### Rulemaking Framework for Commercial Prerinse Spray Valves

Docket # EERE

- 2014

- BT

- STD

- 00 27

U.S. Department of Energy Office of Energy Efficiency and Renewable Energy

Building Technologies Office

September 4 , 2014i TABLE OF CONTENTS

1. INTRODUCTION

................................ ................................ ................................ ......... 1 1.1 The Appliance and Commercial Equipment Standards Program

............................... 1 1.2 Definitions

................................ ................................ ................................ ................... 2 1.3 Current Energy Conservation Standards

................................ ................................ ..... 3 1.4 Overview of the Rulemaking Process

................................ ................................ ......... 4 1.4.1 Preliminary Analysis

................................ ................................ .................... 5 1.4.2 Notice of Proposed Rulemaking

................................ ................................ .. 6 1.4.3 Final Rule

................................ ................................ ................................ ..... 7 1.5 Test Procedures

................................ ................................ ................................ ........... 7 1.6 Labeling

................................ ................................ ................................ ...................... 8 2. ANALYSES FOR RULEMAKING

................................ ................................ .............. 8 3. MARKET AND TECHNOLOGY ASSESSMENT

................................ .................... 11 3.1 Market Assessment

................................ ................................ ................................ ... 11 3.1.1 Manufacturer Trade Group

................................ ................................ ........ 12 3.1.2 Manufacturers and Market Shares

................................ ............................. 13 3.2 Equipment Classes

................................ ................................ ................................ .... 17 3.3 Technology Assessment

................................ ................................ ............................ 18 4. SCREENING ANALYSIS

................................ ................................ .......................... 19 5. ENGINEERING ANALYSIS

................................ ................................ ...................... 20 5.1 Overview

................................ ................................ ................................ ................... 20 5.2 Baseline Models

................................ ................................ ................................ ........ 21 5.3 Efficiency Levels

................................ ................................ ................................ ...... 22 5.4 Cost

- Efficiency Relationship and Analysis

................................ .............................. 23 5.5 Proprietary Designs

................................ ................................ ................................ ... 24 5.6 Other Regulatory Changes Affecting the Engineering Analysis

.............................. 24 6. MARKUPS ANALYSIS

................................ ................................ ............................. 25 7. ENERGY AND WATER USE ANALYS IS

................................ ............................... 26 8. LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS

................................ . 27 8.1 Analytical Approach

................................ ................................ ................................ . 27 8.2 Installation Costs

................................ ................................ ................................ ....... 28 8.3 En ergy Prices

................................ ................................ ................................ ............ 29 8.4 Water Prices

................................ ................................ ................................ .............. 29 8.5 Maintenance and Repair Costs

................................ ................................ .................. 29 8.6 Equipment Lifetime

................................ ................................ ................................ .. 30 8.7 Di scount Rates

................................ ................................ ................................ .......... 30 9. SHIPMENTS ANALYSIS

................................ ................................ .......................... 30 9.1 Standards Impacts on Shipments

................................ ................................ .............. 31 10. NATIONAL IMPACT ANALYSIS

................................ ................................ ............ 31 10.1 Energy and Water Efficiency Trends

................................ ................................ ........ 31 10.2 National Water and Energy Savings

................................ ................................ ......... 32 10.3 Net Present Value

................................ ................................ ................................ ..... 33 11. CUSTOMER SUBGROUP ANALYSIS

................................ ................................ ..... 33 12. MANUFACTURER IMPACT ANALYSIS

................................ ................................ 34 12.1 Sources of Information for the Manufacturer Impact Analysis

................................ 34 12.2 Industry Cash

- Flow Analysis

................................ ................................ .................... 35ii

12.3 Manufacturer Subgroup Analysis

................................ ................................ ............. 36 12.4 Competitive Impacts Assessment

................................ ................................ ............. 36 12.5 Cumulative Regulatory Burden

................................ ................................ ................ 37 13. UTILITY IMPACT ANALYSIS

................................ ................................ ................. 38 14. EMPLOYMENT IMPACT ANALYSIS

................................ ................................ ..... 38 15. EMISSIONS ANALYSIS

................................ ................................ ............................ 39 16. MONETIZING REDUCED CO 2 AND OTHER EMISSIONS

................................ .. 42 17. REGULATORY IMPACT ANALYSIS

................................ ................................ ..... 43 APPENDIX A

– LIST OF ITEMS FOR COMMENT

................................ ......................... 44 APPENDIX B

– DRAFT PRELIMINARY MANUFACTURER IMPACT ANALYSIS QUESTIONAIRE

................................ ................................ ................................ ................. 48

LIST OF FIGURES

Figure 2.1 Flow Diagram of Analyses for the Commercial Prerinse Spray Valves Energy

Conservation Standards Rulemaking Process

................................ .......................... 10 Figure 3.1 Percentage of Basic Models per Manufacturer in the United States Market

.............. 14iii LIST OF ACRONYMS

AEO Annual Energy Outlook ARMTCA American Energy Manufacturing Technical Corrections Act ASME American Society of Mechanical Engineers ASTM American Soci ety for Testing and Materials BLS Bureau of Labor Statistics BOM bill of materials CAIR Clean Air Interstate Rule CCMS Compliance Certification Management System CFR Code of Federal Regulations CO 2 carbon dioxide CSA Canadian Standards Association CSAPR Cross

- State Air Pollution Rule CSL candidate standard level CUWCC California Urban Water Conservation Council D.C. District of Columbia DOE U.S. Department of Energy DOJ U.S. Department of Justice EGU electric generating unit EIA Energy Information Admini stration EPA U.S. Environmental Protection Agency EPAct Energy Policy Act of 2005 EPCA Energy Policy and Conservation Act FFC full

- fuel

- cycle FTC Federal Trade Commission GHG greenhouse gas
gpm gallons per minute GRIM Government Regulatory Impact Model HAP hazardous air pollutant Hg mercury ImSET Impact of Sector Energy Technologies LCC life

- cycle cost MATS Mercury and Air Toxics Standards MIA manufacturer impact analysis MPC manufacturer production cost NAFEM North American Association of Food Equipment Manufacturers NAICS North American Industry Classification System NEMS National Energy Modeling System NES national energy savings NIA national impact analysis NOPR notice of proposed rulemaking NO X oxides of nitrogen NPV net present value OMB U.S. Office of Management and Budget PBP payback periodiv

PM particulate matter PMI Plumbing Manufacturers International psi per square inch SBA Small Business Administration SCC social cost of carbon SEC Securities and Exchange Commission SO 2 sulfur dioxi de TSD technical support document TSL trial standard level1



### Rulemaking Framework for Commercial Prerinse Spray Valves

1. INTRODUCTION

The purpose of this document is to describe the procedural and analytical approaches the U.S. Department of Energy (DOE) anticipates using to evaluate energy conservation standards for commercial pre rinse spray valves

. The DOE Appliances and Commercial Equipment Standards Program, in the Office of Energy Efficiency and Renewable Energy’s Building Technologies Office, develops and promulgates test procedures and energy conservation standards for consumer appliances and commercial equipment. The process for developing standards involves analyses, public notice, and consultation wit h interested parties. Such parties, collectively referred to as interested parties or stakeholders, include manufacturers, customers , energy conservation and environmental advocates, State and Federal agencies, and any other groups or individuals having an interest in the energy conservation standards and test procedures.

This document is intended to inform stakeholders of the standards rulemaking process for commercial prerinse spray valves and to encourage and facilitate stakeholder input during the rulemaking. This document is the starting point for developing standards and is not a definitive statement with respect to any issue to be determined in the rulemaking.

Section 1 provides an overview of the rulemaking process. Sections 2 through 17 discuss analyses DOE intends to conduct to fulfill the statutory requirements and guidance for this standards rulemaking. DOE’s analyses will determine whether new energy conserva tion standards are technologically feasible , economically justified and would result in significant energy savings. DOE will conduct an engineering analysis, a life

- cycle cost (LCC) and payback period (PBP) analysis, a national impact analysis (NIA) , and a manufacturer impact analysis (MIA) in addition to other analyses

. Information regarding this rulemaking effort, along with any formal proposal and accompanying analyses

, will be maintained on the DOE website at: http://www 1 .eere.energy.gov/buildings/appli ance_standards/rulemaking.aspx?ruleid= 10 0

.

This document contains comment boxes that highlight issues on which DOE seeks comment and requests fe edback from interested parties. The comment boxes are also used to ask specific questions on the approaches the DOE is proposing to follow to conduct the analyses required for the standards rulemaking. Such requests for stakeholder feedback are numbered according to the section in which they appear.

1.1 The Appliance and Commercial Equipment Standards Program

Title III of the Energy Policy and Conservation Act of 1975 (EPCA) (42 U.S.C. 6291 et seq

. ) sets forth a variety of provisions designed to improve the energy efficiency of various products and equipment. (All references to EPCA refer to the statute as amended throug h the American Energy Manufacturing Technical Corrections Act (AEMTCA), Pub. L. 112

- 2102

(Dec. 18, 2012))

. Part B of Title III (42 U.S.C. 6291

- 6309) establishe d the “ Energy Conservation Program for Consumer Products Other Than Automobiles, ” 1 which includes commercial prerinse spray valves, the subject of this document. (42 U.S.C. 6291(33))

Pursuant to EPCA, DOE’s energy conservation program for covered consumer products and certain commercial and industrial equipment (hereafter referred to as “covered produc ts”) consists essentially of four parts: (1) testing , (2) labeling, (3) the establishment of Federa l energy conservation standards, and (4) certification and enforcement procedures. The Federal Trade Commission (FTC) is primarily responsible for labeling o f consumer products and DOE implements the remainder of the program , including labeling of commercial and industrial equipment

. DOE must follow specific statutory criteria for prescribing amended standards for covered products. Any amended standard for a covered product must be designed to achieve the maximum improvement in energy or water efficiency that is technologically feasible and economically justified. (42 U.S.C. 6295(o)(2)(A) Subject to certain criteria and conditions, DOE is required by EPCA to d evelop test procedures to measure the energy efficiency, energy use, water use , or estimated annual operating cost

, of each covered product. (42 U.S.C. 6293)

1.2 Definitions

EPCA defines “commercial prerinse spray valve” as “a handheld device designed and mark eted for use with commercial dishwashing and ware washing equipment that sprays water on dishes, flatware, and other food service items for the purpose of removing food residue before cleaning the items.” (42 U.S.C. 6291(33) (A) )

Under EPCA, the Secretary m ay modify the definition of “commercial prerinse spray valve” by rule

–

(i) to include products

– (I) that are extensively used in conjunction with commercial dishwashing and ware washing equipment; (II) the application of standards to which would result in significant energy savings; and (III) the application of standards to which would meet the criteria specified in section 6295(o)(4) of this title; and (ii) to exclude products

– (I) that are use d for special food service applications; (II) that are unlikely to be widely used in conjunction with commercial dishwashing and ware washing equipment; and (III) the application of standards to which would not result in significant energy savings. (42 U.S.C. 6291(33)(B))

DOE is considering modification s to the definition of commercial prerinse spray valve to ensure coverage of equipment types not explicitly addressed in the current definition , but that are substantially similar to or serve the same purp ose as those currently addressed by the existing

1 For editorial reasons, upon codification in the U.S. Code, Part B was redesignated Part A.3

definition (i.e., products that are extensively used in conjunction with commercial dishwashing and ware washing equipment ), the application of standards to which would result in significant energy savings

, and that would not likely become unavailable in the market should standards be applied to them

.

Item 1

- 1 DOE requests comment on the modification of the definition of “commercial

prerinse spray valve ” to include additional covered equipment types

.

1.3 Current Energy Conservation Standards

Section 135(c) of the Energy Policy Act of 2005 (EPAct), Pub. L. 109

- 58, amended section 325 of EPCA to add paragraph (dd), which now state s that commercial prerinse spray valves manufactured on or after January 1, 2006, shal l have a flow rate of not more than 1.6 gallons per minute (gpm).

The current energy cons ervation standard of a maximum f low rate of 1.6 gpm is located at 10 CFR 431.266. This standard was placed in the Code of Federal Regulations ( CFR ) as part of a techni cal amendment final rule in October 2005 that placed energy conservation standards

, test procedures, and related definitions prescribed by Congress into the CFR

. 2 70 FR 60407 (Oct. 18, 2005)

. As part of this rulemaking, DOE may consider adopting an alterna tive water consumption metric to replace the flow rate metric currently used as the commercial prerinse spray valve standard. DOE will consider alternative metrics that will achieve energy and water savings and also take into account preserving the functio n of the equipment ( e.g. , to ensure that a reduction in flow rate does not significantly increase cleaning time , which would reduce water savings)

. One

a lternative metric under consideration is a performance metric that takes into account both flow rate and spray force (measured in gpm divided by ounce

- force ). Spray force is the measurement of the amount of force exerted by the flow of water, which relates to how well the product functions for its intended purpose. This metric may better correlate with efficiency of a prerinse spray valve in terms of water needed to remove food or other particles off dishware rather than a simpl e measure of flow rate . T he m ost recently issued industry test procedures for commercial prerinse spray valves, in the American Society for Testin g and Materials (AS TM) F2324

- 13

, include both flow rate and spray force (see section 1.5 ). Therefore manufacturers are currently required to perform both of these tests to meet the ASTM standard. The current DOE test procedure for commercial prerinse spray valves in 10 CFR 431.264, which incorporates by

2 As explained in the October 18, 2005 final rule, apparently due to a legislative drafting error, several types of commercial equipment, including commercial prerinse spray valves , were placed in Part B of Title III of EPCA, which contains the provisions for the “Energy Conservation Program for Consumer Products Other than Automobiles.” DOE expected at the time that the error would be corrected through legislation and that the provisions would become amendments to Part C of EPCA for “Certain Industrial Equipment.” Because t he location of the provisions within the CFR does not affect either their substan ce or applicable procedure

, DOE plac ed the EPAct provisions for each product or type of equipment in the appropriate CFR part based on their nature or type

, which included placing the regulatory provisions for commercial prerinse spray valves in Title 10 of the CFR , part 43 1 , “Energy Efficiency Program for Certain Comme rcial and Industrial Equipment. ” 70 FR 60407.4

reference ASTM F2324

- 03 (2009), requires only measurement of flow rate for compliance with DOE regulations

.

An alternate metric could directly correlate water use and the amount of time it takes to clean a dish (measure d in gallons per plate washed). Th is metric would take into account prerinse spray valves that have a low flow rate but take substantially longer to accomplish the intended function, which ultimately may not save water.

