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 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 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 for this 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 of the above is "Yes," submit four (4) complete Michael E. McCabe packagesto OIRA

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 (PreviouS versions obsolete)

EE-RM-STD-98-440 COMMENT 205

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 of this 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 

If either of the 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 Part 430

[Docket Number EE-RM-98-440]

RIN:1904-AA77

Energy Conservation Program for Consumer Products: Central Air Conditioners and

Heat Pumps Energy Conservation Standards

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

ACTION: Final Rule.

SUMMARY: The Department of Energy (DOE or Department) has determined that revised

energy conservation standards for central air conditioners and heat pumps will result in.

significant conservation of energy, are'technologically feasible, and are economically justified.

On this basis, the Department is today amending the existing energy conservation standards for

central air conditioners and heat pumps.

EFFECTIVE DATES: The effective date of this rule and the standards is [insert date 5 years

after publication in Federal Register].

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

EE-RM-STD-98-440 COMMENT 205

[6450-01-PJ EE.RM/STD~98-440_g: ~ tJ b 

DEPARTMENT OF ENERGY 

Office of Energy Efficiency and Renewable Energy 

10 CFR Part 430 

[Docket Number EE-RM-98-440J 

RIN:1904-AA 77 

Energy Conservation Program for Consumer Products: Central Air Conditioners and 

Heat Pumps Energy Conservation Standards 

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

ACTION: Final Rule. 

SUMMARY: The Department of Energy (DOE or Department) has determined that revised 

energy conservation standards for central air conditioners and heat pumps wiII result in_ 

significant conservation of energy, are-technologically feasible, and are economically justified. 

On this basis, the Department is today amending the existing energy conservation standards for 

central air conditioners and heat pumps. 

EFFECTIVE DATES: The effective date of this rule and the standards is [insert date 5 years 

after publication in Federal Register]. 

1 C:\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 of the Technical Support Document (TSD) may be read at the DOE

Freedom of Information Reading Room, U.S. Department of Energy, Forrestal Building, Room

1E-190, 1000 Independence Avenue, S.W., Washington, D.C. 20585, (202) 586-3142, between

the hours of 9:00 a.m. and 4:00 p.m., Monday through Friday, except Federal holidays. Copies

of the 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 of Energy, Office of Energy 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 of Energy 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 of Energy, Office of General 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 COMMENT 205... 

EE .. RM/STD-98-440 -:It ~ as, 

.J 

ADDRESSES: A copy of the Technical Support Document (TSD) may be read at the DOE 

Freedom oflnformation Reading Room, U.S. Department of Energy, 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 

of the TSD may be obtained from: the Codes and Standards Internet site at: 

http://www.eren.doe.govlbuildings/codes _ standards/applbrf/central_ air _ conditioner.html or from 

the U.S. Department of Energy, Office of Energy 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 of Energy 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 of Energy, Office of General 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 3 Final Rule draft 12 master J2-J4-00.wpd 
EE-RM/STD-98-440 * _ -•- 

SUPPLEMENTARY INFORMATION:

I. Introduction

A. Consumer Overview

1. Background

2. Central Air Conditioner and Heat Pump Features

3. Consumer Benefits

4. National Benefits

B. Authority

C. Background

II. General Discussion

A. Technological Feasibility

1. General

2. Maximum Technologically Feasible Levels

B. Energy Savings

1. Determination of Savings

2. Significance of Savings

C. Rebuttable Presumption

D. Economic Justification

1. Economic Impact on Manufacturers and Consumers

2. Life-cycle-costs

3. Energy Savings

4. Lessening of Utility or Performance of Products

5. Impact of Lessening of Competition

6. Need of The Nation to Conserve Energy

7. Other Factors

III. Methodology

IV. Discussion of Comments

A. Burdens and Benefits

1. Economic Impacts

a. Economic Impacts on Manufacturers

b. Economic Impacts on Consumers

2. Life-Cycle Costs

3. Energy Savings

4. Lessening of Utility or Performance of Products

5. Impact of Lessening of Competition

6. Need of the Nation to Conserve Energy

7. Other Factors

B. Analysis and Assumptions

1. Engineering Analysis

a. Reliance on ARI and Reverse Engineering Cost Estimates

b. Consideration of Emerging Technologies

2. Life Cycle Cost (LCC) analysis

a. Probability-based analysis

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

EE-RM-STD-98-440 COMMENT 205

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 .. Technological Feasibility 

I. General 

2. Maximum Technologically Feasible Levels 

B. Energy Savings 

I. Determination of Savings 

2. Significance of Savings 

C. Rebuttable Presumption 

D. Economic Justification 

1. Economic Impact on Manufacturers and Consumers 

2. Life-cycle-costs 

3. Energy Savings 

4. Lessening of Utility or Performance of Products 

5. Impact of Lessening of Competition 

6. Need of The Nation to Conserve Energy 

7. Other Factors 

III. Methodology 

IV. Discussion of Comments 

A. Burdens and Benefits 

I. Economic Impacts 

a. Economic Impacts on Manufacturers 

b. Economic Impacts on Consumers 

2. Life-Cycle Costs 

3. Energy Savings 

4. Lessening of Utility or Performance of Products 

5. Impact of Lessening of Competition 

6. Need of the Nation to Conserve Energy 

7. Other Factors 

B. Analysis and Assumptions 

1. Engineering· Analysis 

a. Reliance on ARI and Reverse Engineering Cost Estimates 

h. Consideration of Emerging Technologies 

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 of Trends

C. Other Comments

1. HCFC Phaseout

2. Ozone Reduction Catalyst Requirement

D. Additional Standard Requirements

1. EER Standard

2. TXV Requirement

3. HSPF Levels

V. Analytical Results and Conclusions

A. Trial Standard Levels

B. Significance of Energy Savings

C. Payback Period

D. Economic Justification

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 of Products

5. Impact of Any Lessening of Competition

6. Need of the Nation to Save Energy

7. Other Factors

E. Conclusion

VI. Procedural Issues and Regulatory Review

A. Review Under the National Environmental Policy Act

B. Review Under Executive Order 12866, "Regulatory Planning and Review"

C. Review under the Regulatory Flexibility Act

D. Review Under the Paperwork Reduction Act

E. Review Under Executive Order 12988, "Civil Justice Reform"

F. "Takings"Assessment Review

G. Review under Executive Order 13132

H. Review Under the Unfunded Mandates Reform Act

I. Review Under the Treasury and General Government Appropriations Act of 1999

J. Review Under the Plain Language Directives

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 COMMENT 205

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 Impact Analysis 

5. Utility Impacts 

a. Peak Demand Impacts 

6. Projection of Trends 

C. Other Comments 

1. HCFC Phaseout 

2. Ozone Reduction Catalyst Requirement 

D. Additional Standard Requirements 

]. EER Standard 

2. TXV Requirement 

3. HSPF Levels 

V. Analytical Results and Conclusions 

A. Trial Standard Levels 

B. Significance of Energy Savings 

C. Payback Period 

D. Economic Justification 

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 of Products 

5. Impact of Any Lessening of Competition 

6. Need of the Nation to Save Energy 

7. Other Factors 

E. Conclusion 

VI. Procedural Issues and Regulatory Review 

A. Review Under the National Environmental Policy Act 

B. Review Under Executive Order 12866. "Regulatory Planning and Review" 

C. Review under the Regulatory Flexibility Act 

D. Review Under the Paperwork Reduction Act 

E. Review Under Executive Order 12988. "Civil Justice Reform" 

F. "Takings" Assessment Review 

G. Review under Executive Order 13132 

H. Review Under the Unfunded Mandates Reform Act 

1 Review Under the Treasury and General qovernment Appropriations Act of 1999 

J. Review Under the Plain Language Directives 

K. Congressional Notification 

4 C:lMike\US DOE\Central Air\SEER 13 Final Rule draft 12 .master 12-14~O. wpd 
EE-RM/STD-98-440-- 0 5°

I. Introduction

A. Consumer Overview

1. Background

The Department of Energy (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 of the law. The Department is amending the

almost ten year old minimum efficiency standards for new central air conditioners and heat

pumps. These amended standards take into account a decade of technological advancements and

will save consumers and the nation money, significant amounts of energy, 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 of energy efficiency for the seasonal cooling performance of

central air conditioners and heat pumps. HSPF, Heating Seasonal Performance Factor, is the

Department's measure of energy efficiency for the seasonal heating performance of heat pumps.

The standards will apply to products manufactured for sale in the United States, as of [insert date

5 years after publication in Federal Register]. The standard for split-system air conditioners, the

most common type of residential 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-98-440 COMMENT 205

EE.RM/STD.~8-440-~~o5 

I. Introduction 

A. Consumer Overview 

1. Background 

The Department of Energy (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 of the law. The Department is amending the 

almost ten year old minimum efficiency standards for new central air conditioners and heat 

pumps. These amended standards take into account a decade of technological advanc~ments and 

will save consumers and the nation money, significant amounts of energy, 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 of energy efficiency for the seasonal cooling performance of 

central air conditioners and heat pumps. HSPF, Heating Seasonal Performance Factor, is the 

Department's measure of energy efficiency for the seasonal heating performance of heat pumps. 

The standards will apply to products manufactured for sale in the United States, as of [insert date 

5 years after publication in Federal Register]. The standard for split-system air conditioners, the 

most common type of residential 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 30 percent improvement in cooling efficiency and a 13 percent improvement in

heating efficiency. The standard will also increase the cooling efficiency of single-package air

conditioners and single-package heat pumps by 34 percent and the heating efficiency of singlepackage heat pumps 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

Department has determined that the new standards are the highest efficiency levels that are

technically feasible and economically justified 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 of these 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" of today's typical central air conditioners and

heat pumps. Table 1.2 presents the implications for the average consumer of the standards

becoming effective in 2006.

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EE-RM-STD-98-440 COMMENT 205

EE.RM/STD.~:f1:"~ 05 

represent a 30 percent improvement in cooling efficiency and a 13 percent improvement in 

heating efficiency. The standard will also increase the cooling efficiency of single-package air 

conditioners and single-package heat pumps by 34 percent and the heating efficiency of singlepackage heat pumps 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 

Department has determined that the new standards are the highest efficiency levels that are' 

technically feasible and economically justified 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 of these 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's typical central air conditioners and 

heat pumps. Table 1.2 presents the implications fo~ the average consumer of the standards 

becoming effective in 2006. 

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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 Bill2 $189 $453 $189 $453

Life Expectancy 18.4 years 18.4 years 18.4 years 18.4 years

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

"'Typical" equipment have cooling and heating efficiencies of 10 SEER and 6.8 HSPF, respectively.

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

Table 1.2 Implications of New 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 comprise

approximately 65 percent of today's central air conditioning and heat pump market) has an

installed price of $2,236 and cost $189 in utility bills annually. In order to meet the 2006

standard, the Department estimates that the installed price of a 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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EE-RM-STD-98-440 COMMENT 205

Table 1.1 Vital Statistics of Today's Typical Central Air Conditioners and Heat Pumps I 

Split System Split System Single Package Single Package 

Air Conditioner Heat Pump Air Conditioner Heat Pump 

A verage 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 per year 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. 

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

Table 1.2 Implications of New 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 

A verage 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 of to day's central air conditioning and heat pump market) has an 

installed price of $2,236 and cost $189 in utility bills annually. In order to meet the 2006 

standard, the Department estimates that the install~d price of a 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 

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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 of a typical heat pump will be $4,000,

an increase of $332. This price increase will be offset by an annual energy savings of about $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 of the different energy prices across the nation and

different air-conditioning usage patterns. The Department estimates that 61 percent of all

consumers purchasing a new typical air conditioner will either save money or will be negligibly

impacted as a result of the 2006 standard. In the case of a 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 of the standard.

4. National Benefits

The standards will provide benefits to the nation. DOE estimates the standards will save

approximately 4.5 quads of energy 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 of five 400 megawatt coal-fired plants and thirty-four 400

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EE-RM-STD-98-440 COMMENT 205 .. ..~. 

EE·RM/STD·98-440 -=tP A o~·· 

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 of a typical heat pump will be $4,000, . . 

an increase of $332. This price increase will be offset by an annual energy savings of about $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 of the different energy prices across the nation and 

different air-conditioning usage patterns. The Department estimates that 61 percent of all 

consumers purchasing a new typical air conditioner will either save money or will be negligibly 

impacted as a result of the 2006 standard. In the case of a 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 of the standard. 

4. National Benefits 

The standards will provide benefits to the nation. DOE estimates the standards will save 

approximately 4.5 quads of energy 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 of five 400 megawatt coal-fired plants and thirty-four 400 

8 C:\MikeIUS OOE\Central AirlSEER 13 Final Rule draft 12 ~aster 12-14-00. wpd 
EE-RM/STD-98-440 - 3 0 5'

megawatt gas-fired plants. These energy savings will result in cumulative greenhouse gas

emission reductions of approximately 33 million metric tons (Mt) of carbon, or an amount equal

to that produced by approximately 3 million cars every year. Additionally, air pollution will be

reduced by the elimination of approximately 90 thousand metric tons of nitrous oxides (NO)

from 2006 through 2030. In total, we estimate the benefit of this standard to the nation's

consumers will be $1 billion from 2006 through 2030.

B. Authority

Part B of Title III of the Energy Policy and Conservation Act, Pub. L. 94-163, as amended

by the National Energy Conservation Policy Act, Pub. L. 95-619, by the National Appliance

Energy Conservation Act, Pub. L. 100-12, by the National Appliance Energy Conservation

Amendments of 1988, Pub. L. 100-357, and by the 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 this program (often referred to hereafter as "covered products")

include central air conditioners and heat pumps.

Under the Act, the program consists essentially of three parts: testing, labeling, and

Federal energy conservation standards.

IPart B of Title III of the 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 of Title II is codified at 42 U.S.C. 6291 et seq. Part

B of Title Ill of the 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 COMMENT 205

" 

EE.RM/STD.~~_4404 A 0-5-' , 

megawatt gas-fired plants. These energy savings will result in cumulative greenhouse gas 

emission reductions of approximately 33 million metric tons (Mt) of carbon, or an amount equal 

to that produced by approximately 3 million cars every year. Additionally, air pollution will be 

reduced by the elimination of approximately 90 thousand metric tons of nitrous oxides (NOx) 

from 2006 through 2030. In total, we estimate the benefit of this standard to the nation's 

consumers will be $1 billion from 2006 through 2030. 

B. Authority 

Part B of Title III of the Energy Policy and Conservation Act, Pub. L. 94-163, as amended 

by the National Energy Conservation Policy Act, Pub. L. 95-619, by the National Appliance 

Energy Conservation Act, Pub. L. 100-12, by the National Appliance Energy Conservation 

Amendments of 1988, Pub. L.l 00-357, and by the Energy Policy Act of 1992, Pub. L. 102-4861 

created the Energy Conservation Program for Consumer Products other than Automobiles. The 

consumer products subject to this program (often referred to hereafter as "covered products") 

include central air conditioners and heat pumps. 

Under the Act, the program consists essentially of three parts; testing, labeling, and 

Federal energy conservation standards. 

Ipart B ofTitIe III of the 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 of Title 1\1 of the 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. -. 

9 C:\MikcIUS DOE\Central Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd 
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The National Appliance Energy Conservation Act of 1987 (NAECA) prescribed initial

Federal energy conservation standards for central air conditioners and heat pumps. 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 is technologically 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

economically justified, 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 of the standard exceed its burdens, based, to the greatest extent practicable, on a

weighing of the following seven factors:

"(i) The economic impact of the standard on the manufacturers and on the consumers of

the products subject to such standard;

(ii) The savings in operating costs throughout the estimated average life of the covered

product in the type (or class) compared to any increase in the price of, or in the initial

charges for, or maintenance expenses of, the covered products which are likely to result

from the imposition of the standard;

(iii) The total projected amount of energy savings likely to result directly from the

imposition of the standard;

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EE-RM-STD-98-440 COMMENT 205

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 or amended standard must be deSigned so as to achieve the maximwn 

improvement in energy efficiency that is technologically feasible and economically justified. 

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 

economically justified, 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 of the standard exceed its burdens, based, to the greatest extent practicable, on a 

weighing of the following seven factors: 

"(i) The economic impact of the standard on the manufacturers and on the conswners of 

the products subject to such standard; 

(ii) The savings in operating costs throughout the estimated average life of the covered 

product in the type (or class) compared to any increase in the price of, or in the initial 

charges for, or maintenance expenses of, the covered products which are likely to result 

from the imposition of the standard; 

(iii) The total projected amount of energy savings likely to result directly from the 

imposition of the standard; 

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(iv) Any lessening of the utility or the performance of the covered products likely to

result from the imposition of the standard;

(v) The impact of any lessening of competition, as determined in writing by the Attorney

General, that is likely to result from the imposition of the standard;

(vi) The need for national energy conservation; and

(vii) Other factors the Secretary considers relevant."

In addition, section 325(o)(2)(B)(iii) establishes a rebuttable presumption of economic

justification in instances where the Secretary determines that "the additional cost to the consumer

of purchasing a product complying with an energy conservation standard level will be less than

three times the value of the energy... savings during the first year that the consumer will receive

as a result of the standard, as calculated under the applicable test procedure ...." The rebuttable

presumption test is an alternative path to establishing economic justification.

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 for heat 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

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(iv) Any lessening of the utility or the performance of the covered products likely to 

result from the imposition of the standard; 

(v) The impact of any lessening of competition, as determined in writing by the Attorney 

General, that is likely to result from the imposition of the standard; 

(vi) The need for national energy conservation; and 

(vii) Other factors the Secretary considers relevant." 

In addition, section 325(0 )(2)(B)(iii) establishes a rebuttable presumption of economic 

justification in instances where the Secretary determines that lithe additional cost to the consumer 

of purchasing a product complying with an energy conservation standard level will be less than 

three times the value of the energy ... savings during the first year that the consumer will receive 

as a result of the standard, as'calculated under the applicable test procedure .... " The rebuttable 

presumption test is an alternative path to establishing economic justification. 

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 heat 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.S HSPF 

-- Single package air conditioners and heat pumps - 9.7 SEERl6.6 HSPF 

lIC:\MikeIUS OOElCentral AirlSEER 13 Final Rule dnilll2 master 12-14-00. wpd 

/ 
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On September 8, 1993, DOE published an Advance Notice of Proposed 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 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 of new 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 of Proposed 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 its peak.

2 EER, Energy Efficiency Ratio, is a steady-state measure of energy efficiency which measures efficiency

at a prescribed outdoor temperature (95TF), and is one of the test conditions in the Department's test procedure used

to develop the SEER.

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EE-RM-STD-98-440 COMMENT 205

On September 8, 1993, DOE published an Advance Notice of Proposed 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 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 of new 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 of Proposed 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 singie 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 its peak. 

2 EER, Energy Efficiency Ratio, is a steady-state measure of energy efficiency which measures efficiency 

at a prescribed outdoor temperature (95°F), and is one of the test conditions in the Department's test procedure used 

to develop the SEER. 

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The proposed rule provided additional background information on the current standards,

the history of previous 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 FR 36974 (July 15, 1996). A public hearing was held in Washington,

D.C. on November 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 heat pumps in the market at all of the efficiency

levels prescribed in today's final rule. The Department, therefore, believes all of the efficiency

levels adopted by today's final rule are technologically feasible.

2. Maximum Technologically Feasible Levels

Pursuant to section 325(p)(2) of the Act, and as discussed in the proposed rule, the

Department determined that 18 SEER is the maximum technologically 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 HSPF rating

currently available in residential heat pumps.

B. Energy Savings

1. Determination of Savings

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EE-RM/STD-98-440 -1Fc9, u:f 

The proposed rule provided additional background information on the current standards, 

the history of previous 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 FR 36974 (July 15, 1996). A public hearing was held in Washington, 

D.C. on November 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 heat pumps in the market at all of the efficiency 

levels prescribed in today's final rule. The Department, therefore, believes all of the efficiency 

levels adopted by today's final rule are technologically feasible. 

2. Maximum Technologically Feasible Levels 

Pursuant to section 325(p )(2) of the Act, and as discussed in the proposed rule, the 

Department determined that 18 SEER is the maximum technologically 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 HSPF rating 

currently available in residential heat pumps. 

B. Energy Savings 

1. Determination of Savings 

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 of a 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 of today's final rule is based are

unchanged.

2. Significance of Savings

As discussed in the proposed rule, section 325(o)(3)(B) of the Act prohibits the

Department from adopting a standard for a product if that 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 of section 325 of the Act.

C. Rebuttable Presumption

The National Appliance Energy Conservation Act established new criteria for

determining whether a standard level is economically justified. Section 325(o)(2)(B)(iii) of the

Act states:

"If the Secretary finds that the additional cost to the consumer of purchasing a product

complying with an energy conservation standard level will be less than three times the

value of the energy... savings during the first year that the consumer will receive as a

result of the standard, as calculated under the applicable test procedure, there shall be a

rebuttable presumption that such standard level is economically justified. A

determination by the Secretary that such criterion is not met shall not be taken into

1

4

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EE-AM/ITD .. 8 440 -iP- rA 1J 6 

The Department forecasted energy savings through the use of a 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 of to day's final rule is based are 

unchanged. 

2. . Significance of Savings 

As discussed in the proposed rule, section 325(0)(3)(B) of the Act prohibits the 

Department from adopting a standard for a product if that 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 of section 325 of the Act.' 

