Wednesday,

July 25, 2001

Part III

Department of

Energy

Office of Efficiency and Renewable

Energy

10 CFR Part 430

Energy Conservation Program for

Consumer Products; Central Air

Conditioners and Heat Pumps Energy

Conservation Standards; Proposed Rule


 EE-RM-STD-98-440 COMMENT 312
38822 Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules

DEPARTMENT OF ENERGY

Office of Energy Efficiency and

Renewable Energy

10 CFR Part 430

[Docket Number EE–RM–98–440]

RIN 1904–AA77

Energy Conservation Program for

Consumer Products; Central Air

Conditioners and Heat Pumps Energy

Conservation Standards

AGENCY: Office of Energy Efficiency and

Renewable Energy, Department of

Energy.

ACTION: Supplemental proposed rule;

proposed withdrawal of final rule.

SUMMARY: In response to a petition for

reconsideration, and as a result of

review under President Bush’s

Regulatory Review Plan, the Department

of Energy (DOE) is proposing to

withdraw its January 22, 2001 final rule

setting forth energy conservation

standards for residential central air

conditioners and central air

conditioning heat pumps that are not

yet effective and not enforceable until

January 23, 2006. As a substitute, DOE

proposes to amend the currently

enforceable standards by raising the

minimum energy efficiency levels by 20

percent. DOE also invites public

comment on proposed regulatory

amendments to define and implement

statutory limitations on its authority to

prescribe amended energy conservation

standards.

DATES: Comments must be received on

or before October 9, 2001. DOE is

requesting a signed original, a computer

diskette (WordPerfect 8) and 10 copies

of the written comments. DOE will also

accept e-mailed comments, but you

must send a signed original. Oral views,

data, and arguments may be presented

at the public hearing in Washington,

DC., beginning at 9 a.m. on September

13, 2001.

DOE must receive requests to speak at

the public hearing and a copy of your

statements no later than 4 p.m.,

September 10, 2001, and we request that

you provide a computer diskette

(WordPerfect 8) of each statement at that

time.

ADDRESSES: Please submit written

comments, oral statements, and requests

to speak at the public hearing to: Brenda

Edwards-Jones, U.S. Department of

Energy, Office of Energy Efficiency and

Renewable Energy, Energy Conservation

Program for Consumer Products: Central

Air Conditioners and Heat Pumps,

Docket No. EE–RM/STD–98–440, 1000

Independence Avenue, SW.,

Washington, DC 20585–0121. You may

send emails to: brenda.edwardsjones@ee.doe.gov.

The hearing will begin at 9:00 a.m., in

Room 1E–245 at the U.S. Department of

Energy, Forrestal Building, 1000

Independence Avenue, SW.,

Washington DC. You can find more

information concerning public

participation in this rulemaking

proceeding in Section VII, ‘‘Public

Comment,’’ of this notice of proposed

rulemaking (NOPR).

You may read copies of the public

comments, the Technical Support

Document for Energy Efficiency

Standards for Consumer Products:

Central Air Conditioners and Heat

Pumps (TSD), the transcript of the

public hearing, workshop transcripts in

this proceeding, the petition for

reconsideration submitted by the AirConditioning and Refrigeration Institute,

and other post-promulgation

submissions at the DOE Freedom of

Information (FOI) Reading Room, U.S.

Department of Energy, Forrestal

Building, Room 1E–190, 1000

Independence Avenue, SW.,

Washington, DC 20585, (202) 586–3142,

between the hours of 9 a.m. and 4 p.m.,

Monday through Friday, except Federal

holidays. You may obtain copies of the

TSD and analysis spreadsheets from the

Office of Energy Efficiency and

Renewable Energy’s (EERE) web site at:

http://www.eren.doe.gov/buildings/

codes_standards/applbrf/

central_air_conditioner.html.

FOR FURTHER INFORMATION CONTACT: Dr.

Michael E. McCabe, U.S. Department of

Energy, Office of Energy Efficiency and

Renewable Energy, Forrestal Building,

EE–41, 1000 Independence Avenue,

SW., Washington, DC 20585–0121, (202)

586-0854, e-mail:

ME.mccabe@ee.doe.gov, or Eugene

Margolis, Esq., U.S. Department of

Energy, Office of General Counsel,

Forrestal Building, GC–72, 1000

Independence Avenue, SW.,

Washington, DC 20585, (202) 586–9507,

e-mail: eugene.margolis@hq.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction

II. Authority to Reconsider the January 22,

2001, Final Rule

III. Proposal to Withdraw Final Rule

A. Legal Issues

1. Failure to Obtain the Views of the

Department of Justice on the Potential

Anti-Competitive Impact of 13 SEER

Standards

2. Failure of the Statement of Basis for the

Final Rule to Adequately Address

Cumulative Regulatory Burdens on

Manufacturers

B. Policy Issues

1. Burdens on Consumers

2. Burdens on Manufacturers

a. Cumulative Regulatory Burden

b. Financial Burdens Associated with New

Standards

C. Conclusion

IV. Proposed Rule

A. Background

1. Statutory Authority

2. Rulemaking History

B. Overview of the Proposed Standards

1. Central Air Conditioner and Heat Pump

Features

2. Consumer Benefits

3. National Benefits

C. Technological Feasibility

D. General Discussion of Economic

Justification Factors

1. Economic Impact on Manufacturers and

Consumers

2. Life-Cycle Costs and Rebuttable

Presumption

3. Energy Savings

4. Lessening of Utility or Performance of

Products

5. Impact of Lessening of Competition

6. Need of the Nation to Conserve Energy

7. Other Factors

E. Methodology Used in DOE Analyses

V. Analytical Results and Conclusions

A. Overview of Analytical Results

1. General

2. Through-the-Wall Products

3. Other Space-Constrained Products

B. Re-weighting of Factors

1. Re-weighting of Burdens on Consumers

2. Re-weighting of Burdens on

Manufacturers

a. Cumulative Regulatory Burden

b. Financial Burdens Associated with New

Efficiency Standards

C. Conclusions Regarding Conventional

Products

D. Conclusions Regarding SpaceConstrained Products

VI. Procedural Issues and Regulatory Review

A. Review Under the National

Environmental Policy Act

B. Review Under Executive Order 12866

C. Review Under the Regulatory Flexibility

Act

D. Review Under the Paperwork Reduction

Act

E. Review Under Executive Order 12988

F. Review Under Executive Order 12630

G. Review Under Executive Order 13132

H. Review Under the Unfunded Mandates

Reform Act of 1995

I. Review Under the Treasury and General

Government Appropriations Act, 1999

J. Review Under Executive Order 13211

VII. Public Comment

A. Written Comment Procedures

B. Public Workshop/Hearing

1. Procedure for submitting Request to

Speak

2. Conduct of Hearing

I. Introduction

Pursuant to section 325 of the Energy

Policy and Conservation Act (EPCA) (42

U.S.C. 6295) and the Administrative


 EE-RM-STD-98-440 COMMENT 312
Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules 38823

Procedure Act (APA) (5 U.S.C. 553),

DOE today publishes a three part

proposal with regard to energy

conservation standards for central air

conditioners and central air

conditioning heat pumps. First, DOE

proposes regulatory provisions to clarify

that section 325(o)(1), which qualifies

DOE’s rulemaking authority to prescribe

amended energy conservation

standards, applies as of an effective date

for modifying the Code of Federal

Regulations (CFR) set forth in the notice

of final rulemaking and established

consistent with the Congressional

Review Act (5 U.S.C. 801–804). Second,

in order to correct arguable legal errors

and policy shortcomings, DOE proposes

to withdraw the final rule entitled

‘‘Energy Conservation Program for

Consumer Products; Central Air

Conditioners and Heat Pump Energy

Conservation Standards’ which was

published in the Federal Register (FR)

on January 22, 2001 (61 FR 7170). Third,

based on: (1) Previous determinations

regarding the significance of potential

energy savings, technological feasibility,

and other factors; and (2) factual

information already in the record, DOE

proposes to determine that elevation of

the currently enforceable central air

conditioner and central air conditioning

heat pump energy conservation

standards by 20 percent is the maximum

increase that is economically justified.

Consistent with that proposed

determination and except for throughthe-wall product classes, DOE proposes

a Seasonal Energy Efficiency Rating

(SEER) of 12 with a corresponding

Heating System Performance Factor

(HSPF) of 7.4 which would apply to

manufacturers in 2006. With respect to

space-constrained, through-the-wall

product classes, DOE is today proposing

more modest increases in the existing

standards, which is discussed later in

this SUPPLEMENTARY INFORMATION. 

Today’s action partly is a result of

DOE activities under President Bush’s

Regulatory Review Plan. Pursuant to

that plan, DOE conducted an internal

review of the three final rules issued

under section 325 of EPCA that DOE

published at the end of the Clinton

Administration, including final rules

concerning energy conservation

standards for clothes washers, water

heaters, and central air conditioners and

central air conditioning heat pumps.

Consistent with the EPCA criteria for

determining whether a standard level is

economically justified under section

325 (42 U.S.C. 6295(o)(2)(B)), DOE

examined each of these rules to

determine, among other things, whether

the rulemaking record was complete

and whether the affirmative

determination of economic justification

was based on adequate findings with

regard to the statutorily required

considerations that make up the test of

economic justification.

While DOE examined the three

appliance energy conservation

standards rulemakings under the

President’s Regulatory Review Plan,

DOE received petitions for

reconsideration for each final rule. In

addition, DOE received notice that the

Gas Appliance Manufacturers

Association (with regard to the water

heater rule) and the Air-Conditioning

and Refrigeration Institute (ARI) (with

regard to the central air conditioner

rule) filed petitions for review in the

United States Court of Appeals for the

Fourth Circuit.

While DOE did not seek public

comment as part of the internal review

conducted under the President’s

Regulatory Review Plan or with regard

to the petitions for reconsideration, DOE

received written statements in

opposition to reconsideration of each of

the three final rules. DOE also had an

informal meeting with representatives of

various environmental advocacy groups

who had already filed statements

opposing reconsideration of the water

heater and the central air conditioner

final rules.

Ultimately, DOE decided that neither

the clothes washer rule nor the water

heater rule warranted further

rulemaking action and denied the

related petitions for reconsideration. See

66 FR 19714 (April 17, 2001). With

regard to central air conditioners and

central air conditioning heat pumps,

DOE concluded that ARI had raised

substantial questions as to the legal

sufficiency of the January 22, 2001 final

rule and that the interests of justice

therefore dictated that DOE further

postpone the rule’s effective date in

light of the pendency of ARI’s petition

for judicial review in the Fourth Circuit

and its related petition for

reconsideration. 66 FR 20191 (April 20,

2001). At that time DOE indicated that

it would likely resolve these issues

through supplemental rulemaking that

would be forthcoming shortly.

For the reasons discussed in section

III of this notice, DOE has now

concluded that the January 22, 2001

final rule should be reconsidered and

therefore grants ARI’s petition. In

particular, DOE is of the view that: (1)

DOE should have invited the

Department of Justice to submit a

supplemental determination on the

potential anti-competitive impact; (2)

the statement of basis for the final rule

did not sufficiently explain DOE’s

consideration of cumulative burden

attributable to other Federal agencies’

and State regulatory actions, which was

necessary to DOE’s conclusion regarding

the potential impact of the final rule on

manufacturers; and (3) DOE gave

inadequate weight to the potential

impact of higher installation and

equipment costs on some types of

consumers and to potential burdens on

manufacturers.

DOE recognizes that its conclusion

that the January 22, 2001 final rule was

questionable on legal and policy

grounds and the initiation of litigation

in the Fourth Circuit has left less than

ideal options for a rulemaking that, had

it been concluded on time, would have

been final on January 1, 1994 (42 U.S.C.

6295(d)). If DOE were to allow the

January 22, 2001 final rule to become

effective, there is a significant

possibility of a court ordered remand for

further consideration. The length of

time it would take to deal with

consequences of a court ordered remand

would be substantial. It was just this

sort of consideration that motivated

Congress to enact the 1987 amendments

to EPCA that require this rulemaking.

As the legislative history of those

amendments makes clear, an underlying

legislative purpose was to cure the

problem of indefinite delay that

followed the decision in Natural

Resources Defense Council v.

Herrington, 768 F.2d 1355 (D.C. Cir.

1985) which vacated and remanded an

appliance energy conservation

standards rulemaking. See S. Rep. No.

100–6, 100th Cong, 1st Sess., 4 (1987)

and H.R. Rep. No. 100–11, 100th Cong.,

1st Sess., 28 (1987). DOE also recognizes

that, given the opposition to

reconsideration, there is a near certainty

of a lawsuit challenging DOE’s further

rulemaking actions. However, since

litigation appears to be inevitable

regardless of what option DOE chooses,

DOE has concluded that the better

course is to reopen the rulemaking

record on issues regarding economic

justification with the objective of

publishing, after considering public

comments, a final rule, as soon as

possible in 2001.

II. Authority and Policy Regarding

Reconsideration of Final Rules Under

Section 325(o)(1) of EPCA

In reviewing the January 22, 2001

final rule under the President’s

Regulatory Review Plan, and in

considering ARI’s petition for

reconsideration and the statement in

opposition to it, DOE has had the

occasion to construe and apply the

provisions of section 325(o)(1) of EPCA

for the first time since they were added


 EE-RM-STD-98-440 COMMENT 312
38824 Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules

1We also believe that even if the statute were

found to be ambiguous, for the reasons set out in

the discussion that follows, that would not be the

interpretation that we should select as a matter of

policy.

to EPCA by the National Appliance

Energy Conservation Act of 1987

(NAECA) (Pub. L. 100–12). In relevant

part, section 325(o)(1) of EPCA provides

as follows:

The Secretary may not prescribe any

amended standard which increases the

maximum allowable energy use, * * * or

decreases the minimum required energy

efficiency, of a covered product.

42 U.S.C. 6295(o)(1).

In its petition for reconsideration, ARI

said the following about section

325(o)(1):

We note that the provision in EPCA that

prohibits decreasing the minimum required

energy efficiency of covered products, 42

U.S.C. 562(o)(1)[sic], is inapplicable here. 10

SEER is the minimum required energy

efficiency. New efficiency minimum would

not be required under the rule until several

years from now (the rule provides for such

minimums in 2006). Moreover, the effective

date of the rule has been suspended, and

there is pending litigation challenging the

validity of the rule. Thus, there has been no

final result related to the rulemaking.

ARI Petition, p. 3, n. 2.

Referring to the 1987 amendments to

EPCA, the environmental advocacy

organizations argued that ‘‘it is clear

that, under NAECA, DOE may not

amend the rule to weaken its energy

efficiency standards.’’ After quoting

from section 325(o)(1), they went on to

say:

Thus DOE is statutorily precluded from

amending the Final Rule to weaken its energy

efficiency standards, as ARI requests in its

petition. ARI’s argument (Petition at footnote

2) that this provision is ‘‘inapplicable’’

because the rule phases in tighter energy

efficiency standards over time, is incorrect.

* * * The timing of the phase-in of these

standards is irrelevant.

Statement in Opposition, p. 5.

Although the diametrically opposed

conclusions reached by ARI and the

environmental advocacy organizations’

response are clear enough, those

conclusions are based on arguments that

are too summary to evaluate. DOE’s

interpretation of the statute is set forth

below, and DOE invites ARI and the

environmental advocacy organizations

to reexamine their respective positions

and to comment on DOE’s analysis and

the resulting proposed amendments to

10 CFR Part 430.

The starting point for analysis is the

text of the statute. The critical term in

section 325(o)(1) is ‘‘minimum required

energy efficiency.’’ EPCA does not

define this term. However, in context, it

is clear that a SEER and an HSPF are

benchmarks of ‘‘minimum required

energy efficiency’’ for central air

conditioners and central air

conditioning heat pumps. See 42 U.S.C.

6295(d)(1) and (d)(2). The key question,

however, is which SEER and HSPF

represent the ‘‘minimum required

energy efficiency’’ for central air

conditioners and central air

conditioning heat pumps that may not

be decreased by an amended standard.

Had the new SEER and HSPF set out

in the January 22, 2001 final rule been

allowed to take effect, but (as the rule

set forth) been made applicable only to

appliances manufactured on or after

January 23, 2006, we think this would

be a close question. A reasonable

argument could be made that the new

SEER and HSPF became ‘‘required’’

immediately as to such appliances

provided they were manufactured on or

after January 23, 2006. A reasonable

argument could also be made that the

new SEER and HSPF would not be

‘‘required’’ until January 23, 2006, when

appliances manufactured after that date

would have had to comply with them.

We address this question, and other

considerations bearing on the answer to

it, at greater length below.

In fact, however, the January 22, 2001

final rule expressly stated that the

amendments it set out to existing

standards in the Code of Federal

Regulations would not take effect until

30 days after publication in the Federal

Register. Well before that date arrived,

on February 2, 2001, DOE postponed

that effective date for an additional 60

days. Before that 60-day period had

passed, on April 18, 2001, DOE further

postponed the amendments’ effective

date pending the outcome of petitions

by ARI for reconsideration and for

judicial review.

