CHAPTER 2. ANALYTICAL FRAMEWORK 

TABLE OF CONTENTS 

2.1 INTRODUCTION ........................................................................................................... 2-1
 

2.2 BACKGROUND ............................................................................................................. 2-5
 

2.3 MARKET AND TECHNOLOGY ASSESSMENT ........................................................ 2-5
 

2.3.1 Market Assessment .......................................................................................................... 2-5
 

2.3.2 Technology Assessment................................................................................................... 2-6
 

2.4 SCREENING ANALYSIS .............................................................................................. 2-6
 

2.5 ENGINEERING ANALYSIS.......................................................................................... 2-7
 

2.6 ENERGY AND WATER USE DETERMINATION...................................................... 2-7
 

2.7 MARKUPS FOR PRODUCT PRICE DETERMINATION ........................................... 2-7
 

2.8 LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS ..................................... 2-8
 

2.9 SHIPMENTS ANALYSIS............................................................................................... 2-9
 

2.10 NATIONAL IMPACT ANALYSIS................................................................................ 2-9
 

2.10.1 National Energy Savings Analysis................................................................................... 2-9
 

2.10.2 Net Present Value Analysis ........................................................................................... 2-10
 

2.10.3 Forecasted Efficiencies .................................................................................................. 2-11
 

2.11 LIFE-CYCLE COST SUBGROUP ANALYSIS .......................................................... 2-11
 

2.12 MANUFACTURER IMPACT ANALYSIS.................................................................. 2-11
 

2.13 UTILITY IMPACT ANALYSIS................................................................................... 2-12
 

2.14 EMPLOYMENT IMPACT ANALYSIS....................................................................... 2-12
 

2.15 ENVIRONMENTAL ASSESSMENT .......................................................................... 2-13
 

2.16 REGULATORY IMPACT ANALYSIS........................................................................ 2-14
 

2.17 DEPARTMENT OF JUSTICE REVIEW ..................................................................... 2-14
 

LIST OF FIGURES 

Figure 2.1.1 Flow Diagram of Analyses for the Rulemaking Process..................................... 2-2
 

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EERE-2006-STD-0127 COMMENT 69.1
CHAPTER 2. ANALYTICAL FRAMEWORK 

2.1 INTRODUCTION 

Sections 6295(o)(2)(A) and 6316(a) of 42 U.S.C. require the U.S. Department of Energy 

(DOE) to set forth energy conservation standards that are technologically feasible and 

economically justified and would result in significant additional energy conservation. This 

chapter provides a description of the general analytical framework that DOE uses in developing 

such standards, in particular, standards for residential dishwashers, dehumidifiers, and cooking 

products, and commercial clothes washers (CCWs) (“the considered products”). The analytical 

framework is a description of the methodology, the analytical tools, and relationships among the 

various analyses that are part of this rulemaking. For example, the methodology that addresses 

the statutory requirement for economic justification includes analyses of life-cycle cost (LCC); 

economic impact on manufacturers and users; national benefits; impacts, if any, on utility 

companies; and impacts, if any, from lessening competition among manufacturers. DOE has also 

solicited the views of the U.S. Department of Justice (DOJ) on any lessening of competition 

likely to result from the imposition of a new or amended standard. 

Figure 2.1.1 summarizes the analytical components of the standards-setting process. The 

focus of this figure is the center column, identified as “Analyses.” The columns labeled “Key 

Inputs” and “Key Outputs” show how the analyses fit into the rulemaking process, and how the 

analyses relate to each other. Key inputs are the types of data and information that the analyses 

require. Some key inputs exist in public databases; DOE collects other inputs from interested 

parties or persons with special knowledge. Key outputs are analytical results that feed directly 

into the standards-setting process. Dotted lines connecting analyses show types of information 

that feed from one analysis to another. 

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EERE-2006-STD-0127 COMMENT 69.1
Notice of Proposed Rulemaking (NOPR)

Final Rule

Framework Document

Advance Notice of Proposed Rulemaking (ANOPR)