C. Rebuttable Presumption 

The National Appliance Energy Conservation Act established new criteria for 

determining whether a standard level is economically justified. Section 32S(0)(2)(B)(iii) of the 

Act states: 

"If the Secretary finds that the addition,a} cost to the consumer of purchasing a product 

complying with an energy conservation standard level will be less than three times the 

value of the energy ... savings during the first year that the consumer will receive as a 

result of the standard, as calculated under tQe applicable test procedure, there shall be a 

rebuttable presumption that such standard level is economically justified. 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 of whether a standard is economically

justified."

If, according to the test procedure, the increase in initial price of an appliance due to a

conservation standard would repay itself to the consumer in energy savings in less than three

years, then we presume that such standard is economically justified. This presumption of

economic justification 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 presume them to be economically justified and have performed additional

analysis to support the Secretary's determination that they are indeed economically justified.

D. Economic Justification

As noted earlier, Section 325(o)(2)(B)(i) of the Act provides seven factors to be evaluated

in determining whether a conservation standard is economically justified.

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).

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

EE-RM-STD-98-440 COMMENT 205

EE-RM/STD-98-440 -# c::? () Sconsideration in the Secretary's detennination of whether a standard is economically 

justified. " 

If, according to the test procedure, the increase in initial price of an appliance due to a 

conservation standard would repay itself to the conswner in energy savings in less than three 

years, then we presinne that such standard is economically justified. This preswnption of 

economic justification 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 economically justified and have perfonned additional 

analysis to support the Secretary's detennination that they are indeed economically justified. 

D. Economic Justification 

As noted earlier, Section 325(0)(2)(B)(i) of the Act provides seven factors to be evaluated 

in detennining whether a conservation standard is economically justified. 

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). 

15c:\Mikc\US OOE\Centrnl Air\SEER 13 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 of consumers 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 of energy is a separate statutory requirement for

establishing an energy conservation standard, the Act requires DOE, in determining the economic

justification of a standard, to consider the total projected energy savings that are expected to

result directly from revised standards.

4. Lessening of Utility or Performance of Products

This factor cannot be quantified. In establishing classes of products, the Department has

attempted to eliminate any degradation of utility 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 of utility. Product size or

configuration can also be considered utility if a change in size would cause the consumer to

install the product in a location or in a manner inconsistent with the consumer's preferences.

5. Impact of Lessening of Competition

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EE-RM-STD-98-440 COMMENT 205

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 of consumers 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. of energy is a separate statutory requirement for 

establishing an energy conservation standard, the Act requires DOE, in determining the economic 

justification of a standard, to consider the total projected energy savings that are expected to 

result directly from revised standards. 

4. Lessening of Utility or Performance of Products 

This factor cannot be quantified. In establishing classes of products, the Department has 

attempted to eliminate any degradation of utility 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 of utility. Product size or 

configuration can also be considered utility if a change in size would cause the consumer to 

install the product in a location or in a manner inconsistent with the consumer's preferences. 

5. Impact of Lessening of Competition 

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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 of competition as a result of standards; and on the other hand, it directs

the Attorney General to gauge the impact, if any, of that effect.

In order to assist the Attorney General in making such a determination, the Department

provided the Attorney General with copies of the proposed rule and the Technical Support

Document for review. The Attorney General's response is discussed in section V.D.5 of this rule

and is reprinted at the end of the rule.

6. Need of The Nation to Conserve Energy

The Secretary recognizes that energy conservation benefits the Nation in several

important ways. Enhanced energy efficiency improves the Nation's energy security, strengthens

the economy, and reduces the environmental impacts of energy production.

7. Other Factors

This provision allows the Secretary of Energy, in determining whether a standard is

economically justified, to consider any other factors that the Secretary deems to be relevant.

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 the reliability of the

electrical system. Recent summertime electric power outages in various regions of our country

resulted in disruption of many peoples' 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

1 7C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

EE-RM-STD-98-440 COMMENT 205

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 of competition as a result of standards; and on the other hand, it directs 

the Attorney General to gauge the impact, if any, of that effect. 

In order to assist the Attorney General in making such a determination, the Department 

provided the Attorney General with copies of the proposed rule and the Technical Support 

Document for review. The Attorney General's response is discussed in section V.D.5 of this rule 

and is reprinted at the end o~the rule. 

6. Need of The Nation to Conserve Energy 

The Secretary recognizes that energy conservation benefits the Nation in several 

important ways. Enhanced energy efficiency improves the Nation's energy security, strengthens 

the economy, and reduces the environmental impacts of energy production. 

7. Other Factors 

This provision allows the Secretary of Energy, in determining whether a standard is 

economically justified, to consider any other factors that the Secretary deems to be relevant. 

EPCA Section 325(0)(2)(B)(i)(VI), 42 U.S.~. 6295(0)(2)(B)(i)(VI). 

Under this factor, we considered the potential improvement to the reliability of the 

electrical system. Recent summertime electric power outages in various regions of our country 

resulted in disruption of many peoples' 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: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 of total 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 it was

fully phased in. However, the same efficiency improvement would provide a greater percentage

reduction in peak loads, reducing the prospect of brownouts 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 of experts convened by the Secretary to investigate the

electric power problem included the recommendation to increase the energy efficiency of central

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 of today's final rule for

central air conditioners and heat pumps. Thus, the Department has considered effects of the rule

on electric power system reliability.

3"Report of the U.S. Department of Energy's Power Outage Study Team: Findings and Recommendations

to Enhance Reliability from the Summer of 1999", March 2000.

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EE-RM-STD-98-440 COMMENT 205·. ~ 

EE-RM/STD-98-440 -1F ~ tJ6 . 

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 of total 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 it was 

fully phased in. However, the same efficiency improvement would provide a greater percentage 

reduction in peak loads, reducing the prospect of brownouts 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 of experts convened by the Secretary to investigate the 

electric power problem included the recommendation to increase the energy efficiency of central 

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 of the rule 

on electric power system reliability. 

3"Report of the u.s. Department of Energy's Power Outage Study Team: Findings and Recommendations 

to Enhance Reliability from the Summer of 1999", March 2000. 

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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 net present

value (NPV). The Department also completely revised the methodology used in assessing

manufacturer impacts including the adoption of the Government Regulatory Impact Model

(GRIM). Additionally, DOE developed a new approach using the National Energy Modeling

System (NEMS) to estimate impacts of air conditioner energy efficiency standards on electric

utilities and the environment.

In order to 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 our own reverse .engineering methods. The ARI cost data presented the minimum,

mean, and maximum cost estimates for the sample of ARI 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 by manufacturers,

using bills-of-materials provided by manufacturers. We physically examined three of these

models. In refining our results, we reviewed our detailed cost estimates for split air conditioners

with a major manufacturer.

The benefits of reverse engineering include the transparency of the methods, data, and

assumptions used to produce the estimates, and the insights gained into the design options used

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

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 net present 

value (NPV). The Department also completely revised the methodology used in assessing 

manufacturer impacts including the adoption of the Government Regulatory Impact Model 

(GRIM). Additionally, DOE developed a new approach using the National Energy Modeling 

System (NEMS) to estimate impacts of air conditioner energy efficiency standards on electric 

utilities and the environment. 

In order to 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 our own reverse .engineering methods. The ARI cost data presented the minimum, 

mean, and m~imum cost estimates for the sample of ARI 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 

way to validate the ARI data, analyzed seventy-one samples, mostly selected by manufacturers, 

using bills-of-materials provided by manufacturers. We physically examined three of these 

models. In refining our results, we reviewed our detailed cost estimates for split air conditioners 

with a major manufacturer. 

The benefits of reverse engineering include the transparency of the methods, data, and 

assumptions used to produce the estimates, and the insights gained into the design options used 

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EE-RM/STD-98-440 -4t O--

to achieve the different efficiency levels. The ARI data provides none of these benefits, but does

draw on the considerable expertise of the manufacturers involved in producing the underlying

estimates describing all of the products on the market. One benefit of the reverse engineering

analysis is that results are expressed in absolute costs instead of relative costs. Absolute costs are

needed to represent production costs at the minimum efficiency level and are helpful in

representing the 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 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 of cumulative emission reductions.

IV. Discussion of Comments

Since we opened the docket for this rulemaking, we have received over 800 comments

from a diverse set of interested 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 of our analysis, the merits of the different trial standard levels and

standard options we considered, and the DOE rulemaking process. Many comments raised issues

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EE-RM/STD-9~-440 4A CJ~ 

to achieve the different efficiency levels. The ARI data provides none of these benefits, but does 

draw on the considerable expertise of the manufacturers involved in producing the underlying 

estimates describing all of the products on the market. One benefit of the reverse engineering 

analysis is that results are expressed in absolute costs instead of relative costs. Absolute costs are 

needed to represent production costs at the minimum efficiency level and are helpful in 

representing the 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 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 of cumulative emission reductions. 

IV. Discussion of Comments 

Since we opened the docket for this rulemaking, we have received over 800 comments 

from a diverse set of interested 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 of our analysis, the merits of the different trial standard levels and 

standard options we considered, and the DOE rulemaking process. Many comments raised issues 

2 Oc:\Mike\US DOE\CentraJ Air\SEER 13 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 most recent comment period are addressed below, and some previous

comments are revisited.

A. Burdens and 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 a basis for deciding whether a standard level is economically justified.

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 at p. 6, 13). Some

manufacturers noted that EER and TXV requirements would add to the burden. (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

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EE-RM/STD-9~-440 -=fF ~ oSthat we substantially addressed in the proposed rule and Supplementary ANOPR. Comments 

received during the most recent comment period are addressed below, and some previous 

comments are revisited. 

A. Burdens and 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 a basis for deciding whether a standard level is economically justified. 

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 fmancial burdens on the industry overall as severe. They also assert 

that the HCFC phaseout results in cumulative burdens. CARl, No. 100 at p. 6, 13). Some 

manufacturers noted that EER and TXV requirements would add to the burden. (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 

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since they are already making investments in new technologies to help them improve product

efficiency. (NRDC No. 88 at p. 15; OOE No. 84, p.5).

The reduction in industry net present 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, 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 consider the change in

sales volumes driven by changes in the underlying cost assumptions.

Many comments described what they consider disproportionate impacts on manufacturers

of niche products. Those comments are discussed in Section V.4 below.

The Department has considered the manufacturer burdens as described in the

manufacturer impact analysis of the TSD in adopting the new standard. These include

cumulative burdens. It also considers the extent to which the differences among efficiency

scenarios change the implications of more stringent standards.

b. Economic Impacts on Consumers

4The Roll-up scenario assumes that the proportion of equipment with efficiency ratings above the new

standard level will not increase compared to their proportion today.

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EE-RM-STD-98-440 COMMENT 205

since they are already making investments in new technologies to help them improve product 

efficiency. (NRDC No. 88 at p. 15; OOE No. 84, p.5). 

The reduction in industry net present 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, 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 consider the change in 

sales volumes driven by changes in the underlying cost assumptions. 

Many comments described what they consider disproportionate impacts on manufacturers 

of niche products. Those comments are discussed in Section V.4 below. 

The Department has considered the manufacturer burdens as described in the 

manufacturer impact analysis of the TSD in adopting the new standard. These include 

cumulative ·burdens. It also considers the extent to which the differences among efficiency 

scenarios change the implications of more stringent standards. 

b. Economic Impacts on Consumers 

4The Roll-up scenario assumes that the proportion of equipment with efficiency ratings above the new' 

standard level will not increase compared to their proportion today. 

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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 of consumers 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; APPA No. 113, at p. 2; Lennox No. 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 at p. 4-5)

The Consumer Federation of America 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 of America, No. 110 at 2).

Many comments express the belief that, for various reasons, we either underestimated or

overestimated economic impacts on consumers. Those comments are addressed in Section IV.B.

below.

We recognize that increases in first cost and long payback periods are generally

considered burdens on consumers. Based on the reverse engineering derived manufacturing cost

estimates, however, our analysis shows that, at the adopted standard levels, the payback period is

shorter than the life of the equipment, which means the average consumer will benefit

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.,. -- 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 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 of consumers. who would be able to afford new air 

conditioners. Some comments suggested that this effect could increase .health problems and 

deaths. 

(ARJ No. 100 at p. 2, 5; APPA No. 113, at p. 2; Lennox No. 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.~; York No. 90 at p. 4-5) 

The Consumer Federation of America 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 of America, No. 110 at 2). 

Many comments express the belief that, for various reasons, we either underestimated or 

overestimated economic impacts on consumers. Those comments are addressed in Section IV .B. 

below. 

We recognize that increases in first cost and long payback periods 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 

shorter than the life of the equipment, which means the average consumer will benefit 

23C;\MikeIUS DOE\Central AirlSEERI3 Final Rule draft 12 master 12·14-00.wpd 
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 of consumers realizing life-cycle-cost savings

at the 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 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; 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 at p. 5). In contrast, ACEEE, ASE, PG&E, and NRDC argued that the percent of consumers

realizing life-cycle-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 are national standards, it is to be expected

that some consumers in the North will realize net costs from an increased standard but will be

offset by consumers in the Southern part of the U.S. who are realizing life-cycle cost savings

form more efficient air-conditioning equipment. Due to this disparity, they argue it is better to

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EE-RM-STD-98-440 COMMENT 205

, EE.RM/STD.~~.440 -1F-~ os--

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 EEl asserted that the percent of consumers realizing life-cycle-cost savings 

at the 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 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 at pp. 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 that the percent of consumers 

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 are national standards, it is to be expected 

that some consumers in the North will realize net costs from an increased standard but will be 

offset by consumers in the Southern part of the U.~. who are realizing life-cycle cost savings 

form more efficient air-conditioning equipment. Due to this disparity, they argue it is better to 

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 at p.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 of the seven factors in

determining economic justification. In determining economic justification, the Secretary shall

determine whether the benefits of a standard exceed the burdens. Life-cycle-cost is just one of

the factors to be considered and there is no mathematical formula for weighing the benefits and

burdens of the various factors. There are also no mathematical thresholds for life-cycle-cost as

implied by EEI and ACEEE (EEI, Transcript, No. 73 at p. 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 obviously be regional

differences in usage and energy costs, contemplated that the level of life cycle cost savings

would vary among consumers.

We have quantified the distribution of life cycle costs among consumers and have

considered it, along with other information, in the weighing of the benefits and burdens of each

standard level we assessed.

3. Energy Savings

ARI states that the Department overestimated the energy savings realized from efficiency

standards by basing 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).

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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 at p.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 of the seven factors in 

detennining economic justification. In detennining economic justification, the Secretary shall 

detennine ~hether the benefits of a standard exceed the burdens. Life-cycle-cost is just one of 

the factors to be considered and there is no mathematical fonnula for weighing the benefits and 

burdens of the various factors. There are also no mathematical thresholds for life-cycle-cost as 

implied by EEl and ACEEE (EEl, Transcript, No. 73 at p. 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. Furthennore, it appears that EPCA, in requiring DOE to set national 

standards that maximize energy savings for appliances where there will obviously be regional 

differences in usage and energy costs, contemplated that the level oftife cycle cost savings 

would vary among consumers. 

We have quantified the distribution oflife cycle costs among consumers and have 

considered it, along with other infonnation, in the weighing of the benefits and burdens of each 

standard level we assessed. 

3. Energy Savings 

ARI states that the Department overestimated the energy savings realized from efficiency 

standards by basing the savings 011 source energy consumption (Le., at the power plant) rather 

than site energy use (i.e., at the household or commercial 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 stating that 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 of TXVs (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 of TXVs, and an HSPF standard of 7.9.

NAECA prescribes that consumer energy savings be evaluated based on site rather than

source energy consumption. However, the Department believes national energy savings

evaluated at the source reflects a more accurate representation of the energy consumption being

avoided from a standard. Evaluating energy at the source takes into account the efficiency of the

generation source as well as the transmission and distribution of the electricity. The Department

accounts for site energy consumption in its analysis of consumer life-cycle-cost impacts. With

regard to the magnitude of the 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 of Utility or Performance of Products

Comments regarding lessening of utility related mainly to the impacts that more stringent

standards may have on the availability of niche products and some products that are not typically

considered "niche". Most comments stated that those products face size constraints that they will

find difficult, if not impossible, to conform to under more stringent standards. That result could

lead to the removal of the 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 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 of TXV s, and an HSPF standard of 7.9. 

NAECA prescribes that consumer energy savings be evaluated based on site rather than 

source energy consumption. However, the Department believes national energy savings 

e~aluated at the source reflects a more accurate representation oftbe energy consumption being 

avoided from a standard. Evaluating energy at th~ source takes into account the efficiency of the 

generation source as well as the transmission and distribution of the electricity. The Department 

accounts for site energy consumption in its analysis of consumer life-cycle-cost impacts. With 

regard to the magnitude of the 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 of Utility or Performance of Products 

Comments regarding lessening of utility related mainly to the impacts that more stringent 

standards may have on the availability of niche products and some products that are not typically 

considered "niche". Most comments stated that those products face size constraints that they will 

find difficult, if not impossible, to conform to under more stringent standards. That result could 

lead to the removal of the product from the market, or to equipment prices that are higher than 

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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 at p. 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 it likely that products

will be unavailable that meet the new 13 SEER standard, and have substantially the same

capacities, performance and range of sizes as today's products.

If the 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 higher efficiency 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 of its

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EE-RM/STD-98-440 --1t-t9, 0 b 

the market would be able to sustain. (Friedrich, No. 116; Unicb, No. 117, p. 1-2; Carrier, No. 92, 

p. 8; Lennox, No. 91 at p. 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 can make it more difficult for manufacturers to offer 

equipment meeting perfonnance 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 it likely that products 

\\-ill be unavailable that meet the new 13 SEER standard, and have substantially the same 

capacities, performance and range of sizes as today's products. 

If the size of 13 SEER equipment does not generally decrease Uilder new standards, some 

consumers may be r~quired 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 higher efficiency 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 of its 

27c:lMikc\US OOE\CcntTal AinSEER13 Final Rule draft 12 master 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 similar to those at the baseline. We

trust that under a more stringent standard, manufacturers will seek to serve the needs of the

market with products that dehumidify properly.

5. Impact of Lessening of Competition

The Department of Justice and others commented that the more stringent standards

contained in the proposed rule could lessen competition. (DOJ, No. 112; Trane, No. 93 p. 12;

EEI, No. 80 at 8). Aspects of our manufacturer impact analysis support that conclusion. We

discuss the DOJ concerns in more depth in Section V.D.5. The letter from the Department of

Justice is attached in the Appendix of this 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 of choice and utility for

consumers.

Other comments note that a large fraction of today's models would not be 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 of today's models may not be

available under more stringent standards, we fully expect variations of those models to be

available, offering all the features and utility of currently available products.

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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 similar to those at the baseline. We 

trust that under a more stringent standard, manufacturers will seek to serve the needs of the 

market with products that dehumidify properly. 

5. Impact of Lessening of Competition 

The Department of Justice 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 of our 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 of this 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 of choice and utility for 

consumers. 

Other comments note that a large fraction oftoday's models would 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 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 not be 

available under more stringent standards, we fully expect variations of those models to be 

available, offering all the features and utility of currently available products. 

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6. Need of the Nation to Conserve Energy

Of the approximately 800 comments we have received, 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.

These benefits included savings for consumers, avoided emissions and electrical capacity, and

the reduced occurrence of brownouts and blackouts. Although our results do not agree with

many of these claims, all of these issues relate to the need of our nation to conserve energy. We

recognize that a broad cross-section of citizens and organizations are concerned about these

issues and in the potential for more stringent standards to address them.

We discuss more specific comments related to economic benefits and electric system

capacity in other sections of this chapter. In this section, we discuss the comments 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 of the following

air-borne emission reductions: 15 million metric tons of carbon, 40,000 tons of nitrous oxides,

and 200,000 tons of sulfur 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 Department used the average heat rate of avoided plants rather than the

heat rate of operating plants displaced by the efficiency standards when determining emission

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EE-RM-STD-98-440 COMMENT 205

EE-RM/STD-98-440 -:f(B,O !5 

6. Need of the Nation to Conserve Energy 

Of the approximately 800 comments we have received, 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. 

These benefits included savings for consumers, avoided emissions and electrical capacity, an!i 

the reduced occurrence of brownouts and blackouts. Although our results do not agree with 

many of these claims, all of these issues relate to the need of our nation to conserve energy. We 

recognize that a broad cross-section of citizens and organizations are concerned about these 

issues and in the potential for more stringent standards to address them. 

We discuss more specific comments related to economic benefits and electric system 

capacity in other sections of this chapter. In this section, we discuss the comments 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 of the following 

air-borne emission reductions: 15 million metric tons of carbon, 40,000 tons of nitrous oxides, 

. and 200,000 tons of sulfur 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 Department used the average heat rate of avoided plants rather than the· 

heat rate of operating plants displaced by the efficiency standards when determining emission 

29c:lMikclUS OOElCentral AirlSEERI3 Final Rule draft i2 master 12-14-00.wpd 
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 of the emission reductions are determined through the use of NEMS-BRS5, a version

of NEMS used for appliance standards analyses. NEMS-BRS is based on the AEO2000 version

with minor modifications. NEMS offers a sophisticated picture of the effect of standards 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 of those emission reductions are best estimated with

NEMS-BRS as opposed to any other tool. In the case of SO2, the Clean Air Act Amendments of

1990 set an emissions cap on all power generation. The attainment of this target, 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 of SO2 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 SO2 environmental benefit from electricity savings as long as there is enforcement of the

emission ceilings. With regard to the issue of heat rates, contrary to NWPPC's assertion, the

EIA approves use of the name NEMS to describe only an AEO version of the 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 of Building Research and Standards.