As a result, the new SEER and HSPF,

though set out in a final rule, never in

any sense achieved the status of being

the ‘‘required’’ ‘‘minimum energy

efficiency’’ benchmarks. There has

never been a single moment under any

understanding of the word ‘‘required’’ at

which any central air conditioner or

central air conditioning heat pump,

including one manufactured after

January 23, 2006, could even arguably

have been legally required to be

manufactured in conformity with them.

Hence, whatever might have been the

case had the January 22 final rule been

allowed to take effect, we do not see

how the publication of a final rule that

would have changed those standards,

but was prevented by later agency

action from doing so, could possibly

establish ‘‘minimum required energy

efficiency’’ benchmarks.

This interpretation of ‘‘minimum

required energy efficiency’’ is reinforced

by the rest of the sentence in section

325(o)(1) of which the phrase is a part.

That sentence establishes a limitation

on the ‘‘amended standards’’ the

Secretary may prescribe. That wording

strongly suggests that the ‘‘minimum

required energy efficiency’’ levels below

which the Secretary may not go are the

ones established by the standards being

amended. Because of the various actions

postponing the effective date of the

amendments to the standards it

proposed, the January 22, 2001 rule

never actually effectuated any

amendment to the prior standards.

Therefore, the standards that we now

propose to amend are not the ones that

would have been in place had the

amendments set out in the January 22

rule actually been made. Rather, they

are the standards prescribed by EPCA

(SEER of 10.0 and HSPF of 6.8 for split

systems manufactured after January 1,

1992, SEER of 9.7 and HSPF of 6.6 for

single package systems manufactured

after January 1, 1993), unamended until

now by anything, including the nevermade-effective amendments set out in

the January 22, 2001 rule.

In our view, the foregoing analysis

establishes that EPCA is unambiguous

on the question of whether standards

that are published in the Federal

Register, but not yet effective, represent

the ‘‘minimum required energy

efficiency’’ for central air conditioners

and central air conditioning heat

pumps. Clearly, the standards set out in

the January 22, 2001 notice of final

rulemaking cannot be the ‘‘minimum

required energy efficiency’’ benchmarks

for purposes of section 325(o)(1).1 The

question remains whether DOE should

construe the term ‘‘minimum required

energy efficiency’’ to mean (A) energy

efficiency standards that are not yet

enforceable against the manufacturers,

but that have been prescribed in a final

rule amending prior standards, which

amendments have been made to the CFR

pursuant to an effective date that has

passed; or (B) energy efficiency

standards that are currently enforceable

against the manufacturers if they

manufacture and sell a non-compliant

product.

DOE believes that alternative (A) is

the preferable construction of the term,

but only if the effective date selected for

the final rule is consistent with other

applicable laws and regulations and

allows the Secretary an opportunity

promptly to correct legal and policy

errors that may have been contained in

the final rule. If that precondition is

satisfied, DOE believes alternative (A)

will better advance the relevant


 EE-RM-STD-98-440 COMMENT 312
Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules 38825

statutory and policy considerations

underlying section 325(o)(1): to promote

greater energy efficiency while

providing greater certainty to

manufacturers who must plan and make

the expenditures necessary to comply

with an amended energy conservation

standard—which is often a multi-year

endeavor with substantial costs. We

note that the relative certainty the

interpretation set out in alternative (A)

produces for manufacturers, which is a

key comparative advantage of this

interpretation over the competing one,

is intimately tied to a proper effective

date choice that facilitates prompt error

correction, thereby potentially avoiding

litigation that would seriously

undermine the certainty sought to be

achieved.

DOE believes that this resolution of

the ambiguities in the statute is

consistent with the statute’s text,

structure, legislative history, and the

fundamental policy choices it makes.

We believe that on balance this

approach better accomplishes the

statute’s objectives than either adopting

alternative (A) without the qualification

set out above, thereby establishing a set

of procedures that could have the effect

of preventing the Secretary, within a

short period after publication of a final

rule that would modify such standards,

from correcting defects in them that

subsequently come to his attention; or

adopting alternative (B), thereby reading

the phrase ‘‘minimum required energy

efficiency’’ to encompass only energy

efficiency standards as of the date upon

which manufacturers have to comply

with those standards. Although at least

the latter approach may well be a

permissible interpretation of section

325(o)(1), DOE believes that the view set

out in our proposed rule is the better

one. DOE invites members of the public

to comment on this proposed policy.

The latter view—that a standard is

only covered by section 325(o)(1) after

manufacturers are required to comply

with it—does at first blush appear to be

the most natural reading of the phrase.

This view, however, is in tension with

the rest of the sentence, which, as

explained above, suggests that the

relevant point of comparison is the

standard being amended, regardless of

whether manufacturers actually have to

comply with it. Moreover, if adopted,

this view would allow the Secretary to

change the energy efficiency standards

right up to the minute before the

compliance date. This seems to slight

important reliance interests given

significant weight in other respects by

EPCA’s provisions on central air

conditioner standards. For example,

section 325(d) provides that with

respect to central air conditioners, any

amended standard contained in a final

rule published on January 1, 1994 can

apply only to products manufactured on

or after January 1, 1999. It similarly

provides that any amended standard

contained in a final rule published

between January 1, 1994 and January 1,

2001 can apply only to products

manufactured on or after January 1,

2006. The purpose of these delays is

plainly to give manufacturers a

significant amount of time to develop

and manufacture new products after a

new standard is adopted but before it

becomes enforceable, thereby greatly

diminishing the costs imposed by new

standards. These delays also suggest

that a change of standard on the eve of

the manufacture of a product would be

quite disruptive—which stands to

reason given the lead-time necessary to

be in a position to manufacture a

compliant product. Thus, to allow a

standard to be blocked at the last minute

before the compliance deadline would

potentially leave a rather large residual

uncertainty difficult to reconcile with

the central purpose of establishing a

climate of regulatory stability served by

these closely related portions of EPCA.

The legislative history of section

325(o)(1), although sparse, also suggests

that this interpretation may not be the

one best suited to accomplish the

statute’s objectives. That history

suggests that section 325(o)(1) itself was

in fact also intended in significant

measure to promote regulatory

certainty—a goal it would not achieve

very effectively, given the importance of

such certainty not only at the time of

manufacture but well before

manufacture has begun, if the provision

is interpreted to apply to a standard

only after the compliance date for that

standard has passed.

The only significant information in

section 325(o)(1)’s history appears in the

committee reports which comment on

identical bill language that was

ultimately enacted without change. In

the Senate bill, the language that

became section 325(o)(1) was

denominated new section 325(j). The

Senate report says the following about

that new section:

New section 325(j) establishes the criteria

by which the Secretary may prescribe new or

amended standards. The Secretary may not

increase the maximum allowable energy use

or decrease the minimum required energy

efficiency of a covered product.

Senate Report No.100–6 at p.8. That

statement paraphrases the bill language

without shedding any light on what the

language was supposed to mean.

By contrast, the House report does

add to our understanding by identifying

at least what the House committee

thought the purpose of the bill language

was. In describing that language, which

appears in new section 325(l)(1) of the

House bill, the House report states:

DOE may not prescribe an amended

standard that increases the maximum

allowable energy use or decreases the

minimum required energy efficiency of a

covered product. The purpose of this

requirement is to prevent the Secretary from

weakening any energy conservation standard

for a covered product, whether established in

this Act or subsequently adopted. This serves

to maintain a climate of relative stability with

respect to future planning by all interested

parties * * *

House Report No. 100–11 at p. 22. Since

the Senate report differs from the House

report and no conference committee

report exists, the House report language

does not represent the views of the

Congress as a whole. Therefore, that

language should be used cautiously as a

contributory factor in construing section

325(o)(1) and framing implementing

regulations.

The House report language indicates

that the term ‘‘minimum required

energy efficiency’’ includes both the

legislated standards established by

Congress in 1987 and amended

standards ‘‘subsequently adopted.’’

However, the word ‘‘adopted’’ is not a

term that is used in EPCA or the APA.

As applied to the sequence of steps that

make up the rulemaking process, it is

unclear which step is deemed to be the

moment that an amended standard is

‘‘adopted.’’

More instructive is the sentence from

the House report that states with regard

to the underlying purpose of section

325(o)(1): ‘‘This serves to maintain a

climate of relative stability with respect

to future planning by all interested

parties * * *’’ This suggests, as noted

above, that section 325(o)(1) was

specifically expected, at least in the

view of the House Committee, to act

harmoniously with the other provisions

of EPCA discussed above in facilitating

regulatory certainty. The latter purpose

is better accomplished by construing the

provision to become applicable at a

point well before the compliance date.

On the other hand, the reliance

interests at stake also are not best served

in the long run by taking the opposite

course and adopting the view that

section 325(o)(1) becomes applicable at

the earliest possible moment. Let us

imagine, for example, that DOE were

routinely to make final rules containing

standards potentially subject to section

325(o)(1) effective as soon as possible

after publication. This would likely

result in its making such rules effective


 EE-RM-STD-98-440 COMMENT 312
38826 Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules

2Under the APA in most cases it could not make

them effective before them.

30 days after publication.2 DOE also

could refuse to reconsider any aspect of

such a rule relevant to the standard

(unless it could complete its

consideration and correct any errors

within that 30-day time period), no

matter how serious or legitimate a

question might be raised, since to do so

effectively, it would have to prevent the

standard from going into effect.

This approach, however, would not

be the best way for DOE to promote

regulatory certainty either. It is common

for agencies to entertain petitions for

reconsideration at least for a short

period after issuance of a final rule as

well as to correct errors on their own

motion during that time. Moreover,

there is good reason why agencies

follow this course, since otherwise such

errors would have to await the

completion of judicial review before

they could be corrected, thereby

creating substantial delay and

uncertainty. Accordingly, this approach

too, in addition to running counter to

ordinary administrative practices that

there is no reason to believe section

325(o)(1) was intended to abrogate, is

not the best way to advance the

regulatory stability sought by section

325(o)(1) and the other related EPCA

provisions discussed above.

This approach also would create

unnecessary tension between section

325(o)(1) and the Congressional Review

Act (CRA) (5 U.S.C. 801–804) enacted in

1996. Under CRA, before a final rule can

become ‘‘effective,’’ DOE must send a

report to Congress (5 U.S.C. 801(a)(1)(A)

and (B)). With respect to a ‘‘major rule’’

within the meaning of 5 U.S.C. 804(2),

CRA provides for the passing of a 60-

calendar-day-lie-before-the-Congress

period, after submission of the agency

report, at the end of which a final rule

could become effective in the absence of

a Congressional resolution of

disapproval (5 U.S.C. 801(a)(3)). CRA

allows for an exception to the 60-daylie-before requirement only if the

President determines that a major rule

should take effect before the end of that

period because of an imminent health or

safety threat or other emergency;

because it is necessary to the

enforcement of criminal laws or

national security; or if it is issued

pursuant to a statute implementing an

international trade agreement (5 U.S.C.

801(c)).

In DOE’s view, this last set of

considerations also points the way to

the answer to the question of at what

time amendments to an energyefficiency-setting-standard should best

be viewed as having set ‘‘minimum

required energy efficiency’’ benchmarks.

For the reasons explained at the

beginning of this section, that time must

be after the final rule making the

amendments to the standard is in effect.

But, consistent with the objective of

section 325(o)(1) and the other closely

related EPCA provisions of promoting

regulatory certainty, and to harmonize

section 325(o)(1) with common

administrative practice and the CRA,

such final rules should ordinarily be

made effective only after a reasonable

hiatus after the date of publication has

elapsed, allowing for prompt use of

ordinary administrative error correction

procedures and completion of

congressional review under CRA. This

is the earliest that manufacturer

planning in reliance on a final major

rule to amend appliance energy

conservation standards can realistically

be expected to begin. The certainty of

the regulatory regime sought to be

achieved therefore cannot occur until

that time.

Accordingly, DOE believes it should

construe section 325(o)(1) as applying to

standards designed to set ‘‘minimum

required energy efficiency’’ benchmarks

at the point in time a final rule

containing such a standard becomes

effective. It also believes, however, that

it should take care to select effective

dates for final rules containing such

standards that are consistent with the

CRA and any other applicable law. This

approach will best promote the

regulatory certainty sought by section

325(o)(1) and its companion provisions

and also comports well with the

ordinary understanding of when a rule

containing such standards has

established ‘‘require[ments].’’

We note that DOE’s own past practice

on the selection of such effective dates

has not been consistent with this

approach. But it also has not been

internally consistent even very recently,

potentially creating wide variations

regarding when section 325(o)(1) would

become applicable as well as running

afoul of the various considerations

outlined above.

Typically, DOE has not made

amendments to EPCA standards

contained in final rules effective until

the date on which manufacturers have

had to comply with them. See 10 CFR

430.32. That is the approach we

followed even very recently in the case

of the rules setting out the amendments

to standards for water heaters (66 FR

4474, 4497, Jan. 17, 2001, effective Jan.

20, 2004) and clothes washers (66 FR

3314, 3331, Jan. 12, 2001, effective Jan.

1, 2004). We departed from that practice

in the case of the central air conditioner

rule at issue here. We did so, however,

not because we had considered the

potential ramifications of our prior

approach and of the approach we were

taking to this rule for purposes of the

applicability of section 325(o)(1), but

rather in an effort to follow the current

guidance of the Office of the Federal

Register, which distinguishes between

the date on which a final rule is

effective for purposes of modifying the

Code of Federal Regulations and the

date on which a final rule is effective for

purposes of requiring compliance with

its requirements. See National Archives

and Records Administration, Office of

the Federal Register, Document Drafting

Handbook, Chapter 2, p. 2–12 (October

1998). Consistent with the recent

guidance in the Document Drafting

Handbook, but without taking into

account either the CRA or potential

section 325(o)(1) ramifications, DOE

specified a 30-day-after-publication

effective date consistent with the APA

and a compliance date of January 23,

2006, consistent with EPCA.

Having now considered these issues

more carefully, DOE believes it should

adopt the approach outlined above

which is specifically designed to

accomplish the relevant EPCA policy

objectives. Accordingly, it proposes to

adopt a series of amendments to the

EPCA rules intended to address these

general issues. First, it proposes to

define by rule the terms ‘‘maximum

allowable energy use’’ and ‘‘minimum

required energy efficiency’’ as energy

conservation standards established by a

final rule that has become effective in

the sense that it has modified the Code

of Federal Regulations. It further

proposes to include in its definition that

to qualify, the final rule has to have

made that modification on a date

selected consistent with the CRA and

other applicable law. Finally, in order to

avoid confusion, it proposes a technical

amendment adding a definition of the

EPCA term ‘‘effective date,’’ which

EPCA, inconsistently with the Office of

Federal Register guidance, treats as

synonymous with ‘‘compliance date.’’

To that end, DOE proposes to add a

new § 430.34 which tracks the language

of section 325(o)(1). It also proposes to

add to the definitions section, § 430.2,

new definitions for ‘‘maximum

allowable energy use’’ and ‘‘minimum

required energy efficiency.’’ These

definitions would treat amendments to

a standard contained in a final rule as

establishing ‘‘maximum allowable

energy use’’ and ‘‘minimum required

energy efficiency’’ benchmarks for

purposes of section 325(o)(1) on the date

such a rule made those amendments

effective as to the Code of Federal


 EE-RM-STD-98-440 COMMENT 312
Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules 38827

Regulations, provided that DOE sets out

in the EFFECTIVE DATE line of a notice of

final rulemaking under section 325 a

date on which the Code of Federal

Regulations will be modified that is

selected consistent with the CRA and

any other applicable law. In most

instances, the date selected will be 60 to

80 days after the date of publication.

Consistent with the proposed

definitions to be added to § 430.34, DOE

intends to make the final rule based on

today’s proposal effective 75 days from

the date of publication.

Finally, to make the technical change

referenced above, DOE proposes also to

add to § 430.2 a definition of the term

‘‘effective date’’ as used in EPCA and 10

CFR 430.32. This definition clarifies

that for purposes of construing the term

under EPCA (but not for purposes of

determining the point at which

amendments to a standard qualify for

protection under section 325(o)(1)), the

‘‘effective date’’ is the date on which an

amended energy conservation standard

becomes enforceable.

III. Proposal To Withdraw Final Rule

In this portion of the SUPPLEMENTARY

INFORMATION, DOE sets forth its

conclusions with regard to the legal and

policy issues that DOE considered in

deciding whether to propose

withdrawal of the January 22, 2001 final

rule. Included among these issues are

certain issues raised by ARI in its

petition for reconsideration.

A. Legal Issues

1. Failure To Obtain the Views of the

Department of Justice on the Potential

Anti-Competitive Impact of 13 SEER

Standards

In its petition, ARI contends that DOE

should have invited the Department of

Justice to submit a supplemental

statement of its views on the potential

anti-competitive impact of DOE’s final

rule establishing a 13 SEER standard for

central air conditioners and heat pumps

(ARI Petition Discussion, paragraph d).

Although EPCA does not provide that

DOE must seek supplemental

determinations from the Department of

Justice on final rules, DOE concludes,

for reasons set forth below, that it

should have requested supplemental

views from the Department of Justice on

the effect of a uniform 13 SEER standard

on competition, particularly on the

question of potential consolidation in

the central air conditioning and heat

pump industry.