Utility Impact

Analysis 

Approaches Key Inputs Analyses Key Outputs

Market and Technology

Assessment

Screening Analysis

Engineering Analysis

Markups for

Product Price

Determination Life-Cycle Cost and 

Payback Period

Analysis

National Impact

Analysis

Energy Use

Revise ANOPR

Analyses

Life-Cycle Cost

Sub-Group Analysis

Manufacturer Impact

Analysis

Shipments

Analysis

Employment Impact

Analysis 

Revise Analyses

• Product Classes

• Technology Options

• Industry Cash Flow

• Sub-Group Cash-Flow

• Direct Employment Impacts

• Competitive Impacts

• Cumulative Regulatory Burden

• Cost-Efficiency Relationship

• Life-Cycle Costs

• Payback Periods

• National Energy Savings

• Net Present Values

• National Employment Impacts

• Revised Results

• Characterize Industry

• Market Segmentation

• Non-Regulatory Programs

• Efficiency-Level Approach

• Design Option Approach

• Energy Prices

• Installation Costs

• Maintenance & Repair Costs

• Accounting Approach

• Backcast and Forecast

• Market Saturation

• Stakeholder Comments

• Demographics

• Manufacturer Interviews

• GRIM Analysis

• Emission Rates

• National Energy Savings

• Stakeholder Comments

• Identify Firms/Products

• Historical Shipments

• Define Distribution Channels

• Economic Census Data

Analysis

• Retail Price Collection and

Analysis

• Manufacturer Prices

• Average Costs

• Manufacturer Financial Data

Design Options

Product Classes

Retail Prices

Design Energy/ Use

• Efficiency/Performance

• Manufacturing Cost

Candidate

Standard 

Levels

• Analysis of Energy Use

Data

Environmental

Assessment

Regulatory Impact

Analysis

Technology Options

• Emission Estimates

• Utility Load Factors

• National Energy Savings

• Non-Regulatory

Alternatives

• NEMS-BT

• ImSET

• NEMS-BT

• Design Options

• Energy Price Forecasts

• Site-to-Source Factors

• Energy-Efficiency Levels

Direct Employment

Impacts

• National Energy Savings

• National Product Costs

• National Operating Costs

• Utility Impacts

• Analysis of Market Data

• Analysis of Product Data

• Life-Cycle Costs

• Payback Periods

• Installation

Costs

• Maint Costs

• Repair Costs

• UEC

• Energy Prices

• Annual Energy Use (UEC)

Preliminary

Manufacturer Impact

Analysis

• Manufacturer Prices

• Average Costs

• Conversion Capital Expenditures

• Direct Employment Impacts

• National Energy Savings

• Net Present Values

• Trial Standard Levels (TSLs)

TSLs

• Product Prototypes

Energy-Efficiency

Levels

• Department of Justice Review

Utility Impact 

Analysis 

Notice of Proposed Rulemaking (NOPR) 

Final Rule 

Approaches Key Inputs Analyses Key Outputs 

Market and Technology 

Assessment 

Screening Analysis 

Engineering Analysis 

Markups for 

Product Price 

Determination Life-Cycle Cost and 

Payback Period 

Analysis 

National Impact 

Analysis 

Energy Use 

Revise ANOPR 

Analyses 

Life-Cycle Cost 

Sub-Group Analysis 

Manufacturer Impact 

Analysis 

Shipments 

Analysis 

Employment Impact 

Analysis 

Revise Analyses 

• Product Classes 

• Technology Options 

• Industry Cash Flow 

• Sub-Group Cash-Flow 

• Direct Employment Impacts 

• Competitive Impacts 

• Cumulative Regulatory Burden 

• Cost-Efficiency Relationship 

• Life-Cycle Costs 

• Payback Periods 

• National Energy Savings 

• Net Present Values 

• National Employment Impacts 

• Revised Results 

• Characterize Industry 

• Market Segmentation 

• Non-Regulatory Programs 

Framework Document 

• Efficiency-Level Approach 

• Design Option Approach 

• Energy Prices 

• Installation Costs 

• Maintenance & Repair Costs 

• Accounting Approach 

• Backcast and Forecast 

• Market Saturation 

• Stakeholder Comments 

• Demographics 

• Manufacturer Interviews 

• GRIM Analysis 

• Emission Rates 

• National Energy Savings 

• Stakeholder Comments 

• Identify Firms/Products 

• Historical Shipments 

• Define Distribution Channels 

• Economic Census Data 

Analysis 

• Retail Price Collection and 

Analysis 

• Manufacturer Prices 

• Average Costs 

• Manufacturer Financial Data 

Design Options 

Product Classes 

Retail Prices 

Design Energy/ Use 

Advance Notice of Proposed Rulemaking (ANOPR) 

• Efficiency/Performance 

• Manufacturing Cost 

Candidate 

Standard 

Levels 

• Analysis of Energy Use 

Data 

Environmental 

Assessment 

Regulatory Impact 

Analysis 

Technology Options 

• Emission Estimates 

• Utility Load Factors 

• National Energy Savings 

• Non-Regulatory 

Alternatives 

• NEMS-BT 

• ImSET 

• NEMS-BT 

• Design Options 

• Energy Price Forecasts 

• Site-to-Source Factors 

• Energy-Efficiency Levels 

Direct Employment 

Impacts 

• National Energy Savings 

• National Product Costs 

• National Operating Costs 

• Utility Impacts 

• Analysis of Market Data 

• Analysis of Product Data 

• Life-Cycle Costs 

• Payback Periods 

• Installation 

Costs 

• Maint Costs 

• Repair Costs 

• UEC 

• Energy Prices 

• Annual Energy Use (UEC) 

Preliminary 

Manufacturer Impact 

Analysis 

• Manufacturer Prices 

• Average Costs 

• Conversion Capital Expenditures 

• Direct Employment Impacts 

• National Energy Savings 

• Net Present Values 

• Trial Standard Levels (TSLs) 

TSLs 

• Product Prototypes 

Energy-Efficiency 

Levels 

• Department of Justice Review 

Figure 2.1.1 Flow Diagram of Analyses for the Rulemaking Process 

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EERE-2006-STD-0127 COMMENT 69.1
 

 

The analyses performed in the advance notice of proposed rulemaking (ANOPR)a stage 

and reported in the ANOPR technical support document (TSD) include: 

•	 A market and technology assessment to characterize the relevant product markets and 

existing technology options, including prototype designs. 