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EE-RM-STD-98-440 COMMENT 205

EE-RM/STD-98-440 -=fI::-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 of the emission reductions are determined through the use ofNEMS-BRSs

, a version 

ofNEMS used for appliance standards analyses. NEMS-BRS is based on the AE02000 version 

with minor modifications. NEMS offers a sophisticated picture of the effect of standards 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 of those emission reductions are best estimated with 

NEMS-BRS as opposed to any other tool. In the case ofS02, the Clean Air Act Amendments of 

1990 set an emissions cap on all power generation. The attainment of this target, 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 of S02 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 S02 environmental benefit from electricity savings as 10I?-g as there is enforcement of the 

emission ceilings. With regard to the issue of heat rates, contrary to NWPPC's assertion, the 

5 EIA approves use of the name NEMS to describe only. an AEO version of the model without any modification to 

code or data. Because our analysis entails some minor code modillcations and the model is run under various policy scenanos 

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. DOElEIA-0581 (98), February, 1998. BRS is 

DOE's Office of Building Research and Standards. 

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

Department did use the heat rates of displaced power plants in determining the emission

reductions resulting from efficiency standards.

7. Other Factors

With regard to other factors, the issue of electric 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 of any end-use efficiency measure, such as an air conditioner and heat pump

standard, is likely small.(EEI, Transcript, No. 73 at p. 224; AEP, No. 83 at p. 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 will be a response to expectations

of load 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 conditioner usage. Synapse also notes that conventional assumptions

about the ability of the 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 (of generation, transmission, and distribution capability), environmental, and

other constraints. (Synapse, Transcript, No. 73 at p. 243; ACEEE, No. 104 at p. 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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EE-RM-STD-98-440 COMMENT 205

EE·RM/STD-98·440 -=IF ~ oSDepartment did use the heat rates of displaced power plants in determining the emission 

reductions resulting from efficiency standards. 

7. Other Factors 

With regard to other factors, the issue of electric system reliability attracted numerous 

comments. EEl, AEP, and Dominion Virginia Power stated many changes are occumng in the 

electric utility industry at the same time electric load is continuing to grow. As a result, the 

overall effect of any end-use efficiency measure, such as an air conditioner and heat pump 

standard, is likely small.(EEI, Transcript, No. 73 at p. 224; AEP, No. 83 at p. 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 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'conditioner usage. Synapse also notes that conventional assumptions 

about the ability of the 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 (of generation, transmission, and distribution capability), environmental, and 

other constraints. (Synapse, Transcript, No. 73 at p. 243; ACEEE, No. 104 at p. 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 of the East from New England down past the Mid-Atlantic causing many problems. From

July 3 through 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 of electricity 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 half of the Pennsylvania, New Jersey, Maryland

Interconnection grid experienced sudden and steep voltage declines as an all-time-high peak load

was recorded. The integrity of the system was maintained by reducing voltage, curtailing

contractually interruptible customers and appealing for voluntary load reductions. On that same

day, Delmarva Power and Light had a capacity shortfall that resulted 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 a period of intense heat and humidity.

Resulting system failures caused more than 100,000 customers temporary losses of power for up

to several hours. The summer of 2000 has seen similar types of problems in the state of

California.

Outages such as these can cost millions of dollars per hour depending on which and how

many customers are affected. Although we recognize 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 of the U.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 COMMENT 205

EE-RM/STD-98-440-- tf t?ll)~ 

In a March 2000 final report, the DOE Power OutageStiIdy Team described several 

power outages that occurred in the summer of 1999. During early July, a heat stonn affected 

much of the East from New England down past the Mid-Atlantic causing many problems. From. 

July 3 through 8, service was interrupted to a total of 110,000 Long Island Power Authority 

(LIP A) customers for varying periods.· During that period, two new system peak loads were set 

and LIP A activated its Commercial Peak Reduction Program, appealed to its other large 

customers to voluntarily curtail their use of electricity 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 half of the Pennsylvania, New Jersey, Maryland 

Interconnection grid experienced sudden and steep voltage declines as an all-time-high peak load 

was recorded. The integrity of the system was maintained by reducing voltage, curtailing 

contractually interruptible customers and appealing for voluntary load reductions. On that same 

day, Dehnarva Power and Light had a capacity 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 a period of intense heat and humidity. 

Resulting system failures caused more than 100,000 customers temporary losses of power for up 

to several hours. The summer of2000 has seen similar types of problems in the state of 

California .. 

Outages such ~ these can cost millions of dollars per hour depending on which and how 

many customers are affected. Although we recognize that system adequacy may only playa 

small part in ensuring system reliability, the Department is convinced, especially due to recent 

expansion shortfalls in the Western part of the U.S., that system reliability is an important issue 

32c:\MikC\US DOE\Central Air\SEERI3 Final Rule draft 12 master 12·14-00.wpd 
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 of the

national power system. The impacts of standards could be potentially beneficial in lowering

overall system stress and postponing necessary investment. This is especially important since

annual investment in transmission has roughly halved since the levels of the 1970's6. The

potential benefit of air conditioner and heat pump efficiency improvements is a factor in

establishing the standards being issued today. In addition, the Department will continue to

establish national equipment standards in the form of the 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 of data for relating the manufacturing costs

of current baseline (minimum SEER) equipment to the manufacturing costs of higher efficiency

equipment which would become baseline 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 on the reverse engineering cost estimates.

6"Hirst, E., "Expanding U.S. Transmission Capacity." Paper prepared for Edison Electric Institute,

Washington D.C., July 2000: p. 8-9.

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EE-RM-STD-98-440 COMMENT 205

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 of the 

national power system. The impacts of standards could be potentially beneficial in lowering 

overall system stress and postponing necessary investment. This is especially important since 

annual investment in transmission has roughly halved since the levels of the 1970's6. The 

potential benefit of air conditioner and heat pump efficiency improvements is a factor in 

establishing the standards being issued today. In addition, the Department will continue to 

establish national equipment standards in the form of the current efficiency descriptors (i.e., 

SEER and HSPF) rather than consjdering additional measures, such as minimum EER standards 

and mandatory thermal expansion valve (T~) requirements. 

B. Analysis and Assumptions 

1. Engineering Analysis 

a. Reliance on ARI and Reverse Engineering Cost Estimates 

The Department considered primarily two sets of data for relating the manufacturing costs 

of current baseline (minimum SEER) equipment to the manufacturing costs of higher efficiency 

equipment which would become baseline 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 on the reverse engineering cost estimates. 

6"Hirst, E., "Expanding U.S. Transmission Capacity." Paper prepared for Edison Electric Institute, 

Washington D.C., July 2000: p. 8-9. 

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EE-RM/STD-98-440 ~c: 5

Several comments questioned the validity of the ARI results and recommended we rely

more heavily, if not exclusively, on the reverse engineering estimates. They cited various

reasons, including retail price information that matched the ARI Mean, the greater transparency

of the reverse engineering process and results, and the natural tendencies of manufacturers to

overestimate the costs of complying 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 at p. 11; NEEP, No. 188 at p. 3).

Other comments supported the use of the ARI data, citing the experience of the

manufacturers and apparent flaws in the assumptions and methodology used in the reverse

engineering analysis, which was designed as a validation tool. These perceived flaws included

the small number of tear-downs performed. However, ARI and some of its members recognize

that the reverse engineering results fall within their range and seem to validate their data to some

extent. (ARI, Transcript, No. 14 at p. 42; ARI, No. 48 at p. 2; Carrier, No. 92; Trane, No. 93;

Lennox, No. 91 at p. 4; ARI, No. 100 at p. 9).

While we recognize the expertise of ARI's members related to projecting the cost of

producing central-air 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 similar paths to increase the

efficiency of their 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.

3 4C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

EE-RM-STD-98-440 COMMENT 205

EE.RM/STD.9~.440 -4f-~ {) 5 

Several comments questioned the validity of the 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 the ARI Mean, the greater transparency 

of the reverse engineering process and results, and the natural tendencies of manufacturers to 

overestimate the costs of complying with more 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 at p. 3). 

Other comments supported the use of the ARI data, citing the experience of the 

manufacturers and apparent flaws in the assumptions and methodology used in the reverse 

engineering analysis, which was designed as a validation tool. These perceived flaws included 

. the smali number of tear-downs performed. However, ARI and some of its members recognize 

that the reverse engineering results fall within their range and seem to validate their data to 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 of ARI's members related to projecting the cost of 

producing central air 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 similar paths to increase the 

efficiency of their 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. 

34c:\Mike\US DOE\Central Air\SEERI3 Final Rule drafl12 master 12·14-00.wpd 
EE-RM/STD-98-440 - A < O0

We are also concerned with how closely the 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 of baseline equipment that must meet

that level will decline below the price of equipment 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 of York, Transcript,

No. 73 at p. 117; ARI, No. 100 at p. 3). Those markups are reflected in the current retail prices

of those products. Due to competitive pressures at the baseline level, today's markups would not

be sustainable for baseline equipment that meets, but does not exceed, a new standard. In

addition, as noted by John Compton of Home Excellence, Inc. (HEI), a heating and airconditioning contractor, the new, more efficient, baseline equipment would likely possess fewer

of the premium features found in today's high efficiency equipment. (Mr. Compton of HEI,

Transcript at p. 123). For those reasons, current retail price data would overestimate the relative

cost of high 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 of producing 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 nearer to the ARI Minimum where we expect competitive pressure 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

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EE-RM-STD-98-440 COMMENT 205

EE-RM/STD-9'~-440 -iF-~ () 5' 

We are also concerned with how closely the 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 of baseline equipment that must meet 

that level will decline below the price of equipment 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 of-York, Transcript, 

No. 73 at p. 117; ARI, No.1 00 at p. 3). Those markups are reflected in the current retail prices 

of those products. Due to competitive pressures at the baseline level, today's markups would not 

be sustainable for baseline equipment that meets, but does not exceed, a new standard. In 

addition, as noted by John Compton of Rome Excellence, Inc. (HEI), a heating and airconditioning contractor, the new, more efficient, baseline equipment would likely possess fewer 

of the premium features found in today's high efficiency equipment. (Mr. Compton of HE I, 

Transcript at p. 123). For those reasons, current retail price data would overestimate the relative 

cost of high 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 of producing 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 nearer to the ARI Minimum where we expect competitive pressure 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 

3 5C:lMike\US OOE\Central Air\SEER 13 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 of estimating

equipment production costs, and is well suited for use in this rulemaking as an indicator of the

most likely production costs under new standards.

Based on a consideration of the above, we conclude that the reverse engineering cost

estimates are more representative of what 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 of Emerging Technologies

ACEEE and others commented we should have included the savings that could result

from the use of emerging technologies rather than presenting them separately. The Oregon

Energy Office and Thermalex, Inc. also expressed more optimism regarding the applicability and

probability of adoption for microchannel heat exchangers than we had expressed in the TSD.

(Mr. Nadel of ACEEE, Transcript at p. 88; ASE, No. 81 at pp. 8, 9, and 12; OOE, No. 84 at p. 5;

Thermalex, No. 89 at pp. 1-2).

Trane and York dispute some of the claims regarding the potential of emerging

technologies. (Trane, No. 93 at p. 7; York, No. 90, p.4).

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EE-RM-STD-98-440 COMMENT 205 .. --- EE-RM/STD-98-440 -F~ tJ!::J 

conditioners were reviewed with a majormanufacturer. Our reverse engineering methodology, 

though originally conceived as a validation exercise, is itself a valid method of estimating 

equipment production costs, and is well suited for use in this rulemaking as an indicator of the 

most likely production costs under new standards. 

Based on a consideration of the above, we conclude that the reverse engineering cost 

estimates are more representative of what 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 ARJ Mean data cost to illustrate an upper bound, which we 

believe will be quite an unlikely outcome. 

b. Consideration of Emerging Technologies 

ACEEE and others commented we should have included the savings that could result 

from the use of emerging technologies rather than presenting them separately. The Oregon 

Energy Office and Thermalex, Inc. also expressed more optimism regarding the applicability and 

probabilitY of adoption for microchannel heat exchangers than we had expressed in the TSD. 

(Mr. Nadel of ACEEE, Transcript at p. 88; ASE, No. 81 at pp. 8,9, and 12; ODE, No. 84 at p. 5; 

Thermalex, No. 89 at pp. 1-2). 

Trane and York dispute some of the claims regarding the potential of emerging 

technologies. (Trane, No. 93 at p. 7; York, No. 90, p.4). 

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EE-RM/STD-98-440 - "sco-b0

According to our engineering analysis described in Section 4.5 of the TSD, on a system

basis, emerging technologies cannot make a significant cost impact below 14 SEER. That

explains why they are not in widespread use today. 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 been justified after all, and should have

been considered. (Mr. Nadel of ACEEE, Transcript at p. 171, ACEEE No. 101 at 7)

From our ANOPR 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 of emerging technologies although we could not verify the methods

they used to incorporate them (Madera of York, ANOPR Transcript at p 116, Wethje of ARI,

ANOPR Transcript at p. 115). Economic impact results based on reverse 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 of emerging 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 of emerging 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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EE-RM-STD-98-440 COMMENT 205

o ~ 

EE·oRM/STD-9S-440 -'=/r ~ O!:::J 

According to our engineering analysis described in Section 4.5 of the T~D, on a system 

basis, emerging technologies cannot make a significant cost impact below 14 SEER. That 

explains why they are not in widespread use today. 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 been justified after all, and should have 

been considered. (Mr. Nadel of ACEEE, Transcript at p. 171, ACEEE No. 101 at 7) 

From our ANOPR analysis .based on ARl 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 of emerging technologies although we could not verify the methods 

they used to incorporate them (Madera of York, ANOPR Transcript at p 116, Wethje of ARl, 

ANOPR Transcript at p. 115). Economic impact results based on reverse 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 of emerging 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 of emerging 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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Partially for that reason, we believe that the burdens that could accrue from increases in the size

of baseline 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 the use of a Monte Carlo probability-based analysis

because they claim that several of the distributions used to characterize the inputs to the analysis

are erroneous (Trane Company, No. 93 at p. 4-5).

As part of the process to improve the energy efficiency standards analysis, the

Department uses a probability-based analysis to determine a distribution of life-cycle cost

impacts for consumers utilizing central air conditioners and heat pumps. Most of the inputs to

the analysis are characterized with distributions. While some of the 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 the input 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 of central air

conditioner and heat pump consumers. In addition, they claim the Department is not accurately

representing the saturation of air-conditioned households. Trane states that the saturation

reported by the Department (37.6 percent) is inconsistent with the saturation reported by RECS

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Partially for that reason, we believe that the burdens that could accrue from increases in the size 

of baseline 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 the use of a Monte Carlo probability-based analysis 

because they claim that several of the distributions used to characterize the inputs to the analysis 

are erroneous (Trane Company, No. 93 at p. 4-5). 

As part of the process to improve the energy efficiency standards analysis, the 

Department uses a probability-based analysis to determine a distribution of life-cycle cost 

impacts for consumers utilizing central air conditioners and heat pumps. Most of the inputs to 

the analysis are characterized with distributions. While some of the 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 the input 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 of central air 

conditioner and heat pump consumers. In addition, they claim the Department is not accurately 

representing the saturation of air-conditioned households. Trane states that the saturation 

reported by the Department (37.6 percent) is inconsistent with the saturation reported by RECS 

3 Sc;\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 at p. 4-5).

As part of the process to improve the energy efficiency standards analysis, the

Department is committed to use sensitivity analysis tools to evaluate the potential distribution of

impacts among different subgroups of consumers. The Department believes that RECS provides

a nationally representative household data set which is suited for conducting the type of

sensitivity analyses suggested by the Process Rule. Limiting the RECS households to those

equipped with either central air conditioners or heat pumps, the LCC analysis performs a

household-by-household analysis that predicts the percentage of households that will incur net

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

cited by Trane represents only those households with central air conditioners. When including

homes with central air-conditioning heat pumps, the household saturation used by the

Department in its LCC analysis matches the 47 percent saturation level reported by RECS.

c. Electricity Prices

Wholesale electricity cost data for the period of 1998 through October, 2000, presented

by experts on behalf of the Appliance Standards Awareness Project (ASAP); demonstrated

dramatic variations in seasonal wholesale electricity costs for regions of the country (i.e.,

California, New England, New York, and the Pennsylvania-New Jersey-Maryland region) that

have recently deregulated their electric utility industry. In particular, wholesale costs during

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--

(47 percent) (Trane Company, No. 93 at p. 4-5). 

As part of the process to improve the energy efficiency standards analysis, the 

Department is committed to use sensitivity analysis tools to evaluate the potential distribution of 

impacts among different subgroups of consumers. The Department believes that RECS provides 

a nationally representative household data set which is suited for conducting the type of 

sensitivity analyses suggested by the Process Rule. Limiting the RECS households to those 

equipped with either central air conditioners or heat pumps, the LCC analysis performs a 

household-by-household analysis that predicts the perceptage of households that will incur net 

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 

cited by Trane represents only those households with central air conditioners. When including 

homes with central air-conditioning heat pumps, the household saturation used by the 

Department in its LCC analysis matches the 47 percent saturation level reported by RECS. 

c. Electricity Prices 

Wholesale electricity cost data for the period of 1998 through October, 2000, presented 

by experts on behalf of the Appliance Standards Awareness Project (ASAP)~ demonstrated 

dramatic variations in seasonal wholesale electricity costs for regions of the country (i.e., 

California, New England, New. York, and the Pennsylvania-New Jersey-Maryland region) that 

have recently deregulated their electric utility industry. In particular, wholesale costs during 

39c:\MikC\US DOE\CentraJ Air\SEER 13 Final Rule draft 12 master 12·14'()O. wpd 
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summer months and especially certain summer day hours were significantly greater than annual

average wholesale costs. Wholesale electricity cost data for the period spanning 1998 through

1999 for six regulated 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 of electricity 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 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 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 of generation (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. Extremely high wholesale prices now may not be

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.

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summer months and especially certain summer day hours were significantly greater than annual 

average wholesale costs. Wholesale electricity cost data for the period spanning 1998 through 

1999 for six regulated 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 of electricity 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 jncrease as electricity markets 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 higher marginal costs will result from higher wholesale' electricity 

costs, Dominiol1 stated that recent deregulation pilot programs in Virginia revealed that 

residential consumers are not being offered rates that reflect the co~ts of generation (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. Extremely high wholesale prices now may not be 

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. 

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representative of the current situation in the Southeast where peak prices were considerably

lower in the summer of 2000 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 of high summer wholesale costs will be more than offset by the profits earned during times

when wholesale costs are low (e.g., off peak summer hours or the winter season) (EEI,

Transcript, No. 73 at pp. 148-150; Dominion, Transcript, No. 73 at pp. 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 for those years in which data are available. In the case

of residential pricing, the data for establishing marginal prices (the 1997 RECS') was taken from

the years 1996 and 1997. For commercial 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 lower than average rates while for households with

heat pumps marginal prices are 7 percent lower. Space-cooling marginal prices in commercial

buildings are on average 2 percent greater than average commercial rates. Our method for

determining marginal prices provides a snap shot of recent retail rates and may or may not

accurately reflect what marginal prices will be like in the future. Although wholesale electricity

costs for four deregulated electricity markets demonstrate higher wholesale electricity costs

'Residential Energy Consumption Survey

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. ---- EE·RM/STD·98·440 ..... 4f OJ /) b 

representative of the current situation in the Southeast where peak prices were considerably 

lower in the summer of 2000 on pooled prices than they were the previous summer because of 

greater supply availability. EEl 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 financiallosses incurred during 

times of high summer wholesale costs will be more than offset by the profits earned during times 

when wholesale costs are low (e.g., off peak summer hours or the winter season) {EEl, 

Transcript, No. 73 at pp. 148-150; Dominion, Transcript, No. 73 at pp. 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 for those years in which data are available. In the case 

of residential pricing, the data for establishing marginal prices (the 1997 RECS I) was taken from 

the years 1996 and 1997. For commercial 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 lower than average rates while for households with 

. heat pumps marginal prices are 7 percent lower. Space-cooling marginal prices in coinmercial 

buildings are on average 2 percent greater than average commercial rates. Our method for 

determining marginal prices provides a snap shot of recent retail rates and mayor may not 

accurately reflect what marginal prices will be like in the future. Although wholesale electricity 

costs for four deregulated electricity markets demonstrate higher wholesale electricity costs 

1 Residential Energy Consumption Survey 

41C:\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 be used, we cannot speculate as to how

wholesale electricity prices will be translated into retail prices to residential consumers. Thus,

rather than speculating as to 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 of consumer life-cycle

costs (aggregated to a national level in the form of a net present value (NPV)) to increases in the

marginal electricity price. As will be reported in Chapter V, Analytical Results, the NPV of a 13

SEER standard based on Reverse Engineering manufacturing costs is a savings to the nation of

$1 billion. An increase in the marginal electricity price of 3 cents/kWh 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 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 of the 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 not representative of actual central air

conditioner and heat pump life. Both Carrier and Trane believed the lifetime is 15 years while

ARI stated that the lifetime is even lower at 13 years (ARI, No. 100 at p. 4; Carrier, No. 92 at p.