Section 325(o)(2)(B)(i) of EPCA

requires DOE to determine whether the

benefits of a new or amended energy

conservation standard exceed its

burdens by considering ‘‘to the greatest

extent practicable’’ seven factors,

including: ‘‘(V) 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’’ (42 U.S.C.

6295(o)(2)(B)(i)). Section 325(o) also

provides that:

For purposes of clause (i)(V), the Attorney

General shall make a determination of the

impact, if any, of any lessening of

competition likely to result from such

standard and shall transmit such

determination, not later than 60 days after

the publication of a proposed rule

prescribing or amending an energy

conservation standard, in writing to the

Secretary, together with an analysis of the

nature and extent of such impact. Any such

determination and analysis shall be

published by the Secretary in the Federal

Register.

42 U.S.C. 6295(o)(2)(B)(ii).

In context, it is clear that the term

‘‘the standard’’ in section 325(o)(2)(B)(i)

refers to any new or amended energy

conservation standard prescribed by

DOE under section 325(o) of EPCA.

Because the Department of Justice must

transmit its determination to DOE

within 60 days after the publication of

a proposed rule, EPCA contemplates

that the Department of Justice’s

determination on the anti-competitive

effects of a proposed rule will enable

DOE to fulfill its substantive obligation

to consider the Department’s expert

opinion on the anti-competitive impact

of a final standard.

DOE submitted the October 5, 2000

NOPR to the Attorney General for

review pursuant to the foregoing

provisions. The NOPR described the

range of potential trial standards

considered by DOE, and proposed

adoption of Trial Standard Level 3, i.e.,

a minimum SEER of 12 for central air

conditioner product classes and a SEER

of 13 for central air conditioning heat

pumps, with a corresponding HSPF of

7.7. The Department of Justice,

consistent with its past practice,

confined its response to the proposed

standards, corresponding to Trial

Standard Level 3.

The Department of Justice conveyed

to DOE three concerns about the

proposed rule’s potential impact on

competition (see December 4, 2000,

letter in the Appendix to this notice).

First, the Department of Justice was

concerned the proposed rule would

have a disproportionate impact on small

manufacturers. Second, it was

concerned that the proposed standard

for heat pumps, and in some instances

the standard for air conditioners, would

have an adverse impact on some

manufacturers of equipment to be used

to retrofit existing housing and used in

manufactured housing. Third, it was

concerned that the proposed 13 SEER

for central air conditioning heat pumps

could cause consumers to shift from

heat pumps to other systems that

include resistance heat systems,

reducing the competition that presently

exists between manufacturers of air

conditioning heat pumps and

manufacturers of those other heating

systems. The Department of Justice

urged DOE to take these concerns into

account and consider ‘‘setting a lower

SEER standard for heat pumps, such as

the standard included in Trial Standard

Level 2, and a lower SEER standard for

air conditioners for retrofit markets

where there are space constraints and

for manufactured housing.’’ 66 FR 7200.

DOE published a final rule on January

22, 2001 adopting standards that

corresponded to Trial Standard Level 4

(the next higher level) and prescribed a

minimum SEER of 13 for all the product

classes, except for niche products, with

a corresponding 7.7 HSPF. The

preamble to the final rule addressed the

Department of Justice’s specific

concerns about the October 5 proposed

rule (66 FR 7192–93). It also addressed

the potential anti-competitive impact of

the final rule’s uniform 13 SEER

standard, in general terms:

We recognize that the standard levels we

are adopting could accelerate the

consolidation trend among major

manufacturers. However, as discussed in the

manufacturer impact analysis, we do not

expect that any manufacturer or group of

manufacturers will be able to use the

standards as an opportunity to consolidate

their market power. (See TSD, Chapter 8).

Therefore, we believe that competition will

remain vigorous under the adopted standard,

and any lessening of competition that does

occur will not result in price increases or loss

of choice and utility for consumers.

66 FR 7176. The TSD referenced chapter

also concluded that, under Trial

Standard Level 4, several major

companies would likely consider selling

their production assets rather than make

the investment required to meet the new

standard or face the loss of profits

caused by the absence of premium

products in the marketplace (see, TSD

8.7.4, p. 8–64).

Thus, DOE simply relied on the

manufacturer impact analysis in the

TSD to support its conclusion with

respect to the potential impact on

competition of the final rule’s Trial

Standard Level 4 (13 SEER) standards.

DOE did not have the benefit of the

Department of Justice’s views on the

potential anti-competitive impact of the


 EE-RM-STD-98-440 COMMENT 312
38828 Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules

3For split air conditions and gas water heaters,

the fraction provided represents those consumers

who incur an increase in life-cycle costs that

exceeds 2 percent of the total life-cycle cost, with

low-income data available only for split air

conditioners. For clothes washers, the fraction

represents those consumers who incur any lifecycle cost increase at all. For direct comparison

with clothes washers, the fraction of all consumers

incurring any increase in life-cycle costs for gas

water heaters in 22 percent and for split air

conditioners is 55 percent.

final 13 SEER standards for both air

conditioners and heat pumps.

As the TSD shows, the central issue

regarding the January 22 final rule is the

potential effect of 13 SEER standards on

consolidation in the central air

conditioning and heat pump industry.

DOE adverted to this in the preamble to

the final rule with the statement ‘‘that

the standard levels we are adopting

could accelerate the consolidation trend

among major manufacturers.’’ 66 FR

7176. Arguably, to comply with section

325(o)(2)(B)(i), DOE should have

requested supplemental views from the

Department of Justice on this issue.

2. Failure of the Statement of Basis for

the Final Rule to Adequately Address

Cumulative Regulatory Burdens on

Manufacturers

To determine whether a standard is

economically justified, DOE must assess

the economic impact of the standard on

the manufacturers and consumers of the

products subject to such standard (42

U.S.C. 6295(o)(2)(B)(i)(I)). One aspect of

manufacturer burden is the cumulative

impact of multiple DOE standards and

the regulatory actions of other Federal

agencies and States that affect the

manufacture of a covered product.

In its petition for reconsideration, ARI

criticized DOE for not discussing

information in the TSD on the

cumulative regulatory burden on the

central air conditioning and heat pump

industry (ARI Petition Discussion,

paragraph m). The preamble to the final

rule addressed the issue of cumulative

regulatory burden in conclusory terms

in two brief sentences, as follows: ‘‘The

Department has considered the

manufacturer burdens as described in

the manufacturer impact analysis of the

TSD in adopting the new standard.

These include cumulative burdens.’’ 66

FR 7174. The statement of basis and

purpose required by the APA (5 U.S.C.

553(c)) to accompany a final rule must

establish a rational connection between

the facts the agency found and the

choices it made. In light of the evidence

of cumulative regulatory burdens on

manufacturers documented in the TSD,

it is doubtful whether the mere assertion

by DOE that it considered the

cumulative burdens on manufacturers is

adequate to establish a rational basis for

DOE’s determination on manufacturer

impact resulting from a 13 SEER

standard.

DOE’s discussion and conclusions

regarding the weight that should be

given to cumulative regulatory burden

in this rulemaking are set forth in the

‘‘Policy Issues’’ discussion immediately

following this section, and in the

preamble to today’s proposed rule (see

Section V.B.2. of this SUPPLEMENTARY

INFORMATION).

B. Policy Issues

DOE reviewed the basis and rationale

for the January 22, 2001 final rule

pursuant to the President’s Regulatory

Review Plan, and it considered carefully

numerous claims by ARI of error or

insufficiency in DOE’s analyses and its

weighing of the benefits and burdens of

the final rule. As a result of this review,

DOE has decided to accord more weight

to certain factors, and those changes,

which reflect the current

Administration’s policies, support

DOE’s decisions to propose withdrawal

of the January 22 final rule and to

publish today’s proposed rule.

1. Burdens on Consumers

During its review of the January 22

final rule, DOE reassessed its weighing

of burdens and benefits of the standards,

giving particular attention to the

question of whether burdens on

consumers received adequate

consideration and weight.

DOE currently is particularly

concerned that new standards be

designed to distribute their burdens and

benefits as fairly as practical. Although

some disparity is expected in any

national standard, the disparity in

impacts between low-income and

typical consumers is of more concern at

more stringent efficiency standards

because increases in first cost are felt

more sharply by lower income

consumers. The potential disparities

would be diminished under the 12

SEER standard that DOE is proposing

today.

DOE also has considered that the

fraction of consumers who are

negatively impacted by a 13 SEER

standard, in terms of life-cycle cost

savings versus the existing standards, is

substantially higher than the fraction

who are negatively impacted in other

recent DOE efficiency rules. To

illustrate, the efficiency standard for

clothes washers, published in the

Federal Register on January 12, 2001

(66 FR 3314), will negatively impact 19

percent of all consumers and 19 percent

of low income consumers, and the

efficiency standard for gas-fired

residential water heaters, published in

the Federal Register on January 17,

2001 (66 FR 4474), will result in

negative life-cycle cost impacts for 12

percent of all consumers.3 By contrast,

under a 13 SEER standard for split air

conditioners, 39 percent and 50 percent

of average and low income consumers,

respectively, would be negatively

impacted. A 12 SEER standard would

result in a lower fraction of consumers

who are negatively impacted: 25 percent

and 34 percent of average and low

income consumers, respectively.

In summary, DOE has decided that, in

issuing the January 22 final rule,

inadequate discussion and weight was

given to the fraction of all and low

income consumers who incur negative

life-cycle cost impacts as a result of the

new standard.

2. Burdens on Manufacturers

a. Cumulative Regulatory Burden. In

the preceding section, DOE concluded

that the statement of basis and purpose

for the January 22 final rule did not

adequately address the issue of

cumulative regulatory burden, which

DOE recognizes is a key component of

the assessment of manufacturer impact

(see Process Improvement Rule, section

10(g), codified at 10 CFR Part 430,

Subpart C, Appendix A). DOE’s decision

to propose withdrawal of the January 22

final rule is based in part on DOE’s

current view that the preamble to the

final rule contained insufficient

discussion of cumulative regulatory

burdens and gave insufficient weight to

cumulative regulatory burdens.

As mentioned by ARI, DOE did have

information, which was included in the

TSD, of cumulative regulatory burdens.

The TSD for the final rule shows that

the most significant regulation facing

the central air conditioning industry is

the Environmental Protection Agency’s

(EPA’s) ban on new equipment utilizing

a particular hydrofluorocarbon (HCFC),

HCFC–22, as a refrigerant, scheduled to

take effect in January 2010. In addition,

an EPA ban on use of HCFC–141b as a

foam blowing agent (used in water

heaters, refrigerators and freezers) takes

effect on January 1, 2003. The TSD

reports that companies must develop a

wealth of new knowledge and

experience to replace the refrigerant

HCFC–22, and it estimates the cost of

converting equipment to a substitute

refrigerant to be on the order of $50

million per company. Additional

regulatory burdens on manufacturers of

residential central air conditioner and

heat pump products are new DOE

efficiency standards for refrigerators and

freezers (effective July 1, 2001) and


 EE-RM-STD-98-440 COMMENT 312
Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules 38829

water heaters (effective January 20,

2004); a Consumer Product Safety

Commission voluntary standard for

flammable vapor ignitions on water

heaters (under development); and EPA

standards under section 112(d) of the

Clean Air Act on emissions of

hazardous air pollutants from the

coating of large appliances (expected to

apply in 2004). While acknowledging

that the uncertainty surrounding DOE’s

estimates is high, the TSD estimates the

total investment required by

manufacturers of central air conditioner

and heat pumps to meet these

cumulative regulatory burdens will

exceed $479 million. This estimate

excludes the cost of manufacturer

compliance with DOE’s amended

efficiency standard for air conditioners

and heat pumps, which the TSD

estimates is comparable the cost of the

HCFC–22 phase-out (TSD, Section 8.6.).

b. Financial Burdens Associated with

New Standards. The TSD demonstrated

that the more stringent 13 SEER

standards adopted in the January 22

final rule would likely cause the

industry’s net cash flow to drop below

zero (Section 8.4.6). It also noted that

one segment of the industry

(denominated ‘‘lower operating cost

manufacturers’’ in the analysis) would

likely benefit from more stringent

standards, and that another segment of

the industry (denominated ‘‘higher

operating cost manufacturers’’) would

bear nearly the total financial burden

(Section 8.5). According to the TSD, the

potential outcomes of these impacts

could include accelerated consolidation

and stifling of innovation. As a matter

of policy, DOE considers these

outcomes to be potentially serious, and

certainly material, consequences that

should be discussed when adopting new

standards. DOE is proposing to

withdraw the January 22 final rule, in

part, to give greater weight to the

negative cash flow and maldistribution

of burdens on industry of 13 SEER

standards. DOE explicitly addresses

these issues in the preamble to today’s

proposed rule in Section V.B.2. of this

SUPPLEMENTARY INFORMATION.

IV. Proposed Rule

A. Background

1. Statutory Authority

Part B of Title III of the Energy Policy

and Conservation Act provides for the

Energy Conservation Program for

Consumer Products other than

Automobiles (42 U.S.C. 6291 et seq.).

The consumer products subject to this

program (often referred to hereafter as

‘‘covered products’’) include central air

conditioners and heat pumps. Under the

Act, the program consists essentially of

three parts: testing, labeling, and

Federal energy conservation standards.

As discussed in the Introduction in

Section I of this SUPPLEMENTARY

INFORMATION, NAECA prescribed initial

Federal energy conservation standards

for central air conditioners and heat

pumps (42 U.S.C. 6295(d)). NAECA

further amended EPCA by specifying

that DOE is to review and publish

amended standards by January 1, 1994

(42 U.S.C. 6295(d)(3)(A)). Under EPCA,

any new or amended standard must be

designed so as to achieve the maximum

improvement in energy efficiency that is

technologically feasible and

economically justified (42 U.S.C.

6295(o)(2)(A)).

Section 325(o)(2)(B)(i) provides that

before DOE determines whether a

standard is economically justified, it

must first solicit comments on a

proposed standard (42 U.S.C.

6295(o)(2)(B)(i)). That section further

provides that, after reviewing the

comments, DOE must determine

whether the benefits of the standard

exceed its burdens, based, to the greatest

extent practicable, on a weighing of the

following seven factors:

(i) The economic impact of the

standard on the manufacturers and on

the consumers of the products subject to

such standard;

(ii) The savings in operating costs

throughout the estimated average life of

the covered product in the type (or

class) compared to any increase in the

price of, or in the initial charges for, or

maintenance expenses of, the covered

products which are likely to result from

the imposition of the standard;

(iii) The total projected amount of

energy savings likely to result directly

from the imposition of the standard;

(iv) Any lessening of the utility or the

performance of the covered products

likely to result from the imposition of

the standard;

(v) 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;

(vi) The need for national energy

conservation; and

(vii) Other factors the Secretary

considers relevant.

In addition, section 325(o)(2)(B)(iii)

establishes a rebuttable presumption of

economic justification in instances

where the Secretary determines that

‘‘the additional cost to the consumer of

purchasing a product complying with

an energy conservation standard level

will be less than three times the value

of the energy * * * savings during the

first year that the consumer will receive

as a result of the standard, as calculated

under the applicable test procedure

* * * .’’ (42 U.S.C. 6295(o)(2)(B)(iii)).

The rebuttable presumption test is an

alternative path to establishing

economic justification.

2. Rulemaking History

The existing standards for residential

central air conditioners and heat pumps

have been in effect since 1992. As

described in the Introduction to this

SUPPLEMENTARY INFORMATION, the

efficiency descriptor for air conditioner

and heat pump cooling efficiency is

SEER (or Seasonal Energy Efficiency

Ratio), and the descriptor for heat pump

heating efficiency is HSPF (or Heating

Seasonal Performance Factor). SEER is

DOE’s measure of energy efficiency for

the seasonal cooling performance of

central air conditioners and heat pumps.

HSPF is DOE’s measure of energy

efficiency for the seasonal heating

performance of heat pumps. The current

central air conditioner and heat pump

efficiency standards are as follows:

—Split system air conditioners and heat

pumps—10 SEER/6.8 HSPF

—Single package air conditioners and

heat pumps—9.7 SEER/6.6 HSPF

On September 8, 1993, DOE

published an Advance Notice of

Proposed Rulemaking (ANOPR)

announcing DOE’s intention to revise

the existing central air conditioner and

heat pump efficiency standard. 58 FR

47326. During a workshop on June 30,

1998, DOE presented for comment an

analytical framework for the central air

conditioner and heat pump standards

rulemaking. The analytical framework

described the different analyses to be

conducted, the methods for conducting

them, the use of new spreadsheets, and

the relationship of the various analyses.

On November 24, 1999, DOE published

a Supplemental ANOPR and invited

additional comment on issues raised

following publication of the original

ANOPR. 64 FR 66306.

On October 5, 2000, DOE published a

notice of proposed rulemaking (October

5, 2000, NOPR). 65 FR 59590. The

energy efficiency standards that DOE

proposed for residential central air

conditioners and central air

conditioning heat pumps (heat pumps)

were as follows:

—Split-system and single-package air

conditioners—12 SEER

—Split-system and single package heat

pumps—13 SEER/7.7 HSPF

—Through-the-wall air conditioners and

heat pumps—11 SEER/7.1 HSPF.