•	 A screening analysis to review each technology option and determine if it is 

technologically feasible; is practical to manufacture, install, and service; would adversely 

affect product utility or product availability; or would have adverse impacts on health and 

safety. 

•	 An engineering analysis to develop cost-efficiency relationships, which are the increased 

manufacturer production cost (material, labor, and factory overhead) of more efficient 

products and equipment. 

•	 A product price markup analysis to determine how manufacturing costs are converted to 

customer prices, which are then used in the LCC and payback period (PBP) analyses and 

the manufacturer impact analysis (MIA). 

•	 An energy and water use analysis to determine the annual energy and water use of the 

considered products and equipment. 

•	 An LCC and PBP analysis to calculate, at the customer level, the discounted savings in 

operating costs (less maintenance and repair costs) throughout the estimated average life 

of the covered products and equipment, compared to any increase in the installed cost 

likely to result directly from the imposition of the standard. 

•	 A shipments analysis forecasts product shipments, which are then used to calculate the 

national impacts of standards on energy consumption and costs, net present value (NPV), 

and future manufacturer cash flows. 

•	 A national impact analysis to assess the aggregate impacts at the national level of the 

NPV of total consumer LCC and national energy savings (NES). 

•	 A preliminary MIA to identify key issues for the manufacturers and to qualitatively 

assess potential impacts of energy conservation standards. 

a

 In energy conservation standards rulemakings in the past, and for this rulemaking, DOE issued an ANOPR 

following publication of the framework document. EISA 2007 eliminated the requirement that DOE issue ANOPRs 

as part of the standards rulemaking process; see EISA 2007, at sec. 307. DOE is now using an alternative process 

known as the preliminary activities and analyses. The preliminary activities and analyses will provide the same 

information and ability for public comment as the ANOPR, but without publication of analyses in the Federal 

Register. 

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EERE-2006-STD-0127 COMMENT 69.1
The analyses DOE performed in the subsequent notice of proposed rulemaking (NOPR) 

stage and reported in the NOPR TSD include those listed below. In addition, DOE re-analyzed 

the work done in the ANOPR stage. Because the Energy Independence and Security Act of 2007 

(EISA 2007) (Pub. L. No. 110-140) amended the Energy Policy and Conservation Act (EPCA) 

of 1975 (42 U.S.C. 6291–6309) to establish revised energy conservation standards for residential 

dishwashers and dehumidifiers (42 U.S.C. 6295(g)(9) and (cc)), DOE did not adopt standards for 

these products in a final rule for this rulemaking, and instead codified these statutory standards in 

a separate final rule. 74 FR 12058 (March 23, 2009). Therefore, DOE did not re-analyze 

dishwashers and dehumidifiers for the NOPR, and did not report the results of the ANOPR 

analyses for these products in the NOPR TSD nor is DOE reporting these results in this TSD. 

•	 An LCC subgroup analysis to evaluate variations in customer characteristics that might 

cause a standard to impact particular customer sub-populations differently than the 

overall population. 

•	 An MIA to estimate the financial impact of standards on manufacturers and to calculate 

impacts on competition, employment, and manufacturing capacity. 

•	 A utility impact analysis to estimate effects of proposed standards on electric and gas 

utilities. 

•	 An employment impact analysis to assess the aggregate impacts of standards on national 

employment. 

•	 An environmental assessment to provide estimates of the effects of standards on three 

pollutants—sulfur dioxide (SO2), nitrogen oxides (NOx), and mercury (Hg)—as well as 

carbon dioxide (CO2) emissions. 

•	 A regulatory impact analysis to present major alternatives to proposed standards that 

could achieve energy savings at a lower cost. 

After the publication of the NOPR, DOE reviewed comments from interested parties and 

revised its analyses as appropriate before issuing a final rule. In addition, information DOE 

received from interested parties regarding the NOPR indicated that further analyses were 

warranted for CCWs and microwave ovens as to standby power. As a result, DOE continued the 

rulemaking for these products, and a final rule for conventional cooking products (i.e., cooktops 

and ovens) and microwave oven energy factor (EF) was published on April 8, 2009. 74 FR 

16040. 

DOE revised its NOPR analyses for CCWs in a subsequent supplemental notice of 

proposed rulemaking (SNOPR) that was published on November 9, 2009. 74 FR 57738. After 

the publication of the SNOPR, DOE reviewed comments from interested parties and revised its 

analyses to issue a final rule for CCWs. 