Either of these metrics may allow D OE to establish a standard that mor e directly correlates the efficiency of prerinse spray valves with the primary function of cleaning dishware. An alternate metric may also assist DOE in determining different classes of prerinse spray valve equipment that are designed for specific applicat ions , thereby enabling the maximum increase in water and energy efficiency that does not unnecessarily degrad e the utility of a particular class of products

. In both of these examples above

, however, DOE would need to revise the test procedure to provide a standardized method for determining ratings under any such new metric. Regardles s of metric, the final standard would need to be set so that it achieve s water and energy savings and do es not violate EPCA’s “anti

- backsliding provisions

. ” 3

Item 1

- 2 DOE re quests comment on potential metrics other than flow rate that may be

used to achieve greater water savings in commercial prerinse spray valves and if there is sufficient benefit to using an alternative metric to justify changing from the current flow rate (gpm) metric

.

1.4 Overview of the Rulemaking Process

Under EPCA, any new or amended standards must achieve the maximum improvement in energy or water efficiency that is technologically feasib le and economically justified. (42 U.S.C. 6295(o)(2)(A)) In setting a ny new or amended standards, DOE must consider, to the greatest extent practicable: (1) the economic impact of the standard on the manufacturers and consumers of the affected equipment; (2) the savings in operating costs throughout the estimated average li fe of equipment compared to any increases in the initial cost, or maintenance expense; (3) the total projected amount of energy and water savings likely to result directly from the imposition of the standard; (4) any lessening of the utility or the perform ance of the equipment likely to result from the imposition of the standard; (5) 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; (6 ) the need for nat ional energy and water conservation; and (7) other factors the Secretary of Energy considers relevant. (42 U.S.C. 6295(o)(2)(B)(i)) Other statutory considerations include those set forth in 42 U.S.C. 6295(o)(1)

– (2)(A), (2)(B)(ii)

– (iii), and (3)

– (4).

3 EPCA ’s anti

- backsliding provision mandates that the Secretary not prescribe any amended standard that either increase s the maximum allowable energy use or decrease s the minimum required energy efficiency of a covered product. (42 U.S.C. 6295(o)(1) and 6316(a))5

In its efforts to set energy conservation standards, DOE publishes notices in the Federal Register to inform the public about its activities in this effort. Subsequent to anno uncing the availability of the F ramework d ocument, DOE typically publishes three additional public notices that further advance DOE’s efforts to set standards for a given product or equipment.

The publication of the p r eliminary a nalysis (see section 1.4.1 ) describes in detail the analytical framework DOE plans to apply

, and this presents the public with the opportunity to evaluate and provide substantive feedback on the models and tools that DOE plans to use in developing its proposed standards. This step is designed to help facilitate additional public participation before DOE formally proposes a rule for public consideration. The approach laid out in the p r eliminary a nalysis also addresses stakeholder comments to the F ramework d ocument. Next, DO E publishes a notice of proposed rulemaking (NOPR) (see section 1.4.2 ), which presents DOE’s proposed standards. In doing so, the notice addresses comments receive d in response to the p r eliminary a nalysis ; analyzes the impacts of standards on customers
, manufacturers, and the nation; and details DOE’s balancing of those impacts. Finally, DOE publishes the final rule (see section 1.4.3 ), which contains any standards DOE may adopt along with the applicable compliance dates. The final rule notice addresses comments submitted in response to the NOPR, presents any revised analy ses of the projected impacts from these standards, and discusses DOE’s balancing of the impacts.

DOE considers the participation of all interested parties to be a very important part in the process for setting forth energy conservation standards. DOE activ ely encourages the participation and interaction of interested parties during the comment periods provided at each step. Beginning with public comment on the F ramework d ocument and during subsequent comment periods, interactions among interested parties pr ovide a balanced discussion of critical information required to conduct the standards rulemaking. Additionally, DOE encourages the development and submission of consensus agreements among stakeholders.

1.4.1 Preliminary Analysis

As part of its efforts in preparing a proposed rule, DOE typically identifies equipment design options or candidate standard level s (CSLs) that it will analyze in detail and those it should eliminate from further consideration. This process includes a market and technology

assessm ent (see section 3 ) and a s creening analysis (see section 4 ). These act ivities include identifying the key issues and design options or CSLs to be considered by DOE as it develop s a rulemaking proposal.

At the start of the p r eliminary a nalysis, DOE considers CSLs for each equipment class. DOE uses these CSLs to collect manufa cturer cost data, historical shipment data, shipment

weighted average efficiency data, and preliminary manufacturer impact data ( e.g. , capital conversion expenditures, marketing costs, research and development costs). During the
p r eliminary a nalysis stage, DOE presents customer life

- cycle cost ( LCC ) impact and payback period ( PBP ) results (see section 8 ); national energy savings (NES)

, national water savings

, and
customer net present val ue (NPV) results (see section 10 ) for a range of CSL s; and a preliminary MIA (see section 12 ).6

DOE analyzes the costs and benefits of CSLs or design options. In addition to the

e fficiency corresponding to the maximum technologically feasible (“max

- tech”) design and the efficiency corresponding to the minimum LCC point, DOE generally selects levels or design options for consideration that span the full range of technologically achi evable efficiencies.

The current metric used for the energy conservation standard for commercial prerinse spray valve s is flow rate measured in gallons per minute. An improved CSL ( i.e ., higher efficiency level) for this product reduces flow rate. The reduction in flow rate directly results in energy savings due to decreased hot water usage. DOE intends to include water, energy , and associated cost savings as part of its analysis of commercial prerinse spray valves

. The range of levels analyzed typ ically includes the following :

 t he least efficient model in the market;

 t he current efficiency lev el, as applicable under 10 CFR p art 431 ;

 t he highest CSL that is technologically feasible (the max

- tech level);

 t he level with the lowest LCC; and

 l evels that incorporate noteworthy technologies or fill in large gaps between other CSLs considered.

DOE will make the results of the analyses available on its website for review and will consider comments on them after publication of the preliminary a nalysis. As par t of this process, DOE also makes available for public comment a preliminary technical support document (TSD) containing the details of all the analyses performed to date.

1.4.2 Notice of Proposed Rulemaking

After the publication of the p r eliminary a nalysis, the re is a public comment period and a public meeting. DOE also conducts further economic impact analyses. These analyses may include refinements of previous analyses, and will include a customer LCC subgroup analysis (see section 11 ), a complete MIA (see section 12 ), a utility impact analysis (see section 13 ), an employment impact analysis (see section 14 ), an emissions analysis (see section 15 ), and a regulatory impact analysis (see section 17 ).

DOE will make the results of all the analyses available on its website for review and will consider comments after the publication of the NOPR. This review and comment process may result in revisions to the preliminary analyses that DOE performed. The analytical process ends with the selection of proposed standard levels presented in the NOPR. DOE selects the proposed standard levels from the trial sta ndard levels (TSLs) analyzed. TSLs represent specific combinations of efficiency levels in each equipment class that satisfy certain criteria (efficiency levels in the NOPR phase are known as CSLs in the preliminary analysis phase)

. Examples of potential T SLs include selecting efficiency levels in each equipment class that maximize
customer LCC savings, NES , or national NPV

. The NOPR, published in the Federal Register

, will document the evaluation and selection of any proposed standards.

For each equipment class, DOE will identify the maximum improvement in efficiency that is technologically feasible. If DOE proposes a level that is below the max

- tech level, it will sequentially explain the reasons for eliminating higher levels beginning w ith the highest level7

considered. DOE will present the analysis results in the NOPR and the analysis details in an accompanying TSD.

DOE considers many factors in selecting its proposed standards. These factors are prescribed by EPCA and take into consider ation the benefits and c osts of the standards. When DOE publishes the NOPR, it will provide the Department of Justice (DOJ) with a copy of the NOPR and TSD and solicit feedback on the impact of the proposed standard level on competition. DOJ will review th ese standard levels in light of any lessening of competition that is likely to result from the imposition of standards. DOE will consider DOJ’s determination on the impacts of the proposed standard on competition in preparing the final rule. The NOPR is fo llowed by a public comment period that includes a public meeting.

1.4.3 Final Rule

After the publication of the NOPR, DOE will conduct a thorough review of all analyses performed, and of the TSLs. Final revisions to the analyses and TSLs will be made as appropri ate , considering any comments from DOJ and other interested parties

. The standards rulemaking will conclude with the publication of the final rule. DOE will select any final standard levels based on the complete record before it, including any comments

or data submitted in response to the F ramework d ocument
, preliminary a nalysis

, and NOPR . The final rule will promulgate any standard levels and the accompanying date by which all products subject to the new standard must be in compliance (the compliance date)

. If the final rule results in amended standards, t he final rule notice will also explain the basis for the selection of the amended standard level(s) . A final TSD will also be made available once the rule is issued.

1.5 Test Procedures

EPCA specifies that the test procedure for measuring flow rate for commercial prerinse spray valves shall be based on ASTM Standard F2324, entitled “Standard Test Method for Pre

Rinse Spray Valves

. ” 42 U.S.C. 6293(14) At the time of its incorporation in the CFR by DOE in a final rule published on October 18, 2005 ( 70 FR 60407 ) , the current version of this test method was F2324

- 03.

EPCA also requires that a t least once every 7 years, the Secretary shall review test procedur es for all covered products and either amend test procedures with respect to any covered product ( if the Secretary determines that amended test procedures would more accurately or fully comply with t he requirements of paragraph ) or publish notice in the Federal Register of any determination no t to amend a test procedure . 42 U.S.C. 6293(b)(1)(A) Accordingly, DOE recently conducted a rulemaking to consider adoption of an updated test method for prerinse spray valves. On October 23, 2013

, DOE published a final rule (the 2013 test procedure final

r ule) that incorporated by reference the test procedure specified in ASTM F2324

- 03 (2009)

, “Standard Test Method for Prerinse Spray Valves” as approved on May 1, 2009. 78 FR 62970 (October 23, 2013). This test method is essentially a reissuance of the same test method incorporated by DOE in its October 18, 2005 final rule

. Since the publication of the 2013 test procedure final rule, ASTM has updated the F2324 standard to re flect changes in the industry , which was issued as a new version, ASTM F2324

- 13

.8

DOE h as not yet conducted a rulemaking to consider adoption of this most recent version of the F2324 standard

.

The new ASTM F2324

- 13 amends the previous test procedure, ASTMF2324

- 03 (2009)

, in several ways. The primary change in the ASTM test procedure replaces the cleanability test with a spray force test. The cleanability test evaluates the cleaning time of a standard dinner plate. Spray force (measured in ounce

- force) is the measurement of the amount of force exerted by the flow of water

. This change is based on research conducted by the Environmental Protection Agency ’s (EPA ’s ) WaterSense ® p rogram, which shows the cleanability test has little relation to user satisfaction or commercial prerinse spray valve usage time.

DOE is considering revis ing the test pr ocedure present at 10 CFR part 431, s ubpart O

, for commercial prerinse spray valves to reference the new ASTM F2324

- 13

.

Item 1

- 3 DOE requests comment on the potential use of ASTM F2324

- 1 3 as the test

method required for certification of commercial p rerinse spray valves.

1.6 Labeling

EPCA provides labeling requirements for covered products including commercial prerinse spray valves. DOE or the Federal Trade Commission may establish labeling requirements for prerinse spray valves after a test procedure has been prescribed. (42 U.S.C. 6294(a)(5))

DOE may analyze the appropriateness of a labeling rule in conjunction with the analyses for standards described in the remainder of this document.

Item 1

- 4 DOE seeks comment on whether it should establish a labelin g requirement for

commercial prerinse spray valves

.

2. ANALYSES FOR RULEMAKING

The purpose of the analyses conducted in support of the standards rulemaking is to ensure that DOE selects energy conservation standards that achieve the maximum improvement in eff iciency that is technologically feasible and economically justified. The e conomic justification considers the economic impacts on domestic manufacturers and customer s, national benefits (including environmental impacts)

, issues of customer utility, and imp acts from any lessening of competition. The analyses conducted in support of the standards rulemaking effort help to ensure that the final standards meet these criteria of technological feasibility and economic justification.

This section offers an overvie w of DOE’s analytical methodology and discusses the major components of the analyses DOE will conduct. A consistent analytical approach will be applied by DOE through its consideration of each analysis as a part of the overall standards

setting framework.9

Figure 2

. 1 summarizes the analytical components of the standards

- setting process. The analyses are presented in the center column. Each analysis has a set of key inpu ts, which are data and information required for the analysis. “Approaches” are the methods that will be used to obtain key inputs. For example, some key inputs exist in public databases, some will be collected from stakeholders, and some will be developed by the project team in support of DOE’s evaluation efforts. The results of each analysis are key outputs, which would feed directly into the analytical framework that DOE would apply if it determines that standards would satisfy the statutory requirements ( i.e., technological feasibility and economic practicability). Arrows connect one analysis to another indicate the flow of information.10

Figure 2

. 1 Flow Diagram of Analyses for the Commercial Prerinse Spray Valve s Energy

Conservation Standards Rulemaking Process11

3. MARKET AND TECHNOLOGY ASSESSMENT

The market and technology assessment will provide information about the commercial prerinse spray valve equipment industry. This assessment is used to determine equipm ent classes and identify potential design options or efficiency levels for each equipment class. Section 3.2 discusses the equipment classes being considered ; s ecti on 3.3 describes the technology assessment for this equipment.

3.1 Market Assessment

DOE will qualitatively and quantitatively characterize the structure of the commercial prerinse spray valve equipment industries and markets. In the market assessment, DOE will identify and characterize the manufacturers of commercial prerinse spray valve s, estimate market shares and trends in the market, address regulatory and no n

- regulatory initiatives intended to improve the water efficiency or reduce the water consumption of commercial prerinse spray valves

, and explore the potential for technological improvements in the design and manufacturing of the product

. As part of this analysis, DOE will review product literature, industry publications, and company websites to gather information on market trends and current technology innovation

. DOE will use historical equipment shipments and prices as an aid to create s hipment scenario s and predict future prices. DOE will also identify important issues such as potential small business impacts, competitive disruptions, and other factors that may arise from enacting standards. Market structure data will be used to assess competitive impac ts as part of the manufacturer impact analysis.

T here may be limited public information on national shipments, manufacturing costs, channels of distribution, product lifetimes, and manufacturer market shares of prerinse spray valves

. Such data represent a n important input for analyses that determine whether efficiency standards are economically justified , and technologically feasible, and will result in significant energy conservation . DOE encourages interested parties to submit data that will improve DOE’ s understanding of the prerinse spray valve market . T hese data may be provided under a confidentiality agreement with DOE’s contractor responsible for this part of the rulemaking analysis. In other rulemakings, DOE’s contractors routinely work with confide ntial data provided by manufacturers and other organizations in preparing aggregated results for DOE’s analys e s. These aggregated results do not divulge the sensitive, individual raw data, but enable other interested parties to comment on the aggregated da taset.