In addition to the increase proposed

in SEER and HSPF, DOE requested

comments on a proposal to adopt a


 EE-RM-STD-98-440 COMMENT 312
38830 Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules

4EER is a steady-state measure of energy

efficiency which measures efficiency at a prescribed

outdoor temperature (95° F), and is one of the test conditions in DOE’s test procedure used to develop

the SEER.

standard for steady-state cooling

efficiency, denominated EER (or Energy

Efficiency Ratio).4 The proposal of an

EER was designed to ensure more

efficient operation at high outdoor

temperature, during periods when

electricity use by air conditioners is at

its peak. A public hearing was held in

Washington, D.C. on November 16, 2000

to hear oral views, data and arguments

on the proposed rule.

As explained in the Introduction to

this SUPPLEMENTARY INFORMATION, DOE

published a final rule on January 22,

2001 that would have required a SEER

of 13 for product classes covered by the

rule with a corresponding HSPF of 7.7

for heat pumps. Subsequent events,

including notices delaying the final

rule’s effective date pursuant to the

President’s Regulatory Review Plan,

petitions for judicial review, and ARI’s

petition for reconsideration of the final

rule, are also discussed in the

Introduction.

B. Overview of the Proposed Standards

DOE, through today’s proposed rule,

would amend the almost ten-year old

minimum efficiency standards for new

central air conditioners and heat pumps.

These amended standards would take

into account a decade of technological

advancements and would save

consumers and the nation money,

significant amounts of energy, and have

substantial environmental and

economic benefits.

If today’s proposed standards go into

effect, they would essentially raise the

energy efficiency standards to 12 SEER

for new central air conditioners and

to12 SEER/7.4 HSPF for new central air

conditioning heat pumps. In its petition

for reconsideration, ARI argued that if a

12 SEER standard is adopted for central

air conditioning heat pumps, the HSPF

should be no higher than 7.3 (Petition

Discussion, paragraph n). ARI, and other

persons who commented on the October

5 proposed rule, urged DOE to revise the

HSPF levels to reflect differences among

the SEER–HSPF relationships across

equipment of varying capacity ratings.

As DOE explained in the preamble to

the January 22, 2001 final rule, DOE

established the SEER–HSPF parings in

order to maintain the offset between the

minimum SEER and the minimum

HSPF in the current standards. Because

heating energy is a large fraction of total

heat pump energy consumption, DOE

stated it would not relax the HSPF level

in the absence of sound evidence

regarding the burdens that would be

mitigated (66 FR 7184). DOE continues

to think an HSPF of 7.4 is the

appropriate level for 12 SEER. Data

discussed in the TSD (Section 4.6.2.1)

show that most models of equipment

below 3-tons meet or exceed an HSPF of

7.4, and almost a third of models

available below 20,000 BTU/hr. meet or

exceed an HSPF of 7.4.

The proposed standards would apply

to products manufactured for sale in the

United States, as of July 25, 2006. The

proposed standard for split-system air

conditioners, the most common type of

residential air conditioning equipment,

represents a 20 percent improvement in

energy efficiency. For split-system heat

pumps, the new standard would

represent a 20 percent improvement in

cooling efficiency and a 9 percent

improvement in heating efficiency. The

standard would also increase the

cooling efficiency of single-package air

conditioners and single-package heat

pumps by 24 percent and the heating

efficiency of single-package heat pumps

by 12 percent. Finally, DOE is proposing

to adopt new standards for some

products to ensure that more efficient

versions remain available for certain

niche applications. DOE proposes to

determine that the new standards are

the highest efficiency levels that are

technologically feasible and

economically justified as required by

law. Several aspects of today’s proposed

standards warrant highlighting here, as

follows:

1. Central Air Conditioner and Heat

Pump Features

The proposed efficiency levels can be

met by central air conditioner and heat

pump designs that are already available

in the market. DOE fully expects

variations of these models to exist under

the new standards, offering all the

features and utility that are found in

currently available products.

2. Consumer Benefits

Table 1 summarizes the

‘‘characteristics’’ of today’s typical

central air conditioners and heat pumps.

Table 2 presents the implications for the

average consumer of the standards

becoming effective in 2006.

TABLE 1.—CHARACTERISTICS OF TODAY’S TYPICAL CENTRAL AIR CONDITIONERS AND HEAT PUMPS 1

Split system air

conditioner

Split system heat

pump

Single package air

conditioner

Single package heat

pump

Average Installed Price .................................... $2,236 ....................... $3,668 ....................... $2,607 ....................... $3,599.

Annual Utility Bill 2 ............................................ $189 .......................... $453 .......................... $189 .......................... $453.

Life Expectancy ................................................ 18.4 years ................. 18.4 years ................. 18.4 years ................. 18.4 years.

Energy Consumption per year ......................... 2,305 kWh ................. 6,549 kWh ................. 2,305 kWh ................. 6,549 kWh.

1 ‘‘Typical’’ equipment have cooling and heating efficiencies of 10 SEER and 6.8 HSPF, respectively.

2 Utility bill pertains to the energy cost of operating the air conditioner or heat pump.

TABLE 2.—IMPLICATIONS OF NEW STANDARDS FOR THE AVERAGE CONSUMER

Split system air

conditioner

Split system heat

pump

Single package air

conditioner

Single package heat

pump

Year Standard Comes into Effect .................... 2006 .......................... 2006 .......................... 2006 .......................... 2006.

New Average Installed Price ........................... $2,449 ....................... $3,812 ....................... $2,765 ....................... $3,748.

Estimated Price Increase ................................. $213 .......................... $144 .......................... $158 .......................... $149.

Annual Utility Bill Savings ................................ $31 ............................ $50 ............................ $31 ............................ $50.

Average Net Saving over Equipment Life ....... $113 .......................... $365 .......................... $163 .......................... $421.

Energy Savings per Year ................................. 384 kWh .................... 768 kWh .................... 384 kWh .................... 768 kWh.


 EE-RM-STD-98-440 COMMENT 312
Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules 38831

5Based on estimates supplied by the industry

trade association, the Air-Conditioning and

Refrigeration Institute (ARI), the installed price is

estimated to be $2,510, an increase of $274.

6Based on estimates supplied by ARI, the

installed price is estimated to be $3,933, an increase

of $265.

7Based on estimates supplied by ARI, 61 percent

of all consumers purchasing a new typical air

conditioner will either save money or will be

negligibly impacted as a result of the 2006 standard.

8Based on estimates supplied by ARI, 97 percent

of all consumers purchasing a new typical heat

pump will either save money or will be negligibly

impacted as a result of the 2006 standard.

9Net benefit assumes NAECA efficiency scenario.

Net benefit would be $3 billion for Roll-up

efficiency scenario.

The most typical air conditioner (i.e.,

split system air conditioner

whichcomprises approximately 65

percent of today’s central air

conditioning and heat pump market)

has an installed price of $2,236 and an

annual utility costs of $189. In order to

meet the 2006 proposed standard, DOE

estimates that the installed price of a

typical air conditioner would be $2,449,

an increase of $213.5 This price increase

would be offset by an annual energy

savings of about $31 on the utility bills.

The most typical heat pump (i.e., split

system heat pump) currently has an

installed price of $3,668 and annual

utility costs of $453. In order to meet the

2006 proposed standard, DOE estimates

that the installed price of a typical heat

pump would be $3,812, an increase of

$144.6 This price increase would be

offset by an annual energy savings of

about $50 on the utility bills.

DOE recognizes that most consumers

pay energy prices that are higher or

lower than the ‘‘typical’’ consumer and

operate their equipment more or less

often. Consequently, DOE has

investigated the effects of the different

energy prices across the nation and

different air-conditioning usage

patterns. DOE estimates that 75 percent

of all consumers purchasing a new

typical air conditioner would either

save money or would be negligibly

impacted as a result of the 2006

proposed standard.7 In the case of a new

typical heat pump, all consumers either

would save money or be negligibly

impacted.8

DOE also investigated how these

standards might affect low income

consumers. On average, DOE estimates

that it is likely that low income air

conditioner and heat pump consumers

would also save money over the life of

the equipment as a result of the

standard.

3. National Benefits

The proposed standards would

provide benefits to the nation. DOE

estimates the standards would save

approximately 3 quads of energy over 25

years (2006 through 2030). This is

equivalent to all the energy consumed

by nearly 17 million American

households in a single year. In 2020, the

proposed standards would avoid the

construction of three 400 megawatt coalfired plants and twenty-seven 400

megawatt gas-fired plants. These energy

savings would result in cumulative

greenhouse gas emission reductions of

approximately 24 million metric tons

(Mt) of carbon, or an amount equal to

that produced by approximately 2

million cars every year. Additionally,

air pollution would be reduced by the

elimination of approximately 70

thousand metric tons of nitrous oxides

( NOX) from 2006 through 2030. In total,

DOE estimates this proposed standard

would have a net benefit to the nation’s

consumers of $2 billion over the period

2006 through 2030.9

C. Technological Feasibility

There are central air conditioners and

heat pumps in the market at the

efficiency levels that would be

prescribed by today’s proposed rule.

DOE, therefore, believes all of the

proposed efficiency levels are

technologically feasible.

Pursuant to section 325(p)(2) of EPCA,

and as discussed in the October 5, 2000

NOPR, DOE determined that 18 SEER is

the maximum technologically feasible

level (Max Tech Level) for cooling

efficiency for all product classes and

capacities covered by this rulemaking.

65 FR 59593. The Max Tech Level for

heating efficiency is 9.4 HSPF, which is

the highest HSPF rating currently

available in residential heat pumps.

D. General Discussion of Economic

Justification Factors

As noted earlier, section

325(o)(2)(B)(i) of EPCA requires DOE to

consider seven factors in determining

whether a conservation standard is

economically justified.

1. Economic Impact on Manufacturers

and Consumers

DOE considered the economic impact

on manufacturers and consumers as

discussed in the October 5, 2000, NOPR

(65 FR 59590, 59593) and the January

22, 2001 final rule (66 FR 7174–78,

7185–7191). As explained in Section III

and Section V.B. of this SUPPLEMENTARY

INFORMATION, today’s proposal is based

in part on changes in emphasis or

weight that DOE, as a result of its

reconsideration of the rulemaking

record, now gives to certain aspects of

its analysis of manufacturer and

consumer impact.

2. Life-Cycle costs and Rebuttable

Presumption

DOE considered life-cycle costs (LCC),

as discussed in the January 22, 2001

final rule. 66 FR 7173, 7175, 7187–90.

DOE calculated the installed price and

operation and maintenance costs for a

range of consumers around the nation to

estimate the range in life-cycle cost

benefits that consumers would expect to

achieve due to new standards. DOE has

made no change in its assumptions and

analysis of life-cycle costs in proposing

today’s rule.

As previously mentioned, NAECA

established new criteria for determining

whether a standard level is

economically justified. Section

325(o)(2)(B)(iii) of EPCA provides that

if, according to the applicable test

procedure, the increase in initial price

of an appliance due to a conservation

standard would repay itself to the

consumer in energy savings in less than

three years, then DOE is to presume that

such standard is economically justified.

This presumption of economic

justification can be rebutted upon a

proper showing.

Using the reverse engineering

manufacturing costs, the standards DOE

proposes today for split heat pumps and

packaged heat pumps can be shown to

have satisfied the rebuttable

presumption requirements in section

325(o)(2)(B)(iii). To avoid confusion,

DOE points out that the statute requires

DOE to use ‘‘the applicable test

procedure’’ to calculate the payback

periods for purposes of the rebuttable

presumption. As explained in the

October 5, 2000 NOPR, the annual

cooling and heating energy

consumption calculations based on

DOE’s test procedure are significantly

greater than the weighted-average values

from DOE’s life-cycle cost analyses

based on the 1997 Residential Energy

Consumption Survey, used in other

DOE analyses, including evaluation of

consumer impacts. 65 FR 59596. For

this reason, the payback periods

presented in Section V of this portion of

the preamble, entitled ‘‘Analytical

Results and Conclusions,’’ are

significantly longer than those

calculated to determine whether the

rebuttable presumption applies to these

products.

While the analysis requires DOE to

presume that the standards adopted for

split system and single package heat

pumps are economically justified, it

shows that split system air conditioners

and single package air conditioners do

not meet the standard for use of the

rebuttable presumption of economic

justification. Therefore, DOE does not


 EE-RM-STD-98-440 COMMENT 312
38832 Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules

presume them to be economically

justified. If the rebuttable presumption

does not apply, DOE must perform

additional analysis to determine

economic justification. DOE has

performed an analysis for all classes of

central air conditioner and heat pump

products that shows the standards

proposed today are indeed economically

justified.

3. Energy Savings

EPCA requires DOE, in determining

the economic justification of a standard,

to consider the total projected energy

savings that are expected to result

directly from revised standards. DOE

forecasted energy savings through the

use of a national energy savings (NES)

spreadsheet, as discussed in the October

5, 2000 NOPR. 65 FR 59590, 59593.

DOE relies on the same spreadsheets

and assumptions for its estimate of the

NES that would result from

implementation of today’s proposed

standards.

As discussed in the October 5, 2000

NOPR, section 325(o)(3)(B) of EPCA

prohibits DOE from adopting a standard

for a product if that standard would not

result in ‘‘significant’’ energy savings.

The energy savings for the standard

levels DOE is proposing today are nontrivial—indeed they are substantial—

and therefore we consider them

‘‘significant’’ within the meaning of

section 325 of the Act.

4. Lessening of Utility or Performance of

Products

This factor cannot be quantified. In

establishing classes of products, DOE

has attempted to eliminate any

degradation of utility or performance in

the products covered by today’s

proposed rule. Attributes that affect

utility include the product’s ability to

cool and dehumidify. In some

applications, noise levels may also be an

aspect of utility. Product size or

configuration can also be considered

utility if a change in size would cause

the consumer to install the product in

a location or in a manner inconsistent

with the consumer’s preferences.

5. Impact of Lessening of Competition

This economic justification factor has

two aspects: on the one hand, it assumes

that there could be some lessening of

competition as a result of standards; on

the other hand, it directs the Attorney

General to gauge the impact, if any, of

that effect.

In order to assist the Attorney General

in making such a determination, DOE

provided the Attorney General with

copies of the October 5, 2000, NOPR

and the TSD for review. The Attorney

General’s determination, in a letter

dated December 4, 2000, was discussed

in the preamble to the January 22 final

rule. 66 FR 7176, 7199–200. The

Attorney General’s December 4, 2000,

determination is included in the

Appendix to this Supplemental Notice

of Proposed Rulemaking.

Pursuant to the President’s Regulatory

Review Plan, DOE invited the Attorney

General to submit supplemental views

on the January 22 final rule. The

Department of Justice, in a letter dated

April 5, 2001, provided brief written

comments as to whether the final rule

effectively removed their concerns

regarding possible lessening of

competition that could result from the

October 5 proposed standards. The

Department of Justice’s April 5, 2001,

letter is also included in the Appendix

to this notice.

The Department of Justice concluded

that the 13 SEER standards for heat

pumps and air conditioners in the

January 22 final rule still presented anticompetitive concerns. More specifically,

the Department of Justice concluded

that while the final rule’s exclusion of

niche products might alleviate

competitive problems for manufacturers

of those products, the Department of

Justice remained concerned about the

impact of the final rule on

manufacturers of standard equipment

who could not make 13 SEER

equipment that would fit into spaceconstrained sites. The Department of

Justice also concluded the final rule

would have a disproportionate impact

on smaller manufacturers of heat

pumps. Finally, the Department of

Justice was of the view that the 13 SEER

standard for air conditioners presents

the same kinds of anti-competitive

problems as the 13 SEER standard for

heat pumps, and urged DOE to adopt a

12 SEER standard for all products

covered by the rule.

As explained in Section III. of this

SUPPLEMENTARY INFORMATION, DOE’s

decision today to propose a 12 SEER

standard for most central air

conditioners, with a corresponding 7.4

HSPF for central air conditioning heat

pumps, is based primarily on its reweighting of the burdens and benefits to

manufacturers and consumers, rather

than on the Department of Justice’s

views regarding the anti-competitive

effect of the January 22 final rule. The

Department of Justice’s April 5 letter

raises questions about the January 22

final rule’s treatment of spaceconstrained or niche products, but those

questions do not require resolution

given DOE’s decision to propose a 12

SEER standard for all product classes

except the through-the-wall product

classes that DOE proposes today.

DOE will submit this proposed rule to

the Department of Justice for comment.

DOE also invites the public to submit

views and information regarding the

potential anti-competitive impact of

today’s proposed rule.

6. Need of the Nation To Conserve

Energy

DOE recognizes that energy

conservation benefits the nation in

several important ways. Enhanced

energy efficiency improves the nation’s

energy security, strengthens the

economy, and reduces the

environmental impacts of energy

production. As part of the analysis

supporting today’s proposed rule, DOE

estimated energy savings and the

national consumer benefits and

estimated reduction in emissions of

pollutants and greenhouse gases

resulting from those energy savings. See

the October 5, 2000 NOPR for a

discussion of how these standards affect

energy savings and those benefits. 65 FR

59622–3. The amount of energy savings

ultimately associated with a particular

standard level is also affected by the

effect of a given standard on

competition and consumer cost.

