkmemeit 1

2015 =0 X035 Figure RIA.S Penetration Rates for Non-Weatherized Gas Furnaces at 80

Percent AFUE RIA-14 Consumption Survey (RECS) 2001 (see Chapter 11 ofthe TSD for description ofthe low-income household sample). According to RECS 2001, 7.8 percent ofthe households with gas furnaces and 17.5 percent ofthose with gas boilers were classified as low-income. DOE assumed that these same percentages offurnace and boiler shipments would go to low-income households in each year. To estimate the market impact, the Department considered previous analysis ofthe bulk government purchasing policy in the residential air conditioner RIA22

, where it assumed a 5 percent increase in market share ofhigher-efficiencyunits over the base case due to the policy. Since DOE envisions that the policyfor furnaces and boilers wouldbuild on the existing FEMP program for gas furnaces, DOE assumed that the governmentpurchase policywould likely cause a 10 percent increase in market share in each year. Thus, an additional 10 percent (above the base case) ofshipments to eligible low-income households would meet the target levels through this policy. The result is an additional penetration ofequipment meeting the target efficiency levels of0.8 percent and 1.8 percent (10 percent respectively). 

### 2.3 Non-Regulatory Policy Market Share Impacts Figures RIA.5 through RIA.7 show the market share (penetration rate) impacts for each of the non-regulatorypolicy cases for non-weatherized gas furnaces and gas boilers. illeach case, the market penetration refers to the eligible market for the particularproduct. For each product class, the proposed standard (not shown in the figures) would result in a 100 percent penetration. 

# / 41 II II III II III II II II II II III III II
fI' 

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### Figure RIA.S Penetration Rates for Non-Weatherized Gas Furnaces at 80 Percent AFUE RIA-1414%

127:

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Figure RIA.6 Penetration Rates for Non-Weatherized Gas Furnaces at 81

Percent AFUE

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1541.

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09: -0- Vole 14ar^ Tare -^-C^arsune rPalaat:s rorsane rTmCpd1t -z- r1m itch re rTm Ga dt -w.- BIkGrluenmertPmiaes -r- EmV Pe 1weineit

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2015 Figure RIA.7 Penetration Rates for Gas Boilers at 84 Percent AFUE

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RIA-IS2.4 Results Summary for Non

-Regulatory Alternatives Tables RIA.5 and RIA.6 show the NES and NPV of each of the non-regulatory alternatives. The results are for all six product classes. Table RIA.5 shows the results if the efficiency target levels are equal to TSL 2, and Table RIA.6 shows the results if the efficiency target levels are equal to TSL 2, with the exception of non-weatherized gas furnaces, for which the target is TSL 3 (81 percent AFUE). The case in which no regulatory action is taken with regard to furnaces and boilers constitutes the base case (or "No Action") scenario. Since this is the base case, energy savings and NPV are zero by definition. For comparison, the table includes the impacts of the proposed energy conservation standards. The NPV amounts shown in Tables RIA.5 and RIA.6 refer to the NPV based on two discount rates (seven percent and three percent real). Table RIA.5 Non-Regulatory Alternatives with Tar et Levels at TSL 2 Primary Energy Net Present Values (billion $2004)_ Policy Alternatives Savings (quads) 7% discount rate 3% discount rate No New Regulatory Action 0.0 0.0 0.0 Consumer Rebates 0.078 0.086 0.369 Consumer Tax Credits 0.047 0.052 0.221 Manufacturer Tax Credits 0.023 0.026 0.111 Voluntary Energy Efficiency Targets 0.046 0.074 0.298 Early Replacement 0.025 0.059 0.160 Bulk Government Purchases 0.005 0.006 0.026 Proposed Standards at TSL 2 0.410 0.646 2.480
Table RIA.6 Non-Regulatory Alternatives with Tar et Levels at TSL 2 (NWGF at TSL 3) Primary Energy Net Present Value* (billion $2004) Policy Alternatives Savings (quads) 7% discount rate 3% discount rate No New Regulatory Action 0.0 0.0 0.0 Consumer Rebates 0 .083 0.083 0.374 Consumer Tax Credits 0.050 0.050 0.225 Manufacturer Tax Credits 0.025 0.025 0.112 Voluntary Energy Efficiency Targets 0.041 0.056 0.244 Early Replacement 0.050 0.048 0.183 Bulk Government Purchases 0.008 0 .006 0.030 Proposed Standards at TSL 2 (NWGF at TSL 3) 0.704 0.585 3.096 * Net present value is the value of a time series of costs and savings. The net present value was determined from 2015 to 2038 in billions of 2004 dollars.
RIA-16 2,4 Results Summary for Non-Regulatory Alternatives Tables RIA.5 and RIA.6 show the NES and NPV ofeach ofthe non-regulatory alternatives. The results are for all six product classes. Table RIA.5 shows the results ifthe efficiency target levels are equal to TSL 2, and Table RIA.6 shows the results ifthe efficiency target levels are equal to TSL 2, with the exception ofnon-weatherized gas furnaces, for which the target is TSL 3 (81 percent AFUE). The case in which no regulatory action is taken with regard to furnaces and boilers constitutes the base case (or "No Action") scenario. Since this is the base case, energy savings and NPV are zero bydefinition. For comparison, the table includes the impacts ofthe proposed energy conservation standards. The NPV amounts shown in Tables RIA.5 and RIA.6 refer to the NPV based on two discount rates (seven percent and three percent real). 