Alternatively, interested parties may submit confidential data to DOE, indicating in writing which data should remain confidential. Interested parties must submit confidential information to DOE according to the procedures outlined in 10 CFR 1004.11

. Pursuant to 10 CFR 1004.11, any person submitting information that he or she believes to be confidential and exempt by law from public disclosure should submit two copies. One copy of the document must include all the information believed to be confidential, and the other copy must have the12

information believed to be confidential deleted. DOE will make its own determination about the confidential status of the information and treat it accordingly. 4

Item 3

- 1 DOE requests information that would contribute to the market assessment

, including information on current equipment types available on the market, range of rated flow rates of equipment, current equipment features

, and designs related to efficiency

.

Item 3

- 2 DOE welcomes input on estimates of market shares, products, features, and

trends for the prerinse spray valves covered in this rulemaking.

3.1.1 Manufacturer Trade Group

DOE recognizes the importance of trade groups in distributing information and
promo ting the interests of the industry that they support. Plumbing Manufacturers International (PMI) was identified as the primary group that supports and has an interest in commercial prerinse spray valves. PMI is a trade organization that represents various plumbing product manufacturers working to promote the industry’s growth while promoting water efficiency, environmental sustainability, health

, and safety. PMI advocates the interests of the plumbing product industry regarding Federal and State legislative and regulatory issues. In addition to being a charter member of the Alliance for Water Efficiency, and a member of U.S. Green Building Council, PMI also promotes and supports the WaterSense program as a partner working closely with EPA

. 5

North American As sociation of Food Equipment Manufacturers (NAFEM) is another organization that may be interested in prerinse spray valves. NAFEM is a trade association of over 500 foodservice equip ment and supplies manufacturers, including some that manufacture prerinse s pray valves

. 6 DOE plans to contact both NAFEM and PMI to ask if they can provide market information on prerinse spray valves.

Item 3

- 3 DOE seeks information regarding which trade organizations represent the

commercial prerinse spray valve industry.

4 Factors that DOE considers when evaluating requests to treat submitted information as confidential include: (1) a description of the items; (2) whether and why such items are customarily treated as confidential within the industry; (3) whether the information is generally known by or available from other public sources; (4) whether the information has previously be en made available to others without obligation concerning its confidentiality; (5) an explanation of the competitive injury to the submitting person which would result from public disclosure; (6) a date after which such information might lose its confident ial character; and (7) why disclosure of the information would be contrary to the public interest.
5 Plumbing Manufacturers International, What is PMI?

, www.pmihome.org/files/public/About

- PMI(1).pdf

. 6 North American Association of Food Equipment Manufactu rers, About NAFEM

, http://www.nafem.org/about

nafem/Default.aspx

.13

3.1.2 Manufac turers and Market Shares

This section describes major commercial prerinse spray valve retailers, manufacturers and their market shares, and product lifetime s.

3.1.2.1 Retailers

Prerinse spray valves are generally available to customers from so

- called brick

- and

mortar retailers, I nternet sellers, and showrooms

.

Brick

- and

- mortar retailers hav e a physical retail building th at customers can visit to view products and make purchases. There are several sub

- types in this category, including:

 m ass market ret ailers

— national chain stores such as home centers, discount stores, and hardware stores;

 s pecialty stores, which usually offer a broad range of products in a narrow product category and can be mass market, regional, or independent owner s having a single

r etail outlet; and

 c lub or warehouse stores, which require a membership fee for customers to gain access to the goods , which usually are sold in bulk

. Online sales may be via a division of any of the brick

- and

- mortar retailers, sometimes called “clicks and bricks,” or via a dedicated online retailer

. DOE lacks information on retailer market share for prerinse spray valve, and seeks comment on this issue.

Item 3

- 4 DOE seeks information on retailers and retailer market share for commercial

prerinse spray valv es

.

3.1.2.2 Major Manufacturers

This section describes major commercial prerinse spray valve manufacturers and their market shares . The primary manufacturers are shown in Figure 3

. 1

.14

Figure 3

. 1 Percentage of B asic M odels per M anufacturer in the United States M arket

The chart shown in Figure 3

. 1 was constructed by comparing the number of basic models per manufacturer to the total number of b asic models in the U.S. market for commercial prerinse spray valves. First, DOE researched all t he basic models in the DOE Compliance Certification Management System (CCMS) d atabase

. 7 A total of 29 uniq ue basic models from 7 different brands were found. After that, all commercial prerinse spray valves from the WaterSense database were added to this list. 8 A total of 22 unique models were found in the WaterSense database, 14 of which also appear in th e CCMS d atabase. The remaining eight units were not found in any of the following sources: the CCMS d atabase, the manufacturer website

, and Google search . Therefore, DOE concluded that these eight uni ts are not available in the United States and excluded them from Figure 3

. 1

. Additional models were found by searching the web. DOE identified the following four additional manufacturers: Niagara Conservation, Krowne Metal Corporation, Strahman Valves, Inc.

, and Component Hardware Group , which offered a total of one, two, three and nine basic models

, respectively. Therefore

, Figure 3

. 1 contains 44 basic models from 11 different brands. However, there may be other manufacture r s of commercial prer inse spray valves that are not listed in the chart. Further research is required to develop a comprehensive analysis of the spray valve market. The market share in terms of sales could also differ significantly from the fraction of basic models available f or sale. For example, in a study conducted by the California Urban

7 See U.S. Dep’t of Energy, Compliance Certification Database

, www.regulations.doe.gov/certification

- data/

. 8 See U.S. EPA, Water Sense

, www.epa.gov/watersense/product_search.html

.15

Water Conservation Council, Fisher Manufacturing was said to have a 60 percent of the prerinse spray valve market share in the western United States. 9

Once the list of brands and basic mod els was complete, the manufacturers associated with every brand were added. DOE research indicates that the Centaur, Equip

, and T&S brands ar e all manufactured by T&S Brass; the Trident brand is manufactured by Mueller Streamline Co. ; and the Encore brand is manufactured by Component Hardware Group. All other brands are named after the manufacturer that produces them.

Item 3

- 5 DOE seeks information on major manufacturers that may have been

overlooked in this F ramework document.

3.1.2.3 Historical Shipments

The EPA’s WaterSense program estimates that 306,000 commercial prerinse sp ray valves were sold in the United States in 2012. 10 This was determined based on a National Restaurant Association (NRA) estimate of approximately 970,000 commercial food esta blishments operating in the United States as of 2012, and WaterSense’s estimate of approximately 1.5 prerinse spray valves being used in each establishment. Additionally, WaterSense estimates that approximately 20 percent of the estimated 1.5 million prerinse spray v alves are replaced each
year and that the number of new restaurants grows by 1 percent annually

. Additionally, some states and utilities have also examined annual sales of prerinse spray valves for the states in which their studies were conducted. In 2004 , a study commissioned by the Pacific Gas and Electric Company estimated the total annual sales volume of commercial prerinse spray valves in the state of California was 18,000

. 11 In 2007, based on the assumption that 100,000 prerinse spray valves with a 5

- year life expectanc y were installed in California, the California Urban Water Conservation Council (CUWCC) estimated that approximately 20,000 spray valves were replaced each year. CUWCC also reported that Fisher Manufactur ing estimated that about 30,000 o f its commercial prerinse spray valves were sold in California every year. With this information, and the assumption that Fisher held 60 percent of the prerinse spray valve market share in the Western United States, the CUWCC further estimated that 50,000 prerinse spray valves were sold in California annually

. 12

9 See SBW Consulting, Inc., Impact and Process Evaluation Final Report (Feb. 2007)

, available at www.cuwcc.org/Portals/0/Pre

- Rinse%20Spray%20Valve%20Program%20Phase%202.pdf

. 10 See U.S. EPA, WaterSense Specification for Commercial Pr

- Rinse Spray Valves Supportin g Statement (Sept. 2013), available at www.epa.gov/watersense/docs/prsv_finalspec_suppstate_09.19.13_final_508.pdf

. 11 See Energy Solutions, Draft Analysis of Standards Options for Pre

- Rinse Spray Valves (May 2004), available at www.energy.ca.gov/appliances /archive/2003rulemaking/documents/case_studies/CASE_Pre

Rinse_Spray_Valves.pdf

. 12 See SBW Consulting, Inc., Impact and Process Evaluation Final Report (Feb. 2007)

, available at www.cuwcc.org/Portals/0/Pre

- Rinse%20Spray%20Valve%20Program%20Phase%202.pdf16

Based upon an estimate of approximately 100,000 13 restaurants in California, approximately 10 percent of all restaurants in the United States are in California (100,000/970,000), and thus, approximat ely 10 percent of spray valve sales could also be expected to occur in California. Using the average of CUWCC’s two estimates for the number of spray valves sold per year in California (35,000), this would equate to approximately 340,000 spray valve sales nationally.

DOE’s research on historical shipments data is currently limited to WaterSense estimates for 2012, and older estimates for the state of California. DOE seeks further information on this issue.

Item 3

- 6 DOE requests information on nationwide hi storical equipment shipments and

prices for commercial prerinse spray valves

.

3.1.2.4 Equipment Lifetime

DOE has begun to investigate life expectancy of commercial prerinse spray valves. In establishing the WaterSense specification for commercial prerinse spray va lves, EPA stated that their average lifetime was 5 years. EPA stated that t he 5

- year useful life was determined based on conversations with manufacturers, and input from the American Society of Mechanical Engineers (ASME)

, Canadian Standards Association (CSA) , PMI, and other research conducted on this product category

. 14 The assumption is also supported by an EPA field study conducted in early 2010, in which EPA found several spray valves in use that were not compliant with the EPAct requirements

, indicati ng that these spray valves were at least 4 years old. 15 Survey respondents to the field study said that spray valves last between 2 and 7 years. However, a commenter to EPA stated that o n average, prerinse spray valves last only 1 to 1.5 years and some last as little as 3 months. Additionally, WaterSense set the life

- cycle requirements for a commercial prerinse spray valve to 250,000 cycles based on their field study in 2010. 16

Item 3

- 7 DOE seeks input and data on prerinse spray valve product lifetime and the

relationship between spray valve usage and life expectancy.

13 With 0.241 restaurants per 100 people in California as shown in statemaster.com ( www.statemaster.com/graph/lif_res_percap

- lifestyle

- resturants

- per

- capita ) and the population of California estimated by the U.S. Census Bureau to be 38,332,521 in 2013, the n umber of restaurants in California is found to be 92,381.
14 See U.S. EPA, WaterSense Specification for Commercial Pr

- Rinse Spray Valves Supporting Statement (Sept. 2013), available at www.epa.gov/watersense/docs/prsv_finalspec_suppstate_09.19.13_final_508 .pdf

. 15 See U.S. EPA, Pre

- Rinse Spray Valves Field Study Report (Mar. 2011), available at http://www.epa.gov/watersense/docs/final_epa_prsv_study_report_033111v2_508.pdf

. 16 See U.S. EPA, WaterSense Specification for Commercial Pr

- Rinse Spray Valves Supporting Statement (Sept. 2013), available at www.epa.gov/watersense/docs/prsv_finalspec_suppstate_09.19.13_final_508.pdf

.

.17

3.2 Equipment Classes

When necessary, DOE divides covered products into classes by : ( 1 ) the type of energy used; ( 2 ) the capacity of the product; or ( 3 ) any other performance

- related feature that jus tifies different standard levels, such as features affecting customer utility. (42 U.S.C. 6295(q)) DOE then conducts its analysis and considers establishing separate standard levels for each product class

. If DOE determines that separate classes are appropriate for commercial prerinse spray valves, DOE will consider a separate energy conservation standard for each equipment class.

For commercial prerinse spray valves, separate equipment classes have not been defin ed. As such, all covered commercial prerinse spray valves are currently included in a single c lass that is subject to the 1.6

- gpm standard for maximum flow rate. 10 CFR 431.266 As part of this rulemaking DOE will consider whether to retain a single equipme nt class for all commercial prerinse spray valves included in the scope of this rulemaking or to establish separate equipment classes based on the statutory criteria in 42 U.S.C. 6295(q)

. DOE does not plan to differentiate equipment classes based on the t y pe of energy used, because all spray valves consume energy indirectly through hot water consumption

. DOE is considering if equipment classes should be defined based on capacity or other performance related features. As such, DOE is considering establishing equipment classes based on one or more of the following spray valve cha racteristics :

 f low rate (gpm)

 s pray force

 c leanability time

 d esign of flow control insert

 e quipment features that change functionality, such as different spray modes

One option is to use measured flow rate to develop an equipment class. In comments sent to EPA on its Water S ense Draft Specification for Commercial Prerinse Spray Valves

, stakeholders requested that WaterSense establish a product category and efficiency and performance pr ovisions for “ ultra

- low

- flow ” prerinse spray valves. 17 The commenters suggested defining this category as those commercial prerinse spray valves with a maximum flow rate of 0.8 gpm at 60 pounds per square inch (psi) and a minimum spray force of 4 ounces

. The commenters noted that they regularly sell ultra

- low

- flow spray valves to some commercial kitchens because not every application requires a higher flow rate and higher spray force and that lower flow rates are needed for specific niche markets

. In respo nse, EPA set the WaterSense spray force threshold to 4.0 ounces to include ultra

- low

- flow spray valves in the program and did not establish a separate equipment category for them.

DOE notes that it would be difficult to establish spray valve equipment cla sses based on flow rate (gpm), if the efficiency metric is also measured in gpm. The current regulations for commercial prerinse spray valves are in terms of gpm. However, if an alternative metric is used (see section 1.3 ), this approach to creating equipment classes becomes more feasible. DOE

17 See U.S. EPA Comments on the February 2013 WaterSense Draft Specification for Commercial Pre

- Rinse Spray Valves (May 2013), ava ilable at http://www.epa.gov/watersense/docs/ws_prsvspecpubliccommentcompilation_508.pdf

.18

re quests comment on how ultra

- low

- flow spray valves differ from other spray valves in usage, functionality, features, and cl eaning ability.

Another option is to construct equipment classes based on spray force. Spray force represents the amount of force the water leaving the spray valve can exert. Depending on the relationship between spray force and the cleaning effectiveness, spray force cou ld be a useful way of differentiating spray valve capacity. DOE seeks information on the relationship between a prerinse spray valve’s spray force, flow rate, and its ability to clean.