Selecting a standard level should take

into account manufacturer—and

therefore inevitably consumer—costs, in

order to encourage robust competition

and heightened introduction of newer,

more efficient units into the inventory

of units available for purchase and use

by consumers.

7. Other Factors

Section 325(o) of EPCA allows the

Secretary of Energy, in determining

whether a standard is economically

justified, to consider any other factors

that the Secretary deems to be relevant

(42 U.S.C. 6295(o)(2)(B)(i)(VI)). Under

this provision, DOE considered the

potential improvement to the reliability

of the electrical system and health

effects caused by foregone air

conditioner purchases. These issues are

discussed in Sections IV.B.3. above, as

well as in the October 5, 2000 NOPR (65

FR 59605) and the January 22 final rule

(66 FR 7195). The Utility Impacts

Analysis in Chapter 11 of the TSD also

provides the technical analysis

estimating the effects of adopting new

efficiency standards on installed

generation capacity.

E. Methodology Used in DOE Analyses

For this proposed rule, the

methodologies used to evaluate the

seven factors described above are

unchanged from those used in the


 EE-RM-STD-98-440 COMMENT 312
Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules 38833

analyses that DOE relied on for the

October 5 proposed rule and the January

22 final rule. DOE’s methodology is

discussed in the October 5, 2000 NOPR

(65 FR 59594–97) and the January 22

final rule (66 FR 7173–74).

Additionally, the TSD that accompanies

this rulemaking provides a detailed

description of every aspect of the

various analytical methodologies used.

V. Analytical Results and Conclusions

A. Overview of Analytical Results

1. General

Although DOE has accorded different

weight to certain factors in proposing

this rule, the underlying analyses, and

the results derived from those analyses,

are unchanged from those presented in

the January 22 final rule except for

additional analysis of through-the-wall

product classes. Briefly, DOE examined

five standard levels. Table 3 presents

the trial standards levels analyzed and

the corresponding efficiency level for

each class of product. Trial Standard

Level 5 is the Max Tech Level for each

class of product. Trial Standard Level 4

was the one DOE adopted for the

standards set forth in the January 22

final rule. Trial Standard Level 2 is the

one DOE is now proposing.

TABLE 3.—TRIAL STANDARDS LEVELS FOR CENTRAL AIR CONDITIONERS AND HEAT PUMPS (SEER)

Trial standard level Split air

conditioners

Packaged air

conditioners

Split heat

pumps

Packaged heat

pumps

1 ....................................................................................... 11 11 11 11

2 ....................................................................................... 12 12 12 12

3 ....................................................................................... 12 12 13 13

4 ....................................................................................... 13 13 13 13

5 ....................................................................................... 18 18 18 18

For each trial standard examined,

several different scenarios were

analyzed consisting of variations on: (1)

Electricity price and housing

projections; (2) equipment efficiency

distributions; (3) manufacturer cost

estimates; and (4) societal discount rate.

Electricity price and housing projections

were based on three different forecasts

from the Energy Information Agency’s

2000 Annual Energy Outlook (AEO): (1)

Reference Case, (2) High Growth Case,

and (3) Low Growth Case. DOE analyzed

three efficiency scenarios, each of which

assumed a different efficiency

distribution after new standards would

take effect: (1) NAECA scenario, (2)

Roll-up scenario, and (3) Shift scenario.

See October 5, 2000, NOPR for an

explanation of the three scenarios. 65

FR 59596 (footnotes 10 through 12 and

accompanying text). Under the standard

levels in today’s proposed rule, DOE

believes that the NAECA scenario most

closely represents the likeliest impact of

the new standards, as explained in

Chapter 8 of the TSD. DOE analyzed two

manufacturer cost scenarios: (1) Based

on reverse engineering estimates, and

(2) based on ARI-provided mean cost

estimates. For the reasons expressed in

the preamble to the January 22 final

rule, DOE expects manufacturer costs

under the proposed standards will lie

closer to the estimates produced

through DOE’s reverse engineering

analysis, which lie between ARI’s

minimum and ARI’s mean cost values.

66 FR 7177–78. DOE assumed a societal

discount rate of 7 percent for calculating

net present value (NPV). However, a 3

percent value was investigated as an

alternative scenario in accordance with

the Office of Management and Budget’s

(OMB) Guidelines to Standardize

Measures of Costs and Benefits and the

Format of Accounting Statements.

2. Through-the-Wall Products

In the October 5 proposed rule, DOE

proposed to establish a separate product

class for through-the-wall (TTW)

products with a minimum 11 SEER for

air conditioners and 7.1 HSPF for heat

pumps, noting that they face

particularly acute size constraints that

make increasing their efficiency more

difficult compared to conventional

products, or even other spaceconstrained products. In comments

received responding to the proposed

standards, Carrier suggested that such a

differential could open a loophole and

cause TTW products to be broadly

applied in traditionally non-TTW

applications. (Carrier #92 at p. 9).

National Comfort Products suggested

that they did not believe that their

product could attain even the proposed

11 SEER standard and that the DOE did

not conduct sufficient analysis to

support the proposed level. (NCP #77 at

p.3, 4). However, Armstrong commented

that they did believe their TTW

products could attain 11 SEER, although

they had concerns about their larger

capacity products. (Armstrong #86 at p.

3).

In response to the comments, DOE

conducted additional analysis on the

cost and technical issues related to TTW

products. The analysis is described in

detail in Appendix L of the TSD and is

summarized here.

DOE performed a design assessment

on two split TTW systems and one

packaged TTW system. All systems are

designed primarily for the replacement

market and fit the physical definition of

TTW equipment proposed in the

October 5 proposed rule. The design

assessment sought to identify the cost

and efficiency impacts of employing

commonly applied techniques to

improve efficiency including reduction

of air leakage and improvement in

airflow, utilizing more efficient

compression and fan motors, and

increasing heat exchanger surface area.

Emerging technologies and modulating

technologies were not considered since

they are not likely to be applied in

conventional baseline equipment.

The cost estimation for the analysis

was based on a modified version of the

reverse engineering cost models

developed as part of this rulemaking for

conventional products. The

performance impacts of employing

various design options were estimated

utilizing a spreadsheet model populated

with actual performance data and

engineering guidelines.

The analysis concluded that utilizing

commonly applied technologies and

designs, the most constrained TTW

split-system analysis could increase its

SEER rating from 10.0 SEER to as high

as 11.4 SEER, and the packaged system

analysis could increase its SEER rating

from 9.7 SEER to 10.6 SEER. Employing

all improvements would add $106 and

$129 to the retail price of the

equipment, respectively, comparable to

the increases expected in conventional

equipment moving to a 12 SEER

standard.

To explore the effects that more

stringent standards for TTW products

would have on consumers, DOE

performed a life-cycle cost (LCC)

analysis. The LCC analysis for TTW

consumers used a subset of consumers

identified as living in multi-family


 EE-RM-STD-98-440 COMMENT 312
38834 Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules

10All cumulative effects that are not monetary are

not discounted. Monetary effects are discounted to

1998 dollars.

dwellings, which are the predominate

application for TTW products.

3. Other Space-Constrained Products

Some products, other than throughthe-wall products, face spaceconstraints. However, as discussed in

the October 5 NOPR, DOE proposed to

conclude that it is economically

justified and technologically feasible for

all of those products to comply with the

same efficiency requirements as

conventional products. Comments

received in response to that proposal

focused mainly on the 13 SEER heat

pump requirement. After reviewing the

comments, DOE again proposes to

conclude that a 12 SEER requirement is

the maximum technologically feasible

and economically justified level for all

space-constrained products except

through-the-wall products. DOE is

interested in receiving further comment

on this issue.

B. Re-Weighting of Factors

1. Re-Weighting of Burdens on

Consumers

The record associated with this

rulemaking includes numerous

examples of discussions of the

distributions, extent, and type of

burdens on the typical consumer as well

as on low-income consumers. 65 FR

59623–59624 and 66 FR 7189–7190. In

the January 22 notice of final

rulemaking, DOE determined that most

consumers, including low-income

consumers, would likely benefit

financially over the life of the

equipment, but that all consumers

would bear higher initial costs, and lowincome consumers would not benefit

financially as much as would the

average consumer. DOE also recognized

that the payback periods associated with

the January 22 final rule are long, and

that many consumers, though not the

majority, would never recover the

higher first costs in the form of savings

in their utility bills. However, the

previous Administration concluded that

the national energy savings and the

slight financial benefit to the typical

consumer overrode any negative and

maldistributed consumer impacts.

Energy conservation is an important

part of the Bush Administration’s

energy policy, but this Administration is

particularly sensitive to burdens, and

potential burdens, on consumers. The

benefits of the standards adopted in the

January 22 final rule would accrue to a

much smaller fraction of consumers

than is the case for recent standards for

other products, particularly low income

consumers. Today’s proposed rule

attempts to mitigate those burdens by

reducing the increase in equipment cost

compared to the 13 SEER requirements

issued on January 22. Overall, the

proposed standards would reduce the

burdens on consumers while still

providing substantial benefit to the

nation in the form of energy savings.

2. Re-Weighting of Burdens on

Manufacturers

a. Cumulative Regulatory Burden.

Although DOE included information on

the cumulative burden of Federal and

State regulations on air conditioner

manufacturers in the TSD, DOE did not

fully explain how it considered the

results of its study in the preamble

statement of basis for the January 22

final rule. See discussion in Section III

of this SUPPLEMENTARY INFORMATION.

DOE considers that a proposed standard

is not economically justified if it

contributes to an unacceptable

cumulative regulatory burden. Section

III.B.2.a. above provides a summary of

the cumulative regulatory burden

analysis contained in Section 8.6 of the

TSD. DOE concluded that the burden on

manufacturers due to all other recent or

imminent federal regulations exceeds

$479 million. Revising the standard for

air conditioner and heat pump

efficiency would contribute up to an

additional $300 million, bringing the

total cumulative regulatory burden to as

high as $779 million. In light of that

heavy burden, DOE today is proposing

standards that would reduce the

expected financial burden on

manufacturers from all new Federal and

State regulations by $144 million

compared to the 13 SEER final rule of

January 22.

b. Financial Burdens Associated with

New Efficiency Standards. In addition to

cumulative regulatory burden, both the

TSD and public comments warn that too

stringent efficiency standards would

result in unacceptable financial burdens

for some major manufacturers and could

accelerate consolidation in the central

air conditioning and heat pump

industry. As explained in Section

III.B.2.b. of this SUPPLEMENTARY

INFORMATION, the 13 SEER standards in

the January 22 final rule are projected

by the TSD to result in a negative cash

flow for the industry in the year

preceding the new standards’

enforcement. However, the standards

would impose far greater financial

burdens on manufacturers whose

operating costs exceed the industry

average. Those manufacturers typically

engage in more research and

development or provide additional sales

or service support than do their lower

operating cost competitors. The 12 SEER

standard that DOE proposes today

would reduce the maldistribution of

financial impacts on manufacturers and

would allow manufacturers to maintain

a positive cash flow.

c. Conclusions Regarding

Conventional Products. EPCA specifies

that any new or amended energy

conservation standard for any type (or

class) of covered product shall be

designed to achieve the maximum

improvement in energy efficiency which

the Secretary determines is

technologically feasible and

economically justified (42 U.S.C.

6295(o)(2)(A)). In determining whether a

standard is economically justified, the

Secretary must determine whether the

benefits of the standard exceed its

burdens (42 U.S.C. 6295(o)(2)(B)(i)). The

amended standard must ‘‘result in

significant conservation of energy’’ (42

U.S.C. 6295(o)(3)(B)).

In conducting its analysis, DOE

considers the impacts of standards

beginning with the Max Tech Level, i.e.,

Trial Standard Level 5 in this

rulemaking. DOE then considers less

efficient levels until it reaches the level

which is technologically feasible and

economically justified.

To aid the reader in the discussion of

the benefits and burdens of the trial

standard levels, DOE includes a

summary of the analysis results for all

of the levels in Table 4.10 Table 4

presents a summary of quantitative

analysis results for each trial standard

level based on the assumptions DOE

considers most plausible. These include

manufacturing cost estimates from the

reverse engineering, an 18.4-year

equipment lifetime with one compressor

replacement at 14 years, and electricity

prices based on the AEO2000 Reference

Case.


 EE-RM-STD-98-440 COMMENT 312
Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules 38835

11For instance, if capacity-related blackouts cost

a region $1 billion, society would be willing to pay

up to $1 billion to prevent them. If those blackouts

can be prevented through either a capacity

expansion or a reduction in peak demand, and the

new capacity would cost $100 million, the value of

the reduction in peak demand can be no more than

$100 million. If the region is short on capacity and

cannot add new capacity quickly, however, the

same reduction in peak demand then can equal the

value of the avoided blackout ($1 billion) since

there is no feasible alternative.

12 Generating capacity, carbon and NOX

reductions are based on NAECA efficiency scenario.

TABLE 4.—SUMMARY OF QUANTITATIVE RESULTS 1

Trial std 1 Trial std 2 Trial std 3 Trial std 4 Trial std 5

Primary Energy Saved (quads) ............................................................... 1.7 3.0 3.5 4.2 8.8

Generation Capacity Offset (GW) 2 ......................................................... 6.5 10.6 12.4 15.5 28.8

NPV ($billion):

7% Discount Rate ............................................................................. 2 2 1 1 (10)

Industry Impacts (million $): 3 5

Cumulative Change in Industry NPV ................................................ (62) (179) (199) (300)

Differential impact between Industry Sub-groups4 ........................... 75 238 261 429

Cumulative Regulatory Burden on Industry ..................................... (>541) (>658) (>678) (>779)

Minimum net cash flow ..................................................................... 62 31 18 (3)

Life-Cycle Cost Savings ($): 5

Split AC ............................................................................................. 75 113 113 113 (137)

Packaged AC .................................................................................... 78 163 163 29 (276)

Split HP ............................................................................................. 209 365 372 372 (41)

Packaged HP .................................................................................... 207 421 353 353 166

Equipment Price Increase ($):

Split AC ............................................................................................. 91 213 213 335 754

Packaged AC .................................................................................... 89 158 158 425 859

Split HP ............................................................................................. 55 144 332 332 1039

Packaged Heat Pump ....................................................................... 92 149 435 435 985

Fraction of all Consumers with Net LCC Losses >2% (%):

Split AC ............................................................................................. 2 25 25 39 68

Packaged AC .................................................................................... 1 9 9 52 73

Split HP ............................................................................................. 0 0 6 6 57

Packaged Heat Pump ....................................................................... 0 0 12 12 48

Fraction of Low Income Consumers with Net LCC Losses >2% (%):

Split AC ............................................................................................. 5 34 34 50 77

Packaged AC .................................................................................... 2 14 14 61 80

Split HP ............................................................................................. 0 0 12 12 75

Packaged Heat Pump ....................................................................... 0 0 20 20 66

1Parentheses indicate negative (¥) values. Unless otherwise noted, Trial Standard Levels 1–3 refer to the NAECA efficiency scenario, and

Trial Standard Levels 4 and 5 refer to the Roll-up efficiency scenario. 2Values based on NAECA efficiency scenario.

3 Not calculated at Trial Standard Level 5.

4The benefit accruing to the Higher Operating Cost subgroup compared to the Lower Operating Cost subgroup.

5 Negative values indicate LCC increases.

In addition to the quantitative results,

DOE also considers other burdens and

benefits that affect economic

justification. The potential to improve

the reliability of the electricity system is

the major benefit DOE has not

quantified explicitly. In areas where the

occurrence of blackouts (and

brownouts) can be reduced through

expansion of system capacity, the

economic value of avoided blackouts

associated with reductions in peak load

cannot exceed the value of the avoided

capacity expansion. That value is

already captured in DOE’s analysis as

savings in consumer utility bills.

However, in areas that do not expect to

be able to maintain adequate capacity

reserves, the value of avoided blackouts

associated with reductions in peak

demand can far exceed the normal costs

of capacity expansion.11

DOE also recognizes that the adopted

standards could result in additional

unquantifiable burdens. These include a

possible increase in health problems

caused by consumers foregoing air

conditioner purchases, a possible

reduction in the ability of the product

to dehumidify, a possible lessening of

competition, and possible difficulty in

installing the new baseline products

into replacement applications. Section

IV of the preamble to the January 22

final rule discusses DOE’s response to

comments regarding benefits and

burdens.

First DOE considered Trial Standard

Level 5, the Max Tech Level for each of

four classes of products, representing

uniform 18 SEER requirements. The

manufacturing cost DOE assumes for

Trial Standard Level 5 is equal to 15

SEER equipment, although DOE would

expect that assumption to understate the

cost and price of the product. Trial

Standard Level 5 would likely save 8.6

quads of energy between 2006 and 2030

which DOE considers significant. The

energy savings through 2020 would

result in the avoidance of approximately

29 gigawatts (GW) of installed

generation capacity in 2020. For

comparison, the generating capacity is

equivalent to roughly 73 large, 400

megawatt, power plants, and reduced

emissions would range up to 63 Mt of

carbon equivalent and up to 184

thousand metric tons (kt) of NOX.12

At Trial Standard Level 5, the average

consumer would experience an increase

in life-cycle cost. Compared to today’s

standards, purchasers of split central

air-conditioners, the predominate class

of central air conditioner with 65

percent of the sales of central air

conditioners and heat pumps, would

most likely lose in excess of $137 over

the life of the appliance. Purchasers of

split heat pumps, the predominate class

of heat pump, would most likely lose in

excess of $41. These life-cycle cost

estimates represent lower bounds to the

actual costs because they do not include

the additional price the consumer

would pay over the price of a 15 SEER

product, which would increase the lifecycle cost considerably. Furthermore,


 EE-RM-STD-98-440 COMMENT 312
38836 Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules

13 Generating capacity, carbon, and NOX

reductions are based on NAECA efficiency scenario.