### T bi RIA 5 N R

a e , on- I t egUJa ory Alterna ti 'th T

ves WI arJ:!et LItTSL 2 eve sa Net Present Value* Primary Energy (billion $2004) Savings Policy Alternatives (quads) 7% discount rate 3% discount rate No New Regulatory Action 0.0 0.0 0.0 Consumer Rebates 0.078 0.086 0.369 Consumer Tax Credits 0.047 0.052 0.221 Manufacturer Tax Credits 0.023 0.026 0.111 Vo luntary Energy Efficiency Targets 0.046 0.074 0.298 Early Replacement 0.025 0.059 0.160 Bulk Government Purchases 0.005 0.006 0.026 Proposed Standards at TSL 2 0.410 0.646 2.480 

### T bi RIA 6 N R

a e , on- I t egu a ory Alterna Ives WI f 'th Targe eve s a a t LitTSL 2 (NWGF t TSL 3) Net Present Value* Primary Energy (billion $2004) Savings Policy Alternatives (quads) 7% discount rate 3% discount rate No New Regulatory Action 0.0 0.0 0.0 Consumer Rebates 0.083 0.083 0.374 Consumer Tax Credits 0.050 0.050 0.225 Manufacturer Tax Credits 0.025 0.025 0.112 Voluntary Energy Efficiency Targets 0.041 0.056 0.244 Early Replacement 0.050 0.048 0.183 Bulk Government Purchases 0.008 0.006 0.030 Proposed Standards at TSL 2 (NWGF at TSL 3) 0.704 0.585 3.096 

### * Net present value is the value ofa time series of costs and savings. The net present value was determined from 2015 to 2038 in billions of 2004 dollars.
RIA-16None of the alternatives DOE examined would save as much energy or have as high NPV

as the standards. Consumer rebates is the only policy that results in more than 20 percent of the savings potential from the proposed standards. Also, several of the alternatives would require new enabling legislation, such as consumer or manufacturer tax credits, since authority to carry out those alternatives does not presently exist. None ofthe alternatives DOE examined would save as much energy orhave as high NPV as the standards. Consumerrebates is the onlypolicy that results in more than 20 percent ofthe savings potential from the proposed standards. Also, several ofthe alternatives would require new enabling legislation, such as consumer ormanufacturer tax credits, since authority to carry out those alternatives does not presently exist.

