### EE-RM/STD-98-440 -8 PWO EE-.//STD ^ -9-/ V EXECUTIVE ORDER 12866 SUBMISSION Important Please read the instructions on the reverse side before completing thisform. For additional forms or assistance in completing this form, contact the OIRA Docket Library, (202) 395-6880, or yourOIRA Desk Officer. Sendthree copies of both this form and supporting material (four copies if Economically Significant or an Unfunded Mandate) to: Office of Information and Regulatory Affairs Office of Management and Budget Attention: Docket Library, Room 10102 725 17th Street, N.W. Washington, D. C. 20503 1.Agency/Subagency originating request 2. Regulation Identifier Number (RIN) Department of Energy 1904-AA77 3.Title Energy Efficiency Standards for Central Air Conditioners and Heat Pumps 4. Stage of Development 5.Legal Deadline forthis submission Prerule a) iT Yes I- No Proposed Rule Interim Final Rule b) Date 01 L 01 / 199.4 XX Final Rule OD MM YYYY Final Rule - No material change c) [] Statutory [ Judicial Notice Other 6. Designations a) Economically Significant (E.O. 12866) E[X Yes r No Description of Other b) Unfunded Mandate (2 U.S.C. 1532) 7.Agency Contact (person who can best answer questions 1 Yes ~ No

regarding the content of this submission) If either ofthe above is"Yes," submit four (4) complete Michael E. McCabe packagestoOIRA Phone( 202 586-0854 

### Certification for Executive Order 12866 Submissions The authorizedregulatory contact and the program official certify that the agency has complied with the requirements of E.O. 12866 ad ay applicle p cy diectives. Sig77~~tetuneM PrQ~ram 

### ~, / ////// //Date


# , lZhl/oo Signatuof Authpzed Reulatory Conta .Date OMBT tRevision: 1297 (revi verss ob OMB 83-R |/ 

# ARevision: 12/97 (PreviouSversions obsolete) 

### EE-RM/STD-98-440 

### EXECUTIVE ORDER 12866 SUBMISSION Important Please read the instructions on the reverse side before completing this form. For additional forms or assistance in completing this form, contact the OIRA Docket Library, (202) 395-6880, or your OIRA Desk Officer. Send three copies of both this form and supporting material (four copies if Economica"y Significant or an Unfunded Mandate) to:

1. Agency/Subagency originating request Office of Information and Regulatory Affairs Office of Management and Budget Attention: Docket Library, Room 10102 725 17th Street, N.w. Washington, D. C. 20503 2. Regulation Identifier Number (RIN) Department of Energy 

### 1904-AA77 3. Title Energy Efficiency Standards for Central Air Conditioners and Heat Pumps 4. Stage of Development

__ Prerule

__ Proposed Rule

__ Interim Final Rule**~** Final Rule

__ Final Rule - No material change Notice Other
DeSCription of Other 7. Agency Contact (person who can best answer questions

regarding the content ofthis submission) Michael E. McCabe Phone (20l 586-0854 5. Legal Deadline for this submission a) [X] Yes 

### 0 No b) Date 

### 01 00 I 

### 01 / 1994 MM yyyy c) [Xl Statutory 

# o Judicial 6. Designations

a) Economically Significant (E.O. 12866) 

### CXJ Yes 

### 0 No b) Unfunded Mandate (2 U.S.C. 1532) [!) Yes 

### 0 No Ifeither ofthe above is "Yes," submit four (4) complete packages to OIRA Certification for Executive Order 12866 Submissions

### 16450-01-P] EE-RM/STD-98440-% 5 DEPARTMENT OF ENERGY Office of Energy Efficiency and Renewable Energy 10 CFR Part430 [Docket Number EE-RM-98-440] RIN:1904-AA77 Energy Conservation Programfor Consumer Products: CentralAir Conditioners and HeatPumps Energy Conservation Standards


### AGENCY: Office ofEnergy Efficiency and Renewable Energy, Department ofEnergy.
ACTION: Final Rule.
SUMMARY: The Department ofEnergy (DOE or Department) has determined that revised 

### energy conservation standards for central air conditioners and heat pumps will result in. significant conservation ofenergy, are'technologically feasible, and are economicallyjustified. On this basis,the Department istoday amending the existing energy conservation standards for central air conditioners and heat pumps.
EFFECTIVE DATES: The effective date ofthisrule and the standards is [insert date 5years after publication in Federal Register].

1 C:\Mike\US DOE\Cenlral Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd 

### [6450-01-PJ

### EE.RM/STD~98-440_g:**~**

# tJ

# b DEPARTMENT OFENERGY Office ofEnergy Efficiency and Renewable Energy 10 CFRPart430 [Docket NumberEE-RM-98-440J RIN:1904-AA77 Energy ConservationProgram for ConsumerProducts: CentralAir Conditioners and HeatPumps Energy Conservation Standards

AGENCY: Office ofEnergy Efficiency and Renewable Energy, Department ofEnergy.

ACTION: Final Rule.

SUMMARY: The Department ofEnergy (DOE orDepartment) has determined that revised energy conservation standards for central air conditioners and heatpumps

# wiII result in_ significant conservation ofenergy, are-technologically feasible, and are economicallyjustified. On this basis, the Department is today amending the existing energy conservation standards for central airconditioners and heat pumps.
EFFECTIVE DATES: The effective date ofthis rule and the standards is [insert date 5years afterpublication in Federal Register]. 1C:\Mike\US DOE\Central Air\SEER 13 Final Rule draft 12 master 12-14-00_wpd

### EE-RM/STD-98-440 - c.6O
. ADDRESSES: A copy ofthe Technical Support Document (TSD) may be read at the DOE Freedom ofInformation Reading Room, U.S. Department ofEnergy, Forrestal Building, Room 1E-190, 1000 Independence Avenue, S.W., Washington, D.C. 20585, (202) 586-3142, between the hours of9:00 a.m. and 4:00 p.m., Monday through Friday, except Federal holidays. Copies ofthe TSD may be obtained from: the Codes and Standards Internet site at: http://www.eren.doe.gov/buildings/codes_standards/applbrf/centralairconditioner.html or from the U.S. Department ofEnergy, Office ofEnergy Efficiency and Renewable Energy, Forrestal Building, Mail Station EE-41, 1000 Independence Avenue, S.W., Washington, D.C. 20585. (202) 586-9127.
FOR FURTHER INFORMATION CONTACT: Dr.Michael E. McCabe, U.S. Department of Energy, Office ofEnergy Efficiency and Renewable Energy, EE-41, 1000 Independence Avenue, S.W., Washington, D.C. 20585-0121, (202) 586-0854, e-mail: michael.e.mccabe@ee.doe.gov, or Edward Levy, Esq., U.S. Department ofEnergy, Office ofGeneral Counsel, GC-72, 1000 Independence Avenue, S.W., Washington, D.C. 20585, (202) 586-9507, e-mail: edward.levy@hq.doe.gov.

2 C:\Mike\US DOE\Ccntral Air\SEER13 Final Rule draft 12 master 12-14-00.wpd ... EE..RM/STD-98-440

# -:It**~**

# as,

.J ADDRESSES: A copy ofthe Technical Support Document (TSD) may be read at the DOE Freedom oflnformation Reading Room, U.S. Department ofEnergy, Forrestal Building, Room lE-190, 1000 Independence Avenue, S.W., Washington, D.C. 20585, (202) 586-3142, between the hours of9:00 a.m. and 4:00 p.m., Monday through Friday, except Federal holidays. Copies ofthe TSD may be obtained from: the Codes and Standards Internet site at: http://www.eren.doe.govlbuildings/codes
_standards/applbrf/central_air
_conditioner.html orfrom the U.S. Department ofEnergy, Office ofEnergy Efficiency and Renewable Energy, Forrestal Building, Maii Station EE-41, 1000 Independence Avenue, S.W., Washington, D.C. 20585. (202) 586-9127.

FOR FURTHER INFORMATION CONTACT: Dr. Michael E. McCabe, U.S. Department of Energy, Office ofEnergy Efficiency and Renewable Energy, EE-41, 1000 Independence Avenue, S.W., Washington, D.C. 20585-0121, (202) 586-0854, e-mail: michael.e.mccabe@ee.doe.gov, or Edward Levy, Esq., U.S. Department ofEnergy, Office ofGeneral Counsel, GC-72, 1000 Independence Avenue, S.W., Washington, D.C. 20585, (202) 586-9507, e-mail: edward.levy@hq.doe.gov.

2 C:\Mike\US DOE\Central Air\SEERJ 3Final Rule draft 12 master J2-J4-00.wpd

### EE-RM/STD-98-440 

## •- *
_ - SUPPLEMENTARY INFORMATION: I. Introduction A. ConsumerOverview 1.Background 2.Central Air Conditioner and Heat Pump Features 3.Consumer Benefits 4. National Benefits B. Authority C. Background II. General Discussion A. TechnologicalFeasibility 1. General 2. Maximum Technologically Feasible Levels B. EnergySavings 1. Determination ofSavings 2. Significance of Savings C. RebuttablePresumption D. EconomicJustification 1. Economic Impact on Manufacturers and Consumers 2. Life-cycle-costs 3. Energy Savings 4. Lessening ofUtility or Performance ofProducts 5. Impact ofLessening ofCompetition 6. Need ofThe Nation to Conserve Energy 7. Other Factors III. Methodology IV. Discussion of Comments A. BurdensandBenefits 1. Economic Impacts a. Economic Impacts on Manufacturers b. Economic Impacts on Consumers 2. Life-Cycle Costs 3. Energy Savings 4. Lessening ofUtility or Performance ofProducts 5. Impact ofLessening ofCompetition 6. Need ofthe Nation to Conserve Energy 7. Other Factors B. AnalysisandAssumptions 1. Engineering Analysis a. Reliance on ARI and Reverse Engineering Cost Estimates b. Consideration ofEmerging Technologies 2. Life Cycle Cost (LCC) analysis a. Probability-based analysis 3 C:\Mike\US DOE\Central Air\SEERI3 FinalRule draft 12 master 12-14-OO.wpd 

### SUPPLEMENTARY INFORMATION: I. Introduction A. Consumer Overview I. Background 2. Central Air Conditioner and Heat Pump Features 3. Consumer Benefits 4. National Benefits B. Authority C. Background 

### II. General Discussion A.. TechnologicalFeasibility I. General 2. Maximum Technologically Feasible Levels B. EnergySavings I. Determination ofSavings 2. Significance ofSavings C. Rebuttable Presumption D. EconomicJustification 1. Economic Impact on Manufacturers and Consumers 2. Life-cycle-costs 3. Energy Savings 4. Lessening ofUtility or Performance ofProducts 5. Impact ofLessening ofCompetition 6. Need ofThe Nation to Conserve Energy 7. Other Factors 

### III. Methodology IV. Discussion ofComments A. Burdens andBenefits I. Economic Impacts a. Economic Impacts on Manufacturers b. Economic Impacts on Consumers 2. Life-Cycle Costs 3. Energy Savings 4. Lessening ofUtility or Performance ofProducts 5. Impact ofLessening ofCompetition 6. Need ofthe Nationto Conserve Energy 7. OtherFactors B. Analysis andAssumptions 1. Engineering·Analysis a. Reliance on ARI and Reverse Engineering Cost Estimates h. Consideration ofEmergingTechnologies 2. Life Cycle Cost (LCC) analysis a. Probability-based at,lalysis 3 C:IMike\US DOElCentral Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd

## EE-RM/STD-98-44o- 

# 9 5 b. Energy Use c. Electricity Prices d. Product Life e. Installation Cost f. Mark-ups 3. Shipments/National Energy Savings a. Adjustments to NAECA Shipment Scenario b. Fuel Switching c. Drop in Shipments in New Construction Market 4. Manufacturer Impact Analysis 5. Utility Impacts a.Peak Demand Impacts 6. Projection ofTrends C. OtherComments 1. HCFC Phaseout 2.Ozone Reduction Catalyst Requirement D. AdditionalStandard Requirements 

### 1. EER Standard 2. TXV Requirement 3. HSPF Levels V. Analytical Results and Conclusions A. TrialStandard Levels 

### B. Significanceof EnergySavings C. PaybackPeriod D. EconomicJustification 

### 1. Economic Impact on Manufacturers and Consumers 2. Life-cycle-cost (LCC) 3. Net Present Value and Net National Employment 4. Impact on Utility or Performance ofProducts 5. Impact ofAny Lessening ofCompetition 6. Need ofthe Nation to Save Energy 7. Other Factors E. Conclusion 

### VI. ProceduralIssues and Regulatory Review A. Review UndertheNationalEnvironmental PolicyAct B. Review UnderExecutive Order12866, "RegulatoryPlanningand Review" C. Review undertheRegulatoryFlexibility Act D. Review UnderthePaperwork ReductionAct E. Review UnderExecutive Order12988, "CivilJusticeReform" F. "Takings"AssessmentReview G. Review underExecutive Order13132 H. Review Underthe UnfundedMandatesReform Act I. Review Underthe TreasuryandGeneralGovernmentAppropriations Act of1999 J. Review UnderthePlainLanguageDirectives K. Congressional Notification



### 4 C:\Mike\US DOE\Central Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd 

### EE-RM/STD-98-440-lF

## ~

# 05" h. Energy Use c. Electricity Prices d. Product Life 

# e. Installation Cost f. Mark-ups 3. ShipmentsiNational Energy Savings a. Adjustments to NAECA Shipment Scenario h. Fuel Switching c. Drop in Shipments in New Coristruction Market 4. Manufacturer ImpactAnalysis 5. Utility Impacts a. PeakDemand Impacts 6. Projection ofTrends C. Other Comments 1. HCFC Phaseout 2. Ozone Reduction Catalyst Requirement D. AdditionalStandardRequirements ]. EER Standard 2. TXV Requirement 3. HSPF Levels 

### V. Analytical Results and Conclusions A. Trial StandardLevels B. Significance of Energy Savings C. PaybackPeriod D. EconomicJustification 1. Economic Impact on Manufacturers and Consumers 2. Life-cycle-cost (LCC) 3. Net Present Value and NetNational Employment 4. Impact on Utility orPerformance ofProducts 5. Impact ofAny Lessening ofCompetition 6. Need ofthe Nation to Save Energy 7. OtherFactors E. Conclusion 

### VI. Procedural Issues and Regulatory Review A. Review Under theNationalEnvironmentalPolicyAct B. Review Under Executive Order 12866. "RegulatoryPlanningandReview" C. Review under the RegulatoryFlexibilityAct D. Review Under the PaperworkReductionAct E. Review Under Executive Order 12988. "CivilJustice Reform" F. "Takings"AssessmentReview 

### G. Review underExecutive Order 13132 H. Review Under the UnfundedMandates ReformAct 1 Review Under the Treasury andGeneral qovernmentAppropriationsActof 1999 J. Review Under the Plain LanguageDirectives K. CongressionalNotification

4 C:lMike\US DOE\Central Air\SEER13 Final Rule draft 12 .master**12-14~O.**wpd

### EE-RM/STD-98-440-- 0 5° I. Introduction A. ConsumerOverview

1.Background
The Department ofEnergy (DOE or the Department) is directed by the Energy Policy and Conservation Act, as amended, to consider establishing minimum efficiency standards for various consumer products, including central air conditioners and heat pumps. Today's adopted standards are consistent with these requirements ofthe law. The Department is amending the almost tenyear oldminimum efficiency standards for new central air conditioners and heat pumps. These amended standards take into account a decade oftechnological advancements and will save consumers and the nation money, significant amounts ofenergy, and have substantial environmental and economic benefits.
When today's adopted standards go into effect, they will essentially raise the energy efficiency standards to 13 SEER for new central air conditioners and to 13 SEER/7.7 HSPF for new central air conditioning heat pumps (heat pumps). SEER, Seasonal Energy Efficiency Ratio, is the Department's measure ofenergy efficiency forthe seasonal cooling performance of central air conditioners and heat pumps. HSPF, Heating Seasonal Performance Factor, is the Department's measure ofenergy efficiency for the seasonal heating performance ofheat pumps. The standards will apply to products manufactured for sale in the United States, as of [insert date 5years afterpublication in Federal Register]. The standard for split-system air conditioners, the most common type ofresidential air conditioning equipment, represents a 30 percent improvement in energy efficiency. For split-system heat pumps, the new standard would

5 C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

# EE.RM/STD.~8-440-~~o5 I. Introduction 

### A. Consumer Overview 1. Background

The Department ofEnergy (DOE orthe Department) is directed by the Energy Policy and Conservation Act, as amended, to consider establishing minimum efficiency standards for various consumerproducts, including central air conditioners and heatpumps. Today's adopted standards are consistent with these requirements ofthe law. The Department is amending the almost tenyear oldminimum efficiency standards for new central air conditioners and heat pumps. These amended standards take into account a decade oftechnological**advanc~ments** and will save consumers and the nation money, significant amounts ofenergy, and have substantial environmental and economic benefits.

When today's adopted standards go into effect, they will essentially raise the energy efficiency standards to 13 SEER for new central air conditioners and to 13 SEERl7.7 HSPF for
new central air conditioning heat pumps (heat pumps). SEER, Seasonal Energy Efficiency Ratio, is the Department's measure ofenergy efficiency for the seasonal coolingperformance of central air conditioners and heat pumps. HSPF, Heating Seasonal Performance Factor, is the Department's measure ofenergy efficiency for the seasonal heating performance ofheatpumps. The standards will apply to products manufactured for sale in the United States, as of[insert date 5 years afterpublication in Federal Register]. The standard for split-system air conditioners, the most commontype ofresidential air conditioning equipment, represents a 30 percent improvement in energy efficiency. For split-system heat pumps, the new standard would 

### 5 C:\Mike\US OOE\Central Air\SEERI3 Final Rule draft 12**m~ter** 12-14-00.wpd

### EE-RM/STD-98.440-c?6 Os. represent a 30percent improvement in cooling efficiency and a 13 percent improvement in heating efficiency. The standard will also increase the cooling efficiency ofsingle-package air conditioners and single-package heat pumps by 34 percent and the heating efficiency ofsinglepackage heat pumps by 17percent. Finally, the Department is not yet adopting new standards for some products to ensure that more efficient versions remain available for niche applications. The Department has determined that the new standards are thehighest efficiency levels that are technically feasible and economically justified as required by law. Therefore, the Department is amending the energy conservation standards forresidential central air conditioners and heat pumps.
2. Central Air Conditioner and Heat Pump Features
The amended efficiency levels can be met by central air conditioner and heat pump designs that are already available in the market. We fully expect variations ofthese models'to exist under the new standards, offering all the features and utility that are found in currently available products.
3.Consumer Benefits
Table I.1 summarizes the "vital statistics" oftoday's typical central airconditioners and heat pumps. Table 1.2 presents the implications for the average consumer ofthe standards becoming effective in 2006.

6 C:\Mike\US DOECentral Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

# EE.RM/STD.~:f1:"~

# 05 represent a 30 percent improvement in cooling efficiencyand a 13 percent improvement in heating efficiency. The standard will also increase the cooling efficiencyofsingle-package air conditioners and single-package heat pumps by 34 percent and the heating efficiency ofsinglepackage heatpumps by 17 percent. Finally, the Department is not yet adopting new standards for
some products to ensure that more efficient versions remain available for niche applications. The Departmenthas determined that the new standards are the highest efficiency levels that are' technically feasible and economicallyjustified as required by law. Therefore, the Department is amending the energy conservation standards for residential central air conditioners and heat pumps.
2. Central Air Conditioner and Heat Pump Features

The amended efficiency levels can be met by central air conditioner and heat pump designs that are already available in the market. We fully expect variations ofthese models'to exist under the new standards, offering all the features and utility that are found'in currently available products.

3. Consumer Benefits

Table 1.1 summarizes the "vital statistics" oftoday'stypical central airconditioners and heat pumps. Table 1.2 presents the implications**fo~** the average consumer ofthe standards becoming effective in 2006.



### 6C:\Mike\US DOE\Central Air\SEERI3 Final Rule draft 12 master 12-14-00,wpd

### EE-RM/STD-9844Q-4-?945 Table I.1 Vital Statistics of Today's Typical Central Air Conditioners and Heat Pumps' Split System Split System Single Package Single Package Air Conditioner Heat Pump Air Conditioner 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 18.4years 18.4 years 18.4 years Energy Consumption peryear 2,305 kWh 6,549 kWh 2,305 kWh 6,549 kWh "'Typical"equipment have cooling and heating efficiencies of 10 SEER and 6.8 HSPF, respectively. 2

Utility bill pertains tothe energy cost ofoperating the air conditioner orheat pump.


### Table 1.2 Implications ofNew Standards for the Average Consumer Split System Split System Single Package Single Package Air Conditioner Heat Pump Air Conditioner Heat Pump Year Standard Comes into Effect 2006 2006 2006 2006 New Average Installed Price $2,571 $4,000 $3,032 $4,034 Estimated Price Increase $335 $332 $425 $435 Annual Utility Bill Savings $42 $70 $42 $70 Average Net Saving over $113 .$372 $29 $353 Equipment Life Energy Savings perYear 532 kWh 1081 kWh 532 kWh 1081 kWh



### The most typical air conditioner (i.e., split system air conditioners which comprise approximately 65 percent oftoday's central air conditioning and heat pump market) has an installedprice of$2,236 and cost $189 in utility bills annually. In order to meet the 2006 standard, the Department estimates that the installed price ofa typical air conditioner will be' $2,571, an increase of$335. This price increase will be offset by an annual energy savings of about $42 on the utility bills. The most typical heat pump (i.e., split system heat pump) currently
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### Table 1.1 Vital Statistics ofToday's Typical CentralAir Conditioners and HeatPumpsI Split System Split System Single Package Single Package Air Conditioner Heat Pump Air Conditioner Heat Pump Average Installed Price $2,236 $3,668 $2,607 $3,599 Annual Utility BilJ2 $189 $453 $189 $453 Life Expectancy 18.4 years 18.4 years 18.4 years 18.4 years Energy Consumption peryear 2,305 kWh 6,549 kWh 2,305 kWh 6,549 kWh I "Typical" equipment have coolmg and heatmg effiCienCies of 10 SEER and 6.8 HSPF, respectively.
2Utility bill pertains to the energy cost ofoperatingthe air conditioner orheat pump.


### Table 1.2 Implications ofNew Standards for the Average Consumer Split System Split System
. Single Package Single Package Air Conditioner Heat Pump Air Conditioner Heat Pump Year Standard Comes into Effect 2006 2006 2006 2006 New Average Installed Price $2,571 $4,000 $3,032 $4,034 Estimated Price Increase $335 $332 $425 $435 Annual Utility Bill Savings $42 $70 $42 $70 Average Net Saving over $113 .$372 $29 $353 Equipment Life Energy Savings per Year 532 kWh 1081 kWh 532 kWh 1081 kWh

The most typical air conditioner (i.e., split system air conditioners which compqse approximately 65 percent oftoday's central air conditioning and heat pump market) has an installed price of$2,236 and cost $189 

### in utility bills annually. In orderto meetthe 2006 standard, the Department estimates that the**install~d** price ofa typical air conditioner will be . $2,571, an increase of$335. This price increase will be offset 

### by an annual energy savings of about $42 on the utility bills. The most typical heat pump (Le., split system heat pump) currently 7 C:\Mike\US DOE\Central Air\SEERI3 Final Rule draft 12**mast~r** 12.14.00.wpd

### EE-RM/STD-98-440 2#c' 0 " has an installed price of$3,668 and cost $453 in utility bills annually. In order to meet the 2006 standard, the Department estimates that the installed price ofa typical heat pump will be $4,000, an increase of$332. This price increase will be offset by an annual energy savings ofabout $70 on the utility bills.
The Department 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, the Department has investigated the effects ofthe different energyprices across the nation and different air-conditioning usage patterns. The Department estimates that 61 percent ofall consumers purchasing a new typical air conditioner will either save money or will be negligibly impacted as a result ofthe 2006 standard. In the case ofa new typical heat pump, 94 percent of all consumers either save money or will be negligibly impacted.
The Department also investigated how these standards might affect low income consumers. On average, the Department estimates that it is likely that low income air conditioner and heat pump consumers will also save money as aresult ofthe standard.
4. National Benefits
The standards will provide benefits to the nation. DOE estimates the standards will save approximately 4.5 quads ofenergy over 25 years (2006 through 2030). This is equivalent to all the energy consumed by nearly 26 million American households in a single year. In 2020, the standards will avoid the construction offive 400 megawatt coal-fired plants and thirty-four 400

8 C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd 

### ..**..~.** 

### EE·RM/STD·98-440

# -=tPA**o~··** has an installed price of$3,668 and cost $453 in utility bills annually. In orderto meet the 2006 standard, the Department estimates that the installed price ofa typical heat pump will be $4,000,

. . an increase of$332. This price increase will be offset by an annual energy savings ofabout $70
onthe utility bills.

The Department recognizes that most consumers pay energy prices that are higher or lowerthan the "typical"consumerand operate their equipmentmore orless often. Consequently, the Department has investigated the effects ofthe different energyprices across the nation and different air-conditioning usage patterns. The Department estimates that 61 percent ofall
consumerspurchasing a new typical air conditioner will either save money orwill be negligibly impacted as a result ofthe 2006 standard. In the case ofa new typical heat pump, 94 percent of all consumers either save money or will be negligibly impacted.

The Department also investigated how these standards might affect low income
consumers. On average, the Department estimates that 

### it is likely that low income air conditioner and heat pump consumers will also save money as a result ofthe standard.

4. National Benefits

The standards will provide benefits to the nation. DOE estimates the standards will save approximately 4.5 quads ofenergy over 25 years**(~006** through 2030). This is equivalent to all the energy consumed by nearly 26 million American households in a single year..In 2020, the standards will avoid the construction offive 400 megawatt coal-fired plants and thirty-four400 

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### EE-RM/STD-98-440 

### - 

# 3 05' megawatt gas-fired plants. These energy savings will result in cumulative greenhouse gas emission reductions ofapproximately 33 million metric tons (Mt) ofcarbon, or an amount equal to that produced by approximately 3million cars every year. Additionally, air pollution will be reduced bythe elimination ofapproximately 90 thousand metric tons ofnitrous oxides (NO) from 2006 through 2030. In total, we estimate the benefit ofthis standard to the nation's consumers will be $1billion from 2006 through 2030.
B.Authority Part B ofTitle III ofthe Energy Policy and Conservation Act, Pub. L. 94-163, as amended bythe National Energy Conservation Policy Act, Pub. L. 95-619, by the National Appliance Energy Conservation Act, Pub. L. 100-12, bythe National Appliance Energy Conservation Amendments of 1988, Pub. L. 100-357, and bythe Energy Policy Act of 1992, Pub. L. 102-486' created the Energy Conservation Program for Consumer Products other than Automobiles. The consumer products subject to thisprogram (often referred to hereafter as "covered products") include central air conditioners and heat pumps.
Under the Act, the program consists essentially ofthree parts: testing, labeling, and Federal energy conservation standards.

IPart BofTitle III ofthe Energy Policy and Conservation Act, as amended by the National Energy Conservation Policy Act, the National Appliance Energy Conservation Act. the National Appliance Energy Conservation Amendments of 1988, and the Energy Policy Act of 1992, is referred to inthis notice as the "Act." Part B ofTitle II is codified at 42 U.S.C. 6291 et seq. Part B ofTitleIll ofthe Energy Policy and Conservation Act, as amended by theNational Energy Conservation Policy Act only, is referred to inthis notice as the National Energy Conservation Policy Act.
9 C:\Mik\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd " ----------------------

# EE.RM/STD.~~_4404

# A0-5-'
, megawatt gas-fired plants. These energy savings will result in cumulative greenhouse gas emissionreductions ofapproximately 33 million metric tons (Mt) ofcarbon, oran amount equal to that produced by approximately 3 million cars every year. Additionally, air pollution will be reduced by the elimination ofapproximately 90 thousand metric tons ofnitrous oxides 

### (NOx) from 2006 through 2030. In total, we estimate the benefit ofthis standard to the nation's
consumers will be $1 billion from 2006through 2030.

B. Authority Part B ofTitle III ofthe Energy Policy and Conservation Act, Pub. L. 94-163, as amended bythe National Energy Conservation PolicyAct, Pub. L. 95-619, by the National Appliance Energy Conservation Act, Pub. L. 100-12, by the National Appliance Energy Conservation Amendmentsof 1988, Pub. L.l00-357, and by the Energy Policy Act of 1992, Pub. L. 102-4861 created the Energy Conservation Program for Consumer Products otherthan Automobiles. The
consumerproducts subjectto this program (often referred to hereafter as "coveredproducts") include central air conditioners and heat pumps.


### Underthe Act, the program consists essentially ofthree parts; testing, labeling, and Federal energy conservation standards.

Ipart BofTitIe III ofthe Energy Policy and Conservation Act, as amended by the National Energy Conservation Policy Act, the National Appliance Energy Conservation Act the National Appliance Energy Conservation Amendments of 1988. and the Energy Policy Act of 1992, is referred to in this notice as the "Act." Part B ofTitle III is codified at 42 U.S.c. 6291 et seq. Part B ofTitle 1\1 ofthe Energy Policy and Conservation Act, as amended by the National Energy Conservation Policy Act only, is referred to in this notice as the National Energy Conservation Policy Act. -. 

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### EE-RM/STD-98-440

- 

### A .. The National Appliance Energy Conservation Act of 1987 (NAECA) prescribed initial Federal energy conservation standards for central air conditioners and heatpumps. EPCA Section 325(d), 42 U.S.C. 6295(d). The Act specifies that the Department is to review the standards January 1, 1994. EPCA Section 325(d)(3)(A), 42 U.S.C. 6295(d)(3)(A). Any new or amended standard must be designed so as to achieve the maximum improvement in energy efficiency that istechnologically feasible and economically justified. EPCA Section 325(o)(2)(A), 42 U.S.C. 6295(o)(2)(A).
Section 325(o)(2)(B)(i) provides that before DOE determines whether a standard is economicallyjustified, it must first solicit comments on a proposed standard. After reviewing comments on the proposal, and before it adopts a standard, DOE must then determine whether the benefits ofthe standard exceed its burdens, based, to the greatest extent practicable, on a weighing ofthe following seven factors:
"(i) The economic impact ofthe 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 ofthe covered product in the type (or class) compared to any increase in the price of, orin the initial charges for, or maintenance expenses of,the covered products which are likely to result from the imposition ofthe standard; (iii) The total projected amount ofenergy savings likely to result directly from the imposition ofthe standard;

1OC:\Mike\US DOE\Cental AirASEER13 Final Rule draft 12 master 12-14-OO.wpd

# EE.RM/STD.~~-440 - 

# -#**~** 

# DS/ The National Appliance Energy**Conserv~tion** Act of 1987 (NAECA) prescribed initial Federal energy conservation standards for central air conditioners and heat pwnps. EPCA Section 325(d), 42 U.S.C. 6295(d). The Act specifies that the Department is to review the standards January 1, 1994. EPCA Section 325(d)(3)(A), 42 U.S.C. 6295(d)(3)(A).
Any new oramended standard mustbe deSigned so as to achieve the maximwn improvement in energy efficiency that is technologically feasible and economicallyjustified. EPCA Section 325(0)(2)(A), 42 U.S.c. 6295(0)(2)(A).

Section 325(0)(2)(B)(i) provides that before DOE determines whether a standard is economicallyjustified, it must first solicit comments on a proposed standard. Afterreviewing . comments onthe proposal, and before it adopts a standard, DOE must then determine whether



## . . the benefits ofthe standard exceed its burdens, based, to the greatest extentpracticable, on a weighingofthe following seven factors:
"(i) The economic impact ofthe standard onthe manufacturers and onthe conswners of the products subject to such standard; (ii) The savings in operating costs throughout the estimated average life ofthe covered product in the type (orclass) comparedto any increase in the price of, orin the initial charges for, ormaintenance expenses of, the coveredproducts which are likely to result from the imposition ofthe standard; (iii) The total projected amount ofenergy savings likely to result directly from the imposition ofthe standard;
1 Oc:\Mike\US OOE\Central Air\SEERI3 Final Rule draft 12 masier 12-14-00.wpd

### EE-RM/STD-98-440 

## ^ 0 

# V5 (iv) Any lessening ofthe utility or the performance ofthe covered products likely to result from the imposition ofthe standard; (v) The impact ofany lessening ofcompetition, as determined in writing by theAttorney General, that is likely to result from the imposition ofthe 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 arebuttable presumption ofeconomic justification in instances where the Secretary determines that "the additional cost to the consumer ofpurchasing a product complying with an energy conservation standard level will be less than three times the value ofthe energy... savings during the first year that the consumer will receive as a result ofthe standard, as calculated under the applicable test procedure ...." The rebuttable presumption test is an alternative path to establishing economicjustification.
C. Background
The existing standards for residential central air conditioners and heat pumps have been in effect since 1992. As described above, the descriptor for air conditioner and heat pump cooling is SEER. The DOE energy efficiency descriptor forheat pump heating is Heating Seasonal Performance Factor (HSPF). 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

1 lC:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd**------------------------,~** EE·RM/STD-98-440

# -M 0

# !?'
. (iv) Any lessening ofthe utility orthe performance ofthe covered products likely to result from the imposition ofthe standard; (v) The impact ofany lessening ofcompetition, as determined in writing by the Attorney General, that is likely to result from the imposition ofthe standard; (vi) The need for national energy conservation; and (vii) Otherfactors the Secretary considers relevant."
In addition, section 325(0)(2)(B)(iii) establishes a rebuttable presumption ofeconomic justificationin instances where the Secretary determines that lithe additional cost to the consumer ofpurchasing a product complying with an energy conservation standard level will be less than three times the value ofthe energy... savings during the first yearthat the consumer will receive
as a result ofthe standard, as'calculated underthe applicable testprocedure ...." The rebuttable presumption test is an alternative path to establishing economicjustification.
C. 

### Background

The existing standards fot' residential central air conditioners and heat pumps have been in effect since 1992. As described above, the descriptor for air conditioner and heat pump cooling is SEER. The DOE energy efficiency descriptor for heatpumpheating is Heating Seasonal Performance Factor (HSPF). The current central air conditioner and heatpump efficiency standards are as follows:

-- Split system air conditioners and heatpumps - 10 SEER/6.S HSPF

-- Single package air conditioners andheat pumps - 9.7 SEERl6.6 HSPF

lIC:\MikeIUS OOElCentral AirlSEER13 Final Rule dnilll2 master 12-14-00.wpd 

# /

### EE-RM/STD-98-440 -' c^ 

## 05
On September 8, 1993, DOE published an Advance Notice ofProposed Rulemaking (ANOPR) announcing the Department's intention to revise the existing central air conditioner and heat pump efficiency standard. 58 FR 47326. During a workshop on June 30, 1998, we presented forcomment an analytical framework for the central air conditioner and heat pump standards rulemaking. The analytical framework described the different analyses tobe conducted, the method for conducting them, the use ofnew spreadsheets, and the relationship of the various analyses. On November 24, 1999, DOE published a Supplemental ANOPR. 64 FR 66306. On October 5,2000, DOE published a Notice ofProposed Rulemaking (NOPR or proposed rule). 65 FR 59590. The energy efficiency standards 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, the Department requested comments on a proposal to adopt a standard for steady-state cooling efficiency, EER.2 

### The proposal on EER was designed to ensure more efficient operation at high outdoor temperature, during periods when electricity use by air conditioners is at itspeak.

2 EER, Energy Efficiency Ratio, is a steady-state measure ofenergy efficiency which measures efficiency at aprescribed outdoor temperature (95TF), and is one ofthe test conditions in the Department's test procedure used to develop the SEER. 12C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd On September 8, 1993, DOE published anAdvance Notice ofProposed Rulemaking

.(ANOPR) announcing the Department's intention to revise the existing central air conditioner

and heat pump efficiency standard. 58 FR47326. During a workshop on June 30, 1998, we 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 method·for conducting them, the use ofnew spreadsheets, and the relationship of the various analyses. On November24, 1999, DOE published a Supplemental ANOPR. 64 FR 66306. On October 5,2000, DOEpublished a Notice ofProposed Rulemaking (NOPR or proposed rule). 65 FR 59590. The energy efficiency standards proposed for residential central air conditioners and central air conditioning heat pumps (heatpumps) were as follows:

- Split-system and single-package air·conditioners -12 SEER

- Split-system and singie package heatpumps - 13 SEER/7.7 HSPF

- Through-the-Wall air conditioners and heat pumps - 11 SEER/7.1 HSPF.

In additionto the increase proposed in SEER and HSPF, the Department requested comments on a proposal to adopt a standard for steady-state cooling efficiency, EER. 2 The proposal on EER was designedto ensure more efficient operation at high outdoor temperature, during periods when electricity use by air conditioners is at its peak.

2 EER, Energy Efficiency Ratio, is a steady-state measure ofenergy efficiency which measures efficiency at aprescribed outdoortemperature (95°F), and is one ofthe test conditions in the Department's test procedure used to develop the SEER. 12c:IMike\US OOE\CentraJ Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 

### -- 

## 5 The proposed rule provided additional background information on the current standards, the history ofprevious rulemakings and theprocedures, interpretations and policies which guide the Department in developing new efficiency standards, which are set forth as the Process Improvement Rule. 61 FR 36974 (July 15, 1996). Apublic hearing was held in Washington, D.C. on November 16, 2000, to hear oral views, data and arguments on theproposed rule.
II. General Discussion A. TechnologicalFeasibility

1. General There are central air conditioners and heat pumps in the market at all ofthe efficiency levelsprescribed in today's final rule. The Department, therefore, believes all ofthe efficiency levels adopted bytoday's final rule are technologically feasible.
2. Maximum Technologically Feasible Levels Pursuant to section 325(p)(2) ofthe Act, and as discussed in theproposed rule, the Department determined that 18 SEER isthe maximum technologically feasible (Max Tech) level for cooling efficiency forall product classes and capacities covered bythis rulemaking. 65 FR 59593. The Max Tech level for heating efficiency, is 9.4 HSPF which is the highest HSPFrating currently available in residential heat pumps.
B. EnergySavings 1. Determination ofSavings

13C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd EE-RM/STD-98-440

# -1Fc9, u:f The proposed rule provided additional background information onthe current standards, the history ofprevious rulemakings and the procedures, interpretations and policies which guide the Department in developing new efficiency standards, which are set forth as the Process Improvement Rule. 61 FR36974 (July 15, 1996). A public hearing was held in Washington, D.C. onNovember 16, 2000, to hear oral views, data and arguments on the proposed rule.

II. General Discussion 

### A. Technological Feasibility 1. General There are central air conditioners and heatpumps in the market at all ofthe efficiency levels prescribed in today's final rule. The Department, therefore, believes all ofthe efficiency levels adopted bytoday's final rule are technologicallyfeasible.

2. Maximum Technologically Feasible Levels Pursuant to section 325(p)(2) ofthe Act, and as discussed in the proposedrule, the Department determined that 18 SEER is the maximumtechnologically feasible (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 HSPFrating currently available in residential heat pumps.


### B. Energy Savings 1. Determination ofSavings

13C:lMike\US DOE\Central Air\SEERI3 Final Rule draft. 12 master 12-14-00.wpd

### EERM/STD-98440 -^ 

# D 

# • The Department forecasted energy savings through the use ofa national energy savings (NES) spreadsheet as discussed in the proposed rule. 65 FR 59590, 59593 (October 5, 2000). The spreadsheets and assumptions upon which the results oftoday's final rule is based are unchanged.

2. Significance ofSavings As discussed in the proposed rule, section 325(o)(3)(B) ofthe Act prohibits the Department from adopting a standard for aproduct ifthat standard would not result in "significant" energy savings. The energy savings forthe standard levels we are adopting today
are non-trivial -- indeed they are substantial -- and therefore we consider them "significant" within the meaning ofsection 325 ofthe Act.

C. RebuttablePresumption The National Appliance Energy Conservation Act established new criteria for determining whether a standard level is economicallyjustified. Section 325(o)(2)(B)(iii) ofthe Act states:
"Ifthe Secretary finds that the additional cost to the consumer ofpurchasing a product complying with an energy conservation standard level will be less than three times the value ofthe energy... savings during the first year thatthe consumer will receive as a result ofthe standard, as calculated under the applicable test procedure, there shall be a rebuttable presumption that such standard level is economicallyjustified. A determination by the Secretary that such criterion is not met shall not be taken into

14

C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd 

### EE-AM/ITD.. 8 440

# -iP- rA1J

# 6 The Department forecasted energy savings through the use ofa national energy savings (NES) spreadsheet as discussed in the proposed rule. 65 FR 59590, 59593 (October 5, 2000). The spreadsheets andassumptions upon which the results oftoday'sfinal rule is based are unchanged.

2. .Significance ofSavings As discussed in the proposed rule, section 325(0)(3)(B) ofthe Actprohibits the Department from adopting a standard for a productifthat standard would not result in "significant" energy savings. The energy savings for the standard levels we are adopting today
are non-trivial
-- indeed they are substantial
-- and therefore we consider them "significant" within the meaning ofsection 325 ofthe Act.'