5; The Trane Company, No. 93 at p. 8).

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EE·RM/STD·98-440 -=tt: CJ,1J5 

during times when air conditioners are likely to be used, we cannot speculate as to how . 

wholesale electricity prices will be translated into retail prices to residential consumers. Thus, 

rather than speculating as to 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 of consumer life-cycle 

costs (aggregated to a national level in the fonn of a net present value (NPV» to increases in the 

. , 

marginal electricity price. As will be reported in Chapter V, Analytical Results, the NPV of a 13 

SEER standard based on Reverse Engineering manufacturing costs is a savings to the nation of 

$1 billion. An increase in the marginal electricity price of 3 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 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 of the 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 not representative of actual central air 

conditioner and heat pump life. Both Carrier and Trane believed the lifetime is 15 years while 

ARI stated that the lifetime is even lower at 13 years (ARI, No. 100 at p. 4; Carrier, No. 92 at 'p. 

5; The Trane Company, No. 93 at p. 8). 

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The basis of the 18.4 year equipment lifetime was a survey conducted on more than 2,100

heat pumps in a seven state region of the U.S2. The survey determined not only the lifetime of a

complete heat pump system, but the life of the 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 of system. Since the heat pump survey

clearly indicates that the original compressor is replaced once in a system's life, the analysis was

based on the inclusion of a 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 of the compressor, which is the most expensive component of a system. As indicated by the

survey data, the compressor was assumed to be replaced in the 14th year of the system's life.

Although a shorter equipment lifetime is possible, the Department has not been provided with

more substantive data to drop its use of the above mentioned survey data. The Department

believes that the survey data provides an accurate representation of central air conditioner and

heat pump life. In addition, an average lifetime of 14 years was run as a scenario for the analyses

conducted for the Notice of Proposed Rulemaking showing that the resulting consumer

economics were very close to the results 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.

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EE-RM/STO-9S-440-1r ~ D S 

The basis of the 18.4 year equipment lifetime was a survey conducted on more than 2,100 

heat pumps in a seven state region of the U .S2. The survey determined not only the lifetime of a 

complete heat pump system, but the life of the 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 of system. Since the heat pump survey 

clearly indicates that the original compressor is replaced once in a system's life, the analysis was 

based on the inclusion of a 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 of the compressor, which is the most expensive component of a system. As indicated by the 

survey data, the compressor was assumed to be replaced in the 14th year of the system's life. 

Although a shorter equipment lifetime is possible, the Department has not been provided with 

more substantive data to drop its use of the above mentioned survey data. The Department 

believes that the survey data provides an accurate representation of central air conditioner and 

heat pump life. In addition, an average lifetime of 14 years was run as a scenario for the analyses 

conducted for the Notice of Proposed Rulemaking showing that the resulting consumer 

econoinics were very close to the results 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:\MikeIUS DOEICcntral Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd 
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Comments by 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 or heat pump will increase with product efficiency (Mr. Caronna of ICP,

Transcript, at p. 126-127; Compton of HEI, Transcript at p. 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 of needing extra personnel 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 manufactured homes and

certain replacement installations in single-family homes (MHI, No. 99 at p. 4; York, No. 90 at p.

5; Lennox, No. 91 at p. 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 is necessarily incorrect. Even if installation costs do generally rise as the size

and weight of equipment increases, manufacturers will have the incentive under new 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 and modulating

capacity technologies, converting to microchannel heat exchangers, increasing the size of the

unconstrained outdoor unit or indoor unit only, or changing the footprint or elevation of the unit.

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 the building load which will

typically result in smaller units being installed.

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EE-RM/STD-98-440 -"IF ~{)SComments by International 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 conditioner or heat pump will increase with product efficiency (Mr. Caronna ofICP, 

Transcript, at p. 126-127; Compton of HE I, Transcript at p. 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 of needing extra personnel 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 manufactured homes and 

certain replacement installations in single-fap1ily homes (MHI, No. 99 at p. 4; York, No. 90 at p. 

5; Lennox, No. 91 at p. 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 is necessarily incorrect. Even if installation costs do generally rise as the size 

and weight of equipment increases, manufacturers will have the incentive under new 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 and modulating 

capacity technologies, converting to micro channel heat exchangers, increasing the size of the 

unconstrained outdoor unit or indoor unit only, or changing the footprint or elevation of the unit. 

. 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 the building load which will 

typically result in smaller units being installed. 

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For those reasons, we are retaining our assumption that installation costs remain constant

as efficiency levels rise.

f. Markups

Comments pointed out that we had apparently assumed that markups decreased as

efficiency levels increased, and provided evidence to the contrary (ARI, No. 100 at p. 3; York,

No. 90 at p. 4; Carrier, No. 92 at p. 5; Trane, No. 93 at p. 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 the minimum standard level increases, we assumed that

the some of the markups on the baseline product do decrease. Comments did not address that

issue, and we believe our assumption is correct. Appendix D of the TSD provides 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 all representative of the effect of the NAECA

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F or those reasons, we are retaining our assumption that installation costs remain constant 

as efficiency levels rise. 

f. Markups 

Comments pointed out that we had apparently assumed that markups decreased as 

efficiency levels increased, and provided evidence to the contrary (ARI, No. 100 at p. 3; York, 

No. 90 at p. 4; Carrier, No. 92 at p. 5; Trane, No. 93 at p. 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 the minimum standard level increases, we assumed that 

the some of the markups on the baseline product do decrease. Comments did not address that 

issue, and we believe our assumption is correct. . Appendix D of the TSD provides 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 all representative of the effect of the NAECA 

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standard as we claim. (ACEEE; Transcript No. 73 at p. 213; No. 118 at p. 4). They point out

that the distribution of equipment higher than 10 SEER in 1993 was 18 percent, and that our

NAECA scenarios apply much smaller fractions of shipments than 18 percent.

As we mentioned in the TSD for the Notice of Proposed Rulemaking (8.3.5), the NAECA

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

explanation is warranted. While sales of equipment rated higher than 10 SEER was indeed 18

percent in 1993, it was 10 percent in 1992, 7 percent in 1991, 5 percent in 1990 and 3 percent in

1989. A trend of improving efficiency had already been in place 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 status quo that our

NAECA scenario attempts to reproduce. Thus, under our NAECA scenario, shipments above the

13 SEER level increase from 1 percent under the base case to 7 percent with a 13 SEER standard.

Expecting them to increase from 1 percent to 18 percent as ACEEE and NEEP seem to assert is

not at all representative of the NAECA experience and is more in line with the Shift scenario that

we developed.

b. Fuel Switching

Several comments noted the potential for fuel- 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

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standard as we claim. (ACEEE; Transcript No. 73 at p. 213; No. 118 at p. 4). They point out 

that the distribution of equipment higher than 10 SEER in 1993 was 18 percent, and that our 

NAECA scenarios apply much smaller fractions of shipments than 18 percent. 

As we mentioned in the TSD for the Notice of Proposed Rulemaking (8.3..5), the NAECA 

, . 

scenario represents the effect that NAECA had on equipment efficiency in the market. A.. !urther 

explanation is warranted. While sales of equipment rated higher than 10 SEER was indeed 18 

percent in 1993, it was 10 percent in 1992, 7 percent in 1991,5 percent in 1990 and 3 percent in 

1989. A trend of improving efficiency had already been in place 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 status quo that our 

NAECA scenario attempts to reproduce. Thus, under our NAECA scenario, shipments above the 

13 SEER level increase from 1 percent under the base case to 7 percent with a 13 SEER standard. 

Expecting them to increase from 1 percent to 18 percent as ACEEE and NEEP seem to assert is 

not at all representative of the NAECA experience and is more in line with the Shift scenario that 

we developed. 

b. Fuel Switching 

Several comments noted the potential for fuel- 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 

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comments stated that the incremental purchase price of a 13 SEER heat 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 at p. 2; Carrier, No. 92 at p. 4; EEI, 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, 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 at pp. 202-203).

From the perspective of saving the maximum amount of energy that is economically

justifiable, the biggest "fuel" switching concern is from heat pumps to a combination of central

air conditioners and electric resistance heating. This may occur in households that have only

electric service and where the incremental purchase price of heat pumps is too great. Such a

price increase might occur if the standard on heat pumps is significantly higher than the standard

for central air conditioners.

Based on data from the 1997 RECS, a little over 14 percent of households have either

baseboard or forced air electric resistance heating with room or central air conditioning compared

to almost 10 percent of households which have heat pumps. Because there are already such a

large percentage of households that utilize a combination of central 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.

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comments stated that .the incremental purchase price of a 13 SEER heat pump relative to a 12 

SEER air condjtioner 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 at p. 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, 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 at pp. 202-203). 

From the perspective of saving the maximum amount of energy that is economically 

. justifiable, the biggest "fuel" switching concern is from heat pumps to a combination of central 

air conditioners and electric resistance heating. This may occur in households that have only 

electric service and where the incremental purchase price of heat pumps is too great. Such a 

price increase might occur if the standard on heat pumps is significantly higher than the standard 

for central air conditioners. 

Based on data from the 1997 RECS, a little over 14 percent of households have either 

baseboard or forced air electric resistance heating with room or central air conditioning compared 

to almost 10 percent of households which·have heat pumps. Because there are already such a 

large percentage of households that utilize a combination of central 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. 

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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 of the energy for the same

amount of heating. Therefore, if a standard of 13 SEER and 7.7 HSPF is issued for heat pumps

while a 12 SEER standard is set for central air conditioners, a mere 4 percent of heat pump

households would need to switch to central air conditioners and electric resistance heating to

negate the energy savings achieved from increasing the heat pump standard from 12 SEER/7.4

HSPF to 13 SEER/7.7 HSPF.

If heat pump and air conditioner standards were set at different levels as we had

proposed, the price differential between the two would increase on the order of $200. Under

those conditions, we consider it likely that at least 4 percent of prospective 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 of switching 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 of fuel 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

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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), electric resistance heating uses over 225 percent of the energy for the same 

amount of heating. Therefore, if a standard of 13 SEER and 7.7 HSPF is issued for heat pumps 

while a 12 SEER standard is set for central air conditioners, a mere 4 percent of heat pump 

households would need to switch to central air conditioners and electric resistance heating to 

negate the energy savings achieved from increasing the heat pump standard from 12 SEERl7.4 

HSPF to 13 SEERl7.7 HSPF. 

Ifheat pump and air conditioner standards were set at different levels as we had 

proposed, the price differential between the,two would increase on the order of $200. Under 

those conditions, we consider it likely that at least 4 percent of prospective 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 of switching 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 of fuel 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 

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estimated too large of a 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

this market will forego the installation of more efficient air-conditioning equipment due to its

associated increased purchase price (ACEEE, Transcript, No. 73 at pp. 219-221). This is

effectively an argument that the price elasticity of air conditioners and heat pumps in the new

construction market should be much lower than we have assumed.

Historical saturation data, however, seems to confirm that the price 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 the replacement market, for example. As the price

of air conditioners and heat pumps has dropped over time relative to household income, the

saturation of air-conditioning and heat pump equipment has increased in the new housing market

to its current value of 80 percent. Because of the high 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 of a 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 early replacement market drop much more significantly (approximately 15

percent) as this market is far less saturated and the resulting purchase price elasticity is much

more elastic. For those reasons, we retained our assumed price elasticity in the analysis.

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estimated too ~arge of a 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 uniikely that 

this market will forego the installation of more efficient air-conditioning equipment due to its 

associated increased purchase price (ACEEE, Transcript, No. 73 at pp. 219-221). This is 

effectively an argument that the price elasticity of air conditioners and heat pumps in the new 

construction market should be much lower than we have assumed. 

Historical saturation data, however, seems to confirm that the price elasticity in the new 

v 

construction market is closer to what was derived for the Shipments Analysis, which is already 

much lower than the elasticity we assumed in the replacement market, for example. As the price 

of air conditioners and heat pumps has dropped over time relative to household income, the 

saturation of air-conditioning and heat pump equipment has increased in the new housing market 

to its current value of 80 percent. Because of the high 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 of a 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 comp~son purposes, 

shipments to the early replacement market drop much more significantly (approximately 15 

percent) as this market is far less saturated and the resulting purchase price elasticity is much 

more elastic. For those reasons, we retained our assumed price elasticity in the analysis. 

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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 of their 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 at p. 3).

Trane also pointed out several oversights and simplifications relating to our

characterization of manufacturers and our apparent failure to present cash flow results and other

important indicators of financial strength. (Trane, No. 93, pp. 6, 11-13, 23). We believe that

Chapter 8 of the TSD addresses most of Trane'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 is based on what they consider as more accurate and significantly greater

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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 of their 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 of manufacturers and our apparent failure to present cash flow results and other 

important indicators of financial strength. (Trane, No. 93, pp. 6, 11-13,23). We believe that 

Chapter 8 of the TSD addresses most of Trane'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 is based on what they consider as more accurate and significantly greater 

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peak impacts as estimated by the Appliance Standards Awareness Project (ASAP)3 (ACEEE, No.

104 at pp. 5-6. APPA warned that excessively high SEER standards could increase peak demand

(APPA, No. 113)

For purposes of comparing the estimated peak impacts from the Department's analysis

based on the use of NEMS-BRS and those from ASAP, it is helpful to consider the concept of a

conservation load factor (CLF). The CLF was first introduced by researchers at Lawrence

Berkeley National Laboratory to allow for the straightforward calculation of the peak demand

avoided from a given amount of energy savings.4 The CLF is defined as:

Annual Site Energy Savings (kWh) CLF Peak Load Savings (kW) 8760 hours

Thus, a conservation technology that saves a constant amount of power on a continuous

basis has a CLF of 1.0. Because air conditioning use occurs most often during times of peak

demand, the CLF is significantly lower. The lower the CLF, the greater the amount of peak load

savings achieved for a given amount of annual 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 of 0.22. In contrast, for the

3 Staying cool: How Energy-Efficient Air Conditioners Can Prevent Blackouts, Cut Pollution and Save

Money, Applance Standards Awareness Project, July 2000, Authors: J. Thone, T. Kubo, and S. Nadel.

4 Conservation Screening Curves to Compare Efficiency Investments to Power Plants: Applications to

Commercial Sector Conservation-Programs, Lawrence Berkeley National Laboratory, Berkeley, EA, August 1990,

published in the Proceedings of the 1990 ACEEE Summer Study on Energy Efficiency in Buildings, Authors: J.

Koomey, A. Rosenfeld, and A. Gadgil.

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EE-RM/STD-98-440-#~05 

peak impacts as estimated by the Appliance Standards Awareness Project (ASAP)3 (ACEEE, No. 

104 at pp. 5-6. APP A warned that excessively high SEER standards could increase peak demand 

(APPA, No. 113) 

For purposes of comparing the estimated peak impacts from the Department's analysis 

based on the use ofNEMS-BRS and those from ASAP, it is helpful to consider the concept of a 

conservation load factor (CLF). The CLF was first introduced by researchers at Lawrence 

Berkeley National Laboratory to allow for the straightforward calculation of the peak demand 

avoided from a given amount of energy savings.4 The CLF is defined as: 

Annual Site Energy Savings (kWh) eLF = . 

. Peak Load Savings(kW)· 8760 hours 

Thus, a conservation technology that saves a constant amount of power on a continuous 

basis has a CLF of 1.0. Because air conditioning use occurs most often during times of peak 

demand, the eLF is significantly lower. The lower the CLF, the greater the amount of peak load 

savings achieved for a given amount of annual 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 of 0.22. In contrast, for the 

3 Staying cool: How Energy-Effi.cient Air Conditioners Can Prevent Blackouts. Cut Pollution and Save 

Money, Apphance Standards Awareness Project, July 2000, Authors: J. Thone, T. Kubo, and S. Nadel. 

4 Conservation ScreeninILCurves to Compare Efficiency Investments to Power Plants: Al2P.lications to 

Commercial Sector Conservation-Programs, Lawrence B'erkel~y National Laboratory, Berkeley, CA, August 1990, 

published in the Proceedings of the 1990 ACEEE Summer Study on Energy Efficiency in Buildings, Authors: J. 

Koorney, A. Rosenfeld, and A. Gadgil. 

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same 13 SEER standard, ASAP forecasts energy and peak 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 of 0.22 is reasonable.

With regard to ASAP's peak demand estimates, regional calculations are based 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 25 percent for the Pacific division, no basis for these

adjustments are provided. Because of ASAP's reliance on peak demand data from only one

region of the country, we do not place much confidence in 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 by ASAP. In

Southern California, a metered 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 on ten air-conditioned homes

5 Personal communication with Steve Nadel, ACEEE, October, 2000.

6Residential Appliance End-Use Survey: Collection of Residential Appliance Time-of-Use Energy Load

Profiles; 1991 Results, prepared by Quantum Consulting Inc., Berkeley, CA for Southern California Edison Co.,

San Dimas, CA, November, 1992.

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same 13 SEER standard, ASAP forecasts energy and peak 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 of 0.22 is reasonable. 

With regard to ASAP's peak demand estimates, regional calculations are based on peak 

demand data from a single 1988 study by the Narragansett Electric Co. (an electric utility in the 

NortheastV Although ASAP increased the Northeast peak demand data by 25 percent for the 

two Southern divisions and decreased it by 25 percent for the Pacific division, no basis for these' 

. adjustments are provided. Because of ASAP's reliance on peak demand data from only one 

region of the country, we do not place much confidence in 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 by ASAP. In 

Southern California, a metered 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 on ten air-conditioned homes 

S Personal communication with Steve Nadel, ACEEE, October. 2000, 

. 6 Residential Appliance End-Use Sllrv~~y; Collection of Residential Appliance Time-of: Use Energy Load 

Profiles; 1991 Results, prepared by Quantum Consulting Inc" Berkeley, CA fcir Southern Cahfornia Edison Co., . 

San Dimas, CA, November, 1992. 

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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 of 0.22 is reasonable 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 of peak demand impacts due

to increased air conditioner efficiency. But until such extensive research is conducted, the

Department sees no reason to discontinue its use of NEMS-BRS to estimate peak demand

savings.

6. Projection of Trends

Several comments suggested or asserted that we should project historical trends that they

believe exist. These include price reductions or productivity 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 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 of these suggestions. With regard to the issue of

7 Monitored Enerym Use Patterns in Low-Income Housin (FSEC-PF-300), Florida Solar Energy Center, Cocoa, FL, 1996, Authors:T). S. Parker, M. D. Mazzara, and J. R.Sherwin.

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EE-RM/STD-.S..wO - ~ (), D 6' 

indicated that the eLF 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 eLF estimate of 0.22 is reasonable since it falls between the eLF 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 of peak 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 of Trends 

Several comments suggested or asserted that we should project historical trends that they 

believe exist. These include price reductions or productivity 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 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. 152-1.53). 

Other comments responded to some 'of these suggestions. With regard to the issue of 

7 Monitored EnerJIT Use Patterns in Low-Income Housin~,JFSEr::-PF-300), Florida Solar Energy Center, Cocoa, FL, 1996, Authors:D. S. Parker, M. D. Mazzara, and J. R. -Sherwm. 

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price reductions 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 of efficiency 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 of the electric utility industry, others state that the future path

of deregulation is so uncertain that it is 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

most recent set of data 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 of electricity 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 of this rulemaking.

Since this is the case for all the supposed trends listed above, we have not changed any of our

projections.

C. Other Comments

1. HCFC Phaseout

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EE.RM/STD.8~O -F ~ 0.6' 

price reductions or productivity 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 of efficiency trends, EEl claims that rather than post-standard efficiency 

increases, the Department neglected to account for pre-standard efficiency increases (EEl, 

Transcript, No. 73 at pp. 206-208). And counter to claims that electricity prices will increase in 

the future due to the deregulation of the electric utility industry, others state that the future path 

of deregulation is so uncertain that it is unknown as to whether prices will decline or increase 

(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 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 

most recent set of data 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 of electricity 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 of this rulemaking. 

Since this is the case for all the supposed trends listed above, we have not changed any of our 

projections. 

C. Other Comments 

1. HCFC Phaseout 

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Comments noted that as efficiency increases, refrigerant charge may increase also. This

could cause the United States to reach its cap on HCFC-22 use earlier, resulting in higher prices

for HCFC-22 than we have considered. (Carrier, No. 92 at 4). We would point out that

occurrence would likely accelerate the transition to HCFC-free refrigerants. There are also other

options available for manufacturers to improve equipment efficiency without increasing

equipment size or charge. Both of these factors will have the effect of suppressing increases in

refrigerant prices over the long term.

2. Ozone Reduction Catalyst Requirement

ARI and its members remind us to consider the potential impact on the industry of Texas'

proposed requirement to mandate the application of ozone reduction technology in its most

severe non-attainment areas. (ARI, No. 100 at p. 13; Carrier, No. 92 at p. 4).

We understand that Texas has since withdrawn its proposal. However, the TSD does

include a preliminary estimate of the burden of this requirement on the industry and, to the extent

that other states may pursue the same course of action, included that in our consideration of

cumulative burden. We consider that widespread requirements for this technology will not be

likely, due to its apparently high cost, questionable efficacy, and possible reduction in energy

efficiency.