Another possible way of differentiating spray valve capacity is throug h cleanability, where cleanability is “ the effectiveness of the prerinse spray valve to remove soil from the plate before it is placed in a dishwashing machine ” as defined in the ASTM F2324

- 03 (2009) test procedure. Testing involves measuring the average c leaning time in seconds per plate.

Alternatively, DOE could establish product classes based on performance

- related feature s , such as features affecting customer utility . Features that could possibly warrant the creation of different equipment classes inclu de the presence or design of flow control inserts and the availability of different spray modes. DOE will analyze whether there are unique design constraints associated with these design characteristics that would warrant the creation of separate equipment classes.

Item 3

- 8 DOE requests input from interested parties about the design characteristics

and criteria that it is considering using when creating equipment classes. In particular, should additional or fewer criteria beyond those identified above be us ed as a basis for developing equipment classes?

Item 3

- 9 DOE seeks comment on whether spray force and cleanability are useful

characteristics that could define the equipment classes of a prerinse spray valve.

Item 3

- 10 DOE re quests comment on how ultra

- low

- flow spray valves differ from other spray valves in usage, functionality, features, and cleaning ability.

3.3 Technology Assessment

Measures that improve the energy efficiency of the product are called “ technology options, ” and they are based on exis ting technologies

, as well as prototype designs and concepts. In consultation with interested parties, DOE will develop a list of technology options for consideration in this rulemaking. Following research into this list of technology options, DOE will con sider each one against four screening criteria: (1) technological feasibility; (2) practicability to manufacture, install, and service; (3) adverse impacts on product utility or availability; and (4) adverse impacts on health or safety

. The screening analy sis is discussed in further detail in section 4

. Those technology options that pass the four screening criteria become

“ design options ” and will be considered in t he engineering analysis as appropriate ways of improving the efficiency and will assist DOE in determining the “ max

- tech ” design.19

DOE’s research indicates that the design of the nozzle can impact the flow rate and therefore the water consumption of commerc ial prerinse spray valves. DOE has identified the following designs that m ight be used to improve commercial prerinse spray valve performance:

1. addition of a flow control insert; 2. smaller nozzle tip openings to increase pressure; 3. incorporation of additional components including, but not limited to backflow preventers, additional valves, or hoses ; and 4. specially designed spray patterns, such as the following :

a. f an spray pattern (single nozzle with a hollow cone stream) b. s olid stream pattern (single nozzle with si ngle solid jet stream)

c. t riple action spray pattern (three nozzles with solid jet streams) d. k nife

- like spray pattern (single nozzle with a flat stream)

e. r ose spray pattern (multiple nozzles resembling a common showerhead)

.

Item 3

- 11 DOE seeks information from manufacturers on various nozzle designs and

spray patterns and their impacts on flow rate, spray force, cleanability, or other related functionality of the equipment.

Item 3

- 12 DOE seeks information on what technology options are availab le to improve

the performance of commercial prerinse spray valves.

4. SCREENING ANALYSIS

The purpose of the screening analysis is to screen out design options that DOE will not consider in examining potential standards, if any, for commercial prerinse spray valves.

As an initial matter, DOE will develop a list of design options (through its own research and in consultation with interested parties) for consideration in the engineering analysis (see section 5 ). The identified candidate design options will encompass all those technologies that may improve water efficiency. Thereafter, DOE will review each design option in light of the following four criteria:

1. Technologica l feasibility. DOE will not further consider technologies unless they are incorporated in commercially available products or in working prototypes.

2. Practicability to manufacture, install, and service. If DOE determines that mass production of a technology in commercial products and reliable installation and servicing of the technology could not be achieved on the scale necessary to serve the relevant market by the time of the effective date of the standard, then it will not consider that technology further.

3. Adverse impacts on equipment utility or availability. If DOE determines a technology to have significant adverse impact on the utility of equipment to significant subgroups of customer s , or result in the unavailability of any covered equipment type with
p erformance characteristics (including reliability), features, size, capacities, and20 volumes that are substantially the same as products generally available in the United States at the time, it will not consider that technology further.

4. Adverse impacts on h ealth or safety. If DOE determines that a technology will have significant adverse impacts on health or safety, it will not consider that technology further.

DOE will document the reasons for eliminating any design options during the screening analysis and will publish this documentation for stakeholder review and comment as part of the
p reliminary a nalysis. Technology options that are not screened out by the above four criteria will be considered design options in the development of cost

- efficiency curves in the engineering analysis.

Item 4

- 1 DOE welcomes comments on any technologies listed in section 3.3 (or others

not identified) that it should not consider based on any of the four screening criteria. If so, please provide details regarding the specific screening criteria that would preclude DOE from considering such technology options. DOE also welcomes comments on how the above four screening criteria might apply to any additional technology option(s) that an interested party recommends to DOE.

5. ENGINEERING ANALYSIS

After conducting the screening analysis described in section 4 , DOE will perform an engineering analysis based on the remaining design options that are available to improve commercial prerinse spray valve efficiency. The engineering analysis consists o f estimating the
energy and water consumption and cost of products at various levels of increased efficiency. Section 5.1 provides an overview of the engineering a nalysis. Section 5.2 discusses baseline models. Section 5.3 discusses efficiency levels. Section 5.4 describes DOE’s planned approach to the cost

- efficiency relationship and analysis. Section 5.5 addresses proprietary designs. Section 5.6 discusses cumulative regulatory burdens that might affect the eng ineering analysis.

5.1 Overview

The purpose of the engineering analysis is to determine the relationship between manufacturer selling price and efficiency for commercial prerinse spray valves. In determining the cost

- efficiency relationship, DOE estimates the increase in manufacturer selling price associated with design changes that increase efficiency relative to the baseline models (which, in most cases, are the most typical, lowest

- efficiency products currently sold on the market). DOE will develop cost esti mates for spray valves at a range of efficiency levels based on the technologies incorporated into products at those levels and the associated changes in material, labor, shipping, and overhead costs. This relationship between price and efficiency serves a s the basis for cost/benefit calculations to individual customer s in the LCC analysis and to the n ation in the NIA.21

As a preliminary step in this analysis, DOE may determine an appropriate subset of equipment classes to analyze. DOE would extrapolate the results of this analysis to the remaining equipment classes. The number of equipment classes chosen to be representative will depend on whether appropriate relationships between engineering results can be developed between the various equipment classes.

O nce DOE establishes the representative equipment classes, it will select a baseline model as a reference point for each class . DOE will also identify the highest efficiency that is technologically feasible within each equipment class ( i.e

. , the “ max

- tech” model). DOE may determine the max

- tech model by investigating the existence of any prototypes with higher efficiency than commercially available models. DOE will then develop separate cost

- efficiency relationships for each equipment class analyzed.

DOE w ill derive cost estimates for the engineering analysis from a reverse

- engineering process, supplemented by manufacturer

- supplied data. The reverse

- engineering process consists of a detailed equipment disassembly process, where: (1) representative units are torn down; (2) all components, processes, assembly, and manufacturing steps are noted in an activities

- based cost model; and (3) all manufacturing costs are calculated. Representative units are chosen based on the range of efficiencies, design options, an d capacities.

To develop the relationships between efficiency and cost for prerinse spray valves, DOE intends to u s e publicly available data, including data from government databases, manufacturer catalogs

, and websites as well as selected product testing

. DOE encourages interested parties to submit test data or other information that will improve DOE’s understanding of prerinse spray valve performance and cost

. Using these data, which will allow DOE to determine the incremental costs of changes in materia l, labor, shipping, and overhead from the baseline, DOE will develop cost estimates for design options or efficiency levels (which it will also use in the manufacturer impact analysis, section 12 ).

Thus, DOE proposes the following two

- part method for determining the cost

- efficiency relationship:

1. Developing a detailed bill of materials (BOM) for baseline models in each representative equipment class through product teardowns.

2. Calculating the incremental cost and efficiency of adding specific design options to a baseline model.

Item 5

- 1 DOE seeks stakeholder comment on these and other potential approaches to

determining the cost

- efficiency relationship of commercial prerinse spray valves.

5.2 Baseline Models

For each equipment class, DOE will identify a baseline model to serve as a reference point against which DOE can measure changes resulting from potential energy conserva tion22

standards. DOE will develop a separate efficiency curve for each baseline model directly analyzed. Selection of the baseline model is a critical aspect of DOE’s analytical approach. The baseline model should represent the characteristics of a typical prerinse spray valve in a given representative equipment class. Normally, the baseline model is a model that just meets current energy conservation standards. If DOE moves forward with flow rate as the efficiency metric for this rulemaking, then DOE will u se 1.6 gpm at 60 psi as the baseline efficiency. If DOE uses an alternative metric, then s election of the baseline model will involve consideration of spray valve features and performance characteristics, such as spray pattern, spray force, and cleanabilit y.

Item 5

- 2 DOE welcomes comments on its proposed approach to select baseline models

for each equipment class

.

Item 5

- 3 DOE seeks information regarding the specific technological characteristics of

baseline models.

5.3 Efficiency Levels

To establish the effi ciency levels DOE intends to consider, DOE will identify the highest efficiency that is technologically feasible within each equipment class ( i.e. , the max

- tech model) and analyze the design options and costs associated with improving commercial prerinse s pray valve efficiency from the baseline through the max

- tech models. DOE intends to collect efficiency data from various sources including manufacturer catalogs and websites to establish the range of efficiencies currently available on the market. DOE will also use these data to categorize relationships between efficiency and technological options, where the technological options used can be identified.

DOE notes that the maximum efficiency levels available in current prerinse spray valves may not necessar ily correspond to the max

- tech levels. It is possible that some of the design options that have met the screening criteria ( i.e. , passed the screening analysis) may be working prototypes that are not yet commercially available and, therefore, would not be found in today’s available maximum

- efficiency products. DOE seeks stakeholder input to determine appropriate

max

- tech efficiency levels.

Item 5

- 4 DOE seeks input from stakeholders regarding the range of efficiency levels

that should be examined as part of its analysis for commercial prerinse spray valves.

Item 5

- 5 DOE seeks input from interested parties on a methodology that would be

appropriate for determining the max

- tech models for each commercial prerinse spray valve analyzed.23

5.4 Cost

- Efficiency Relations hip and Analysis

The engineering analysis primarily involves estimating the energy consumption and cost of products at various levels of efficiency. Those estimates are then used to identify the cost

efficiency relationship for the products. DOE typically structures its estimation of the cost

efficiency relationship around one of three methodologies: (1) the design

- option approach, which calculates the incremental cost of adding specific design options to the baseline model; (2) the efficiency

- level approac h, which calculates the incremental costs of achieving increases in efficiency, without regard to the particular design options used to achieve such increases; and (3 ) the reverse

- engineering cost

- assessment approach, which involves a “bottom

- up” manufactu ring cost assessment based on a detailed BOM being analyzed. The methodology used for the engineering analysis depends on the product, the technologies under study, and any historical data DOE can utilize.

DOE is considering whether to use the design opti on approach or the efficiency level approach to identifying incremental improvements in efficiency. DOE tentatively has decided to use the reverse

- engineering approach to develop a cost assessment for each baseline model. If a relationship between various equipment classes can be quantified, DOE may select a representative equipment class to analyze and develop a scaling method to derive results for the other equipment classes. If not, DOE could conduct a separate analysis for each equipment class.

Before performing the engineering analysis, DOE plans to test a number of prerinse spray valve models . The testing would enable DOE to gather measured data on spray valve performance to support the engineering analysis. DOE is also considering obtaining efficienc y data from DOE’s CCMS d atabase

, 18 supplemented by other government sources, manufacturer catalogues, and manufacturer interviews, as necessary.

DOE plans to disassemble and inventory the spray valve components for select models and to identify manufactur ing processes required to fabricate them. This approach will allow DOE to derive the material and labor costs and generate BOMs for baseline spray valves in each equipment class and representative size bin. The BOMs describe the products in detail, includi ng manufacturing steps required to make and/or assemble each part. DOE will then develop a cost model to convert the BOMs for baseline models and the cost of the design options associated with different efficiency levels into manufacturer production costs (MPCs). By applying derived manufacturer markups to the MPCs, DOE will calculate the manufacturer selling prices and construct industry cost

- efficiency curves. As a compl e ment to this work, DOE may also evaluate retail prices to estimate manufac turer selli ng prices; review data collected from manufacturers about prices, efficiencies, and other features of various models of prerinse spray valve ; and interview manufacturers about the techniques and associated costs used to improve efficiency.

Item 5

- 6 DOE se eks comments on its proposed methods for determining costs

associated with incremental efficiency improvements in commercial prerinse spray valves.

18 See U.S. Dep’t of Energy, Compliance Certification Database

, http://www.regulations.doe.gov/certification

- data/

.24

Item 5

- 7 DOE seeks information on prerinse spray valve performance and related

incremental manufacturing cos ts (e.g., material costs, labor costs, overhead costs, building conversion capital expenditures, capital expenditures for tooling or equipment conversion associated with more efficient designs, research and development expenses, and marketing expenses).

I tem 5

- 8 DOE seeks comment on shipping expenses, markups, and any other factors

that affect the manufacturer selling price of commercial prerinse spray valves.

Item 5

- 9 DOE welcomes comments on how commercial prerinse spray valve efficiency

varies with spra y force, cleanability, or any other parameter.

5.5 Proprietary Designs

In its engineering and economic analyses, DOE will consider all design options that are commercially available or present in a working prototype, including proprietary designs that
meet the screening criteria discussed in section 4

. DOE will consider a proprietary design in the subsequent analyses, however, only if it does not represent a unique path to a given efficiency level. If the proprietary design is the only approach available to achieve a given efficiency level, then DOE will eliminate that efficiency level from further analysis. DOE will reject a standard level that can only be met with a single proprietary technology because it could result in an anti

competitive market, a principle consistently applied in past DOE rulemakings as economically unjustifiable. However, if a given energy efficiency level can be achieved by a number of design approaches, including a proprietary design, DOE will continue to examine the given efficiency level, despite the proprie tary nature of that one design.

DOE is sensitive to manufacturer concerns about proprietary designs and will take steps to maintain the confidentiality of any proprietary data provided by manufacturers. This information will provide input to the competitive impacts assessment and other economic analyses.

Item 5

- 10 DOE seeks information on proprietary designs of which it should be aware fo r

commercial prerinse spray valves under consideration in this rulemaking. If such proprietary designs exist, DOE would like to acquire the cost data necessary for evaluating those designs.