RIA-I7REFERENCES

1. U.S. Department of Energy-Office of Energy Efficiency and Renewable Energy. Energy Conservation Program for Consumer Products. Technical Support Document: Energy Conservation Program for Consumer Products; Residential Furnaces and Boilers. 2005. Washington, D.C. 2. Rufo, M. and Fred Coito. California ' s Secret Energy Surplus: The Potentialfor Energy Efficiency., 2002. XENERGY Inc. Oakland, CA. Prepared for The Energy Foundation and The Hewlett Foundation. 3. Koomey, J. G. "The Big Mistake" in forecasting technology adoption. Technological Forecasting and Social Change. 2002. 69(2002): pp. 511-518. 4. Lawrence Berkeley National Laboratory-End-Use Forecasting Group. Analysis of Tax Credits for Efficient Equipment. June 10, 2005.) The June 10, 2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://enduse.lbl.gov/Projects/TaxCredits.html>
5. NSTAR. High-Efficiency Heating Equipment Rebate Program

. (Last accessed June 10, 2005.) The June 10, 2005 material from this website is available in Docket #EERM/STD- 00-550

. For more information, contact Brenda Edwards

-Jones at (202) 586- 2945. <http://www. nstaronline

.com/customer

_servic e/energy

_efficiency

/gas. asp#Heating%20E quipment> 6. Colorado Spring Utilities

. Residential Efficiency Program. (Last accessed June 10, 2005.) The June 10, 2005 material from this website is available in Docket #EERM/STD-00-550

. For more information, contact Brenda Edwards-Jones at (202) 586- 2945. <http ://www.csu.org/files/other/5643.pdf> 7. Gas Networks

. Residential High-Efficiency Programs. (Last accessed June 10, 2005.) The June 10, 2005 material from this website is available in Docket #EE-RM/STD-00- 550. For more information, contact Brenda Edwards

-Jones at (202) 586-2945. <http : //www. gasnetworks

.com/efficiency /re sid_heating. asp> 8. New Jersey's Clean Energy Program and Warm Advantage Program. Gas Furnace, Boiler and Water Heater Rebate Program. (Last accessed June 10, 2005.) The June 10, 2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://www.njcleanenergy.com/html/lresidential/2 warm advantage_lmay05.html>

RIA-18 

### REFERENCES 1. U.S. Department ofEnergy-Office ofEnergy Efficiency and Renewable Energy. Energy Conservation Program for Consumer Products. Technical SupportDocument: Energy Conservation Programfor ConsumerProducts; ResidentialFurnaces andBoilers. 2005. Washington, D.C. 2. Rufo, M. and Fred Coito. California's SecretEnergy Surplus: The Potential for Energy Efficiency.,2002. XENERGY Inc. Oakland, CA. Prepared for The Energy Foundation and The Hewlett Foundation. 3. Koomey,1. G. "The Big Mistake" in forecasting technology adoption. Technological Forecasting andSocial Change. 2002. 69(2002): pp.511-518. 4. LawrenceBerkeleyNational Laboratory-End-Use Forecasting Group. Analysis of Tax Creditsfor EfficientEquipment. June 10, 2005.) The June 10, 2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://enduse.lbl.gov/Projects/TaxCredits.html> 5. NSTAR. High-Efficiency Heating EquipmentRebate Program. (Last accessed June 10, 2005.) The June 10,2005 material from this website is available in Docket #EERM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586- 2945. <http://www.nstaronline.com/customer

_service/energy

_efficiency/ gas.asp#Heating%20E quipment> 6. Colorado Spring Utilities. ResidentialEfficiency Program. (Last accessed June 10, 2005.) The June 10,2005 material from this website is available in Docket #EERM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586- 2945. <http://www.csu.org/files/other/5643.pdf> 7. Gas Networks. ResidentialHigh-Efficiency Programs. (Last accessed June 10,2005.) The June 10,2005 material from this website is available in Docket #EE-RM/STD-OO550. For more information, contact BrendaEdwards-Jones at (202) 586-2945. <http://www.gasnetworks.com/efficiency/resid

_heating.asp> 8. New Jersey's Clean EnergyProgram and Warm Advantage Program. Gas Furnace, Boiler and Water HeaterRebate Program. (Last accessed June 10,2005.) The June 10, 2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://www.njcleanenergy.com/html/1 residentiaV2_warm_advantage _1mayO5.html>