### C. RebuttablePresumption TheNational Appliance Energy ConservationAct established newcriteria for determining whether a standard level is economicallyjustified. Section 32S(0)(2)(B)(iii) ofthe Act states:

"Ifthe Secretary finds that the addition,a} costto the consumer ofpurchasing a product complying with an energy conservation standard level will be less than three timesthe value ofthe energy... savings during the first year thatthe consumer will receive as a result ofthe standard, as calculated undertQe applicable test procedure, there shall be a rebuttable presumptionthat such standard level is economicallyjustified. A determination by the Secretary that such criterion is not met shall not be taken into

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### EE-RM/ STD-98-440 -# 

### ?

## e 5 consideration in the Secretary's determination ofwhether a standard is economically justified." If, according to the test procedure, the increase in initial price ofan appliance due to a conservation standard would repay itselfto the consumer in energy savings in less than three years, then we presume that such standard iseconomicallyjustified. This presumption of economicjustification can be rebutted upon aproper showing.
The standard levels we are adopting today do not satisfy the criteria set forth above. Therefore, we cannot presume them tobe economicallyjustified and have performed additional analysis to support the Secretary's determination that they are indeed economically justified.
D. EconomicJustification As noted earlier, Section 325(o)(2)(B)(i) ofthe Act provides seven factors to be evaluated in determining whether a conservation standard is economicallyjustified.
1. Economic Impact on Manufacturers and Consumers We considered the economic impact on manufacturers and consumers as discussed in the proposed rule. 65 FR 59590, 59593 (October 5,2000).

1SC:\Mikc\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd --------------------- 

### ------- EE-RM/STD-98-440

# -#

# c::?()Sconsideration in the Secretary's detennination ofwhether a standard is economically justified."
If, according to the test procedure, the increase in initial price ofan appliance due to a conservation standard would repay itselfto the conswner in energy savings in less than three years, then we presinne that such standard is economicallyjustified. This preswnption of economicjustification can·be rebutted upon a proper showing.

The standard levels we are adopting today do not satisfy the criteria set forth above. Therefore, we cannot preswne them to be economicallyjustifiedand have perfonned additional analysis to support the Secretary's detennination that they are indeed economicallyjustified.



### D. EconomicJustification As noted earlier, Section 325(0)(2)(B)(i) ofthe Act provides seven factors to be evaluated in detennining whether a conservation standard is economicallyjustified.

1. Economic Impact on Manufacturers and Consumers We considered the economic impact onmanufacturers and consUmers as discussed in the proposed rule. 65 FR 59590, 59593 (October 5, 2000).

15c:\Mikc\US OOE\Centrnl Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 -- ' 

## e • 2. Life-cycle-costs We considered life-cycle-costs as discussed in the proposed rule. 65 FR 59590, 59594 (October 5, 2000). The installed price and operation and maintenance costs were calculated for a range ofconsumers around the nation to estimate the range in life cycle cost benefits that consumers would expect to achieve due to new standards.
3. Energy Savings While significant conservation ofenergy is a separate statutory requirement for establishing an energy conservation standard, the Act requires DOE, in determining the economic justification ofa standard, to consider the total projected energy savings that are expected to result directly from revised standards.
4. Lessening ofUtility or Performance ofProducts This factor cannot be quantified. In establishing classes ofproducts, the Department has attempted to eliminate any degradation ofutility or performance in the products covered by today's final rule. Attributes that affect utility include the product's ability to cool and dehumidify. In some applications, noise levels may also be an aspect ofutility. Product size or configuration can also be considered utility ifa 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 ofLessening ofCompetition

16C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

# EE.RM/STD.~~-440**~ tJ~**  2. Life-cycle-costs We considered life-cycle-costs as discussed in the proposed rule. 65 FR 59590, 59594 (October

### 5, 2000).The installed price and operation and maintenance costs were calculated for a . range ofconsumers around the nation to estimate the range in life cycle costbenefits that
consumers would expect to achieve due to new standards..
3. Energy Savings While significant conservation.ofenergy is a separate statutory requirement for establishing an energy conservation standard, the Act requires DOE, in determining the economic justification ofa standard, to considerthe total projected energy savings that are expected to result directly from revised standards.

4. Lessening ofUtility orPerformance ofProducts This factor cannotbe quantified. Inestablishing classes ofproducts, the Department has attempted to eliminate any degradation ofutility orperformance in the products covered by today's final rule. Attributes that affect utility include the product's ability to cool and dehumidify. In some applications, noise levels may also be an aspect ofutility. Product size or configuration can also be considered utility ifa change in size would cause the consumerto install the product in a location orin a manner inconsistent with the consumer's preferences.

5. Impact ofLessening ofCompetition

16c:\MikeIUS DOEICentral AirlSEER13 Final Rule

### draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440

--- = It is important to note that this factor has two parts; on the one hand, it assumes that there could be some lessening ofcompetition as a result ofstandards; and on the other hand, it directs the Attorney General to gauge the impact, ifany, ofthat effect.
In order to assist the Attorney General in making such a determination, the Department provided the Attorney General with copies ofthe proposed rule and the Technical Support Document for review. The Attorney General's response isdiscussed in section V.D.5 ofthis rule and is reprinted at the end ofthe rule.
6. Need ofTheNation to Conserve Energy The Secretary recognizes that energy conservation benefits theNation in several important ways. Enhanced energy efficiency improves the Nation's energy security, strengthens the economy, and reduces the environmental impacts ofenergy production.
7. Other Factors This provision allows the Secretary ofEnergy, in determining whether a standard is economicallyjustified, to consider any other factors that the Secretary deems to be relevant. EPCA Section 325(o)(2)(B)(i)(VI), 42 U.S.C. 6295(o)(2)(B)(i)(VI).
Under this factor, we considered the potential improvement to thereliability ofthe electrical system. Recent summertime electric power outages in various regions ofour country resulted in disruption ofmanypeoples' lives and businesses. The schedule contained in the Act called for the Department to revise the standards for central air conditioners and heat pumps by

17C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd EE-RM/STD-98-440

# -4f==-~8 It is important to note that this factor has two parts; on the one hand, it assumes that there could be some lessening ofcompetition as a result ofstandards; and on the otherhand, it directs the Attorney General to gauge the impact, ifany, ofthat effect.

In orderto assist the Attorney General in making such a determination, the Department provided the Attorney General with copies ofthe proposed rule and the Technical Support Document for review. The Attorney General's response is discussed in section V.D.5 ofthis rule and is reprinted at the end**o~the** rule.

6. Need ofTheNationto Conserve Energy The Secretaryrecognizes that energy conservation benefits the Nation in several important ways. Enhanced energy efficiency improves theNation's energy security, strengthens the economy, and reduces the environmental impacts ofenergyproduction.

7. Other Factors This provision allows the Secretary ofEnergy, indetermining whether a standard is economicallyjustified, to consider any other factors that the Secretary deems to be relevant. EPCA Section 325(0)(2)(B)(i)(VI), 42**U.S.~.** 6295(0)(2)(B)(i)(VI).

Underthis factor, we considered the potential improvementto the reliability ofthe electrical system. Recent summertime electric poweroutages in various regions ofourcountry resulted in disruption ofmany peoples' lives and businesses. The schedule contained intheAct called for the Departmentto revise the standards for central air conditioners and heat pumps by

17C:lMikelUS DoElCentral AirlSEER13 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 5C> 1994, to be effective in 1999. For reasons explained in the NOPR and ANOPR, promulgation of many standards including those for central air conditioners and heat pumps was delayed. Recent unprecedented peak electricity demand and price spikes could have been dampened had these standards been in effect.

While air conditioning accounts for only 8 percent oftotal U.S. electricity consumption, it
can account for several times this amount during peak hours onhot summer days, when electricity reliability is most strained. A 30 percent improvement in air conditioner efficiency would reduce the nation's total annual electricity useby approximately 2 percent after it was fully phased in. However, the same efficiency improvement wouldprovide a greater percentage reduction in peak loads, reducing the prospect ofbrownouts and price spikes. These peak load reductions are critical given that the conditions leading to grid instability can occur well before peak demand even equals supply.
The Final Report3 

### bythe team ofexperts convened by the Secretary to investigate the electric power problem included the recommendation to increase the energy efficiency ofcentral air conditioners as one means for enhancing reliability. This recommendation led the Secretary to put this rulemaking on the fast track and to advance the publication oftoday's final rule for central air conditioners and heat pumps. Thus, the Department has considered effects ofthe rule on electric power system reliability.

3"Report ofthe U.S. Department ofEnergy's Power Outage Study Team: Findings and Recommendations to Enhance Reliability from the Summer of 1999", March 2000. 18c:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd ·.**~** EE-RM/STD-98-440

# -1F**~**

## tJ6 . 1994, to be effective in 1999. Forreasons explained in theNOPR and ANOPR, promulgation of many standards including those for central airconditioners and heat pumps was delayed. Recent

. . unprecedented peak electricity demand and price spikes could have been dampened had these standards been in effect.

While air conditioning accounts for only 8 percent oftotal U.S. electricity consumption, it
can account for several times this amount during peak hours on hot summer days, when electricity reliability is most strained. A 30 percent improvement in air conditioner efficiency would reduce the nation's total annual electricity use by approximately 2 percent after 

### itwas fully phased in. However, the same efficiency improvement wouldprovide a greaterpercentage reduction in peak loads, reducing the prospect ofbrownouts and price spikes. These peak load reductions are critical given that the conditions leading to grid instability can occur well before peak demand even equals supply.

The Final Report3 by the team ofexperts convenedby the Secretaryto investigate the electric powerproblem included the recommendation to increase the energy efficiency ofcentral air conditioners as one means for enhancingreliability. This recommendation led the Secretary to put this rulemaking on the fast track and to advance the publication oftoday's final rule for central airconditioners and heat pumps. Thus, the Departmenthas considered effects ofthe rule
on electric power system reliability.

3"Report ofthe

## u.s. Department ofEnergy's Power Outage Study Team: Findings and Recommendations to Enhance Reliability from the Summer of 1999", March 2000. 18c:\MikeIUS DOEICentral AirlSEERI3 Final Rule draft 12 master 12·14-00.wpd

### EE-RM/STD-98-440- . 

# - 4 5 III. Methodology As discussed in the NOPR, the Department developed new analytical tools for this and other recent rulemakings. The first tool was a spreadsheet that calculates life-cycle-cost (LCC) and payback period. The second calculates national energy savings and national netpresent value (NPV). The Department also completely revised the methodology used in assessing manufacturer impacts including the adoption ofthe Government Regulatory Impact Model (GRIM). Additionally, DOE developed a new approach using the National Energy Modeling System (NEMS) to estimate impacts ofairconditioner energy efficiency standards on electric utilities and the environment.
In order to estimate production costs forthis rulemaking, we used an efficiency level approach, with cost data provided by the Air Conditioning and Refrigeration Association (ARI) and through our own reverse .engineering methods. The ARI cost data presented the minimum, mean, and maximum cost estimates forthe sample ofARI members who participated. The data covered each product class at each efficiency level through 15 SEER, and was expressed relative to the base cost for each manufacturer. The reverse engineering methodology, conceived as a way to validate the ARI data, analyzed seventy-one samples, mostly selected bymanufacturers, using bills-of-materials provided by manufacturers. We physically examined three ofthese models. In refining our results, we reviewed our detailed cost estimates for split air conditioners with a major manufacturer.
The benefits ofreverse engineering include the transparency ofthe methods, data, and assumptions used to produce the estimates, and the insights gained into the design options used

1 9C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

# EE.RM/STD.~~-440~~~~ III. Methodology As discussed in the NOPR, the Department developed new analytical tools for this and otherrecentrulemakings. The first toolwas a spreadsheet that calculates life-cycle-cost (LCC) and payback period. The second calculates national energy savings and national net present value (NPV). The Department also completely revised the methodology used in assessing manufacturer impacts including the adoption ofthe Government Regulatory Impact Model (GRIM). Additionally, DOE developed a new approach using the National Energy Modeling System (NEMS) to estimate impacts ofair conditioner energy efficiency standards on electric utilities and the environment.


### In orderto estimate production costs for this rulemaking, we used an efficiency level approach;with cost data provided by the Air Conditioning and Refrigeration Association (ARI) and through ourown reverse .engineering methods. The ARI cost data presentedthe minimum, mean, and**m~imum** cost estimates for the sample ofARI members who participated. The data covered each product class at each efficiency level through 15 SEER, and was expressed relative to the base cost for each manufacturer. The reverse engineering**m~thodology,** conceived as a wayto validate the ARI data, analyzed seventy-one samples, mostly selected by manufacturers, usingbills-of-materials providedbymanufacturers. We physically examinedthree ofthese models. 

### In refining ourresults, we reviewed our detailed cost estimates for split air conditioners with a majormanufacturer.

The benefits ofreverse engineering include the transparency ofthe methods, data, and assumptions used to produce the estimates, and the insights gained into the design options used 

### 19

c:\MikcIUS DoElCentral Air\SEERI3 Final Rule draft 12 master f2-14-OO.wpd

### EE-RM/STD-98-440 -4t O-- to achieve the different efficiency levels. The ARI data provides none ofthese benefits, but does draw on the considerable expertise ofthe manufacturers involved in producing the underlying estimates describing all ofthe products on the market. One benefit ofthe reverse engineering analysis is that results are expressed in absolute costs instead ofrelative costs. Absolute costs are needed to represent production costs at the minimum efficiency level and are helpful in representing the production costs athigher efficiency levels. Regarding the analytical methodology, the Department continues to use the spreadsheets and approaches explained in the proposed rule. 65 FR 194 59594
- 59597 (October 5, 2000). We have applied them to develop the analysis further in this final rule. We added new analysis based on the manufacturing cost estimates that we had derived through reverse engineering techniques. Also, because its results were similar to those derived using our 18.4-year equipment life assumption, we are no longer considering the 14-year equipment lifetime scenarios in the economic analysis. Finally, the emissions reductions analysis now also estimate the discounted value ofcumulative emission reductions.
IV. Discussion of Comments Since we opened the docket for this rulemaking, we have received over 800 comments from a diverse set ofinterested parties, including manufacturers and their representatives, states, energy conservation advocates, heating and air-conditioning contractors, consumers, electric utilities and others. The comments addressed the burdens and benefits associated with more stringent standards, aspects ofour analysis, the merits ofthe different trial standard levels and standard options we considered, and the DOE rulemaking process. Many comments raised issues

20C:\Mike\US DOE\Centra Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd -------- ------------------- --**~---**

# EE-RM/STD-9~-440

# 4A**CJ~** to achieve the different efficiency levels. The ARI dataprovides none ofthese benefits, but does draw onthe considerable expertise ofthe manufacturers involved in producing the underlying estimates describing all ofthe products on the market. One benefit ofthe reverse engineering analysis is that results are expressed in absolute costs instead ofrelative costs. Absolute costs are needed to represent production costs at the minimum efficiency level and are helpful in representingthe production costs at higher efficiency levels.
Regarding the analytical methodology, the Department continues to use the spreadsheets and approaches explained in the proposed rule. 65 FR 19459594
- 59597 (October 5, 2000). We have applied them to develop the analysis further in this final rule. We added new analysis based on the manufacturing cost estimates that we had derived through reverse engineering techniques. Also, because its results were similarto those derived using our 18.4-yearequipment life assumption, we are no longer considering the 14-year equipment lifetime scenarios in the economic analysis. Finally, the emissions reductions analysis now also estimate the discounted value ofcumulative emission reductions.



### IV. Discussion ofComments Since we opened the docket for this rulemaking, we have received over 800 comments from a diverse set ofinterestedparties, including manufacturers andtheir representatives, states, energy conservation advocates, heating and air-conditioning contractors, consumers, electric utilities and others. The comments addressed the burdens and benefits associated with more stringent standards, aspects ofour analysis, the merits ofthe different trial standard levels and standard options we considered, and the DOE rulemaking process. Many comments raised issues
2Oc:\Mike\US DOE\CentraJ Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 

## Lo 9~) that we substantially addressed in the proposed rule and Supplementary ANOPR. Comments received during the mostrecent comment period are addressed below, and some previous comments are revisited.
A. Burdensand Benefits This section discusses comments we received on the burdens and benefits associated with more stringent minimum efficiency standards, organized into the seven factors that the Secretary considers as abasis for deciding whether a standard level is economicallyjustified.
1. Economic Impacts a. Economic Impacts on Manufacturers According to our manufacturer impact analysis, more stringent efficiency standards burden most manufacturers by causing them to make new investments in capacity, research and development, and testing. We also expect most manufacturers to experience lower profitability and sales volumes for several years after the adopted standards become effective. Some manufacturers in our analysis benefit under more stringent standards.
ARI characterizes the financial burdens on the industry overall as severe. They also assert that the HCFC phaseout results in cumulative burdens. (ARI,No. 100 atp. 6, 13). Some manufacturers noted that EER and TXV requirements would add to theburden. (York No. 90, p. 4-5). NRDC questions whether we considered that reverse engineering-based prices reduce impacts through price elasticity effects, but noted that industry impacts did not seem to change across trial standard levels, and OOE believes that we have overstated manufacturer impacts

21C:\Mike\US DOE\Central AirMSEER13 Final Rule draft 12 master 12-14-00.wpd**-------------~** ----- -------- -- --- -------

# EE-RM/STD-9~-440 

# -=fF**~**

# oSthat we substantially addressed in the proposedrule and Supplementary ANOPR. Comments received during the most recent commentperiod are addressed below, and some previous comments are revisited.



### A. Burdens andBenefits This section discusses comments we received onthe burdens and benefits associated with
more stringent minimum efficiency standards, organized into the seven factors that the Secretary considers as a basis for deciding whether a standard level is economicallyjustified.

1. Economic Impacts
a. Economic Impacts on Manufacturers According to our manufacturer impact analysis, more stringent efficiency standards burden most manufacturers by causing them to make new investments in capacity, research and development, and testing. We also expect most manufacturers to experience lower profitability and sales volumes for several years afterthe adopted standards become effective. Some . manufacturers in our analysis benefit undermore stringent standards.

ARI characterizes the fmancial burdens onthe industry overall as severe. They also assert that the HCFC phaseoutresults in cumulative burdens. 

### CARl, No. 100 at p. 6, 13). Some manufacturers noted that EER and TXV requirements would add to the burden. (YorkNo. 90, p. 4-5). NRDC questions whether we! considered that reverse engineering-based pricesreduce impacts through price elasticity effects, but noted that industry impacts did not seem: to change
across trial standard levels, and OOE believes that we have overstated manufacturer impacts

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### EE-RM/STD-98-440 0 o 5 

### since they are already making investments in new technologies to help them improve product efficiency. (NRDC No. 88 atp. 15; OOE No. 84, p.5).
The reduction in industry netpresent value does increase with increasing standard levels, particularly since we consider it more likely that the Roll-up4 

### scenario will occur under higher standard levels. Manufacturers themselves discussed their situations with us at length, and we have incorporated the information they presented to us into our manufacturer impact analysis. In adopting this rule, wehave assumed that the Roll-up scenario is the most likely outcome resulting from anew 13 SEER standard for all product classes. We did consider the change in sales volumes driven by changes in the underlying cost assumptions. Many comments described what they consider disproportionate impacts on manufacturers ofniche products. Those comments are discussed in Section V.4 below.
The Department has considered the manufacturer burdens as described in the manufacturer impact analysis ofthe TSD in adopting the new standard. These include cumulative burdens. It also considers the extent to which the differences among efficiency scenarios change the implications ofmore stringent standards.
b. Economic Impacts on Consumers

4

### TheRoll-up scenario assumes that the proportion ofequipment with efficiency ratings above the new standard level will not increase compared to theirproportion today. 22C:\Mike\US DOEXCentral Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd since they are already making investments in new technologies to help them improve product efficiency. (NRDC No. 88 at p. 15; OOENo. 84, p.5).

The reduction in industry net present value does increase with increasing standard levels, particularly since we consider it more likely thatthe Roll-up4 scenario will occurunder higher standard levels. Manufacturers themselves discussed their situations with us at length, and we have incorporated the information theypresented to us into our manufacturer impact analysis. In adoptingthis rule, we have assumed that the Roll-up scenario is the most likely outcome resulting from a new 13 SEER standard for all product classes. We did considerthe change in sales volumes driven by changes inthe underlying cost assumptions.
Many comments described what they consider disproportionate impacts on manufacturers ofniche products. Those comments are discussed in SectionV.4 below.

The Departmenthas considered the manufacturerburdens as described in the manufacturer impact analysis ofthe TSD in adopting the new standard. These include 

### cumulative·burdens. It also considers the extentto which the differences among efficiency scenarios change the implications ofmore stringent standards.

b. Economic Impacts on Consumers

4The Roll-up scenario assumes that the proportion ofequipment with efficiency ratings above the new' standard level will not increase compared to theirproportion today. 22c:IMikeIUS OOE\CentraI Air\SEER13 Final Rule draft 12 master 12·14..()O.wpd

### EE-RM/STD-98-44Q0OY 

### j 5 

### , Many comments mention the economic burdens that more stringent efficiency standards can place on consumers who are sensitive to increases in first cost. Many noted that our decision should consider burdens on consumers through long median payback periods. Some commenters emphasized that disproportionate impacts on low income consumers due to an expected increase in installed price would reduce the number ofconsumers who would be able to afford new air conditioners. Some comments suggested that this effect could increase health problems and deaths. (ARI No. 100 at p. 2, 5; APPANo. 113, atp. 2; LennoxNo. 91, p. 3; Consumer Federation of America No. 110, p. 1; Nebraska Public Power District,No. 109, p. 2; NAHB No. 94; Nordyne No. 101, p. 2; Trane No. 93, p. 4; York No. 90 atp. 4-5)
The Consumer Federation ofAmerica considers lower energy bills a benefit and would support regional standards and public assistance programs to mitigate long payback periods and disproportionate impacts on consumers. (Consumer Federation ofAmerica, No. 110 at 2). Many comments express the beliefthat, forvarious reasons, we either underestimated or overestimated economic impacts on consumers. Those comments are addressed in Section IV.B. below.
Werecognize that increases in first cost and long payback periods are generally considered burdens on consumers. Based onthe reverse engineering derived manufacturing cost estimates, however, our analysis shows that, atthe adopted standard levels, the payback period is shorter than the life ofthe equipment, which means the average consumer will benefit
23C:\Mikc\US DOE\Central AirSEER13 Final Rule draft 12 master 12-14-OO.wpd .,. 

# --**EE.RM/STD.98.440_~ ~**  

# b5 Many comments mention the economic burdens that more stringent efficiency standards
can place on consumers who are sensitive to increases in first cost. Many noted that our decision should considerburdens on consumers through long median payback periods. Some commenters emphasized that disproportionate impacts on low income consumers due to an expected increase in installed price would reduce the number ofconsumers.who would be able to affordnew air conditioners. Some comments suggested that this effect could increase.health problems and deaths. (ARJ No. 100 at p. 2, 5; APPANo. 113, at p. 2; Lennox No. 91, p. 3; ConsumerFederation of AmericaNo. 110, p. 1; Nebraska Public Power District, No. 109, p. 2; NAHB No. 94; Nordyne No. 101,p. 2; Trane No. 93,**p.~;** York No. 90 atp. 4-5)

The ConsumerFederation ofAmerica considers lower energy bills a benefit and would support regional standards and public assistance programs to mitigate long paybackperiods and' disproportionate impacts on consumers. (Consumer Federation ofAmerica, No. 110 at 2).
Many comments express the beliefthat, for various reasons, we either underestimated or overestimated economic impacts onconsumers. Those comments are addressed in Section IV.B. below.

We recognize that increases in first cost and long paybackperiods are generally considered burdens on consumers. Based on the**n~verse** engineering derived manufacturing cost estimates, however, our analysis shows that, at the adopted standard levels, the payback period is shorterthan the life ofthe equipment, which means the average consumer will benefit
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### EE.RM/STD-98-440 -*4 

## O financially. Thus, the new efficiency standards should provide the average consumer with a long term economic benefit. Also, we have examined impacts on low income consumers, and found them to benefit overall. Consumers concerned about potential health effects should note that assistance programs are already available to assist them with their air conditioning purchases, and that room air conditioners will continue to be available when cooling in individual rooms could mitigate their health concerns.
2. Life-Cycle Costs ARI, The Trane Company, AEP, Mercatus Center, Southern Company, Dominion Virginia Power, and EEI asserted that the percent ofconsumers realizing life-cycle-cost savings atthe standard levels issued in the proposed rule were too low and did not warrant an increase in the minimum efficiency standard (ARI, No. 100 at p. 2; Trane, No. 93 at p. 4; AEP, No. 83 atp. 1; Mercatus Center, No. 115; Southern Company, No. 96 at p. 2; Dominion, No. 103 at p. 3, Transcript, No. 73 at pp. 50-51; EEI, Transcript, No. 73 at pp. 176-178). Carrier Corp. asserted that there were too many consumers incurring life-cycle-cost increases at 12 SEER (Carrier, No. 92 atp. 5). In contrast, ACEEE, ASE, PG&E, and NRDC argued that the percent ofconsumers realizing life-cycle-cost savings from a particular standard level is notthe appropriate measure forestablishing an updated efficiency standard. Because air-conditioning use ishighly dependent on climatic conditions andbecause these are national standards, it is tobe expected that some consumers in the North will realize net costs from anincreased standard but will be offset by consumers in the Southern part ofthe U.S. who are realizing life-cycle cost savings formmore efficient air-conditioning equipment. Due to this disparity, they argue itis better to

24C\Mike\US DOECentral Air\SEERI3 Final Rule draft 12 master 12-14-OO.wpd 

### ,

# EE.RM/STD.~~.440**-1F-~**

# os-- financially. Thus, the newefficiency standards should provide the average consumer with a long term economic benefit. Also, we have examined impacts on low income consumers, and found them to benefit overall. Consumers concerned aboutpotential health effects should note that assistance programs are already available to assist them With their airconditioning purchases, and that room air conditioners will continue to be available when cooling in individual rooms could mitigate theirhealth concerns.
2. Life-Cycle Costs ARI, TheTrane Company, AEP, Mercatus Center, Southern Company, Dominion Virginia Power, and EEl asserted that the percent ofconsumers realizing life-cycle-cost savings atthe standard levels issued in theproposed rule were too low and did not warrant an increase in the minimum efficiency standard (ARI, No. 100 atp. 2; Trane, No. 93 at p. 4; AEP, No. 83 at p. 1; Mercatus Center, No. 115; Southern Company, No. 96 at p. 2; Dominion, No. 103 at p. 3, Transcript, No. 73 at pp. 50-51; EEl, Transcript, No. 73 atpp. 176-178). Carrier Corp. asserted that there were too many consumers incurring life-cycle-cost increases at 12 SEER (Carrier, No. 92 at p. 5). In contrast, ACEEE, ASE, PG&E, and NRDC argued thatthepercent ofconsumers realizing life-cyc1e-cost savings from a particular standard level is not the appropriate measure for establishing an updated efficiency standard. Because air-conditioning use is highly dependent on climatic conditions and because these arenational standards, it isto be expected that some consumers in theNorth will realize net costs from an increased standardbut will be offsetby consumers in the Southernpart ofthe**U.~.** who are realizing life-cycle cost savings form more efficient air-conditioning equipment. Due to this disparity, they argue itisbetterto

24c:\Mike\US OOE\CentraJ Air\SEERI3 Final Rule draft 12 master 12-14-00,wpd

## EE-RM/STD-98-4404 

## -4 O r? base the standard on national average life-cycle-cost results (ACEEE, No. 104 at p. 13; ASE, No. 81 atp.9; PG&E, No. 104 at 5; NRDC, No. 88 at pp. 19-21). EPCA requires the Department to consider life-cycle-cost as one ofthe seven factors in determining economicjustification. In determining economicjustification, the Secretary shall determine whether the benefits ofa standard exceed theburdens. Life-cycle-cost isjust one of the factors to be considered and there is no mathematical formula for weighing the benefits and burdens ofthe various factors. There are also no mathematical thresholds for life-cycle-cost as implied by EEI and ACEEE (EEI, Transcript, No. 73 atp. 177; ACEEE, Transcript, No. 73 at p. 182). The Department notes that under the standards in today's rule, consumers on average will have lower life-cycle costs. Furthermore, it appears that EPCA, in requiring DOE to set national standards that maximize energy savings for appliances where there will obviouslybe regional differences in usage and energy costs, contemplated that the level oflife cycle cost savings would vary among consumers.
Wehave quantified the distribution oflife cycle costs among consumers and have considered it, along with other information, in the weighing ofthebenefits and burdens ofeach standard level we assessed.
3. Energy Savings ARI states that the Department overestimated the energy savings realized from efficiency standards bybasing the savings on source energy consumption (i.e., at the power plant) rather than site energy use (i.e., at the household or commercial building) (ARI, No. 100 at P. 11).
25C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd --------------:---------

# EE.RM/STD.98-440-1F~

# 00 base the standard on national average life-cycle-cost results (ACEEE, No. 104 at p. 13; ASE, No. 81 atp.9; PG&E, No. 104 at 5; NRDC, No. 88 atpp. 19-21).

EPCA requires the Department to considerlife-cycle-cost as one ofthe seven factors in detennining economicjustification. In detennining economicjustification, the Secretary shall detennine**~hether** thebenefits ofa standard exceed theburdens. Life-cycle-cost isjustone of the factors to beconsidered and there is no mathematical fonnula for weighing thebenefits and burdens ofthe various factors. There are also no mathematical thresholds for life-cycle-cost as implied byEEl and ACEEE (EEl, Transcript, No. 73 at p. 177; ACEEE, Transcript, No. 73 at p. 182). The Departmentnotes that underthe standards intoday's rule, consumers on average will have lower life-cycle costs. Furthennore, it appears that EPCA, in requiring DOE to setnational standards that maximize energy savings for appliances where there will obviouslyberegional differences inusage and energy costs, contemplated that the level oftife cycle cost savings would vary among consumers.

Wehave quantified the distribution oflife cycle costs among consumers and have considered it, along with other infonnation, in the weighing ofthebenefits and burdens ofeach standard level we assessed.

3. Energy Savings ARI states that the Department overestimated the energy savings realized from efficiency standards bybasingthe savings 011 source energy consumption (Le., at the powerplant) rather than site energy use (i.e., at the household orcommercial building) (ARI, No. 100 at P. 11). 25C:\MikeIUS DOElCentral Air\SEERI3 Final Rule draft 12 master 12.14-00.wpd

### EE-RM/STD-98-440 -:a 05, While neither statingthat the energy savings estimated by the Department were too great or too low, ASE claims that 70 billion kWh would be saved from a 13 SEER standard coupled with a minimum EER requirement of 11.6 and mandatory use ofTXVs (ASE, No. 81 at p. 12). ACEEE also claims that significant national energy savings will be realized from a 13 SEER standard, an 11.6 minimum EER requirement, mandatory use ofTXVs, and an HSPF standard of7.9.
NAECA prescribes that consumer energy savings be evaluated based on siterather than source energy consumption. However, the Department believes national energy savings evaluated atthe source reflects a more accurate representation ofthe energy consumption being avoided from a standard. Evaluating energy atthe source takes into account the efficiency ofthe generation source as well as thetransmission and distribution ofthe electricity. The Department accounts for site energy consumption in its analysis ofconsumer life-cycle-cost impacts. With regard to the magnitude ofthe energy being saved from a standard, the Department has full confidence in its National Energy Savings (NES) spreadsheet model to forecast the source energy savings realized from all standard levels including a 13 SEER standard. Discussions with regard to minimum EER standards and TXV requirements are presented later in this Chapter.
4. Lessening ofUtility or Performance ofProducts Comments regarding lessening ofutilityrelated mainly to the impacts that more stringent standards may have on the availability ofniche products and someproducts that are not typically considered "niche". Most comments stated that those products face size constraints that they will find difficult, ifnot impossible, to conform to under more stringent standards. That result could lead to the removal ofthe product from the market, or to equipment prices that are higher than

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### EE-RM/STO-98-440

# -~

# 05
While neither stating that the energy savings estimatedbythe Department were too great ortoo low, ASE claims that 70 billionkWh would be saved from a 13 SEER standard coupled with a minimum EERrequirement of 11.6 and mandatory use ofTXVs (ASE, No. 81 at p. 12). ACEEE also claims that significant national energy savings will berealized from a 13 SEER standard, an 11.6 minimum EER requirement, mandatory use ofTXVs, and an HSPF standard of7.9.

NAECAprescribes that consumerenergy savings beevaluated based on siterather than
source energy consumption. However, the Departmentbelieves national energy savings**e~aluated** at the source reflects a more accuraterepresentation oftbeenergy consumptionbeing avoided from a standard. Evaluating energy at**th~** sourcetakes into account the efficiency ofthe generation source as well as the transmission and distribution ofthe electricity. TheDepartment accounts for site energy consumption in its analysis ofconsumerlife-cycle-cost impacts. With regard to the magnitude ofthe energy being saved from a standard, the Departmenthas full confidence in its National Energy Savings (NES) spreadsheet model to forecast the source energy savings realized from all standard levels including a 13 SEER standard. Discussions withregard to minimum EER standards and TXVrequirements are presented laterin this Chapter.

4. Lessening ofUtility orPerformance ofProducts Commentsregarding lessening ofutilityrelated mainlyto the impacts thatmore stringent standards may have onthe availability ofniche products and someproducts that are not typically considered "niche". Most comments stated that those products face size constraints that they will find difficult, ifnot impossible, to conform to under more stringent standards. Thatresult could lead to the removal ofthe product from the market, orto equipment prices that are higherthan
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### EE-RM/STD-98-440 -"C~ C 

# 5 the market would be able to sustain. (Friedrich, No. 116; Unico, No. 117, p. 1-2; Carrier, No. 92, p. 8; Lennox, No. 91 atp. 7; Trane, No. 93 at 18; Mitsubishi, No. 87 at 1; Armstrong, No. 86 at 1-3; Fujitsu, No. 85 at 1).

We recognize that contractors and consumers do take product size into account when making a purchase, and that size constraints can make it more difficult for manufacturers to offer equipment meeting performance needs. This is true for niche products, which we discuss elsewhere, as well as for conventional products. The same was the case when the 10 SEER minimum standards were agreed upon and established in 1987. Manufacturers can attempt to prevent size constraints from degrading performance or utility by offering smaller 13 SEER equipment than they typically offer today. The technical options for achieving that objective include existing and emerging technologies. Therefore, we do not consider itlikely thatproducts will be unavailable that meet the new 13 SEER standard, and have substantially the same capacities, performance and range ofsizes astoday's products.

Ifthe size of 13 SEER equipment does not generally decrease under new standards, some consumers may be required to incur additional installation expense to accommodate the larger equipment. We discuss this in more depth in Section IV.B.2.e. The Department did consider that possibility when adopting today's standards. Along a separate line, Southern Company is concerned that higherefficiency equipment will reduce dehumidification, which is an important attribute in moderate, humid, climates. (Southern Co., No. 96 at p. 4-5). The equipment's ability to dehumidify is a function ofits

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### EE-RM/STD-98-440

# --1t-t9,0 

# b the market would beable to sustain. (Friedrich, No. 116; Unicb, No. 117, p. 1-2; Carrier, No. 92, p. 8; Lennox, No. 91 atp. 7; Trane, No. 93 at 18; Mitsubishi, No. 87 at 1; Annstrong, No. 86 at 1-3; Fujitsu, No. 85 at 1).

We recognize that contractors and consumers do take product size into account when making a purchase, and that size constraints canmake it more difficult for manufacturers to offer equipment meetingperfonnanceneeds. This is true for niche products, which we discuss elsewhere, as well as for conventional products. The same was the case whenthe 10 SEER minimum standards were agreed upon and established in 1987. Manufacturers can attempt to prevent size constraints from degrading performance orutility by.offering smaller 13 SEER . equipmentthan theytypically offertoday. The technical options for achieving that objective include existing and emergingtechnologies. Therefore,wedo not considerit likelythatproducts \\-ill be unavailable that meet the new 13 SEER standard, and have substantially the same capacities, performance and range ofsizes as today's products.

Ifthe size of 13 SEERequipment does not generally decrease Uilder new standards, some consumers may be**r~quired** to incur additional installation expense to accommodate the larger equipment. Wediscuss this'in more depth in Section IV.B.2.e. The Department did consider thatpossibility when adoptingtoday's standards.
Along a separate line, Southern Company is concerned thathigherefficiency equipment will reduce dehumidification, which is an important attribute in moderate, humid, climates. (Southern Co., No. 96 at p. 4-5). The equipment's ability to dehumidify is a function ofits 27c:lMikc\US OOE\CcntTalAinSEER13FinalRule draft 12master 12.14-00.wpd

### EE-RM/STD-98-440 

### -- 

# _ 

# o5 design and not necessarily its efficiency. As we stated in the proposed rule, evidence indicates that sensible heat ratios in high efficiency equipment are similarto those at the baseline. We trustthat under a more stringent standard, manufacturers will seek to serve the needs ofthe market with products that dehumidify properly.
5. Impact ofLessening ofCompetition The Department ofJustice and others commented that the more stringent standards contained in theproposed rule could lessen competition. (DOJ, No. 112; Trane, No. 93 p. 12; EEI, No. 80 at 8). Aspects ofour manufacturer impact analysis support that conclusion. We discussthe DOJ concerns in more depth in Section V.D.5. The letter from the Department of Justice is attached in the Appendix ofthis rulemaking. We recognize that the standard levels we are adopting could accelerate the consolidation trend among major manufacturers. However, 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 ofchoice and utility for consumers.
Other comments note that a large fraction oftoday's models would notbe able to meet more stringent standards. (AEP, No. 83; Dominion, No. 68 at p. 2; ARI, No. 100 at p. 11; EEI, No. 80 at p. 8). In the manufacturer impact analysis, we considered that manufacturers will have to design new products to meet any increased standard level. Furthermore, products are technologically feasible through 18 SEER. So, while many oftoday's models may notbe available under more stringent standards, we fully expect variations ofthose models tobe available, offering all the features and utility ofcurrently available products.

2 8C:\Mike\US DOECentral Air\SEER13 Final Ruledraft 12 master 12-14-0O.wpd

# EE.RM/STD.~~.440**-~**

# 06 design and not necessarily its efficiency. As we stated in the proposed rule, evidence indicates that sensible heat ratios in high efficiency equipment are similarto those at the baseline. We trust that under a more stringent standard, manufacturers 

### will seekto serve the needs ofthe market with products that dehumidify properly.

5. Impact ofLessening ofCompetition The Department ofJustice and others commented that the more stringent standards contained in the proposed rule could lessen competition. (DOJ, No. 112; Trane, No. 93 p. 12; EEl, No. 80 at 8). Aspects ofour manufacturer impact analysis support that conclusion. We discuss the DOJ concerns in more depth in Section V.D.S. The letter from the Department of Justice is attached in the Appendix ofthis rulemaking. We recognize thatthe standard levels we'
are adopting could accelerate the consolidation trend among major manufacturers. However, we believe that competition will remain vigorous underthe adopted standard, and any lessening of competition that does occurwill not result in price increases or loss ofchoice and utility for
consumers.
Other comments note that a large fraction oftoday'smodelswould not be able to meet
more stringent standards. (AEP, No. 83;Dominion, No.. 68 at**p.2~** ARl, No. 100 at p. 11; EEl, No. 80 atp. 8). Inthe manufacturer impact analysis, we considered that manufacturers 

### will have to design newproducts to meet any increased standard level. Furthermore, products are technologically feasible through 18 SEER. So, while many oftoday'smodels may notbe available under more stringent standards, we fully expect variations ofthose models to be available, offering all the features and utility

### ofcurrently available products.

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### EE-RM/STD-98-440 - 0t 5 

### 6. Need oftheNation to Conserve Energy Ofthe approximately 800 comments we havereceived, the vast majority were from individuals and organizations who made similar claims regarding the benefits that would be associated with a 13 SEER standard and an EER standard for air conditioners andheat pumps. These benefits included savings for consumers, avoided emissions and electrical capacity, and the reduced occurrence ofbrownouts and blackouts. Although our results do not agree with many ofthese claims, all ofthese issues relate to the need ofour nation to conserve energy. We recognize that abroad cross-section ofcitizens and organizations are concerned about these issues and in the potential formore stringent standards to address them.
We discuss more specific comments related to economic benefits and electric system capacity in other sections ofthis chapter. In this section, we discuss thecomments we received regarding environmental benefits.
ASE claims that a 13 SEER standard coupled with an 11.6 EER minimum standard and a mandatory TXV requirement would yield environmental benefits in the form ofthe following air-borne emission reductions: 15 million metric tons ofcarbon, 40,000 tons ofnitrous oxides, and 200,000 tons ofsulfur dioxidein 2020. Northeast Energy Efficiency Partnership (NEEP) also states that significant carbon dioxide emission reductions could be achieved with a 13 SEER standard relative to a 12 SEER standard (ASE, No. 81 at p. 12; NEEP, No. 118 at p. 2). NWPPC states that the Department used the average heat rate ofavoided plants rather than the heat rate ofoperating plants displaced by the efficiency standards when determining emission

29C:\Mike\US DOECentral Air'SEER13 Final Rule draft 12 master 12-14-OO.wpd EE-RM/STD-98-440 

## -:f(B,O

# !5
6. Need oftheNation to Conserve Energy Ofthe approximately 800 comments wehavereceived, the vast majority were from individuals and organizations who made similar claims regarding the benefits that would be associated with a 13 SEER standard and an EER standard for 

### air conditioners and heat pumps. Thesebenefits included savings for consumers, avoided emissions and electrical capacity, an!i thereduced occurrence of brownouts and blackouts. Although ourresults do not agree with many ofthese claims, all ofthese issues relate to the need ofournation to conserve energy. We recognize that abroad cross-section ofcitizens and organizations are concerned about these issues and in the potential for more stringent standards to address them.