14Under the NAECA efficiency scenario, the

increase in national net present value would be

zero.

for the nation as a whole, Trial Standard

Level 5 would result in a net cost in

excess of $10 billion in NPV. DOE did

not calculate manufacturer impacts at

this trial standard level, determining

based on preliminary evaluation that

they would be severe and unacceptable.

DOE proposes to conclude that at

Trial Standard Level 5, the benefits of

energy savings, generating capacity

reductions and emission reductions

would be outweighed by the negative

economic impacts to the nation, to the

vast majority of consumers and to the

manufacturers. Consequently, DOE

proposes to determine that Trial

Standard Level 5, the Max Tech Level,

is not economically justified.

Next, DOE considered Trial Standard

Level 4. This level specifies 13 SEER

equipment for all product classes. In

considering Trial Standard Level 4, DOE

assumed the Roll-up efficiency scenario

and reverse engineering cost estimates

to be the most probable. (See Section

8.4.8 of the TSD for the reasons DOE

considers the Roll-up efficiency

scenario most probable above Trial

Standard Level 3 and the NAECA

efficiency scenario most probable at

Trial Standard Levels 1, 2, and 3. See

Section 7.2.2.5 of the TSD for the

current efficiency distribution for each

product class and for the assumed

efficiency distributions after new

standards.) Primary energy savings

between 2006 and 2030 would likely be

4.2 quads, which DOE considers

significant. The estimated energy

savings through 2020 would result in

avoidance of approximately 15.5 GW in

installed generating capacity in 2020.

For comparison, the generating capacity

is equivalent to avoiding the need for 39

large 400 megawatt power plants, and

reduced emissions would range up to 33

Mt of carbon equivalent and up to 85 kt

of NOX.13

At this standard level, the average

purchaser of a split system air

conditioner, the predominate class with

65 percent of all shipments, would see

the installed price of $2236 rise to

$2571, an increase of $335. Lower

utility bills from the energy savings

would repay this increase in 11.3 years

and produce a total saving with a net

present value of $113 over the 18.4 year

life of the product. The average

purchaser of a single package air

conditioner, which represents 10

percent of all shipments, would see the

average installed price of $2607 rise to

$3032, an increase of $425. Lower

utility bills from the energy savings

would repay this increase in 14.5 years

and produce a total saving with a net

present value of $29 over the 18.4 year

life of the product.

The average purchaser of a split

system heat pump, which represents 22

percent of all shipments, would see the

average installed price of $3668 rise to

$4000, an increase of $332. Lower

utility bills from the energy savings

would repay this increase in 6.4 years

and produce a total saving with a net

present value of $372 over the 18.4 year

life of the product. The average

purchaser of a single package heat

pump, which represents 4 percent of all

shipments, would see the average

installed price of $3599 rise to $4034, an

increase of $435. Lower utility bills

from the energy savings would repay

this increase in 8.4 years and produce

a total saving with a net present value

of $353 over the 18.4 year life of the

product. Trial Standard Level 4 would

lower peak electricity demand

compared to the base case. That would

allow utility service areas to either

avoid new capacity or, to the extent that

peak loads contribute to reliability

problems, improve system reliability.

A measure of an efficiency standard’s

economic benefit to the nation is the

increase in net present value, which is

the difference in total cost, both initial

cost and discounted operating cost,

between the base case (without a new

standard) and the case with a new

standard. For Trial Standard Level 4, the

increase in national net present value

would be $1 billion.14

Since DOE expects the Roll-up

efficiency scenario to result from

standards adopted at Trial Standard

Level 4, the burdens of Trial Standard

Level 4 on manufacturers are likely to

be severe. Not only does DOE expect the

average loss in industry NPV to be

around 20 percent, but impacts on most

manufacturers would reach almost 30

percent. Their long term drop in return

on investment and short term drop in

cash flow suggest that standards

adopted at Trial Standard Level 4 could

accelerate the consolidation trend,

possibly resulting in fewer choices for

consumers and in a slowing of the pace

of innovation well into the future.

Furthermore, the cumulative impact on

the industry of all new Federal and

State regulations would exceed $779

million.

While the average consumer

purchasing a 13 SEER air conditioner or

heat pump would experience a net

saving over the lifetime of the product,

some households would experience net

costs exceeding 2 percent of the total

life-cycle cost of today’s baseline units.

Thus, 39 percent of the households with

split system air conditioners, 52 percent

with single package air conditioners, 6

percent with split system heat pumps

and 12 percent with single package heat

pumps would experience a net cost. The

percentage of low-income consumers

who would experience net costs

exceeding 2 percent of the total lifecycle cost of today’s baseline units is

greater than that of the average

household. Thus, 50 percent of lowincome households with split system air

conditioners, 61 percent with single

package air conditioners, 12 percent

with split system heat pumps and 20

percent with single package heat pumps

would experience a net cost. Also, the

possibility that consumers would incur

substantial installation costs is great

because 13 SEER equipment is not

likely to fit in the same space as current

10 SEER equipment. In light of the

higher purchase cost increase

experienced by all consumers and the

percentage of households, which

experience life-cycle cost increases,

consumer burdens, in particular those

for low-income households, are

especially acute under Trial Standard

Level 4.

DOE proposes to conclude that at

Trial Standard Level 4, the benefits of

energy savings, generating capacity and

emission avoidance, possible

improvements in electric system

reliability, and net benefit to the

nation’s consumers would be

outweighed by the maldistribution of

consumer benefits, the potential

increase in installation costs for some

consumers related to installing

potentially larger equipment, and the

cost to manufacturers taking into

account the cumulative regulatory

burden. Trial Standard Level 4

introduces the serious concern that

prospective owners of air conditioning

heat pump systems would instead

purchase less costly air conditioner

resistance heater combinations because

of the substantial purchase price

differential between heat pumps and air

conditioners. As discussed in the

January 22 notice of final rulemaking

(66 FR 7196), the energy savings from

the more efficient heat pumps would be

eliminated if only a small fraction of

heat pump owners (4 percent) switched

to resistance heating. Those households

residing in manufactured housing,

which is often shipped from the factory

without an air conditioning system but

with a resistance furnace, might be

inclined to simply add a lower cost air

conditioner and retain the resistance


 EE-RM-STD-98-440 COMMENT 312
Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules 38837

15 Generating capacity, carbon, and NOX

reductions are based on NAECA efficiency scenario.

16Under the Roll-up efficiency scenario, the

increase in national net present value would be $2

billion.

17 Generating capacity, carbon, and NOX

reductions are based on NAECA efficiency scenario.

furnace instead of replacing the

resistance furnace with a heat pump. In

short, the large financial burdens of

Trial Standard Level 4 are not

outweighed by the expected financial

benefits. Other potential burdens

include possible health effects caused

indirectly by foregone air conditioning

purchases and possible lessening of

competition. Consequently, DOE

proposes to determine that Trial

Standard Level 4 is not economically

justified.

Next, DOE considered Trial Standard

Level 3. This level specifies 12 SEER

equipment for air conditioners and 13

SEER equipment for heat pumps. In

considering Trial Standard Level 3, DOE

assumed the NAECA efficiency scenario

and reverse engineering cost estimates

to be the most probable. (See Section

8.4.8 of the TSD for the reasons DOE

considers the Roll-up efficiency

scenario most probable at Trial Standard

Levels 4 and 5 and the NAECA

efficiency scenario most probable at

Trial Standard Levels 1, 2, and 3.)

Primary energy savings between 2006

and 2030 would likely be 3.5 quads,

which DOE considers significant. The

energy savings through 2020 would

result in avoidance of approximately

12.4 GW in installed generating capacity

in 2020. For comparison, the generating

capacity is equivalent to avoiding the

need for 31 large 400 megawatt power

plants, and reduced emissions would

range up to 28 Mt of carbon equivalent

and up to 84 kt of NOX.15

At this standard level, the average

purchaser of a split system air

conditioner, the predominate class with

65 percent of all shipments, would see

the installed price of $2236 rise to

$2449, an increase of $213. Lower

utility bills from the energy savings

would repay this increase in 9.8 years

and produce a total saving with a net

present value of $113 over the 18.4 year

life of the product. The average

purchaser of a single package air

conditioner, which represents 10

percent of all shipments, would see the

average installed price of $2607 rise to

$2765, an increase of $158. Lower

utility bills from the energy savings

would repay this increase in 7.5 years

and produce a total saving with a net

present value of $163 over the 18.4 year

life of the product.

The average purchaser of a split

system heat pump, which represents 22

percent of all shipments, would see the

average installed price of $3668 rise to

$4000, an increase of $332. Lower

utility bills from the energy savings

would repay this increase in 6.4 years

and produce a total saving with a net

present value of $372 over the 18.4 year

life of the product. The average

purchaser of a single package heat

pump, which represents 4 percent of all

shipments, would see the average

installed price of $3599 rise to $4034, an

increase of $435. Lower utility bills

from the energy savings would repay

this increase in 8.4 years and produce

a total saving with a net present value

of $353 over the 18.4 year life of the

product. Trial Standard Level 3 would

lower peak electricity demand

compared to the base case. That would

allow utility service areas to either

avoid new capacity or, to the extent that

peak loads contribute to reliability

problems, improve system reliability.

The increase in national net present

value would be $1 billion.16

Since DOE expects the NAECA

efficiency scenario to result from

standards adopted at Trial Standard

Level 3, the burdens of Trial Standard

Level 3 on manufacturers are likely to

be less severe than at Trial Standard

Level 4. DOE expects the average loss in

industry NPV to be around 11 percent,

but impacts on most manufacturers

would be around 17 percent. Their long

term drop in return on investment and

short term drop in cash flow suggest

that standards adopted at Trial Standard

Level 3 could accelerate the

consolidation trend, possibly resulting

in fewer choices for consumers and in

a slowing of the pace of innovation well

into the future. Furthermore, the

cumulative impact on the industry of all

new Federal and State regulations

would exceed $678 million.

Similar to the concern over Trial

Standard Level 4, Trial Standard Level

3 raises the serious concern that

prospective owners of air conditioning

heat pump systems would purchase less

costly air conditioner resistance heater

combinations. In this case there is a

potential loss of energy savings because

of the lower standards for air

conditioners compared to heat pumps.

which could eliminate all energy

savings from the more efficient heat

pumps if only a small fraction of heat

pump owners (4 percent) switched to

resistance heating. Trial Standard Level

3 poses a serious concern regarding

potential anti-competitive effects

because the size and cost of the higher

efficiency heat pumps could reduce

competition between manufacturers of

heat pumps and manufacturers of

resistance heating and other lower cost

heating systems.

DOE proposes to conclude that, at

Trial Standard Level 3, the benefits of

energy savings, generating capacity and

emission avoidance, possible

improvements in electric system

reliability, and net benefit to the

nation’s consumers would be

outweighed by the maldistribution of

consumer benefits and manufacturer

costs, the likelihood of higher

installation costs resulting from

potentially larger equipment, and the

net impact on the industry in light of

the cumulative regulatory burden. The

most serious concern is the possibility

of equipment switching that would

likely substantially reduce the

calculated energy savings, drastically

reducing the potential benefits. Other

possible burdens include lessening of

competition and health effects caused

by forgone air conditioner purchases.

Consequently, DOE proposes to

determine that Trial Standard Level 3 is

not economically justified.

Next, DOE considered Trial Standard

Level 2. This level specifies 12 SEER

equipment for all product classes. In

considering Trial Standard Level 2, DOE

assumed the NAECA efficiency scenario

and reverse engineering cost estimates

to be the most probable. Primary energy

savings between 2006 and 2030 would

likely be 3 quads, which DOE considers

significant. The energy savings through

2020 would result in avoidance of

approximately 10.6 GW in installed

generating capacity in 2020. For

comparison, the generating capacity is

equivalent to avoiding the need for 27

large 400 megawatt power plants, and

reduced emissions would range up to 24

Mt of carbon equivalent and up to 73 kt

of NOX.17

At this standard level, the average

purchaser of a split system air

conditioner, the predominate class with

65 percent of all shipments, would see

the installed price of $2236 rise to

$2449, an increase of $213. Lower

utility bills from the energy savings

would repay this increase in 9.8 years

and produce a total saving with a net

present value of $113 over the 18.4 year

life of the product. The average

purchaser of a single package air

conditioner, which represents 10

percent of all shipments, would see the

average installed price of $2607 rise to

$2765, an increase of $158. Lower

utility bills from the energy savings

would repay this increase in 7.5 years

and produce a total saving with a net


 EE-RM-STD-98-440 COMMENT 312
38838 Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules

18Under the Roll-up efficiency scenario, the

increase in national net present value would be $3

billion.

present value of $163 over the 18.4 year

life of the product.

The average purchaser of a split

system heat pump, which represents 22

percent of all shipments, would see the

average installed price of $3668 rise to

$3812, an increase of $144. Lower

utility bills from the energy savings

would repay this increase in 3.9 years

and produce a total saving with a net

present value of $365 over the 18.4 year

life of the product. The average

purchaser of a single package heat

pump, which represents 4 percent of all

shipments, would see the average

installed price of $3599 rise to $3748, an

increase of $149. Lower utility bills

from the energy savings would repay

this increase in 4 years and produce a

total saving with a net present value of

$421 over the 18.4 year life of the

product. Trial Standard Level 2 would

lower peak electricity demand

compared to the base case. That would

allow utility service areas to either

avoid new capacity or, to the extent that

peak loads contribute to reliability

problems, improve system reliability.

The increase in national net present

value would be $2 billion, which

represents the highest level for all the

standard levels considered.18

Since DOE expects the NAECA

efficiency scenario to result from

standards adopted at Trial Standard

Level 2, the burdens of Trial Standard

Level 2 on manufacturers are likely to

be moderate. DOE expects the average

loss in industry NPV to be around 10

percent, with impacts on most

manufacturers around 16 percent. Their

long term drop in return on investment

and short term drop in cash flow are

moderate, suggesting that standards

adopted at Trial Standard Level 2 would

not accelerate the consolidation trend,

and could result in more choices for

consumers and raise the pace of

innovation. The cumulative impact on

the industry of all new Federal and

State regulations would exceed $658

million.

While the average consumer

purchasing a 12 SEER air conditioner or

heat pump would experience a net

saving over the lifetime of the product,

some households would experience net

costs exceeding 2 percent of the total

life-cycle cost of today’s baseline units.

Thus, 25 percent of the households with

split system air conditioners and 9

percent with single package air

conditioners would experience a net

cost. No households with heat pumps

would experience a net cost. The

percentage of low-income consumers

who would experience net costs

exceeding 2 percent of the total lifecycle cost of today’s baseline units is

greater than that for an average

household. Thus, 34 percent of lowincome households with split system air

conditioners and 14 percent with single

package air conditioners would

experience a net cost. No low-income

households with heat pumps would

experience a net cost. Also, the

possibility that consumers would incur

substantial installation costs is less than

that with a 13 SEER standard because 12

SEER equipment is more likely to fit in

the same space as current 10 SEER

equipment. In light of the moderate

purchase cost increase experienced by

all consumers, the percentage of

households, in particular low-income

households, which experience life-cycle

cost increases, consumer burdens are

less severe under Trial Standard Level

2.

After carefully reconsidering the

analyses and comments, and adjusting

the weight given to consumer impacts

and cumulative regulatory burden in the

assessment of the benefits and burdens,

DOE is proposing to amend the energy

conservation standards for central air

conditioners and central air

conditioning heat pumps at Trial

Standard Level 2. DOE proposes to

conclude this standard saves a

significant amount of energy and is

technologically feasible and

economically justified. In determining

economic justification, DOE proposes to

conclude that the benefits of energy

savings, the projected amount of

avoided power plant capacity or

improvement in system reliability that

accompanies expected reduction in

peak demand, consumer life-cycle cost

savings, national net present value

increase, and emission reductions

resulting from the standards outweigh

the burdens. The burdens include the

loss of manufacturer net present value,

taking into account the cumulative

regulatory burden and annual cash flow,

increases in life-cycle cost for some

users of products covered by today’s

proposed rule, any possible increase in

health problems caused by consumers

foregoing air conditioner purchases, any

possible reduction in the ability of the

product to dehumidify, any possible

lessening of competition, and any

possible difficulty in installing the new

baseline products into replacement

applications.