D. Additional Standard Requirements

1. EER Standard

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EE.RM/STD.98-440~O SComments noted that as efficiency increases, refrigerant charge may increase also. This 

could cause the United States to reach its cap on HCFC-22 use earlier, resulting in higher prices 

for HCFC-22 than we have considered. (Carrier, No. 92 at 4). We would point out that 

occurrence would likely accelerate the transition to HCFC-free refrigerants. There are also other 

options available for manufacturers to improve equipment efficiency without increasing 

equipment size or charge. Both of these factors will have the effect of suppressing increases. in 

refrigerant prices over the long term. 

2. Ozone Reduction Catalyst Requirement 

ARl and its members remind us to consider the potential impact on the industry of Texas' 

proposed requirement to mandate the application of ozone reduction technology in its most 

severe non-attainment areas. (ARl, No; 100 at p. l3; Carrier, No. 92 at p. 4). 

We understand that Texas has since withdrawn its proposal. However, the TSD does 

include a preliminary estimate of the burden of this requirement on the industry and, to the extent 

that other states may pursue the same course of action, included that in our consideration of 

cumulative burden. We consider that widespread requirements for this technology will not be 

likely, due to its apparently high cost, questionable efficacy, and possible reduction in energy 

efficiency. 

D. Additional Standard Requirements 

1. EER Standard 

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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 of available EER ratings 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 for new power plants and,

in the view of many stakeholders, improve power system reliability. We asked whether an EER

standard would impose a significant burden on manufacturers, would significantly affect the cost

of equipment considered in our analysis, would negatively impact the sale of modulating

equipment, or would significantly improve power system reliability.

Several comments, including those of environmental 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 of new power plant

capacity and a reduction in the occurrence of blackouts. NRDC believes that the Act requires us

to adopt an EER-based standard. Underlying these comments is a belief that 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 at p. 1; NPPD, No. 109 at p. 1; Oregon Office of Energy, 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-98-440 COMMENT 205

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 of available EER ratings 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 for new power plants and, 

in the view of many stakeholders, improve power system reliability. We asked whether an EER 

standard would impose a significant burden on manufacturers, would significantly affect the cost 

of equipment considered in our analysis, would negatively i~pact the sale of modulating 

equipment, or would significantly improve power system reliability. 

Several comments, inclu~ing those of environmental 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 of new power plant 

capacity and a reduction in the occurrence of blackouts. NRDC believes that the Act requires us 

to adopt an EER-based standard. Underlying these comments is a belief that 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 at p. 1; NPPD, No. 109 at p. 1; Oregon Office of Energy, No. 84 at 2; NRDC, 

No. 88 at p. 3; OPPD, No. III at p. 2; Carrier, No. 92 at p. 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 the grounds that including an EER

standard would impede the application of modulating components; that we are not permitted to

adopt a standard other than SEER and have not sufficiently analyzed the validity of an 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 at pp. 1-4; ARI, Transcript, No.

73 at p. 320; EEI, Transcript, No. 73 at p. 327; Goodman, Transcript No. 73 at p. 302; ARI, No.

100 at p. 16; Southern, Transcript, No. 73 at p. 243; and Dominion, Transcript, No. 73 at p.

264).

It is true that under the efficiency level approach, we assume that all equipment at the

same SEER level costs the same to produce regardless of the combination of design options

chosen to achieve that SEER level. These options include those that raise EER, including

compressor and heat exchanger upgrades, as well as those that do not raise EER, such as

thermostatic expansion valves. For any 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, a manufacturer who

was required to raise the EER of its equipment from the 10th percentile 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 of SEER and

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

EE-RM-STD-98-440 COMMENT 205

EE-RM/STD-9a.440 -#c:f tJ~ 

Other comments took an opposing position on the .grounds that including an EER 

standard would impede the application of modulating components; that we are not permitted to 

adopt a standard other than SEER and have not sufficiently analyzed the validity of an 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; EEl, No. 80, pp. 3, 9; 

Dominion, No. 68 at p. 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 at p. 327; Goodman, Transcript No. 73 at p. 302; ARl, No. 

100 at p. 16; Southern, Transcript, No. 73 at p. 243; and Dominion, Transcript, No. 73 at p. 

264). 

It is true that under the efficiency level approach, we assume that all equipment at the 

same SEER level costs the same to produce regardless of the combination of design options 

chosen to achieve that SEER level. These options include those that raise EER, including 

compressor and heat exchanger upgrades, as well as those that do not raise EER, such as 

. thermostatic expansion valves. For any 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, a manufacturer who 

was required to raise the EER of its equipment from the 10th percentile to the 50th perc~ntile 

(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 of SEER and 

57C:lMike\US DOE\Central Air\SEER13 FinaJ Rule draft 12 master 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 if we 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 is whether a new EER requirement is warranted even if we were to conclude

that the cost of compliance 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 of non-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 of baseline equipment. This suggests they 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

of power 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 COMMENT 205

EE-RM/STD-98-440-#~ asHSPF only, we would have to depart from the efficiency level approach in order to quantify those 

costs. _ 

Even if we 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 is whether a new EER requirement is warranted even if we were to conclude 

that the cost of compliance 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 of non-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 of baseline equipment. This suggests they 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 

of power electronics and control technologies come down, this possibility becomes more likely. 

58c:\Mike\uS DOE\Central Air\SEERI3 Final Rule draft 12 master 12.14-00.wpd 
EE-RM/STD-98-440 - O S

However, even if variable 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 of a group of modulating air conditioners with lower EERs will likely be lower than that

of a similar group of non-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 of appliance efficiency standards is to save energy. An EER standard could be

counterproductive by discouraging variable speed and modulation, which can save substantial

amounts of energy 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 of an EER standard, for

the foregoing reasons, we do not believe that the 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 this rule.

5 9C:lMike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

EE-RM-STD-98-440 COMMENT 205

EE-RM/STD-98-440 ~~ SHowever, even if variable 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 of a group of modulating air conditioners with lower EERs will likely be lower than that 

of a similar group of non-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 of appliance efficiency standards is to save energy. An EER standard could be 

counterproductive by discouraging variable speed and modulation, which can save substantial 

amounts of energy 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 of an EER standard, for 

the foregoing reasons, we do not believe that the 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 this rule. 

59C:\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

a requirement may be capable of saving a great deal of energy. 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 Proctor that describes the results of a field study covering 4,000 units in

California. The study concluded that 62 percent of equipment is mischarged by more than 5

percent, and that TXVs, which perform better than fixed orifices in undercharged conditions,

could save 11 percent of the energy used by that equipment. (Proctor No. 105; OOE, No. 84 at p.

2; NRDC, No. 88; CEC, No. 98 at p. 1; ACEEE, No. 101 at 8; PG&E No. 104 at 1; ASAP,

Transcript, No. 73 at p. 4).

Other comments expressed some resistance to a TXV 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 at p. 19; York, No. 90, p. 4-5; Lennox, No. 91 p. 3;

EEI No. 80 at 3; Carrier, No. 92 at p. 10).

In response to our concern that mandating TXVs would stifle the development of other,

perhaps preferable, technologies, Mr. Proctor and ACEEE suggested performance tests that could

60C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

EE-RM-STD-98-440 COMMENT 205

EE-RM/STD-98-440· =;'t=c:?tJ.s2. 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 

a requirement may be capable of saving a great deal of energy. 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 Proctor that describes the results of a field study covering 4,000 units in 

. California. The study concluded that 62 percent of equipment is mischarged by more than 5 

percent, and that TXV s, which perform better than fixed orifices in undercharged conditions, 

could save 11 percent of the energy used by that equipment. (proctor No. 105; ODE, No. 84 at p. 

2; NRDC, No. 88; CEC, No. 98 at p. 1; ACEEE, No. 101 at 8; PG&E No. 104 at 1; ASAP, 

Transcript, No. 73 at p. 4). 

Other comments expressed some resistance to a TXV 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 at p. 19; York, No. 90, p. 4-5; Lennox, No. 91 p. 3; 

EEl No. 80 at 3; Carrier, No. 92 at p. 10). 

In response to our concern that mandating TXV s would stifle the development of other, 

perhaps preferable, technologies, Mr. Proctor and ACEEE suggested performance tests that could 

6Oc:\Mike\US DOE\Central Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd 
EE-RM/STD-98-440- Jan 1'

be applied in lieu of a 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; CEC No. 199 at 1; Oregon No. 84 at 8).

Some of the commenters preferred that we initially specify TXVs but then phase out that

requirement in favor of a 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 of EPCA. As such, the SEER test 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 of their superior cyclic performance. We are not eager to

circumvent the test procedure, particularly when the key data either are not available or have 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 to encourage 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 the use of TXVs will be undertaken in a separate

process. In addition to pursuing modifications to the test procedure, we encourage parties

interested in encouraging the broader application of TXVs to pursue other avenues. These

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

EE-RM-STD-98-440 COMMENT 205

EE-RM/STD-98-440 -1t-cf5 tJ ~ 

be applied in lieu of a 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; CEC No. 199 at 1; Oregon No. 84 at 8). 

Some of the commenters preferred that we initially specify TXVs but then phase out that 

requirement in favor of a 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 of EPCA. As such, the SEER test 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, TXV s already receive credit 

in the test procedure because of their superior cyclic performance. We are not eager to 

circumvent the test procedure, particularly when the key data either are not available or have 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 to encourage 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 equipm~nt performance under improper charge or 

airflow. 

In sum, are not adopting a TXV requirement in this rulemaking. Any alterations iIi the 

SEER test procedure to further encourage the use ofTXVs will be undertaken in a separate 

process. In addition to pursuing modifications to the test procedure, we encourage parties 

interested in encouraging the broader application of TXV s to pursue other avenues. These 

6 IC;IMikeIUS DOElCenlTal Air\SEER 13 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 of a device like a TXV. States also have the opportunity to

apply to us for an exemption from preemption that would allow them to implement their own

requirements based on their own unique circumstances.

3. HSPF Levels

Some comments urged us to reconsider our proposed HSPF levels, particularly to reflect

differences among the HSPF-SEER relationships across capacity ratings. Trane commented that

HSPF-SEER factors for heat pumps are lower with 410A refrigerant than with HCFC-22, and

that the current proposal for HSPF is too high for 410A by as much as 3 to 5 percent. (ARI, No.

100 at p. 11; Carrier, No. 92 at p. 7; Trane, No. 93 at p. 8). Others urged us to adopt HSPF levels

at the median for each SEER level we considered. (Oregon Office of Energy, No. 84 at p. 11;

ACEEE, No. 104 at p. 12).

As we explained in the proposed rule, we established the HSPF levels corresponding to

SEER levels in an attempt to maintain the existing offset between the minimum HSPF and the

minimum SEER. Heating energy is a large fraction of total 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 of heat pump market share to

electric resistance heat, and could encourage fuel switching.

62C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

EE-RM-STD-98-440 COMMENT 205

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 of a device like a TXV. States also have the opportunity to 

apply to us for an exemption from preemption that would allow them to implement their own 

requirements based on their own unique circumstances. 

3. HSPF Levels 

Some comments urged us to reconsider our proposed HSPF levels, particularly to reflect 

differences among the HSPF-SEER relationships across capacity ratings. Trane commented that 

HSPF-SEER factors for heat pumps are lower with 4 lOA refrigerant than with HCFC-22, and 

that the current proposal for HSPF is too high for 4 lOA by as much as 3 to 5 percent. (ARl, No. 

100 at p. 11; Carrier, No. 92 at p. 7; Trane, No. 93 at p. 8). Others urged us to adopt HSPF levels 

at the median for each SEER level we considered. (Oregon Office of Energy,-No. 84 at p. 11; 

ACEEE, No. 104 at p. 12). 

As we explained in the proposed rule, we established the HSPF levels corresponding to 

SEER levels in an attempt to maintain the existing offset between the minimum HSPF and the 

minimum SEER. Heating energy is a large fraction of total 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 of heat pump market share to 

electric resistance heat, and could encourage fuel switching. 

62c:\Mike\US DOE\Central Air\SEERI3 Final Rule draft 12 master 12.14-00.wpd 
EE-RM/STD-98-440 -. : 5

For those reasons, we are retaining our proposed minimum HSPF levels in the standards

adopted today.

V. Analytical Results and Conclusions

A. Trial Standard 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 of product. Trial

standard level 5 is the max tech level for each class of product.

Table V. 1: Trial Standards Levels for Central Air Conditioners and Heat Pumps (SEER)

Trial Standard 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

For each trial standard level examined, several different scenarios were analyzed

consisting of variations on: (1) electricity price and housing projections; (2) equipment

efficiency distributions; (3) manufacturer cost estimates; and (4) societal discount rate.

Electricity price and housing projections were based on three different AEO 2000 forecasts: (1)

6 3C:\Mike\US DOE\Central AirSEER13 Final Rule draft 12 master 12-14-00.wpd

EE-RM-STD-98-440 COMMENT 205

EE-RM/STD-98-440 4~ ZJS 

For those reasons, we are retaining our proposed miniIill.im HSPF levels in the standards 

adopted today . 

. V. Analytical Results and Conclusions 

A. Trial Standard 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 of product. Trial 

standard level 5 is the max tech level for each class of product. 

Table V.1: Trial Standards Levels for Central Air Conditioners and Heat Pumps (SEER) 

Trial Standard Split Air Packaged Air Split Heat Packaged 

Level Conditioners Conditioners Pumps Heat Pumps 

I J 1 11 II 11 

2 12 12 12 12 

3 12 12 13 13 

4 J3 13 13 13 

5 18 18 18 18 

For each trial standard level examined, several different scenarios were analyzed 

consisting of variations on: (1) electricity price and housing projections; (2) equipment 

efficiency distributions; (3) manufacturer cost estimates; and (4) societal discount rate. 

Electricity price and housing projections were based on three different AEO 2000 forecasts: (1) 

63C:\Mike\US OOE\Central Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd 
EE-RM/STD-98-440 --9C~ °3

Reference Case, (2) High Growth Case, and (3) Low Growth Case. We analyzed three efficiency

scenarios, each of which assumed a different efficiency distribution after new standards would

take effect: (1) NAECA scenario, (2) Roll-up scenario, and (3) Shift scenario. Under the

standard levels we are adopting, we believe that the Roll-up scenario most closely represents the

most likely impact of the new standards, as explained in Chapter 8 of the TSD. We analyzed two

manufacturer cost scenarios: (1) based on reverse engineering data, and (2) based on ARIprovided mean cost data. For the reasons expressed in Parts III and IV of this 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 of 7 percent for calculating net

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

accordance with the Office of Management and Budget's (OMB) Guidelines to Standardize

Measures of Costs and Benefits and the Format ofAccounting Statements.

Our decision on today's final rule was arrived at by placing more emphasis on some

scenarios rather than others. Our estimates of electricity 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 of the 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 we presented 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

64C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

EE-RM-STD-98-440 COMMENT 205

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 of which assunied a. different efficiency distribution after new standards would 

take effect: (l) 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 of the new standards, as explained in Chapter 8 of the ~SD. We analyzed two 

manufacturer cost scenarios: (1) based on reverse engineering data, and (2) based on ARIprovided mean cost data. For the reasons expressed in Parts III and IV of this 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 of 7 percent for calculating net 

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

accordance with the Office of Management and Budget's (OMB) Guidelines to Standardize 

Measures of Costs and Benefits and the Format of Accounting Statements. 

Our decision on today's final rule was arrived at by placing more emphasis on some 

scenarios rather than others. Our estimates of electricity 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 of the Roll-tip 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 we presented 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 

64c:lMike\US DOE\Central Air\SEER\3 Final Rule draft 12 master 12-14-00.wpd 
EE-RM/STD-98-440 -4-*> 05

the 18.4-year life with a compressor replacement in the 14th year addresses the concerns of those

who believe that actual equipment life is closer to 14 years 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. Significance of Energy Savings

To estimate the energy savings through 2030 due to revised standards, we compared the

energy consumption of central air conditioners and heat pumps under the base case to energy

consumption of central air conditioners and heat pumps under the revised standard.

Table V.2 shows the range of cumulative energy savings based on the 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 of National Energy Savings with AEO Price Forecast

Range of National 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 3.4 to 3.6 3.3 to 3.5 3.8 to4.1

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-STD-98-440 COMMENT 205

EE-RM/STO-98-440-trcq osthe 18.4-year life with a compressor replacement in the 14th year addresses the concerns of those 

who believe that actual equipment life is closer to 14 years and achieves substantially the same 

analytical results. Therefore, all analyses below assume an 18.4-year average equipment lifetime 

with" a compressor repiacement in the 14th ye~. 

B. Significance of Energy Savings 

To estimate the energy savings through 2030 due to revised standards, we compared the 

energy consumption of central air conditioners and heat pumps under the base case to energy 

consumption of central air conditioners and heat pumps under the revised standard. 

Table V.2 shows the range of cumulative energy savings based on the 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 of National Energy Savings with AEO Price Forecast . 

Range of National 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 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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C. Payback Period

As discussed above, the Act requires the Department to examine payback periods to

determine if the three-year rebuttable presumption of economic justification 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 of use in the test procedure are on the order of 50 percent greater than the weightedaverage energy consumption data used in the life-cycle-cost (LCC) analysis. The LCC data are

based on the 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 shorter than median payback periods calculated from the LCC analysis.

In Table 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 of heat pumps are presumed to be economically justified up to a 12 SEER

efficiency level, using the reverse engineering cost estimates.

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EE.RM/STD.9~~40 -tr cR CJ ~ 

C. Payback Period 

As discussed above, the Act requires the Department to examine payback periods to 

determine if the three-year rebuttable presumption of economic justification 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 of use in the test procedure are on the order of 50 percent greater than the weightedaverage energy consumption data used in the life-cycle-cost (LCC) analysis. The LCC data are . . 

based on the 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 shorter than median payback periods calculated from the LCC analysis. 

In Table 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 of heat pumps are presumed to be economicaIIy justified up to a 12 SEER 

efficiency level, using the reverse engineering cost estimates. 

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Table V.3: Summary of Rebuttable 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. Economic Justification

1. Economic Impact on Manufacturers and Consumers

Estimated economic impact of standards 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 on manufacturers are presented in terms of

industry net present value (INPV) as well as change in INPV. Data are presented for the base

case (no change in standards) and for trial standard levels 1 through 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 of Rebuttable 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 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. Economic Justification 

1. Economic Impact on Manufacturers and Consumers 

Estimated economic impact of standards 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 on manufacturers are presented in terms of 

industry net present value (INPV) as well as change in INPV. Data are presented for the base 

case (no change in standards) and for trial standard levels I through 4, in Tables VA 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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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

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Table V.4: Changes in Industry Net Present Value - Reverse Engineering Relative Cost, 

NAECA Efficiency 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 Industry NetPresent Value - 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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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 Industry Net

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%

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""~"" · ....' .... - - 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 

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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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%

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." 

Table V.8: Changes in Industry Net Present Value - 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 Net Present Value -' ARI Mean Manufacturing Cost" Shift 

Efficiency Mix 

Industry Net Change in 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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Table V. 10 provides the change in INPV relative to the base case for trial standard levels

1 through 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%

For the 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 the NAECA and Roll-up shipment efficiency scenarios

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EE.RM/STD.9~O"" aas 11_, 

Table V.IO provides the change in INPV relative to the base case for trial standard levels1 through 4. Data are presented for two industry segments (lower cost manufacturers and higher 

cost manufacturers), and for the three shipment efficiency scenarios. 

Table V.I 0: 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% 

For the group mosfnegatively impacted,Le., the higher cost group, Table V.ll presents 

the Return on Invested 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 

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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 of the LCC model is the mean LCC savings for each product class as well as a

probability distribution or likelihood of LCC reduction or increase. The LCC analysis for today's

final rule employs a concept described in the proposed rule with regard to the percentage of

consumers (both residential and commercial) that are impacted to a substantial degree by an

increase in the minimum efficiency standard.

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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.{Le., 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 of the LCC 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 the propqsed rule with regard to the percentage of 

consumers (both residential and commercial) that are impacted to a substantial degree by an 

increase in the minimum efficiency standard. 

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Table V.12 summarizes the LCCs for baseline split systems and single package central

air conditioners and heat pumps and also shows a 2 percent 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% of Baseline 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 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 LCC savings or an LCC cost increase. In addition, the tables

show the subset of consumers (both residential and commercial) at each efficiency level who are

impacted in one of three ways: consumers who achieve net LCC savings in excess of 2 percent of

the baseline LCC, consumers whose change in LCC is within ±2 percent of the baseline LCC,

and consumers who achieve a net LCC increase exceeding 2 percent of the baseline LCC.

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Table V.12 summarizes the LCCs for baseline split systems and single package central 

air conditioners and heat pumps and also shows a 2 percent 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% of Baseline LCC 

Split Air Conditioners $5,170 $]03 

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.l4depict the LCC results for split system and single package central 

. air conditioners and heat pumps. 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 Lee cost increase. In addition, the tables 

show the subset of consumers (both residential and commercial) at each efficiency level who are 

impacted in one of three ways: consumers who achieve net LCC savings in excess of 2 percent of 

the baseline LCC, consumers whose change in LCC is within ±2 percent of the baseline LCC, 

and consumers who achieve a net LCC increase exceeding 2 percent of the baseline LCC. 