RIA-IS9. Bay State Gas. Rebates for Heating Conversions. (Last accessed June 10, 2005.) The June 10, 2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://www.baystategas.com/forhome/rebates.htm>
10. Berkshire Gas. High Efficiency Heating System & Water Heating Rebate Programs. (Last accessed June 10, 2005 .) The June 10, 2005 material from this website is available in Docket #EE-RM/STD-00-550

. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://www.berkshiregas

.com/p_docs_f2/Resprgrmsflyr4_04web.pdf> 11. Energy Trust of Oregon Inc. Home Energy Savings. (Last accessed June 10, 2005.) The June 10, 2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://www.energytrust.org/residential/hes/forms/Form 320g_Incentive App.pdf> 12. Southern California Gas Company. 2005 Home Energy Efficiency Rebate Program. (Last accessed June 10, 2005 .) The June 10, 2005 material from this website is available in Docket #EE-RM/STD-00-550

. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http ://socalgas.com/residential/savemoney /home

_erp.shtml> 13. Pacific Gas and Electric Company. Rebates for Existing Single Family Homes. (Last accessed June 10, 2005.) The June 10, 2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://www.pge.com/res/rebates/gas_fumaces/index.html> 14. Puget Sound Energy. Energy Efficiency Rebates. (Last accessed June 10, 2005.) The June 10, 2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://www.pse.com/yourhome/rebates/gasfamace.html> 15. Aquila. Innovative Heating Technologies Rebates. (Last accessed June 10, 2005.) The June 10, 2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <https://networks.aquila.com/online/my_hom/ProgSrv/ProgServDetail.j sp?url=/shared/pr ods/innovative space_waterheater ia.html> 16. U.S. Department of Energy-Office of Codes and Standards. Technical Support Document: Energy Efficiency Standards for Consumer Products: Refrigerators, Refrigerator-Freezers, and Freezers, including Environmental Assessment and Regulatory Impact Analysis. July, 1995. Washington, DC. Report No. DOE/EE-0064. The material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945.

RIA-19 9. Bay State Gas. RebatesforHeating Conversions. (Last accessed June 10,2005.) The June 10,2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact BrendaEdwards-Jones at (202) 586-2945. <http://www.baystategas.com/forhome/rebates.htm> 10. Berkshire Gas. High Efficiency Heating System & Water HeatingRebate Programs. (Last accessed June 10,2005.) The June 10,2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://www.berkshiregas.com/p_docs_f2/Resprgrmsflyr4_04web.pdf> 11. Energy Trust ofOregon Inc. Home Energy Savings. (Last accessed June 10,2005.) The June 10,2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact BrendaEdwards-Jones at (202) 586-2945. <http://www

.energytrust.org/residentiallhes/forms/Form _320g_Incentive

_App.pdf> 12. Southern California Gas Company. 2005 Home Energy EfficiencyRebateProgram. (Last accessed June 10,2005.) The June 10,2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://socalgas.com/residentiallsavemoney/home

_etp.shtml> 13. Pacific Gas and Electric Company. RebatesforExisting Single Family Homes. (Last accessed June 10,2005.) The June 10,2005 material from this website is available in Docket#EE-RM/STD-00-550. Formore information, contact Brenda Edwards-Jones at (202) 586-2945. <http://www.pge.com/res/rebates/gas_furnaces/index.html> 14. Puget Sound Energy. Energy EfficiencyRebates. (Last accessed June 10,2005.) The June 10,2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact BrendaEdwards-Jones at (202) 586-2945. <http://www.pse.com/yourhome/rebates/ gasfurnace.html> 15. Aquila. Innovative Heating Technologies Rebates. (Last accessed June 10,2005.) The June 10,2005 material from this website is available in Docket#EE-RM/STD-00-550. For more information, contact BrendaEdwards-Jones at (202) 586-2945. <https://networks.aquila.com/online/my_homlProgSrv /ProgServDetai1.jsp?ml =/shared/pr ods/innovative_space