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EERE-2006-STD-0127 COMMENT 69.1
The information DOE developed for all covered products and equipment as part of the 

market and technology assessment is presented in chapter 3, but only the details of the analyses 

for CCWs are included in this TSD. Discussion of the analyses which were conducted at the 

NOPR stage for the covered products can be found in the NOPR TSD for this rulemaking, and 

updated analyses for the final rule for conventional cooking products and microwave oven EF 

are presented in the final rule TSD for those products. Details of the revised analyses for 

microwave oven standby power will be provided in a separate TSD when a final rule for this 

product is published. This final rule TSD contains details of the revised SNOPR analyses 

conducted for CCWs. 

2.2 BACKGROUND 

As described in chapter 1, the July 15, 1996, Procedures for Consideration of New or 

Revised Energy Conservation Standards for Consumer Products (the “Process Rule”), 61 FR 

36974 (July 15, 1996) outlined procedural improvements to the standards rulemaking process 

which included a review of the following elements used in the rulemaking process: (1) economic 

models; (2) analytical tools; (3) methodologies; (4) non-regulatory approaches; and (5) 

prioritization of future rules. See appendix A to subpart C of Title 10 Code of Federal 

Regulations Part 430 (10 CFR Part 430). 

DOE developed this analytical framework for the rulemaking on the considered 

equipment under the Process Rule. DOE documented this analytical framework in the 

Rulemaking Framework for Commercial Clothes Washers and Residential Dishwashers, 

Dehumidifiers, and Cooking Products (March 15, 2006), and presented the analytical approach 

to interested parties during a public meeting held on April 30, 2006. The framework document is 

available at http://www1.eere.energy.gov/buildings/appliance_standards/. The following 

sections provide a general description of the different analytical components of the rulemaking 

framework. 

2.3 MARKET AND TECHNOLOGY ASSESSMENT 

The market and technology assessment characterizes the relevant equipment markets and 

existing technology options, including prototype designs, for the considered equipment. 

2.3.1 Market Assessment 

When initiating a standards rulemaking, DOE develops information on the present and 

past industry structure and market characteristics for the products and equipment concerned. This 

activity assesses the industry and equipment, both quantitatively and qualitatively, based on 

publicly available information. As such, for the considered products and equipment, DOE 

addressed the following: (1) manufacturer market share and characteristics; (2) existing 

regulatory and non-regulatory product efficiency improvement initiatives; and (3) trends in 

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EERE-2006-STD-0127 COMMENT 69.1
product characteristics and retail markets. This information serves as resource material 

throughout the rulemaking. 

DOE reviewed existing literature and interviewed manufacturers to get an overall picture 

of the markets for the considered products and equipment in the United States. Industry 

publications and trade journals, government agencies, and trade organizations provided the bulk 

of the information, including information on: (1) manufacturers and their market share; (2) 

shipments by capacity; and (3) market saturation. The appropriate sections of this TSD describe 

the resulting information as DOE used it in the analysis. 

DOE has used the most reliable and accurate data available at the time of each analysis in 

this rulemaking. All data is available for public review. 

2.3.2 Technology Assessment 

DOE typically uses information relating to existing and past technology options and 

prototype designs as inputs to determine what technologies manufacturers use to attain higher 

performance levels. In consultation with interested parties, DOE develops a list of technologies 

for consideration. Initially, these technologies encompass all those it believes are technologically 

feasible. 

DOE developed its list of technologically feasible design options for the considered 

products and equipment through consultation with manufacturers of components and systems, 

and from trade publications and technical papers. Since many options for improving product 

efficiency are available in existing units, product literature and direct examination provided 

additional information. 

2.4 SCREENING ANALYSIS 

The screening analysis examines various technologies as to whether they: (1) are 

technologically feasible; (2) are practicable to manufacture, install, and service; (3) have an 

adverse impact on product utility or availability; and (4) have adverse impacts on health and 

safety. As described in section 2.3.2 above, DOE develops an initial list of efficiencyenhancement options from the technologies identified as technologically feasible in the 

technology assessment. Then DOE, in consultation with interested parties, reviews the list to 

determine if these options are practicable to manufacture, install, and service, would adversely 

affect equipment utility or availability, or would have adverse impacts on health and safety. In 

addition, DOE removed from the list technology options that lack energy consumption data as 

well as technology options whose energy consumption could not be adequately measured by 

existing DOE test procedures. In the engineering analysis, DOE further considers efficiency 

enhancement options that it did not screen out in the screening analysis. 

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EERE-2006-STD-0127 COMMENT 69.1
 

2.5 ENGINEERING ANALYSIS
 

As presented in chapter 5, the engineering analysis establishes the relationship between 

the manufacturing cost and efficiency of CCWs. This relationship serves as the basis for 

cost/benefit calculations in terms of individual consumers, manufacturers, and the Nation. 

Chapter 5 discusses the equipment classes DOE analyzed, the representative baseline units, the 

incremental efficiency levels, the methodology DOE used to develop manufacturing costs, and 

the cost-efficiency curves. 