D. Conclusions Regarding SpaceConstrained Products

If a 12 SEER minimum requirement

for air conditioners and heat pumps is

implemented, as proposed, DOE’s

analysis suggests that of all potential

space-constrained products, only those

with through-the-wall condensers need

special consideration. The TSD contains

a new appendix (Appendix L)

describing the results of our recent reevaluation of those products. The

results of that analysis are summarized

in Section V.A.2 above. They

demonstrate that split TTW equipment

can attain 10.9 SEER using designs and

technologies that are commonly applied

or available, with price impacts similar

to those that conventional equipment

would experience in meeting the

proposed 12 SEER standard. The

packaged equipment analyzed was

demonstrated to be capable of attaining

only a 10.6 SEER rating, although

comments received indicate that one

manufacturer of packaged TTW

equipment, Armstrong, expects their

equipment to be capable of attaining 11

SEER. (Armstrong No. 86 at p.3).

Based on this evaluation, DOE is

proposing to establish new product

classes for products that have throughthe-wall condensers and are intended

for replacement applications. The new

classes would be required to meet

minimum efficiencies lower than those

of the other classes: 10.9 SEER and 7.1

HSPF for through-the-wall air

conditioner and heat pump splitsystems, and 10.6 SEER and 7.0 HSPF

for through-the-wall air conditioner

single-package systems. DOE’s analysis

suggests those products can attain these

levels without substantial redesign or

price increases that would result in a

loss of market share to conventional

products. Also, the life-cycle cost

analysis confirms that, on average,

consumers of split TTW equipment

would not incur an increase in life-cycle

cost, and that consumers of packaged

TTW equipment would incur an

increase of $52 over the life of the

equipment. In no case would any

consumer of split TTW products be

expected to incur life-cycle costs greater

than 2 percent of the total life-cycle

cost, and only 17 percent of consumers

of packaged TTW equipment would be

expected to incur cost increases greater

than 2 percent of the total life-cycle

cost.

DOE proposes to conclude that

standard levels higher than 10.9 SEER

(split TTW) and 10.6 SEER (packaged

TTW) are not technologically feasible.

DOE’s analysis on three TTW models

suggests that those products could attain

efficiencies as high as 11.4 SEER using

design options that would likely be

economically justified. However, the

results are not conclusive and cannot be

confidently applied to all TTW


 EE-RM-STD-98-440 COMMENT 312
Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules 38839

products. DOE’s analysis does not

provide enough evidence to convince us

that levels higher than 10.9 SEER (10.6

SEER for packaged TTW) will be

technologically feasible during the five

year period during which manufacturers

would prepare to meet the new

requirements. DOE’s analysis does

indicate that opportunities for efficiency

improvement do exist, and that

manufacturers of those products should

continue to investigate those

opportunities.

A serious concern that DOE has

considered is that the lower TTW

standards could encourage purchasers

of conventional equipment to shift to

TTW products, undermining the

benefits of the 12 SEER standard for

conventional products. DOE is therefore

proposing that the new through-the-wall

classes would consist only of products

manufactured before July 26, 2010. See

proposed definition of ‘‘through-thewall air conditioner and heat pump.’’

Thus, the classes would exist only for a

period of four years following the

establishment of the new standards.

During that time, the availability of

suitable high-efficiency components

will likely increase and the

manufacturers of through-the-wall

products would be able to investigate

options for meeting the more stringent

12 SEER level. Both will make it easier

for through-the-wall products to attain

the 12 SEER minimum efficiency

required of other products, thereby

making 12 SEER a technologically

feasible and economically justified

level. The sunset provision will help to

ensure that other manufacturers will not

make the investment required to market

through-the-wall products heavily for

conventional applications during the

four year period. It will also limit the

time during which lower efficiency

TTW equipment is installed, ensuring

that additional energy savings

associated with the 12 SEER level are

realized in a certain time period.

To further limit the application of the

through-the-wall class, products in

these classes may not exceed 30,000

BTU/hr in cooling capacity, may not

contain special weatherization features

that would allow them to be installed

totally outdoors, and must be marked

for installation only through an exterior

wall. DOE also proposes limiting the

size of the area used for condenser air

exchange to attempt to limit these

classes to those products intended

primarily for replacement applications.

No other new product classes are

proposed since all other products types

of which we are aware have

demonstrated the ability to compete in

the market at the 12 SEER level.

VI. Procedural Issues and Regulatory

Review

A. Review Under the National

Environmental Policy Act

DOE prepared an Environmental

Assessment (EA) (DOE/EA–1352)

available from: U.S. Department of

Energy, Office of Energy Efficiency and

Renewable Energy, Forrestal Building,

Mail Station EE–1, 1000 Independence

Avenue, SW, Washington, DC 20585–

0121, (202) 586–0854. DOE found the

environmental effects associated with

various standard efficiency levels for

central air conditioners and heat pumps

to be not significant, and therefore DOE

published in the Federal Register (66

FR 7201), A Finding of No Significant

Impact (FONSI) pursuant to the

National Environmental Policy Act of

1969 (NEPA), 42 U.S.C. 4321 et seq., the

regulations of the Council of

Environmental Quality (40 CFR Parts

1500–1508), and DOE’s regulations for

compliance with NEPA (10 CFR Part

1021).

B. Review Under Executive Order 12866

Today’s regulatory action has been

determined to be an ‘‘economically

significant regulatory action’’ under

Executive Order 12866, ‘‘Regulatory

Planning and Review.’’ 58 FR 51735

(October 4, 1993). Accordingly, today’s

action was subject to review under the

Executive Order by the Office of

Information and Regulatory Affairs

(OIRA) of the Office of Management and

Budget.

The draft submitted to OIRA and

other documents submitted to OIRA for

review have been made a part of the

rulemaking record and are available for

public review in DOE’s Freedom of

Information Reading Room, 1000

Independence Avenue, SW,

Washington, DC 20585, between the

hours of 9 a.m. and 4 p.m., Monday

through Friday, telephone (202) 586–

3142.

The October 5, 2000, NOPR contained

a summary of the Regulatory Analysis

which focused on the major alternatives

considered in arriving at the approach

to improving the energy efficiency of

consumer products. 65 FR 59627–29.

The alternatives considered in DOE’s

analysis are consumer product labeling,

consumer education, prescriptive

standards, consumer tax credits,

consumer rebates, manufacturer tax

credits, voluntary efficiency targets, low

income subsidy, mass government

purchases, and performance standards.

The reader is referred to the complete

draft ‘‘Regulatory Impact Analysis,’’

which is contained in the TSD, available

as indicated at the beginning of this

notice or from the contact person named

at the beginning of this notice. The TSD

provides: (1) A statement of the problem

addressed by this regulation, and the

mandate for government action; (2) a

description and analysis of the feasible

policy alternatives to this regulation; (3)

a quantitative comparison of the

impacts of the alternatives; and (4) the

national economic impacts of the

proposed standard.

C. Review Under the Regulatory

Flexibility Act

The Regulatory Flexibility Act, 5

U.S.C. 601 et seq., requires that a

Federal agency prepare a regulatory

flexibility analysis for any rule for

which the agency is required to publish

a general notice of proposed

rulemaking. Such an assessment of the

impact of regulations on small

businesses is not required if the agency

certifies that the rule would not, if

promulgated, have a significant

economic impact on a substantial

number of small entities (5 U.S.C.

605(b)). To be categorized as a ‘‘small’’

air conditioning and warm air heating

equipment manufacturer, a firm must

employ no more than 750 employees.

In the October 5, 2000 NOPR, DOE

discussed the potential impacts on

small businesses of the October 5

proposed rule (corresponding to Trial

Standard Level 3), and certified that the

proposed standard levels would not

have a significant economic impact on

a substantial number of small entities.

65 FR 59629–30. DOE reported that

nearly all small businesses engaged in

the manufacture of central air

conditioners and heat pumps produce

products that DOE has called ‘‘niche’’

products. To avoid adversely impacting

manufacturers of niche products, DOE

proposed a separate product class for

through-the-wall equipment, much of

which is manufactured by small

manufacturers. See 65 FR 59609–11. In

the preamble to the January 22 final

rule, DOE addressed comments

regarding the impacts more stringent

standards might have on the availability

of niche products, and although the

final rule adopted the higher Trial

Standard Level 4 standards, DOE

deferred setting an amended standard

for niche products. 66 FR 7175, 7196–

97. Because the final rule excluded most

products made by small manufacturers,

DOE affirmed its certification.

Today DOE is proposing energy

conservation standards for central air

conditioners and heat pumps that

correspond to Trial Standard Level 2.

Because of severe size constraints, DOE

is again proposing a separate product

class for through-the-wall equipment,


 EE-RM-STD-98-440 COMMENT 312
38840 Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules

with a lower SEER. No other provisions

for niche products are being proposed.

DOE certifies, based on its analysis

and public comments, that today’s

proposed rule would not have a

significant impact on a substantial

number of small entities. Accordingly,

DOE has not prepared a regulatory

flexibility analysis. This certification is

based on an assessment of the impact

the proposed standards would have on

small entities that would be directly

affected by their implementation, which

is all the Regulatory Flexibility Act

requires. The assertion by ARI, in its

petition for consideration, that DOE is

required to assess the indirect effects of

proposed standards is contrary to

established case law interpreting the

Act.

D. Review Under the Paperwork

Reduction Act

No new information or record keeping

requirements are imposed by this

rulemaking. Accordingly, no Office of

Management and Budget clearance is

required under the Paperwork

Reduction Act. 44 U.S.C. 3501 et seq.

E. Review Under Executive Order 12988

With respect to the review of existing

regulations and the promulgation of

new regulations, Section 3(a) of

Executive Order 12988, ‘‘Civil Justice

Reform,’’ 61 FR 4729 (February 7, 1996),

imposes on Executive agencies the

general duty to adhere to the following

requirements: (1) Eliminate drafting

errors and ambiguity; (2) write

regulations to minimize litigation; and

(3) provide a clear legal standard for

affected conduct rather than a general

standard and promote simplification

and burden reduction. With regard to

the review required by section 3(a),

section 3(b) of Executive Order 12988

specifically requires that Executive

agencies make every reasonable effort to

ensure that the regulation: (1) Clearly

specifies the preemptive effect, if any;

(2) clearly specifies any effect on

existing Federal law or regulation; (3)

provides a clear legal standard for

affected conduct while promoting

simplification and burden reduction; (4)

specifies the retroactive effect, if any; (5)

adequately defines key terms; and (6)

addresses other important issues

affecting clarity and general

draftsmanship under any guidelines

issued by the Attorney General. Section

3(c) of Executive Order 12988 requires

Executive agencies to review regulations

in light of applicable standards in

section 3(a) and section 3(b) to

determine whether they are met or it is

unreasonable to meet one or more of

them. DOE reviewed today’s proposed

rule under the standards of section 3 of

the Executive Order and determined

that, to the extent permitted by law, this

proposed rule meets the relevant

standards.

F. Review Under Executive Order 12630

DOE has determined pursuant to

Executive Order 12630, ‘‘Governmental

Actions and Interference with

Constitutionally Protected Property

Rights,’’ 52 FR 8859 (March 18, 1988),

that this proposed regulation would not

result in any takings that might require

compensation under the Fifth

Amendment to the United States

Constitution.

G. Review Under Executive Order 13132

Executive Order 13132, ‘‘Federalism,’’

64 FR 43255 (August 4, 1999) imposes

certain requirements on agencies

formulating and implementing policies

or regulations that preempt State law or

that have federalism implications.

Agencies are required to examine the

constitutional and statutory authority

supporting any action that would limit

the policymaking discretion of the

States and carefully assess the necessity

for such actions. Agencies also must

have an accountable process to ensure

meaningful and timely input by State

and local officials in the development of

regulatory policies that have federalism

implications. DOE published its

intergovernmental consultation policy

on March 14, 2000. 65 FR 13735. DOE

has examined today’s proposed rule and

has determined that it would not have

a substantial direct effect on the States,

on the relationship between the national

government and the States, or on the

distribution of power and

responsibilities among the various

levels of government. State regulations

that may have existed on the products

that are the subject of today’s proposed

rule were preempted by the Federal

standards established in NAECA. States

can petition DOE for exemption from

such preemption to the extent, and

based on criteria, set forth in EPCA.

H. Review Under the Unfunded

Mandates Reform Act of 1995

With respect to a proposed regulatory

action that may result in the

expenditure by State, local and tribal

governments, in the aggregate, or by the

private sector of $100 million or more,

section 202 of the Unfunded Mandates

Reform Act of 1995 (UMRA) requires a

Federal agency to publish estimates of

the resulting costs, benefits and other

effects on the national economy. 2

U.S.C. 1532(a), (b). UMRA also requires

each Federal agency to develop an

effective process to permit timely input

by state, local, and tribal governments

on a proposed significant

intergovernmental mandate. DOE’s

consultation process is described in a

notice published in the Federal Register

on March 18, 1997. 62 FR 12820.

Today’s proposed rule may impose

expenditures of $100 million or more on

the private sector. It does not contain a

Federal intergovernmental mandate.

Section 202 of UMRA authorizes an

agency to respond to the content

requirements of UMRA in any other

statement or analysis that accompanies

the proposed rule. 2 U.S.C. 1532(c). The

content requirements of section 202(b)

of UMRA relevant to a private sector

mandate substantially overlap the

economic analysis requirements that

apply under section 325(o) of EPCA and

Executive Order 12866. The

SUPPLEMENTARY INFORMATION section of

the January 22, 2001, notice of final

rulemaking and ‘‘Regulatory Impact

Analysis’’ section of the TSD for this

proposed rule responds to those

requirements.

Under section 205 of UMRA, DOE is

obligated to identify and consider a

reasonable number of regulatory

alternatives before promulgating a rule

for which a written statement under

section 202 is required. DOE is required

to select from those alternatives the

most cost-effective and least

burdensome alternative that achieves

the objectives of the rule unless DOE

publishes an explanation for doing

otherwise or the selection of such an

alternative is inconsistent with law. As

required by section 325(o) of the Energy

Policy and Conservation Act (42 U.S.C.

6295(o)), today’s proposed rule would

establish energy conservation standards

for central air conditioners and heat

pumps that are designed to achieve the

maximum improvement in energy

efficiency that DOE has determined to

be both technologically feasible and

economically justified. A full discussion

of the alternatives considered by DOE is

presented in the ‘‘Regulatory Impact

Analysis’’ section of the TSD for today’s

proposed rule.

I. Review Under the Treasury and

General Government Appropriations

Act, 1999

Section 654 of the Treasury and

General Government Appropriations

Act, 1999 (Pub. L. 105–277) requires

Federal agencies to issue a Family

Policymaking Assessment for any

proposed rule or policy that may affect

family well-being. Today’s proposed

rule would not have any impact on the

autonomy or integrity of the family as

an institution. Accordingly, DOE has

concluded that it is not necessary to


 EE-RM-STD-98-440 COMMENT 312
Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules 38841

prepare a Family Policymaking

Assessment.

J. Review Under Executive Order 13211

Executive Order 13211, ‘‘Actions

Concerning Regulations That

Significantly Affect Energy Supply,

Distribution, or Use,’’ (66 FR 28355,

May 22, 2001) requires Federal agencies

to prepare and submit to the Office of

Information and Regulatory Affairs

(OIRA), Office of Management and

Budget, a Statement of Energy Effects for

any proposed significant energy action.

A ‘‘significant energy action’’ is defined

as any action by an agency that

promulgates or is expected to lead to the

promulgation of a final rule, and that:

(1) Is a significant regulatory action

under Executive Order 12866, or any

successor order; and (2) is likely to have

a significant adverse effect on the

supply, distribution, or use of energy; or

(3) is designated by the Administrator of

OIRA as a significant energy action. For

any proposed significant energy action,

the agency must give a detailed

statement of any adverse effects on

energy supply, distribution, or use

should the proposed action be

implemented, and of reasonable

alternatives to the action and their

expected benefits on energy supply,

distribution, and use.

Today’s proposal would not have any

adverse effects on the supply,

distribution, or use of energy in the near

term because neither the January 22,

2001 final rule nor any final rule

resulting from this action would have

any effect on the manufacture of central

air conditioners and heat pumps until

2006. In the longer term, beginning in

2006, the proposed rule, if

implemented, would have a positive

impact on the reliability of electricity

supply in the United States. The

standards that DOE is proposing would

represent a 20 percent improvement in

the energy efficiency of split-system

central air conditioners, and a 9 percent

improvement in heating efficiency for

heat pumps. The proposed standards

would improve the cooling efficiency of

single-package heat pumps by 24

percent and the heating efficiency of

single-package heat pumps by 12

percent. As explained in Section IV.B.3.

of this SUPPLEMENTARY INFORMATION,

DOE estimates the standards would save

approximately 3 quads of energy over 25

years (2006 through 2030). Also, in

determining whether the proposed

standards are economically justified,

DOE considered as a benefit the

potential of the proposed standards to

improve the reliability of the electric

generation and distribution system. See

Section IV.D.7 (‘‘Other Factors’’) and the

preamble to the January 22 final rule. 66

FR 7181–82, 7194. DOE’s analysis

shows the proposed standards would

result in an estimated reduction in

installed generation capacity in the year

2020 of approximately 11 gigawatts.

This would be the equivalent of three

400 megawatt coal-fired plants and

twenty-three 400 megawatt gas-fired

plants.