5.6 O ther Regulatory Changes Affecting the Engineering Analysis

In con ducting an engineering analysis, DOE considers the effects of the full complement of regulatory burdens (including those outside DOE’s statutory standards rulemaking process) that can affect manufacturers of covered products. Some regulatory requirements p otentially could affect the energy efficiency or energy consumption of the commercial prerinse spray valves covered under this rulemaking. DOE will attempt to identify all regulatory requirements that could affect the engineering analysis. Evaluating such requirements is closely related to the25

cumulative regulatory burden assessment that DOE will conduct as part of the manufacturer impact analysis. Based on consideration of the comments received on the engineering analysis, DOE will make any necessary chang es to its analysis. Those changes will be reflected in the NOPR.

Item 5

- 11 DOE welcomes comments on regulatory burdens and changes that should be

considered in the engineering analysis of commercial prerinse spray valves.

Item 5

- 12 DOE welcomes comments on other engineering issues that could affect the

engineering analysis.

6. MARKUPS ANALYSIS

DOE uses custo mer price estimates in its LCC and PBP analysis , and NIA . DOE typically uses manufacturer

- to

- customer markups to convert estimates of the manufacturer sell ing price derived from the engineering analysis (section 5 ) to customer prices. The manufacturer

- to

- customer markups are in addition to the manufacturer markups on production costs that DOE uses in estimating manufacturer selling price in the engineering analysis.

Before developing markups, DOE identifies distribution channels ( i.e. , how the equipment is distributed from the manufacturer to the customer). DOE’s consu ltations with industry experts indicate that manufacturers provide commercial prerinse spray valve s to the marketplace through a variety of channels.

Based on discussions with industry experts, DOE believes there are three main channels that prerinse spray valve s move through between the manufacturer and final customer

.

1. Direct Sales: This channel represents direct sales from a manufacturer to the final
customer

.

2. Authorized Distributor: This channel represents a mix of businesses that are authorized by spec ific manufacturers to sell their equipment. These may be independent businesses, or manufacturer/company

- owned stores. Authorized distributors will generally have the ability to sell the complete line of a manufacturer ’ s equipment, and offer servicing and parts.

3. Retail Merchants: This channel represents a mix of businesses, including catalog sales, I nternet sales, “ big

- box ” retail, or other merchant retail sales. These sales can be through either manufacturer

- authorized agents or non

- authorized distributo rs

. Consistent with the approach followed for o ther products and equipment, DOE will determine an average manufacturer ma rkup by examining the annual Securities and Exchange Commission ( SEC ) 10

- K reports filed by publicly traded manufacturers of appliances and commercial equipment to include prerinse spray valve s. DOE will also use current industry

- level financial data reported in the Economic Census produced by the U.S. Census Bureau to estimate26

markups for distributors and catalog sales. I f available, DOE will also make use of financial data included in industry reports.

The baseline markup relates the manufacturer sales price of baseline products to the distributor sales price. DOE calculates the baseline markup as an average ratio of selling price to
cost . Incremental markups are coefficients that relate the change in the manufacturer sales price of higher

- efficiency models to the change in the distributor sales price. The incremental markup reflects a situation in which the distributor faces an increase i n cost of goods sold for particular equipment because of manufacturing changes necessitated by new or amended standards.

In addition to developing markups, DOE will develop and include sales taxes to calculate final prices to customers. DOE will use an ann ually updated Internet source, the Sales Tax Clearinghouse, to calculate applicable sales taxes. 19

Item 6

- 1 DOE seeks comment on the distribution channels and the share of industry

shipments for each distribution channel described in this document as it applies to the range of commercial prerinse spray valve s that are covered by this potential rule

.

7. ENERGY AND W ATER USE ANALYSIS

For commercial prerinse spray valves, DOE will establish the annual energy and water consumption of the equipment and assess the energy

- and water

- savings potential of various equipment efficiencies. As part of the energy and water use an alysis, certain engineering assumptions may be required regarding equipment application, including how often the equipment is operated and under what conditions. DOE uses the annual energy

- and water

consumption and energy

- and water

- savings potential in t he LCC and PBP analys i s to establish the savings in customer operating costs at various equipment flow rates

. DOE may also account for cost savings related to reduction in wastewater discharge as a result of water savings in the LCC and PBP analys i s.

DOE i ntends for this analysis to capture and estimate water savings as a result of reduced flow rate and the related energy savings as a result of reduced hot water use

. DOE will consider the specific flow rates by equipment classes used in distinct application s. DOE will also consider changes in operation patterns as a result of varying flow rates and equipment classes

.

Item 7

- 1 DOE requests input on operational patterns of commercial prerinse spray

valves for different equipment classes and applications that may impact water consumption

.

19 See The Sales Tax Clearinghouse, Determine Sale s and Use Tax Rates

, www.thestc.com/.27

Item 7

- 2 DOE seeks recommendations on sources of data for regional potable water

supply temperatures and typical operational water temperatures used in commercial prerinse spray valve s for different applications and equ ipment classes.

Item 7

- 3 DOE seeks comments on the inclusion of associated reduction in wastewater

discharge as a result of lower flow rate for prerinse spray valves.

8. LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS

This section describes the LCC and PBP analysis that DOE will perform for commercial prerinse spray valve s, including how DOE develops the inputs to the calculation. The LCC analysis establishes the total cost of equipment over its lifetime (including purchase price and operating costs). The P BP analysis calculates the amount of time required for water and energy cost savings to pay back any increased initial cost of higher

- efficiency equipment.

The effects of energy conservation standards on customers include a change in operating expense (usu ally decreased) and a change in purchase price (usually increased). DOE analyzes the net effect on customers by calculating the LCC and PBP using the engineering performance data, the equipment prices, and the water

- use and end

- use load characterization da ta. Inputs to the LCC calculation include the cost to the customer of the installed equipment (purchase price plus installation cost), operating expenses (energy expenses and, if applicable, repair costs and maintenance costs), the lifetime of the equipmen t, and a discount rate. Section 8.1 describes the analytical approach used to model prerinse spray valves. Section 8.2 characterizes the installation costs of the equipment. Sections 8.3 and 8.4 discuss energy and water prices, respectively. Sections 8.5

, 8.6 , and 8.7 respectively d e scribe maintenance and repair costs, equipment lifetime, and discount rates.

8.1 Analytical Approach

DOE plans to conduct an LCC and PBP analysis for each of the representative units for each commercial prerinse spray valve equipment class . DOE conducts the LCC and PBP analysis by modeling both the uncertainty and variability in the i nputs using Monte Carlo simulation and probability distributions , starting in the preliminary analysis phase of this rulemaking

. Among other calculations, t he Monte Carlo approach identifies the percentage of customers benefit t ing from and being burdened by a prospective standard.

The LCC model uses Monte Carlo simulation to sample probability distributions for several of the parameters that affect the LCC. The Monte Carlo simulation is implemented using Microsoft Excel spreadsheets and the Crystal Ball ad d

- in program. Each Monte Carlo simulation would typically consist of 10,000 computer

- generated LCC and PBP calculations.

Each calculation uses input values sampled from a probability distribution or defined as single point values. The analysis results are presented as a distribution of LCC values and summary statistics such as average LCC savings and median PBP

.28

DOE expects to use probability distributions to characterize equipment lifetime, discount rates, and annual energy and water use. DOE may also use probability distributions for distributor markups. DOE expects to use point values to characterize the other LCC inputs, including the manufacturer markup, as these data are available only as single values.

To accurately estimate the percentage of customer s that would be affected by a particular standard level, DOE accounts for the distribution of equipment efficiencies expected for the compliance year. In other words, rather than analyzing the impacts of a particular standard level assuming that all custom ers are currently purchasing equipment at the baseline level, DOE conducts the analysis by taking into account the full range of equipment efficiencies that customers would purchase under the base case ( i.e. , the case without new energy conservation standa rds). By accounting for customers who already purchase more

- efficient equipment, DOE avoids overstating the potential benefits from standards. DOE determines the LCC savings and PBP for a particular standard level relative to the base case distribution of equipment efficiencies. Hence, if the equipment chosen in the base case has an efficiency that meets a given standard level, the customer is not affected by a given standard level ; the LCC savings are zero and the PBP is not defined.

DOE also performs an a nalysi s to determine whether the 3

- year rebuttable presumption of economic justification applies, i.e. , whether the additional cost of purchasing equipment that meets the standard level would be less than three times the value of the water and energy savin gs in the first year. (42 U.S.C. 6295(o)(2)(B)(iii)) For this analysis, DOE determines the value of the first year’s water and energy savings using the DOE test procedure. Although DOE examines the rebuttable

- presumption criteria, the economic justificatio n for potential standard levels are based on the full economic analysis required under section 325(o)(2)(B)(i) of EPCA. (42 U.S.C. 6295(o)(2)(B)(i))

The following sections discuss how DOE plans to develop key inputs to the LCC and PBP analysis, including ( 1) installation costs

, (2) water and energy prices

, (3) maintenance and repair costs

, ( 4 ) equipment lifetime

, and ( 5 ) discount rates. The other inputs to the LCC and PBP analysis

— namely, manufacturer costs, annual water and energy consumption, and markups for the determination of equipment prices

—have been previously addressed.

8.2 Installation Costs

The installation cost includes labor, overhead, and any other miscellaneous materials and parts. DOE is aware that there may be variability in the costs for commer cial prerinse spray valve installations. However, DOE does not have information to suggest that existing installation practices would necessarily change under an energy conservation standard.

Item 8

- 1 DOE seeks comment on whether installation costs for com mercial prerinse

spray valve s increase with higher

- efficiency equipment.

Item 8

- 2 DOE seeks comment on whether installation costs for commercial prerinse

spray valves are variable depending on equipment class and application

.29

8.3 Energy Prices

DOE will use ave rage energy prices , adjusting by building type if necessary, to value energy savings for customers. Marginal prices will be developed for the commercial sector for all 50 U.S. states plus the District of Columbia (D.C.).

DOE will then use projections of e nergy prices for commercial customers by state from the most recent version of the Energy Information Administration’s (EIA’s) Annual Energy Outlook ( AEO ) to estimate future energy prices.

8.4 Water Prices

DOE will determine marginal water and wastewater rates in the U nited States that will be used in the LCC and PBP analysis and NPV analys i s. W ater and wastewater prices vary considerably across the U nited States

. Currently

, the Federal government does not track projections for regional water and wastewater prices as it does for energy prices. The American Water Works Association publishes a water and wastewater rate survey biannually that provides pricing data for water util ities across the United States

. 20 DOE will investigate th ese data when mod e ling water and wastewater marginal pricing and projected future rate escalations.

Item 8

- 3 DOE seeks comment on sources of data for determining marginal water and

wastewater rates an d methods to break out water and wastewater rates across different pricing segments (such as regionally or by state).

Item 8

- 4 DOE seeks data sources and methods to determine future trends in water and

wastewater rate escalations

.

8.5 Maintenance and Repair Costs

DOE will consider any expected changes to maintenance and repair costs for the covered equipment. Small incremental changes in equipment efficiency are expected to incur little or no change in repair and maintenance costs over baseline equipment. For equipment with significant efficiency improvements over the baseline, there may be increased repair and maintenance costs because such equipment may incorporate technologies that are not widely available and/or more costly to maintain

. Also, DOE will investigate whether commercial prerinse spray valves are typically replaced upon failure of the equipment rather than repaired.

Item 8

- 5 DOE invites comment on whether repair costs may change for more

- efficient

commercial prerinse spray valve s.

20 American Water Works Ass’n, Water & Wastewater Rates

, www.awwa.org/resources

- tools/water

- utility

management/water

- wastewater

- rates.aspx

.30

Item 8

- 6 DO E invites comment on whether commercial prerinse spray valves are

typically replaced upon failure or repaired.

8.6 Equipment Lifetime

DOE will use information from catalogs and various literature sources, and input from manufacturers and other stakeholders, to establish commercial prerinse spray valve lifetimes (measured in years) for use in the LCC and PBP analysis, and subsequent analyses. Based on available information, DOE believes that the useful life of a commercial prerinse spray valve is approximately 5 years

. 21

Item 8

- 7 DOE seeks comment on appropriate commercial prerinse spray valve

lifetimes for the equipment under consideration, as well as data regarding correlation between hours of use and commercial prerinse spray valve lifetime.

8.7 Discount Rates

The calculation of LCC requires the use of an appropriate discount rate for those commercial companies that purchase commercial prerinse spray valve s. DOE will derive the discount rates for these commercial customers by estimating the capital costs for com panies that purchase prerinse spray valve s. The cost of capital is commonly used to estimate the present value of cash flows to be derived from a typical company project or investment. Most companies use both debt and equity capital to fund investments, so the cost of capital is the weighted

average cost of equity and debt financing, which is referred to as the weighted

- average cost of capital.

Item 8

- 8 DOE seeks input on the proposed approach for estimating discount rates for

commercial prerinse spray valv e customers.

9. SHIPMENTS ANALYSIS

DOE uses shipment projections by equipment class to calculate the national impacts of standards on energy and water consumption, NPV, and future manufacturer cash flows. DOE’s approach considers that shipments of commercial prerinse spray valve s are driven by the economic growth of commercial sectors that use this equipment. Historical data will be used to establish the relationship between shipments of commercial prerinse spray valve s and the appropriate index for sector gro wth. DOE intends to use historical shipments data for

21 U.S. EPA, WaterSense Specification for Commercial Pre

- Rinse Spray Valves Supp orting Statement (Sept. 2013), available at http://www.epa.gov/watersense/docs/prsv_finalspec_suppstate_09.19.13_final_508.pdf

.31

commercial prerinse spray valve s from trade organization surveys and commercial floor space growth data to characterize the shipments of this equipment

. DOE typically projects shipments for a 30

- year pe riod beginning with the expected compliance date of any standards.

Item 9

- 1 DOE seeks comment on an appropriate shipments projection methodology

,

including the selection of appropriate economic drivers.

Item 9

- 2 DOE requests historical shipments data for t he equipment discussed in this

F ramework document

, including shipments for differing equipment flow rates

.

9.1 Standards Impacts on Shipments

DOE plans to derive standards

- case projection s using the same data used in the development of the base

- case projection s. Often, DOE standards

- case projection s take into account the usual increase in purchase price and the usual decrease in operating costs caused by a new standard. The magnitude of the difference between the standards

- case and base

- case shipment projection s depends on the estimated purchase price increase, as well as the operating

cost savings from the standard and the corresponding effects on customer purchasing behavior

. DOE plans to assess whether there are sufficient data to estimate the impact of the c onsidered standard on prerinse spray valve shipments relative to the base case.