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Table V. 13: Summary of LCC Results based on Reverse Engineering Manufacturing Costs

Average LCC Percent of Consumers with

Efficiency

Product Class 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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Table V.l3: Summary ofLCC Results based on Reverse Engineering Manufacturing Costs 

AverageLCC Percent of Consumers 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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Table V.14: Summary of LCC 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 of the

trial standard levels on those consumers who are below the poverty line (e.g., for a family of four,

this constitutes a household income of less than $16,036). To perform this calculation, we used

the subset of RECS 97 data for households that are considered low-income. 8 Table V.15 and

s Approximately 7 percent of the RECS 97 households with central air conditioners and 9 percent of the households with heat

pumps met this criteria.

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Table V.14: Summary orLCC Results based on ARt Mean Manufacturing Costs 

Average LCC Percent of Consumers 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 of the 

trial standard levels on those consumers who are below the poverty line (e.g., for a family of four, 

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.lS and 

8 Approximately 7 percent of the RECS 97 households with central air conditioners and 9 percent of the households with heal 

pumps met this criteria. 

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V. 16 summarize the impacts on low-income consumers who utilize central air conditioners and

heat pumps.

Table V.15: Summary of LCC 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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V.16 summarize the impacts on low-income consumers who utilize central air conditioners and 

heat pumps. 

Table V.l5: Summary ofLCe Results on Low-Income Consumers Based on Reverse 

Engineering Manufacturing Costs 

AverageLCC 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 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% 

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Table V.16: Summary of LCC Results on Low-Income Consumers Based on ARI Mean

Manufacturing Costs

Average LCC Percent of Consumers 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 - - -

Pac1 1Single $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 of consumers 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 of central air conditioner and heat pump consumers. Table

V. 17 directly compares the LCC impacts of the final rule on both the low-income subgroup and

all consumers.

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Table V.l6: Summary ofLCC Results on Low-Income Consumers Based on ARI Mean 

Manufacturing Costs 

Average LCC Percent 01 Consumers 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% 

Heat Pump 13 $9,145 $4 25% 27% 48% 

18 $9619 ($470) 18% 8% 74% 

In comparing the LCC results on the subgroup of consumers who are low-income (Tables 

V.l5 and V.16) versus all central air conditioner and heat pump 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 of central air co~ditioner and heat pump consumers. Table 

V.17 directly compares the LCC impacts of the final rule on both the low-income subgroup and 

all consumers. 

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Table V.17: Comparison of LCC Impacts of the Final Rule on All Consumers vs.

Low-Income Consumers

Reverse Engineering Costs ARI Mean Costs

Percent of Consumers Percent of Consumers

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 and Net National Employment

The net present value analysis is a measure of the cumulative benefit or cost to the Nation

that would result from more stringent standards. As with the determination of national 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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Table V.17: Comparison ofLCC Impacts of the Finai Rule on All Consumers vs. 

Low-Income Consumers 

Reverse Engineering Costs ARI Mean Costs 

Percent of Consumers Percent of Consumers 

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 Net National Employment 

The net present value analysis is a measure of the cumulative benefit or cost to the Nation 

that would result from more stringent standards. As With the determination of national energy 

savings, four different scenarios were analyzed for each trial standard level consisting of 

variations on: (l) electricity price and housing projections; (2) shipment efficiency distributions; 

(3) manufacturer cost estifl1.ates; 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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18.4 years, coupled with the inclusion of compressor replacement costs and an assumed societal

discount rate of 7 percent. The range of NPVs are reported in Table V.18.

Table V.18: Range of Net 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 2 to 3 0 to -1 -1 0 to 1 -3 to -4

3 to 2 2 to3 -1 to -2 -1 to -2 0 to -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 of the NPVs in Table V.18 to the various input

assumptions, Tables V.19 through V.22 report the range of NPV 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 of no

new efficiency standards. The results in Table V.19 and V.20 are the AEO 2000 Reference Case

forecast of electricity 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, the NPV (the difference in total

costs between the base case and trial standard level), as well as the NPV as a percentage of the

"Base Case Total Costs," are calculated for each trial standard level.

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18.4 years, coupled with the inclusion of compressor replacement costs and an assumed societal 

discount rate of 7 percent. The range ofNPVs are reported in Table V.18. 

Table V.18: Range of Net Present Value with Electricity Price and Housing Projections 

Trial Standard 

Net Present Value For Units Sold from 2006 to 2030 (billion 98$) 

Reverse Engineering Costs ARI Mean Costs 

Level 

NAECA Roll-up Shift NAECA Roll-up Shift 

I 1 to 2 2 1 to 2 0 1 o to-l 

2 2 2 to 3 o to-l -1 o to 1 -3 to-4 

3 1 to 2 2 to 3 -1 to-2 -1 to -2 o to-l -5 

4 o to 1 1 to 2 -3 to-4 -5 to-6 -4 -10 

5 -10 to-11 -10 to-11 -10to-l1 -22 -22 -22 

In order to show the sensitivity of the 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 of no 

new efficiency standards. The results in Table V.19 and V.20 are the AEO 2000 Reference Case 

forecast of electricity 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, the NPV (the difference in total 

costs between the base case and trial standard level), as well as the NPV as a percentage of the 

"Base Case Total Costs," are calculated for each trial standard level. 

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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 as percent Costs as percent Costs as percent billion

billion billion 98$ of Base billion billion 98 oBase billion billion 98S 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 as percent Costs as percent Costs as percent billion

billion billion 98S of Base billion billion 98 of Base billion billion 98 of Base 98$

98S Case Total 98S Case Total 98S Case Total

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%

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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 as percent Costs as percent Costs as percent 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 as percent billion 

Costs as percent Costs as percent 

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% 

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Table V.21 show how 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: Net Present Values Results based on 3 percent Discount Rate

Reverse Engineering Costs ARI Mean Costs

Trial Standard Level Trial Standard Level

Base Case as percent Base Case as percent

Net Present Net Present

TSL Total Costs Total Cost of Base Total Costs Total Cost of Base

Value Value

billion 98 billion billion 98 9 $ 8$ 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 $ 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 of the 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

of economic 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 of the new

standards on national labor demand using an input/output model of the U.S. economy. The

9 A societal discount rate of 3 percent value was investigated as a scenario in accordance with the Office of Management and

Budget's (OMB) Guidelines to Standardize Measures of Costs and Benefits and the Format ofAccounting Statements.

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Table V.21 show how 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: Net Present Values Results based on 3 percent Discount Rate 

Reverse Engineering Costs ARI Mean Costs 

Trial Standard Level Trial Standard Level 

Base Case as percent Base Case as percent 

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 proposed rule also estimated the national employment impacts due to each of the 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 

of economic 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 of the new 

standards on national labor demand using an input/output model of the U.S. economy. The 

9 A societal discount rate of 3 percent value was investigated as a scenario in accordance with the Office of Management and 

Budget's (OMB) Guidelines to Standardize Measures of Costs and Benefits and the Format of Accounting Statements. 

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model characterizes the interconnections among 35 economic sectors using data from the Bureau

of Labor 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 of the economy,'° producing a loss 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 its loss

of revenues. As annual consumer energy savings begin to exceed annual new expenditures on air

conditioners, and eventually the new standards will produce a net 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 to be very small

relative to total national employment. For the following reasons any modest changes in

employment are in doubt:

* Unemployment is now at the lowest rate in 30 years. If unemployment 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 of the jobs. 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 lor the Regional liplt-OuIpu

WModeling System (RIMS ll)

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model characterizes the interconnections among 35 economic sectors using data from the Bureau 

of Labor 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 of the economy,IO producing a loss 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 its loss 

of revenues. As annual consumer energy savings begin to exceed annual new expenditures on ,air 

conditioners, and eventually the new standards will produce a net gain in national employment. 

The increases or decreases 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. For the following reasons any modest changes in 

. . 

employment are in doubt: 

• Unemployment is now at the lowest rate in 30 years. If unemployment 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 of the jobs. 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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The net benefits or losses from potential employment changes are a result of the

estimated net present value of benefits 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 of net present value.

Taking into consideration these legitimate concerns regarding the interpretation and use

of the employment impacts analysis, the Department concludes only that the proposed central air

conditioner and heat pump standards are likely to result in no appreciable job losses to the nation.

4. Impact on Utility or Performance of Products

As detailed in Section V of the proposed rule, in establishing classes of products we

believe the adopted standards will not result in any degradation of utility or performance in the

covered products.

5. Impact of Any Lessening of Competition

The Act directs the Department to consider any lessening of competition that is likely to

result from standards. It further directs the Attorney General to determine the impact, if any, of

any lessening of competition likely to result from a proposed standard and transmit such

determination to the Secretary, not later than 60 days after the publication of a proposed rule,

together with an analysis of the nature and extent of such 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 or losses from potential employment changes are a result of the 

estimated net present value of benefits 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 of net present value. 

Taking into consideration these legitimate concerns regarding the interpretation and use 

of the employment impacts analysis, the Department concludes only that the proposed central air 

conditioner and heat pump standards are likely to result in no appreciable job losses to the nation. 

4. Impact on Utility or Perfonnance of Products 

As detailed in Section V of the proposed rule, in establishing classes of products we 

believe the adopted standards will not result in any degradation of utility or perfonnance in the 

covered products. 

5. Impact cif Any Lessening of Competition 

The Act directs the Department to consider any lessening of competition that is likely to 

- result from standards. It further directs the Attorney General to detennine the impact, if any, of 

any lessening of competition likely to result from a proposed standard and transmit such 

detennination to the Secretary, not later than 60 days 'after the publication of a proposed rule, 

together with an analysis of the nature and extent of such 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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In order to assist the Attorney General in making such a determination, the Department

provided the Department of Justice (DOJ) with copies of the 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 of competition due

to any proposed trial standard levels.

As previously discussed in II.D.4, the Department of Justice concluded that the

residential central air conditioner and heat 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

air conditioners 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 of the total

current product lines meet the proposed standards, but for some small manufacturers, 100 percent

of their product lines fail to satisfy the proposed standard.

Second, DOJ stated that the proposed standard for heat pumps, and in some instances for

air conditioners, would have an adverse impact on some manufacturers of products (including

those products referred to in the proposed rule as "niche products") used to retrofit existing

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In order to assist the Attorney General in making such a determination,-the Department 

provided the Department of Justice (DOJ) with copies of the proposed rule and the TSD for 

review. At DOE's request, the DO] reviewed the manufacturer impact analysis interview 

questionnaire to ensure that it would provide insight concerning any lessening of competition due 

to any proposed trial standard levels. 

As previously discussed in II.D.4, the Department of Justice concluded that the 

residential central air conditioner and heat 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 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 competitive problems presented by the proposed standards. 

First, DOl 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 of the total 

current product lines meet the proposed standards, but for some small manufacturers, 100 percent 

of their product lines fail to satisfy the proposed standard. 

Second, DOJ stated that the proposed standard for heat pumps, and in some Instances for ' 

air conditioners, would have an adverse impact on some manufacturers of products (including 

those products referred to in the proposed rule as "niche products") used to retrofit existing 

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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 of heat 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 exists between heat pumps and those other

systems."

The Department of Justice urged the Department of Energy 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 of Energy should consider setting a

lower SEER standard for heat pumps, such as the standard included in Trial Standard Level 2,

and a lower SEER standard for air conditioners for retrofit markets where there are space

constraints (such as markets served by niche products) and for manufactured housing.

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 our request for comments on a proposal to adopt a standard for

steady-state cooling efficiency (EER). The regulation language in the proposed rule did not

include a provision regarding an EER standard, and DOJ limited its views to the standards set

forth in the proposed regulation language, indicating that if the Department proposes rule

language in the future incorporating an EER standard, DOJ would address the competitive

impact of that standard.

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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 ~ncern 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 of heat pumps, it is possible that 

purchasers would shift away from heat pumps to other systems that inc 1 ude electric resistance 

heat, reducing the competition that presently exists between heat pumps and those other 

systems. I I 

The Department of Justice urged the Department of Energy 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 of Energy 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 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. DOl's first concern relates to disproportionate 

IIDOJ also wrote about our request for col1l?1ents on a proposal to adopt a standard for 

· steady-state cooling efficiency (EER). The regulation language in the proposed rule did not 

include a provision regarding an EER standard, and DOJ limited its views to the standards set 

forth in the proposed regulation language, indicating that if the Department proposes rule 

language in the future incorporating an EER standard, DOJ would address the competitive 

impact of that standard. 

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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 for those products that are not

severely space-constrained, and therefore substantially eliminates their first concern regarding the

impact of more 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 of replacement products that could be enforced at the point of

manufacture. We have removed one element of this concern by not specifying new standards for

niche products, primarily due to our concern over their continued viability in replacement

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 of equipment without increasing the size of both the indoor and outdoor units, and we

expect products utilizing those options to be 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 heat pumps as we

have for air conditioners. That action substantially reduces the incentive for consumers to

switch, thereby addressing that concern.

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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 for those products that are not 

severely space-constrained, and therefore substantially eliminates their first concern regarding the 

impact of more 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 of replacement products that could be enforced at the point of 

. manufacture. We have removed one element of this concern by not specifying new standards for 

niche products, primarily due to <;>ur concern over their continued viability in replacement . 

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 of equipment without increasing the size of both the indoor and outdoor units, and we 

expect products utilizing those options to be 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 heat pumps as we 

have for air conditioners. That action substantially reduces the incentive for consumers to 

switch, thereby addressing that concern. 

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In summary, the standards we are adopting should effectively eliminate most of DOJ's

concerns regarding the lessening of competition, 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 as we weighed the burdens of today's adopted standards.

6. Need of the Nation to Save Energy

The Secretary recognizes the need of the Nation to save energy. Enhanced energy

efficiency improves the nation's energy security, and reduces the environmental impacts of

energy production. Improved efficiency of central air conditioners and heat pumps is also likely

to improve the reliability of the nation's electric system. The energy savings from central air

conditioner and heat pump standards result in reduced emissions of carbon 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 on the AEO 2000 Reference Case for electricity

price and housing projections and the NAECA efficiency scenario.

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In summary, the standards we are adopting should effectively eliminate most of DO]' s 

concerns regarding the lessening of competition, 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 as we weighed the burdens oftoday's adopted standards. 

6. Need of the Nation to Save Energy 

The Secretary recognizes the need of the Nation to save energy. Enhanced energy 

efficiency improves the nation's energy security, and reduces the environmental impacts of 

energy production. Improved efficiency of central air conditioners and heat pumps is also likely 

to improve the reliability of the nation's electric system. The energy savings from central air 

conditioner and heat pump standards result in reduced emissions of carbon and NOx .• 

Cumulative emissions savings over the I5-year period 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 the NAECA efficiency scenario. 

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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 of varying electricity price and housing projections (i.e., different AEO cases)

as well as different efficiency scenarios were considered for the 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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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) 

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 of varying 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 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 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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The annual carbon emission reductions range up to 6.8 Mt in 2020 and the NO, emissions

reductions up to 27.0 kt in 2015.12'3 Total carbon and NO, emissions for each trial standard

level are reported in the Environmental Assessment, in the TSD.

The Department makes no effort to monetize the benefits of the actual emission

reductions, but there may be time related differences in the perceived value of the emissions

depending on when they occur, as with monetized benefits that accumulate over time. Emission

reductions that occur sooner are often more desirable than equivalent reductions that occur later.

Like monetary benefits, the health, recreational and ecosystem benefits that result from emission

reductions are often perceived to have a greater value if they occur sooner, rather than later. To

the extent that the different trial standard levels have slightly different shipment distributions

over time, some trial standard levels might have a slightly higher proportion of earlier emission

reductions than another trial standard level. To show the possible effect of the different timing

patterns of the 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)

"

2

Million metric tons (Mt).

3

Thousand metric tons (kt).

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The annual carbon emission reductions range up to 6.8 Mt in 2020 and the NOx emissions 

reductions up to 27.0 kt in 2015. 12, 13 Total carbon and NOx emissions for each trial standard 

level are reported in the Environmental Assessment, in the TSD. 

The Department makes no effort to monetize the benefits of the actual emission 

reductions, but there may be time related differences in the perceived value of the emissions 

depending on when they occur, as with monetized benefits that accumulate over time. Emission 

reductions that occur sooner are often more desirable than equivalent reductions that occur later. 

Like monetary benefits, the health, recreational and ecosystem benefits that result from emission 

reductions are often perceived to have a greater value if they occur sooner, rather than later. To 

the extent that the different trial standard levels have slightly different shipment distributions 

over time, some trial standard levels might have a slightly higher proportion of earlier emission 

reductions than another trial standard level. To show the possible effect of the different timing 

patterns of the emissions, the Department is also pres~nting 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) 

12Million metric t~ns (Mt). 

13Thousand metric tons (kt). 

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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 of Energy, in determining whether a standard is

economically justified, 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). The Secretary has decided

to consider the impact on peak 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 is used to estimate

peak power impacts by calculating the reduction in planned 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 the year 2020, due to each'of the trial

standard levels. Of the 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. Other Factors 

This provision allows the Secretary of Energy, in determining whether a.standard is 

economically justified, to consider any other factors that the· Secretary deems to be relevant. 

EPCA Section 325(0)(2)(B)(i)(VI), 42 U.S.C. 6295(0)(2)(B)(i)(VI). The Secretary has decided 

to consider the impact on peak 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 is used to estimate 

peak power impacts by calculating the reduction in planned 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), inthe year 2020, due to each' of the trial 

standard levels. Of the 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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Table V.25: Installed Generation Capacity Reductions in the year 2020 based on

AEO 2000 Reference Case and NAECA 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 of varying 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

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 of Different 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 in the year 2020 based on 

AEO 2000 Reference Case and NAECA 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 ]0.6 

3 12.4 12.3 -

4 15.5 15.4 

5 28.8 28.6 

The impact of varying 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 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 of Different 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) of the Act, 42 U.S.C. 6295(o)(2)(A), specifies that any new or

amended energy conservation standard for any type (or class) of covered product shall be

designed to achieve the maximum improvement in energy efficiency which the Secretary

determines is technologically feasible and economically justified. In determining whether a

standard is economically justified, the Secretary must determine whether the benefits of the

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 of energy." EPCA Section

325(o)(3)(B), 42 U.S.C. 6295(o)(3)(B).

We consider the impacts of standards 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 economically justified.

To aid the reader as we discuss the benefits or burdens of the trial levels, we have

included a summary of the 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 14 years, and electricity prices based on

the AE02000 Reference Case.

14 All cumulative effects that are not monetary are not discounted. Monetary effects are discounted to 1998 dollars.

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E. Conclusion 

Section 325(0)(2)(A) of the Act, 42 U.S.C. 6295(0)(2)(A), specifies that any new or 

amended energy conservation standard for any type (or class) of covered product shall be 

designed to achieve the maximum improvement in energy efficiency which the Secretary 

determines is te~hnologically feasible and economically justified. In determining whether a 

standard is economically justified, the Secretary must determine whether the benefits of the 

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 of energy." EPCA Section 

325(0)(3)(B), 42 U.S.C. 6295(0)(3)(B). 

We consider the impacts of standards 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 economically justified. 

To aid the reader as we discuss the benefits or burdens of the trial levels, we have 

included a summary of the 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 consider most 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 electricity prices 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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Table V.27. Summary of Quantitative Results'

Trial Std 1 Trial Std 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 _____(62) 1 (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.

3 Values based on NAECA efficiency scenario with the exception ofTSL 4 which is based on the Roll-up scenario.

4 Not calculated at Trial.Standard Level 5.

' Negative values indicate LCC increases.

6 Payback periods are median values.

In addition to the quantitative results, we also consider other burdens and benefits that

affect economic justification. The potential to improve the reliability of the electricity system is

the major benefit we have not quantified explicitly. In areas where the occurrence of blackouts

(and brownouts) can be reduced through expansion of system capacity, the economic value of

avoided blackouts associated with reductions in peak load cannot exceed the value of the avoided

capacity expansion. That value is already captured in our analysis. as savings in consumer utility

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Table V.27. Summary of Quantitative 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. 

2 Energy savings based on Roll-up efficiency scenario. 

3 Values based on NAECA efficiency scenario with the exception ofTSL 4 which is based on the Roll-up scenario. 

4 Not calculated at Trial.Standard Level 5. 

~ Negative values indicate LCC increases. 

6 Payback periods are median values. 

In addition to the quantitative results, we also consider other burdens and benefits that 

affect economic justification. The potential to improve the reliability of the electricity system is 

the major benefit we have not quantified explicitly. In areas where the occurrence of blackouts 

(and brownouts) can be reduced through expansion of system capacity, the economic value of 

avoided blackouts associated with reductions in peak load cannot exceed the value of the avoided 

capacity expansion. That value is already captured in our analysis. as savings in consumer utility 

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EE-RM/STD-98-440 "jfSO5

bills. However, in areas that do not expect to be able to maintain adequate capacity reserves, the

value of avoided blackouts associated with reductions in peak demand can far exceed the normal

costs of capacity expansion."

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, a possible-reduction in the ability of the product to dehumidify, a possible lessening of

competition, and possible difficulty in installing the new baseline products into retrofit

applications. However, we generally believe that these burdens are capable of being 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 of four classes, representing uniform 18 SEER requirements. The

manufacturing cost we assume for TSL 5 is equal to 15 SEER equipment, although we would

expect that assumption to understate the cost and price of the product. TSL 5 will likely save 8.3

quads of energy which the Department considers significant. These savings will result in the

avoidance of approximately 29 GW of installed generation capacity. For comparison, the

generating capacity is equivalent to roughly 75 large, 400 megawatt, power plants,' 6

1

5 For instance, if capacity-related blackouts cost a region $1 billion, society would be willing topay up to

$1 billion to prevent them. If those blackouts can be prevented through either a capacity expansion or a reduction in

peak demand, and the new capacity would cost $100 million, the value of the reduction in peak demand can be no

more than $100 million. If the region is short on capacity and cannot add new capacity quickly, however, the same

reduction in peak demand then can equal the value of the avoided blackout ($1 billion) since there is no feasible

alternative.