We discuss more specific commentsrelated to economicbenefits and electric system capacity in other sections ofthis chapter. In this section, we discuss the comments wereceived regarding environmental benefits.

ASE claims that a 13 SEER standard coupled with an 11.6 EERminimum standard and a mandatory TXVrequirement would yield environmental benefits in the form ofthe following air-borne emission reductions: 15 millionmetric tons ofcarbon, 40,000 tons ofnitrous oxides,

.and 200,000 tons ofsulfur dioxide in 2020. Northeast Energy Efficiency Partnership (NEEP) also states.that significant carbon dioxide emission reductions could be achieved with a 13 SEER standard relative to a 12 SEER standard (ASE, No. 81 at p. 12; NEEP, No. 118 at p. 2). NWPPC states that the Departmentused the averageheat rate ofavoided plants rather than the· heat rate ofoperating plants displaced bythe efficiency standards when determining emission

29 c:

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### EE-RM/STD-98-440

- c? 

# 5 reductions. As a result, NWPPC claims that the emissions mitigated by the standards were estimated (NWPPC, No. 76 at p.6).
National energy savings realized from central air conditioner and heat pump efficiency standards are directly translated into reduced air-borne emissions at electric power plants. The magnitude ofthe emission reductions are determined through theuse ofNEMS-BRS5

### , a version ofNEMS used for appliance standards analyses. NEMS-BRS is based on the AEO2000 version with minor modifications. NEMS offers a sophisticated picture ofthe effect ofstandards since its scope allows it to measure the interactions between the various energy supply and demand sectors and the economy as a whole. Thus, although the Department agrees with ASE that emissions will be avoided from new air conditioner and heat pump efficiency standards, the Department believes that the magnitude ofthose emission reductions arebest estimated with NEMS-BRS as opposed to any other tool. Inthe case ofSO 2



### , the Clean Air Act Amendments of 1990 set an emissions cap on all power generation. The attainment ofthistarget, however, is flexible among generators and is enforced by applying market forces, through the use of emissions allowances and tradable permits. As a result, accurate simulation ofSO 2 

### trading tends to imply that physical emissions effects will be zero because emissions will always be at, or near, the ceiling. This fact has caused considerable confusion in the past. There is virtually no real possible SO 2 

### environmental benefit from electricity savings as long as there is enforcement ofthe emission ceilings. With regard to the issue ofheat rates, contrary to NWPPC's assertion, the

EIA approves use ofthe name NEMS to describe onlyan AEO version ofthe model without any modification to code or data. Because our analysis entails some minor code modifications and the model is run under various policy scenarios that deviate from AEO assumptions, the name NEMS-BRS refers to the model as used here. For more information on NEMS, please refer to the National Energy Modelling System: An Overview 1998. DOE/EIA-0581 (98), February, 1998. BRS is DOE's Office ofBuilding Research and Standards. 30C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd EE-RM/STD-98-440 

# -=fI::-c:?

# /)5'
reductions. As a result, NWPPC claims that the emissions mitigated bythe standards were estimated (NWPPC, No. 76 at p.6).

National energy savings realized from central airconditioner and heatpump efficiency standards are directly translated into reduced air-borne emissions at electric powerplants.. The magnitude ofthe emission reductions are determined through the use ofNEMS-BRS

### s, a version ofNEMS used for appliance standards analyses. NEMS-BRS is based onthe AE02000 version with minormodifications. NEMS offers a sophisticated picture ofthe effect ofstandards since its scope allows it to measure the interactions between the various energy supply and demand sectors and the economy as a whole. Thus, although the Department agrees with ASE that emissions will be avoided from new airconditioner and heatpump efficiency standards, the Departmentbelieves that the magnitude ofthose emission reductions arebest estimated with NEMS-BRS as opposed to any othertool. In the case ofS02, the Clean AirAct Amendments of 1990 set an emissions cap on all power generation. The attainment ofthis target, however, is flexible among generators and is enforced by applying market forces, through the use of emissions allowances and tradablepermits. As a result, accurate simulation ofS02 trading tends to imply that physical emissions effects will be zero because emissions will always be at, ornear, the ceiling. This fact has caused considerable confusion in the past. There is virtually no real possible S02 environmental benefit from electricity savings as 10I?-g as there is enforcement ofthe emission ceilings. With regard to the issue ofheat rates, contrary to NWPPC's assertion, the

5 EIA approves use ofthe nameNEMS to describe only.an AEO version ofthe model without any modification to code ordata. Because our analysis entails someminor code modillcations and the model is run under various policy scenanos that deviate from AEO assumptions, the name NEMS-BRS refers to themodel as used here. Formore information on NEMS, please refer to the National Energy Modelling System: An Overview 1998. DOElEIA-0581 (98), February, 1998. BRS is DOE's Office ofBuilding Research and Standards. 3Oc:\Mike\US DOE\CentraJ Air\SEERI3 Final Rule draft 12 master 12·14-00.wpd

### EE-RM/STD-98-440

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## -F. Department did use the heat rates ofdisplaced power plants in determining the emission reductions resulting from efficiency standards.

7. Other Factors With regard to other factors, the issue ofelectric system reliability attracted numerous comments. EEI, AEP, and Dominion Virginia Power stated many changes are occurring in the electric utility industry at the same time electric load is continuing to grow. As a result, the overall effect ofany end-use efficiency measure, such as an air conditioner and heat pump standard, is likely small.(EEI, Transcript, No. 73 atp. 224; AEP, No. 83 atp. 4; Dominion, No. 103 at p. 4). Southern Company argued that once a standard is established, new load growth forecasts incorporating its effects will likely be made and investment decisions will be accordingly adjusted. In other words, future available capacity willbe a response to expectations ofload growth, reserve margin, and, where competition hasbecome normal practice, to prices. (Southern Company, Transcript, No. 73 at p. 241). Synapse, along with ACEEE, NWPPC, NRDC, ASE, and PG&E noted that there is areal issue in meeting increased demand, due in large part to increased air conditioner usage. Synapse also notes that conventional assumptions about the ability ofthe power system to meet growing load are increasingly coming into question
as the barriers to system expansion are not inadequate price incentives or unwillingness to invest, but rather siting (ofgeneration, transmission, and distribution capability), environmental, and other constraints. (Synapse, Transcript, No. 73 at p. 243; ACEEE, No. 104 atp. 13-15; NWPPC, Transcript, No. 73 at p. 253; NRDC, No. 88 at p. 4,6; ASE, No. 81 at p. 7,10; PG&E, Transcript, NO.73 atp. 251).



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# -=IF**~**

# oSDepartment did usethe heatrates ofdisplaced powerplants in determining the emission reductions resulting from efficiency standards.

7. OtherFactors With regard to other factors, the issue ofelectric system reliability attracted numerous comments. EEl, AEP, and Dominion Virginia Power stated many changes are occumngin the electric utility industry at the same time electric load is continuing to grow. As a result, the overall effect ofany end-use efficiency measure, such as an air conditioner and heat pump standard, is likely small.(EEI, Transcript, No. 73 atp. 224; AEP, No. 83 atp. 4; Dominion, No. 103 at p. 4). Southern Company argued that once a standard is established, new load growth forecasts incorporating its effects will likely bemade and investment decisions will be accordingly adjusted. In other words, future available capacity will be a response to expectations ofload growth, reserve margin, and, where competition has become normal practice, to prices. (Southern Company, Transcript, No. 73 at p. 241). Synapse, along with ACEEE, NWPPC, NRDC, ASE, and PG&E noted that there is a real issue in meeting increased demand, due in large part to increased air'conditionerusage. Synapse also notes that conventional assumptions about the ability ofthe power system to meet growing load are increasingly coming into question
as thebarriers to system expansion are not inadequateprice incentives orunwillingness to invest, butrather siting (ofgeneration, transmission, and distribution capability), environmental, and other constraints. (Synapse, Transcript, No. 73 at p. 243; ACEEE, No. 104 atp. 13-15; NWPPC, Transcript, No. 73 at p. 253; NRDC, No. 88 at p. 4,6; ASE, No. 81 at p. 7,10; PG&E, Transcript, NO. 73 at p. 251).

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### EE-RM/STD-98-440 -~-@ 

### In a March 2000 final report, the DOE Power Outage Study Team described several power outages that occurred in the summer of 1999. During early July, a heat storm affected much ofthe East from New England down past the Mid-Atlantic causing many problems. From July 3through 8,service was interrupted to a total of 110,000 Long Island Power Authority (LIPA) customers for varying periods. During that period, two new system peak loads were set and LIPA activated its Commercial Peak Reduction Program, appealed to its other large customers to voluntarily curtail their use ofelectricity and reduced system-wide voltage by five percent. Many organizations and government offices responded by closing early or cutting back on their electricity use. OnJuly 6,the eastern halfofthe Pennsylvania, New Jersey, Maryland Interconnection grid experienced sudden and steep voltage declines as an all-time-high peak load was recorded. The integrity ofthe system was maintained by reducing voltage, curtailing contractually interruptible customers and appealing for voluntary load reductions. On that same day, Delmarva Power and Lighthad a capacity shortfall that resulted in rotating outages from 10:30 a.m. until 7:30 p.m. affecting 138,000 customers. Inthe Chicago area on July 30, 

### Commonwealth Edison set all-time-peak demand during a period ofintense heat and humidity. Resulting system failures caused morethan 100,000 customers temporary losses ofpower for up to several hours. The summer of2000 has seen similar types ofproblems in the state of California. Outages such as these can cost millions ofdollars per hour depending on which and how many customers are affected. Although werecognize that system adequacy may only play a small part in ensuring system reliability, the Department is convinced, especially due to recent expansion shortfalls in the Western part oftheU.S., that system reliability is an important issue
32C:\Mikc\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd EE-RM/STD-98-440--

# tf

# t?ll)~ In a March 2000 final report, the DOE Power OutageStiIdy Team described several poweroutages that occurred in the summerof1999. During early July, aheat stonn affected much ofthe East from New England down past the Mid-Atlantic causing many problems. From. July 3through 8, service was interrupted to atotal of 110,000 Long Island PowerAuthority (LIPA) customers for varying periods.· During thatperiod, two new system peak loads were set and LIPA activated its Commercial Peak Reduction Program, appealed to its other large customers to voluntarily curtail theiruse ofelectricity and reduced system-wide voltage by five percent. Many organizations and government offices responded by closing early or cutting back
on their electricity use. On July 6, the eastern halfofthe Pennsylvania, New Jersey, Maryland Interconnection grid experienced sudden and steep voltage declines as an all-time-high peak load was recorded. The integrity ofthe system was maintained by reducing voltage, curtailing contractually interruptible customers and appealing for voluntary load reductions. On that same day, Dehnarva Power and Lighthad acapacity shortfall that resu1ted in rotating outages from' 10:30 a.m. until 7:30 p.m. affecting 138,000 customers. In the Chicago area on July 30, Commonwealth Edison set all-time-peak demand during aperiod ofintense heat and humidity. Resulting system failures caused more than 100,000 customers temporary losses ofpower for up to several hours. The summerof2000 has seen similar types ofproblems in the state of California.. Outages such**~** 

### these can cost millions ofdollars perhour depending on which and how many customers are affected. Although we recognize that system adequacy may onlyplaya small part in ensuring system reliability, the Department is convinced, especially due to recent expansion shortfalls in the Western part ofthe U.S., that system reliability is an important issue
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## EE-RM/STD-98-440 

# -. 

# t d5 which can be addressed, to some degree,by increased air conditioner and heat pump standards. Industry restructuring simply adds to the uncertainty over investment in and performance ofthe national power system. The impacts ofstandards could bepotentially beneficial in lowering overall system stress and postponing necessary investment. This is especially important since annual investment in transmission hasroughly halved since the levels ofthe 1970's6. The potential benefit ofair conditioner and heat pump efficiency improvements is afactor in establishing the standards being issued today. In addition, the Department will continue to establish national equipment standards in the form ofthe current efficiency descriptors (i.e., SEER and HSPF) rather than considering additional measures, such as minimum EER standards and mandatory thermal expansion valve (TXV) requirements.

B. Analysis and Assumptions 

### 1. Engineering Analysis a. Reliance on ARI and Reverse Engineering Cost Estimates
The Department considered primarily two sets ofdata for relatingthe manufacturing costs ofcurrent baseline (minimum SEER) equipment to the manufacturing costs ofhigher efficiency equipment which would become baseline equipment under new standards: one source provided bythe industry through ARI and the other source determined from the Department's reverse engineering analysis. Inthe proposed rule, our analyses and conclusions relied heavily on the ARI manufacturing cost estimates, and less heavily on the reverse engineering cost estimates.

6"Hirst, E., "Expanding U.S. Transmission Capacity." Paperprepared for Edison Electric Institute, Washington D.C., July 2000: p. 8-9. 33C:\Mike\US DOECentral Air\SEER13 Final Rule drafl 12 master 12-14-OO.wpd which can be addressed, to some degree, by increased air conditioner and heat pump standards. Industry restructuring simply adds to the uncertainty overinvestment in and performance ofthe national power system. Theimpacts ofstandards could bepotentiallybeneficial in lowering overall system stress and postponing necessary investment. This is especially important since annual investment in transmission has roughlyhalved since the levels ofthe 1970's6. The potential benefit ofair conditioner and heat pump efficiency improvements is a factor in establishing the standardsbeing issued today. In addition, the Department will continue to establish national equipment standards in the form ofthe current efficiency descriptors (i.e., SEER and HSPF) ratherthan consjdering additional measures, such as minimum EER standards and mandatory thermal expansion valve**(T~)** requirements.



### B. AnalysisandAssumptions 1. Engineering Analysis
a. Reliance onARI and Reverse Engineering Cost Estimates

The Department considered primarily two sets ofdata for relatingthe manufacturing costs ofcurrent baseline (minimum SEER) equipment to the manufacturing costs ofhigher efficiency equipment which would becomebaseline equipment under new standards: one source provided by the industry through ARI and the other source determined from the Department's reverse engineering analysis. In the proposed rule, our analyses and conclusions relied heavily on the ARI manufacturing cost estimates, and less heavily onthe reverse engineering cost estimates.
6"Hirst, E., "Expanding U.S. Transmission Capacity." Paperprepared for Edison Electric Institute, Washington D.C., July 2000: p. 8-9. 

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## 5 Several comments questioned the validity ofthe ARI results and recommended we rely more heavily, ifnot exclusively, on the reverse engineering estimates. They cited various reasons, including retail price information that matched theARI Mean, the greater transparency ofthereverse engineering process and results, and the natural tendencies ofmanufacturers to overestimate the costs ofcomplying with more stringent standards. The same comments even suggest that the reverse engineering cost estimates may themselves be overestimates. (OOE, No. 84 at 3; NRDC, No. 88 at p. 3-15; ASE, No. 81 atp. 11; NEEP, No. 188 at p. 3).
Other comments supported the use oftheARI data, citing the experience ofthe manufacturers and apparent flaws in the assumptions andmethodology used in the reverse engineering analysis, which was designed as a validation tool. These perceived flaws included the small number oftear-downs performed. However, ARI and some ofits members recognize that thereverse engineering results fall within their range and seem to validate their data to some extent. (ARI, Transcript, No. 14at p. 42; ARI, No. 48 at p. 2; Carrier, No. 92; Trane, No. 93; Lennox, No. 91 atp. 4; ARI, No. 100 at p. 9).
While we recognize the expertise ofARI's members related to projecting the cost of producing central-air conditioning equipment, wehave several concerns with the ARI data. First, ARI has not satisfactorily explained why their cost data at 12 SEER and higher levels display such alarge range between the minimum and maximum values. We are convinced that, in order toremain competitive, manufacturers will have to adopt relatively similar paths to increase the efficiency oftheir baseline products to meet the new minimum standards. This will tend to result in actual costs that are closer to the ARI Minimum values than to the ARI Mean values.

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# EE.RM/STD.9~.440**-4f-~**

# {)

# 5 Several comments questioned the validity ofthe ARI results and recommended we rely
more heavily, ifnotexclusively, on the reverse engineering estimates. They cited various reasons, including retail price information that matched the ARI Mean, the greatertransparency ofthe reverse engineering process and results, andthe natural tendencies ofmanufacturersto overestimate the costs ofcomplying withmore stringent standards. The same comments even suggest that the reverse engineering cost estimates may themselves be overestimates. (ODE, No. 84 at 3; NRDC, No. 88 at p. 3·15; ASE, No. 81 at p. 11; NEEP, No. 188 atp. 3).

Other comments supported the use ofthe ARI data, citing the experience ofthe manufacturers and apparent flaws in the assumptions and methodology used in the reverse engineering analysis, which was designed as a validationtool. These perceived flaws included

.the smali number oftear-downs performed. However, ARI and some ofits members recognize that the reverse engineering results fall withintheirrange and seem to validate their datato some extent. (ARI, Transcript, No. 14 at p. 42; ARI, No. 48 at p. 2; Carrier, No. 92; Trane, No. 93; Lenn0x, No. 91 at p. 4; ARI, No. 100 at p. 9).

While we recognize the expertise ofARI's members related to projecting the cost of producing centralair conditioning equipment, we have several concerns with the ARI data. First, ARI has not satisfactorily explained why their cost data at 12 SEER and higher levels display such a large range between the minimum and maximum values. We are convinced that, in order to remain competitive, manufacturers will have to adopt relatively similarpaths to increase the efficiency oftheirbaseline products to meet the new minimum standards. This will tend to result in actual costs that are closer to the ARI Minimum values than to the ARI Mean values.

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### EE-RM/STD-98-440 - < A 

### O0 We are also concerned with how closely the data on recent Wisconsin retail prices, submitted byACEEE, agrees with the ARI Mean cost estimates. Once we adopt a higher minimum efficiency level, we believe that the retail prices ofbaseline equipment that must meet that level will decline below the price ofequipment currently at that level. York International Corporation (York) and ARI confirmed, for example, that their markups generally increase on higher efficiency equipment, and Star Supply Company seemed to imply that distributor markups increase with increasing efficiency (Star Supply Co., No. 95 at 2; Mr. Arnold ofYork, Transcript, No. 73 at p. 117; ARI, No. 100 atp. 3). Those markups are reflected in the current retail prices ofthose products. Due to competitive pressures at thebaseline level, today's markups would not be sustainable for baseline equipment that meets,but does not exceed, anew standard. In addition, as noted by John Compton ofHome Excellence, Inc. (HEI), a heating and airconditioning contractor, the new, more efficient, baseline equipment would likely possess fewer ofthe premium features found in today's high efficiency equipment. (Mr. Compton ofHEI, Transcript at p. 123). Forthose reasons, current retail price data would overestimate the relative cost ofhigh efficiency products under new standards. The agreement between ARI's mean cost data and the Wisconsin retail price data suggests that the ARI cost data correspond to today's costs ofproducing high efficiency equipment rather than to the lower production costs we would expect under new standards.
The reverse engineering analysis, on the other hand, is transparent and the results fall within the ARI range and nearerto the ARI Minimum where we expect competitive pressure to drive manufacturing costs. Seventy-one samples were analyzed usingbills-of-materials provided manufacturers, supplemented with three physical teardowns, and detailed estimates for split air

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# EE-RM/STD-9'~-440 

# -iF-**~**

# ()

# 5'
We are also concerned with how closelythe data on recent Wisconsin retail prices, submitted by ACEEE, agrees with the ARI Mean cost estimates. Once we adopt a higher minimum efficiency level, we believe that the retail prices ofbaseline equipment that must meet that level will decline belowthe price ofequipment currently at that level. York International Corporation (York) and ARI confirmed, for example, that theirmarkups generally increase on higher efficiency equipment, and Star SupplyCompany seemed to imply that distributormarkups increase with increasing efficiency (Star Supply Co., No. 95 at 2; Mr. Arnold of-York, Transcript, No. 73 at p. 117; ARI, No.100 at p. 3). Those markups are reflected in the current retail prices ofthose products. Due to competitive pressures at the baseline level, today'smarkups would not be sustainable for baseline equipment that meets, but does not exceed, a new standard. In addition, as noted by John Compton ofRome Excellence, Inc. (HEI), a heating and airconditioning contractor, the new, more efficient, baseline equipment would likelypossess fewer ofthe premium features found in today's high efficiency equipment. (Mr. ComptonofHEI, Transcript atp. 123). Forthose reasons, currentretail price datawould overestimate the relative cost ofhigh efficiency products under new standards. The agreement between ARI's mean cost data and the Wisconsin retail price data suggests that the ARI cost data correspond to today's costs ofproducing high efficiency equipment ratherthan to the lowerproduction costs we would expect under new standards.

The reverse engineering analysis, on the otherhand, is transparent and the results fall within the ARI range and nearerto the ARI Minimum where we expect competitivepressure to drive manufacturing costs. Seventy-one samples were analyzed using bills-of-materials provided manufacturers, supplemented with three physical teardowns, and detailed estimates for split air 

### 35C:lMike\US OOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 -- ;<3 5 conditioners were reviewed with a majormanufacturer. Our reverse engineering methodology, though originally conceived as a validation exercise, is itself a valid method ofestimating equipment production costs, and iswell suited for use in this rulemaking as an indicator ofthe most likely production costs under new standards.
Based on a consideration ofthe above, we conclude that the reverse engineering cost estimates are more representative ofwhat actual production costs will be under new standards and that the ARI Mean cost data very likely overestimate those costs. For that reason, we are weighing the reverse engineering cost estimates heavily in our decision-making. We continue to provide the results based on the ARI Mean data cost to illustrate an upper bound, which we believe will be quite an unlikely outcome.
b. Consideration ofEmerging Technologies ACEEE and others commented we should have included the savings that could result from the use ofemerging technologies rather than presenting them separately. The Oregon Energy Office and Thermalex, Inc. also expressed more optimism regarding the applicability and probability ofadoption for microchannel heat exchangers than we had expressed in the TSD. (Mr. Nadel ofACEEE, Transcript at p. 88; ASE, No. 81 atpp. 8, 9, and 12; OOE, No. 84 at p. 5; Thermalex, No. 89 atpp. 1-2).
Trane and York dispute some ofthe claims regarding the potential ofemerging technologies. (Trane, No. 93 at p. 7; York, No. 90, p.4).

36C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-0O.wpd .. 

# --- EE-RM/STD-98-440

## -F~ 

## tJ!::J conditioners were reviewed with a majormanufacturer. Ourreverse engineering methodology, though originally conceived as a validation exercise, is itselfa valid method ofestimating equipmentproduction costs, and is well suited for use in this rulemaking as an indicator ofthe most likelyproduction costs under new standards.

Based on a consideration ofthe above, we conclude that the reverse engineering cost estimates are more representative ofwhat actual production costs will be under new standards and that the ARI Mean cost data very likely overestimate those costs. Forthat reason, we are weighing the reverse engineering cost estimates heavily in our decision-making. We continue to provide the results based on the ARJ Mean data cost to illustrate an upper bound, which we believe will be quite an unlikely outcome.


### b. Consideration ofEmerging Technologies ACEEE and others commented we should have included the savings that could result from the use ofemerging technologies rather than presenting them separately. The Oregon Energy Office and Thermalex, Inc. also expressed more optimismregarding the applicability and probabilitY ofadoption for microchannel heat exchangers than we had expressed in the TSD. (Mr. Nadel ofACEEE, Transcript at p. 88; ASE, No. 81 atpp. 8,9, and 12; ODE, No. 84 at p. 5; Thermalex, No. 89 at pp. 1-2).

Trane and York dispute some ofthe claimsregardingthe potential ofemerging technologies. (Trane, No. 93 atp. 7; York, No. 90, p.4).

36c:\MikeIUS OOEICentral AirlSEERI3 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 - "sco-b0 According to our engineering analysis described in Section 4.5 ofthe TSD, on a system basis, emerging technologies cannot make a significant cost impact below 14 SEER. That explains why they are not in widespread usetoday. At 14 SEER and above, some emerging technologies could compete quite favorably with the technologies that currently dominate in some applications. We did not analyze standard levels at 14 SEER since those were eliminated based on the economic analysis contained in the ANOPR. ACEEE contends that, had we evaluated life-cycle-costs using reverse engineering analysis combined with emerging technology impacts, a standard level as high as 14 SEER may have beenjustified after all, and should have been considered. (Mr. Nadel ofACEEE, Transcript atp. 171, ACEEENo. 101 at 7)

From ourANOPR analysis based on ARI mean costs, we concluded that standard levels above 13 SEER did not warrant further consideration. York had stated that ARI's cost data already included the benefits ofemerging technologies although we could not verify the methods they used to incorporate them (Madera ofYork, ANOPR Transcript at p 116, Wethje ofARI, ANOPR Transcript atp. 115). Economic impact results based onreverse engineering were more favorable, but still were far from compelling. For example, the impact on national net present value was negative $8.4 billion for 14 SEER split air conditioners. Incorporating the modest reduction in cost due to the most likely impact ofemerging technologies (about 10 percent for split air conditioners) would not have changed our decision to eliminate the 14 SEER level from further consideration.
Overall, we considered the potential ofemerging technologies to penetrate the market in 13 SEER products under a 13 SEER standard to be higher than under lower standard levels.

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### ------------ --------- ---

o**~** EE· oRM/STD-9S-440 

# -'=/r**~**

## O!:::J According to our engineering analysis described in Section 4.5 ofthe**T~D,** on a system basis, emergingtechnologies cannot make a significant cost impact below 14 SEER. That explainswhythey are not in widespread use today. At 14 SEERand above, some emerging technologies could compete quite favorably

## with the technologies that currently dominate in
some applications. We did not analyze standard levels at 14 SEER since those were eliminated based onthe economic analysis contained in the ANOPR. ACEEE contends that, had we evaluated life-cycle-costs using reverse engineering analysis combined with emerging technology impacts, a standard level as high as 14 SEERmay'have beenjustified after all, and should have been considered. (Mr. Nadel ofACEEE, Transcript at p. 171, ACEEENo. 101 at 7)

From ourANOPR analysis .based on ARlmean costs, we concluded that standard levels above 13 SEER did not warrant further consideration. York had stated that ARI's cost data already included the benefits ofemerging technologies although we could not verify the methods they used to incorporate them (Madera ofYork, ANOPRTranscript at p 116, Wethje ofARl, ANOPR Transcript atp. 115). Economic impactresults based onreverse engineering were more favorable, but still were far from compelling. For example, the impact on national net present value was negative $8.4 billion for 14 SEER split air conditioners. Incorporating the modest reduction in cost due to the most likely impact ofemerging technologies (about 10 percent for split air conditioners) would not have changed our decisionto eliminate the 14 SEER level from further consideration.
Overall, we considered the potential ofemerging technologies to penetrate the market in 13 SEERproducts under a 13 SEER standard to be higherthan under lower standard levels. 

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### EE-RM/STD-98-440 -- 

# a5 Partially forthat reason, we believe that the burdens that could accrue from increases in the size ofbaseline equipment under a 13 SEER standard can be somewhat mitigated by the use of emerging technologies.
2. Life Cycle Cost (LCC) analysis
a. Probability-based analysis The Trane Company questions theuse ofa Monte Carlo probability-based analysis because they claim that several ofthe distributions used to characterize the inputs to the analysis
are erroneous (Trane Company, No. 93 at p. 4-5).

As part ofthe process to improve the energy efficiency standards analysis, the Department uses aprobability-based analysis to determine a distribution oflife-cycle cost impacts for consumers utilizing central air conditioners and heat pumps. Most ofthe inputs to the analysis are characterized with distributions. While some ofthe input distributions are based
on limited data, no other data have been offered to recharacterize the distributions. Therefore, the Department sees no reason to alter its assumptions regarding theinput distributions.
b. Energy Use The Trane Company claims that the 1997 Residential Energy Consumption Survey (RECS) sample is too small and may not accurately represent the population ofcentral air conditioner and heat pump consumers. In addition, they claim the Department is not accurately representing the saturation ofair-conditioned households. Trane states that the saturation reported by the Department (37.6 percent) is inconsistent with the saturation reported by RECS 

### 3 8C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd EE-RM/STD-98-440

## --~ 

# bJ,**~** Partially for that reason, we believe thatthe burdensthat could accrue from increases inthe size ofbaseline equipment under a 13 SEER standard can be somewhat mitigated by the use of emergingtechnologies.

2. Life Cycle Cost (LCC) analysis
a. Probability-based analysis , .

TheTrane Company questions theuse ofa Monte Carlo probability-based analysis because they claim that several ofthe distributions used to characterize the inputs to the analysis
are erroneous (Trane Company, No. 93 atp. 4-5).

Aspart oftheprocess to improve the energy efficiency standards analysis, the Department uses a probability-based analysis to determine a distribution oflife-cycle cost impacts for consumers utilizing central air conditioners and heat pumps. Most ofthe inputs to the analysis are characterized with distributions. While someofthe input distributions arebased
on limited data, no otherdata havebeen offered to recharacterize the distributions. Therefore, the Department sees no reason to alterits assumptions regarding the input distributions.

b. Energy Use TheTrane Company claims that the 1997 Residential Energy Consumption Survey (RECS) sample is too small and maynot accurately rePresent the population ofcentral air conditioner and heatpump consumers. 

### In addition, they claim the Department is not accurately representing the saturation ofair-conditionedhouseholds. Trane states that the saturation reported bythe Department (37.6 percent) is inconsistent with the saturation reported by RECS 3Sc;\Mike\US**DOE\C~ntral** Air\SEER\3 Final Rule draft 12 master 12.14-00.wpd

### EE-RM/STD-98-440 

# 5 ° (47 percent) (Trane Company, No. 93 atp. 4-5).
As part ofthe process to improve the energy efficiency standards analysis, the Department is committed to use sensitivity analysis tools to evaluate thepotential distribution of impacts among different subgroups ofconsumers. The Department believes that RECS provides anationally representative household data set which is suited forconducting the type of sensitivity analyses suggested by theProcess Rule. Limiting the RECS households to those equipped with either central air conditioners orheat pumps, the LCC analysis performs a household-by-household analysis that predicts the percentage ofhouseholds that will incurnet life-cycle cost savings or costs from an increased efficiency standard. With regard to apparent discrepancies between air-conditioned household saturations, the 37.6 percent saturation value citedby Trane represents only those households with central airconditioners. When including homes with central air-conditioning heat pumps, the household saturation used by the Department in itsLCC analysis matches the 47 percent saturation level reported by RECS.

c. Electricity Prices
Wholesale electricity cost data forthe period of 1998 through October, 2000, presented by experts on behalfofthe Appliance Standards Awareness Project (ASAP); demonstrated dramatic variations in seasonal wholesale electricity costs for regions ofthe country (i.e., California, New England, New York, and the Pennsylvania-New Jersey-Maryland region) that haverecently deregulated their electric utility industry. In particular, wholesale costs during
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### · 

# -- EE-RM/STD-98-440

# --.:It A05 (47 percent) (Trane Company, No. 93 at p. 4-5).

Aspart oftheprocess to improvethe energy efficiency standards analysis, the Department is committed to use sensitivity analysis tools to evaluate thepotential distribution of impacts among different subgroups ofconsumers. The Departmentbelieves that RECS provides
a nationally representativehousehold data set which is suited for conducting the type of sensitivity analyses suggested bythe Process Rule. Limiting the RECS households to those equipped with either central air conditioners orheat pumps, the LCC analysis performs a household-by-household analysis that predicts the perceptage ofhouseholds that will incurnet life-cycle cost savings orcosts from an increased efficiency standard.' Withregard to apparent discrepanciesbetween air-conditioned household saturations, the 37.6 percent saturation value cited by Tranerepresents onlythose households with central airconditioners. When including homes with central air-conditioning heat pumps, thehousehold saturation usedbythe Departmentin its LCC analysis matches the 47 percent saturation level reported by RECS.

c. Electricity Prices

Wholesale electricity cost data for theperiod of 1998 through October, 2000, presented by experts on behalfofthe Appliance Standards Awareness Project**(ASAP)~** demonstrated dramatic variations in seasonal wholesale electricity costs for regions ofthe country (i.e., California, New England, New. York, and the Pennsylvania-New Jersey-Maryland region) that haverecently deregulated their electricutility industry. In particular, wholesale costs during 

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### EE-RM/STD-98-440 - - ' ° .
summer months and especially certain summer day hours were significantly greater than annual average wholesale costs. Wholesale electricity cost data forthe period spanning 1998 through 1999 for sixregulated North American Electric Reliability Council (NERC) regions were also presented showing that summer costs were also significantly greater than average annual costs (Synapse Energy Economics (Synapse), Transcript, No. 73 p. 127-137; Synapse, No. 108 at p. 5). Asserting that DOE's marginal prices based on 1996 and 1997 data are regulated and do not reflect the marginal cost ofelectricity under a deregulated market, ASAP, ACEEE, NWPPC, and Synapse argued that based on recent wholesale electricity cost data, marginal costs will significantly exceed average costs during periods when air conditioners are operating. 7 

### Future marginal electricity prices are also likely to increase as electricity markets through out the U.S.
are deregulated (ASAP, No. 108 at p. 1; ACEEE, Transcript, No. 73 atp. 154-158; NWPPC, No. 76 at p. 3-4; Synapse, Transcript, No. 73 at pp. 152-153).

Dominion Virginia Power (Dominion), The Southern Company (Southern), and EEI all disagree with the assertion that higher marginal costs will result from higher wholesale electricity costs. Dominion stated that recent deregulation pilot programs in Virginia revealed that residential consumers are not being offered rates that reflect the costs ofgeneration (e.g., time of
use rates). Southern warned that itis premature to draw conclusions from wholesale electricity costs this early into the deregulation process. Extremely high wholesale prices now may notbe
an indicator as what will happen to retail prices in the future. Southern also warned that the specific problems facing California with regard to wholesale electricity costs are not

7Marginal prices exclude fixed charges, average prices include fixed charges. 40c:Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-O0.wpd
'i EE-RM/STD-98-440 --

# tr 

# c1 0

# ~ summermonths and especially certain summer day hours were significantly greaterthan annual average wholesale costs. Wholesale electricity cost data for the period spanning 1998 through 1999 for six regulated North American ElectricReliability Council (NERC) regions were also presented showing that summercosts were also significantly greaterthan average annual costs (Synapse EnergyEconomics (Synapse), Transcript, No. 73 p.127-137; Synapse, No. 108 atp. 5). Asserting that DOE'smarginal prices based on 1996 and 1997 data areregulated and do not reflect the marginal cost ofelectricity under a,deregulated market, ASAP, ACEEE, NWPPC, and Synapse argued thatbased on recent wholesale electricity cost data, marginal costs will significantlyexceed average costs during periods when airconditioners are operating. 7 Future marginal electricityprices are also'likely to jncrease as electricitymarkets through out the U.S.
are deregulated (ASAP, No. 108 at p. 1; ACEEE, Transcript, No. 73 at p.**154-158~** NWPPC, No. 76 at p. 3-4; Synapse, Transcript, No. 73 at pp. 152-153).

Dominion Virginia Power (Dominion), The Southern Company (Southern), and EEl all disagree with the assertion that highermarginal costs will result from higher wholesale'electricity costs, Dominiol1 stated that recent deregulation pilotprograms in Virginia revealed that residential consumers are not being offered rates thatreflect the**co~ts** ofgeneration (e.g., time of
use rates). Southern warned that it is premature to draw conclusions from wholesale electricity costs this early into the deregulation process. Extremelyhigh wholesaleprices nowmaynotbe
an indicator as what will happen to retail prices in the futUre. Southern also warned that the specific problems facing California with regard to wholesale electricity costs are not
'Marginal prices exclude fixed charges, average prices include fixed charges. 4Oc:\Mikc\US OOE\Central Air\SEER\3 Final Rule draft 12 master 12-14.()O,wpd

### EE-RM/STD-98-440 - 

# aj4 

# 5 representative ofthe current situation in the Southeast where peak prices were considerably lower in the summer of2000 on pooled prices than they were the previous summer because of greater supply availability. EEI argued that flat rate retail pricing will likely continue into the future even under a deregulated market. Electricity suppliers will hedge against any probable summer price spikes by offering high enough flat rates so that financial losses incurred during times ofhigh summer wholesale costs will bemore than offset bytheprofits earned during times when wholesale costs are low (e.g., offpeak summer hours orthe winter season) (EEI, Transcript, No. 73 atpp. 148-150; Dominion, Transcript, No. 73 atpp. 158-160; Southern Company, No. 96 at pp. 6-7).
As was stated in the proposed rule, the method for establishing marginal electricity prices only allows for defining marginal prices forthose years in which data are available. In the case ofresidential pricing, the data for establishing marginal prices (the 1997 RECS') was taken from the years 1996 and 1997. For commercial buildings, utilitytariffs used to establish marginal prices were collected in the year 1997. On average, residential marginal prices forhouseholds with central air conditioners are 3percent lower than average rates while for households with heatpumps marginal prices are 7percent lower. Space-cooling marginal prices in commercial buildings are on average 2percent greater than average commercial rates. Our method for determining marginal prices provides a snap shot ofrecent retail rates and may or may not accurately reflect what marginal prices will belike in the future. Although wholesale electricity costs for four deregulated electricity markets demonstrate higher wholesale electricity costs

'Residential Energy Consumption Survey 41C:\Mike\US DOECentral Air\SEER13 Final Rule draft 12 master 12-14-O0.wpd . 

# ---- EE·RM/STD·98·440
.....

# 4f 

# OJ/)b representative ofthe current situation inthe Southeast where peak prices were considerably lowerin the summer of2000 on pooled prices than they were the previous summerbecause of greater supply availability. EEl argued that flat rateretail pricing will likely continueinto the future even under a deregulatedmarket. Electricity suppliers will hedge against any probable . summerprice spikes byoffering high enough flat rates so that financiallosses incurred during times ofhigh summerwholesale costs will bemorethan offsetbytheprofits earned duringtimes when wholesale costs are low (e.g., offpeak summerhours orthe winter season){EEl, Transcript, No. 73 atpp. 148-150; Dominion, Transcript, No. 73 at pp. 158-160; Southern Company, No. 96 at pp. 6-7).

As was stated inthe proposed rule, the method for establishing marginal electricity prices only allows for definingmarginal prices for those years in which data are available. In the case ofresidential pricing, the data for establishing marginal prices (the 1997 RECSI) was taken from theyears 1996 and 1997. Forcommercial buildings, utility tariffs used to establish marginal prices were Collected in the year 1997. On average, residential marginal prices for households with central air conditioners are 3 percent lowerthan averagerates while for households with

.heatpumpsmarginal prices are 7 percent lower. Space-coolingmarginal prices incoinmercial buildings are on average 2 percent greater than average commercial rates. Ourmethod for determining marginal prices provides a snap shot ofrecentretail rates and mayormaynot accurately reflect what marginal prices will belike inthe future. Althoughwholesale electricity costs for four deregulated electricity markets demonstratehigher wholesale electricity costs

1 Residential Energy Consumption Survey 41 C:\Mike\US OOE\CentraJ Alr\SEERJ3 Final Rule draft 12 master 12.14'()O.wpd

### EE-RM/STD-98-440 -'6, . 

### during times when air conditioners are likely to beused, we cannot speculate as to how wholesale electricity prices will be translated into retail prices to residential consumers. Thus, rather than speculating asto how electricity deregulation may impact marginal electricity prices, we are retaining our existing method for establishing marginal prices.
With the above said,the Department investigated the sensitivity ofconsumer life-cycle costs (aggregated to a national level in the form ofa net present value (NPV)) to increases in the marginal electricity price. As will be reported in Chapter V, Analytical Results, the NPV ofa 13 SEER standard based on Reverse Engineering manufacturing costs is a savings to the nation of $1billion. An increase in the marginal electricity price of 3 cents/kWh yields a further increase in the operating cost savings so that theNPV equals $5billion. Although the Department will continue to rely on its existing method for establishing marginal electricity prices, we recognize that future changes in the electric utility industry due to deregulation could significantly change future electricity prices and, as a result, improve the economic benefits ofthe standards being issued today.
d. Product Life
ARI, Carrier Corp., and The Trane Company all asserted that the 18.4 year average equipment lifetime assumed by the Department is notrepresentative ofactual central air conditioner and heat pump life. Both Carrier and Tranebelieved the lifetime is 15 years while ARI stated that the lifetime is even lower at 13 years (ARI, No. 100 atp. 4; Carrier, No. 92 at p. 5; The Trane Company, No. 93 atp. 8).
42C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-0wpd . ,**~** EE·RM/STD·98-440

# -=tt: CJ,1J5 during times when air conditioners are likely to beused, we cannot speculate as to how . wholesale electricityprices will betranslated into retail prices to residential consumers. Thus, rather than speculating as to how electricity deregulation may impact marginal electricity prices,
we are retaining ourexisting method for establishingmarginal prices.