Item 9

- 3 DOE seeks comment on how an energy conservation standard for commercial

prerinse spray valve s might impact shipments of the equipment.

10. NATIONAL IMPACT ANALYSIS

The NIA assesses the aggregate impacts of potential conservation standards at the national level. Impacts that DOE will report include the cumulative NES and national water savings from potential commercial prerinse spray valve standards and the cumulative NPV of the total customer benefits. Section 10.1 discusses energy and water savings trends. Section 10.2 describes the national water and energy savings calculations, and s ection 10.3 discusses the NPV calculations.

10.1 Energy and Water Efficiency Trends

Key components of DOE’s estimates of NES , national water savings

, and NPV are the equipment efficiency projections over time for the base case (without new standards) and for each of the standards cases. To develop the various cases, DOE plans to develop market

- share efficiency data ( i.e. , data on the distribution of equipment shipments by efficiency) for the commercial prerinse spray valve equipment classes DOE is considering. DOE will estimate the change in efficiency in the base case by considering historical trends and input from stakeholders.32

The market

- share efficiency data will allow DOE to estimate the efficiency impact that standards may have in the standards’ compliance year. DOE expects to use a “roll

- up” scenario in developing p otential standards for commercial prerinse spray valve s. Under this scenario, DOE assumes (1) equipment efficiencies in the base case s that do not meet the standard level under consideration would “roll up” to meet the new standard level; and (2) e quipment efficiencies above the standard level under consideration would not be affected. DOE plans to use this scenario because it believe s commercial prerinse spray valve manufacturers would not take on the addition al costs associated with re

- tooling and make mo difications to commercial prerinse spray valve lines whose efficienc ies are higher than the new standard level.

Once DOE establishes the shipment

- weighted efficiency for each considered standard level for the assumed compliance date of the standard, it can estimate future shipment

- weighted efficiencies using the same rate of projected efficiency growth as in the base case, or if appropriate, a different rate for the standards case

.

Item 10

- 1 DOE seeks comment on how the efficiency of commercial prerinse spray

valve s would be likely to change in the future in the absence of standards.

10.2 National Water and Energy Savings

DOE intends to calculate national commercial prerinse spray valve water and associated energy consumption for each year beginning with the expected compliance date of any standards. It will calculate national water and energy consumption for the base cases and each efficiency standard level analyzed, and the water and energy savings will be calculated as the difference in water and energy consumption between the base case s and the standards cases. DOE plans to perform this calculation using a spreadsheet model that accounts for the stock of equipment affected by standards. 22 The water and ener gy savings are measured over the entire lifetime of equipment purchased in the 30

- year projection period. 23 DOE is also considering incorporating resulting cost savings from reduction in wastewater discharge.

DOE intends to consider whether there may be a r ebound effect associated with more

efficient commercial prerinse spray valve s in its determination of NES and national water savings . Increased equipment utilization may result from an increase in water efficiency. If data indicate that there may be a rebound effect and the data are sufficient to allow quantification of this effect for commercial prerinse spray valve s, DOE will account for the rebound effect in its calculation of NES.

22 Several examples of NES spreadsheet models from previous rulemakings can be found on DOE’s website at: www.eere.energy.gov/buildings/appliance_standards/.
23 In the past DOE presented energy savings results for only the 30

- year period that begins in the year of compliance. In the calculation of economic impacts, however, DOE considered operating cost savings measured over the entire lifetime of products purchased in the 30

- year period. DOE has chosen to modify its presentation of NES to be consistent with the approach used for its national economic analysis.33

Item 10

- 2 DOE seeks comment on the likelihood of increased commercial prerinse spray

valve usage as a direct result of improved equipment efficiency.

10.3 Net Present Value

To determine the NPV of potential energy conservation standards, DOE calculates annual
energy and water expe nditures based on annual energy and water consumption by incorporating project ed energy and water prices, using the projection of shipments and average efficiency described in section 9

. DOE calculates annual equipment expenditures by multiplying the price per unit by the number of project ed shipments. The difference between a b ase case and a standards case scenario gives the national energy and water cost savings a nd increased equipment expenditures in dollars. The difference each year between energy and water cost savings and increased equipment expenditures is the net savings (if positive) or net costs (if negative). DOE discounts those annual values to the presen t time and sums them to obtain a NPV.

Consistent with guidelines set by the U.S. Office of Management and Budget (OMB), DOE will conduct two NPV calculations, one using a real discount rate of 3 percent and the other using a real discount rate of 7 percent

. 24 The discount rates for the determination of NPV differ from the discount rates used in the LCC analysis (which are developed from a customer’s perspective). The 7

- percent real value is an estimate of the average before

- tax rate of return on private capital in the U.S. economy. The 3

- percent real value represents the “societal rate of time preference,” which is the rate at which society discounts future consumption flows to their present value.

11. CUSTOMER SUBGROUP ANALYSIS

The LCC and PBP analysis descr ibed in section 8 investigates the impacts of energy conservation standards on all users of commercial prerinse spray valv es . For the customer subgroup analysis, D OE divides users into subgroups, which comprise a subset of the population that is likely to be affected disproportionately by new or revised energy conservation standards ( e.g. , small businesses or firms that use prerinse spray valve s in particular applic ations where
energy and water savings are likely to be small). 25 The purpose of a subgroup analysis is to determine the magnitude of this disproportional impact. DOE will work with stakeholders to identify any subgroups for consideration and will conduct a subgroup analysis as part of the NOPR.

24 OMB, Circular A

- 4: Regulatory Analysis (September 17, 2003 ).
25 These firms differ from any prerinse spray valve manufacturers who may qualify as a small business under the size standards established by the Small Business Administration (SBA) . DOE analyzes impacts to these small businesses, which would be directly impacted by any final standards DOE might establish, as required by the Regulatory Flexibi lity Act (see section 12.3 ).34

Item 11

- 1 DOE seeks comment on what, if any, user subgroups should be considered in

evaluating potential standards for commercial prerinse spray valve s.

12. MANUFACTURER IMPACT ANALYSIS

DOE conducts its MIA consistent with the Report to Congress, “Energy Conservation Standards Activities” (Jan. 31, 2006) (required report under Section 141 of the Energy Policy Act of 2005) (Standards Activities), available at http://www1.eere.energy.gov/buildings/appliance_standards/pdfs/congressional_report_013106.p df

. Prior to 2006, DOE did not report any MIA results during the preliminary analys is phase; however, under the format established by the “Energy Conservation Standards Activities,” DOE typically collects, evaluates, and reports preliminary information and data in the preliminary analysis , if performed for a given rulemaking

. ( See Standa rds Activities, p. 48

. ) Such preliminary information would include the anticipated conversion costs by efficiency level and the corresponding anticipated impacts on direct employment. DOE would solicit further information during the preliminary analysis ph ase through the manufacturer interviews conducted as part of that phase’s engineering analysis. A draft set of questions to be used for those interviews is contained in Appendix B.

DOE intends the MIA to help assess the potential impacts of amended energy conservation standards on manufacturers of commercial prerinse spray valves. In addition to financial impacts, a wide range of quantitative and qualitative effects may occur following adoption of an amended standard that may require changes to the manufact uring practices for these products. DOE identifies these potential effects through interviews with manufacturers, as well as other stakeholders and experts.

For the NOPR, DOE supplements the results of the preliminary MIA with more

- detailed analyses, as de scribed in sections 12.1 through 12.5 . Specifically, DOE carries out an industry

wide cash flow analysis using the Government Regulatory Impact Model (GRIM), identifies and analyzes subgroups of manufacturers whose businesses vary significantly from the industry as a whole, performs a competitive impacts assessment, and revie ws the cumulative regulatory burden for the industry.

12.1 Sources of Information for the Manufacturer Impact Analysis

Many of the analyses described earlier provide important information that DOE uses as inputs for the MIA. Such information includes financial parameters developed in the market assessment (section 3 ), manufacturing costs and prices from the engineering analysis (section 5 ), retail price forecasts (section 6 ), and shipments forecasts (section 9 ). DOE supplements this information with information gathered during manufacturer interviews, as discussed below.

During the preliminary analysis phase, DOE conducts detailed interviews with manufacturers to gain insight into the range of possible impacts from potential amended energy35

conservation standards. These interviews will coincide with preliminary technical interviews for the engineering analysis.

During the NOPR phase, DOE will condu ct more detailed MIA interviews with manufacturers. The interview process plays a key role in the MIA by providing an opportunity for directly affected parties to express their views on important issues. During the interviews, DOE solicits information on t he possible impacts of potential amended standards on manufacturing costs, product prices, sales, direct employment, capital assets, and industry competitiveness. Both qualitative and quantitative information are valuable in terms of this analysis. DOE sch edules interviews well in advance to provide every opportunity for key individuals to be available to participate. In addition, DOE provides manufacturers with the questionnaire before the interviews to facilitate the gathering of the appropriate informati on. Although a written response to its questionnaire is acceptable, DOE prefers an interactive interview process, because it helps clarify manufacturer responses and provides the opportunity to identify additional issues.

DOE asks interview participants to identify all confidential information provided in writing or orally . While it will consider information gathered, as appropriate, in its energy conservation standards decision

- making process

, DOE will protect confidential information from disclosure, cons istent with applicable law. DOE also asks participants to identify any information they wish to have included in the public record

, but do not want to have associated with their interview (thereby identifying that particular manufacturer). DOE incorporates such information into the public record, but reports it without attribution.

DOE collates the completed interview questionnaire results and prepares a summary of the major issues and outcomes. This summary becomes part of the TSD produced in a rulemaking.

12.2 Industry Cash

- Flow Analysis

The industry cash flow analysis relies primarily on the GRIM. DOE uses the GRIM to analyze the financial impacts of new or amended energy conservation standards on the industries that produce the products covered by the standar d.

The GRIM analysis uses a number of inputs

— annual expected revenues; manufacturer costs such as costs of goods sold; selling, general, and administrative costs; taxes; and capital expenditures (both ordinary capital expenditures and those related to stan dards)

— to determine a series of annual cash flows beginning from the announcement of the new or amended standards and continuing throughout the analysis period. DOE compares the results against base

- case projections that involve no amended standards. The f inancial impact of new or amended standards is the difference between the two sets of discounted annual cash flows. Other performance metrics, such as return on invested capital, also are available from the GRIM.

DOE gathers the inputs needed for the GRIM from two primary sources: (1) the analyses conducted to this point; and (2) interviews with manufacturers and other stakeholders. Information gathered from previous analyses includes financial parameters, manufacturing costs,36

price forecasts, and shipments forecasts. Interviews with manufacturers and other stakeholders are essential in supplementing this information.

12.3 Manufacturer Subgroup Analysis

It is possible that the use of average industry cost values may not adequately assess differential impacts among subgroups of manufacturers. DOE recognizes that smaller manufacturers, niche players, and manufacturers exhibiting a cost structure that differs significantly from the industry average may be affected differently by new or amended standards. Ideally, DOE would consider the impact on every firm individually. In highly concentrated industries, this may be possible. In industries having numerous participants, however, DOE uses the results of the market and technology assessment to group manufacturers int o subgroups, as appropriate.

Small businesses, as defined by the SBA for commercial prerinse spray valve manufacturers, are enterprises with 500 employees or fewer. Small business size standards are listed by North American Industry Classification System ( NAICS) code and industry description. Commercial prerinse spray valve manufacturing is classified under NAICS 332913, “Plumbing Fixture Fitting and Trim Manufacturing.” 26 As part of its subgroup analysis, DOE would identify small businesses that manufacture these products and interview small businesses affected by the rulemaking to determine if there are differential impacts on these companies that may result from amended energy conservation standards. DOE examines publicly available data and contacts manufa cturers, when needed, to determine if they meet the SBA’s definition of a small manufacturing facility and if their manufacturing facilities are located within the United States.

The detailed manufacturer subgroup impact analysis entails calculating cash f lows separately for each defined class of manufacturer. For commercial prerinse spray valves, DOE is interested in feedback about potential subgroups, including small businesses. DOE will conduct a Regulatory Flexibility Act analysis to determine the impac ts of any amended standards on small businesses consistent with the Regulatory Flexibility Act

.

Item 1 2

- 1 DOE seeks comment on the appropriate manufacturer subgroups, if any, for

commercial prerinse spray valves that DOE should consider in a manufacturer s ubgroup analysis.

12.4 Competitive Impacts Assessment

EPCA directs DOE to consider any lessening of competition that is likely to result from an imposition of standards. (42 U.S.C. 6295(o)(2)(B)(i)(V) and 6316(a)) It further directs the Attorney General to dete rmine in writing the impacts, if any, of any lessening of competition likely to result from standards. (42 U.S.C. 6295(o)(2)(B)(ii))

26 NAICS Ass’n, NAICS Code Descripti on , www.naics.com/free

- code

- search/naicsdescription.php?code=332913

.37

DOE makes a determined effort to gather firm

- specific information regarding financial and other impacts associated with the proposed amended energy conservation standard, and report s the anticipated aggregated impact of the proposed amended standard on manufacturers. A key aspect of the competitive impacts analysis focuses on assessing the impacts on smaller manufacturers. DO E bases this assessment on manufacturing cost data and on information collected from interviews with manufacturers. These manufacturer interviews focus on gathering information that will help in assessing asymmetrical cost increases to some manufacturers, increased proportion of fixed costs potentially increasing business risks, and potential barriers to market entry ( e.g. , proprietary technologies). DOE provides the Attorney General with a copy of the NOPR and the TSD for consideration in the evaluation of the impact of amended standards in terms of the lessening of competition. DOE publishes the Attorney General’s letter and addresses any related comments in the final rule.

12.5 Cumulative Regulatory Burden

Other regulations (Federal, State, local, or internati onal) may apply to manufacturers of commercial prerinse spray valves covered under this rulemaking, as well as to other products made by the same manufacturers. Multiple regulations may result in a significant, cumulative regulatory burden on these manufacturers. Accordingly, DOE carefully considers the overlapping effects of amended DOE standards and other regulatory actions on manufacturers of commercial prerinse spray valves.

DOE is aware of additional regulations concerning spray valves for sale in California. California has in place a flow rate standard for commercial prerinse spray valves of 1.6 gpm at 60 psi, which is identical to the Federal standard, as well as a cleanability standard that requires that “commercial pre

- rinse spray valves manu factured on or after January 1, 2006, shall be capable of cleaning 60 plates in an average time of not more than 30 seconds per plate.” 27 California adopted the standards on December 15, 2004. 28 EPCA preempts any requirements of State and local governments c oncerning the energy efficiency or energy use of products and equipment covered by the Act, with certain exceptions. See, e.g., 42 U.S.C. 6297(c). An exception from the general rule of preemption exists for regulations concerning standards for commercial prerinse spray valves adopted by the California Energy Commission (CEC) before January 1, 2005. 42 U.S.C. 6297 (c)(7)

. Any state regulations concerning commercial prerinse spray valves adopted by the CEC after January 1, 2005 would not be excepted from st andard preemption.