16 DOE estimates 9 coal-fired power plants and 66 gas-fired power plants can be avoided. See TSD, Chapter 11 and Appendix

H.

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bills. However, in areas that do not expect to be able to maintain adequate capacity reserves, the 

value of avoided blackouts associated with reductions in peak demand can far exceed the nonnal 

costs of capacity expansion. IS 

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, a possible-reduction in the ability of the product to dehumidify, a possible lessening of 

competition, and possible difficulty in installing th~ new baseline products into retrofit 

applications. However, we generally believe that these burdens are capable of being 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 of four classes, representing unifonn 18 SEER requirements. The 

manufacturing cost we assume for TSL 5 is equal to 15 SEER equipment, although we would 

expect that assumption to understate the cost and price of the product. TSL 5 will likely save 8.3 

quads of energy which the Department considers significant. These savings will result in the 

avoidance of approximately 29 GW of installed generation capacity. For comparison, the 

generating capacity is equivalent to roughly 75 large, 400 megawatt, power plants, 16 

IS For instance, if capacity-related blackouts cost a region $1 billion, society would be willing to· pay up to 

$1 billion to prevent them. If those blackouts can be prevented through either a capacity expansion or a reduction in 

peak demand, and the new capacity would cost $100 million, the value of the reduction in peak demand can be no 

more than $100 million. If the region is short on capacity and cannot add new capacity quickly, however, the same 

reduction in peak demand then can equal the value of the avoided blackout ($1 billion) since there is no feasible 

alternative. . 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 of current installed generating capacity nationwide and more than 13

percent of the anticipated growth in capacity needed by 2020. The emissions reductions ranging

from 63.0 Mt of carbon equivalent and 184.2 kt of NO, are also significant.

At TSL 5, the average consumer would experience an increase in LCC costs. Purchasers

of split central air-conditioners, the predominant class of central air conditioner with 65 percent

of the sales of central air conditioners and heat pumps, would lose on average $137 over the life

of the appliance. Purchasers of split heat pumps, the predominant class of heat pump, would lose

on average $41. Again, these results do not include the additional price the consumer would pay

over the price of a 15 SEER product, 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 in NPV.

We did not calculate manufacturer impacts at this trial standard level, determining based on

preliminary evaluation that they would be severe and unacceptable.

The Secretary concludes that at TSL 5, the benefits of energy savings, generating capacity

reductions and emission reductions would be outweighed by the negative economic impacts to

the nation, to the vast majority of consumers and to the manufacturers. Consequently, the

Secretary has concluded that TSL 5, the Max Tech Level, is not economically justified.

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 consider to 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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EE.RM/STD.9~.440 ~ ~ A IJ 5' 

approximately 3.7 percent of current installed generating capacity nationwide and more than 13 

percent of the anticipated growth in capacity needed by 2020. The emissions reductions ranging 

from 63.0 Mt of carbon equivale.nt and 184.2 kt of NO x are also significant. 

At TSL 5, the average consumer would experience an increase in LCC costs. Purchasers 

of split central air-conditioners, the predominant class of central air conditioner with 65 percent 

of the sales of central air conditioners and heat pumps, would lose on average $137 over the life 

of the appliance .. Purchasers of split heat pumps, the predominant class of heat pump, would lose 

on average $41. Again, these results do not include the additional price the consumer would pay 

over the price of a 15 SEER product, 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 in NPV . 

. We did not calculate manufacturer impacts at this trial standard level, determining based on 

preliminary evaluation that they would be severe and unacceptable. 

The Secretary concludes that at TSL 5, the benefits of energy savings, generating capacity 

reductions and emission reductions would be outweighed by the negative economic impacts to 

the nation, to the vast majority of consumers and to the manufacturers. Consequently, the 

Secretary has concluded that TSL 5, the Max Tech Level, is not economically justified .. 

Next, we considered TSL 4. This level specifies 13 SEER equipment for all product 

classes. In considering TSL 4 the Roll-up efficien~y scenario and reverse engineering cost data 

are the assumptions we consider to 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 

95c:\Mike\US OOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd 
EE-RM/STD-98-440- 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 of carbon equivalent and up to 93.8 kt of NO,.

The average air conditioner owner would save $113 over the life of a split air conditioner

and $29 over the life of a packaged air conditioner. These equate to median payback periods of

11.3 years and 14.5 years, respectively. Low income consumers of split air conditioners and split

heat pumps also incur LCC savings ($43 for split air conditioner owners and $185 savings for

split heat pump owners). In addition, the average heat pump owner would benefit, saving $372

over the life of a split heat pump and $353 over the life of a packaged 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 net present value is expected to be $1 billion. The decrease

in the net present value of the 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 of energy and is technologically feasible and economically justified. In

determining economic justification, the Department finds that the benefits of energy savings, the

projected amount of avoided power plant capacity or improvement in system reliability that

accompanies expected reduction in peak demand, consumer life cycle cost savings, national net

9 6C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

EE-RM-STD-98-440 COMMENT 205

EE.RM/STD.9~.440- #- ~ IJ .s 

significant. The estimated reduction in installed generating capacity is approximately 15 GW, 

and reduced emissions would range up to 32.7 Mt of carbon equivalent and up to 93.8 kt ofNOx' 

The average air conditioner owner would save $113 over the life of a split air conditioner 

and $29 over the life of a packaged air conditioner. These equate to median payback periods of 

11.3 years and 14.5 years, respectively. Low income consumers of split air conditioners and split 

heat pumps· also incur LCC savings ($43 for split air conditioner owners and $185 savings for 

split heat pump owners). In addition, the average heat pump owner would benefit, saving $372 

over the life of a split heat pump and $353 ov~r the life of a packaged 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 net present value is expected to be $1 billion. The decrease 

in the net present value of the 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 of energy and is technologically feasible and economically justified. In 

determining economic justification, the Departmeqt finds that the benefits of energy savings, the 

projected amount of avoided power plant capacity or improvement in system reliability that 

accompanies expected reduction in peak demand, consumer life cycle cost savings, national net 

96c:lMikeIUS DOEICentral AirlSEER13 Final Rule draft 12 master 12.14.00.wpd 
EE-RM/STD-98-440-9 A 0S

present value increase and emission reductions resulting from the standards outweigh the

burdens. The burdens include the loss of manufacturer net present value, increases in consumer

life cycle cost for some users of products 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 of the product to dehumidify, any possible lessening of competition, 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 we received regarding the

prices and markups applied to today's equipment persuaded us that the reverse engineering cost

data are much more likely than the ARI Mean cost data to represent the actual costs of producing

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 of TSL 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 to purchase electric resistance furnaces

and air conditioners instead of heat pumps. In response to those comments, we verified that the

energy savings from the more efficient heat pumps would be eliminated if only a small fraction

of heat pump owners (4 percent) switched to resistance heating. That possibility provided added

justification for adopting the same minimum standards for heat pumps as for air conditioners.

97C:\Mike\US DOE\Ccntal Air\SEER13 Final Rule draft 12 master 12-14-0.wpd

EE-RM-STD-98-440 COMMENT 205

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

present value increase and emission reductions resulting from the standards outweigh the 

burdens. The burdens include the loss of manufacturer net present value, increases in consumer 

life cycle cost for some users of products 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 of the product to dehumidify, any possible lessening of competition, 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 we received regarding the 

prices and markups applied to today's equipment persuaded us that the reverse engineering cost 

data are much more likely than the ARI Mean cost data to represent the actual costs of producing 

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 of TSL 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 to purchase electric resistance furnaces 

and air conditioners instead of heat pumps. In response to those comments, we verified that the 

energy savings from the more efficient heat pumps would be eliminated if only a small fraction 

of heat pump owners (4 percent) switched to resistance heating. That possibility provided added 

justification for adopting the same minimum standards for heat-pumps as for air conditioners. 

97c:lMikc\US DOE\Ccnlrlll Air\SEER13 Final Rule draft 12 mast~ 12·14-00.wpd 
EE-RM/STD-98-440-$ 0 6

Given our decision to adopt a 13 SEER standard for both central air conditioners and

central air conditioning heat pumps, we believe 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 have referred 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

in meeting the standards proposed in the proposed rule, and the concerns expressed by the

Department of Justice, we have serious concerns about whether 13 SEER is an appropriate

standard for most such products. On the other hand, we are uncertain whether it would be

prudent for us to apply the standards contained in the proposed rule to niche products in light of

the 13 SEER standard we are adopting today for other products. Doing so may create a strong

tendency for niche products, with lower minimum efficiency standards than conventional

products, to be 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 these products 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 least two overall exterior dimensions or an overall

displacement that:

98C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

EE-RM-STD-98-440 COMMENT 205

EE-RM/STO-9S-440-. A 0 6 

Given our decision to adopt a 13 SEER standard for both central air conditioners and 

central air conditioning heat pumps, we believe 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 have referred 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 

in meeting the standards proposed in the proposed rule, and the concerns expressed by the 

Department of Justice, we have serious concerns about whether 13 SEER is an appropriate 

standard for most such products. On the other hand, we are uncertain whether it would be· 

prudent for us to apply the standards contained in the proposed rule to niche products in light of 

the 13 SEER standard we are adopting today for other products. Doing so may create a strong 

tendency for niche products, with lower minimum efficiency standards than conventional 

products, to be applied in conventional applications. 

Therefore, today' s. final rule provides efficiency standards for all residential central air . 

~nditioners and heat pumps, except the niche products. We are referring to these products 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 BTUIhf 

(2) An outdoor or indoor unit having at least two overall exterior dimensions or an overall 

displacement that: 

. 98c:\Mike\US oOE\Central Air\SEERI3 Final Rule draft 12 master 12-1·4-00.wpd 
EE-RM/STD-98-4404^A 5

(a) are (is) substantially smaller than those of other units that are (i) currently usually

installed in site-built single family homes, and (ii) of a similar cooling, and, if a heat

pump, heating, capacity, and

(b) if increased, would certainly result in a considerable increase in the cost of

installation or would certainly result in a significant loss in the utility of the product

to the consumer.

(3) Of a product type that was available for purchase in the United States as of December 1,

2000.

Based on the 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, high velocity equipment is covered by today's standards.

As proposed 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 be tested as coil-only

equipment. Also, the standards in today's rule will clearly apply to the types of central air

conditioners and heat pumps normally installed in site-built single family homes.

The Department will re-open the comment'period in this rulemaking to address standards

for space-constrained products, and plans to publish a final rule in the Federal Register no later

than eighteen (18) months from the date of publication of today's rule. The rule covering space99C:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

EE-RM-STD-98-440 COMMENT 205

(a) are (is) substantially smaller than those of other units that are (i) currently usually 

installed in site-built single family homes, and (ii) of a similar cooling, and, if a heat 

pump, heating, capacity, and 

(b) if increased, would certainly result in a considerable increase in the cost of 

installation or would certainly result in a significant loss in the utility of the product 

to the consumer. 

(3) Of a product type that was available for purchase in the United States as of December I," 

2000. 

Based on the 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, high velocity equipment is covered by today's standards. 

As proposed in the NOPR, 65 FR at 59609-10, bOE is addressing the concerns for that 

equipment by modifying the test procedure to allow those products to be tested as coil-only 

equipment. Also, the standards in today's rule will clearly apply to the types of central air 

conditioners and heat pumps normally installed in site-built single family homes. 

The Department will re-open the comment'period in this rulemaking to address standards 

for space-constrained products, and plans to publish a final rule in the Federal Register no later 

than eighteen (18) months from the date of publication of to day's rule. The rule covering space99C:\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 these products. It will also contain an assessment of technical feasibility

and economic justification in accordance with the requirements of the Act. The Department

intends to make the rule for niche products effective on the same date as the effective date of this

final rule.

Before reopening the comment period, we will initially identify those product types we

believe should be treated as space-constrained products and begin to assess the impact of a

rulemaking for these products on small businesses. To aid in this process, we will seek shortly

the following information from each manufacturer of those products that we believe may meet

the definition of space-constrained products:

(1) the number of employees employed by the company as of December 31, 2000 (to assist us in

determining whether we should consider the company to be a small business entity);

(2) a list of proposed space-constrained products, providing for each type of product:

(a) a description of its intended applications

(b) a description based on physical characteristics, manufacturing characteristics, capacity,

and performance attributes that would distinguish it from other types of products, and

which would be enforceable at the point of manufacture

(c) a list of models produced of that product type by the manufacturer, containing for each

model: physical dimensions, rated capacities, and range of efficiency ratings available;

(3) a statement of whether the number of units produced by the manufacturer was less than or

greater than 100,000 units in the year 2000; and

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

EE-RM-STD-98-440 COMMENT 205

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. It will also contain an assessment of technical feasibility 

and economic justification in accordance with the requirements of the Act. The Department 

intends to make the rule for niche products effective on the same date as the effective date of this 

final rule. 

Before reopening the comment period, we will initially identify those product types we 

believe should be treated as space-constrained products and begin to assess the impact of a 

rulemaking for these products on small businesses. To aid in this process, we will seek shortly 

the following information from each manufacturer of those products that we believe may meet 

the definition of space-constrained products: 

(I) the number of employees employed by the company as of December 31,2000 (to assist us in 

determining whether we should consider the company to be a small business entity); 

(2) a list of proposed space-constrained products, proyiding for each type of product: 

(a) a description of its intended applications 

(b) a description based on physical characteristics, manufacturing characteristics, capacity, 

and performance attributes that would distinguish it from other types of products, and 

which would be enforceable at the point of manufacture 

(c) a list of models produced of that product type by the manufacturer, containing for each 

model: physical dimensions, rated capacities, and range of efficiency ratings available; 

(3) a statement of whether the number of units produced by the manufacturer was less than or 

greater than 100,000 units in the year 2000; 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 of the percentage of units 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 of the comment period, we will issue in the Federal Register

our determination of which of the published products we believe are space-constrained products

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 Environmental Policy Act

The Department prepared an Environmental Assessment (EA) (DOE/EA-1352) available

from: U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Forrestal

Building, Mail Station EE-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-98-440 COMMENT 205

EE.RM/STD.9~-440", 1F a I) S 

(4) an estimate of the percentage of units 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 

infonnation) through a Federal Register notice. A comment period will follow during which time 

the public will have an opportunity to review the published infonnation and respond to the 

. Department. Following the close of the comment period, we will issue in the Federal Register 

our detennfnation of which of the published products we believe are space-constrained products 

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 Environmental Policy Act 

The Department prepared an Environmental Assessment (EA) (DOEIEA-1352) available 

from: U.S. Department of Energy, Office of Energy 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 

10 l::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 of the Federal Register, A Finding of No Significant Impact

(FONSI) pursuant to the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et

seq., the regulations of the Council of Environmental Quality (40 CFR Parts 1500-1508), and the

Department's regulations for compliance with NEPA (10 CFR Part 1021).

B. Review Under Executive Order 12866, "Regulatory Planning and Review"

Today's regulatory action has been determined to be an "economically significant

regulatory action" under Executive Order 12866, "Regulatory Planning and Review." (58 FR

51735, October 4, 1993). Accordingly, today's action was subject to review under the Executive

Order by the Office of Information and Regulatory Affairs (OIRA) of the Office of Management

and Budget.

The draft submitted to OIRA and other documents submitted to OIRA for review have

been made a part of the rulemaking record and are available for public review in the

Department's Freedom of Information Reading Room, 1000 Independence Avenue, SW,

Washington, DC 20585, between the hours of 9:00 a.m. and 4:00 p.m., Monday through Friday,

telephone (202) 586-3142.

The proposed rule contained a summary of the Regulatory Analysis which focused on the

major alternatives considered in arriving at the approach to improving the energy efficiency of

consumer products. The reader is referred to the complete draft "Regulatory Impact Analysis,"

which is contained in the TSD, available as indicated at the beginning of this notice. It consists

of: (1) a statement of the problem addressed by this regulation, and the mandate for government

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

EE-RM-STD-98-440 COMMENT 205

EE-RM/STD-9~-440 ~ ~. ~ 

publishing, elsewhere in this issue of the Federal Register, A Finding of No Significant Impact 

(FONSI) pursuant to the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et 

seq., the regulations of the Council of Environmental Quality (40 CFR Parts 1500-1508), and the 

Department's regulations for compliance with NEPA (10 CFR Part 1021). 

Ii. Review Under Executive Order 12866, "Regulatory Planning and Review" 

Today's regulatory action has been determined to be an "economically significant 

regulatory action" under Executive Order 12866, "Regulatory Planning and Review." (58 FR 

51735, October 4, 1993). Accordingly, today's action was subject to review under the Executive 

Order by the Office of Information and Regulatory Affairs (OIRA) of the Office of Management 

and Budget .. 

The draft submitted to OIRA and other documents submitted to OIRA for review have 

been made a part of the rulemaking record and are available for public review in 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 of the Regulatory Analysis which focused on the 

major alternatives considered in arriving at the approach to improving the energy efficiency of 

consumer products. The reader 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 of the 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.wpd 
EE-RM-STD-98-440 COMMENT 205 

action; (2) a description and analysis of the feasible policy alternatives to this regulation; (3) a 

quantitative comparison of the impacts of the alternatives; and (4) the national economic impacts 

of the proposed standard. 

C. Review under the Regulatory Flexibility Act 

The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., requires an assessment of the impact 

of regulations on small businesses. To be categorized as a "small" air conditioning and warm air 

heating equipment manufacturer, a firm must employ no more than 750 employees. 

The Department prepared a manufacturing impact analysis which was made public and 

available to all residential central air conditioner and heat pump manufacturers. Other impacts 

on small businesses were previously discussed in the proposed rule. 65 FR 59590,59629-30 

(October 5,2000). The Department reaffirms its certification in the proposed rule. Today's rule 

will not have a significant impact on a substantial number of small entities, and preparation of a 

regulatory flexibility analysis is unnecessary. 

Most small businesses engaged in the manufacture of central air conditioners and heat 

pumps produce products what we have called "niche" products. To address the concerns of the 

Department of Justice and many commenters regarding the impacts of more stringent standards 

on small manufacturers, we are continuing our evaluation of standards for those products and 

have not issued new standards for them as part of ~his rule. 

D. Review Under the Paperwork Reduction Act 

1 OlIMike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12.14-00.wpd 
EE-RM/STD-98-440- a0 5

No new information or record keeping requirements are imposed by this rulemaking.

Accordingly, no Office of Management and Budget clearance is required under the Paperwork

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

E. Review Under Executive Order 12988, "Civil Justice Reform"

With respect to the review of existing regulations and the promulgation of new

regulations, Section 3(a) of Executive Order 12988, "Civil Justice Reform," 61 FR 4729

(February 7, 1996), imposes on Executive agencies the general duty to adhere to the following

requirements: (1) eliminate drafting errors and ambiguity; (2) write regulations to minimize

litigation; and (3) provide a clear legal standard for affected conduct rather than a general

standard and promote simplification and burden reduction. With regard to the review required by

section 3(a), section 3(b) of Executive Order 12988 specifically requires that Executive agencies

make every reasonable effort to ensure that the regulation: (1) clearly specifies the preemptive

effect, if any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a

clear legal standard for affected conduct while promoting simplification and burden reduction;

(4) specifies the retroactive effect, if any; (5) adequately defines key terms; and (6) addresses

other important issues affecting clarity and general draftsmanship under any guidelines issued by

the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to

review regulations in light of applicable standards in section 3(a) and section 3(b) to determine

whether they are met or it is unreasonable to meet one or more of.them. DOE reviewed today's

final rule under the standards of section 3 of the Executive Order and determined that, to the

extent permitted by law, the final regulations meet the relevant standards.

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EE-RM-STD-98-440 COMMENT 205

EE.RM/STD.9~.440-$ A' ~ 

No new infonnation or record keeping requirements are imposed by this rulemaking. 

Accordingly, no Office of Management and Budget clearance is required under the Paperwork 

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

E. Review Under Executive Order 12988, "Civil Justice Reform II 

With respect to the review of existing regulations and the promulgation of new 

regulations, Section 3(a) of Executive Order 12988, "Civil Justice Refonn," 61 FR 4729 

(February 7, 1996), imposes on Executive agencies the general duty to adhere to the following 

requirements: (1) eliminate drafting errors and ambiguity; (2) write regulations to minimize 

litigation; and (3) provide a clear legal standard for affected conduct rather than a general 

standard and promote simplification and burden reduction. With regard to the review required by 

section 3(a), section 3(b) of Executive Order 12988 specifically requires that Executive agencies 

make every reasonable effort to ensure that the regulation: (1) clearly specifies the preemptive 

effect, if any; (2) clearly specifies any effect on existing Federal law or regulation; (3) provides a 

clear legal standard for affected conduct while promoting simplification and burden reduction; 

(4) specifies the retroactive effect, if any; (5) adequately defines key tenns; and (6) addresses 

other important issues affecting clarity and general draftsmanship under any guidelines issued by 

the Attorney General. Section 3(c) of Executive Order 12988 requires Executive agencies to 

review regulations in light of applicable standards in section 3(a) and section 3(b) to detennine 

whether they are met or it is unreasonable to meet one or more of them. DOE reviewed today's 

final rule under the standards of section 3 of the E~ecutive Order and detenninedthat, to the 

extent pennitted by law, the final regulations meet the relevant stand~ds. 