In determining the relationship between manufacturer cost and energy efficiency for 

CCWs, DOE estimated the increase in manufacturer cost associated with technological changes 

that increase the efficiency of the baseline models. DOE typically obtains cost estimates for the 

engineering analysis (which it also uses in the MIA) from detailed incremental cost data supplied 

by manufacturers, disaggregated into the cost of incremental material, labor, and overhead. DOE 

created an industry-wide analysis based primarily on the manufacturer-supplied data, and 

supplemented this analysis with a manufacturing cost estimate. This approach involved the 

limited laboratory testing, data gained through review of recent residential clothes washer 

(RCW) engineering analyses, and other primary and secondary research. DOE obtained input 

from interested parties on the manufacturing cost estimates and assumptions to confirm their 

accuracy. 

For each of the equipment classes presented in chapter 5, DOE selected efficiency levels 

and estimated incremental cost data at each of these levels. 

2.6 ENERGY AND WATER USE DETERMINATION 

The energy use determination assessed the energy- and water-savings potential of 

different efficiencies for CCWs. 

As part of the energy use determination, DOE made certain engineering assumptions 

regarding equipment application, including how the equipment is operated and under what 

conditions. For CCWs, the test procedure that is codified in the Code of Federal Regulations 

(CFR) provides a viable method for establishing a unit’s rated efficiency—e.g., cubic feet of 

capacity/kilowatt-hour energy consumption (kWh)—but does not provide an accurate means for 

establishing annual energy consumption. Because the test procedure is based on rating the 

performance of RCWs, the cycles-per-year values do not reflect CCW usage. Thus, DOE 

conducted further research to establish the energy and water consumption for this equipment. 

2.7 MARKUPS FOR PRODUCT PRICE DETERMINATION 

For the LCC and PBP analysis and the MIA, retail prices are required for the baseline 

efficiency level and all other efficiency levels under consideration. DOE derived retail prices by 

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EERE-2006-STD-0127 COMMENT 69.1
applying manufacturer-to-customer markups to the manufacturing cost estimates. To develop 

markups, DOE identified distribution channels (i.e., how the equipment is distributed from the 

manufacturer to the customer.) Once DOE established proper distribution channels for each of 

the equipment classes, it relied on economic census data from the U.S. Census Bureau and input 

from the industry to define how equipment is marked up from the manufacturer to the customer. 

2.8 LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS 

The effects of amended energy conservation standards are changes in operating 

expenses—usually a decrease—and changes in customer price—usually an increase. DOE 

analyzed the net effect of new standards on customers by evaluating the net LCC using the costefficiency relationships derived in the engineering analysis, as well as the costs derived from the 

energy and water use determination. Inputs to the LCC calculation include the installed cost to 

the customer (customer price plus installation cost), operating expenses (energy expenses and 

maintenance costs), the lifetime of the equipment, and a discount rate. 

The installed and operating costs of equipment typically change in response to new 

standards—installed cost typically increases while operating cost typically decreases. Thus, there 

is a specific time in the life of higher-than-baseline efficiency equipment when the net operating 

cost benefit (in dollars) from the time of purchase is equal to the incremental first cost of 

purchasing the higher efficiency unit. The length of time required for equipment to reach this 

cost-equivalence point is known as the payback period. 

For the ANOPR, DOE conducted the LCC and PBP analysis using typical values to 

reflect the conditions in the field for equipment life, equipment retail price, national or regional 

energy costs, energy consumption, and discount rates. DOE subsequently conducted the LCC 

subgroup analysis for the NOPR and included an assessment of impacts on subgroups of 

consumers. For the SNOPR and this final rule, DOE updated the NOPR LCC and PBP analysis, 

as well as the LCC subgroup analysis, to reflect current energy costs. 

To estimate the LCC for CCWs, DOE had to determine several input values, including 

retail prices; electricity and natural gas prices; discount rates; maintenance, service, and 

installation costs; and equipment lifetimes. DOE reviewed the Energy Information 

Administration (EIA)’s energy price data to establish electricity and natural gas prices for 

residential customers. DOE used EIA’s Annual Energy Outlook (AEO) as the default source of 

projections of future energy prices in its LCC and PBP analysis. 

DOE developed discount rates for companies that purchase CCWs. It derived the 

discount rates from estimates of the interest or “finance cost” to purchase residential products. 

Following financial theory, the finance cost of raising funds to purchase this equipment can be 

interpreted as: (1) the financial cost of any debt incurred to purchase equipment, principally 

interest charges on debt, or (2) the opportunity cost of any equity used to purchase equipment, 

principally interest earnings on household equity. 

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EERE-2006-STD-0127 COMMENT 69.1
DOE considered expected changes to maintenance, repair, and installation costs for the 

equipment covered in this rulemaking. Typically, small incremental changes in equipment 

efficiency incur no, or only very small, changes in repair and maintenance costs over baseline 

efficiency equipment. There is a greater probability that units with efficiencies that are 

significantly greater than the baseline will incur increased repair and maintenance costs, since 

such equipment is more likely to incorporate technologies that are new to the industry and not 

widely available. DOE used input from manufacturers, installers, and servicers in developing 

appropriate repair and maintenance costs. 

DOE used information from various literature sources (e.g., Appliance Magazine) and 

input from manufacturers and other interested parties to establish average equipment lifetimes 

for use in the LCC and subsequent analyses. 