DOE acknowledges that projections

indicate that the standard levels set out

in the January 22, 2001 rulemaking

would avoid electricity consumption to

an even greater extent than under the

standard level proposed in today’s

supplemental notice of proposed

rulemaking. However, section 325 of

EPCA requires DOE to weigh all of the

significant costs and benefits associated

with standard levels that are being

considered and not just avoided

electricity costs. DOE has set forth its

evaluation of costs and benefits

elsewhere in this notice (see Section

V.C.). DOE has also considered various

regulatory and non-regulatory

alternatives to today’s proposed

standard (see Section VI.B., ‘‘Review

Under Executive Order 12866,’’ and the

Regulatory Impact Analysis portion of

the TSD). DOE has concluded that the

costs associated with elevating the

current standard to the standard level

set forth in the January 22, 2001, final

rule exceed the associated benefits,

including the benefit of avoided

electricity consumption.

VII. Public Comment

A. Written Comment Procedures

DOE invites interested persons to

participate in the proposed rulemaking

by submitting data, comments, or

information with respect to the

proposed issues set forth in today’s

proposed rule to Ms. Brenda EdwardsJones, at the address indicated at the

beginning of this notice. We will

consider all submittals received by the

date specified at the beginning of this

notice in developing the final rule.

According to 10 CFR 1004.11, any

person submitting information that he

or she believes to be confidential and

exempt by law from public disclosure

should submit one complete copy of the

document and ten (10) copies, if

possible, from which the information

believed to be confidential has been

deleted. DOE will make its own

determination with regard to the

confidential status of the information

and treat it according to its

determination.

Factors of interest to DOE when

evaluating requests to treat as

confidential information that has been

submitted include: (1) A description of

the items; (2) an indication as to

whether and why such items are

customarily treated as confidential

within the industry; (3) whether the

information is generally known by or

available from other sources; (4)

whether the information has previously

been made available to others without

obligation concerning its

confidentiality; (5) an explanation of the

competitive injury to the submitting

person which would result from public

disclosure; (6) an indication as to when

such information might lose its

confidential character due to the

passage of time; and (7) whether

disclosure of the information would be

contrary to the public interest.

B. Public Workshop/Hearing

1. Procedure for Submitting Requests To

Speak

You will find the time and place of

the public hearing listed at the

beginning of this notice. We invite any

person who has an interest in today’s

notice, or who is a representative of a

group or class of persons that has an

interest in these issues, to request an

opportunity to make an oral

presentation. If you would like to attend

the public hearing, please notify Ms.

Brenda Edwards-Jones at (202) 586–

2945. You may hand deliver requests to

speak to the address indicated at the

beginning of this notice between the

hours of 8 a.m. and 4 p.m., Monday

through Friday, except Federal holidays.

You may also send them by mail or Email to brenda.edwardsjones@ee.doe.gov.

The person making the request should

state why he or she, either individually

or as a representative of a group or class

of persons, is an appropriate

spokesperson, briefly describe the

nature of the interest in the rulemaking,

and provide a telephone number for

contact. We request each person

selected to be heard to submit an

advance copy of his or her statement at

least two weeks prior to the date of this

hearing as indicated at the beginning of

this notice. At our discretion, we may

permit any person who cannot do this

to participate if that person has made

alternative arrangements with the Office

of Building Research and Standards in

advance. The request to give an oral

presentation should ask for such

alternative arrangements.

2. Conduct of Hearing

DOE will designate a DOE official to

preside at the workshop and we may

also use a professional facilitator to

facilitate discussion. The workshop will


 EE-RM-STD-98-440 COMMENT 312
38842 Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules

not be a judicial or evidentiary-type

hearing, but DOE will conduct it in

accordance with 5 U.S.C. 553 and

Section 336 of the Act and a court

reporter will be present to record the

transcript of the workshop. We reserve

the right to schedule the presentations

by workshop participants, and to

establish the procedures governing the

conduct of the workshop.

DOE will permit each participant to

make a prepared general statement,

limited to five (5) minutes, prior to the

discussion of specific topics. DOE will

permit other participants to briefly

comment on any general statements.

DOE will introduce each topic with a

brief summary of the relevant parts of

our analysis and of the proposed rule,

and the significant issues involved. We

will then permit participants in the

hearing to make a prepared statement

limited to five (5) minutes on that topic.

At the end of all prepared statements on

a topic, DOE will permit each

participant to briefly clarify his or her

statement and comment on statements

made by others. Participants should be

prepared to answer questions by us and

by other participants concerning these

issues. Our representatives may also ask

questions of participants concerning

other matters relevant to the hearing.

The total cumulative amount of time

allowed for each participant to make

prepared statements will be 20 minutes.

The official conducting the hearing

will accept additional comments or

questions from those attending, as time

permits. The presiding official will

announce any further procedural rules,

or modification of the above procedures,

needed for the proper conduct of the

hearing.

We will make the entire record of this

rulemaking, including the transcript,

available for inspection in DOE’s

Freedom of Information Reading Room.

Any person may purchase a copy of the

transcript from the transcribing reporter.

List of Subjects in 10 CFR Part 430

Administrative practice and

procedure, Energy conservation,

Household appliances.

Issued in Washington, D.C., on July 18,

2001.

David K. Garman,

Assistant Secretary, Energy Efficiency and

Renewable Energy.

For the reasons set forth in the

preamble, Part 430 of Chapter II of Title

10, Code of Federal Regulations is

proposed to be amended, as set forth

below.

PART 430—ENERGY CONSERVATION

PROGRAM FOR CONSUMER

PRODUCTS

1. The authority citation for Part 430

continues to read as follows:

Authority: 42 U.S.C. 6291–6309; 28 U.S.C.

2461 note.

2. Section 430.2 is amended by

adding definitions for ‘‘effective date,’’

‘‘maximum allowable energy use,’’

‘‘minimum required energy efficiency,’’

and ‘‘through-the-wall air conditioner

and heat pump’’ in alphabetical order to

read as follows:

§ 430.2 Definitions.

* * * * *

Effective date for purpose of the part,

means the date on and after which a

manufacturer must comply with an

energy conservation standard in the

manufacture of a covered product.

* * * * *

Maximum allowable energy use

means an energy conservation standard

for a covered product, expressed in

terms of a maximum amount of energy

that may be consumed, which is

established by statute or by a final rule

that has modified this part pursuant to

a date DOE has selected consistent with

the Congressional Review Act (5 U.S.C.

801–804) and any other applicable law.

* * * * *

Minimum required energy efficiency

means an energy conservation standard

for a covered product, expressed in

terms of a minimum efficiency quotient,

which is established by statute or by a

final rule that has modified this part

pursuant to a date DOE has selected

consistent with the Congressional

Review Act (5 U.S.C. 801–804) and any

other applicable law.

* * * * *

Through-the-wall air conditioner and

heat pump means a central air

conditioner or heat pump that is

designed to be installed totally or

partially within a fixed-size opening in

an exterior wall, and:

(1) Is manufactured prior to July 26,

2010;

(2) Is not weatherized;

(3) Is clearly and permanently marked

for installation only through an exterior

wall;

(4) Has a rated cooling capacity no

greater than 30,000 Btu/hr;

(5) Exchanges all of its outdoor air

across a single surface of the equipment

cabinet; and

(6) Has a combined outdoor air

exchange area of less than 800 square

inches (split systems) or less than 1,210

square inches (single packaged systems)

as measured on the surface described in

(5).

* * * * *

3. Section 430.32 of Subpart C is

amended by revising paragraph (c) to

read as follows:

§ 430.32 Energy and water conservation

standards and effective dates.

(c) Central air conditioners and

central air conditioning heat pumps. (1)

Split system central air conditioners and

central air conditioning heat pumps

manufactured after January 1, 1992, and

before July 25, 2006, and single package

central air conditioners and central air

conditioning heat pumps manufactured

after January 1, 1993, and before July 25,

2006, shall have Seasonal Energy

Efficiency Ratio and Heating Seasonal

Performance Factor no less than:

Product class Seasonal energy

efficiency ratio

Heating seasonal

performance factor

1. Split systems ....................................................................................................................................... 10.0 6.8

2. Single package systems ...................................................................................................................... 9.7 6.6

(2) Central air conditioners and central air conditioning heat pumps manufactured on or after July 25, 2006, shall

have Seasonal Energy Efficiency Ratio and Heating Seasonal Performance Factor no less than:

Product class

Seasonal energy

efficiency ratio

(SEER)

Heating seasonal

performance factor

(HSPF)

1. Split system air conditioners ............................................................................................................... 12 ................................

2. Split system heat pumps ..................................................................................................................... 12 7.4

3. Single package air conditioners .......................................................................................................... 12 ................................

4. Single package heat pumps ................................................................................................................ 12 7.4


 EE-RM-STD-98-440 COMMENT 312
Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules 38843

1The Federal Register notice also requested

comments on a proposal to adopt a standard for

steady-state cooling efficiency (EER) and discussed

several options DOE of Energy is considering. The

proposed rule set forth in the notice does not,

however, include a provision regarding an EER

standard, and the views of Department of Justice

expressed in this letter are limited to the impact of

any lessening of competition * * * that is likely to

result from the imposition of the [proposed]

standard,’’ as required by EPCA. If DOE of Energy

proposes a rule in the future incorporating an EER

standard, DOE will then evaluate that proposed rule

and express its views about the competitive impact

of that standard.

Product class

Seasonal energy

efficiency ratio

(SEER)

Heating seasonal

performance factor

(HSPF)

5.A. Through-the-wall air conditioners and heat pumps—split system ................................................... 10.9 7.1

5.B. Through-the-wall air conditioners and heat pumps—single package ............................................. 10.6 7.0

* * * * *

4. Section 430.34 is added to Subpart

C to read as follows:

§ 430.34 Energy and water conservation

standards amendments

The Department of Energy may not

prescribe any amended standard which

increases the maximum allowable

energy use or, in the case of

showerheads, faucets, water closets or

urinals, water use, or which decreases

the minimum required energy efficiency

of a covered product.

Appendix

(The following letters from Department of

Justice will not appear in the Code of Federal

Regulations.)

DEPARTMENT OF JUSTICE—Antitrust

Division

A. DOUGLAS MELAMED—Acting Assistant

Attorney Genera1

Main Justice Building, 950 Pennsylvania

Avenue. NW., Washington, DC 20530–

0001, (202) 514–2401/ (202) 616–2645 (f),

antitrust@justice.usdoj.gov (internet), http:/

/www.usdoj.gov (World Wide Web)

December 4, 2000

Mary Anne Sullivan, General Counsel,

Department of Energy, Washington, D.C.

20585

Dear General Counsel Sullivan: I am

responding to your October 16, 2000 letter

seeking the views of the Attorney General

about the potential impact on competition of

two proposed energy efficiency standards:

one for clothes washers and the other for

residential central air conditioners and heat

pumps. Your request was submitted pursuant

to Section 325(o)(2)(B)(i) of the Energy Policy

and Conservation Act, 42 U.S.C. § 6291, 6295

(‘‘EPCA’’), which requires the Attorney

General to make a determination of the

impact of any lessening of competition that

is likely to result from the imposition of

proposed energy efficiency standards. The

Attorney General’s responsibility for

responding to requests from other

departments about the effect of a program on

competition has been delegated to the

Assistant Attorney General for the Antitrust

Division in 28 CFR § 0.40(g).

We have reviewed the proposed standards

and the supplementary information

published in the Federal Register notices and

submitted to the Attorney General, which

include information provided to DOE of

Energy by manufacturers. We have

additionally conducted interviews with

members of the industries.

We have concluded that the proposed

clothes washer standard would not adversely

affect competition. In reaching this

conclusion, we note that the proposed

standard is based on a joint recommendation

submitted to DOE of Energy by

manufacturers and energy conservation

advocates. That recommendation states that

virtually all manufacturers of clothes washers

who sell in the United States participated in

arriving at the recommendation through their

trade association, that the recommendation

was developed in consultation with small

manufacturers, and that the manufacturers

believe the new standard would not likely

reduce competition. We note further that, as

the industry recommended, the proposed

standard will be phased in over six years,

which will allow companies that do not

already have products that meet the proposed

standard sufficient time to redesign their

product lines.

With respect to the proposed residential

central air conditioner and heat pump

standard, we have concluded that there could

be an adverse impact on competition. The

proposed standard, Trial Standard Level 3, is

expressed in terms of two industry

measurements: SEER (Seasonal Energy

Efficiency Ratio) and HSPF (Heating Seasonal

Performance Factor).1 These standards would

change from the current central air

conditioner and heat pump efficiency

standards of 10 SEER/6.8 HSPF for split

system air conditioners and heat pumps and

9.7 SEER/6.6 HPSF for single package air

conditioners and heat pumps to 12 SEER for

air conditioners and 13 SEER/7.7 HPSF for

heat pumps.

We have identified three possible

competitive problems presented by the

proposed standards. First, the proposed 13

SEER heat pump standard would have a

disproportionate impact on smaller

manufacturers. Currently less than 20% of

the total current product lines meet the

proposed standards, but for some small

manufacturers, 100% of their product lines

fail to satisfy the proposed standard.

Second, the proposed standard for heat

pumps, and in some instances for air

conditioners, would have an adverse impact

on some manufacturers of these products

(including those products referred to in the

Federal Register notice as ‘‘niche products’’)

used to retrofit existing housing and used in

manufactured housing. These manufacturers

could not make units that comply with the

rule and fit into the available space.

Third, the proposed heat pump standard of

13 SEER could make heat pumps less

competitive with alternative heating and

cooling systems. Because the standard will

result in increases in the size and cost of heat

pumps, it is possible that purchasers will

shift away from heat pumps to other systems

that inc1ude electric resistance heat,

reducing the competition that presently

exists between heat pumps and those other

systems.

Department of Justice urges DOE of Energy

to take into account these possible impacts

on competition in determining its final

energy efficiency standard for air

conditioners and heat pumps. DOE of Energy

should consider setting a lower SEER

standard for heat pumps, such as the

standard included in Trial Standard Level 2,

and a lower SEER standard for air

conditioners for retrofit markets where there

are space constraints (such as markets served

by niche products) and for manufactured

housing.

Sincerely,

A. Douglas Melamed.

DEPARTMENT OF JUSTICE—Antitrust

Division–Antitrust Division

JOHN M. NANNES–Acting Assistant

Attorney General

Main Justice Building, 950 Pennsylvania

Avenue NW., Washington, DC 20530–0001,

(202) 514–2401/ (202) 616–2645 (f),

antitrust@justice.usdoj.gov (internet)

http://www.usdoj.gov (World Wide Web)

April 5, 2001

Eric J. Fygi, Acting General Counsel,

Department of Energy, Washington, DC

20585

Dear Acting General Counsel Fygi: I am

responding to your letter dated March 20,

2001, seeking the views of the Attorney

General about the potential effect on

competition of the final rule published on

January 22, 2001, setting forth new energy

efficiency standards for central air

conditioners and heat pumps. You

specifically asked for our views about the

impact on competition of the rule’s

prescription of a 13 SEER (Seasonal Energy

Efficiency Rating) standard for all product

classes, except for niche products, and the

desirability of reducing the standard to a 12

SEER level for all subcategories. Your letter

requested our views by March 30, but your

staff agreed to extend the response date to

Apri1 6.

As you noted in your letter to the Attorney

General, the Antitrust Division had earlier

expressed its views on the proposed rule,

which provided for a 12 SEER standard for

air conditioners and a 13 SEER standard for

heat pumps. The Division had concluded

that the 13 SEER standard for heat pumps


 EE-RM-STD-98-440 COMMENT 312
38844 Federal Register / Vol. 66, No. 143 / Wednesday, July 25, 2001 / Proposed Rules

2We noted in our previous letter that less than

20% of the total current heat pump product lines

meet the new standard, but for some small

manufacturers, 100% of their product lines failed

to satisfy the standard. The same is true for air

conditioner manufacturers when the standard is 13

SEER.

could have an adverse effect on competition

and urged the Department of Energy to adopt

a 12 SEER standard for heat pumps. We

noted only minor concerns about the

proposed 12 SEER standard for air

conditioners.

We have reviewed the final rule and

determined that the 13 SEER heat pump

standard still raises competitive problems.

We have further determined that the 13 SEER

standard for air conditioners also raises

competitive concerns.

In our earlier letter, we identified and

described three competitive problems

resulting from the proposed 13 SEER

standard for heat pumps, including a

disproportionate impact on smaller

manufacturers 2 and an adverse effect on

manufacturers of specialized equipment (the

niche product manufacturers) and

manufacturers of equipment for spaceconstrained installation sites (such as

manufactured housing, which accounts for a

significant percentage of the country’s

housing starts). The exception made in the

final rule for niche product manufacturers

may alleviate competitive problems for their

products, but the exception does not

eliminate the difficulties for manufacturers of

standard equipment who could not make

equipment that complied with the 13 SEER

standard and still fit into space-constrained

sites. The final rule also continues to have a

disproportionate impact on smaller

manufacturers of heat pumps. The 13 SEER

standard for air conditioners raises the same

kinds of competitive problems as the 13

SEER standard does for heat pumps.

We urge the Department of Energy to

consider the impact on competition and to

adopt a 12 SEER standard for all products

covered by the rule.

Sincerely,

John M. Nannes.

[FR Doc. 01–18429 Filed 7–24–01; 8:45 am]

BILLING CODE 6450–01–P


 EE-RM-STD-98-440 COMMENT 312