With the above said, the Department investigated the sensitivity ofconsumer life-cycle costs (aggregated to a national level in the fonn ofa netpresent value (NPV» to increases in the

. , marginal electricityprice. As will bereported in ChapterV, Analytical Results, theNPV ofa 13 SEER standardbased onReverse Engineeringmanufacturing costs is a savings to the nation of $1 billion. Anincrease in themarginal electricityprice of3 centslkWh yields a further increase in the operating cost savings so that the NPV equals $5 billion. Although the Department will continue to rely on its existingmethod for establishing marginal electricitY prices, werecognize that future changes in the electric utility industry due to deregulation could significantly change future electricityprices and, as a result, improve the economicbenefits ofthe standards being issued today.

d. Product Life
ARI, Carrier Corp., and TheTrane Company all asserted that the 18.4 year average equipment lifetime assumed bythe Departmentis not representative ofactual central air conditioner and heatpump life. Both Carrier and Tranebelieved the lifetime is 15 years while ARI stated that the lifetimeis even lower at 13 years (ARI, No. 100 at p. 4; Carrier, No. 92 at'p. 5; TheTrane Company, No. 93 at p. 8).
42c:\Mike\US DOE\Central Air\SEERI3 Final Rule dmft 12 master 12'14'()O',wpd

### EE-RM/STD-98-440-_A 5 

### The basis ofthe 18.4 year equipment lifetime was a survey conducted on more than 2,100 heat pumps in a seven state region ofthe U.S 2


### . The survey determined not only the lifetime ofa complete heat pump system, butthe life ofthe original compressor as well. Although the system lifetime is on average over 18 years, the survey also showed that the original compressor lifetime was, on average, 14 years. Thus, the survey indicated that essentially all heat pump owners replaced their original compressor once in the lifetime ofsystem. Since theheat pump survey clearly indicates that the original compressor is replaced once in a system's life, the analysis was based on the inclusion ofa repair cost for the compressor. Conducting the analysis in this manner retains the average system lifetime of 18.4 years but explicitly addresses the replacement cost ofthe compressor, which is the most expensive component ofa system. Asindicated by the survey data, the compressor was assumed to be replaced in the 14 th 

### year ofthe system's life. Although a shorter equipment lifetime is possible, the Department has notbeen provided with more substantive data to drop its use ofthe above mentioned survey data. The Department believes that the survey data provides an accurate representation ofcentral air conditioner and heat pump life. In addition, an average lifetime of 14 years was run as a scenario for the analyses conducted for theNotice ofProposed Rulemaking showing that the resulting consumer economics were very closeto theresults generated with the 18.4 year average life coupled with compressor replacement costs.

e. Installation Cost

2 "Bucher, M.E., Grastataro, C.M., and Coleman, W.R, "Heat Pump Life and Compressor Longevity in Diverse Climates." ASHRAE Transactions, 1990. 96(1): p. 1567-1571. 43C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd ... I ..-- 

### EE-RM/STO-9S-440-1r

### ~ 

### D

## S Thebasis ofthe 18.4 year equipment lifetime was a survey conducted onmorethan 

### 2,100 heatpumps 

### in a seven stateregion ofthe U.S2. The survey determined not only the lifetime ofa completeheat pump system, butthe life ofthe original compressor as well. Although the system lifetime is on average over 18 years, the survey also showed that theoriginal compressor lifetime was, on average, 14 years. Thus, the survey indicated that essentially all heat pump owners replaced their original compressoronce in the lifetime ofsystem. Since theheat pump survey clearly indicates thatthe original compressor is replaced once in a system's life, the analysis was based onthe inclusion ofa repair cost for the compressor. Conducting the analysis in this
mannerretains the average system lifetime of 18.4 yearsbut explicitly addresses the replacement cost ofthe compressor, which is the most expensive component ofa system. Asindicated bythe survey data, the compressorwas assumed to bereplaced in the 14th year ofthe system's life. Although a shorter equipment lifetime is possible, the Departmenthas notbeenprovided with
more substantive datato drop its use ofthe above mentioned survey data. The Department believes that the survey data provides an accuraterepresentation ofcentral air conditioner and heat pump life. In addition, an average lifetime of 14 years was run as a scenario for the analyses conducted for theNotice ofProposed Rulemaking showing that the resulting consumer econoinics were very closeto the results generated with the 18.4 year average life coupled with compressorreplacement costs.

e. Installation Cost

2 "Bucher, M.E., Grastataro, C.M., and Coleman, W.R, "Heat Pump Life and Compressor Longevity in Diverse Climates." ASHRAE Transactions, 1990.96(1): p. 1567-1571. 43C:\MikeIUS DOEICcntral Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 - o-. Commentsby International Comfort Products (ICP) and HEI stated that consumer's installation costs, e.g, labor and materials costs, exclusive of equipment cost, for installing a central air conditioner orheat pump will increase with product efficiency (Mr. Caronna ofICP, Transcript, atp. 126-127; Compton ofHEI, Transcript atp. 92-93). ICP specifically voiced concerns over the installation cost differences between baseline (10 SEER) and 14 SEER equipment stating that the more efficient equipment, due its increased physical size, would incur higher labor expenses as a result ofneeding extra personnel to install the equipment. Other comments claimed that installation costs would be impacted by larger and more efficient units forthose installations with size constraints such as equipment closets in manufactured homes and certain replacement installations in single-family homes (MHI, No. 99 atp. 4; York, No. 90 at p. 5; Lennox, No. 91 atp. 7). Throughout the analysis we have assumed that installation costs would remain constant as efficiency increased. We remain unconvinced based on the comments we have received that our assumption isnecessarily incorrect. Even ifinstallation costs do generally rise asthe size and weight ofequipment increases, manufacturers will have the incentive undernew standards to reduce the size of 13 SEER equipment using various approaches at their disposal. These include existing design options that we have mentioned, such as adopting variable speed andmodulating capacity technologies, converting to microchannel heat exchangers, increasing the size ofthe unconstrained outdoor unit or indoor unit only, or changing the footprint or elevation oftheunit. These possible solutions are applicable to manufactured homes as well as site-built homes. Also, contractors will have incentive to more correctly size units to thebuilding load which will typically result in smaller units being installed.
44C:\Mike\US DOE\Cental Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd EE-RM/STD-98-440

# -"IF**~{)S** CommentsbyInternational Comfort Products (ICP) and HE! stated that consumer's installation costs, e.g, labor and materials costs, exclusive of equipment cost, for installing a central air conditionerorheatpump will increase withproduct efficiency (Mr. CaronnaofICP, Transcript, atp. 126-127; Compton ofHEI, Transcript at p. 92-93). ICP specifically voiced
concerns overthe installation cost differences between baseline (10 SEER) and 14 SEER equipment stating that the more efficient equipment, due its increased physical size, would incur higherlabor expenses as a result ofneeding extrapersonnel to install the equipment. Other comments claimed that installation costs would be impacted by larger and more efficient units for those installations with size constraints such as equipment closets in manufacturedhomes and certain replacement installations in single-fap1ily homes (MHI, No. 99 at p. 4; York, No. 90 atp. 5; Lennox, No. 91 atp. 7).
Throughout the analysis we have assumed that installation costs would remain constant
as efficiency increased. Weremain unconvincedbased on the comments we havereceived that
our assumption is necessarily incorrect. Even ifinstallation costs do generally rise as the size and weight ofequipment increases, manufacturers will have the incentiveundernew standards to reducethe size of 13 SEER equipment using various approaches at their disposal. Theseinclude existing design options that wehave mentioned, such as adopting variable speed and modulating capacity technologies, converting to microchannel heat exchangers, increasing the size ofthe unconstrained outdoorunit orindoorunit only, orchanging the footprint orelevation ofthe unit.

.Thesepossible solutions are applicableto manufactured homes as well as site-built homes. Also, contractors will have incentive to more correctly size units to thebuilding load which will typically result in smallerunits being installed.
44c:\MikeIUS DOElCentral Air\SEER\3 Final Rule draft 12 master 12.14-00.wpd

### EE-RM/STD-98-440 -" 

### ~ 5 

### For those reasons, we are retaining our assumption that installation costs remain constant as efficiency levels rise.
f. Markups
Comments pointed out that wehad apparently assumed that markups decreased as efficiency levels increased, and provided evidence to the contrary (ARI, No. 100 atp. 3; York, No. 90 atp. 4; Carrier, No. 92 at p. 5; Trane, No. 93 atp. 12).
In fact, we did assume for the Manufacturer Impact Analysis that markups increase with increasing efficiency under a given standard level. This agrees with the comments. However, for the consumer economic analyses, as theminimum standard level increases, we assumed that the some ofthe markups on thebaseline product do decrease. Comments did not address that issue, and we believe our assumption is correct. Appendix D ofthe TSDprovides more information on this issue.
3. Shipments/National Energy Savings

a. Adjustments to NAECA Shipment Scenario
ACEEE and the Northeast Energy Efficiency Partnerships (NEEP) assert that the NAECA efficiency scenario we developed is not at allrepresentative ofthe effect ofthe NAECA
45C:\Mike\US DOE\Central Air\SEER13 Final Ruledraft 12 master 12-14-OO.wpd

# EE.RM/STD-9~.440 --:tF

# ~ lJ

# 5"

Forthosereasons, we are retaining our assumption that installation costs remain constant
as efficiency levels rise.


### f. Markups

Commentspointed out that we had apparently assumed that markups decreased as efficiency levels increased, and provided evidenceto the contrary (ARI, No. 100 atp. 3; York, No. 90 atp. 4; Carrier, No. 92 at p. 5; Trane, No. 93 at p. 12).

In fact, we did assume for the ManufacturerImpact Analysis that markups increase with increasing efficiencyunder a given standard level. This agrees with the comments. However, for the consumereconomic analyses, as the minimum standard level increases, we assumed that the some ofthe markups on thebaseline productdo decrease. Comments did not address that issue, and webelieve our assumption is correct. .Appendix D ofthe TSD provides more information onthis issue.

3..Shipments/National Energy Savings

a. Adjustments to NAECA Shipment Scenario

ACEEE and the Northeast Energy Efficiency Partnerships (NEEP) assert that the NAECA efficiency scenario we developed is not at all representative ofthe effect oftheNAECA 

### 45c:\MikeIUS DOElCentral Air'lSEER13 Final Rule draft 12 master 12-14.QO.wpd

### EE-RM/STD-98-440 

# -FfK 9f standard as we claim. (ACEEE; Transcript No. 73 atp. 213; No. 118 at p. 4). Theypoint out that the distribution ofequipment higher than 10 SEER in 1993 was 18 percent, and that our NAECA scenarios apply much smaller fractions ofshipments than 18 percent.
As we mentioned in the TSD fortheNotice ofProposed Rulemaking (8.3.5), the NAECA scenario represents the effect thatNAECA had on equipment efficiency in themarket. A further explanation is warranted. While sales ofequipment rated higher than 10 SEER was indeed 18 percent in 1993, it was 10percent in 1992, 7percent in 1991, 5percent in 1990 and 3percent in 1989. A trend ofimproving efficiency had alreadybeen inplace since the late 1970's. NAECA, which became effective in 1992, clearly did not cause all the high efficiency shipments that existed in 1993. However, NAECA did seem to stimulate more high efficiency shipments than could have been explained by the ongoing trend. It is that enhancement to the statusquothat our NAECA scenario attempts to reproduce. Thus, under our NAECA scenario, shipments above the 13 SEER level increase from 1percent under the base case to 7percent with a 13 SEER standard. Expecting them to increase from 1percent to 18percent as ACEEE and NEEP seem to assert is not at all representative oftheNAECA experience and is more in line with the Shift scenario that we developed.
b. Fuel Switching
Several comments noted thepotential forfuel- or equipment-switching from heat pumps to either gas-fired or electric resistance heating equipment due to the disparity in the standards proposed in the NOPR for air conditioners (12 SEER) and heat pumps (13 SEER). The
46C:\Mike\US DOE\Ccntral Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

# EE-RM/STD~9:~-440

# 4-

# cA tJ

# ~ standard as we claim. (ACEEE; TranscriptNo. 73 at p. 213; No. 118 at p. 4). Theypoint out that the distribution ofequipment higherthan 10 SEERin 1993 was 18 percent, and that our NAECA scenarios apply much smaller fractions ofshipmentsthan 18 percent.

As wementioned in the TSD for theNotice ofProposedRulemaking (8.3..5), theNAECA

, . scenario represents the effect that NAECA had on equipment efficiency in the market. 

### A.. !urther explanation is warranted. While sales ofequipment rated higher than 10 SEERwas indeed 18 percentin 1993, itwas 10 percent in 1992, 7 percent in 1991,5percent in 1990 and 3 percent in 1989. A trend ofimproving efficiencyhad alreadybeeninplace since the late 1970's. NAECA, whichbecame effective in 1992, clearly did .not cause all thehigh efficiency shipments that existed in 1993. However, NAECA did seem to stimulatemorehigh efficiency shipments than could have been explained bythe ongoing trend. It is that enhancement to the status quo that our NAECA scenario attempts to reproduce. Thus, under ourNAECA scenario, shipments above the 13 SEER level increase from 1percent underthebasecaseto 7 percent with a 13 SEER standard. Expecting them to increase from 1percent to 18 percent as ACEEE and NEEP seem to assert is not at all representative ofthe NAECA experience and is more in line withthe Shift scenario that
we developed.

b. Fuel Switching

Several comments noted the potential for fuel- orequipment-switching from heatpumps to either gas-fired orelectric resistance heating equipment due to the disparity in the standards proposed in the NOPR for air conditioners (12 SEER) and heat pumps (13 SEER). The

46c:IMikeIUS DOElCentral Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 -' 

# 0 f 

### comments stated that the incremental purchase price ofa 13 SEERheat pump relative to a 12 SEER air conditioner with either a gas-fired or electric resistance heating system is great enough to drive heat pump consumers to an alternative space-conditioning system (ARI, No. 100 at p. 10; Southern Company, No. 96 at p. 3; AEP, No. 83 atp. 2; Carrier, No. 92 atp.4; EEI, No. 80 atp. 8; York, No. 90 atp. 7; Lennox, No. 91, p. 4-6). Acknowledging the potential for fuel- or equipment-switching, both ASE and ACEEE recommended setting both air conditioner and heat pump standards to 13 SEER. (ASE, Transcript, No. 73 at p. 197; ACEEE, Transcript, No. 73 atpp. 202-203).
From the perspective ofsaving the maximum amount ofenergy that is economically justifiable, the biggest "fuel" switching concern is from heat pumps to a combination ofcentral air conditioners and electric resistance heating. This may occur in households that have only electric service and where the incremental purchase price ofheat pumps is too great. Such a price increase might occur ifthe standard on heatpumps is significantly higher than the standard for central air conditioners.
Based on data from the 1997 RECS, a little over 14 percent ofhouseholds have either baseboard orforced air electric resistance heating with room or central air conditioning compared to almost 10percent ofhouseholds which have heat pumps. Because there are already such a large percentage ofhouseholds thatutilize a combination ofcentral or room air-conditioning with resistance heat to meet their space-conditioning needs, this supports the possibility that some purchasers would choose to switch to resistance heat from heat pumps.
47C:\Mikc\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd ----------------- ---- EE-RM/STD-98-440 

# ,.::ff-

# A

# 06
comments stated that.the incremental purchase price ofa 13 SEERheat pump relative to a 12 SEER air condjtionerwith either a gas-fired orelectricresistanceheating system is great enough to driveheat pump consumers to an alternative space-conditioning system (ARI, No. 100 atp. 10; Southern Company, No. 96 at p. 3; AEP, No. 83 atp. 2; Carrier, No. 92 at p. 4; EEl, No. 80 at p. 8; York, No. 90 at p. 7; Lennox, No. 91, p. 4-6).
Acknowledging the potential for fuel- or equipment-switching,bothASE and ACEEE recommended settingboth air conditioner and heat pump standards to 13 SEER. (ASE, Transcript, No. 73 at p. 197; ACEEE, Transcript, No. 73 atpp. 202-203).

From the perspective ofsaving the maximum amount ofenergy that is economically

.justifiable, thebiggest "fuel" switching concern is from heatpumps to a combination ofcentral

air conditioners and electricresistance heating. This may occur in households that have only electric service and where the incremental purchaseprice ofheat pumps is too great. Such a price increase might occurif the standard onheatpumps is significantlyhigherthan the standard for central air conditioners.

Based on data from the 1997 RECS, a little over 14 percent ofhouseholds have either baseboard orforced air electricresistanceheating with room orcentral air conditioning compared to almost 10 percent ofhouseholds which·haveheatpumps. Becausethere are already such a large percentage ofhouseholds thatutilize a combination ofcentral orroom air-conditioning with resistanceheat to meet their space-conditioning needs, this supports the possibility that
somepurchasers would choose to switch to resistance heat from heat pumps. 47c:lMikc\US DOE\CentralAir\SEERI3 FinalRuledrafll2master 12-14-00.wpd

### EE-RM/STD-98-440-W 4 

### 0 Compared to heat pumps meeting the standards issued in the proposed rule (i.e., 13 SEER and 7.7 HSPF), electric resistance heating uses over 225 percent ofthe energy for the same amount ofheating. Therefore, ifa standard of 13 SEER and 7.7 HSPF is issued for heat pumps while a 12 SEER standard is set forcentral airconditioners, a mere 4 percent ofheat pump households would need to switch to central air conditioners and electric resistance heating to negate the energy savings achieved from increasing the heatpump standard from 12 SEER/7.4 HSPF to 13 SEER/7.7 HSPF.

Ifheat pump and air conditioner standards were set at different levels as we had proposed, the price differential between thetwo would increase on the order of$200. Under those conditions, we consider it likely that at least 4 percent ofprospective heat pump owners would switch to lower-priced resistance heat. Therefore, we have weighed this concern in adopting today's standard levels, which require air conditioners and heat pumps to meet the same minimum efficiency standard so as to reduce the likelihood ofswitching to resistance heating. A larger price differential between heat pumps and air conditioners will also tend to encourage switching to gas or oil fired furnaces. It is not our objective to encourage or discourage that type offuel switching. Therefore, we also considered this potential effect in our decision to establish air conditioner and heat pump efficiency standards at the same SEER level.

c. Drop in Shipments in New Construction Market

ACEEE argued that DOE's forecasts for more efficient air-conditioning equipment
48C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd .... 

# -- EE·RM/STD-98-440

# -tr-c9, 06 Compared to heat pumps meeting the standards issued in the proposed rule (i.e., 13 SEER and 7.7 HSPF), electricresistance heating uses over225 percent ofthe energy for the same amount ofheating. Therefore, ifa standard of 13 SEER and 7.7 HSPF is issued for heatpumps while a 12 SEER standard is set for central airconditioners, a mere4 percent ofheat pump households would need to switchto central air conditioners and electric resistanceheating to negate the energy savings achieved from increasing the heatpump standard from 12 SEERl7.4 HSPF to 13 SEERl7.7 HSPF.

Ifheatpump and air conditioner standards were set at different levels as wehad proposed, the price differential between the,two would increase onthe orderof$200. Under those conditions, we considerit likely that at least 4 percent ofprospectiveheat pump owners '" would switch to lower-priced resistance heat. Therefore, we have weighed this concern in adopting today's standard levels, which require air conditioners and heat pumps to meet the same minimum efficiency standard so as to reduce the likelihood ofswitching to resistanceheating.

A largerprice differential between heat pumps and air conditioners will also tend to 

### encourage switching to gas or oil fired furnaces. It

### is not ourobjective to encourage or discourage that type offuel switching. Therefore, we also considered this potential effect in our decision to establish air conditioner and heat pump efficiency standards at the same SEER level.

c. Drop in Shipments inNew Construction Market

ACEEE argued that DOE's forecasts for more efficient air-conditioning equipment
48c:\MikeIUS OOElCentml Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 -o 

# Ao estimated too large ofa drop in shipments to the new construction market. They state that because the new construction market already has an 80 percent saturation rate it is unlikely that thismarket will forego the installation ofmore efficient air-conditioning equipment due to its associated increased purchase price (ACEEE, Transcript, No. 73 atpp. 219-221). This is effectively an argument that theprice elasticity ofair conditioners and heatpumps in the new construction market should bemuch lower than we have assumed.
Historical saturation data, however, seems to confirm that theprice elasticity in the new construction market is closer to what was derived for the Shipments Analysis, which is already much lower than the elasticity we assumed in thereplacement market, for example. As theprice ofair conditioners and heat pumps has dropped over timerelative to household income, the saturation ofair-conditioning and heat pump equipment has increased in the newhousing market to its current value of80 percent. Because ofthehigh saturation in the new construction market, the purchase price elasticity for the new housing market is small relative to the replacement market. But although the price elasticity is small, a decrease in shipments to the new construction market will still be likely when equipment prices increase (as we expect to occur under a new efficiency standard). As a result, for the case ofa 13 SEER standard for split system air conditioners for example, shipments to the new construction market drop by approximately 3 percent based on reverse engineering manufacturing cost data. For comparison purposes, shipments to the earlyreplacement market drop much more significantly (approximately 15 percent) as this market is far less saturated and theresulting purchase price elasticity is much more elastic. Forthose reasons, we retained our assumed price elasticity in the analysis.

49C:\Mike\US DOECentral Air\SEERI3 Final Rule draft 12 master 12-14-OO.wpd EE-RM/STO-9S-440

## ~**~**

# 06 estimated too**~arge** ofa drop 

### in shipments to the new construction market. They state that becausethe new construction market already has an 80 percent saturation rate it is uniikelythat this market will forego the installation ofmore efficient air-conditioning equipment dueto its associated increased purchase price (ACEEE, Transcript, No. 73 at pp. 219-221). This is effectively an argument that the price elasticity ofair conditioners and heatpumps in the new construction market should bemuch lower than wehave assumed.

Historical saturation data, however, seems to confirm that theprice elasticity inthe new v construction market is closerto what was derived for the Shipments Analysis, which is already much lowerthan the elasticity we assumed 

### in thereplacementmarket, for example. As theprice ofair conditioners and heat pumps has dropped overtimerelative to household income, the saturation ofair-conditioning and heat pump equipment has increased in the new housing market to its current value of80 percent. Because ofthe high saturation in the new construction market, the purchaseprice elasticity for the new housing market is small relative to thereplacement market. But although the price elasticity.is small, a decrease in shipments to the new construction market will still be likely when equipment prices increaSe (as we expect tooccur under a new efficiency standard). As a result, for the case ofa 13 SEER standard for split system air conditioners for example, shipments to thenew construction market drop by approximately 3 percentbased onreverse engineering manufacturing cost data. For**comp~son**purposes, shipments to the early replacementmarket drop muchmore significantly (approximately 15 percent) as this market is far less saturated and theresulting purchase price elasticity is much
more elastic. Forthose reasons, we retained our assumed price elasticity in the analysis.



### 49C:\Mike\US DOE\Central Air\SEERI3 Final Rule draft 12 master 12-14-OO.wpd

### EE-RM/STD-98-440--c9- _- 4. Manufacturer Impact Analysis
A few comments addressed the manufacturer impact analysis. Trane disputes our assumed manufacturer markups. ARI commented that a survey oftheir members revealed that our markup assumptions are grossly underestimated, but the TSD (Table 8.7) reveals that, in fact, their survey data agrees with the markups we used in the GRIM analysis to estimate manufacturer impacts. (Trane, No. 93 at pp. 12 and 22; ARI, No. 100 atp. 3).
Trane also pointed out several oversights and simplifications relating to our characterization ofmanufacturers and our apparent failure topresent cash flow results and other important indicators offinancial strength. (Trane, No. 93, pp. 6, 11-13, 23). We believe that Chapter 8 ofthe TSD addresses most ofTrane's concerns. No evidence cited in the comments suggest that our assumptions contain errors that would warrant significant change in our conclusions regarding manufacturing impacts.
5. Utility Impacts

a. Peak Demand Impacts ACEEE asserts that the peak power impacts presented in the proposed rule underestimate the true peak generation impacts due to central air conditioner and heat pump standards. ACEEE's assertion isbased on what they consider asmore accurate and significantly greater

50C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

### EE.RM/STD.98.4404~LJ 

# .5 4. Manufacturer Impact Analysis

A few comments addressed the manufacturer impact analysis. Trane disputes our assumed manufacturer markups. 

### ARl commented that a survey oftheir members revealed that
our markUp assumptions are grossly underestimated, but the TSD (Table 8.7) reveals that, in fact, their survey data agrees with the markups we used in the GRIM analysis to estimate manufacturer impacts. (Trane, No. 93 at pp. 12 and 22; ARl, No. 100 at p. 3).

Trane also pointed out**sever~l** oversights and simplifications relating to our characterization ofmanufacturers and ourapparent failure to present cash flow results and other important indicators offinancial strength. (Trane, No. 93, pp. 6, 11-13,23). We believe that Chapter 8 ofthe TSD addresses most ofTrane's concerns.. No evidence cited in the comments suggest that our assumptions contain errors that would warrant significant change in our conclusions regarding manufacturing impacts.

5: Utility Impacts

a. Peak Demand Impacts ACEEE asserts that the peak powerimpacts presented in theproposed rule underestimate the true peak generation impacts due to central air conditioner andheatpump standards. ACEEE's assertion is based on what they consider as more accurate and significantly greater

5Oc:\Mike\US DOE\Central Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 --4t: )_ peak impacts as estimated by the Appliance Standards Awareness Project (ASAP)3 

### (ACEEE, No. 104 atpp. 5-6. APPA warned that excessively high SEER standards could increase peak demand (APPA, No. 113)

Forpurposes ofcomparing the estimated peak impacts from the Department's analysis based on the use ofNEMS-BRS and those from ASAP, itis helpful to consider the concept ofa conservation load factor (CLF). The CLF was first introduced by researchers at Lawrence Berkeley National Laboratory to allow forthe straightforward calculation ofthe peak demand avoided from a given amount ofenergy savings.4 

### The CLF is defined as: 

### AnnualSiteEnergySavings(kWh) CLF 

### PeakLoadSavings (kW) 8760hours
Thus, a conservation technology that saves a constant amount ofpower on a continuous basis has a CLF of 1.0. Because air conditioning use occurs most often during times ofpeak demand, the CLF is significantly lower. The lower the CLF, the greater the amount ofpeak load savings achieved for a given amount ofannual energy savings.

For a 13 SEER central air conditioner and heat pump standard, NEMS-BRS forecasts peak demand savings which result in a nationally representative CLF of0.22. In contrast, for the

3Stayingcool:HowEnergy-Efficient Air ConditionersCanPrevent Blackouts, CutPollutionandSave Money, Applance Standards Awareness Project, July 2000, Authors: J. Thone, T. Kubo, and S. Nadel. 4 ConservationScreeningCurvesto CompareEfficiencyInvestments toPower Plants: Applications to CommercialSector Conservation-Programs, Lawrence Berkeley National Laboratory, Berkeley, EA, August 1990, published in the Proceedings ofthe 1990 ACEEE Summer Study on Energy Efficiency in Buildings, Authors: J. Koomey, A. Rosenfeld, and A. Gadgil. 5 lC:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-0O.wpd

### EE-RM/STD-98-440-#~05 peak impacts as estimatedbythe Appliance Standards Awareness Project (ASAP)3 (ACEEE, No. 104 atpp. 5-6. APPA warned that excessively high SEER standards could increase peak demand (APPA, No. 113)

Forpurposes ofcomparing the estimated peak impacts from the Department's analysis based on theuse ofNEMS-BRS and those from ASAP, it is helpful to considerthe concept ofa conservation load factor (CLF). The CLF was first introducedbyresearchers at Lawrence BerkeleyNational Laboratory to allow for the straightforward calculation ofthepeak demand avoided from a given amount ofenergy savings.4 The CLF is defined as: 

### AnnualSiteEnergySavings(kWh) 

### eLF

# = .

. PeakLoadSavings(kW)· 8760

### hours
Thus, a conservation technology that saves a constant amount ofpoweron a continuous basis has a CLF of 1.0. Because air conditioninguse occurs most often during times ofpeak demand, the eLF is significantly lower. Thelowerthe CLF, the greaterthe amount ofpeak load savings achieved for a given amount ofannual energy savings.

For a 13 SEER central air conditioner and heatpump standard, NEMS-BRS forecasts peak demand savings whichresult in a nationallyrepresentative CLF of0.22. In contrast, for the

3 Staying cool: HowEnergy-Effi.cientAir Conditioners Can PreventBlackouts. CutPollution andSave Money, Apphance Standards Awareness Project, July 2000, Authors: J. Thone, T. Kubo, and S. Nadel. 4 Conservation ScreeninILCurves to Compare EfficiencyInvestments to PowerPlants: Al2P.lications to Commercial Sector Conservation-Programs, Lawrence**B'erkel~y**National Laboratory, Berkeley, CA, August 1990, published in the Proceedings ofthe 1990 ACEEE Summer Study on Energy Efficiency in Buildings, Authors: J. Koorney, A. Rosenfeld, and A. Gadgil. 51C:\MikeIUS DOEICentral AirlSEER\3 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 -4 

## , a 

## s. same 13 SEER standard, ASAP forecasts energy andpeak demand savings which result in CLFs ranging from 0.08 to 0.14. Based on the above discrepancy in the CLF, ACEEE asserts that the peak demand savings forecasted by NEMS-BRS are too low. The Department disagrees with ACEEE's position for two reasons: (1)ASAP's peak savings estimates rely on suspect air conditioner demand data, and (2) metered end-use data from air-conditioned households in California and Florida indicate that the NEMS-BRS-based CLF value of0.22 is reasonable.
With regard to ASAP's peak demand estimates, regional calculations arebased on peak demand data from a single 1988 study by the Narragansett Electric Co. (an electric utility in the Northeast). 5 

### Although ASAP increased the Northeast peak demand data by 25 percent for the two Southern divisions and decreased it by 25percent for the Pacific division, no basis for these adjustments are provided. Because ofASAP's reliance onpeak demand data from only one region ofthe country, we donot place much confidence in thepeak generation savings provided by ASAP.
As opposed to the ASAP results, metered end-use data from Southern California and Florida indicate that climate has a much larger affect on the CLF than reported by ASAP. In Southern California, ametered end-use study conducted on 132 air-conditioned households in Southern California Edison's service area revealed that the CLF for this region is likely 0.08.6 In Homestead, Florida, a metered end-use study conducted onten air-conditioned homes

5Personal communication with Steve Nadel, ACEEE, October, 2000. 6Residential Appliance End-UseSurvey: Collectionof Residential Appliance Time-of-UseEnergyLoad Profiles;1991 Results,prepared by Quantum Consulting Inc., Berkeley, CA for Southern California Edison Co., San Dimas, CA, November, 1992. 5 2 C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd EE_RM/STD-98-440

# -#Ao5.

same 13 SEER standard, ASAP forecasts energy and peak demand savings whichresult in CLFs ranging from 0.08 to 0.14. Based on the above discrepancy in the CLF, ACEEE asserts that the peak demand savings forecasted byNEMS-BRS are too low. The Department disagrees with ACEEE'sposition for two reasons: 

### (1) ASAP's peak savings estimates rely on suspect air conditionerdemand data, and (2) metered end-use data from air-conditioned households in

. . California and Floridaindicate that theNEMS-BRS-based CLF value of0.22 is reasonable.

With regard to ASAP'speak demand estimates, regional calculations arebased onpeak demanddata from a single 1988 studybythe Narragansett Electric Co. (an electric utility 

### in the NortheastV Although ASAP increased theNortheast peak demand data by 25 percent for the two Southern divisions and decreaseditby25 percent for the Pacific division, no basis for these'

. adjustments are provided. Because ofASAP's reliance onpeak demand data from only one

region ofthe country, we do not placemuch confidencein the peak generation savings provided by ASAP.

As opposed to the ASAP results, metered end-use data from Southern California and Florida indicate that climate has a much larger affect on the CLF than reported byASAP. In Southern California, a metered end-use study conducted on 132 air-conditioned households in Southern CaliforniaEdison's service arearevealed thatthe CLF for this region is likely 0.08. 6 In Homestead, Florida, a metered end-use study conducted onten air-conditioned homes

SPersonal communication with Steve Nadel, ACEEE, October. 2000, . 6ResidentialApplianceEnd- Use**Sllrv~~y;** Collection of ResidentialAppliance Time-of: Use EnergyLoad Profiles; 1991 Results, preparedby Quantum Consulting Inc" Berkeley, CA fcir Southern Cahfornia Edison Co., . San Dimas, CA, November, 1992. 52c:\Mike\US DOE\Central Air\sEER13 Final Rule dmft 12 master 12-14-00.wpd

## EE.RM/STD-98440 

# - 0 6 indicated that the CLF is likely 0.42.7 

### Although strong conclusions cannot be drawn from only two studies, the metered end-use results do provide the Department with some confidence that the NEMS-BRS CLF estimate of0.22 isreasonable since it falls between the CLF range provided by the two metered end-use studies. Therefore, we have reason to believe that our assumption is more valid than ASAP's. Obviously more research needs to be conducted in the area ofpeak demand impacts due to increased air conditioner efficiency. But until such extensive research is conducted, the Department sees no reason to discontinue its use ofNEMS-BRS to estimate peak demand savings.

6. Projection ofTrends

Several comments suggested or asserted that we should project historical trends that they believe exist. These include price reductions orproductivity improvements in manufacturing (ACEEE, Transcript, No. 73 at p. 64, 88-90; NRDC, Transcript, No. 73 atp. 105, 115), poststandard product efficiencies (ACEEE, Transcript, No. 73 at p. 210), and electricity prices (ASAP, No. 108 at p. 1; ACEEE, Transcript, No. 73 at p. 154-158; NWPPC, No. 76 at p. 3-4; Synapse, Transcript, No. 73 at pp. 152-153).
Other comments responded to some ofthese suggestions. With regard to the issue of

7

Monitored Enerym UsePatternsinLow-Income Housin (FSEC-PF-300), Florida SolarEnergy Center, Cocoa, FL, 1996, Authors:T). S.Parker, M. D.Mazzara, and J.R.Sherwin. 53C:\Mike\US DOECentral Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd 

### EE-RM/STD-.S..wO -

# ~ (), 

# D 

# 6'
indicated that the eLF is likely 0.42.7 Although strong conclusions cannotbe drawn from only two studies, themetered end-useresults do provide the Department with some confidence that theNEMS-BRS eLF estimate of0.22 is reasonable since it falls betweenthe eLFrange providedbythetwo metered end-use studies. Therefore, wehavereason to believe that our assumption is morevalid than ASAP's.
Obviously moreresearchneeds to be conducted inthe area ofpeak demand impacts due to increased airconditioner efficiency. Butuntil such extensiveresearch is conducted, the Department sees no reason to discontinue its use ofNEMS-BRSto estimatepeak demand savings.

6. Projection ofTrends

Several comments suggested orasserted that we should projecthistorical trends thatthey believe exist. Theseincludepricereductions orproductivity improvements in manufacturing (ACEEE, Transcript, No. 73 at p. 64, 88-90; NRDC, Transcript, No. 73 at p. 105, 115), poststandard product efficiencies (ACEEE, Transcript, No. 73 at p. 210), and electricityprices (ASAP, No. 108 at p. 1; ACEEE, Transcript, No. 73 at p. 154-158; NWPPC, No. 76 at p. 3-4; Synapse, Transcript, No. 73 at pp. 152-1.53).

Othercomments responded to some'ofthese suggestions. Withregard to the issue of

7MonitoredEnerJIT Use Patterns in Low-Income**Housin~,JFSEr::-PF-300),** Florida SolarEnergy Center, Cocoa, FL, 1996, Authors:D. S. Parker, M. D. Mazzara, and J. R.-Sherwm.**53c:\Mik~\US** OOE\Central Air\SEERI3 Final Ruie draft 12 master 12·14'()O,wpd

### EE-RM/STD-98-440 -- 

## : O pricereductions or productivity improvements, some contend that reductions are due to declining commodity metals prices rather than any increases in production efficiency (Lennox, No. 91 at pp. 4-5). On the issue ofefficiency trends, EEI claims that rather than post-standard efficiency increases, the Department neglected to account for pre-standard efficiency increases (EEI, Transcript, No. 73 at pp. 206-208). And counter to claims that electricity prices will increase in 

### the future due to the deregulation ofthe electric utilityindustry, others state that the futurepath ofderegulation is so uncertain that itis unknown as to whether prices will decline or increase (EEI, Transcript, No. 73 at pp. 148-150; Dominion, Transcript, No. 73 at pp. 158-160; Southern Company, No. 96 at pp. 6-7).


### In these instances where we have conflicting opinions about what is responsible for creating a trend, we have no basis for changing our initial assumption. Usually, we rely on the mostrecent set ofdata we have available to us to make projections into the future. In the case of efficiency trends, we rely on existing trends that seem to indicate that efficiency will remain static after a new standard becomes effective. In the case ofelectricity prices, we rely on the projections provided in the Annual Energy Outlook, which is publicly and readily available, and which we assume is unbiased with respect to parties interested in the outcome ofthis rulemaking. Since this is the case for allthe supposed trends listed above, we have not changed any ofour projections.
C. OtherComments 1. HCFC Phaseout

54C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

# EE.RM/STD.8~O

# -F**~**

# 0.6' pricereductions orproductivity improvements, some contend that reductions are due to declining commodity metals prices**ra~er** than any increases in production efficiency (Lennox, No. 91 at pp. 4-5). On the issue ofefficiency trends, EEl claims that ratherthan post-standard efficiency increases, the Department neglected to account for pre-standard efficiency increases (EEl, Transcript, No. 73 at pp. 206-208). And counterto claims that electricityprices will increase in the future due to the deregulation ofthe electric utility industry, others state that the future path ofderegulation is so uncertain that it is unknown as to whetherprices will decline orincrease (EEl, Transcript, No. 73 at pp. 148-150; Dominion, Transcript, No. 73 at pp. 158-160; Southern Company, No. 96 at pp. 6-7).

In these instances where wehave conflicting opinions about what is responsible for creating a trend, wehave no basis for changing our initial assumption. Usually, werely onthe mostrecent set ofdata we have available to us to makeprojections into the future. In the case of efficiency trends, we rely on existing trends that seem to indicate that efficiency will remain static after

# a new standard becomes effective. In the case ofelectricity prices, werely on the projections provided in the Annual Energy Outlook, which is publicly and readily available, and which we assume isunbiased with respect to parties interested in theoutcome ofthis rulemaking. Sincethis is the case for all

# the supposed trends listed above, wehave not changed any ofour projections.
C. 

### Other Comments 1. HCFC Phaseout

54c:\MikeIUS DOElCentrBI Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

### EE.RM/STD-98-440-Zq__ 95 Comments noted that as efficiency increases, refrigerant charge may increase also. This could cause the United States to reach its cap onHCFC-22 use earlier, resulting in higher prices for HCFC-22 than we have considered. (Carrier, No. 92 at4). We would point outthat occurrence would likely accelerate thetransition to HCFC-free refrigerants. There are also other options available for manufacturers to improve equipment efficiency without increasing equipment size or charge. Both ofthese factors will have the effect ofsuppressing increases in refrigerant prices over the long term.
2. Ozone Reduction Catalyst Requirement ARI and its members remind us to consider thepotential impact on the industry ofTexas' proposed requirement to mandate the application ofozone reduction technology in its most severe non-attainment areas. (ARI, No. 100 atp. 13; Carrier, No. 92 at p. 4).
We understand that Texas has since withdrawn its proposal. However, the TSD does include apreliminary estimate ofthe burden ofthis requirement on the industry and, to the extent that other states may pursue the same course ofaction, included that in our consideration of cumulative burden. We consider that widespread requirements for this technology will notbe likely, due to its apparently high cost, questionable efficacy, and possible reduction in energy efficiency.
D.AdditionalStandard Requirements 1. EER Standard

55C:\Mike\US DOECentral Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd ----------------------------------

### EE.RM/STD.98-440~O

# SComments noted that as efficiency increases, refrigerant charge may increase also. This could cause the United Statesto reach its cap on HCFC-22 use earlier, resulting inhigherprices for HCFC-22 than we have considered. (Carrier, No. 92 at4). We would point outthat
occurrence would likely accelerate the transitionto HCFC-free refrigerants. There are also other options available for manufacturers to improve equipment efficiency without increasing equipment size orcharge. Both ofthese factors will havethe effect ofsuppressing increases.