2.9 SHIPMENTS ANALYSIS 

Shipment forecasts are required to calculate the national impacts of standards on energy, 

NPV, and future manufacturer cash flows. DOE developed shipment forecasts using historical 

data as a basis for projecting future shipments of CCWs. In projecting shipments, DOE 

accounted for three market segments: (1) new construction; (2) existing buildings (i.e., replacing 

failed equipment); and (3) retired units not replaced. DOE used the non-replacement market 

segment to calibrate the Shipments Model to historical shipments data. For purposes of 

estimating the impacts of prospective standards on equipment shipments (i.e., forecasting 

standards-case shipments,) DOE accounted for the combined effects of changes in purchase 

price, annual operating cost, and household income on the consumer purchase decision. 

2.10 NATIONAL IMPACT ANALYSIS 

The national impact analysis assesses the NPV of total customer LCC and NES. DOE 

determined both the NPV and the NES for the performance levels considered for the equipment 

classes it analyzed. To make the analysis more accessible and transparent to all interested parties, 

DOE prepared an NES Spreadsheet Model in Microsoft Excel to forecast energy savings and the 

national economic costs and savings resulting from new standards. The model assessed the 

aggregate economic impacts of standards at the national level. The NES Spreadsheet Model does 

not use probability distributions for inputs or outputs. To assess the impact of input uncertainty 

on the NES and NPV results, DOE can conduct sensitivity analyses by running scenarios on 

input variables that are of interest. 

2.10.1 National Energy Savings Analysis 

The inputs for the determination of NES are: (1) annual energy consumption per unit; (2) 

shipments; (3) product stock; (4) national energy consumption; and (5) site-to-source conversion 

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EERE-2006-STD-0127 COMMENT 69.1
 

factors. DOE calculated the national energy consumption by multiplying the number of units, or 

stock, of equipment (by vintage) by the unit energy consumption (also by vintage).b

 DOE 

calculated national annual energy savings as the difference between national energy consumption 

in the base case (without amended energy conservation standards) and in each higher efficiency 

standards case. The analysis included estimated energy savings by fuel type used for generating 

electricity. DOE estimated energy consumption and savings based on site energy, and converted 

the electricity consumption and savings to source energy. Cumulative energy savings are the sum 

of the annual NES, which DOE determined over specified time periods. 

The stock of equipment is dependent on annual shipments and the lifetime of the 

equipment. DOE conducted shipments projections under the base efficiency case and higher 

efficiency standards cases for a variety of possible equipment efficiency scenarios and trends. 

DOE determined that shipment projections under the higher standard efficiency cases were lower 

than those from the base efficiency case projection, because of the higher installed cost of the 

more efficient equipment. The projections indicated that higher installed costs would cause some 

customers to forego equipment purchases. As a result, DOE used the higher efficiency standard 

case shipments projection and, in turn, the resulting stock of equipment under the higher 

efficiency standards case, to determine the NES. Calculating the NES in this way avoids the 

inclusion of savings resulting from displaced shipments. 

2.10.2 Net Present Value Analysis 

The inputs for the determination of NPV are (1) total annual installed cost; (2) total 

annual operating cost savings; (3) discount factor; (4) present value of costs; and (5) present 

value of savings. DOE calculated NPV as the difference between the present value of operating 

cost savings and the present value of increased total installed costs. It calculated net savings each 

year as the difference between total operating cost savings (including electricity, repair, and 

maintenance cost savings) and increases in total installed costs (including equipment price and 

installation cost). DOE calculated savings over the life of the equipment, accounting for 

differences in yearly energy rates, and discounted future costs and savings to the present with a 

discount factor. 

DOE calculated increases in total installed costs by multiplying the difference in the total 

installed cost between the base case and standards case by the annual shipments in the standards 

case. Because costs of the more efficient equipment bought in the standards case are higher than 

those of the equipment bought in the base case, price increases appear as negative values in the 

NPV analysis. 

DOE expressed operating cost savings as decreases in operating costs associated with the 

lower energy consumption of equipment bought in the standards case compared to the base case. 

Total operating cost savings are the product of savings per unit and the number of units of each 

vintage surviving in a particular year. 

b

 Vintage represents the age of the equipment. 

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EERE-2006-STD-0127 COMMENT 69.1
2.10.3 Forecasted Efficiencies 

Several of the inputs for the determination of NES (e.g., the annual energy consumption 

per unit) and NPV (e.g., the total annual installed cost and the total annual operating cost 

savings) are dependent on the efficiency of the equipment. Thus, DOE forecasted efficiencies for 

the base case and standards cases. The forecasted efficiencies specify the annual shipmentweighted average equipment efficiencies for future years. 

DOE based the development of the equipment efficiencies in the base case on the 

assignment of efficiencies in the year 2005. In other words, DOE determined the distribution of 

equipment efficiencies currently in the marketplace to develop a shipment-weighted efficiency 

for the year 2005. As described in chapter 11, DOE assumed that forecasted efficiencies 

remained frozen at the efficiency level in the year 2005 until the end of the forecast period. 