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F. "Takings"Assessment Review

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 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 FR 43255, August 4, 1999) imposes certain requirements on

agencies formulating and implementing policies or regulations that preempt State law or that

have federalism implications. Agencies are required to examine the constitutional and statutory

authority supporting any action that would limit the policymaking discretion of the States and

carefully assess the necessity for such actions. Agencies also must have an accountable process

to ensure meaningful and timely input by State and local officials in the development of

regulatory policies that have federalism implications. DOE published its intergovernmental

consultation policy on March 14, 2000. (65 FR 13735). DOE has examined today's final rule

and has determined that it would not have a substantial direct effect on the States, on the

relationship between the national government and the States, or on the distribution of power and

responsibilities among the various levels of government. State regulations that may have existed

on the products that are the subject of today's final rule were preempted by the Federal standards

established in NAECA. States can petition the Department for exemption from such preemption

to the extent, and based on criteria, set forth in EPCA.

H. Review Under the Unfunded Mandates Reform Act

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EE-RM-STD-98-440 COMMENT 205

F. "Takings" Assessment Review 

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 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 FR 43255, August 4, 1999) imposes certain requirements on 

agencies formulating and implementing policies or regulations that preempt State law or that 

have federalism implications. Agencies are required to examine the constitutional and statutory 

authority supporting any action that would limit the policymaking discretion of the States and 

carefully assess the necessity for such actions. Agencies also must have an accountable process 

to ensure meaningful and timely input by State and local officials in the development of 

regulatory policies that have federalism implications. DOE published its intergovernmental 

consultation policy on March 14,2000. (65 FR 13735). DOE has examined today's fmal rule . , . 

and has determined that it would not have a substantial direct effect on the States, on the 

relationship between the national government and the States, or on the distribution of power and 

responsibilities among the various levels of government. State regulations that may have existed 

on the products that are the subject oftoday's final rule were preempted by the Federal standards 

established in NAECA. States can petition the Department for exemption from such preemption 

to the extent, and based on criteria, set forth in EPCA. 

H Review Under the Unfunded Mandates Reform Act 

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 by the private sector of $100 million or more

(adjusted annually for inflation), section 202 of the Unfunded Mandates Reform Act of 1995

(UMRA) requires a Federal agency to publish estimates of the resulting costs, benefits and other

effects on the national economy. 2 U.S.C. 1532(a), (b). UMRA also requires each Federal

agency to develop an effective process to permit timely input by state, local, and tribal

governments on a proposed significant intergovernmental mandate. The Department's

consultation process is described in a notice published in the Federal Register on March 18, 1997

(62 FR 12820). Today's final rule may impose expenditures of $100 million or more on the

private sector. It does not contain a Federal intergovernmental mandate.

Section 202 of UMRA authorizes an agency to respond to the content requirements of

UMRA in any other statement or analysis that accompanies the proposed rule. 2 U.S.C. 1532(c).

The content requirements of section 202(b) of UMRA relevant to a private sector mandate

substantially overlap the economic analysis requirements that apply under section 325(o) of

EPCA and Executive Order 12866. The Supplementary Information section of the Notice of

Final Rulemaking and "Regulatory Impact Analysis" section of the TSD for this Final Rule

responds to those requirements.

Under section 205 of UMRA, the Department is obligated to identify and consider a

reasonable number of regulatory alternatives before promulgating a rule for which a written

statement under section 202 is required. DOE is required to select from those alternatives the

most cost-effective and least burdensome alternative that achieves the objectives of the rule

106:l\Mike\US DOE\Cntral Air\SEER13 Final Rule draft 12 master 12-14-OOwpd

EE-RM-STD-98-440 COMMENT 205

EE.RM/STD.9~.440 -':II'tR' r 

With respect to a proposed regulatory action that may result in the expenditure by State, 

local and tribal governments, in the aggregate, or by the private sector of $1 00 million or more 

(adjusted annually for inflation), section 202 of the Unfunded Mandates Refonn Act of 1995 

(UMRA) requires a Federal agency to publish estimates of the resulting costs, b~nefits and other, 

effects on the national economy. 2 U.S.C. 1532(a), (b). UMRA also requires each Federal 

agency to develop an effective process to penn it timely input by state, local, and tribal 

governments on a'proposed significant intergovernmental mandate. The Department's 

consultation process is described in a notice published in the Federal Register on March 18, 1997 

(62 FR 12820). Today's final rule mayimpose expenditures of$100 million or more on the 

private sector. It does not contain a Federal intergovernmental mandate. 

Section 202 ofUMRA authorizes an agency to respond to the content requirements of 

UMRA in any other statement or analysis ~at accompanies the proposed rule. 2 U.S.C. lS32(c). 

The content requirements of section 202(b) of UMRA relevant to a private sector mandate 

substantially overlap the economic analysis requirements that apply under section 325(0) of 

EPCA and Executive Order 12866. The Supplementary Infonnation section of the Notice of 

Final Rulemaking and "Regulatory Impact Analysis" section of the TSD for this Final Rule 

responds to those requirements. 

Under section 205 of UMRA, the Department is obligated to identify and consider a 

reasonable number of regulatory alternatives before promulgating a rule for which a written 

statement under section 202 is required. DOE is required to select from those alternatives the 

most cost-effective and least burdensome alternative that achieves the objectives of the rule 

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 of such an alternative

is inconsistent with law. As required by section 325(o) of the Energy Policy and Conservation

Act (42 U.S.C. 6295(o)), today's final rule establishes energy conservation standards for central

air conditioners and heat pumps that are designed to achieve the maximum improvement in

energy efficiency that DOE has determined to be both technologically feasible and economically

justified. A full discussion of the alternatives considered by DOE is presented in the "Regulatory

Impact Analysis" section of the TSD for today's final rule.

I. Review Under the Treasury and General Government Appropriations Act of 1999

Section 654 of the Treasury and General Government Appropriations Act, 1999 (Pub. L.

No. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any

proposed rule or policy that may affect family well-being. Today's final rule would not have any

impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has

concluded that it is not necessary to prepare a Family Policymaking Assessment.

J. Review Under the Plain Language Directives

Section l(b)(12) of Executive Order 12866 requires that each agency draft its regulations

to be simple and easy to understand, with the goal of minimizing the potential for uncertainty and

litigation arising from such uncertainty. Similarly, the Presidential memorandum of June 1, 1998

(63 FR 31883) directs the heads of executive departments and agencies to use plain language in

all proposed and final rulemaking documents published in the Federal Register.

Today's rule uses the following general techniques to abide by Section l(b)(12) of

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

EE-RM-STD-98-440 COMMENT 205

EE-RM/STD-9~-440 -JI ~. S" 

unless DOE publishes an explanation for doing otherwise or the selection of such an alternative 

is inconsistent with law. As required by section 325(0) of the Energy Policy and Conservation 

Act (42 U.S.C. 6295(0)), today's final rule establishes energy conservation standards for central 

air conditioners and heat pumps that are designed to achieve the maximum improvement in 

energy efficiency that DOE has determined to be both technologically feasible and economically 

justified. A full discussion of the alternatives considered by DOE is presented in the "Regulatory 

Impact Analysis" section of the TSD for today's final rule. 

1 Review Under the Treasury and General Government Appropriations Act of 1999 

Section 654 of the Treasury and General Government Appropriations Act, 1999 (pub. L. 

No. 105-277) requires Federal agencies to issue a Family Policymaking Assessment for any 

proposed rule or policy that may affect family well-being. Today's final rule would not have any· 

impact on the autonomy or integrity of the family as an institution. Accordingly, DOE has 

concluded that it is not necessary to prepare a Family Policymaking Assessment. 

J. Review Under the Plain Language Directives 

Section 1 (b)(l 2) of Executive Order 12866 requires that each agency draft its regulations 

to be simple and easy to understand, with the goal of minimizing the potential for uncertainty and 

litigation arising from such uncertainty. Similarly, the Presidential memorandum of June 1, 1998 

(63 FR 31883) directs the heads of executive departments and agencies to use plain language in 

all proposed and final rulemaking documents publ~shed in the Federal Register. 

Today's rule 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 of June 1, 1998:

* Organization of the material to serve the needs of the readers (stakeholders).

· Use of common, everyday words in short sentences.

· Shorter sentences and sections.

K. Congressional Notification

As required by 5 U.S.C. 801, DOE will submit to Congress a report regarding the

issuance of today's final rule prior to the effective date set forth at the outset of this notice. DOE

also will submit the supporting analyses to the Comptroller General (GAO) and make them

available to each House of Congress. The report will state that it has been determined that the

rule is a "major rule" as defined by 5 U.S.C. 804(2).

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EE.RM/STD-9~.440 -$ ~ I r 

Executive Order 12866.and the Presidential memorandum of June 1, 1998: 

• Organization of the material to serve the needs of the readers (stakeholders). 

• Use of common, everyday words in short sentences. 

• Shorter sentences and sections. 

K. Congressional Notification 

As required by 5 U.S.C. 801, DOE will submit to Congress a report regarding the 

issuance oftoday's fmal rule prior to the effective date set forth at the outset of this notice. DOE 

also will submit the supporting analyses to the Comptroller General (GAO) and make them 

available to each House of Congress. The report will state that it has been determined that the 

rule is a "major rule" 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 of Subjects 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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EE.RM/STD.9~.440 -* JtDS 

List of Subjects 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 02::\Mike\US DOE\Central Air\SEERI3 Final Rule draft 12 master 12·14.()(),wpd 
EE-RM/STD-98-440 - t^6^9

For the reasons set forth in the preamble, Part 430 of Chapter II of Title 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 or heat 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 of other units that are (i) currently usually

installed in site-built single family homes, and (ii) of a similar cooling, and, if a heat

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EE-RM-STD-98-440 COMMENT 205

EE.RM/STD.9~-440 - ttAIJS 

For the reasons set forth in the preamble, Part 430 of Chapter II of Title 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 constrained product means a central air conditioner or heat pump: 

(1) That has rated cooling capacities no greater than 30,000 BTUIhr; 

(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 of other units that are (i) currently usually 

installed in site-built single family homes, and (ii) of a similar cooling, and, if a 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) if increased, would certainly result in a considerable increase in the usual cost of

installation or would certainly result in a significant loss in the utility of the product

to the consumer; and

(3) Of a product type that was available for purchase in the United States as of December

1,2000.

3. Section 430.32 of Subpart C is amended by revising paragraph (c) to read as follows:

§ 430.32 Energy and water conservation standards and effective dates.

* * * * *

(c) Central air conditioners and central air conditioning heat pumps. (1) Split system central air

conditioners and central air conditioning heat pumps manufactured after January 1, 1992, and

before [insert 5 years after FR publication date], and single package central air conditioners and

central air conditioning heat pumps manufactured after January 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:

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EE-RM-STD-98-440 COMMENT 205

EE.RM/STD-9~-440 _'It ~D.5 

pump, heating, capacity, ·and 

(b) if increased, would certainly result in a considerable increase in the usual cost of 

installation or would certainly result in a significant loss in the utility of the product 

to the consumer; and 

(3) Of a product type that was available for purchase in the United States as of December 

1,2000. 

• • • • • 

3. Section 430.32 of Subpart 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 after January 1, 1992, and 

before linsert 'Syears after FR p~bli~ation date], and single package central air conditioners and 

central air conditioning heat pumps manufactured after January I, 1993, and before [insert 5 

years after FR publication 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 air conditioning heat pumps manufactured on or after

[insert 5 years after FR publication 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 pum ps........................................................ 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 12 master 12-14-00.* 

1 l

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EE-RM-STD-98-440 COMMENT 205

EE.RM/STD.~_#'~f) ~ 

Product class Seasonal Energy Heating Seasonal 

Efficiency Ratio Perfonnance Factor 

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

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

2. Central air conditioners and central air conditioning heat pumps manufactured on or after 

[insert 5 years after FR publication date], shall have Seasonal Energy Efficiency Ratio and 

Heating Seasonal Perfonnance Factor no 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] 

* * * * * 

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EE-RM/STD-98-440 - ^ 0 .

Appendix

[The following letter from the Department of Justice will not appear in the Code of Federal

Regulations.]

DEPARTMENT OF JUSTICE

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 of Energy

Washington, D.C. 20585

Dear General Counsel Sullivan:

I am responding to your October 16, 2000 letter seeking the views of the Attorney

General about the potential impact on competition of two proposed energy efficiency standards:

one for clothes washers and the other for residential central air conditioners and heat pumps.

Your request was submitted pursuant to Section 325(o)(2)(B)(i) of the Energy Policy and

Conservation Act, 42 U.S.C. §6291, 6295 ("EPCA"), which requires the Attorney General to

make a determination of the impact of any lessening of competition that is likely to result from

the imposition of proposed energy efficiency standards. The Attorney General's responsibility

for responding to requests from other departments about the effect of a program on competition

has been delegated to the Assistant Attorney General for the Antitrust Division in 28 CFR §

0.40(g).

We have reviewed the proposed standards and the supplementary information published

in the Federal Register notices and submitted to the Attorney General, which include information

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EE-RM-STD-98-440 COMMENT 205

EE.RM/STD.9~.440 _ -=.A 0 S 

AppendiX 

[The following letter from the Department of Justice will not appear in the Code of Federal 

Regulations. ] 

Mary Anne Sullivan, General Counsel 

Department of Energy 

Washington, D.C. 20585 

Dear General Counsel Sullivan: 

DEPARTMENT OF JUSTICE 

Antitrust Division 

A. DOUGLAS MELAMED 

Acting Assistant Attorney General 

Main Justice Building 

950 Pennsylvania Avenue. N . W . 

. Washington, D.C. 20530-0001 

(202) 514-24011 (202) 616-2645 (f) 

antitrust@justice.usdoj.gov (internet) 

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

December 4, 2000 . 

I am responding to your October 16, 2000 letter seeking the views of the Attorney 

General about the potential impact on competition of two proposed energy efficiency standards: 

one for clothes washers and the other for residential central air conditioners and heat pumps. 

Your request was submitted pursuant to Section 325(0)(2)(B)(i) of the Energy Policy and 

Conservation Act, 42 U.S.C. §6291, 6295 ("EPCA"), which requires the Attorney General to 

make a determination of the impact of any lessening of competition that is likely to result from 

the imposition of proposed energy efficiency standards. The Attorney General's responsibility· 

for responding to requests from other departments about the effect of a program on competition 

has been delegated to the Assistant Attorney General for the Antitrust Division in 28 GFR § 

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 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 of Energy by manufacturers. We have additionally conducted

interviews with members of the industries.

We have concluded that the proposed clothes washer standard would not adversely affect

competition. In reaching this conclusion, we note that the proposed standard is based on a joint

recommendation submitted to the Department of Energy by manufacturers and energy

conservation advocates. That recommendation states that virtually all manufacturers of clothes

washers who sell in the United States participated in arriving at the recommendation through

their trade association, that the recommendation was developed in consultation with small

manufacturers, and that the manufacturers believe the new standard would not likely reduce

competition. We note further that, as the industry recommended, the proposed standard will be

phased in over six years, which will allow companies that do not already have products that meet

the proposed standard sufficient time to redesign their product lines.

With respect to the proposed residential central air conditioner and heat pump standard,

we have concluded that there could be an adverse impact on competition. The proposed standard,

Trial Standard Level 3, is expressed in terms of two industry measurements: SEER (Seasonal

Energy Efficiency Ratio) and HSPF (Heating Seasonal Performance Factor).' These standards

would change from the current central air conditioner and heat pump efficiency standards of 10

SEER/6.8 HSPF for split system air conditioners and heat pumps and 9.7 SEER/6.6 HPSF for

single package air conditioners and heat pumps to 12 SEER for air conditioners and 13 SEER/7.7

HPSF for heat pumps.

We have identified three possible competitive problems presented by the proposed

standards. First, the proposed 13 SEER heat pump standard would have a disproportionate

impact on smaller manufacturers. Currently less than 20% of the total current product lines meet

the proposed standards, but for some small manufacturers, 100% of their product lines fail to

satisfy the proposed standard.

Second, the proposed standard for heat pumps, and in some instances for air conditioners,

would have an adverse impact on some manufacturers of these products (including those

products referred to in the Federal Register notice as "niche products") used to retrofit existing

housing and used in manufactured housing. These manufacturers could not make units that

comply with the rule and fit into the available space.

'The Federal Register notice also requested comments on a proposal to adopt a standard

for steady-state cooling efficiency (EER) and discussed several options the Department of

Energy is considering. The proposed rule set forth in the notice does not, however, include a

provision regarding an EER standard, and the views of the Department of Justice expressed in

this letter are limited to the impact of any lessening of competition ... that is likely to result

from the imposition of the [proposed] standard," as required by EPCA. If the Department of

Energy proposes a rule in the future incorporating an EER standard, the Department will then

evaluate that proposed rule and express its views about the competitive impact of that standard.

11 4:\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-OO.wpd

EE-RM-STD-98-440 COMMENT 205

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

provided to the Department of Energy by manufacturers. We have additionally conducted 

interviews with members of the industries. 

We have concluded that the proposed clothes washer standard would not adversely affect 

competition. In reaching this conclusion, we note that the proposed standard is based on a joint 

recommendation submitted to the Department of Energy by manufacturers and energy' 

conservation advocates. That recommendation states that v'irtually all manufacturers of clothes 

washers who sell in the United States participated in arriving at the recommendation through 

their trade association, that the recommendation was developed in consultation with small 

manufacturers, and that the manufacturers believe the new standard would not likely reduce 

competition. We note further that, as the industry recommended, the proposed standard will be 

phased in over six years, which will allow companies that do not already have products that meet 

the proposed standard sufficient time to redesign their product lines. 

With respect to the proposed residential central air conditioner and heat pump standard, 

we have concluded that there could be an adverse impact on competition. The proposed standard, 

Trial Standard Level 3, is expressed in terms of two industry measurements: SEER (Seasonal 

Energy Efficiency Ratio) and HSPF (Heating Seasonal Performance Factor}.1 These standards 

would change from the current central air conditioner and heat pump efficiency standards of 10 

SEERJ6.8 HSPF for split system air conditioners and heat pumps and 9.7 SEERJ6.6 HPSF for 

single package air conditioners and heat pumps to 12 SEER for air conditioners and 13 SEERl7.7 

HPSF for heat pumps. 

We hav~ identified three possible competitive problems presented by the proposed 

standards. First, the proposed 13' SEER heat pump standard would have a disproportionate 

impact on smaller manufacturers. Currently less than 20% of the total current product lines meet 

the proposed standards, but for some small manufacturers, 100% of their product lines fail to 

satisfy the proposed standard. 

Second, the proposed standard for heat pumps, and in some instance,s for air conditioners, 

would have an adverse impact on some manufacturers of these products (including those 

products referred to in the Federal Register notice as "niche products") used to retrofit existing 

housing and used in manufactured housing. These manufacturers could not make units that 

comply with the rule and fit into the available space. 

IThe Federal Register notice also requested comments on a proposal to adopt a standard 

for steady-state cooling efficiency (EER) and discussed several options the Department of 

Energy is considering. The proposed rule set forth in the notice does not, however, include a 

provision regarding an EER standard, and the views of the Department of Justice expressed in 

this letter are limited to the impact of any lessening of competition ... that is likely to result 

from the imposition of the [proposed] standard~" as required by EPCA. If the Department of 

Energy proposes a rule in the future incorporating an EER standard, the Department will then 

evaluate that proposed rule and express its views about the competitive impact of that standard. 

114:IMike\US DOE\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 of heat pumps, it is possible 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 of Justice urges the Department of Energy to take into account these

possible impacts on competition in determining its final energy efficiency standard for air

conditioners and heat pumps. The Department of Energy should consider setting a lower SEER

standard for heat pumps, such as the standard included in Trial Standard Level 2, and a lower

SEER standard for air conditioners for retrofit markets where there are space constraints (such as

markets served by niche products) and for manufactured housing.

Sincerely

A. Douglas Melamed

1 1 :\Mike\US DOE\Central Air\SEER13 Final Rule draft 12 master 12-14-00.wpd

EE-RM-STD-98-440 COMMENT 205

... 

Third, the proposed heat pump standard of 13 SEER could make heat pumps less 

competitive with alternative heating and cooling systems. Because the standard will result in 

increases in the size and cost of heat pumps, it is possible that purchasers will shift away from 

heat pumps to other systems that inc 1 ude electric resistance heat, reducing the competition that 

presently exists between heat pumps and those other systems. 

The Department of Justice urges the Department of Energy to take into account these 

possible impacts on competition in determining its final energy efficiency standard for air 

conditioners and heat pumps. The Department of Energy should consider setting a lower SEER 

standard for heat pumps, such as the standard included in Trial Standard Level 2, and a lower 

SEER standard for air conditioners for retrofit markets where there are space constraints (such as 

markets served by niche products) and for manufactured housing. 

Sincerely 

A. Doug 1 as Melamed 

11,$;:\Mike\uS DOE\Central Air\SEERI3 Final Rule draft 12 master 12-14-00.wpd