Item 1 2

- 2 DOE welcomes comments on what other existing regulations or pending

regulations it should consider in its examination of cumulative regulatory burden

.

27 California Energy Commission, 2014 Appliance Efficiency Regulations , Report No. CEC

- 400

- 2014

- 009

- CMF, available at http://www.energy.ca.gov/2014publications/CEC

- 400

- 2014

- 009/CEC

- 400

- 20 14

- 009

- CMF.pdf

. 28 State of California, Order No. 04

- 1215

- 08, Docket No. 04

- AAER

- 01, available at http://www.energy.ca.gov/appliances/archive/2004rulemaking/notices/2004

- 12

- 22_ORDER_ADOPT.PDF

.38

Item 1 2

- 3 DOE seeks comment on small businesses that could be impacted by en ergy

conservation standards for commercial prerinse spray valves, and what the impacts on small businesses of potential standards might be.

13. UTILITY IMPACT ANALYSIS

To estimate the effects of energy conservation standards for commercial prerinse spray valve s on the electric and gas utilities industries, DOE plans to use a variant of EIA’s National Energy Modeling System ( NEMS ) , called NEMS

- BT. NEMS is a large, multi

- sectoral partial equilibrium model of the U.S. energy sector, used primarily for the purpose of preparing EIA’s AEO . NEMS produces a widely recognized reference case projection for the United States through 2040 and is available in the public domain.

The effect of reducing site energy use is modeled by making NEMS runs that deviate from the most r ecent AEO r eference case. Each year, DOE develops response coefficients using NEMS

- BT that give changes in capacity and generation by fuel type for a given quantity of site energy use reduction to a particular energy end use. DOE develops response coeffici ents for several different energy end uses. To model the impact of this standard on the electric and gas utilities industries, the response coefficients will be weighted by end use, and then they will be applied to the site energy savings for commercial pr erinse spray valve s that are generated from the NIA analysis.

Given the current and future water supply and infrastructure concerns that are affecting many parts of the United States, assessing impacts on water and wastewater utilities may be possible in this rulemaking. However, there is a high degree of regional and climatic variab ility among water and wastewater utilities, and DOE is not aware of standardized tools or models to appropriately quantify water utility impacts at the national level

.

Item 13

- 1 DOE seeks comment from interested parties about its proposed use of NEMS

BT to conduct the utility impact analysis.

Item 13

- 2 DOE seeks comment and information on potential methods and data sources

that can be used to assess the impacts on water and wastewater utilities as a result of energy conservation standards for commercial prerinse spray valves.

14. EMPLOYMENT IMPACT ANALYSIS

The employment impact analysis examines indirect employment impacts from standards, which consist of the net jobs created or eliminated in the national economy, other than in the manufacturing se ctor being regulated, caused by (1) reduced spending by end users on energy and water ; (2) reduced spending on new energy supply by the utility industry ; (3) increased spending on new eq uipment t o which the new standards apply ; and (4) the effects of those three factors throughout the economy. (Direct employment impacts are any changes in the number of employees of manufacturers of the equipment subject to standards, their suppliers, and related39

service firms. The MIA will address impacts on the number of employees working for the manufacturers.)

One method for assessing the possible effects on the demand for labor of such shifts in economic activity is to compare sector employment statist ics developed by the Labor Department’s Bureau of Labor Statistics (BLS). The BLS regularly publishes its estimates of the number of jobs per million dollars of economic activity in different sectors of the economy, as well as the jobs created elsewhere in the economy by this same economic activity. Data from BLS indicate that expenditures in the utility sector generally create fewer jobs (both directly and indirectly) than expenditures in other sectors of the economy. 29 There are many reasons for these diff erences, including wage differences and the fact that the utility sector is more capital

intensive and less labor

- intensive than other sectors. Energy conservation standards have the effect of reducing customer utility bills. Because reduced customer expe nditures for energy likely lead to increased expenditures in other sectors of the economy, the general effect of efficiency standards is to shift economic activity from a less labor

- intensive sector ( i.e. , the utility sector) to more labor

- intensive sectors ( e.g. , the retail and service sectors).

As part of its NOPR analyses , DOE plans to estimate indirect national employment impacts using an input/output model of the U.S. economy called Impact of Sector Energy Technologies version 3.1.1 (ImSET). 30 ImS ET is a special

- purpose version of the “U.S. Benchmark National Input

- Output” (I

– O) model, which was designed to estimate the national employment and income effects of energy

- saving technologies. The ImSET software includes a computer

- based I

– O model havin g structural coefficients that characterize economic flows among 187 sectors most relevant to industrial, commercial, and residential building energy use.

DOE notes that ImSET is not a general equilibrium forecasting model and understands the uncertainties involved in projecting employment impacts, especially changes in the later years of the analysis. Because ImSET does not incorporate price changes, the employment effects predicted by ImSET may over

- estimate actual job impacts over the long run. DOE may

c onsider the use of other modeling approaches for examining long

- run employment impacts.

Item 14

- 1 DOE seeks comments about its proposed approach to assessing national

indirect employment impacts.

15. EMISSIONS ANALYSIS

In the emissions analysis, DOE will estimate the reduction in power sector emissions of carbon dioxide (CO 2 ), nitrogen oxides (NO X ), sulfur dioxide (SO 2 )

, and mercury (Hg) from potential energy conservation standards for the considered equipment . In addition, DOE will

29 See U.S. Dep’t of Commerce, Bureau of Economic Analysis, Re gional Multipliers: A User Handbook for the Regional Input

- Output Modeling System (RIMS II) (1992).
30 MJ Scott, OV Livingston, JM Roop, RW Schultz & PJ Balducci

, Imset 3.1: Impact of Sector Energy Technologies Model Description and User’s Guide

, (May 2009) (prepared by Pacific Northwest National Laboratory for the U.S. Dep’t of Energy , PNNL

- 18412 ), available at www.pnl.gov/main/publications/external/technical_reports/PNNL

18412.pdf.40

estimate emissions impa cts in production activities (extracting, processing, and transporting fuels) that provide the energy inputs to power plants. These are referred to as “upstream” emissions. Together, these emissions account for the full

- fuel

- cycle (FFC). In accordance with DOE’s FFC Statement of Policy (76 FR 51281), the FFC analysis includes impacts on emissions of methane and nitrous oxide, both of which are recognized as greenhouse gases (GHGs)

.

DOE primarily conducts the emissions analysis using emissions factors for CO 2 and most of the other gases derived from data in EIA’s most recent AEO

. Combustion emissions of CH 4 and N 2 O are estimated using emissions intensity factors published by the Environmental Protection Agency (EPA), GHG Emissions Factors Hub. 31

EIA pr epares t he AEO using NEMS. Each annual version of NEMS incorporates the projected impacts of existing air quality regulations on emissions. The text below refers to AEO 201 4

, which generally represents current legislation and environmental regulations, including recent government actions, for which implementing regulations were available as of December 31, 201 3

.

SO 2 emissions from affected electric generating units (EGUs) are subject to nationwide and regional emissions cap and trading programs. Title IV of the Cl ean Air Act sets an annual emissions cap on SO 2 for affected EGUs in the 48 contiguous states and the District of Columbia (D.C.) . SO 2 emissions from 28 eastern states and D.C. were also limited under the Clean Air Interstate Rule (CAIR), which created an allowance

- based trading program that operates along with the Title IV program in those s tates and D.C. 70 FR 25162 (May 12, 2005). CAIR was remanded to the U.S. Environmental Protection Agency ( EPA ) by the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit), but it remained in effect. 32 On July 6, 2011

, EPA issued a replacement for CAIR, the Cross

- State Air Pollution R ule (CSAPR). 76 FR 48208 (Aug. 8, 2011). On August 21, 2012, the D.C. Circuit issued a decision to vacate CSAPR. 33 The cou rt ordered EPA to continue administering CAIR. AEO 201 4 assumes that CAIR remains a binding regulation through 2040

. 34

The attainment of emissions caps is typically flexible among EGUs and is enforced through the use of emissions allowances and tradable per mits. Under existing EPA regulations, any excess SO 2 emissions allowances resulting from the lower electricity demand caused by the

31 U.S. EPA, Center for Corporate Climate Leadership

, http://www.e pa.gov/climateleadership/inventory/ghg

emissions.html

. 32 See North Carolina v. EPA , 550 F.3d 1176 (D.C. Cir. 2008); North Carolina v. EPA , 531 F.3d 896 (D.C. Cir. 2008).
33 See EME Homer City Generation, LP v. EPA

, 696 F.3d 7, 38 (D.C. Cir. 2012).
34 On April 29, 2014, the U.S. Supreme Court reversed the judgment of the D.C. Circuit. The case will now return to the D.C. Circuit for further proceedings consistent with the Supreme Court's opinion. The Supreme Court held in part that EPA's methodology for qu antifying emissions that must be eliminated in certain states due to their impacts in other downwind states was based on a permissible, workable, and equitable interpretation of the Clean Air Act provision that provides statutory authority for CSAPR. See E PA v. EME Homer City Generation, Slip. Op. No 12

- 1182, *32 s lip o p. at 32 ( U.S. April 29, 2014). B ecause DOE would be using emissions factors based on AEO 201 4 for the NOPR phase of this rulemaking, this document assumes that CAIR, not CSAPR, is the regula tion in force. The difference between CAIR and CSAPR is not relevant for the purpose of DOE's analysis of SO 2 emissions.41

adoption of an efficiency standard could be used to permit offsetting increases in SO 2 emissions by any regulated EGU. In pa st rulemaking efforts, DOE recognized that there was uncertainty about the effects of efficiency standards on SO 2 emissions covered by the existing cap

- and

- trade system, but it concluded that no reductions in power sector emissions would occur for SO 2 as a result of standards.

Beginning in 201 6 , however, SO 2 emissions will fall as a result of the Mercury and Air Toxics Standards (MATS) for power plants, which were announced by EPA on December 21, 2011. 77 FR 9304 ( Feb

. 16, 2012). In the final MATS rule, EPA established a standard for hydrogen chloride as a surrogate for acid gas hazardous air pollutants (HAP s ), and also established a standard for SO 2 (a non

- HAP acid gas) as an alternative equivalent surrogate standard for acid gas HAP s . The same controls are used to reduce HAP s and non

- HAP acid gas; thus, SO 2 emissions will be reduced as a result of the control technologies installed on coal

- fired power plants to comply with the MATS requirements for acid gas. AEO 201 4 assumes that, in order to continue opera ting, coal plants must have either flue gas desulfurization or dry sorbent injection systems installed by 201 6 . Both technologies, which are used to reduce acid gas emissions, also reduce SO 2 emissions. Under the MATS, e missions will be far below the cap t hat would be established by CSAPR, so it is unlikely that excess SO 2 emissions allowances resulting from the lower electricity demand would be needed or used to permit offsetting increases in SO 2 emissions by any regulated EGU. Therefore, DOE believes that efficiency standards will reduce SO 2 emissions in 2015 and beyond.

CAIR established a cap on NO X emissions in eastern s tates and the District of Columbia. S tandards are expected to have little or no physical effe ct on these emissions in those s tates

cover ed by CAIR because excess NO X emissions allowances resulting from the lower electricity demand could be used to permit offsetting increases in NO X emissions. However, standards would be expected to reduce NO X emissions in the s tates not affected by the caps, so DOE estimates NO X emissions reductions f rom potential standards in the s tates where emissions are not capped.

The MATS limit mercury emissions from power plants, but they do not include emissions caps and, as such, DOE’s energy conservation standa rds would likely reduce Hg emissions. DOE will estimate merc ury emissions reduction using e m issions factors based on AEO 201 4 , which incorporates the MATS.

Power plants may emit particulates from the smoke stack, which are known as direct particulate matte r (PM) emissions. NEMS does not account for direct PM emissions from power plants. DOE is investigating the possibility of using other methods to estimate reduction in PM emissions due to standards. The great majority of ambient PM associated with power pl ants is in the form of secondary sulfates and nitrates, which are produced at a significant distance from power plants by complex atmospheric chemical reactions that often involve the gaseous emissions of power plants, mainly SO 2 and NO X . The monetary bene fits that DOE estimates for reductions in SO 2 and NO X emissions resulting from standards are in fact primarily related to the health benefits of reduced ambient PM.42

DOE recognizes that there are emission s reductions related to reduction in water production and distribution

. However, c urrently, no standardized model s or tools adequately account for emission s reductions as a result of water savings.

Item 15

- 1 DOE seeks comment about its approach to conduct the emissions analysis for

the equipment that would b e covered under this proposed rulemaking.

Item 15

- 2 DOE seeks comment and information on potential methods and data sources

that can be used to assess emission s reductions as a result of water savings.

16. MONETIZING REDUCED CO 2 AND OTHER EMISSIONS

DOE plans to consider the estimated monetary benefits likely to result from the reduced emissions of CO 2 and NO X that are expected to result from each of the standard levels considered.

To estimate the monetary value of benefits resulting from reduced emissions of C O 2 , DOE plans to use the most current social cost of carbon (SCC) values developed and/or agreed to by an interagency process. The SCC is intended to be a monetary measure of the incremental damage resulting from GHG emissions, including, but not limited t o, net agricultural productivity loss, human health effects, property damage from sea level rise, and changes in ecosystem services. Any effort to quantify and to monetize the harms associated with climate change will raise serious questions of sc ience, ec onomics, and ethics. However, with full regard for the limits of both quantification and monetization, the SCC can be used to provide estimates of the social benefits of reductions in GHG emissions.

The Interagency Working Group on Social Cost of Carbon re leased an update of its previous report in 2013. 35 The most recent estimates of the SCC in 2015, expressed in 201 3 $, are $ 12.0 , $ 40.5 , $ 62.4 , and $ 119 per metric ton of CO 2 avoided. For emissions reductions that occur in later years, these values grow in re al terms over time. Additionally, the interagency group determine d that a range of values from 7 percent to 23 percent should be used to adjust the global SCC to calculate domestic effects, although DOE will give preference to consideration of the global b enefits of reducing CO 2 emissions.

DOE multiplies the CO 2 emissions reduction estimated for each year by the SCC value for that year in each of the four cases. To calculate a present value of the stream of monetary values, DOE discounts the values in each of the four cases using the discount rates that had been used to obtain the SCC values in each case.