DOE based its standards case forecasts (i.e., forecasts of efficiency trends after standards 

take effect) on the use of a roll-up efficiency scenario. Under a roll-up scenario, all equipment at 

performance levels below a prospective standard are moved, or rolled up, to the minimum 

performance level allowed under the new standard. The distribution of equipment at efficiency 

levels above the new minimum standard levels is assumed to be unaffected (i.e., this equipment 

remains at its pre-standard performance levels.) The roll-up efficiency scenario dictates how 

DOE determined efficiency distributions in the first year a new standard takes effect, but does 

not define how equipment efficiency will be distributed in the future. As was done for the base 

case, DOE assumed that forecasted efficiencies under the standards case remained frozen at the 

level in the year that standards became effective until the end of the forecast period. 

2.11 LIFE-CYCLE COST SUBGROUP ANALYSIS 

The LCC subgroup analysis evaluates economic impacts of standards on any identifiable 

groups of customers who might be disproportionately affected by a change in the national energy 

conservation standard levels for CCWs. During the NOPR stage of the rulemaking, DOE 

evaluated the impacts of particular subgroups of customers in part by using the LCC Spreadsheet 

Model to analyze the LCC and PBP for these particular customers. DOE updated these analyses 

for the SNOPR and the final rule. 

For CCWs, DOE analyzed as subgroups: (1) low-income households; (2) households 

occupied by senior citizens; (3) small business subgroups that own commercial laundries; and (4) 

consumers not served by municipal water and sewer. 

2.12 MANUFACTURER IMPACT ANALYSIS 

The MIA assesses the impacts of amended energy conservation standards on 

manufacturers of CCWs. Potential impacts include financial effects, both quantitative and 

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qualitative, that might lead to changes in the manufacturing practices for this equipment. DOE 

identified these potential impacts through interviews with manufacturers and other interested 

parties. 

DOE conducted the MIA in three phases, and further tailored the analytical framework 

based on interested parties’ comments. In Phase I, an industry profile was created to characterize 

the industry, and a preliminary MIA was conducted to identify important issues that required 

consideration. In Phase II, an industry cash flow model and an interview questionnaire were 

prepared to guide subsequent discussions. In Phase III, manufacturers were interviewed, and the 

impacts of standards were assessed both quantitatively and qualitatively. Industry and cash flow 

and industry NPV were assessed through use of the Government Regulatory Impact Model 

(GRIM). Then impacts on competition, manufacturing capacity, employment, and cumulative 

regulatory burden were assessed based on manufacturer interview feedback and discussions. 

2.13 UTILITY IMPACT ANALYSIS 

The utility impact analysis assessed the impact of energy conservation standards on the 

electric and gas utility industries. To carry out this analysis, DOE used a variant of the EIA’s 

National Energy Modeling System (NEMS). NEMS is a large, multi-sectoral, partial-equilibrium 

model of the U.S. energy sector that EIA has developed over the past decade, primarily for the 

purpose of preparing the AEO. DOE used a variant known as NEMS-BT to provide key inputs to 

the analysis.c

NEMS produces a widely recognized baseline energy forecast for the United States 

through the year 2030, and is available in the public domain. The typical NEMS outputs include 

forecasts of electricity sales, price, and avoided electric generating capacity. DOE conducted the 

utility impact analysis as a scenario departing from the latest AEO reference case. In other words, 

DOE modeled the energy savings impacts from amended energy conservation standards using 

NEMS-BT to generate forecasts that deviate from the AEO reference case. 

2.14 EMPLOYMENT IMPACT ANALYSIS 

New or amended energy conservation standards can impact employment both directly 

and indirectly. Direct employment impacts are changes in the number of employees at the plants 

that produce CCWs, and at the affiliated distribution and service companies, resulting from the 

a For more information on NEMS, please refer to the U.S. Department of Energy, Energy Information 

Administration documentation . A useful summary is National Energy Modeling System: An Overview 2000,

DOE/EIA‐0581(2000), March 2000 . EIA approves use of the name NEMS to describe only an official version 

of the model without any modification to code or data . Because this analysis entails some minor code

modifications and the model is run under various policy scenarios that are variations on EIA assumptions, 

DOE refers to the model by the name NEMS‐BT (BT is DOE’s Building Technologies Program, under whose

aegis this work has been performed) . NEMS‐BT was previously called NEMS‐BRS. 

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adoption of new standards. DOE evaluated direct employment impacts in the MIA. Indirect 

employment impacts may result from expenditures shifting between goods (the substitution 

effect) and changes in income and overall expenditure levels (the income effect) that occur due 

to the adoption of standards. DOE investigated the combined direct and indirect employment 

impacts using the Pacific Northwest National Laboratory (PNNL)’s “Impact of Sector Energy 

Technologies” (ImSET) model. PNNL developed the ImSET model for DOE’s Office of 

Planning, Budget, and Analysis. The model estimates the employment and income effects of 

energy-saving technologies in buildings, industry, and transportation. In comparison with simple 

economic multiplier approaches, ImSET allows for more complete and automated analysis of the 

economic impacts of energy conservation investments. 