_waterheater _ia.html> 16. U.S. Department ofEnergy-Office ofCodes and Standards. Technical Support Document: Energy Efficiency Standardsfor Consumer Products: Refrigerators, Refrigerator-Freezers, andFreezers, includingEnvironmentalAssessment and Regulatory ImpactAnalysis. July, 1995. Washington, DC. Report No. DOEIEE-0064. The material from this website is available in Docket #EE-RM/STD-00-550. Formore information, contact Brenda Edwards-Jones at (202) 586-2945.
RIA-19<http://www.osti.gov/bridge/product.bibliojsp?osti_id=90266>

17. U.S. Environmental Protection Agency and U.S. Department of Energy. Energy Star Program. (Last accessed June 10, 2005.) The June 10, 2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://www.energystar.gov> 18. Webber, C. A., R.E. Brown, A. Mahajan, and J.G. Koomey. Savings Estimates for the ENERGY STAR Voluntary Labeling Program. Energy Policy. 2000. 28(15): pp. 1137- 1150. 19. Webber, C. A., R.E. Brown, A. Mahajan, and J.G. Koomey. Savings Estimates for ENERGY STAR Voluntary Labeling Program: 2001 Status Report. 2002. Lawrence Berkeley Laboratory. Berkeley, CA. Report No. LBNL-48496. 20. U.S. Department of Energy. Early Replacement of Appliances. 1994. Lawrence Berkeley Laboratory. Berkeley, CA. Unpublished report by James E. McMahon and J.P. Harris. 21. U.S. Department of Energy

-Federal Energy Management Program. Energy Efficiency Recommendations

. (Last accessed June 10, 2005.) The June 10, 2005 material from this website is available in Docket #EE

-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://www. eere. energy. gov/femp/technologies/eep_gas_fumace. cfm> 22. U.S. Department of Energy-Energy Efficiency and Renewable Energy. Technical Support Document: Energy Efficiency Standards for Consumer Products: Residential Central Air Conditioners and Heat Pumps Including: Regulatory Impact Analysis. May,2002. Washington, D.C. The material from this website is available in Docket #EERM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586- 2945. <http://www. eere. energy.gov/buildings/appliance-standards/residential/pdfs/title_page.pd 

### f> <http://www.osti.gov/bridge/product.biblio.jsp?osti

_id=90266> 17. U.S. Environmental Protection Agency and U.S. Department ofEnergy. 

### Energy Star Program. (Last accessed June 10,2005.) The June 10,2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://www.energystar.gov> 18. Webber, C. A., R.E. Brown, A. Mahajan, and lG. Koomey. Savings Estimates for the ENERGY STARVoluntary Labeling Program. 

### Energy Policy. 2000. 28(15): pp. 1137- 1150. 19. Webber, C. A., R.E. Brown, A. Mahajan, and lG. Koomey. 

### Savings Estimatesfor ENERGYSTAR Voluntary LabelingProgram: 2001 Status Report. 2002. Lawrence BerkeleyLaboratory. Berkeley, CA. Report No. LBNL-48496. 20. U.S. Department ofEnergy. 

### EarlyReplacement of Appliances. 1994. Lawrence Berkeley Laboratory. Berkeley, CA. Unpublished report byJames E. McMahon and J.P. Harris. 21. U.S. Department ofEnergy-Federal EnergyManagement Program. 

### Energy Efficiency Recommendations. (Last accessed June 10,2005.) The June 10,2005 material from this website is available in Docket #EE-RM/STD-00-550. For more information, contact Brenda Edwards-Jones at (202) 586-2945. <http://www

.eere.energy.gov /femp/technologies/eep _gas _furnace.cfm> 22. U.S. Department ofEnergy-EnergyEfficiency and Renewable Energy. 

### Technical SupportDocument: Energy Efficiency Standards for Consumer Products: Residential CentralAir Conditioners andHeat Pumps Including: Regulatory ImpactAnalysis. May, 2002. Washington, D.C. The material from this website is available in Docket#EERM/STD-00-550. Formore information, contact Brenda Edwards-Jones at (202) 586- 2945. <http://www.eere.energy.gov /buildings/appliance

_standards/residential/pdfs/title yage.pd f>

RIA-20