### in refrigerantprices overthe longterm.

2. OzoneReduction Catalyst Requirement ARl and its members remindus to considerthe potential impact onthe industry ofTexas' proposedrequirement to mandate the application ofozone reduction technology in its most severe non-attainment areas. (ARl, No; 100 atp. 

### l3; Carrier,No. 92 at p. 4).

We understand that Texas has since withdrawn itsproposal. However, the TSD does include a preliminary estimate ofthe burden ofthis requirement onthe industry and, to the extent that other states may pursue the same course ofaction, included that in ourconsideration of cumulative burden. We considerthatwidespread requirements for this technology will not be likely, due to its apparently high cost, questionable efficacy, and possible reduction in energy efficiency.



### D. AdditionalStandardRequirements 1. EER Standard

55c:\MikeIUS OOElCentraJ AirlSEERI3 Final Rule draft 12 master 12.14-00.wpd

### EE-RM/STD-98-440 4-, 5 In the proposed rule, we discussed including a requirement for a new standard based on a system's energy efficiency ratio (EER) in addition to its seasonal energy efficiency ratio (SEER). That new standard was to be established at the median ofavailable EERratings at a particular SEER level. Our objective was to ensure that any increase in the SEER standard also resulted in
an increase in equipment efficiency under the warmer conditions best measured by EER. That resulting drop in peak power demand would then help avoid the need fornew power plants and, in the view ofmany stakeholders, improve power system reliability. We asked whether an EER standard would impose a significant burden on manufacturers, would significantly affect the cost ofequipment considered in our analysis, would negatively impact the sale ofmodulating equipment, or would significantly improve power system reliability.
Several comments, including those ofenvironmental advocacy groups and some utilities, supported adding an EER standard and urged us to adopt the median EER standards we proposed. They cited potential benefits that would accrue from avoidance ofnew power plant capacity and a reduction in the occurrence ofblackouts. NRDC believes that the Act requires us to adopt an EER-based standard. Underlying these comments is a beliefthat SEER standards alone do cannot guarantee those benefits. Carrier supports an EER-based standard only in lieu of
a SEER-based standard because itwould harmonize with International Standards Organization testing requirements. (ACEEE, Transcript, No. 73 at p. 62; NWPPC, Transcript, No. 73 at p. 161; ASE, No. 81 atp. 1;NPPD, No. 109 at p. 1; Oregon Office ofEnergy, No. 84 at 2; NRDC, No. 88 at p. 3; OPPD, No. 111 at p. 2; Carrier, No. 92 at p. 8).

56C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-0O.wpd

# EE-RM/STD-9~O**.~i:J**

# z;SIn the proposed rule, we discussed including a requirement for a new standard based on a system's energy efficiency ratio (EER) in addition to its seasonal**ene~gy** efficiency ratio (SEER). That new standard was to be established at the median ofavailable EERratings at a particular SEERlevel. Ourobjective was to ensure that any increase 

### in the SEER standard also resulted 

### in
an increase in equipment efficiency under the warmer conditions best measured by EER. That resulting drop inpeakpowerdemand would then help avoid the need for newpowerplants and, in the view ofmany stakeholders, improve power system reliability. We asked whether an EER standard would impose a significantburden on manufacturers, would significantly affect the cost ofequipment considered in our analysis, would negatively**i~pact** the sale ofmodulating equipment, orwould significantly improve power system reliability.

Several comments,**inclu~ing** those ofenvironmental advocacy groups and some utilities, supported adding an EER standard and urged us to adopt the median EER standards we proposed. They cited potential benefits that would accrue from avoidance ofnew powerplant capacity and a reduction in the occurrence ofblackouts. NRDC believes that the Act requires us to adopt an EER-based standard. Underlying these comments is a beliefthat SEER standards alone do cannot guarantee those benefits. Carrier supports an EER-based standard only in lieu of
a SEER-based standard because it would harmonize with International Standards Organization testing requirements. (ACEEE, Transcript, No. 73 at p. 62; NWPPC, Transcript;No. 73 at p. 161; ASE, No. 81 atp. 1; NPPD, No. 109 at p. 1; Oregon Office ofEnergy, No. 84 at 2; NRDC, No. 88 at p. 

### 3; OPPD, No. III atp. 

### 2; Carrier, No. 92 atp. 8).

56c:\Mike\US DOE\Central Air\SEERI3 Final Rule draft 12 master 12-14-00.....'jld

### EE-RM/STD-98-440 --- _ Other comments took an opposing position on thegrounds that including an EER standard would impede the application ofmodulating components; that we are not permitted to adopt a standard other than SEER and have not sufficiently analyzed the validity ofan EERbased standard; that an EER standard would eliminate products from the market; that an EER standard will not improve electric system reliability, particularly nationwide; and that there are burdens associated with testing and certifying EER. (NCP, No. 77 at pg. 3; EEI, No. 80, pp. 3, 9; Dominion, No. 68 at p. 2; Trane, No. 93 at p. 14; York, No. 90 atpp. 1-4; ARI, Transcript, No. 73 at p. 320; EEI, Transcript, No. 73 atp. 327; Goodman, Transcript No. 73 atp. 302; ARI, No. 100 atp. 16; Southern, Transcript, No. 73 atp. 243; and Dominion, Transcript, No. 73 atp. 264).
It istrue that under the efficiency level approach, we assume that all equipment atthe same SEER level costs the same toproduce regardless ofthe combination ofdesign options chosen to achieve that SEER level. These options include those that raise EER, including compressor and heat exchanger upgrades, as well asthose that donot raise EER, such as thermostatic expansion valves. Forany given SEER and HSPF levels, the efficiency level approach cannot differentiate equipment cost based on different EER choices. Underlying the efficiency level approach, however, is the assumption that manufacturers make cost-optimal choices based on their own unique situations. Therefore, amanufacturer who was required to raise the EER ofits equipment from the 10thpercentile to the 50th percentile (median) would indeed incur added costs since its design choices would no longer be costoptimal for its own circumstances. Since efficiency levels are expressed in terms ofSEER and

57C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd ------------------------- 

### EE-RM/STD-9a.440

# -#c:f**tJ~** Other commentstook an opposing position onthe.grounds that including an EER standard would impede the application ofmodulating components; that we are notpermitted to adopt a standard otherthan SEERand have not sufficiently analyzed the validity ofan EERbased standard; that an EER standard would eliminate products from the market; that an EER standard will not improve electric system reliability, particularly nationwide; and thatthere are

. burdens associated withtesting and certifyingEER. (NCP, No. 77 at pg. 3; EEl,No. 80, pp. 3, 9;

Dominion, No. 68 atp. 2; Trane, No. 93 at p. 14; York, No. 90 at pp. 1-4; ARl,**Transcript~** No. 73 at p. 320; EEl, Transcript, No. 73 atp. 327; Goodman, TranscriptNo. 73 atp. 302; ARl, No. 100 atp. 16; Southern, Transcript, No. 73 at p. 243; and Dominion, Transcript, No. 73 atp. 264).


### Itis true that underthe efficiency level approach, we assume that all equipment at the
same SEERlevel costs the same to produceregardless ofthe combination ofdesign options chosen to achieve that SEERlevel. These options include those thatraise EER, including compressor and heat exchangerupgrades, as well as those that do notraise EER, such as

.thermostatic expansion valves. For any given SEERand HSPF levels, the efficiency level approach cannot differentiate equipment costbased ondifferent EERchoices.
Underlyingthe efficiency level approach, however, is the assumption that manufacturers make cost-optimal choices based ontheir own unique situations. Therefore, a manufacturerwho
was required to raise the EERofits equipmentfrom the 10th percentile to the 50th**perc~ntile** (median) would indeed incuradded costs since its design choices would no longer be costoptimal for its owncircumstances. Since efficiency levels are expressed in terms ofSEERand 57C:lMike\USDOE\CentralAir\SEER13 FinaJRule draft 12master 12-14-00.wpd

### EE-RM/STD-98-440--O--? : HSPF only, we would have to depart from the efficiency level approach in order to quantify those costs.


### Even ifwe were to attempt to quantify the costs, we would expect that an EER requirement at the median EER level would be acceptable from an economic impact perspective. The real question iswhether a new EER requirement is warranted even ifwe were to conclude that the cost ofcompliance is negligible.
We are still convinced that the stringent physical relationship between EER and SEER in equipment rated through 12 SEER, which is comprised exclusively ofnon-modulating equipment, would remain intact under new standards and for the foreseeable future. Under the adopted 13 SEER standard, we have less certainty since there are counteracting incentives. On the one hand, to reduce warranty claims, manufacturers have a strong incentive to simplify the design ofbaseline equipment. This suggeststhey will favor heat exchanger or compressor improvements that improve EER.
On the other hand, manufacturers will have a strong incentive to reduce the size of 13 SEER baseline equipment. Although microchannel heat exchangers could reduce size and improve EER, manufacturers could also choose to introduce variable speed or capacity modulation technologies that can induce them to lower EER at a given SEER level. As the cost ofpower electronics and control technologies come down, this possibility becomes more likely.

58c:\Mike\US DOE\Cental Air\SEERi3 Final Rule draft 12 master 12-14-00.wpd

## EE-RM/STD-98-440-#~

# asHSPF only, we would have to depart from the efficiency level approach in orderto quantify those costs. _
Even ifwe were to attempt to quantify the costs, we would expectthat an EER requirement at the median EER level would be acceptable from an economic impactperspective. The real question is whether a new EERrequirement is warranted evenifwe were to conclude thatthe cost ofcompliance is negligible.

_We are still convinced thatthe stringentphysical relationship between EERand SEER in equipmentrated through 12 SEER, which is comprised exclusively ofnon-modulating equipment, would remain intact undernewstandards and for the foreseeable future. Underthe adopted 13 SEER standard, we have less certainty since there are counteracting incentives. On the one hand, to reduce warranty claims, manufacturers have a strong incentive to simplify the design ofbaseline equipment. This suggests they will favor heat exchanger orcompressor improvements that improve EER.

On the otherhand, manufacturers will have a strong incentive to reduce the size of 13 SEER baseline equipment. Although microchannel heat exchangers could reduce size and improve EER, manufacturers could also choose to introduce variable speed orcapacity modulationtechnologies that can induce themto lower-EER at a given SEER level. As the cost ofpowerelectronics and control technologies come down, this possibility becomes more likely.

58c:\Mike\uSDOE\Central Air\SEERI3 Final Rule draft 12 master 12.14-00.wpd

### EE-RM/STD-98-440 - O S However, even ifvariable speed or modulating technologies eventually predominate, and thereby reduce EERs in typical equipment, they would still reduce peak demand compared to today's 10 SEER baseline equipment. Furthermore, because variable speed and modulating equipment mitigate the cyclic losses that are due to widespread over sizing, the aggregated peak demand ofa group ofmodulating air conditioners with lower EERs will likely be lower than that ofa similar group ofnon-modulating air conditioners with higher EERs at the same SEER level. Also, utilities have the opportunity with modulating equipment to offer customers the option to allow the utility to "lock" the equipment into low-capacity operation in return for a lower electricity price. Finally, although the Department is interested in reducing peak demand, the primary purpose ofappliance efficiency standards is to save energy. An EER standard could be counterproductive by discouraging variable speed and modulation, which can save substantial amounts ofenergy over the cooling season while providing consumers with additional benefits not found in single speed and non-modulating equipment. Although the Department believes that EPCA permits adoption ofan EER standard, for the foregoing reasons, we do not believe thatthe Act requires or suggests that we establish such a standard under the circumstances here. Given the adopted standard levels, a national EER standard is both unnecessary and undesirable. Most benefits accruing from an EER standard will likely accrue from the SEER standards alone, without the associated burdens on manufacturers and the disincentives to apply energy-saving modulating technologies. Therefore, we have not adopted an EER standard in thisrule.
59C:lMike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd 

### EE-RM/STD-98-440

# ~~ 

# SHowever, even ifvariable speed ormodulating technologies eventually predominate, and thereby reduce EERs intypical equipment, they would still reduce peak demand comparedto today's 10 SEERbaseline equipment. Furthermore, because variable speed and modulating equipment mitigate the cyclic lossesthat are due to widespread over sizing, the aggregatedpeak demand ofa group ofmodulating air conditioners with lower EERs will likely be lowerthan that ofa similar group ofnon-modulating air conditioners withhigherEERs at the same SEERlevel. Also, utilities have the opportunity withmodulating equipmentto offer customers the optionto allow the utility to "lock"the equipment into low-capacity operation in return for a lower electricityprice.
Finally, although the Department is interested in reducingpeak demand, the primary

. purpose ofappliance efficiency standards is to save energy. AnEER standard couldbe

counterproductive by discouraging variable speed and modulation, which can save substantial amounts ofenergy overthe cooling season while providing consumers with additional benefits not found in single speed and non-modulating equipment. Although the Departmentbelieves that EPCApermits adoption ofan EER standard, for the foregoing reasons, we do not believe that the Actrequires or suggests that we establish such a standard underthe circumstances here. Given the adopted standard levels, a national EER standard is bothunnecessary and undesirable. Mostbenefits accruing from an EER standard will likely accrue from the SEER standards alone, without the associated burdens onmanufacturers and the disincentives to apply energy-saving modulating technologies. Therefore, we have not adopted an EER standard in this rule. 

### 59 C:\Mike\US DOE\Centrnl Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440-- c0,5- 2. TXV Requirement
In the proposed rule, we discussed the issues associated with mandating thermostatic expansion valves, or TXVs. We did not propose such a requirement, but we recognized that such
arequirement maybe capable ofsaving a great deal ofenergy. We discussed our options for encouraging their use. Many comments continue to express strong support for aTXV requirement. Many cite a report submitted by John Proctor that describes theresults ofa field study covering 4,000 units in California. The study concluded that 62 percent ofequipment is mischarged bymore than 5 percent, and that TXVs, which perform better than fixed orifices in undercharged conditions, could save 11 percent ofthe energy used bythat equipment. (ProctorNo. 105; OOE, No. 84 at p. 2; NRDC, No. 88; CEC,No. 98 atp. 1; ACEEE, No. 101 at 8; PG&ENo. 104 at 1; ASAP, Transcript, No. 73 atp. 4).
Other comments expressed some resistance to aTXV requirement, particularly regarding
our authority to establish one. Some also express concerns about problems associated with TXVs. (NCP, No. 77 at p. 4; Trane, No. 93 atp. 19; York, No. 90, p. 4-5; Lennox, No. 91 p. 3; EEI No. 80 at 3; Carrier, No. 92 atp. 10).
In response to our concern that mandating TXVs would stifle the development ofother, perhaps preferable, technologies, Mr. Proctor and ACEEE suggested performance tests that could

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# =;'t=c:?tJ.s2. TXV Requirement


### In the proposed rule, we discussed the issues associated with mandating thermostatic expansion valves, orTXVs. We did not propose such a requirement, but we recognized that such
a requirement may be capable ofsaving a great deal ofenergy. We discussed our options for encouraging their use. Many comments continue to express strong support for a TXV requirement. Many cite a report submitted by John Proctorthat describes the results ofa field study covering 4,000 units in

.California. The study concluded that 62 percent ofequipment is mischarged by more than 5 percent, and that TXVs, whichperform betterthan fixed orifices in undercharged conditions, could save 11 percent ofthe energy used by that equipment. (proctorNo. 105; ODE, No. 84 atp. 2; NRDC, No. 88; CEC, No. 98 at p. 1; ACEEE, No. 101 at 8; PG&ENo. 104 at 1; ASAP, Transcript, No. 73 atp. 4).

Other comments expressed some resistance to a TXV requirement, particularlyregarding
our authority to establish one. Some also express concerns about problems associated with TXVs. (NCP, No. 77 at p. 4; Trane, No. 93 atp. 19; York, No. 90, p. 4-5; Lennox, No. 91 p. 3; EEl No. 80 at 3; Carrier,No. 92 atp. 10).

In response to our concern that mandating TXVs would stifle the development ofother, perhaps preferable, technologies, Mr. Proctor and ACEEE suggested performance tests that could

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### EE-RM/STD-98-440- Jan 

# 1' be applied in lieu ofa TXV requirement. They would reward equipment that possessed a TXV or performed similarly well while undercharged or when airflow is restricted. This approach is at least partially endorsed by others. (NRDC No. 88 at 17; CECNo. 199 at 1; Oregon No. 84 at 8). Some ofthe commenters preferred thatwe initially specify TXVs but then phase out that requirement in favor ofaperformance-based approach.
As we alluded to in the proposed rule, aperformance-based approach is also our preference and is certainly in the spirit ofEPCA. As such, the SEER test procedure, not aTXV requirement, appears tobe the most appropriate vehicle for assuring that an equipment's efficiency rating is based on its performance characteristics. In fact, TXVs already receive credit in the test procedure because oftheir superior cyclicperformance. We are not eager to circumvent the test procedure, particularly when the key data either are not available orhave not been thoroughly reviewed by all interested parties. That said, we favor a SEER test procedure that fairly evaluates equipment performance under conditions that represent those encountered in the field. We would prefer toencourage correct charging or proper airflow, but we recognize that practical barriers exist, and we will take steps to evaluate whether the SEER test procedure can and should be amended to better reflect equipment performance under improper charge or airflow.
In sum, are not adopting a TXV requirement in this rulemaking. Any alterations in the SEER test procedure to further encourage theuse ofTXVs will be undertaken in a separate process. In addition to pursuing modifications to the testprocedure, we encourage parties interested in encouraging the broader application ofTXVs topursue other avenues. These

6 iC:\Mike\US DOE\Central AirSEER13 FinalRule draft 12 master 12-14-OO.wpd 

### EE-RM/STD-98-440

# -1t-cf5tJ**~** be applied in lieu ofa TXV requirement. They would reward equipmentthat possessed a TXV
orperformed similarly well while undercharged or when airflow is restricted. This approach is at leastpartially endorsed by others. (NRDC No. 88 at 17; CECNo. 199 at 1; OregonNo. 84 at 8). Some ofthe commenters preferred that we initially specify TXVs but then phase out that requirement in favor ofa performance-based approach.

As we alluded to in the proposed rule, a performance-based approach is also our preference and is certainly in the spirit ofEPCA. As such, the SEERtest procedure, not a TXV requirement, appears to be the most appropriate vehicle for assuring that an equipment's efficiency rating is based on its performance characteristics. 

### In fact, TXVs already receive credit in the test procedure because oftheir superiorcyclic performance. We are not eagerto circumventthe test procedure, particularly when the key data eitherare not available orhave not been thoroughly reviewed by all interested parties. That said, we favor a SEERtest procedure that fairly evaluates equipment performance under conditions that represent those.encountered in the field. We would preferto encourage correct charging orproper airflow, but we recognize that practical barriers exist, and we will take steps to evaluate whetherthe SEERtest procedure . can and should be amended to better reflect**equipm~nt** performance under impropercharge or airflow.


### In sum, are notadopting a TXVrequirement in this rulemaking. Any alterations iIi the SEERtest procedure to furtherencourage the use ofTXVs will be undertaken in a separate process. In addition to pursuing modifications to the testprocedure, we encourage parties interested in encouraging the broader application ofTXVsto pursue otheravenues. These 

### 6IC;IMikeIUS DOElCenlTal Air\SEER13 Final Rule draft 12 master 12.14-00.wpd

### EE.RM/STD-98-440 -8-.~ - include voluntary programs like Energy Star, tax incentives, and other state and local initiatives, which can all be tied to the presence ofa device like aTXV. States also have the opportunity to apply to usfor an exemption from preemption that would allow them to implement their own requirements based ontheir own unique circumstances.
3. HSPF Levels Some comments urged us to reconsider ourproposed HSPF levels, particularly to reflect differences among the HSPF-SEER relationships across capacity ratings. Trane commented that HSPF-SEER factors for heatpumps are lower with 410A refrigerant than with HCFC-22, and thatthe current proposal for HSPF istoo high for 410A by as much as 3to 5percent. (ARI, No. 100 at p. 11; Carrier, No. 92 atp. 7; Trane, No. 93 atp. 8). Others urged us to adopt HSPF levels at the median for each SEER level we considered. (Oregon Office ofEnergy, No. 84 atp. 11; ACEEE, No. 104 atp. 12).
As we explained in theproposed rule, we established the HSPF levels corresponding to SEER levels in an attemptto maintain the existing offset between the minimum HSPF and the minimum SEER. Heating energy is a large fraction oftotal heat pump energy consumption, so we prefer not to relax that relationship without sound evidence regarding the burdens that would be mitigated. We are reluctant to adopt a more stringent level since we are aware that heatpump design is difficult and costly, and that improvements in HSPF typically are associated with a reduction in SEER. Too stringent a standard would impose considerable design and testing burdens onmanufacturers, could result in the permanent loss ofheat pump market share to electric resistance heat, and could encourage fuel switching.

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### -----------------
.. _----- EE-RM/STD-98-440

# -#**cq~~** include voluntary programs like Energy Star, tax incentives, and other state and local initiatives, which can all be tied to the presence ofa device like a TXV. States also have the opportunity to apply to us for an exemption from preemption that would allowthem to implementtheir own requirements based ontheir ownunique circumstances.

3. HSPF Levels Some comments urged us to reconsider ourproposed HSPF levels, particularly to reflect differences amongthe HSPF-SEERrelationships across capacity ratings. Trane commentedthat HSPF-SEERfactors for heat pumps are lower with 4lOA refrigerant than with HCFC-22, and that the current proposal for HSPF is too high for 4lOA by as much as 3 to 5 percent. (ARl, No. 100 atp. 11; Carrier, No. 92 at p. 7; Trane, No. 93 atp. 8). Others urged us to adopt HSPF levels at the median for each SEER level we considered. (Oregon Office ofEnergy,-No. 84 at p. 11; ACEEE, No. 104 atp. 12).

As we explained in the proposed rule, we established the HSPF levels corresponding to SEERlevels in anattempt to maintainthe existing offset between the minimum HSPF and the minimum SEER. Heating energy is a large fraction oftotal heat pump energy consumption, so we prefer not to relax that relationship without sound evidence regarding the burdens.that would be mitigated. We are reluctant to adopt a more stringent level since we are aware that heat pump design is difficult and costly, and that improvements in HSPF typically are associated with a reduction in SEER. Too stringent a standard would impose considerable design and testing burdens on manufacturers, could result in the permanent loss ofheatpump market share to electricresistance heat, and could encourage fuel switching.

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### EE-RM/STD-98-440 -. : 5 For those reasons, we are retaining ourproposed minimum HSPF levels in the standards adopted today.
V. Analytical Results and Conclusions


### A. TrialStandard Levels
We examined five standard levels. Table V.1 presents the trial standards levels analyzed for today's final rule and the corresponding efficiency level for each class ofproduct. Trial standard level 5is the max tech level for each class ofproduct.
Table V. 1: Trial Standards Levels for Central Air Conditioners and Heat Pumps (SEER) TrialStandard Split Air Packaged Air Split Heat Packaged Level Conditioners Conditioners Pumps 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



### Foreach trial standard level examined, several different scenarios were analyzed consisting ofvariations 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 AEO 2000 forecasts: (1)

6 3

C:\Mike\US DOE\Central AirSEER13 Final Rule draft 12 master 12-14-00.wpd EE-RM/STD-98-440

## 4~

# ZJS Forthose reasons, we are retaining ourproposed miniIill.im HSPF levels inthe standards adopted today.



### . V. Analytical Results and Conclusions

A. TrialStandardLevels

We examined five standard levels. Table V.1 presents the trial standards levels analyzed for today's final rule and the corresponding efficiency level for each class ofproduct. Trial standard level 5 is the maxtech level for each class ofproduct.

Table V.1: Trial Standards Levels for Central Air Conditioners and HeatPumps (SEER) Trial Standard Split Air Packaged Air Split Heat Packaged Level Conditioners Conditioners Pumps Heat Pumps I J1 11 II 11 2 12 12 12 12 3 12 12 13 13 4 J3 13 13 13 5 18 18 18 18

Foreachtrial standard level examined, several different scenarios were analyzed consisting ofvariations on: (1) electricity price and housing projections; (2) equipment efficiency distributions; (3) manufacturercost estimates; and (4) societal discount rate. Electricity price and housing projections were based onthree different AEO 2000 forecasts: (1)
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### EE-RM/STD-98-440 --

## 9C~ °3 Reference Case, (2) High Growth Case, and (3) Low Growth Case. We analyzed three efficiency scenarios, each ofwhich assumed a different efficiency distribution after new standards would take effect: (1) NAECA scenario, (2) Roll-up scenario, and (3) Shift scenario. Under the standard levels we are adopting, we believe that the Roll-up scenario most closely represents the most likely impact ofthe new standards, as explained in Chapter 8 ofthe TSD. We analyzed two manufacturer cost scenarios: (1)based onreverse engineering data, and (2) based onARIprovided mean cost data. For the reasons expressed in Parts III and IV ofthis document, we believe that the reverse engineering data most closely represents the costs as they will actually be under the new standards. We assumed a societal discount rate of7 percent for calculating net present value (NPV). However, a 3 percent value was investigated as an alternative scenario in accordance with the Office ofManagement and Budget's (OMB) Guidelinesto Standardize 

### MeasuresofCostsandBenefitsandthe FormatofAccountingStatements.

Our decision ontoday's final rule was arrived at by placing more emphasis on some scenarios rather than others. Our estimates ofelectricity price and housing projections relied primarily on the AE02000 reference case. We considered primarily the NAECA and Roll-up efficiency scenarios with an increasing expectation ofthe Roll-up scenario occurring for more stringent trial standard levels. Finally, we expect manufacturer costs to lie closer to the-reverse engineering estimates (which lie between the ARI minimum and ARI mean values).
The results presented in this chapter include only those that are needed to supplement or replace the results wepresented in the proposed rule, which still form a basis for our decision with the exception that we are no longer considering the 14-year life scenarios. We believe that

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EE-RM/STD-98-440 

# -f!= 

# t5?

# O.sReference**Case~** (2) High Growth Case, and (3) Low Growth Case. We analyzed three efficiency scenarios, each ofwhich assunied a.different efficiency distribution after new standards would take effect: 

### (l)NAECA scenario, (2) Roll-up scenario, and (3) Shift scenario. Underthe standard levels we are adopting, we believe that the Roll-up scenario most closely represents the most likely impact ofthe new standards, as explained in Chapter 8 ofthe**~SD.** We analyzed two manufacturer cost scenarios: 

### (1) based on reverse engineering data, and (2) based onARIprovidedmean cost data. Forthe reasons expressed in Parts III and IV ofthis document, we

.believe that the reverse engineering data most closely represents the costs as they will actually be under the new standards. We assumed a societal discount rate of7 percent for calculating net

. present value (NPV). However, a 3 percent value was investigated as an alternative scenario in

accordance with the Office ofManagement and Budget's (OMB) 

### Guidelines to Standardize Measures of Costs andBenefits andthe Format of AccountingStatements.

Our decision on today's final rule was arrived atby placing more emphasis on some scenarios ratherthan others. Our estimates ofelectricityprice and housingprojections relied primarily on the AE02000reference case. We considered primarily the NAECA and Roll-up efficiency scenarios with an increasing expectation ofthe Roll-tip scenario occurring for more stringenttrial standard levels. Finally, we expect manufacturer costs to lie closerto the-reverse engineering estimates (which lie between the ARI minimum and ARI meanvalues).

The results presented in this chapter include onlythose that are needed to supplement or replace the results we presented in the proposed rule; which still form a basis for our decision with the exception that we are no longer consideringthe 14-year life scenarios. We believe that

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### EE-RM/STD-98-440 -4-*> 

## 05 the 18.4-year life with a compressor replacement inthe 14th year addresses the concerns ofthose whobelieve that actual equipment life is closer to 14years and achieves substantially the same analytical results. Therefore, all analyses below assume an 18.4-year average equipment lifetime with a compressor replacement in the 14th year.

B. Significanceof EnergySavings 

### To estimate the energy savings through 2030 due torevised standards, we compared the energy consumption ofcentral air conditioners and heat pumps under the base case to energy consumption ofcentral air conditioners and heat pumps under the revised standard.
Table V.2 shows the range ofcumulative energy savings based on the AEO 2000 Reference, High Growth, and Low Growth cases foreach trial standard level. The parameters shown are the two manufacturing costs and the three equipment shipment efficiency scenarios.
Table V.2: Range ofNational Energy Savings with AEO Price Forecast Range ofNational Energy Savings For Units Sold from 2006 to 2030 (quads) Trial Standard Reverse Engineering Costs ARI Mean Costs Level NAECA Roll-up Shift NAECA Roll-up Shift 1 1.7 to 1.8 1.5 to 1.6 1.9 to 2.0 1.7 to 1.8 1.5 to 1.6 1.9 to 2.0 2 2.9 to 3.2 2.8 to 3.0 3.4 to 3.6 2.9 to 3.2 2.8 to 3.0 3.4 to 3.6 3 3.4 to 3.7 3.3 to 3.5 3.8 to4.1 3.4to 3.6 3.3 to 3.5 3.8to4.1 4 4.3 to 4.6 4.1 to 4.4 4.7 to 5.0 4.2 to 4.5 4.1 to 4.4 4.6 to 4.9 5 8.4 to 9.0 8.4 to 9.0 8.4 to 9.0 8.1 to 8.7 8.1 to 8.7 8.1 to 8.7

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### EE-RM/STO-98-440-trcq

# osthe 18.4-year life with a compressor replacement in the 14th year addresses the concerns ofthose who believe that actual equipment life is closerto 14 years and achieves substantially the same analytical results. Therefore, all analyses below assume an 18.4-year average equipment lifetime with" a compressorrepiacement in the 14th

### ye~.

B. Significance of Energy Savings To estimatethe energy savings through 2030 due to revised standards, we compared the energy consumption ofcentral air conditioners and heatpumps underthe base case to energy consumption ofcentral air conditioners and heat pumps underthe revised standard.

Table V.2 shows the range ofcumulative energy savings based onthe AEO 2000 Reference, High Growth, and Low Growth cases for each trial standard level. The parameters shown are the two manufacturing costs and the three equipment shipment efficiency scenarios.

Table V.2: Range ofNational Energy Savings with AEO Price Forecast . Range ofNational Energy Savings ForUnits Sold from 2006 to 2030 (quads) ("" Trial Standard Reverse EngineeringCosts ARI Mean Costs
- Level NAECA Roll-up Shift NAECA Roll-up Shift 1 1.7 to 1.8 1.5 to 1.6 1.9 to 2.0 1.7 to 1.8 1.5 to 1.6 1.9 to 2.0 2 2.9 to 3.2 2.8 to 3.0 3.4 to 3.6 2.9 to 3.2 2.8 to 3.0 3.4 to 3.6 3 3.4 to 3.7 3.3 to 3.5 3.8 to 4.1 . 3.4 to 3.6 3.3 to 3.5 3.8 to 4.] 4 4.3 to 4.6 4.1 to 4.4 4.7 to 5.0 4.2 to 4.5 4.] to 4.4 4.6 to 4.9 5 8.4 to.9.0 8.4 to 9.0 8.4 to 9.0 8.1 to 8.7 8.1 to 8.7 8.1 to 8.7

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### EE-RM/STD-98-440 --- e 

### 0:~ C. PaybackPeriod As discussed above, the Act requires the Department to examine payback periods to determine ifthe three-year rebuttable presumption ofeconomicjustification applies. As prescribed by the Act, the rebuttable payback period is "calculated under the applicable test procedure, ...".
The annual space-cooling and space-heating energy consumption calculated based on the hours ofuse in the test procedure are on the order of50 percent greater than the weightedaverage energy consumption dataused in the life-cycle-cost (LCC) analysis. The LCC data are based on the 1997 RECS forresidential buildings and hourly simulations for commercial buildings. Since the test procedure assumes higher annual operating hours than the RECS data implied, the use of test procedure energy consumption results in rebuttable payback periods which are shorter than median payback periods calculated from theLCC analysis.
InTable V.3, we list the rebuttable payback periods versus SEER efficiency level for the four product classes, using the 1997 RECS energy consumption data. This information shows that both classes ofheat pumps are presumed to be economicallyjustified up to a 12 SEER efficiency level, using the reverse engineering cost estimates.

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# EE.RM/STD.9~~40

# -tr cRCJ

# ~ C. PaybackPeriod As discussed above, the Act requires the Departmentto examine payback periods to determine ifthe three-yearrebuttablepresumption ofeconomicjustification applies. As prescribed by the Act, the rebuttable payback period is "calculatedunder the applicable test procedure, ...".

The annual space-cooling and space-heating energy consumption calculated based onthe hours ofuse in the test procedure are on the order of50 percent greater than the weightedaverage energy consumption data used in the life-cycle-cost (LCC) analysis. TheLCC data are 

# . .

based onthe 1997 RECS for residential buildings and hourly simulations for commercial buildings. Since the test procedure assumes higher annual operating hours than the RECS data implied, the use of test procedure energy consumption results in rebuttable payback periods which are shorterthan median payback periods calculated from the LCC analysis.


### InTable V.3, we list the rebuttable paybackperiods versus SEER efficiency level for the four product classes, using the 1997 RECS energy consumption data. This information shows that both classes ofheat pumps are presumed to be economicaIIyjustified up to a 12 SEER efficiency level, using the reverse engineering cost estimates.

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### EEWRMISTD-W9-440-#^9?G Table V.3: Summary ofRebuttable Payback Period (Years) Product Class Efficiency Level Reverse Engineering Costs ARI Mean Costs Split System Central Air 11 3.5 4.7 Conditioner 12 4.5 5.8 13 5.2 7.6 18 7.3 11.3 Split System Heat Pump 1l 1.3 2.5 12 1.8 3.3 13 3.2 4.5 18 5.8 6.8 Single Package Air 11 3.5 7.3 Conditioner 12 3.3 6.2 13 6.8 9.8 18 8.6 13.3 Single Package Heat Pump 11 2.1 3.7 12 1.8 4.0 13 4.3 6.5 _________18 5.4 7.2 

### D. EconomicJustification 1. Economic Impact on Manufacturers and Consumers Estimated economic impact ofstandards on manufacturers is based on the methodology described in the proposed rule; however, in today's final rule the manufacturer impact analysis has been expanded to include impacts based on reverse engineering cost estimates as well as ARI manufacturing cost data. The economic impacts onmanufacturers are presented in terms of industry net present value (INPV) as well as change in INPV. Data are presented forthe base
case (no change in standards) and fortrial standard levels 1through 4, in Tables V.4 through V.9. As can be observed, manufacturer impacts are relatively insensitive between the manufacturing cost estimates, but sensitive to the shipment scenarios. The proposed rule provides additional information on the methodology, assumptions and results.

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# EE.RMJSTD-~~**~.** Table V.3: Summary ofRebuttable Payback Period (Years) ProductClass Efficiency Level Reverse Engineering Costs ARI Mean Costs Split System Central Air 11 3.5 4.7 Conditioner 12 4..5 5.8 13 5.2 7.6 18 7.3 11.3 Split System Heat Pump 

# l' 1.3 2.5 12 1.8 3.3 13 3.2 4.5 18 5.8 6.8 Single Package Air 11 3.5 7.3 Conditioner 12 3.3 6.2 13 6.8 9.8 18 8.6 13.3 Single Package Heat Pump 11 2.1 3.7 12 1.8 4.0 13 4.3 6.5 18 5.4 7.2 

### D. EconomicJustification 1. Economic Impact on Manufacturers and Consumers Estimated economic impact ofstandards on manufacturers is based on the methodology described in theproposed rule; however, in today's final rule the manufacturer impact analysis has been expandedto include impacts baSed onreverse engineering cost estimates as well as ARI manufacturing cost data. The economic impacts on manufacturers are presented in terms of industry net present value (INPV) as well as change inINPV. Data are presented for the base
case (no changein standards) and for trial standard levels I through 4, in Tables VA through V.9. As canbe observed, manufacturer impacts are relatively insensitive betweenthe manufacturing cost estimates, but sensitive to the shipment scenarios. Theproposed rule provides additional information on the methodology, assumptions and results.

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### EE-RM/STD-98-440 

## - 

# b ( -
Table V.4: Changes in Industry Net Present Value
- Reverse Engineering Relative Cost, NAECA Efficiency Mix
Industry Net Change in INPV from Industry Net Standard Base Case Present Value Level ($ million) $ million percent Base $ 1,473 -- -

1 $ 1,411 $ (62) -4% 2 $ 1,294 $ (179) -12% 3 $ 1,274 $ (199) -14% 4 $ 1,297 $ (176) -12%


### Table V.5: Changes in Industry Net Present Value
- Reverse Engineering Relative Cost, Roll-up Efficiency Mix
Industry Net Change in INPV from Industry Net Standard Standard Present Value Base Case Present Value Level ($ million) $ million percent Base $ 1,473
- --

1 $ 1,299 $ (174) -12% 2 $ 1,154 $ (319) -22% 3 $ 1,136 $ (337) -23% 4 $ 1,173 $ (300) -20% 

### Table V.6: Changes in Industry Net Present Value
- Reverse Engineering Relative Cost, Shift Efficiency Mix

68C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd Table V.4: Changes in IndustryNet Present Value
- Reverse Engineering Relative Cost, NAECAEfficiency Mix
Industry Net Change in INPV from Standard Base Case Present Value Level ($ million) $ million percent Base $ 1,473 

# -- --

I $ 1,411 $ (62) -4% 2 $ 1,294 $ (179) -12% 3 $ 1,274 $ (199) -14% 4 $ 1,297 $ (176) -12%

Table V.S: Changes in IndustryNetPresentValue
- Reverse Engineering Relative Cost, Roll-up Efficiency Mix
Industry Net Change in INPV from Standard Base Case Present Value Level ($ million) $ million percent Base $ 1,473 

## - 

# --

I $ 1,299 $ (174) -12% 2 $ 1,154 $ (319) -22% 3 $ 1,136 $ (337) -23% 4 $ 1,173 $ (300) -20% Tab.le V.6: Changes in Industry Net Present Value
- Reverse Engineering Relative Cost, Shift Efficiency Mix

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### EE-RM/STD-98-440 -: U 0 > Industry Net Change in INPV from Standard Base Case Present Value Level ($ million) $ million percent Base $ 1,473
- -

1 $ 1,544 $ 71 5% 2 $ 1,618 $ 145 10% 3 $ 1,658 $ 185 13% 4 $ 1,711 $ 238 16% 

### Table V.7: Changes in Industry Net Present Value
- ARI Mean Manufacturing Cost, NAECA Efficiency Mix

Indusy Nt Change in INPV from IndustryNet Standard Base Case Present Value Base Case Level ($ million) $ million percent Base $ 1,603 -- -

1 $ 1,566 $ (37) -2% 2 $ 1,417 $ (186) -12% 3 $ 1,406 $ (197) -12% 4 $ 1,420 $ (183) -11%

69C:\Mike\US DOECentral AirASEER13 Final Rule draft 12 master 12-14-OO.wpd**""~""** 

## · ... .'

....