35 Interagency Working Group on Social Cost of Carbon, U. S. Gov’t, Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 .(May 2013, revised Nov. 2013), available at www.whitehouse.gov/sites/default/files/omb/inforeg/so cial_cost_of_carbon_for_ria_2013_update.pdf

.43

DOE recognizes that scientific and economic knowledge continues to evolve rapidly as to the contribution of CO 2 and other GHG to changes in the future glob al climate and the potential resulting damages to the world economy. Thus, these values are subject to change.

DOE also estimates the potential monetary benefit of reduced NO X emissions resulting from the standard levels it considers. For NO X emissions, es timates suggest a very wide range of monetary values, ranging from $ 476 to $ 4,893 per ton in 201 3 $

. 36 DOE calculate d monetary benefits using a medium value for NO X emissions of $2,684 per short ton (in 2013$), and real discount rates of 3 percent and 7 percent.

DOE is evaluating the appropriate valuation of avoided SO 2 and Hg emissions. Whether monetization of reduced SO 2 and Hg emissions will occur as part of any proposed rule that DOE issues for commercial prerinse spray valve s is yet to be determined.

Item 16

- 1 DOE requests comment about the approach it plans to use for estimating

monetary benefits associated with emissions reductions.

17. REGULATORY IMPACT ANALYSIS

If DOE issues a proposal to amend standards for commercial prerinse spray valve s, it will prepare a regulatory impact analysis to address the potential for non

- regulatory approaches to supplant or augment energy conservation standards to improve the efficiency of commercial prerinse spray valve s. DOE recognizes that voluntary or othe r non

- regulatory efforts by manufacturers, utilities, and other interested parties can result in substantial improvements in efficiency. DOE intends to analyze the likely effects of non

- regulatory initiatives on equipment water and energy use, customer uti lity, and LCC. DOE will attempt to base its assessment on the impacts of any such initiatives to date, but will also consider information presented regarding the impacts that an initiative might have in the future.

If DOE proposes amended energy conservati on standards for commercial prerinse spray valve s, and the NOPR constitutes a significant regulatory action as defined under section 3(f) of Executive Order 12866, “Regulatory Planning a nd Review,” 58 FR 51735 (Oct. 4, 1993), DOE will prepare and submit to OMB for review the assessment of costs and benefits required under section 6(a)(3) of the order.

36 For additional information, see U.S. Office of Management and Budget, Office of Information and Regulatory Affairs, 2006 Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities (2006), available at http://www.whitehouse.gov/sites/defau lt/files/omb/assets/omb/inforeg/2006_cb/2006_cb_final_report.pdf

.44 APPENDIX A

– LIST OF ITEMS FOR CO MMENT

Item 1

- 1 DOE requests comment on the modification of the definition of

“commercial prerinse spray valve” to include additional covered equipment types.

................................ ................................ ................................ .......................... 3 Item 1

- 2 DOE requests comment on potential metrics other than flow rate that may

be used to achieve greater water savings in commercial prerinse spray valves and if there is sufficient benefit to using an alternative metric to justify changing from the c urrent flow rate (gpm) metric.

................................ ........ 4 Item 1

- 3 DOE requests comment on the potential use of ASTM F2324

- 13 as the test

method required for certification of commercial prerinse spray valves.

................... 8 Item 1

- 4 DOE seeks comment on whether it should establish a labeling req uirement

for commercial prerinse spray valves.

................................ ................................ ....... 8 Item 3

- 1 DOE requests information that would contribute to the market assessment

,

including information on current equipment types available on the market, range of rated flow rates of equipment, current equipment features, and designs related to efficiency.

................................ ................................ ................... 12 Item 3

- 2 DOE welcomes input on estimates of market shares, products, features, and

trends for the prerinse spray valves covered in this rulemaking.

............................. 12 Item 3

- 3 DOE seeks information regarding which trade organizations represent the

commercial prerinse spray valve industry.

................................ .............................. 12 Item 3

- 4 DOE seeks information on retailers and retailer market share for commercial

prerinse spray valves.

................................ ................................ ............................... 13 Item 3

- 5 DOE seeks information on major manufacturers that may have been

overlooked in this Framework document.

................................ ............................... 15 Item 3

- 6 DOE requests information on nationwide historical equipment shipments

and prices for commercial prerinse spray valves.

................................ .................... 16 Item 3

- 7 DOE seeks input and data on prerinse spray valve product lifetime and the

relationship between spray valve usage and life expectancy.

................................ .. 16 Item 3

- 8 DOE requests input from interested parties about the design characteristics

and criteria that it is considering using when creating equipment classes. In particular, should additional or fewer criteria beyond those identified above be used as a basis for developing equipment classes?

................................ ............. 18 Item 3

- 9 DOE seeks comment on whether spray force and cleanability are useful

characteristics that could define the equipment classes of a prerinse spray valve.

................................ ................................ ................................ ........................ 18 Item 3

- 10 DOE requests comment on how ultra

- low

- flow spray valves differ from

other spray valves in usage, functionality, features, and cleaning ability.

.............. 18 Item 3

- 11 DOE seeks information from manufacturers on various nozzle designs and

spray patterns and their impacts on flow rate, spray force, cleanability, or other related functionality of the equipment

. ................................ ........................... 19 Item 3

- 12 DOE seeks information on what technology options are available to improve

the performance of commercial prerinse s pray valves.

................................ ........... 19 Item 4

- 1 DOE welcomes comments on any technologies listed in section 3.3 (or

others not identified) that it should not consider based on any of the four screening criteria. If so, please provide details regarding the specific45 screening criteria that would preclude DOE from considering such technology options. DOE also welcomes comments on how the above four screening criteria might apply to any additional technology option(s) that an interested party recommends to DOE.

................................ ................................ ..... 20 Item 5

- 1 DOE seeks stakeholder comment on these and other potential approaches to

determining the cost

- efficiency relationship of commercial prerinse spray valves.

................................ ................................ ................................ ...................... 21 Item 5

- 2 DOE welcomes comments on its proposed approach to select baseline

models for each equipment class.

................................ ................................ ............ 22 Item 5

- 3 DOE seeks information regarding the specific technological characteristics

of baseline models.

................................ ................................ ................................ .. 22 Item 5

- 4 DOE seeks input from stakeholders regarding the range of efficiency levels

that should be examined as part of its analysis for commercial prerinse spray valves.

................................ ................................ ................................ ...................... 22 Item 5

- 5 DOE seeks input from interested parties on a methodology that would be

appropriate for determining the max

- tech models fo r each commercial prerinse spray valve analyzed.

................................ ................................ ................. 22 Item 5

- 6 DOE seeks comments on its proposed methods for determining costs

associated with incremental efficiency improvements in commercial prerinse spray valves.

................................ ................................ ............................... 23 Item 5

- 7 DOE seeks information on prer inse spray valve performance and related

incremental manufacturing costs (e.g., material costs, labor costs, overhead costs, building conversion capital expenditures, capital expenditures for tooling or equipment conversion associated with more efficient d esigns, research and development expenses, and marketing expenses).

............................. 24 Item 5

- 8 DOE seeks comment on shipping expenses, markups, and any other factors

that affect the manufacturer selling price of commercial prerinse spray valves.

................................ ................................ ................................ ...................... 24 Item 5

- 9 DOE welcomes co mments on how commercial prerinse spray valve

efficiency varies with spray force, cleanability, or any other parameter.

................ 24 Item 5

- 10 DOE seeks information on proprietary designs of which it should be aware

for commercial prerinse spray valves under consideration in this rulemaking. If such proprietary designs exist, DOE would like to acquire the cost data necessary for evaluating th ose designs.

................................ .................... 24 Item 5

- 11 DOE welcomes comments on regulatory burdens and changes that should be

considered in the engineering analysis of commercial prerinse spray valves.

........ 25 Item 5

- 12 DOE welcomes comments on other engineering issues that could affect th e

engineering analysis.

................................ ................................ ................................ 25 Item 6

- 1 DOE seeks comment on the distribution channels and the share of industry

shipments for each d istribution channel described in this document as it applies to the range of commercial prerinse spray valves that are covered by this potential rule.

................................ ................................ ................................ .... 26 Item 7

- 1 DOE requests input on operational patterns of commercial prerinse spray

valves for different equipment classes and applications that may impact water consumption.

................................ ................................ ................................ .. 2646

Item 7

- 2 DOE seeks recommendations on sources of data for regional potable water

supply temperatures and typical operational water temperatures used in commercial prerinse spray valves f or different applications and equipment classes.

................................ ................................ ................................ ..................... 27 Item 7

- 3 DOE seeks comments on the inclusion of associated reduction in wastew ater

discharge as a result of lower flow rate for prerinse spray valves.

.......................... 27 Item 8

- 1 DOE seeks comment on whether installation costs for commercial prerinse

spray valves increase with higher

- efficiency equipment.

................................ ........ 28 Item 8

- 2 DOE seeks comment on whether installation costs for commercial prerinse

spray valves are variable depending on equipment class and applicat ion.

.............. 28 Item 8

- 3 DOE seeks comment on sources of data for determining marginal water and

wastewater rates and methods to break out water and wastewater rates across different pricing segments (such as regionally or by state).

......................... 29 Item 8

- 4 DOE seeks data sourc es and methods to determine future trends in water

and wastewater rate escalations.

................................ ................................ .............. 29 Item 8

- 5 DOE invites comment on whether re pair costs may change for more

efficient commercial prerinse spray valves.

................................ ............................ 29 Item 8

- 6 DOE invites comment on whether commercial prerinse spray valves are

typically replaced upon failure or repaired.

................................ ............................. 30 Item 8

- 7 DOE seeks comment on appropriate commercial pre rinse spray valve

lifetimes for the equipment under consideration, as well as data regarding correlation between hours of use and commercial prerinse spray valve lifetime.

................................ ................................ ................................ .................... 30 Item 8

- 8 DOE seeks input on the proposed approach for estimating discount rates for

commercial prerinse spray valve customers.

................................ ........................... 30 Item 9

- 1 DOE seeks comment on an appropriate shipments projection methodology,

including the selection of appropriate economic drivers.

................................ ........ 31 Item 9

- 2 DOE requests historical shipments data for the equipment discussed in this

Framework document, including shipments for differing equipment flow
rates.

................................ ................................ ................................ ......................... 31 Item 9

- 3 DOE seeks comment on how an energy conservation standard for

commercial prerinse spray valves might impact shipments of the equipment.

....... 31 Item 10

- 1 DOE seeks comment on how the efficiency of commercial prerinse spray

valves would be likely to change in the future in the absence of standards.

........... 32 Item 10

- 2 DOE seeks comment on the likelihood of increased commercial prerinse

spray valve usage a s a direct result of improved equipment efficiency.

................. 33 Item 11

- 1 DOE seeks comment on what, if any, user subgroups should be cons idered

in evaluating potential standards for commercial prerinse spray valves.

................ 34 Item 12

- 1 DOE seeks comment on the appropriate m anufacturer subgroups, if any, for

commercial prerinse spray valves that DOE should consider in a manufacturer subgroup analysis.

................................ ................................ ............. 36 Item 12

- 2 DOE welcomes comments on what other existing regulations or pending

regulations it should consider in its examination of cumulative regulatory burden.

................................ ................................ ................................ ..................... 3747

Item 12

- 3 DOE seeks comment on small businesses that could be impacted by energy

conservation standards for commercial prerinse spray valves, and what the impacts on small businesses of potential standards might be.

................................ . 38 Item 13

- 1 DOE seeks comment from interested parties about its proposed use of

NEMS

- BT to conduct the utility impact analysis.

................................ .................. 38 Item 13

- 2 DOE seeks comment and information on potential methods and data sources

that can be used to assess the impacts on water and wastewater utilities as a result of energy conservation standards for commercial prerinse spray valves.

................................ ................................ ................................ ...................... 38 Item 14

- 1 DO E seeks comments about its proposed approach to assessing national

indirect employment impacts.

................................ ................................ .................. 39 Item 15

- 1 DOE seeks comment ab out its approach to conduct the emissions analysis

for the equipment that would be covered under this proposed rulemaking.

............ 42 Item 15

- 2 DOE seeks comment and information on potential methods and data sources

that can be used to assess emissions reductions as a result of water savings.

......... 42 Item 16

- 1 DOE requests comment about the approach it plans to use for estimating

monetary benefits associated with emissions reductions.

................................ ........ 4348

APPENDIX B

– DRAFT PRELIMINARY MANUFACT URER IMPACT ANALYSIS QUESTIONAIRE

1 Issues

1.1 What are the key issues for your company regarding a possible future product rulemaking?

2 Shipment Projections

2.1 What is your company’s approximate market share?

2.2 W ould you expect your market share to change once standards become effective? Does your outlook change with higher efficiency levels?

2.3 How would you expect shipments to change for the industry as a whole as a function of standards and why?

2.4 Looking at price/c ost effects only, how would you expect shipments to change for a 5 percent, 10 percent, 25 percent, or 50 percent manufacturer price/cost increase?

3 Conversion Costs

3.1 What level of capital expenditure and product conversion costs would you anticipate to make at higher standard levels? Please describe what they are and provide your best estimate of their respective magnitudes.

3.2 How would the adoption of amended energy conservation standards affect capacity utilization and manufacturing assets at your domest ic production facilities? Would an amended standard result in stranded capital assets? Would any facilities be closed or downsized? Added or upgraded?

3.3 How might an amended standard impact product innovation?

4 Product Mix and Profitability

4.1 How would your c ompany’s product mix and marketing strategy change with changes in the efficiency standard?

4.2 What distribution channels are used from the man ufacturer to the retail outlet? What is the share of product going through each distribution channel?

4.3 Generally, how would new product standards affect your customer mix, distribution channels, and corresponding profit margins?

4.4 How might a new standard affect the Water Sense program, and consequently your firm?49

5 Market Shares and Industry Consolidation

5.1 In the absence of amended standards, do you expect any industry consolidation?

5.2 How would amended standards affect your ability to compete?

5.3 Could amended standards disproportionately advance or harm the competitive positions of some firms?

5.4 Are there concerns over intellectu al property?

5.5 Could amended standards result in disproportionate economic or performance penalties for particular customer

/user subgroups?

5.6 Beyond price and energy efficiency, could amended standards result in products that will be more or less desirable to customer s due to changes in product functionality, utility, or other features?

6 Cumulative Regulatory Burden

6.1 Are there recent or impending regulations on your specific product or other products that impose a cumulative burden on the industry?

6.2 If so, what is the total expected impact of those other regulations?