2.15 ENVIRONMENTAL ASSESSMENT 

The environmental assessment estimates the impact of possible energy conservation 

standards on three energy-related pollutants—NOx, SO2, and Hg—as well as CO2 emissions. The 

primary environmental effects of energy conservation standards for CCWs will be reduced 

emissions resulting from reduced electricity and natural gas consumption. For power sector CO2 

emissions, DOE based these calculations on the NEMS-BT modeling work used for the utility 

impact analysis. NEMS-BT tracks CO2 emissions using a detailed module that produces robust 

results because of its broad coverage of all sectors and inclusion of interactive effects. This 

approach has the advantage of examining the marginal impact of energy conservation standards 

for CCWs on the utility generation mix and the subsequent environmental emissions. There are 

two rules regulating SO2, NOx, and Hg emissions, the Clean Air Intestate Rule (CAIR) and the 

Clean Air Mercury Rule (CAMR). Both the CAIR and CAMR were vacated by federal courts in 

July and February of 2008, respectively. However, on December 23, 2008, the U.S. Court of 

Appeals for the District of Columbia Circuit decided to allow CAIR to remain in effect until it is 

replaced by a rule consistent with the court’s earlier opinion. The CAIR permanently caps 

emissions of SO2 and NOx in 28 eastern States and the District of Columbia. The CAMR is 

closely related to the CAIR and would have established standards of performance for Hg 

emissions from new and existing coal-fired electric utility steam generating units. DOE used the 

NEMS-BT model for this final rule to estimate the NOx and Hg emissions reductions due to 

standards. 

With regard to SO2 emissions, DOE has preliminarily determined that SO2 emissions 

from affected Electric Generating Units (EGUs) are subject to nationwide and regional emissions 

cap and trading programs that create uncertainty about standard’s impact on SO2 emissions. 

Title IV of the Clean Air Act sets an annual emissions cap on SO2 for all affected EGUs. SO2 

emissions from 28 eastern States and the District of Columbia (D.C.) are also limited under the 

Clean Air Interstate Rule (CAIR, published in the Federal Register on May 12, 2005. 70 FR 

25162 (May 12, 2005), which creates an allowance-based trading program that will gradually 

replace the Title IV program in those States and D.C. The attainment of the emissions caps is 

flexible among EGUs and is enforced through the use of emissions allowances and tradable 

permits. The standard could lead EGUs to trade allowances and increase SO2 emissions that 

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offset some or all SO2 emissions reductions attributable to the standard. DOE is not certain that 

there will be reduced overall SO2 emissions from the standards. The NEMS-BT modeling 

system that DOE plans to use to forecast emissions reductions currently indicates that no 

physical reductions in power sector emissions would occur for SO2. However, remaining 

uncertainty prevents DOE from estimating SO2 reductions from the standards at this time. 

Because CCWs have an impact on commercial building CO2 and NOx emissions at the 

site, DOE estimated the reduction in these building emissions due to standards. 

DOE also estimated the economic value of CO2, NOx, and Hg emission reductions. DOE 

used several sources to estimate a range in the possible economic value. As noted above, there is 

a possible SO2 impact from conservation in the form of changes in allowance prices. DOE used 

NEMS-BT to estimate the impact of standards on SO2-allowance trading and forecasts of SO2-

allowance prices. 

2.16 REGULATORY IMPACT ANALYSIS 

DOE has prepared a regulatory impact analysis (RIA) under Executive Order 12866, 

“Regulatory Planning and Review,” 58 FR 51735, October 4, 1993, which is subject to review 

under the Executive Order by the Office of Information and Regulatory Affairs (OIRA) at the 

Office of Management and Budget. The RIA evaluates non-regulatory alternatives to standards, 

in terms of their ability to achieve significant energy savings in CCWs at a reasonable cost, and 

compares the effectiveness of each one to the effectiveness of the proposed standards. 

DOE recognizes that voluntary or other non-regulatory efforts by manufacturers, utilities, 

and other interested parties can result in substantial improvements to energy efficiency or 

reductions in energy consumption. DOE considered the likely effects of non-regulatory 

initiatives on equipment energy use, consumer utility, and LCC. DOE based its assessment on 

the actual impacts of any such initiatives to date, but also considered information presented 

regarding the impacts that any existing initiative might have in the future. 

2.17 DEPARTMENT OF JUSTICE REVIEW 

EPCA states that before the Secretary of Energy may prescribe a new or amended energy 

conservation standard, the Secretary shall ask the U.S. Attorney General to make a determination 

of “the impact of any lessening of competition...that is likely to result from the imposition of the 

standard.” (42 U.S.C. 6295(o)) Pursuant to this requirement, DOE solicited the views of the 

Department of Justice (DOJ) on any lessening of competition likely to result from the imposition 

of amended standards. DOE gave full consideration to DOJ’s views in assessing economic 

justification for the amended standards. 

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