# - 

# - Industry Net .Change in INPV from Standard Base Case Present Value Level ($ million) $ million percent Base $ 1,473 

## - -

1 $ 1,544 $ 71 5% 2 $ 1,618 $ 145 10% 3 $ 1,658 $ 185 13% 4 $ 1,711 $ 238· 16% 

### Table V.7: Changes in Industry Net Present Value -ARIMean Manufacturing Cost, NAECA Efficiency Mix

Industry Net Change in INPV from Standard Base Case Present Value Level ($ million) .$ million percent Base $ 1,603 

# -- --

I $ 1,566 $ (37) -2% 2 $ 1,417 $ (186) -12% 3 $ 1,406 $ (197) -12% 4 $ 1,420 $ (183) -11%



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### EE-RM/STD-98-440* 

### a .a 

### Table V.8: Changes in Industry Net Present Value
- ARI Mean Manufacturing Cost, Roll-up Efficiency Mix
Indusy Nt Change in INPV from Base Industry Net Standard C Present Value Case Level ($ million) $ million percent Base $ 1,603-
-

1 $ 1,422 $ (181) -11% 2 $ 1,241 $ (362) -23% 3 $ 1,236 $ (367) -23% 4 $ 1,268 $ (335) -21% 

### Table V.9: Changes in Industry Net Present Value
- ARI Mean Manufacturing Cost, Shift Efficiency Mix
Industry Net Change in INPV from Base Industry Net Standard Case Present Value Level (S million) S million percent Base $ 1,603
--

1 $ 1,740 $ 137 9% 2 $ 1,825 $ 222 14% 3 $ 1,854 $ 251 16% 4 $ 1,914 $ 311 19%

70C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd ." TableV.8: Changes in IndustryNetPresentValue
- ARI Mean Manufacturing Cost, Roll-up Efficiency Mix

Industry Net Change in INPV from Base Standard Case Present Value Level ($ million) $ million percent Base $ 1,603 

# - -

1 $ 1,422 $ - (181) -11% 2 $ 1,241 $ (362) -23% 3 $ 1,236 $ (367) -23% 4 $ 1,268 $ (335) -21%
Table V.9: Changes in Industry NetPresent Value -'ARI Mean Manufacturing Cost" Shift Efficiency Mix

Industry Net Changein INPV from Base Standard Case Present Value Level ($ million) $ million percent Base $ 1,603 

## - 

# --

1 $ 1,740 $ 137 9% 2 $ 1,825 $ 222 14% 3 $ 1,854 $ 251 16% 4 $ 1,914 $ 311 19%

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### EE-RM/STD-98-440.,a Table V. 10 provides the change in INPV relative to the base case for trial standard levels 1through 4. Data are presented for two industry segments (lower cost manufacturers and higher cost manufacturers), and for the three shipment efficiency scenarios.
Table V.10: Change in Industry Net Present Value (percent) Relative to Base
- Comparison Between Lower (L) and Higher (H) Cost Manufacturers
Reverse Engineering Relative Cost ARI Mean Manufacturing Cost Standard NAECA Roll-up Shift NAECA Roll-up Shift

Level L H L H L H L H L H L H I 1% -6% 0% -16% 3% 5% 5% -5% 3% -16% 7% 9% 2 2% -17% 0% -29% 6% 11% 7% -17% 5% -31% 12% 14% 3 2% -19% 0% -30% 9% 14% 9% -19% 6% -32% 14% 16% 4 8% -19% 6% -29% 15% 17% 15% -19% 13% -31% 21% 19%


### Forthe group most negatively impacted, i.e., the higher cost group, Table V.11 presents the Return on Invested Capital (ROIC) in year 2011 associated with the base case, and with each new standard level for theNAECA and Roll-up shipment efficiency scenarios

7 c:\Mike\US DOECentra Air\SEER13 Final Ruledraft 12 master 12-14-OO.wpd - -----------------------------------------------------

# EE.RM/STD.9~O""

# aas

11_, Table V.IO providesthe change in INPV relative to the base case for trial standard levels1through 4. Data are presented for two industry segments (lower cost manufacturers and higher cost manufacturers), and for the three shipment efficiency scenarios.

Table V.I0: Change in Iridustry Net Present Value (percent) Relative to Base
- Comparison Between Lower (L) and Higher (H) Cost Manufacturers
Reverse Engineering Relative Cost ARI Mean Manufacturing Cost Standard NAECA Roll-up Shift NAECA Roll-up Shift

Level L H L H L H L H L H L H

1 - 1% -6% 0% -16% 3% S% 5% -5% 3% -16% 7% 9% 2 2% -17% 0% -29% 6% 11% 7% -17% 5% -31% 12% 14% 3 2% -19% 0% -30% 9"10 14% 9% -19% 6% -32% 14% 16% 4 8% -19% 6% -29% 15% 17% 15% -19% 13% -31% 21% 19%

Forthe group mosfnegatively impacted,Le., the higher cost group, Table V.ll presents the Return onInvested Capital (ROIC) in year 2011 associated with the base case, and with each
new standard level for the NAECA and Roll-up shipment efficiency scenarios

7IC;\MikeIUS**DOE\Ce~tJaI** AirlSEER 13 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440-#* 

## 05 Table V. 11: Return on Invested Capital (ROIC) in 2011 for Higher Cost Manufacturers
Reverse Engineering ARI Manufacturing Costs Standard

Level NAECA Roll-up NAECA Roll-up Base 12.7% 12.7% 13.3% 13.3%

1 11.7% 10.3% 12.3% 10.7% 2 10.1% 8.4% 10.2% 8.4% 3 9.8% 8.2% 10.0% 8.3% 4 9.6% 8.3% 

### 9.6% 8.3% 

### Consumers will also be affected by increased efficiency standards in that they will experience higher purchase prices and lower operating costs. These impacts are best captured by changes in life cycle costs which are discussed below.
2. Life-cycle-cost (LCC) We analyzed the net effect by calculating the LCC. Inputs required for calculating LCC include total.installed costs.(i.e., equipment price plus installation costs), annual energy savings, average and marginal electricity prices, electricity price trends, repair costs, maintenance costs, equipment lifetime, and discount rates.
The output oftheLCC model is the mean LCC savings for each product class as well as a probability distribution or likelihood ofLCC reduction or increase. The LCC analysis for today's final rule employs a concept described in theproposed rule withregard to thepercentage of consumers (both residential and commercial) that are impacted to a substantial degree by an increase in the minimum efficiency standard.

72C:\Mike\US DOE\Cntral Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd Table V.11: Return on Invested Capital (ROIC) in 2011 for Higher Cost Manufacturers
Reverse Engineering ARI Manufacturing Costs Standard

Level NAECA Roll-up NAECA Roll-up

. Base 12.7% 12.7% 13.3% 13.3% 1 . 11.7% 10.3% 12.3% 10.7% 2 10.1% 8.4% 10.2% 8.4% 3 9.8% 8.2% 10.0% 8.3% 4 9.6% 8.3% 9.6% 8.3%
Consumers will also be affected by increased efficiency standards in that they will experience higherpurchase prices and lower operating costs. These impacts are best captured by changes in life cycle costs which are discussed below.

2. Life-cycle-cost (LCC) We analyzed the net effect by calculating the LCC. Inputs required for calculating LCC include total.installed costs.{Le., equipment price plus installation costs), annual energy savings, average and marginal electricityprices, electricityprice trends, repair costs, maintenance costs, equipment lifetime, and discount rates.
The output ofthe LCC model is the mean LCC savings for eachproduct class as well as a probability distribution orlikelihood ofLCC reduction or**increase~** The LCC analysis for today's final rule employs a concept described in the propqsed rule withregard to the percentage of
consumers (both residential and commercial) that are impacted to a substantial degree by an increase inthe minimum efficiency standard.

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### EE.RM/STD-98-440 -$ 

# 0 Table V.12 summarizes the LCCs for baseline split systems and single package central air conditioners and heat pumps and also shows a 2percent threshold which helped us identify those consumers who are impacted to a more substantial degree.
Table V.12: Baseline Life-Cycle-Costs Product Class Baseline LCC 2% ofBaseline LCC Split Air Conditioners $5,170 $103 Split Heat Pumps $9,679 $194 Single Package Air Conditioners $5,629 $113 Single Package Heat Pumps $9,626 $193 

### Tables V.13 and V.14 depict the LCC results for split system and single package central air conditioners and heat pumps. The tables show the average LCC values forthe baseline and each trial standard level. Since manufacturer cost data were not available forthe 18 SEER efficiency levels, 15 SEER cost datawere used for all 18 SEER calculations resulting in 18 SEER LCC results which underestimate their true cost level. The datain Tables V.13 and V.14 also present the difference in LCC ateach efficiency level relative to thebaseline. The differences represent either an LCC savings or an LCC cost increase. In addition, the tables show the subset ofconsumers (both residential and commercial) at each efficiency level who are impacted in one ofthree ways: consumers who achieve net LCC savings in excess of2 percent of the baseline LCC, consumers whose change in LCC is within ±2percent ofthe baseline LCC, and consumers who achieve a net LCC increase exceeding 2percent ofthe baseline LCC.

73C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd ---------------**------------------------------~---~-**



### Table V.12 summarizes the LCCs for baseline split systems and single package central air conditioners and heatpumps and also shows a 2percent threshold which helped us identify those consumers who are impacted to a more substantial degree.
Table V.12: Baseline Life-Cycle-Costs Product Class Baseline LCC 2% ofBaseline LCC Split Air Conditioners $5,170 $]03 Split Heat Pumps $9,679 $194 Single Package AirConditioners $5,629 $113 Single Package Heat Pumps $9,626 $193 

### Tables V.13 and V.l4depictthe LCC results for split system and single package central

. air conditioners and heatpumps. The tables show the average LCC values for the baseline and

each trial standard level. Since manufacturer cost data were not available for the 18 SEER efficiency levels, 15 SEER cost data were used for all 18 SEER calculations resulting in 18 SEER LCC results which underestimate their true cost level. The data in Tables V.13 and V.14 also present the difference in LCC at each efficiency level relative to the baseline. The differences represent either an LCe savings or an Leecost increase. In

### addition, the tables show the subset ofconsumers (both residential and commercial) at each efficiency level who are impacted in one ofthree ways: consumers who achieve net LCC savings in excess of2 percent of the baseline LCC, consumers whose change in LCC is within ±2 percent ofthe baseline LCC, and consumers who achieve a netLCC increase exceeding 2percent ofthe baseline LCC.

73C;\Mike\US DOE\Ccntral Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440-. a0 5 Table V.13: Summary ofLCC Results based on Reverse Engineering Manufacturing Costs Average LCC Percent of Consumers with Efficiency ProductClass Levl Average LCC Savings Net Savings Net Savings or Net Costs (Costs) (>2 %) Costs (±2%) (>2 %) 10 $5,170

- - - Split System 11 $5,095 $75 28% 70% 2% Central Air 12 $5,057 $113 35% 40% 25% . Conditioner 13 $5,057 $113 34% 27% 39% 18 $5,307 ($137) 25% 7% 68% 10 $9,679 - - - Split Sym 11 $9,470 $209 40% 60% 0% Split System . 12 $9,314 $365 58% 42% 0% Heat Pump 13 $9,307 $372 52% 42% 6% 18 $9,720 ($41) 28% 15% 57% 10 $5,629

- - Single Package 11 $5,551 $78 27% 72% 1% Air 12 $5,466 $163 40% 51% 9% Conditioner 13 $5,600 $29 28% 20% 52% 18 $5,905 ($276) 21% 6% 73% 10 $9,626 Sie

P e 11 $9,419 $207 39% 61% 0% Single Package 12 $9,205 $421 66% 34% 0% Heat Pump Heat Pmp 13 $9,273 $353 50% 38% 12% 18 $9,460 $166 37% 15% 48%

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# EE-RM/STD-9~-440~~**~O ~** 

Table V.l3: Summary ofLCC Results based on Reverse Engineering Manufacturing Costs AverageLCC Percent ofConsumers with Efficiency Product Class Average LCC Savings Net Savings Net Savings or Net Costs Level (Costs) (>1 %) Costs (±1%) (>1 %)

10 $5,170 

## · . . . Split System II $5,095 $75 28% 70% 2% Central Air 12 $5,057 $113 35% 40% 25% . Conditioner 13 $5,057 $113 34% 27% 39% 18 $5,307 ($137) 25% 7% 68% 10 $9,679 

## · . 

## - - Split System 11 $9,470 $209 40% 60% 0% 12 $9,314 $365 58% 42% 0% Heat Pump 13 $9,307 $372 52% 42% 6% 18 $9,720 ($41) 28% 15% 57% . 10 $5,629 

## · - - - Single Package 11 $5,551 $78 27% 72% 1% Air 12 $5,466 $163 40% 51% 9% Conditioner 13 $5,600
. $29 28% 20% 52% 18 $5,905 ($276) ·21% 6% 73% IO $9,626 

## · - . 

## . Single Package 11 $9,419 $207 39% 61% 0% 12 $9,205 $421 66% 34% 0% Heat Pump 13 $9,273 $353 50% 38% 12% 18 $9,460 $166 37% 15% 48%

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### EE-RM/STD-98-440 OR 

## OS Table V.14: Summary ofLCC Results based on ARI Mean Manufacturing Costs Average LCC Percent of Consumers with Efficiency Product Class Level Average LCC NetSavings Net Savingso Net Costs .(Costs) (>2 %) Costs (+2%) (>2 %) 10 $5,170

- - - Split System 11 $5,126 $44 23% 68% 9% Central Air 12 $5,125 $45 27% 34% 39% Conditioner 13 $5,199 ($29) 25% 17%
- 58% 18 $5,725 ($555) 15% 4% 81% 10 $9,679

- - - 11 $9,529 $150 30% 70% 0% Split System 12 $9,437 $242 42% 55% 3% Heat Pump Heat Pump 13 $9,464 $215 39% 39% 22% 18 $9,955 ($276) 23% 11% 66% 10 $5,629

- - Single Package 11 $5,649 ($20) 16% 47% 37% Air 12 $5,600 $29 26% 30% 44% Conditioner 13 $5,804 ($175) 18% 11% 71% 18 $6,370 ($741) 12% 4% 84% 10 $9,626

- -- 11 $9,492 $134 28% 72% 0% Single Package Single

Package 12 $9,372 $254 44% 49% 7% Heat Pump 13 $9,514 $112 33% 31% 36% 18 $9,922 ($296) 24% 10% 66%



### Consumer subgroup impacts have been estimated by determining the LCC impacts ofthe trial standard levels on those consumers who are below the poverty line (e.g., for a family offour, this constitutes a household income ofless than $16,036). To perform this calculation, we used the subset ofRECS 97 data for households that are considered low-income. 8 

### Table V.15 and

s Approximately 7 percent ofthe RECS 97 households with central air conditioners and 9 percent ofthe households with heat pumps met this criteria. 75C:\Mike\US DOECcntral Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

# EE.RM/STD.9~-440

# -3t**~ (j~**  Table V.14: Summary orLCC Results based on

## ARt Mean Manufacturing Costs Average LCC Percent ofConsumers witb Efficiency Product Class Average LeC Savings Net Savings Net Savings or Net Costs Level (Costs) (>2 %) Costs (±2%) (>2 %)

10 $5,170 

# - . 

# - - - Split System 11 $5,126 $44 23% 68% 9% Central Air 12 $5,125 $45 27% 34% 39% Conditioner 13 $5,199 ($29) 25% 17% . 58% 18 $5,725 ($555) 15% 4% 81%

- 10 $9,679 

## - - - - Split System 11 $9,529 $150 30% 70% 0% 12 $9,437 $242 42% 55% 3%

.Heat Pump 13 $9,464 $215 39% 39% 22% 18 $9,955 ($276) 23% 11% 66% 10 $5,629 

## - 

# - - - Single Package 11 $5,649 ($20) 16% 47% 37% Air 12 $5,600 $29 26% 30% 44% Conditioner 13 $5,804 ($175) 18% 11% 71% 18 $6,370 ($741) 12% 4% 84% 10 $9,626 

## - - 

# - - II $9,492 $134 28% 72% 0% Single Package 12 $9,372 $254 44% 49% 7% Heat Pump 13 $9,514 $112 33% 31% 36% 18 $9,922 ($296) 24% 10% 66%



### Consumer subgroup impacts have been estimated by determining the LCC impacts ofthe trial standard levels on those consumers who are below the poverty line (e.g., for afamily offour, this constitutes ahousehold income ofless than $16,036). To perform this calculation, we used the subset ofRECS 97 datafor households that are considered low-income. 8 

### Table V.lS and

8 Approximately 7 percent ofthe RECS 97 households with central air conditioners and 9 percent ofthe households with heal pumps met this criteria. 75c:\Mike\US DOE\Central AirlSEER13 Final Rule draft 12 master 12·14-00.wpd

### EE-RM/STD-98-440-+^. 0 g' V. 16 summarize the impacts on low-income consumers who utilize central air conditioners and heat pumps.
Table V.15: Summary ofLCC Results on Low-Income Consumers Based on Reverse Engineering Manufacturing Costs Average LCC Percent of Consumers with Efficiency Product Class Average LCC Savings Net Savings Savings/Costs Net Costs Level (Costs) (>2 %) (+2%) (>2 %) 

### -10 $4,906 - - Split System I $4,855 $51 21% 74%/ 5% Central Air 12 $4,841 $65 28% 38% 34% Conditioner 13 . $4,863 $43 26% 24% 50% 18 $5,176 ($270) 17% 6% 77% 10 $8,965

- - - 11 $8,836 $129. 26% 74% 0% Split System 12 $8,742 $223 44% 56% -0% Heat Pump 13 $8,780 $185 39% 49% 12% 18 $9,389 ($424) 15% 10% 75% 10 $5,327

- - - Single Package I $5,272 $55 21% 77% 2% Air 12 $5,202 $125 34% 52% 14% Conditioner 13 $5,364 ($37) 21% 18% 61% 18 $5,704 ($377) 15% 5% 80% 10 $9,149 11 $9,057 $118 24% 76% 0% Single Package 12 $8,973 $265 53% 47% 0% Heat Pump 13 $9,145 $148 36% 44% 20% 18 $9,619 ($284) 20% 14% 66%

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### --------------------

# EE.RM/STD-9~_440-~~

# {)5 V.16 summarizethe impacts on low-income consumers who utilize central airconditioners and heat pumps.
Table V.l5: Summary ofLCe Results onLow-Income Consumers Based on Reverse Engineering Manufacturing Costs AverageLCC Percent ofConsumers with Efficiency Product Class Average LCC Savings Net Savings Savings/Costs Net Costs Level (Costs) (>2%) (:2%) (>2 %) -10 $4,906 

## - 

# - - - Split System t I $4,855 $51 21% 74% 5% Central Air 12 $4,841 $65 28% 38% 34% Conditioner 13 $4,863 $43 26% 24% 50% 18 $5,176 ($270) 17% 6% 77% 10 $8,965 

# - - - - Split System II $8,836 $129_ 26% 74% 0% 12 $8,742 $223 44% 56% -0% Heat Pump 13 $8,780 $185 39% 49% 12% 18 $9,389 ($424) 15% 10% 75% 10 $5,327 

# - - 

# - - Single Package 11 $5,272 $55 21% 77% 2% Air 12 $5,202 $125 34% 52% 14% Conditioner 13 $5,364 ($37) 21% 18% 61% 18 $5,704 ($377) 15% 5% 80% 10 $9,149 

# - - - - Single Package 11 $9,057 $118 24% 76% 0% 12 $8,973 $265- 53% 47% 0% Heat Pump 13 $9,145 $148 36% 44% 20% 18 $9,619 ($284) 20% 14% 66%

76c:\MikeIUS OOElCentral AirlSEERI3 Final Rule draft 12 master 12·14-00.wpd

### EE-RM/STD-98-440 -9>0 " 

### 6 Table V.16: Summary ofLCC Results on Low-Income Consumers Based on ARI Mean Manufacturing Costs

Average LCC PercentofConsumers with Efficiency Product Class Lee Average LCC Savings Saving Savings/Costs Net Costs Level ._(Costs) (>2 %) (±2%) (>2 %)

10 $4,906

- - - Split System 1 $4,887 $19 17% 66% 17% Central Air 12 $4,903 $3 20% 29% 51% Conditioner 13 $5,007 ($101) 17% 14% 69% ______18 $5,598 ($692) 10% 2% 88% 10 $8,965

- Si. St11 $8,890 $75 16% 84% 0% Split System 12 $8,862 $103 27% 64% 9% Heat Pump .13 $8,948 $17 25% 40% 35% 18 $9,610 ($645) 11% 8% 81% 10 $5,327

- Single Package 11 $5,283 $44 11% .42% 47% Air 12 $5,313 $14 20% 27% 53% Conditioner 13 $5,568 ($241) 12% 9% 79% 18 $6,158 ($831) 10% 2% 88% 10 $9,149

- - - 1Single Pac1 $9,057 $92 21% 78% 1% Single Package -12 $8,973 $176 35% 53% 12% Heat Pump 13 $9,145 $4 25% 27% 48% 18 $9,619 ($470) 18% 8% 74%



### In comparing the LCC results on the subgroup ofconsumers who are low-income (Tables V.15 and V.16) versus all central air conditioner and heat pump consumers (Tables V.13 and V.14), it appears that low-income consumers have lower savings at the different trial standard levels than the general population ofcentral air conditioner and heat pump consumers. Table V.17 directly compares the LCC impacts ofthe final rule on both the low-income subgroup and all consumers.
77C:\Mike\US DOE\Central AirSEER13 Final Rule draft 12 master 12-14-OO.wpd Table V.l6: Summary ofLCC Results on Low-Income Consumers Based on ARI Mean Manufacturing Costs

Average LCC Percent01Consumers with Efficiency Product Class Average LCC Savings Net Savings Savings/Costs Net Costs Level (Costs) (>2 %) (±2%) (>2 %)

10 $4,906 

# - - - - Split System 11 $4,887 $19· 17% 66% 17% Central Air 12 $4,903 $3 20% 29% 51% Conditioner 13 $5,007 ($101) 17% 14% 69% 18 $5,598 ($692) 10% 2% 88% 10 $8,965 

# - - - - Split System 11 $8,890 $75 16% 84% 0% 12 $8,862 $103 27% 64% 9% Heat Pump 13 $8,948 $17 25% 40% 35% 18 $9,610 ($645) 11% 8% 81% 10 $5,327 

## - 

# - - - Single Package 11 $5,283 $44 11% 42% 47% Air 12 $5,313 $14 20% 27% 53% Conditioner 13 $5,568 ($241) 12% 9% 79% )8 $6,158 ($831) 10% 2% 88% 10 $9,149 

## - - - - Single Package 11 $9,057 $92 21% 78% 1%

.)2 $8,973 $1.76 35% 53% 12% HeatPump 13 $9,145 $4 25% 27% 48% 18 $9619 ($470) 18% 8% 74%

In comparing the LCC results on the subgroup ofconsumers who are low-income (Tables V.l5 and V.16) versus all central air conditioner and heatpump consumers**(T~bles** V.l3 and V.14), it appears that low-income cons.umers have lower savings at the different trial standard levels than the general population ofcentral air**co~ditioner** and heat pump consumers. Table V.17 directly compares the LCC impacts ofthe final rule onboththe low-income subgroup and all consumers.
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## EE-RM/STD-98-4404ao 

# 5 Table V.17: Comparison ofLCC Impacts ofthe Final Rule on All Consumers vs. Low-Income Consumers Reverse Engineering Costs ARI Mean Costs Percent ofConsumers Percent ofConsumers Average LCC Savings Average LCC Savings with Net Costs (>2 %of with Net Costs (>2 % of (Costs) (Costs) Baseline LCC) Baseline LCC) Product All Low- All Low- All Low- All LowClass SEER Consumers Income Consumers Income Consumers Income Consumers Income Split System Split

Systm 13 $113 $43 39% 50% ($29) ($101) 58% 69% A/C Split System 13 $372 $185 6% 12% $215 $17 22% 35% HP Package A/C Single 13 $353 $148 12% 20% $112 $4 36% 48% Package HP 

### 3. Net Present Value andNet National Employment The net present value analysis is a measure ofthe cumulative benefit or cost to the Nation that would result from more stringent standards. As with the determination ofnational energy savings, four different scenarios were analyzed for each trial standard level consisting of variations on: (1) electricity price and housing projections; (2) shipment efficiency distributions; (3) manufacturer cost estimates; and (4) societal discount rate. Electricity price and housing projections were based on three different AEO 2000 forecasts: (1) Reference Case, (2) High Growth Case, and (3) Low Growth Case. Three efficiency scenarios were analyzed which forecast the shipment efficiency distribution after new standards: (1)NAECA scenario, (2) Rollup scenario, and (3) Shift scenario. For these results the equipment lifetime was assumed to be

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# EE.RM/STD.9~-440

# --#-9.05 Table V.17: Comparison ofLCC Impacts ofthe Finai Rule on All Consumers vs. Low-Income Consumers Reverse Engineering Costs ARI Mean Costs Percent ofConsumers Percent ofConsumers Average LCC Savings with Net Costs (>2 % of Average LCC Savings with Net Costs (>2 % of (Costs) Baseline LCC) (Costs) Baseline LCC) Product All Low- All Low- All Low- All LowClass SEER Consumers Income Consumers Income Consumers Income Consumers Income Split System J3 $1 J3 $43 39% AlC 50% ($29) ($101 ) 58% 69% Split System 13 $372 $185 6% 12% $215 $17 22% 35% HP Single J3 $29 ($37) 52% 61% ($175) ($241) 71% 79% PackageA/C Single J3 $353 $148 12% 20% $112 $4 36% 48% Package HP 3. Net Present Value and NetNational Employment The netpresent value analysis is a measure ofthe cumulative benefit orcost to theNation that would result from more stringent standards. As With the determination ofnational energy savings, four different scenarios were analyzed for each trial standard level consisting of variations on: (l) electricity price and housing projections; (2) shipment efficiencydistributions; (3) manufacturer cost estifl1.ates; and (4) societal discount rate. Electricity price and housing projections were based onthree different AEO 2000 forecasts: (1) Reference Case, (2) High Growth Case, and (3) LowGrowth Case. Three efficiency scenarios were analyzed which forecast the shipment efficiency distribution after new standards: (1) NAECA scenario, (2) Rollup scenario, and (3) Shift scenario. Forthese results the equipment lifetime was assumed to be

78c:\Mikc\US OOE\CenttaJ Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 4 40 

## 05 18.4 years, coupled with the inclusion ofcompressor replacement costs and an assumed societal discount rate of 7percent. Therange ofNPVs are reported in Table V.18.
Table V.18: Range ofNet Present Value with Electricity Price and Housing Projections Net Present Value For Units Sold from 2006 to 2030 (billion 98$) Trial Standard Reverse Engineering Costs ARI Mean Costs Level NAECA Roll-up Shift NAECA Roll-up Shift 1 to2 2 to2 0 1 Oto-1 2 2 2to 3 0 to -1 -1 0 to 1 -3 to -4 3 to 2 2 to3 -1to -2 -1to -2 0to -1 -5 4 Oto I to 2 -3 to -4 -5 to -6 -4 -10 5 -10 to-11 -10 to -11 -10 to-11 -22 -22 -22 

### In order to show the sensitivity oftheNPVs in Table V.18 to the various input assumptions, Tables V.19through V.22 report the range ofNPV results for a range of assumptions and scenarios relative to the base case national equipment and operating costs for all central air-conditioning and heat pump equipment. Bythe "base case" we mean the case ofno
new efficiency standards. The results in Table V.19 and V.20 are the AEO 2000 Reference Case forecast ofelectricity prices and housing. The total costs are presented for the base case and each trial standard level. The discount rate is 7percent. In addition, the NPV (the difference in total costs between the base case and trial standard level), aswell asthe NPV as apercentage ofthe "Base Case Total Costs," are calculated for each trial standard level.

79C:\Mike\US DOE\Cenral Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd 

### EE-RM/STD-98-440-.,#

## ~**~S** 18.4 years, coupled withthe inclusion ofcompressorreplacement costs and an assumed societal discount rate of 7 percent. Therange ofNPVs are reported in Table V.18.

Table V.18: Range ofNetPresent Value with Electricity Price and Housing Projections
Trial Standard Net PresentValue For Units Sold from 2006 to 2030 (billion 98$) Reverse EngineeringCosts ARI Mean Costs Level NAECA Roll-up Shift NAECA Roll-up Shift I 1to 2 2 1to 2 0 1 

## oto-l 2 2 2 to 3 

## oto-l -1 

## oto 1 -3 to-4 3 1to 2 2 to 3 -1 to-2 -1 to -2 

## oto-l -5 4 

## o to 1 1to 2 -3 to-4 -5 to-6 -4 -10 5 -10 to-11 -10 to-11 -10to-l1 -22 -22 -22 

### In orderto showthe sensitivity ofthe NPVs in Table V.18 to the various input assumptions, Tables V.19 through V.22 report the range ofNPV results for a range of assumptions and scenarios relative to the base case national equipment and operating costs for all central air-conditioning and heat pump equipment. By the "base case" we mean the case ofno newefficiency standards. The results in Table V.19 and V.20 are the AEO 2000 Reference Case forecast ofelectricity prices and housing. The total costs are presented for the base case and each trial standard level. The discount rate is 7 percent. 

### In addition, theNPV (the difference in total costs between the base case and trial standard level), as well as the NPV as a percentage ofthe "Base Case Total Costs," are calculated for eachtrial standard level.

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### EE-RM/STD-98-4404-* 

# 0 5 Table V.19: Net Present Values Results Relative to Base Case Total Equipment and Operating Costs based on Reverse Engineering Manufacturing Costs Efficiency Scenario Base Case NAECA Roll-up Shift

Total Total NPV Total NPV Total NPV Costs TSL Costs aspercent Costs aspercent Costs as percent billion billion billion98$ ofBase billion billion98 oBase billion billion98S of Base 98$ 98S Case Total 98$ Case Total 98S Case Total I $379 $378 $ 2 0.4% $377 $ 2 0.5% $378 $ 1 0.4% 2 $379 $377 $ 2 0.5% $377 $ 3 0.7% $380 $ (1) -0.2% 3 $379 $378 $ 1 0.4% $377 $ 2 0.6% $381 $ (2) -0.5% 4 $379 $379 $ 0 0.0% $378 $ 1 0.3% $383 $ (4) -0.9% 5 $379 $390 $ (10) -2.7% $390 $ (10) -2.7% $390 S (10) -2.7%


### Table V.20: Net Present Values Relative to Base Case Total Equipment and Operating Costs based on ARI Mean Manufacturing Costs Efficiency Scenario Base Case NAECA Roll-up Shift

Total Total NPV Total NPV Total NPV Costs TSL -Costs aspercent Costs as percent Costs as percent billion billion billion98S ofBase billion billion98 of Base billion billion 98 of Base 98$ 98S Case Total 98S Case Total 98S CaseTotal 1 $381 $381 $ 0 0.0% $381 $ 1 0.2% $385 $ 0 -0.1% 2 $381 $382 $ (1) -0.3% $381 $ 0 0.0% $388 $ (3) -0.9% 3 $381 $383 $ (2) -0.5% $382 $ (1) -0.2% $390 $ (5) -1.4% 4 $381 $387 $ (5) -1.4% $386 $ (4) -1.1% $395 $ (10) -2.5% 5 $381 $403 $ (22) -5.8% $403 $ (22) -5.8% $407 $ (22) -5.8%

80C:\Mike\US DOE\Centra Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd Table V.19: Net Present Values Results Relative to Base Case Total Equipment and Operating Costs based on Reverse Engineering Manufacturing Costs
Base Case Efficiency Scenario NAECA Roll-up Shift Total Total Costs NPV Total NPV Total NPV TSL Costs aspercent Costs aspercent Costs aspercent billion

98$ billion billion 98$ o/Base b/llion billion 98$ o/Base billion billion 98$ o/Base 98$ Case Total 98$ Case Total 98$ Case Total I $379 $378 $ 2 0.4% $377 $ 2 0.5% $378 $ 1 0.4% 2 $379 $377 $ 2 0.5% $377 $ 3 0.7% $380 $ (I) -0.2% 3 $379 $378 $ 1 0.4% $377 $ 2 0.6% $381 $ (2) -0.5% 4 $379 $379 $ 0 0.0% $378 $ 1 0.3% $383 $ (4) -0.9% 5 $379 $390 $ (10) -2.7% $390 $ (10) -2.7% $390 $ (10) -2.7%

Table V.20: Net Present Values Relative to Base Case Total Equipment and Operating Costs based on ARI Mean Manufacturing Costs
Base Case Efficiency Scenario NAECA Roll-up Shift Total Total Costs NPV Total NPV Total NPV TSL Costs aspercent billion Costs aspercent Costs aspercent billion 98$ billion 98$ o/Base billion billion 98$ o/Base billion billion 98$ o/Base 98$ Case Tolal 98$
. Case Tolal 98$ Case Tolal 1 $381 $381 $ 0 0.0% $381 $ 1 0.2% $385 $ 0 -0.1% 2 $381 $382 $ (1) -0.3% $381 $ 0 0.0% $388 $ (3) -0.9% 3 $381 $383 $ (2) -0.5% $382 $ (I) -0.2% $390 $ (5) -1.4% 4 $381
. $387 $ (5) -1.4% $386 $ (4) -1.1% $395 $ (10) -2.5% 5 $381 $403 $ (22) -5.8% $403 $ (22) -5.8% $407 $ (22) -5.8%

8Oc:lMikc\US OOE\Central Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440-:F aS Table V.21 show how a 3percent discount rate9 

### impacts the netpresent value. Only the Roll-up efficiency scenario and the AEO Reference Case electricity price and housing projection
were considering in analyzing the impacts from a 3percent discount rate.

Table V.21: Net Present Values Results based on 3 percent Discount Rate Reverse Engineering Costs ARI Mean Costs Trial StandardLevel Trial Standard Level Base Case as percent Base Case aspercent Net Present Net Present TSL Total Costs Total Cost ofBase Total Costs Total Cost of Base Value Value billion98 billion 98 $ billion9 8$ CaseTotal billion98$ billion98$ CaseTotal billion98$ billion98$ Costs Costs I $708 $701 $ 7 0.9% $712 $707 $ 4 0.6% 2 $708 $697 $ 11 1.6% $712 $705 $ 6 0.9% 3 $708 $697 $ 11 1.6% $712 $706 $ 6 0.8% 4 $708 $697 $ 11 1.5% $712 $711 $ 0 0.0% 5 $708 $716 $ (8) -1.2% $712 $746 $ (35) -4.9%


### The proposed rule also estimated the national employment impacts due to each ofthe five trial standard levels. As discussed in the proposed rule, the energy efficiency standards for central air conditioners and heat pumps are expected to reduce electricity bills for residential and commercial consumers and the resulting net savings are expected to be redirected to other forms ofeconomic activity. These shifts in spending and economic activity are expected to affect the demand for labor.

As we did for theproposed rule, the Department estimated the impacts ofthe new standards on national labor demand using an input/output model ofthe U.S. economy. The

9 A societal discount rate of 3 percent value was investigated as a scenario inaccordance with the Office ofManagement and Budget's (OMB) GuidelinestoStandardizeMeasuresof CostsandBenefits andthe FormatofAccountingStatements. 8lC:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

# EE.RM/STD.9~-440

# -¥

# ,,;rDO Table V.21 showhow a 3 percent discount rate9 impacts the net present value. Only the Roll-up efficiency scenario and the AEO Reference Case electricity price and housing projection
were considering in analyzing the impacts from a 3 percent discount rate.
Table V.21: NetPresent Values Results based on 3 percent Discount Rate Reverse Engineering Costs ARI Mean Costs Trial Standard Level Trial Standard Level Base Case aspercent Base Case aspercent Net Present Net Present TSL Total Costs Total Cost o/Base Total Costs Total Cost o/Base Value Value billion 98$ billion 98$ Case Total billion 98$ billion 98$ Case Total billion 98$ billion 98$ Costs Costs I $708 $701 $ 7 0.9% $712 $707 $ 4 0.6% 2 $708 $697 $ 11 1.6% $712 $705 $ 6 0.9% 3 $708 $697 $ II 1.6% $712 $706 $ 6 0.8% 4 $708 $697 $ 11 1.5% $712 $711 $ 0 0.0% 5 $708 $716 $ (8) -1.2% $712 $746 $ . (35) -4.9% The proposedrule also estimated the national employment impacts due to each ofthe five trial standard levels. As discussed in the proposed rule, the energy efficiency standards for central airconditioners and heatpumps are expected to reduce electricity bills for residential and commercial consumers and the resulting net savings are expected to be redirected to otherforms ofeconomic activity. These shifts in spending and economic activity are expected to affect the demand for labor.

As we did for the proposed rule, the Department estimated the impacts ofthe new standards onnational labor demand using an input/output model ofthe U.S. economy. The

9 Asocietal discount rate of 3 percent value was investigated as a scenario in accordance with the Office ofManagement and Budget's (OMB) Guidelines to Standardize Measures of Costs andBenefits andthe Format of AccountingStatements. 

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### EE-RM/STD-98-4404- O^

## D model characterizes the interconnections among 35 economic sectors using data from the Bureau ofLabor Statistics. For some years after the new standards go into effect, new consumer expenditure on air conditioners and heat pumps each year outpaces their annual energy savings. This activity redirects expenditures into the manufacturing sector, which is less labor intensive than other sectors ofthe economy,'° 

### producing aloss of jobs in those sectors that is larger than the gain of jobs in manufacturing. Also, a loss of jobs results in the utility sector due to itsloss ofrevenues. As annual consumer energy savings begin to exceed annual new expenditures on air conditioners, and eventually the new standards will produce anet gain in national employment.
The increases or decreases in the net demand for labor in the economy estimated by the input/output model due to air conditioner and heat pumps standards are likely tobe very small relative to total national employment. For the following reasons any modest changes in employment are in doubt:
* Unemployment is now atthe lowest rate in 30 years. Ifunemployment remains very low during the period when the standards are put into effect, it is unlikely that the standards 

### alone could result in any change in national employment levels. * Neither the BLS data nor the input-output model used by DOE include the quality or wage level ofthejobs. The losses or gains from any potential employment change may be offset if job quality and pay also change.

' 1 Bureau of Economic Analysis, Regional tMultiplirs. ers.A l.ser fltmdh lorthe Regional liplt-OuIpu WModeling System (RIMS ll)
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# ,,5
model characterizes the interconnections among 35 economic sectors using data from the Bureau ofLabor Statistics. For some years afterthe new standards go into effect, new consumer expenditure on airconditioners and heat pumps each year outpaces their annual energy savings. This activity redirects expenditures into the manufacturing sector, which is less labor intensive than other sectors ofthe economy,IO producing a loss of jobs in those sectors that is larger than the gain of jobs in manufacturing. Also, aloss of jobsresults in the utility sector due to its loss ofrevenues. As annual consumer energy savings begin to exceed annual new expenditures on,air conditioners, and eventually the new standards will produce anet gain in national employment.
The increases ordecreases in the net demand for labor in the economy eS,timated by the input/output model due to air conditioner and heat pumps standards are likely to be very small relative to total national employment. Forthe following reasons any modest changes in

. . 

### employment are in doubt:

• Unemployment is now atthe lowest rate in 

### 30 years. Ifunemployment remains very low during theperiodwhen the standards areput into effect, itis unlikely that the standards 

### alone could result in any change in national employment levels. • Neitherthe BLS data northe input-outputmodel used by DOE include the quality or wage level ofthejobs. The losses or gains from any potential employment change may be offset if job quality and pay also change.

10 Burt'au of Economic Analysis, Regional Afulliplii:rs: A User Handhuo/ijhr the R':'gional}lIplll-()/llpW Afodeling S)'Slt!n1 (RIMS fIj

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### EE-RM/STD-98-440-* O 

## 6 The netbenefits or losses frompotential employment changes are aresult ofthe estimated net present value ofbenefits or losses likely to result from air conditioner and heat pump standards. It may not be appropriate to separately identify and consider any employment impacts beyond the calculation ofnet present value. Taking into consideration these legitimate concerns regarding the interpretation and use ofthe employment impacts analysis, the Department concludes only that the proposed central air conditioner and heat pump standards are likely to result in no appreciablejob losses to the nation.
4. Impact on Utility or Performance ofProducts As detailed in Section V ofthe proposed rule, in establishing classes ofproducts we believe the adopted standards will not result in anydegradation ofutility or performance in the covered products.
5. Impact ofAny Lessening ofCompetition
The Act directs the Department to consider any lessening ofcompetition that is likely to result from standards. It further directs the Attorney General to determine the impact, ifany, of any lessening ofcompetition likely toresult from aproposed standard and transmit such determination to the Secretary, not later than 60 days after thepublication ofaproposed rule, together with an analysis ofthe nature and extent ofsuch impact. EPCA Section 325(o)(2)(B)(i)(V) and (B)(ii), 42 U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii).

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• The net benefits orlosses from potential employment changes are a result ofthe estimated netpresent value ofbenefits or losses likely to result from air conditioner and heat pump standards. It may not be appropriate to separately identify and consider any employment impacts beyond the calculation ofnet present value.
Takinginto considerationthese legitimate concerns regarding the interpretation and use ofthe employment impacts analysis, the Departmentconcludes only that the proposed central air conditioner andheatpump standards are likelyto result 

### in no appreciablejob losses to the nation.

4. Impact on Utility orPerfonnance ofProducts As detailed in SectionV ofthe proposed rule, in establishing classes ofproducts we believe the adopted standards will not result in any degradation ofutility orperfonnance inthe covered products.

5. Impact cifAny Lessening ofCompetition

The Act directs the Departmentto consider any lessening ofcompetition that is likely to



## - result from standards. Itfurther directs the Attorney General to detenninethe impact, ifany, of any lessening ofcompetition likelyto result from a proposed standard and transmit such detenninationto the Secretary, not later than 60 days 'after the publication ofa proposed rule, togetherwith an analysis ofthe nature and extent ofsuch impact. EPCA Section 325(0)(2)(B)(i)(V) and (B)(ii), 42 U.S.C. 6295(0)(2)(B)(i)(V) and (B)(ii).

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### EE.RM/STD-98-440 - 9 

## 0 

# 05 In order to assist the Attorney General in making such a determination, the Department provided the Department ofJustice (DOJ) withcopies ofthe proposed rule and the TSD for review. At DOE's request, the DOJ reviewed the manufacturer impact analysis interview questionnaire to ensure that it would provide insight concerning any lessening ofcompetition due to any proposed trial standard levels.
As previously discussed in II.D.4, the Department ofJustice concluded that the residential central air conditioner andheat pump standards contained in the proposed rule could have an adverse impact on competition. The proposed standards would have changed the current central air conditioner and heat pump efficiency standards of 10 SEER/6.8 HSPF for split system airconditioners and heat pumps and 9.7 SEER/6.6 HSPF for single package air conditioners and heat pumps to 12 SEER for air conditioners and 13 SEER/7.7 HSPF for heat'pumps. Throughthe-wall equipment was the only exception. We proposed an 11 SEER standard for that class.
DOJ identified three possible competitive problems presented by the proposed standards. First, DOJ stated that the proposed 13 SEER heat pump standard would have a disproportionate impact on smaller manufacturers. They stated that currently less than 20 percent ofthe total current product lines meet theproposed standards, but for some small manufacturers, 100percent oftheir product lines fail to satisfy theproposed standard. Second, DOJ stated that the proposed standard forheat pumps, and in some instances for air conditioners, would have an adverse impact on some manufacturers ofproducts (including thoseproducts referred to in the proposed rule as "niche products") used to retrofit existing

8 4

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# 5*' In orderto assistthe Attorney General in making such a determination,-the Department provided the Department ofJustice (DOJ) with copies ofthe proposed rule and the TSD for review. At DOE'srequest, the DO]reviewed the manufacturer impact analysis interview questionnaire to ensure that it would provide insight concerning any lessening ofcompetition due to any proposedtrial standard levels.

As previously discussed in II.D.4, the Department ofJustice concluded that the residential central air conditionerand heat pump standards contained in the proposed rule could have an adverse impacton competition. The proposed standards would have changed the current central air conditioner and heat pump efficiency standards of 10 SEERl6.8 HSPF for split system· air conditioners and heat pumps and 9.7 SEERl6.6 HSPF for single package air conditioners and heat pumps to 12 SEER for air conditioners and 13 SEERl7.7 HSPF for heafpumps. Throughthe-wall equipment was the only exception. We proposed·an 11 SEER standard for that class.

DOJ identified three possible competitiveproblems presentedbythe proposed standards. First, DOl stated that theproposed 13 SEERheatpump standard would have a disproportionate impact on smaller manufacturers. They stated that currently less than 20percent ofthe total current product lines meet theproposed standards, but for some small manufacturers, 100percent oftheirproduct lines fail to satisfy theproposed standard.
Second, DOJ stated that theproposed standard for heatpumps, and in someInstances for ' air conditioners, would have an adverse impact on somemanufacturers ofproducts (including thoseproducts referred to in theproposedrule as "nicheproducts") used to retrofit existing
84c:\Mike\US DOE\Ccntra1**Ai~EERI3** Final Rule draft 12 master 12.14-00.wpd

### EE-RM/STD-98-440O1-t housing and used in manufactured housing. These manufacturers could not, according to DOJ, make units that comply with the rule and fit into the available space. Third, DOJ expressed concern that the proposed heat pump standard of 13 SEER could make heat pumps less competitive with alternative heating and cooling systems. Because the standard would result in increases in the size and cost ofheat pumps, it is possible that purchasers would shift away from heat pumps to other systems that include electric resistance heat, reducing the competition that presently existsbetween heat pumps and those other systems."
The Department ofJustice urged the Department ofEnergy to take into account these possible impacts on competition in determining its final energy efficiency standard for air conditioners and heat pumps. DOJ wrote that the Department ofEnergy should consider setting a lower SEER standard for heat pumps, such asthe standard included in Trial Standard Level 2, and a lower SEER standard for air conditioners for retrofit markets where there are space constraints (such asmarkets served by niche products) and for manufactured housing.
As we noted in the Supplementary ANOPR and proposed rule, nearly all small manufacturers produce only niche products. DOJ's first concern relates to disproportionate
"DOJ also wrote about ourrequest forcomments on aproposal to adopt a standard for steady-state cooling efficiency (EER). The regulation language inthe proposed rule did not include a provision regarding an EER standard, and DOJ limited its views to the standards set forth inthe proposed regulation language, indicating that ifthe Department proposes rule language in the future incorporating an EER standard, DOJ would address the competitive impact ofthat standard.
85C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd housing and used in manufactured housing. These manufacturers could not, according to DOJ,· makeunits that comply with the rule and fit into the available space.
Third, DOJ expressed**~ncern** that the proposedheat pump standard of 13 SEER could

·make heat pumps less competitive with alternativeheating and cooling systems. Because the

·standard would result in increases in the size and cost ofheat pumps, it is possiblethat purchasers would shift away from heatpumps to other systems that inc1 ude electricresistance heat, reducing the competitionthatpresently exists between heat pumps and those other systems. I I

The Department ofJustice urged the Department ofEnergy to take into account these possible impacts on competition indetermining its final energy efficiency standard for air conditioners and heat pumps. DOJ wrote that the Department ofEnergy should consider setting a lower SEER standard for·heat pumps, such as the**st~dard** 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 servedbyniche products) and for manufactured housing.

As we noted in the Supplementary ANOPR and proposed rule, nearly all small manufacturers produce only niche products. DOl's first concern relates to disproportionate
IIDOJ also wrote about ourrequest for col1l?1ents ona proposal to adopt a standard for ·steady-state cooling efficiency (EER). Theregulation language 

### intheproposedrule did not include aprovisionregarding an EER standard, and DOJ limited its views to the standards set forth inthe proposed regulation language, indicating that ifthe Departmentproposes rule languagein the future incorporating an EER standard, DOJ would address the competitive impact ofthat standard. 

### 85c:lMike\US**DOE\C~ntral** Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 impacts on small manufacturers, which are the substantially the same group as the niche product manufacturers. Furthermore, niche products almost exclusively serve applications with severe space constraints. Today's final rule prescribes standards only forthose products that are not severely space-constrained, and therefore substantially eliminates their first concern regarding the impact ofmore stringent standards on small manufacturers.
DOJ's second concern is more difficult to address since we have not been able to establish a general definition ofreplacement products that could be enforced atthe point of manufacture. We have removed one element ofthis concern by not specifying new standards for niche products, primarily due to our concern over their continued viability inreplacement applications. However; we recognize that larger conventional equipment also poses problems in retrofit applications and that these problems may be more complex in manufactured homes. Nevertheless, air conditioner and heat pump manufacturers do have options for increasing the efficiency ofequipment without increasing the size ofboth the indoor and outdoor units, and we expect products utilizing those options tobe available to consumers during the time when the standards we are adopting today are in effect.
As to DOJ's third concern regarding possible shifting in the market from heat pumps to resistance heaters, we have adopted the same minimum SEER requirement for heatpumps as we have for air conditioners. That action substantially reduces the incentive for consumers to switch, thereby addressing that concern.

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# A/) 5 impacts on small manufacturers, which are the substantially the same group as the nicheproduct manufacturers. Furthermore, niche products almost exclusively serve applications with severe space constraints. Today's final rule prescribes standards only for those products that are not severely space-constrained, and therefore substantially eliminates their first concern regarding the impact ofmore stringent standards on small manufacturers.

DOJ's second concern is more difficult to address since we**hav~** not been able to '. establish a general definition ofreplacementproducts that could be enforced atthe point of

.manufacture. We have removed one element ofthis concernby not specifying new standards for niche products, primarily due to <;>ur concern overtheir continued viability inreplacement . applications. However; we recognize that larger conventional equipment also poses problems in retrofit applications and that these problems may be more complex in manufactured homes. Nevertheless, air conditioner and heat pump manufacturers do have options for increasing the efficiency ofequipment without increasing the size ofboththe indoor and outdoorunits, and we expect products utilizing those options tobe available to consumers during the time when the standards we are adopting today are ineffect.

As to DOJ'sthird concernregardingpossible shifting in the market from heatpumps to resistance heaters, we have adopted the same minimum SEERrequirementfor heatpumps

# as we have for air conditioners. That action substantiallyreduces the incentive for consumers to switch, thereby addressing that concern.

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### EE-RM/STD-98- 4 40


### - # i 

# 0
In summary, the standards we are adopting should effectively eliminate most ofDOJ's
concerns regarding the lessening ofcompetition, even under TSL 4. To the extent that we have not fully eliminated all their concerns, however, we have considered the remaining possibility for lessening of competition aswe weighed the burdens oftoday's adopted standards.

6. Need oftheNation to Save Energy The Secretary recognizes the need ofthe Nation to save energy. Enhanced energy efficiency improves the nation's energy security, and reduces the environmental impacts of energy production. Improved efficiency ofcentral air conditioners and heat pumps is also likely to improve the reliability ofthe nation's electric system. The energy savings from central air conditioner and heat pump standards result in reduced emissions ofcarbon and NO.. Cumulative emissions savings over the 15-year period modeled are shown in Table V.22. The results presented in Table V.22 are based only onthe AEO 2000 Reference Case for electricity price and housing projections and the NAECA efficiency scenario.

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# it 

# 0( I)

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In summary, the standards we are adopting should effectively eliminate most ofDO]'s concerns regarding the lessening ofcompetition, even underTSL 4. To the extent that we have not fully eliminated all their concerns, however, we have considered the remaining possibility for lessening of competition as we weighed the burdens oftoday's adopted standards.

6. Need oftheNationto Save Energy The Secretary recognizes the need ofthe Nation to save energy. Enhanced energy efficiency improves the nation's energy security, and reduces the environmental impacts of energy production. Improved efficiency ofcentral airconditioners and heat pumps is also likely to improve the reliability ofthe nation's electric system. The energy savings from central air conditioner and heat pump standards result in reduced emissions ofcarbon and NOx.• Cumulative emissions savings overthe I5-yearperiod modeled are shown in Table V.22..The results presented in Table V.22 are based only on the AEO 2000 Reference Case for electricity price and housing projections and theNAECAefficiency scenario.

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### EE-RM/STD-98-440-" 

# 4 S Table V.22: Cumulative Emissions Reductions based on AEO 2000 Reference Case and NAECA Efficiency Scenario (2006-2020) Trial Standard Reverse Engineering Costs ARI Mean Costs Level Carbon (Mt) NO, (kt) Carbon (Mt) NO, (kt) 1 13.2 36.7 13.4 37.2 2 23.8 72.7 23.7 67.9 3 27.7 84.4 27.4 78.8 4 32.6 85.8 33.6 102.5 5 63.0 184.2 63.7 193.7 

### The impact ofvarying electricity price and housing projections (i.e., different AEO cases)
as well as different efficiency scenarios were considered forthe Trial Standard Level 4. Table V.23 shows how carbon and NOX emissions are impacted by the different projections and scenarios.
Table V.23 Cumulative Emissions Reductions for Final Standard (2006-2020) and the Impact of Different Electricity Price/Housing Projections and Efficiency Scenarios Electricity Price and Efficiency Reverse Engineering Costs ARI Mean Costs Housing Projection Scenario Carbon (Mt) NO, (kt) Carbon (Mt) NO, (kt) AEO Reference Case NAECA 32.6 85.8 33.6 102.5 AEO Reference Case Roll-up 32.7 93.8 31.3 87.5 AEO Reference Case Shift 36.0 107.1 34.9 97.9 AEO Low Growth Case NAECA 28.5 .97.2 27.5 95.8 AEO High Growth Case NAECA 42.2 92.4 42.8 103.1

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# S'
Table V.22: Cumulative Emissions Reductions based onAEO 2000 Reference Case and NAECA Efficiency Scenario (2006-2020) Trial Standard Reverse Engineering Costs ARI Mean Costs Level Carbon (Mt) NO. (kt) Carbon (Mt) NO. (kt) I 13.2 36.7 13.4 37.2 2 23.8 72.7 23.7 67.9 3 27.7 84.4 27.4 78.8 4 32.6 85.8 33.6 102.5

- 5 63.0 184.2 63.7 193.7 The impact ofvarying electricity price and housing projections (Le., different AEO cases)
as well as different efficiency scenarios were considered for the Trial Standard Level 4. Table V.23 shows howcarbon andNOxemissions are impacted bythe differentprojections and scenarios.

Table V.23 Cumulative Emissions Reductions for Final Standard (2006-2020) and the Impact of Different Electricity PricelHousing Projections and Efficiency Scenarios Electricity Price and Efficiency Reverse Engineering Costs ARJ Mean Costs Housing Projection Scenario Carbon (Mt) . NO. (kt) Carbon (Mt) NO. (kt) AEO Reference Case NAECA 32.6 85.8 33.6'**102~5** AEO Reference Case Roll-up 32.7 93.8 31.3 87.5 AEO Reference Case Shift 36.0 ·107.1 34.9 97.9 AEO Low Growth Case .NAECA 28.5 ·97.2 27.5 95.8 AEO High Growth Case NAECA 42.2 92.4 42.8 103.1

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### EE-RM/STD-98-440 - _*^ 05 

### The annual carbon emission reductions range upto 6.8 Mt in 2020 and theNO, emissions reductions up to 27.0 kt in 2015.12'3 Total carbon andNO, emissions for each trial standard level are reported in the Environmental Assessment, in the TSD.
The Department makes no effort to monetize the benefits ofthe actual emission reductions, but there may be time related differences inthe perceived value ofthe emissions depending on when they occur, as with monetized benefits that accumulate overtime. Emission reductions that occur sooner are often more desirable than equivalent reductions that occur later. Like monetary benefits, thehealth, recreational and ecosystem benefits that result from emission reductions are often perceived to have a greater value ifthey occur sooner,rather than later. To the extent that the different trial standard levelshave slightly different shipment distributions
over time, some trial standard levels might have a slightly higher proportion ofearlier emission reductions than another trial standard level. To show the possible effect ofthe different timing patterns ofthe emissions, the Department is also presenting discounted emissions. These calculations were done using the same seven percent discount rate as was used for discounting monetized benefits.. We show discounted cumulative emission savings from 2006 through 2030 in Table V.24.
Table V.24: Cumulative Discounted Emissions Reductions based on AEO 2000 Reference Case and NAECA Efficiency Scenario (2006-2020)

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# Dr
The annual carbon emissionreductions range up to 6.8 Mt in 2020 and the NOxemissions reductions up to 27.0 kt in 2015. 12, 13 Total carbon and NOxemissions for each trial standard level are reported in the Environmental Assessment, 

### in the TSD.

The Department makes no effort to monetizethebenefits ofthe actual emission reductions, butthere maybe time related differences inthe perceived value ofthe emissions depending onwhen they occur, as with monetized benefits that accumulate overtime. Emission reductions that occur sooner are oftenmore desirablethan equivalent reductions that occurlater. Likemonetarybenefits, the health, recreational and ecosystembenefits that result from emission reductions are often perceived to have a greatervalue ifthey occur sooner, ratherthan later. To the extent that the different trial standard levels have slightly different shipment distributions
overtime, some trial standard levels might have a slightlyhigherproportion ofearlier emission reductions than another trial standard level. To show the possible effect ofthe different timing patterns ofthe emissions, the Departmentis also**pres~nting** discounted emissions. These calculations were done using the same seven percent discount rate as was used for discounting monetizedbenefits.. We showdiscounted cumulative emission savings from 2006 through 2030 in Table V.24.

Table V.24: Cumulative Discounted Emissions Reductions based onAEO 2000 Reference Case and NAECA Efficiency Scenario (2006-2020)

12Million metric**t~ns** (Mt). 13Thousand metric tons (kt). 

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# 5

Trial Standard ,Reverse Engineering Costs ARI Mean Costs Level Carbon (Mt) NO, (kt) Carbon (Mt) NO , (kt) 1 4.7 15.7 4.8 15.7 2 8.5 30.3 8.5 29.2 3 9.8 35.2 9.8 33.8 4 11.6 36.7 12.0 43.3 5 22.3 77.1 22.7 81.1 

### 7. Other Factors This provision allows the Secretary ofEnergy, in determining whether a standard is economicallyjustified, to considerany other factors that the Secretary deems to be relevant. EPCA Section 325(o)(2)(B)(i)(VI), 42 U.S.C. 6295(o)(2)(B)(i)(VI). The Secretary has decided to consider the impact onpeak power requirements and electric utility system reliability.
Peak power impacts on electric utilities from increases in the central air conditioner and heat pump standard are calculated using the NEMS-BRS model. NEMS-BRS isused toestimate peak power impacts by calculating the reduction inplanned generation capacity due to an increase in the minimum efficiency standard. Table V.25 shows the estimated reductions in installed generation capacity, in giga-watts (GW), in theyear 2020, due to each'ofthe trial standard levels. Ofthe installed generating capacity avoided, 13 percent would have been provided by coal power plants. The remaining percentage (87 percent) would have been supplied by either gas-fired, oil-fired, or dual-fired power plants. The results presented in Table V.25 are based only on the AEO 2000 Reference Case for electricity price and housing projections and the NAECA efficiency scenario.

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Trial Standard .Reverse Engineering Costs ARI Mean Costs Level Carbon (Mt) NO. (kt) Carbon (Mt) NO. (kt) I 4.7 15.7 4.8 15.7 2 8.5 30.3 8.5 29.2 3 9.8 35.2 9.8 33.8 4 11.6 36.7 12.0 43.3 5 22.3 77.1 22.7 81.1
7. OtherFactors This provision allows the Secretary ofEnergy, in determining whether a.standard is economicallyjustified, to consideranyotherfactors that the· Secretarydeems to be relevant. EPCA Section 325(0)(2)(B)(i)(VI), 42 U.S.C. 6295(0)(2)(B)(i)(VI). The Secretaryhas decided to considerthe impact onpeakpowerrequirements and electric utility system reliability.

Peak power impacts on electric utilities from increases in the central airconditioner and . heatpump standard are calculatedusing theNEMS-BRS model. NEMS-BRS is used to estimate peakpowerimpacts bycalculating the reduction inplanned generation capacity due to an increase in the minimum efficiency standard. Table V.25 shows the estimated reductions in installed generation capacity, in giga-watts 

### (OW), intheyear

### 2020, due to each'ofthe 

### trial standard levels. Ofthe installed generating capacity avoided, 13 percent would have been provided bycoal powerplants. The remainingpercentage (87 percent) would have been supplied by either gas-fired, oil-fired, ordual-:fired power plants. The results presented in Table V.25 are based only on the AEO 2000 Reference Case for electricityprice and housing projections and the NAECA efficiency scenario.

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# ID 9^ Table V.25: Installed Generation Capacity Reductions in the year 2020 based on AEO 2000 Reference Case andNAECA Efficiency Scenario Reverse Engineering Costs ARI Mean Costs Trial Standard Installed Generating Capacity Installed Generating Capacity Level Reduction (GW) Reduction (GW) 1 6.5 6.4 2 10.6 10.6 3 12.4 12.3 4 15.5 15.4 5 28.8 28.6 

### The impact ofvarying electricity price and housing projections (i.e., different AEO cases) as well as different efficiency scenarios were considered only forthe final standard (trial standard level 4). Table V.26 shows how installed generation capacity is impacted by the different projections and scenarios.

Table V.26 Installed Generation Capacity Reductions in the year 2020 for Final Standard and the Impact ofDifferent Electricity Price/Housing Projections and Efficiency Scenarios

Reverse Engineering Costs ARI Mean Costs Electricity Price and Efficiency Scenario Installed Generating Installed Generating Housing Projection Capacity Reduction (GW) Capacity Reduction (GW) AEO Reference Case NAECA 15.5 15.4 AEO Reference Case Roll-up 15.5 15.0 AEO Reference Case Shift 16.6 16.4 AEO Low Growth Case NAECA 14.5 13.9 AEO High Growth Case NAECA 16.0 15.6
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Table V.2S: Installed Generation Capacity Reductions inthe year 2020 based on AEO 2000 Reference Case and NAECA Efficiency Scenario Reverse Engineering Costs ARI Mean Costs Trial Standard Installed GeneratingCapacity Installed Generating Capacity Level Reduction (GW) Reduction (GW) 1 6.5 6.4 2 10.6 ]0.6 3 12.4 12.3

- 4 15.5 15.4 5 28.8 28.6
The impact ofvarying electricity price and housing projections (i.e., different AEO cases)
as well as different efficiency scenarios were considered only for the final standard (trial standard leveI4). Table V.26 shows howinstalled generation capacity is impacted by the different projections and scenarios.

Table V.26 Installed Generation Capacity Reductions inthe year 2020 for Final Standard and the Impact ofDifferent Electricity PricelHousing Projections and Efficiency Scenarios

Reverse Engineering Costs ARI Mean Costs Electricity Price and Efficiency Scenario Installed Generating Installed Generating Housing Projection Capacity Reduction (GW) Capacity Reduction (GW) AEO Reference Case NAECA 15.5 15.4 AEO Reference Case Roll-up 15.5 15.0 AEO Reference Case Shift 16.6 16.4 AEO Low Growth Case NAECA 14.5 13.9 AEO High Growth Case NAECA 16.0 15.6
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E. Conclusion Section 325(o)(2)(A) ofthe Act, 42 U.S.C. 6295(o)(2)(A), specifies that any new or amended energy conservation standard for anytype (or class) ofcovered product shall be designed to achieve the maximum improvement in energy efficiency which the Secretary determines istechnologically feasible and economicallyjustified. In determining whether a standard is economicallyjustified, the Secretary must determine whether the benefits ofthe standard exceed its burdens. EPCA Section 325(o)(2)(B)(i), 42 U.S.C. 6295(o)(2)(B)(i). The amended standard must "result in significant conservation ofenergy." EPCA Section 325(o)(3)(B), 42 U.S.C. 6295(o)(3)(B).
We consider the impacts ofstandards beginning with the max tech level, i.e., trial standard level 5. We then consider less efficient levels until we reach the level which is technologically feasible and economicallyjustified.
To aid the reader as we discuss the benefits orburdens ofthe trial levels, we have included a summary ofthe analysis results in Table V.27.'4 

### Table V.27 presents a summary of quantitative analysis results for each TSL based on the assumptions we consider most plausible. These include manufacturing cost estimates from the reverse engineering, an 18.4-year equipment lifetime with one compressor replacement at 14years, and electricity prices based on the AE02000 Reference Case.

14 All cumulative effects that are not monetary are notdiscounted. Monetary effects are discounted to 1998 dollars. 92C:\Mike\US DOECentral Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

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E. Conclusion 

### Section 325(0)(2)(A) ofthe Act,42 U.S.C. 6295(0)(2)(A), specifies that any new or amended energy conservation standard for any type (or class) ofcovered product shall be designed to achieve the maximum improvement in energy efficiency which the Secretary determines is**te~hnologically** 

### feasible and economicallyjustified. In 

### determining whether a standard is economicallyjustified, the Secretary must determine whetherthe benefits ofthe standard exceed its burdens. EPCA Section 325(0)(2)(B)(i), 42 U.S.C. 6295(0)(2)(B)(i). The amended standard must "result in significant conservation ofenergy." EPCA Section 325(0)(3)(B), 42 U.S.C. 6295(0)(3)(B).
We considerthe impacts ofstandards beginning with the max tech level, i.e., trial standard level 5. We then consider less efficient levels until we reach the level which is technologically feasible and economicallyjustified.
To aid the reader as we discuss the benefits orburdens ofthe trial levels, we have included a summary ofthe analysis results in Table V.27.14 Table V.27 presents a summary of quantitative analysis results for each TSL based on the assumptions we considermost plausible. These include manufacturing cost estimates from the reverse engineering, an 18.4-year equipment lifetime with one compressor**replacem~nt** 

### at 14 years, and electricityprices based on the AE02000 Reference Case.
14 All cumulative effects that are not monetiuy are not discounted. Monetary effects are discounted to 1998 dollars. 

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# 5" Table V.27. Summary ofQuantitative Results' Trial Std 1 TrialStd 2 Trial Std 3 Trial Std 4 Trial Std 5 Primary Energy Saved (quads) 2 1.6 2.9 3.4 4.2 8.6 Generation Capacity Offset (GW) 3 6.5 10.6 12.4 15.5 28.8 NPV ($billion) 7% Discount Rate, Roll-up 2 3 2 1 (10) 7% Discount Rate, NAECA 2 2 1 0 (10) 3% Discount Rate, Rol-up 7 1 11 11 (8) Emissions

Carbon Equivalent (Mt) 3 13.2 23.8 27.7 32.7 63.0 NO, (kt)' 36.7 72.7 84.4 93.8 184.2 Cumulative Change in INPV ($million) 4

Roll-upI (174) (319) (337) (300) NAECA 1 _____(62) (179) (199) (176) 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 Payback (years)6

Split AC 7.8 9.8 9.8 11.3 19.6 Packaged AC 7.7 7.5 7.5 14.5 25.1 Split HP 2.7 3.9 6.4 6.4 14.0 Packaged Heat Pump 4.6 4.0 8.4 8.4 12.8 'Parentheses indicate negative (-)values. 2 Energy savings based on Roll-up efficiency scenario. 3Values based on NAECA efficiency scenario with the exception ofTSL 4 which is based on the Roll-up scenario. 4Notcalculated atTrial.Standard Level 5. ' Negative values indicate LCC increases. 6Payback periods are median values.


### In addition to the quantitative results, we also consider other burdens andbenefits that affect economicjustification. The potential to improve the reliability ofthe electricity system is the major benefit we have not quantified explicitly. In areas where the occurrence ofblackouts (and brownouts) can be reduced through expansion ofsystem capacity, the economic value of avoided blackouts associated with reductions in peak load cannot exceed the value ofthe avoided capacity expansion. That value is already captured in our analysis.as savings in consumer utility 93C:\Mike\US DOE\Centra AirSEER13 Final Rule draft 12 master 12-14-O0.wpd 

### Table V.27. Summary ofQuantitative Results I . Trial Std 1 Trial Std 2 Trial Std 3 Trial Std 4 Trial Std 5 Primal)' Energy Saved (quads)2 1.6 2.9 3.4 4.2 8.6 Generation Capacity Offset (GW)3 6.5 10.6 12.4 15.5 28.8 NPV ($billion) 7% Discount Rate, Roll-up 2 3 2 1 (10) 7% Discount Rate, NAECA 2 2 1 0 (10) 3%Discount Rate, Roll-up 7 )} 11 11 (8) Emissions

Carbon Equivalent (Mt)3 13.2 23.8 27.7 32.7 63.0 NOx (kt)3 36.7 72.7 84.4 93.8 184.2 Cumulative Change in lNPV ($ milliont

Roll-up (174) (319) (337) (300) 

## - NAECA J62) (179) (199) (176) 

## - Life CyCle Cost Savings ($)5

Split AC 75 113 113 113 J137) Packaged AC 78 163 163 29 (276) Split HP 209 365 372 372 (41) Packaged HP 207 421 353 353 166 Payback (years)6

Split AC 7.8 9.8 9.8 11.3 19.6

. Packaged AC 7.7 7.5 7.5 14.5 25.1**~lit** HP 

### 2.7 3.9 6.4 6.4 14.0

Packaged Heat Pump_ 4.6 4.0 8.4 8.4 12.8 I Parentheses indicate negative (.) values.
2Energy savings based on Roll-up efficiency scenario.
3 Values based on NAECA efficiency scenario with the exception ofTSL4 which is based on the Roll-up scenario.
4 Not calculated atTrial.Standard Level 5.**~** Negative values indicate LCC increases.
6 Payback periods are median values.


### In addition to the quantitative results, we also considerotherburdens andbenefits that affect economicjustification. The potential to improve the reliability ofthe electricity system is the majorbenefitwe have not quantified explicitly. In 

### areas where the occurrence ofblackouts (and brownouts) can be reduced through expansion ofsystem capacity, the economic value of avoided blackouts associated with reductions in peak load cannot exceed the value ofthe avoided capacity expansion. That value is already captured in our analysis.as savings in consumer utility 93C:\Mike\US OOE\Central Air\SEERt3 Final Rule draft 12 master 12.14-OO.wpd

### EE-RM/STD-98-440 "jfSO5 bills. However, in areas that do not expect to be able to maintain adequate capacity reserves, the value ofavoided blackouts associated with reductions inpeak demand can far exceed the normal costs ofcapacity expansion."
We also recognize that the adopted standards could result in additional burdens. These include a possible increase in health problems caused by consumers forgoing air conditioner purchases, apossible-reduction in the ability ofthe product to dehumidify, apossible lessening of competition, and possible difficulty ininstalling the new baseline products into retrofit applications. However, we generally believe that these burdens are capable ofbeing mitigated at any standard level, except possibly trial standard level 5. Section IV discusses our response to comments regarding benefits and burdens and explains our viewpoints on those issues.
First we considered trial standard level (TSL) 5,the maximum technologically achievable efficiency level for each offour classes, representing uniform 18 SEER requirements. The manufacturing cost we assume for TSL 5is equal to 15 SEER equipment, although we would expect that assumption to understate the cost and price oftheproduct. TSL 5will likely save 8.3 quads ofenergy which the Department considers significant. These savings will result in the avoidance ofapproximately 29 GW ofinstalled generation capacity. For comparison, the generating capacity is equivalent to roughly 75 large, 400 megawatt, powerplants,'6

15 

### For instance, ifcapacity-related blackouts cost aregion $1billion, society wouldbe willing topay upto $1billion toprevent them. Ifthose blackouts can be prevented through either acapacity expansion or areduction in peak demand, and the new capacity would cost $100 million,the value ofthe reduction inpeak demand can be no more than $100 million. Ifthe region isshort on capacity and cannot addnew capacity quickly, however,the same reduction inpeak demand then can equal the value ofthe avoided blackout ($1 billion) since there isno feasible alternative. 16 

### DOE estimates 9coal-fired power plants and 66 gas-fired power plants can be avoided. See TSD,Chapter 11 and Appendix H. 94C:\Mike\US DOE\Central AirMSEER13 Final Rule draft 12 master 12-14-OO.wpd

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bills. However, in areas that do not expect to be able to maintain adequate capacity reserves, the value ofavoided blackouts associated with reductions in peak demand can far exceed the nonnal costs ofcapacity expansion.IS

We also recognize that the adopted standards could result in additional burdens. These include a possible increase inhealth problems caused by consumers forgoing air conditioner purchases,

## a possible-reduction in the ability ofthe product to dehumidify, a possible lessening of competition, and possible difficulty ininstalling**th~** newbaseline products into retrofit applications. However, we generally believe that these burdens are capable ofbeing mitigated at any standard level, except possibly trial standard level 5. Section IV discusses ourresponse to comments regarding benefits and burdens and explains our viewpoints on those issues.

First we considered trial standard level (TSL) 5, the maximum technologically achievable efficiency level for each offour classes, representing unifonn 18 SEERrequirements. The manufacturing cost we assume for TSL 5 is equal to 15 SEERequipment, although we would expect that assumptionto understate the cost and price ofthe product. TSL 5 will likely save 8.3 

### quads ofenergy whichthe Departmentconsiders significant. These savings will result inthe avoidance ofapproximately 29 GW ofinstalled generation capacity. For comparison, the generating capacity is equivalent to roughly 75 large, 400 megawatt, powerplants,16

IS For instance, ifcapacity-related blackouts cost aregion $1 billion, society would be willing to·pay up to $1 billion to prevent them. Ifthose blackouts can be prevented through either acapacity expansion or areduction in peak demand, and the new capacity would cost $100 million, the value ofthe reduction in peak demand can be no more than $100 million. Ifthe region is short on capacity and cannot add new capacity quickly, however, the same reduction in peak demand then can equal the value ofthe avoided blackout ($1 billion) since there is no feasible alternative. . 16 DOE estimates 9 coal-fired power plants and 66 gas-fired power plants can be avoided. See TSD, Chapter II and Appendix H. 94c:\Mike\US OOE\Ccntral Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 ^ 

### O approximately 3.7 percent ofcurrent installed generating capacity nationwide and more than 13 percent ofthe anticipated growth in capacity needed by 2020. The emissions reductions ranging from 63.0 Mt ofcarbon equivalent and 184.2 kt ofNO, are also significant.
At TSL 5,the average consumer would experience an increase in LCC costs. Purchasers ofsplit central air-conditioners, the predominant class ofcentral air conditioner with 65 percent ofthe sales ofcentral air conditioners and heatpumps, would lose on average $137 over the life ofthe appliance. Purchasers ofsplit heat pumps, the predominant class ofheat pump, would lose on average $41. Again, theseresults do not includethe additional price the consumer would pay over theprice ofa 15 SEER product, which would increase the life cycle cost considerably. Furthermore, for the nation as a whole, TSL 5would result in anet cost of$10 billion in NPV. We did not calculate manufacturer impacts atthistrial standard level, determining based on preliminary evaluation that they would be severe and unacceptable.
The Secretary concludes that at TSL 5,the benefits ofenergy savings, generating capacity reductions and emission reductions wouldbe outweighed by the negative economic impacts to the nation, to the vast majority ofconsumers and to the manufacturers. Consequently, the Secretary has concluded that TSL 5,the Max Tech Level, isnot economicallyjustified.
Next, we considered TSL 4. This level specifies 13 SEER equipment for all product classes. In considering TSL 4 the Roll-up efficiency scenario and reverse engineering cost data are the assumptions we considerto be the most probable as discussed in Part V.A Trial Standard Levels. Primary energy savings would likely be 4.2 quads which the Department considers

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# 5' approximately 3.7 percent ofcurrent installed generating capacity nationwide and more than 13 percent ofthe anticipated growth in capacity needed by 2020. The emissions reductions ranging from 63.0 Mt ofcarbon equivale.nt and 184.2 ktofNO xare also significant.

AtTSL 5, the average consumerwould experience an increase in LCC costs. Purchasers ofsplit central air-conditioners, the predominant class ofcentral air conditioner with 65 percent ofthe sales ofcentral air conditioners and heat pumps, would lose on average $137 overthe life ofthe appliance.. Purchasers ofsplitheatpumps, the predominant class ofheat pump, would lose
onaverage $41. Again, these results do not includethe additional price the consumerwould pay overthe price ofa 15 SEERproduct, which would increase the life cycle cost considerably. Furthermore, for the nation as a whole, TSL 5 would result in a net cost of$10 billion inNPV.

.We did not calculate manufacturer impacts atthistrial standard level, determining based on preliminary evaluation that they would be severe and unacceptable.

The Secretary concludes that atTSL 5, the benefits ofenergy savings, generating capacity reductions and emissionreductions would be outweighedby the negative economic impacts to the nation, to the vast majority ofconsumers and to the manufacturers. Consequently, the Secretary has concluded that TSL 5, the Max TechLevel, is not economicallyjustified.. Next, we considered TSL4. This level specifies 13 SEERequipment for all product classes. 

### In considering TSL 4 theRoll-up**efficien~y** scenario and reverse engineering cost data
are the assumptions we considerto be the most probable as discussed in Part V.A Trial Standard Levels. Primary energy savings would likely be 4.2 quads which the Department considers
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## 4 O 

# 5 significant. The estimated reduction in installed generating capacity is approximately 15 GW, and reduced emissions would range up to 32.7 Mt ofcarbon equivalent and up to 93.8 kt ofNO,.
The average air conditioner owner would save $113 over the life ofa split air conditioner and $29 over the life ofa packaged air conditioner. These equate to median payback periods of 11.3 years and 14.5 years, respectively. Lowincome consumers ofsplit air conditioners and split heat pumps also incur LCC savings ($43 for split air conditioner owners and $185 savings for splitheat pump owners). In addition, the average heat pump owner would benefit, saving $372 over the life ofa split heat pump and $353 over the life ofapackaged heat pump. These equate to median payback periods between 6.4 and 8.4 years, respectively. TSL4 will lower peak electricity demand compared to the base case. That will 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 netpresent value is expected to be $1billion. The decrease inthe net present value ofthe air conditioning and heatpump manufacturing industry is expected to be $300 million.
After carefully considering the analysis, comments, and benefits versus burdens, the Department is amending the energy conservation standards for central air conditioners and central air conditioning heat pumps at TSL 4. The Department concludes this standard saves a significant amount ofenergy and is technologically feasible and economicallyjustified. In determining economicjustification, the Department finds that thebenefits ofenergy savings, the projected amount ofavoided power plant capacity or improvement in system reliability that accompanies expected reduction in peak demand, consumer life cycle cost savings, national net

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# .s significant. The estimatedreduction in installed generating capacity is approximately 15 GW, and reduced emissions would range up to 32.7 Mt ofcarbon equivalent and up to 93.8 kt ofNOx'
The average air conditioner owner would save $113 over the life ofa split air conditioner and $29 overthe life ofa packaged air conditioner. These equate to medianpaybackperiods of 11.3 years and 14.5 years, respectively. Low income consumers ofsplit air conditioners and split heat pumps·also incurLCC savings ($43 for split air conditioner owners and $185 savings for split heat pump owners). In addition, the average heatpump owner would benefit, saving $372
overthe life ofa splitheatpump and $353**ov~r** the life ofa packaged heat pump. These equate to median paybackperiods between 6.4 and 8.4 years, respectively. TSL4 will lowerpeak electricity demand compared to the base case. That will allow utility service areas to eitheravoid
new capacity or, to the extent that peak loads contribute to reliability problems, improve system reliability. The increase in national net present value is expected to be $1 billion. The decrease inthe net present value ofthe air conditioning and heat pump manufacturing industrY is expected to be $300 million.

After carefully considering the analysis, comments, and benefits versus burdens, the Department is amending the energy conservation standards for central air conditioners and central air conditioning heat pumps at TSL 4. The Department concludes this standard saves a significant amount ofenergy and is technologically feasible and economicallyjustified. 

### In determining economicjustification, the Departmeqtfinds that the benefits ofenergy savings, the projected amount ofavoidedpowerplant capacity or improvement in system reliability that accompanies expectedreduction in peak demand, consumer life cycle cost savings, national net

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# A 0S present value increase and emission reductions resulting from the standards outweigh the burdens. The burdens include the loss ofmanufacturer net present value, increases in consumer life cycle cost for some users ofproducts covered by today's final rule, any possible increase in health problems caused by consumers forgoing air conditioner purchases, any possible reduction in the ability ofthe product to dehumidify, any possible lessening ofcompetition, and any possible difficulty in installing the new baseline products into retrofit applications.
In the proposed rule, we proposed to adopt TSL 3. The Department's decision to instead adopt the more stringent standards represented by TSL 4 was influenced by comments we received during the intervening comment period. First, comments wereceived regarding the prices and markups applied to today's equipment persuaded us thatthe reverse engineering cost data are much more likelythan the ARI Mean cost data torepresent the actual costs ofproducing equipment under more stringent standards. Placing more weight on the costs represented by the reverse engineering data substantially improved the economic benefits to air conditioner owners, demonstrating that the benefits ofTSL 4 outweigh the burdens. Second, many comments expressed concern that adopting heat pump standards that were more stringent than air conditioner standards would encourage more consumers topurchase electric resistance furnaces and air conditioners instead ofheat pumps. In response to those comments, we verified that the energy savings from the more efficient heat pumps would be eliminated ifonly a small fraction ofheat pump owners (4 percent) switched to resistance heating. That possibility provided added justification for adopting the same minimum standards forheat pumps as for air conditioners.

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## # 

# A

# os present value increase and emission reductions resulting from the standards outweigh the burdens. The burdens include the loss ofmanufacturernet present value, increases in consumer life cycle cost for some users ofproducts covered by today's final rule, any possible increase in healthproblems causedby consumers forgoing air conditionerpurchases, any possible reduction· in the ability ofthe product to dehumidify, any possible lessening ofcompetition, and any possible difficulty in installing the newbaseline products into retrofit applications.


### In the proposed rule, we proposed to adopt TSL 3. The Department's decisionto instead adopt the more stringent standards represented by TSL 4 was influenced by comments we received during the intervening comment period. First, comments we received regarding the prices and markups applied to today's equipment persuaded us thatthe reverse engineering cost data are much more likely than the ARI Mean cost datato represent the actual costs ofproducing equipmentundermore stringent standards. Placing more weight on the costs represented by the
reverse engineering data substantially improvedthe economic benefits to air conditioner owners, demonstrating thatthe benefits ofTSL 4 outweighthe burdens. Second, many comments expressed concernthat adopting heatpump standards that were more stringent than air conditioner standards would encourage more consumers to purchase electricresistance furnaces and air conditioners instead ofheat pumps. 

### In response to those comments, we verified that the energy savings from the more efficientheat pumps would be eliminated ifonly a small fraction ofheat pump owners (4 percent) switched to resistance heating. That possibilityprovided added justificationfor adopting the same minimum standards for heat-pumps as for air conditioners.

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### EE-RM/STD-98-440-$ 0 6 Given our decision to adopt a 13 SEER standard forboth central air conditioners and central air conditioning heat pumps, webelieve further evaluation is needed before we can issue final standards for air conditioners or heat pumps that currently are intended to serve applications with severe space constraints, exemplified by what we havereferred to as "niche" products. Based on our preliminary assessment of "highest viable efficiency levels" we identified for these products in the TSD (Table 4.23), the comments stating that these products would have difficulty inmeeting the standards proposed in the proposed rule, and the concerns expressed by the Department ofJustice, we have serious concerns about whether 13 SEER is an appropriate standard for most such products. On the otherhand, we are uncertain whether itwould be prudent for us to apply the standards contained in theproposed rule to niche products in light of the 13 SEER standard we are adopting today for otherproducts. Doing so may create a strong tendency forniche products, with lower minimum efficiency standards than conventional products, tobe applied in conventional applications.
Therefore, today's.final rule provides efficiency standards for all residential central air conditioners and heat pumps, except the niche products. We are referring to theseproducts more generally as "space-constrained products", since they are specifically intended for severely spaceconstrained applications. We define them as having the following characteristics:
(1) Rated cooling capacities no greater than 30,000 BTU/hr (2) An outdoor or indoor unit having at leasttwo overall exterior dimensions oran overall displacement that:

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# 6
Given ourdecision to adopt a 13 SEER standard for both central air conditioners and central air conditioningheat pumps, webelieve further evaluation is needed before we can issue. final standards for air conditioners orheat pumps that currently are intended to serve applications with severe space constraints, exemplifiedbywhat wehavereferred to as "niche" products. Based on ourpreliminary assessment of "highest viable efficiency levels" we identified for these . products in theTSD (Table 4.23), the comments stating that these products would have difficulty inmeeting the standards proposed in theproposed rule, and the concerns expressed bythe Department ofJustice, wehave serious concerns about whether 13 SEERis an appropriate standard for most suchproducts. On the other hand, we are uncertain whether it wouldbe· prudent for us to apply the standards contained in theproposed rule to niche products in light of the 13 SEER standard we are adopting today for otherproducts. Doing so may create a strong tendency for niche products, with lowerminimum efficiency standards than conventional products, to be applied in conventional applications.
Therefore, today's.final ruleprovides efficiency standards for all residential central air .**~nditioners** and heatpumps, except the niche products. We are referring to theseproductsmore generally as "space-constrainedproducts", since they are specifically intended for severely spaceconstrained applications. Wedefine them as havingthe following characteristics:


### (1) Rated cooling capacities no greaterthan 30,000 BTUIhf (2) An outdoor orindoorunithaving at least two overall exterior dimensions or an overall displacementthat:

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# 5 (a) are (is) substantially smaller than those ofotherunits that are (i)currently usually installed in site-built single family homes, and (ii) ofa similar cooling, and, ifa heat pump, heating, capacity, and 

### (b) ifincreased, would certainly result in a considerable increase in the cost of installation or would certainly result in a significant loss in the utility ofthe product to the consumer. (3)Ofa product type that was available for purchase in theUnited States as ofDecember 1, 2000. Based onthe information we have gathered thus far in this rulemaking, we believe spaceconstrained products would include equipment described as: * through-the-wall packaged and split * ductless split * single package and non-weatherized
On the other hand, small duct, highvelocity equipment is covered by today's standards. Asproposed in the NOPR, 65 FR at 59609-10, DOE is addressing the concerns for that equipment by modifying the test procedure to allow those products to betested as coil-only equipment. Also, the standards in today's rule will clearly apply to the types ofcentral air conditioners and heat pumps normally installed in site-built single family homes.
The Department will re-open the comment'period inthis rulemaking to address standards for space-constrained products, and plans to publish a final rule in theFederal Register no later than eighteen (18) months from the date ofpublication oftoday's rule. The rule covering space99C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd ------- --------------------

(a) are (is) substantially smallerthan those ofotherunits that are (i) currently usually installed in site-built single family homes, and (ii) ofa similar cooling, and, ifa heat pump, heating, capacity, and 

### (b) ifincreased, would certainly result in a considerable increase in the cost of installation or would certainly result in a significant loss in the utility ofthe product to the consumer. (3) Ofa product type that was available for purchase in the United States as ofDecember I," 2000. Based on the information wehave gathered thus far in this rulemaking, webelieve spaceconstrained products would include equipment described as: • through-the-wall packaged and split
• ductless split
• single package and non-weatherized

Onthe otherhand, small duct, highvelocity equipment is covered bytoday's standards. Asproposed in the NOPR, 65 FR at 59609-10, bOE is addressing the concerns for that equipmentbymodifying the test procedureto allow thoseproducts to betested as coil-only equipment. Also, the standards in today's rule will clearly apply to the types ofcentral air conditionersand heatpumps normally installed in site-built single family homes.

The Departmentwill re-open the comment'periodinthis rulemaking to address standards for space-constrained products, and plans to publish a final rule in theFederal Registerno later than eighteen (18) months from the date ofpublication oftoday's rule. Therule covering space99 C:\Mike\US OOE\Central Aii\SEERI3 Final Rule dmft 12 master 12-14-00.wpd

### EE-RM/STD-98-440-:"t 

# RA constrained products will establish new product classes, to the extent necessary, and minimum efficiency standards for theseproducts. It will also contain an assessment oftechnical feasibility and economicjustification in accordance with therequirements oftheAct. The Department intends to make therule for niche products effective on the same date as the effective date ofthis final rule.
Before reopening the comment period, we will initially identify those product types we believe should betreated as space-constrained products andbegin to assess the impact ofa rulemaking for these products on small businesses. To aid inthis process, we will seek shortly the following information from each manufacturer ofthose products that we believe may meet the definition ofspace-constrained products: (1) the number ofemployees employed by the company as ofDecember 31, 2000 (to assist us in determining whether we should consider the company to be a small business entity); (2) a list ofproposed space-constrained products, providing foreach type ofproduct: (a) a description ofits intended applications (b) a description based on physical characteristics, manufacturing characteristics, capacity, and performance attributes that would distinguish it from other types ofproducts, and which would be enforceable atthe point ofmanufacture (c) a list ofmodels produced ofthat product type by the manufacturer, containing for each model: physical dimensions, rated capacities, and range ofefficiency ratings available; (3) a statement ofwhether the number ofunits produced by the manufacturer was less than or greaterthan 100,000 units in the year2000; and

1 OQ:\Mike\US DOE\Central Air\SEERI3 Final Rule draft 12 master 12-14-OO.wpd ...........**-.-----~~~~~------------**

## EE.RM/STD-98.440-~

# IIJ.,I)$
constrained products will establish new product classes, to the extent necessary, and minimum efficiency standards for these products. Itwill also contain an assessment oftechnical feasibility and economicjustification in accordance with therequirements oftheAct. TheDepartment intends to make the rule for nicheproducts effective on the same date as the effective date ofthis final rule.

Beforereopening the comment period, we will initially identifythoseproducttypes we believe shouldbetreated as space-constrainedproducts and begin to assess the impact ofa rulemaking for these products on small businesses. To aid inthis process, we will seek shortly the following information from each manufacturer ofthose products that webelieve maymeet the definition ofspace-constrained products: (I) the numberofemployees employed bythe company as ofDecember 31,2000 (to assistus in determining whetherwe should considerthe company to be a smallbusiness entity); (2) a list ofproposed space-constrained products, proyiding for each type ofproduct: (a) a description ofits intended applications (b) a description based onphysical characteristics, manufacturing characteristics, capacity, andperformance attributes that would distinguish it from othertypes ofproducts, and which would be enforceable at thepoint ofmanufacture (c) a list ofmodels produced ofthatproduct typebythe manufacturer, containing for each model: physical dimensions, rated capacities, and range ofefficiency ratings available; (3) a statement ofwhetherthe numberofunits producedbythe manufacturerwas less than or greaterthan 100,000units inthe year2000; and

1

O(t:\Mike\US DOE\Centra1 Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440.^'a 5 (4) an estimate ofthe percentage ofunits produced by the manufacturer that the manufacturer estimates are installed as replacements for similar units. The Department encourages companies that believe they manufacture space-constrained products to immediately submit this information without awaiting a request from DOE, at the following address: :


### We will make the information we obtain publicly available (excluding confidential information) through a Federal Register notice. A comment period will follow during which time the public will have an opportunity to review the published information and respond to the Department. Following the close ofthe comment period, we will issue inthe Federal Register our determination ofwhich ofthe published products webelieve are space-constrained products and which webelieve are not. We expect these steps to proceed simultaneously with the other activities to set standards for such products.

VI. Procedural Issues and Regulatory Review 

### A. Review UndertheNationalEnvironmental PolicyAct The Department prepared an Environmental Assessment (EA) (DOE/EA-1352) available from: U.S. Department ofEnergy, Office ofEnergy Efficiency and Renewable Energy, Forrestal Building, Mail Station EE-41, 1000 Independence Avenue, SW, Washington, DC 20585-0121, (202) 586-0854. We found the environmental effects associated with various standard efficiency levels for central air conditioners and heat pumps to be not significant, and therefore we are

0 l:\Mike\US DOE\Cental Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

# EE.RM/STD.9~-440",

# 1F

# a I)

# S (4) an estimate ofthe percentage ofunits producedbythe manufacturerthat the manufacturer estimates are installed as replacements for similarunits.

TheDepartment encourages companies thatbelievethey manufacture space-constrained products to immediately submitthis information without awaiting a request from DOE, at the· following address:
__ _
We will make the information we obtainpublicly available (excluding confidential infonnation) through a Federal Register notice. A commentperiod will follow during which time thepublic will have an opportunity to review the published infonnation and respond to the

.Department. Followingthe close ofthe commentperiod, we will issue inthe Federal Register

ourdetennfnation ofwhich ofthe published products webelieve are space-constrainedproducts and which we believe are not. We expect these steps to proceed simultaneously with the other activities to set standards for such products.



### VI. Procedural Issues and Regulatory Review 

### A. Review Under the National EnvironmentalPolicyAct The Departmentprepared anEnvironmental Assessment (EA) (DOEIEA-1352) available from: U.S. Department ofEnergy, Office ofEnergy Efficiency and Renewable Energy, Forrestal Building, Mail Station EE-41, 1000 Independence'Avenue, SW, Washington, DC 20585-0121, (202) 586-0854. We found the environmental effects associated 

### with various standard efficiency levels for central air conditioners and heatpumps to be not significant, and therefore we are 10l::IMike\US DOE\Central Air\SEERI3 Final Rule draft 12 master 12-14-OO.wpd

----------------

## EE-RM/STD-98-440 

# f 4 

# 5 publishing, elsewhere in this issue ofthe Federal Register, A Finding ofNo Significant Impact (FONSI) pursuant to the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et seq., theregulations ofthe Council ofEnvironmental Quality (40 CFR Parts 1500-1508), and the Department's regulations for compliance with NEPA (10 CFR Part 1021).

B. Review UnderExecutive Order12866, "RegulatoryPlanning andReview" 

### Today's regulatory action has been determined tobe an "economically significant regulatory action" under Executive Order 12866, "Regulatory Planning and Review." (58 FR 51735, October4, 1993). Accordingly, today's action was subject to review under the Executive Order by the Office ofInformation and Regulatory Affairs (OIRA) ofthe Office ofManagement and Budget.
The draft submitted to OIRA and other documents submitted to OIRA for review have been made apart ofthe rulemaking record and are available for public review in the Department's Freedom ofInformation Reading Room, 1000 Independence Avenue, SW, Washington, DC 20585, between thehours of9:00 a.m. and 4:00 p.m., Monday through Friday, telephone (202) 586-3142.
The proposed rule contained a summary ofthe Regulatory Analysis which focused on the major alternatives considered in arriving atthe approach to improving the energy efficiency of consumer products. The reader is referred to the complete draft "Regulatory Impact Analysis," which is contained in the TSD, available as indicated at thebeginning ofthis notice. It consists of: (1)a statement ofthe problem addressed bythis regulation, and the mandate for government

1OZ:\Mike\US DOE\Central Air\SEER13 FinalRule draft 12 master 12-14-OO.wpd

# EE-RM/STD-9~-440**~ ~.** **~** publishing, elsewhere inthis issue ofthe Federal Register, A Finding ofNo SignificantImpact (FONSI) pursuantto theNational Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et seq., theregulations ofthe Council ofEnvironmental Quality (40 CFRParts 1500-1508), and the Department's regulations for compliance withNEPA (10 CFRPart 1021).


### Ii. Review UnderExecutive Order 12866, "RegulatoryPlanningandReview" 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, October4, 1993). Accordingly, today's action was subject to review underthe Executive Orderbythe Office ofInformation and Regulatory Affairs (OIRA) ofthe Office ofManagement and Budget..
The draft submitted to OIRA and other documents submittedto OIRA for reviewhave been made a part ofthe rulemaking record and are available for public review in the Department's Freedom ofInformation Reading Room, 1000 Independence Avenue, SW, Washington, DC 20585, between the hours of9:00 a.m. and 4:00 p.m., Monday through Friday, telephone (202) 586-3142.

The proposed rule contained a summary ofthe Regulatory Analysis which focused onthe majoralternatives considered in arriving at the approachto improving the energy efficiencyof
consumerproducts. Thereader is referred to the cQmplete draft "Regulatory Impact Analysis," which is contained in the TSD, available as indicated at the beginning of

### this notice. It consists of: (1) a statement ofthe problem addressed by this regulation, and the mandate for government
1**O~:\Mike\US** DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpdaction; (2) a description and analysis ofthe feasible policy alternatives to this regulation; (3) a quantitative comparison ofthe impacts ofthe alternatives; and (4) the national economic impacts ofthe proposed standard.
C. 

### Review under the RegulatoryFlexibilityAct The Regulatory FlexibilityAct, 5 U.S.C. 601 et seq., requires an assessment ofthe impact ofregulations on small businesses. To be categorized as a "small" airconditioning and warm air heating equipment manufacturer, a firm must employ no more than 750 employees.

The Departmentprepared a manufacturing impact analysis which was madepublic and available to all residential central airconditioner and heat pump manufacturers. Otherimpacts
on small businesses were previously discussed inthe proposedrule. 65 FR 59590,59629-30 (October 5,2000). The Departmentreaffirms its certification in the proposedrule. Today'srule will not have a significant impact on a substantial numberofsmall entities, and preparation ofa regulatory flexibility analysis is unnecessary.

Most small businesses engaged inthe manufacture ofcentral airconditioners and heat pumps produce products whatwe have called "niche" products. To address the concerns ofthe Department ofJustice and many commentersregarding the impacts ofmore stringent standards
on small manufacturers, we are continuing ourevaluation ofstandards for those products and have notissued new standards for them as part of**~his** rule.



### D. Review Under the PaperworkReductionAct
1

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## EE-RM/STD-98-440- a0 

# 5 No new information or record keeping requirements are imposed bythis rulemaking. Accordingly, no Office ofManagement and Budget clearance is required under the Paperwork Reduction Act. 44 U.S.C. 3501 et seq.
E. Review UnderExecutive Order12988, "CivilJusticeReform" 

### With respect to the review ofexisting regulations and thepromulgation ofnew regulations, Section 3(a) ofExecutive Order 12988, "Civil Justice Reform," 61 FR 4729 (February 7, 1996), imposes on Executive agencies the general dutyto 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) ofExecutive Order 12988 specifically requires that Executive agencies make every reasonable effort to ensure that the regulation: (1)clearly specifies the preemptive effect, ifany; (2) clearly specifies any effect on existing Federal law or regulation; (3)provides a clearlegal standard for affected conduct while promoting simplification and burden reduction; (4) specifies the retroactive effect, ifany; (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) ofExecutive Order 12988 requires Executive agencies to review regulations in light ofapplicable 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. DOEreviewed today's final rule under the standards of section 3 ofthe Executive Order and determined that, to the extent permitted by law, the final regulations meet the relevant standards.

1 04:\Mike\US DOECentral Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

# EE.RM/STD.9~.440-$

# A'**~** No new infonnation orrecord keeping requirements are imposed by this rulemaking. Accordingly, no Office ofManagement and Budget clearance is required underthe Paperwork Reduction Act. 44 U.S.C. 3501 et seq.


### E. Review Under Executive Order 12988, 

### "CivilJustice Reform II With respect to the review ofexistingregulations andthe promulgation ofnew regulations, Section 3(a) ofExecutive Order 12988, "Civil Justice Refonn," 61 FR4729 (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 conductratherthan a general standard and promote simplification and burden reduction. With regard to the reviewrequired by section 3(a), section 3(b) ofExecutive Order 12988 specifically requires that Executive agencies make everyreasonable effort to ensure thatthe regulation: (1) clearly specifies the preemptive effect, ifany; (2) clearly specifies any effect on existing Federal law orregulation; (3) provides a clearlegal standard for affected conduct while promoting simplification andburden reduction; (4) specifies the retroactive effect, ifany; (5) adequately defines key tenns; and (6) addresses other important issues affecting 

### clarity and general draftsmanship under any guidelines issued by the Attorney General. Section 3(c) ofExecutive Order 12988 requires Executive agencies to reviewregulations in light ofapplicable standards in section 3(a) and section 3(b) to detennine whetherthey are met or it is unreasonable to meet one ormore of them. DOEreviewed today's final rule under the standards ofsection 3 ofthe**E~ecutive** Order and detenninedthat, to the extentpennittedby law, the final regulations meetthe relevant**stand~ds.**



### 1

04::lMikeIUS DOElCentrai AirlSEER!3 Final Rule draft !2master !2-!4..o0.wpd

### EE-RM/STD-98-440- ofv F. "Takings"AssessmentReview 

### 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 regulation would not result in anytakings that might require compensation under the Fifth Amendment to the United States Constitution.

G. Review underExecutive Order13132 

### Executive Order 13132 (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 limitthe policymaking discretion ofthe States and carefully assess the necessity for such actions. Agencies alsomust 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 final rule and has determined that itwould not have a substantial direct effect on the States, on the relationship between the national government and the States, or on the distribution ofpower and responsibilities among the various levels ofgovernment. State regulations that may have existed on the products that are the subject oftoday's final rule werepreempted by the Federal standards established inNAECA. States can petition the Department for exemption from such preemption to the extent, and based on criteria, set forth in EPCA.

H. Review Underthe UnfundedMandatesReformAct

1 0.:\Mike\USDOE\Central Air\SEER13 FinalRule draft 12 master 12-14-OO.wpd -------

------

F. 

### "Takings"AssessmentReview DOEhas determinedpursuantto Executive Order 12630, "Governmental Actions and Interference with ConstitutionallyProtected Property Rights," 52 FR 8859 (March 18, 1988), that this 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 (64 FR43255, August4, 1999) imposes certain requirements on agencies formulating and implementingpolicies orregulations thatpreempt State law orthat have federalism implications. Agencies are required to examine the constitutional and statutory authority supporting any actionthat would limit the policymaking discretion ofthe 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 consultationpolicy on March 14,2000. (65 FR 13735). DOE has examinedtoday's fmal rule

. , . and has determined that itwould not have a substantial direct effect onthe States, on the relationship between the national government and the States, oronthe distribution ofpower and responsibilities among the various levels ofgovernment. State regulations that may have existed
onthe products that are the subject oftoday'sfinal rule werepreempted by the Federal standards established in NAECA. States canpetitionthe Department for exemption from suchpreemption to the extent, and based on criteria, set forth inEPCA.



### H Review Under the UnfundedMandates ReformAct 

### 1**O~:lMikc\US** DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 u'e 

### vF With respect to a proposed regulatory action that may result in the expenditure by State, local and tribal governments, in the aggregate, or bythe private sector of$100 million ormore (adjusted annually for inflation), section 202 ofthe Unfunded Mandates Reform Act of 1995 (UMRA) requires a Federal agency to publish estimates ofthe resulting costs, benefits and other effects on the national economy. 2U.S.C. 1532(a), (b). UMRA also requires each Federal agency to develop an effective processto permit timely inputby state, local, and tribal governments on aproposed significant intergovernmental mandate. The Department's consultation process is described in anotice published inthe Federal Register onMarch 18, 1997 (62 FR 12820). Today's final rule may impose expenditures of$100 million ormore on the private sector. It does not contain a Federal intergovernmental mandate.
Section 202 ofUMRA authorizes an agency to respond tothe content requirements of UMRA in any other statement or analysis that accompanies the proposed rule. 2 U.S.C. 1532(c). The content requirements ofsection 202(b) ofUMRA relevant to aprivate sector mandate substantially overlap the economic analysis requirements that applyunder section 325(o) of EPCA and Executive Order 12866. The Supplementary Information section ofthe Notice of Final Rulemaking and "Regulatory Impact Analysis" section ofthe TSD forthis Final Rule responds to those requirements.
Under section 205 ofUMRA, the Department is obligated to identify and consider a reasonable number ofregulatory alternatives before promulgating a rule for which a written statement under section 202 is required. DOE isrequired to select from those alternatives the most cost-effective and least burdensome alternative that achieves the objectives ofthe rule

106:l\Mike\US DOE\Cntral Air\SEER13 Final Rule draft 12 master 12-14-OOwpd

# EE.RM/STD.9~.440

# -':II'tR' 

# r
Withrespect to a proposed regulatory action that may result in the expenditure by State, local and tribal governments, inthe aggregate, orbythe private sector of$100 million or more (adjusted annually for inflation), section 202 ofthe Unfunded Mandates Refonn Act of 1995 (UMRA) requires a Federal agency to publish estimates ofthe resulting costs,**b~nefits** and other, effects onthe national economy. 2 U.S.C. 1532(a), (b). UMRA also requires each Federal agency to develop an effective process to penn

### ittimely input by state, local, and tribal governments on a'proposed significant intergovernmental mandate. The Department's consultationprocess is described in a notice published inthe Federal Register onMarch 18, 1997 (62 FR 12820). Today's final rule mayimpose expenditures of$100million ormore on the private sector. It does not contain a Federal intergovernmental mandate.

Section 202 ofUMRA authorizes an agency to respondto the content requirements of UMRA in any other statement or analysis**~at** accompanies the proposed rule. 2 U.S.C. lS32(c). The contentrequirements ofsection 202(b) ofUMRA relevant to a private sectormandate substantially overlap the economic analysis requirements that applyunder section 325(0) of EPCA and Executive Order 12866. The Supplementary Infonnation section ofthe Notice of Final Rulemaking and "Regulatory Impact Analysis" section ofthe TSD for this Final Rule responds to those requirements.

Under section 205 ofUMRA, the Department is obligated to identify and consider a reasonable number ofregulatory alternatives beforepromulgating a rule for which a written statement under section 202 is required. 

### DOE is requiredto select from those alternatives the most cost-effective and least burdensome alternative that achieves the objectives ofthe rule
1**O~:\Mike\US** OOE\Ccntral Air\SEERI3 Final Rule draft'I2 master 12-14-OO.wpd

# EE-RM/STD-98-440 - 

# d unless DOE publishes an explanation for doing otherwise or the selection ofsuch an alternative is inconsistent with law. Asrequired by section 325(o) ofthe Energy Policy and Conservation Act (42 U.S.C. 6295(o)), today's final rule establishes energy conservation standards for central airconditioners 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 ofthe alternatives considered byDOE is presented in the "Regulatory Impact Analysis" section ofthe TSD fortoday's final rule.

I. Review Underthe TreasuryandGeneralGovernmentAppropriations Act of1999 

### Section 654 ofthe Treasury and General Government Appropriations Act, 1999 (Pub. L. No. 105-277) requires Federal agencies to issue aFamily Policymaking Assessment for any proposed rule or policy that may affect family well-being. Today's final rule would not have any impact on the autonomy or integrity ofthe family as an institution. Accordingly, DOE has concluded that it isnot necessary to prepare aFamily Policymaking Assessment.

J. Review Underthe PlainLanguage Directives 

### Section l(b)(12) ofExecutive Order 12866 requires that each agency draft itsregulations to be simple and easy to understand, with the goal ofminimizing the potential for uncertainty and litigation arising from suchuncertainty. Similarly, the Presidential memorandum ofJune 1, 1998 (63 FR 31883) directs the heads ofexecutive departments and agencies to use plain language in all proposed and final rulemaking documents published in the Federal Register. Today's ruleuses the following general techniques to abide by Section l(b)(12) of

1O :\Mike\US DOE\Central Air\SEER13 FinalRule draft 12 master 12-14-OO.wpd

# EE-RM/STD-9~-440

# -JI**~.**

# S"
unless DOE publishes an explanation for doing otherwise orthe selection ofsuch an alternative is inconsistent with law. As required by section 325(0) ofthe Energy Policy and Conservation Act (42 U.S.C. 6295(0)), today's final rule establishes energy conservation standards for central airconditioners and heatpumps 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 ofthe alternatives consideredby DOE is presented in the "Regulatory Impact Analysis" section ofthe TSD for today's final rule.

1 Review Under the Treasury andGeneral GovernmentAppropriationsActof 1999 Section 654 ofthe Treasury and General Government Appropriations Act, 1999 (pub. 

### L. No. 105-277) requires Federal agencies to issue a FamilyPolicymakingAssessment for any proposed rule orpolicy that may affect family well-being. Today's final rule would not have any· impact onthe autonomy or integrity ofthe family as an institution. Accordingly, DOE has concluded that it is not necessary to prepare a Family Policymaking Assessment.



### J. Review Under the Plain Language Directives Section 1(b)(l2) ofExecutive Order 12866 requires that each agency draft its regulations to be simple and easyto understand, withthe goal ofminimizing the potential for uncertainty and litigation arising from such uncertainty. Similarly, the Presidential memorandum ofJune 1, 1998 (63 FR 31883) directs the heads ofexecutive departments and agencies to use plain language in all proposed and final rulemaking documents**publ~shed** in the Federal Register.
Today'srule uses the following general techniques to abide by Section 1(b)(12) of 

### 1

OC:\Mikc\US OOE\Ccntral AirlSEER13 Final Rule draft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 .. 

# 1 

# S Executive Order 12866 and the Presidential memorandum ofJune 1,1998: * Organization ofthe material to serve the needs ofthe readers (stakeholders).

· Use ofcommon, everyday words in short sentences.

· Shorter sentences and sections.

K. Congressional Notification 

### As required by 5U.S.C. 801, DOE will submit to Congress a reportregarding the issuance oftoday's final rule priorto the effective date set forth atthe outset ofthis notice. DOE also will submit the supporting analyses to the Comptroller General (GAO) and make them available to each House ofCongress. The report will state that ithas been determined that the rule is a "major rule" as defined by 5U.S.C. 804(2).

108: \Mike\US DOE\Central AirSEER13 Final Rule draft 12 master 12-14-0O.wpd

# EE.RM/STD-9~.440

# -$**~**

# I

# r
Executive Order 12866.andthe Presidential memorandum ofJune 1, 1998:
• Organization ofthe material to serve the needs ofthe readers (stakeholders).
• Use ofcommon, everyday words 

### in short sentences.
• Shorter sentences and sections.
K. CongressionalNotification As required by 5 U.S.C. 801, DOE will submitto Congress a report regarding the issuance oftoday's fmal rule priorto the effective date set forth at the outset ofthis notice. DOE also will submitthe supporting analyses to the Comptroller General (GAO) and make them available to each House ofCongress. The report will state that 

### ithas been determined that the rule is a "majorrule" as defined by 5 U.S.C. 804(2).



### 1

O$:;\Mike\US OOE\Centtal AiJ\SEERI3 Final Rule draft 12 master 12-14.o0.wpd

### EE-RM/STD-98-440- .*^R
List ofSubjects in 10 CFR Part 430
Administrative practice and procedure, Energy conservation, Household appliances.

Issued in Washington, D.C., on

Dan W. Reicher Assistant Secretary Energy Efficiency and Renewable Energy

1 0:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-O0.wpd

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List ofSubjects in 10 CFRPart430

Administrativepractice and procedure, Energy conservation, Household appliances.

Issued in Washington, D.C., on

Dan W. Reicher Assistant Secretary Energy Efficiency and Renewable Energy

1

02::\Mike\US DOE\Central Air\SEERI3 Final Rule draft 12 master 12·14.()(),wpd

## EE-RM/STD-98-440 - 

## t^6^ 9 

### Forthe reasons set forth in the preamble, Part 430 ofChapter II ofTitle 10, Code of Federal Regulations is 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 a definition for "space-constrained products" in alphabetical order to read as follows: §430.2 Definitions

* * * * * 

### Space constrainedproduct means a central air conditioner orheat pump: (1)That has rated cooling capacities no greater than 30,000 BTU/hr; (2) That has an outdoor or indoor unit having at least two overall exterior dimensions or an overall displacement that: (a) are (is) substantially smaller than those ofother unitsthat are (i)currently usually installed in site-built single family homes, and (ii) ofa similar cooling, and, ifa heat

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# EE.RM/STD.9~-440- 

# ttAIJS
Forthe reasons setforth inthe preamble, Part 430 ofChapterII ofTitle 10, Code of Federal Regulations is amended, as set forth below. Part 430
-- ENERGY CONSERVATION PROGRAM FOR CONSUMERPRODUCTS

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 a definition for "space-constrainedproducts" in alphabetical orderto read as follows:


### §430.2 Definitions 

## * * 

## * * * Space constrained product means a central airconditionerorheat pump: (1) Thathas rated cooling capacities no greaterthan 30,000 BTUIhr; (2) ThathaS an outdoororindoorunithaving at least two overall exteriordimensions or an overall displacement that: (a) are (is) substantially smallerthan those ofotherunits that are (i) currently usually installed in site-built single family homes, and 

### (ii) ofa similarcooling, and, ifa heat
11 Q;;\Mike\US OOE\Central Air\SEERI3 Final Rule draft 12 master 12.14-00.wpd

### EE-RM/STD-98-440, . 05 pump,heating, capacity, and (b) ifincreased, would certainly result in a considerable increase in theusual cost of installation or would certainly result in a significant loss in theutility oftheproduct to the consumer; and (3) Ofa product type that was available forpurchase in the United States as ofDecember 1,2000.

3. Section 430.32 ofSubpart C is amended by revising paragraph (c) toread as follows: §430.32 Energy and water conservation standards and effective dates.

* * * * * 

### (c) Central airconditioners and central air conditioning heat pumps. (1)Split system central air conditioners and central air conditioning heatpumps manufactured after January 1, 1992, and before [insert 5years after FR publication date], and single package central air conditioners and central air conditioning heat pumps manufactured afterJanuary 1, 1993, and before [insert 5 years after FR publication date], shall have Seasonal Energy Efficiency Ratio and Heating Seasonal Performance Factor no less than:

11 :\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-O0.wpd**-~--** ---- -- --- ---- ---- --- - - -------- 

### ----------

# EE.RM/STD-9~-440

# _'It**~D.5** pump, heating, capacity,·and 

### (b) ifincreased, would certainlyresult in a considerable increase in the usual cost of installation orwould certainlyresult in a significant loss in theutility oftheproduct to the consumer; and (3) Ofa product type that was available for purchase in the United States as ofDecember 1,2000.


# • • 

# • 

# • 

# •

3. Section430.32 ofSubpart C is amended by revising paragraph (c) to read as follows:


### §43q.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 afterJanuary 1, 1992, and before linsert'Syears afterFR

### p~bli~ation date], and single package central air conditioners and central air conditioning heat pumps manufactured afterJanuary I, 

### 1993, and before [insert 5 years afterFRpublication date], shall have Seasonal Energy Efficiency Ratio and Heating Seasonal Performance Factor no less than:

11l::lMikc\US OOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

## EE-RM/STD-98-440s - 

## 0_ 

# 5
Product class Seasonal Energy Heating Seasonal Efficiency Ratio Performance Factor 1. Split systems..................................... 10.0 6.8 2. Single package systems...................... 9.7 6.6
2. Central air conditioners and central airconditioning heat pumps manufactured on or after [insert 5 years after FRpublication date], shall have Seasonal Energy Efficiency Ratio and Heating Seasonal Performance Factor no less than: Seasonal Energy Heating Seasonal Product class Efficiency Ratio Performance Factor (SEER) (HSPF) I. Split system air conditioners................................................. 13 2. Split system heat pumps........................................................ 13 7.7 3. Single package air conditioners............................................. 13 4. Single package heat pumps................................... 13 7.7 5.Space constrained products......... [reserved] [reserved]

MikUS en AirER3 Final Re draft 12master 12-14-00.* * * *

1 l

2:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14.OO.wpd

# EE.RM/STD.~_#'~f)**~** Product class Seasonal Energy Heating Seasonal EfficiencyRatio Perfonnance Factor 1. Split systems...........**~**.......................... 10.0 6.8 

### 2. Single package systems...................... 

### 9.7 6.6
2. Central airconditioners andcentral airconditioning heatpumps manufactured onorafter [insert 5 years afterFRpublication date], shall have Seasonal Energy EfficiencyRatio and Heating Seasonal Perfonnance Factorno less than: Seasonal Energy Heating Seasonal Product class Efficiency Ratio Perfonnance Factor (SEER) (HSPF) ]. Split system air conditioners................................................. 13 

## - 2. Split system heat pumps........................................................ 13 7.7 3. Single package air conditioners............................................. 13 

## - 4. Single package heat pumps................................................... 13 7.7 5. Space constrained products......... [reserved] [reserved] 

## * * * * ***11~:\Mike\US** DOE\Central Air\SEER1; Final Rule drnft 12 master 12-14-00.wpd

### EE-RM/STD-98-440 - ^ 

## 0

. Appendix [The following letter from the Department ofJustice will not appear in the Code ofFederal Regulations.] 

## DEPARTMENT OFJUSTICE Antitrust Division 

## A. DOUGLAS MELAMED Acting Assistant Attorney General Main Justice Building 950 Pennsylvania Avenue. N . W. Washington, D.C. 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 ofEnergy Washington, D.C. 20585 Dear General Counsel Sullivan: I am responding to your October 16, 2000 letter seeking the views ofthe Attorney General about the potential impact on competition oftwo 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) ofthe Energy Policy and Conservation Act,42 U.S.C. §6291, 6295 ("EPCA"), which requires the Attorney General to make a determination ofthe impact ofany lessening ofcompetition that is likely to result from the imposition ofproposed energy efficiency standards. The Attorney General's responsibility for responding to requests from other departments about the effect ofa program on competition hasbeen 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 11 :\Mikc\US DOECentral AirSEER13 Final Rule draft 12 master 12-14-OO.wpd

# EE.RM/STD.9~.440 _ 

# -=.A0

# S AppendiX [The following letter from the Department ofJustice will not appear inthe Code ofFederal Regulations.]

MaryAnne Sullivan, General Counsel Department ofEnergy Washington, D.C. 20585
Dear General Counsel Sullivan: 

### DEPARTMENTOFJUSTICE Antitrust Division 

### A. DOUGLAS MELAMED ActingAssistantAttorney General Main Justice Building 950 PennsylvaniaAvenue. N . W .

.Washington, D.C. 20530-0001 (202) 514-24011 (202) 616-2645 (f) antitrust@justice.usdoj.gov (internet) http://www.usdoj.gov(World WideWeb) December4, 2000 .

I am responding to your October 16, 2000 letter seeking the views ofthe Attorney General about the potential impact on competition oftwo proposed energy efficiency standards: one for clothes washers and the otherfor residential central air conditioners and heatpumps. Yourrequest was submittedpursuant to Section 325(0)(2)(B)(i) ofthe Energy Policy and Conservation Act, 42 U.S.C. §6291, 6295 ("EPCA"), which requires the Attorney General to make a determination ofthe impact ofany lessening ofcompetition that is likelyto result from the imposition ofproposed energy efficiency standards. The Attorney General's responsibility· for responding to requests from other departmentsaboutthe effect ofa program on competition has been delegated to the AssistantAttorney General for the Antitrust Divisionin28 GFR § 0.40(g). We have reviewed the proposed standards and the supplementary information published inthe Federal Registernotices and submitted to the Attorney General, which include information 11 l:lMikc\US OOE\CcntraJ Air\SEERI3 Final Rule draft 12 master 12.14-00.wpd

### EE-RM/STD-98-440-P ^A 

### provided to the Department ofEnergy by manufacturers. We have additionally conducted interviews with members ofthe industries. We have concluded that the proposed clothes washer standard wouldnot adversely affect competition. In reaching this conclusion, we note that the proposed standard is based on ajoint recommendation submitted to the Department ofEnergyby manufacturers and energy conservation advocates. That recommendation states that virtually all manufacturers ofclothes washers who sell in the United Statesparticipated in arriving at the recommendation through their trade association, that therecommendation 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 sixyears, which will allow companies that donot already have products that meet the proposed standard sufficient time to redesign their product lines. With respect to theproposed residential central air conditioner and heat pump standard, we have concluded that there could be an adverse impact on competition. Theproposed standard, Trial Standard Level 3,is expressed in terms oftwo industry measurements: SEER (Seasonal Energy Efficiency Ratio) and HSPF (Heating Seasonal Performance Factor).' These standards would change from the current central air conditioner and heatpump efficiency standards of 10 SEER/6.8 HSPF for split system air conditioners and heatpumps 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 forheat 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% ofthe total current product lines meet the proposed standards, but for some small manufacturers, 100% oftheir 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 ofthese products (including those products referred to in the Federal Register notice as "niche products") used toretrofit existing housing and used in manufactured housing. These manufacturers could notmake units that comply with the rule and fit into the available space.

'The Federal Register notice also requested comments on a proposal to adopt a standard for steady-state cooling efficiency (EER) and discussed several options theDepartment of Energy is considering. The proposed rule set forth inthe notice does not, however, include a provision regarding an EER standard, and the views ofthe Department ofJustice expressed in this letter are limited to the impact ofany lessening ofcompetition ... that is likelyto result from the imposition ofthe [proposed] standard," as required by EPCA. Ifthe Department of Energy proposes a rule in the future incorporating an EER standard, the Department will then evaluate that proposed rule and express itsviews about the competitive impact ofthat standard. 11 4:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

# EE-RM/STD-9~-440"

# #**~,~** provided to the Department ofEnergy by manufacturers. We have additionally conducted interviews with members ofthe industries. We have concluded thatthe proposed clothes washer standard wouldnot adversely affect competition. 

### Inreaching this conclusion, we note thatthe proposed standard is based onajoint recommendation submitted to the Department ofEnergy by manufacturers and energy' conservation advocates. That recommendation states that v'irtually all manufacturers ofclothes washers who sell in the United Statesparticipated 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 haveproducts that meet the proposed standard sufficienttime to redesign theirproduct lines. Withrespectto the proposed residential central air conditioner and heat pump standard, we have concluded that there could be an adverse impact oncompetition. Theproposed standard, Trial Standard Level 3, is expressed in terms oftwo 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 heatpump efficiency standards of 10 SEERJ6.8 HSPF for split system airconditioners and heat pumps and 9.7 SEERJ6.6 HPSF for single package air conditioners and heat pumpsto 12 SEERfor air conditioners and 13 SEERl7.7 HPSF for heatpumps. We**hav~** identified three possible competitive problems presentedby the proposed standards. First, the proposed 13' SEERheat pump standard would have a disproportionate impact on smallermanufacturers. Currently less than 20% ofthe total currentproduct lines meet the proposed standards, but for some small manufacturers, 100% oftheirproduct lines fail to satisfy the proposed standard. Second, the proposed standard for heat pumps, andin some instance,s for air conditioners, would have an adverse impact on some manufacturers oftheseproducts (includingthose products referredto inthe Federal Register notice as "niche products") used to retrofit existing housing and used in manufactured housing. These manufacturers could notmake units that comply with the rule and fit into the available space.

IThe Federal Register notice also requested comments on aproposal to adopt a standard for steady-state cooling efficiency (EER) and discussed several options the Department of Energy is considering. Theproposed rule set forth inthenotice does not, however, include a provision regarding an EER standard, and the views ofthe Department ofJustice expressed in this letter are limited to the impact ofany lessening ofcompetition ...that is likelyto result from the imposition ofthe [proposed]**standard~"** as requiredbyEPCA. Ifthe Department of Energy proposes a rule in the future incorporating an EER standard, the Department will then evaluatethat proposedrule and express its views aboutthe competitive impact ofthat standard. 114:IMike\USDOE\Centrai Air\SEERI3 Final Rule draft 12 master 12-14-OO,wpd

### 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 ofheat pumps, it ispossible that purchasers will shift away from heat pumps to other systems that include electric resistance heat, reducing the competition that presently exists between heat pumps and those other systems. The Department ofJustice urges the Department ofEnergy to take into account these possible impacts on competition in determining its final energy efficiency standard for air conditioners and heat pumps. The Department ofEnergy should consider setting a lower SEER standard forheat 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

1 1 :\Mike\US DOE\Central Air\SEER13 Final Ruledraft 12 master 12-14-00.wpd 

# ...
-

Third, the proposed heat pump standard of 13 SEERcould make heat pumps less competitive with alternative heating and cooling systems. Because the standard will result in increases in the size and cost ofheat pumps, it is possible that purchasers will shift away from heatpumps to other systems that inc1 ude electric resistance heat, reducing the competitionthat presently exists between heatpumps andthose other systems. TheDepartment ofJusticeurges the Department ofEnergyto take into account these possible impacts on competition 

### in determining its final energy efficiency standard for air conditioners and heat pumps. The Department ofEnergy should consider setting a lower SEER standard forheatpumps, such as the standard included in Trial Standard Level 2, and a lower SEER standard for airconditioners for retrofit markets wherethere are space constraints (such as markets servedbyniche products) and for manufactured housing.
Sincerely

A. Doug1 as Melamed

11,$;:\Mike\uSDOE\Central Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd