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CHAPTER 12 PRELIMINARY MANUFACTURER IMPACT ANALYSIS

TABLE OF CONTENTS

12.1 INTRODUCTION .........................................................................................................12-1

12.2 METHODOLOGY ........................................................................................................12-1

12.2.1 Phase I: Industry Profile..................................................................................... 12-2

12.2.2 Phase II: Industry Cash-Flow Analysis and Interview Guide............................ 12-2

12.2.2.1 Industry Cash-Flow Analysis........................................................... 12-2

12.2.2.2 Interview Guide ............................................................................... 12-2

12.2.3 Phase III: Subgroup Analysis............................................................................. 12-3

12.2.3.1 Manufacturer Interviews.................................................................. 12-3

12.2.3.2 Revised Industry Cash-Flow Analysis............................................. 12-3

12.2.3.3 Manufacturer Subgroup Analysis.................................................... 12-3

12.2.3.4 Competitive Impact Assessment...................................................... 12-4

12.2.3.5 Manufacturing Capacity Impact ...................................................... 12-4

12.2.3.6 Employment Impact......................................................................... 12-4

12.2.3.7 Cumulative Regulatory Burden ....................................................... 12-4

12.3 INDUSTRY OVERVIEW.............................................................................................12-4

12.3.1 Industry Cost Structure ...................................................................................... 12-5

12.3.2 Inventory Levels ................................................................................................ 12-6

12.4 INTERVIEW TOPICS AND PRELIMINARY FINDINGS.........................................12-7

12.4.1 Market Shares and Industry Consolidation........................................................ 12-7

12.4.2 Production and Product Mix .............................................................................. 12-8

12.4.2.1 Impact on Product Mix .................................................................... 12-9

12.4.2.1 Product Utility.................................................................................. 12-9

12.4.3 Conversion Costs............................................................................................... 12-9

12.4.4 Cumulative Regulatory Burden ....................................................................... 12-10

12.5 OVERALL KEY ISSUES ...........................................................................................12-10

12.5.1 System Approach............................................................................................. 12-11

12.5.2 Absence of Electronic Ballast ANSI standards ............................................... 12-11

12.5.3 Testing Burden................................................................................................. 12-11

12.5.4 Technology Shift.............................................................................................. 12-11

12.5.5 Impacts on Profitability.................................................................................... 12-11

12.5.6 Product Conversion Costs................................................................................ 12-12

12.5.7 Product Innovation........................................................................................... 12-12

LIST OF TABLES

Table 12.3.1 Commercial Lighting Fixture Industry Employment and Earnings ..............12-5

Table 12.3.2 Power, Distribution, and Specialty Transformer Industry Employment and 

Earnings 12-5

Table 12.3.3 Commercial Lighting Fixture Industry Material and Payroll Costs ..............12-6

Table 12.3.4 Power, Distribution, and Specialty Transformer Industry Material and Payroll 

Costs 12-6
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Table 12.3.5 Commercial Lighting Fixture Industry End-of-Year Inventory ....................12-7

Table 12.3.6 Power, Distribution, and Specialty Transformer Industry End-of-Year Inventory

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12-1

CHAPTER 12 PRELIMINARY MANUFACTURER IMPACT ANALYSIS

12.1 INTRODUCTION

The purpose of the manufacturer impact analysis (MIA) is to identify and quantify the 

likely impacts of amended energy conservation standards on manufacturers. The Process Rulea

provides guidance for conducting this analysis with input from manufacturers and other 

interested parties. The U.S. Department of Energy (DOE) applies this methodology to its 

evaluation of amended energy conservation standards for metal halide lamp fixtures to the extent 

that it is appropriate for this rulemaking. The Process Rule gives guidelines for considering 

financial impacts and a wide range of quantitative and qualitative industry impacts that might 

occur due to an amended energy conservation standard. For example, a particular standard level 

could require changes in manufacturing practices for metal halide lamp fixtures and ballasts.

DOE identifies and analyzes these impacts through interviews with manufacturers and other 

interested parties during the notice of proposed rulemaking (NOPR) stage of analysis.

DOE announced changes to the MIA format through a report issued to Congress on 

January 31, 2006 (as required by section 141 of the Energy Policy Act of 2005 (EPACT 2005)), 

entitled “Energy Conservation Standards Activities.”b Previously, DOE did not report any MIA 

results before the NOPR phase; however, under this new format, DOE collects, evaluates, and 

reports preliminary information and data in the Preliminary Analysis. Such information includes 

market data, key issues, product mixes, conversion costs, foreign competition, market shares, 

industry consolidation, and cumulative regulatory burden information. DOE solicits this 

information during the preliminary manufacturer interviews and reports the results in this 

chapter. Appendix 12A includes a copy of the interview guide that DOE distributed to 

manufacturers.

12.2 METHODOLOGY

DOE conducts the MIA in three phases. In Phase I, DOE creates an industry profile to 

characterize the industry and conducts preliminary MIA interviews to identify important issues 

that require consideration. Section 12.3 of this chapter presents initial findings of the Phase I 

analysis. In Phase II, DOE prepares an industry cash flow model and an interview questionnaire 

to guide subsequent discussions with manufacturers. In Phase III, DOE interviews manufacturers 

and assesses the impacts of amended energy conservation standards both quantitatively and 

qualitatively. DOE assesses industry and subgroup cash flow impacts and the industry net 

present value (INPV) using the Government Regulatory Impact Model (GRIM). DOE then 

 a On July 15, 1996, the Department of Energy published a Process Improvement Rule establishing procedures, 

interpretations and policies to guide the Department in the consideration of new or revised appliance efficiency 

standards (Procedures for Consideration of New or Revised Energy Conservation Standards for Consumer 

Products). 61 FR 36974.

b This report is available on the DOE website at 

www.eere.energy.gov/buildings/appliance_standards/2006_schedule_setting.html.
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assesses impacts on competition, manufacturing capacity, employment, and regulatory burden 

based on manufacturer interviews and discussions. The Federal Register NOPR and technical 

support document (TSD) will both present results of the Phase II and III analyses.

12.2.1 Phase I: Industry Profile

In Phase I of the MIA, DOE collects pertinent qualitative and quantitative financial and 

market information. This includes wages, employment, and industry costs for metal halide lamp 

fixtures and ballasts. Sources of information include reports published by industry groups, trade 

journals, the U.S. Census Bureau, and Securities Exchange Commission (SEC) 10-K filings. In 

addition, DOE relies on information from its market and technology assessment, engineering 

analysis, life-cycle cost analysis, and consumer price analysis to characterize the metal halide 

lamp fixture and ballast manufacturing industry. 

12.2.2 Phase II: Industry Cash-Flow Analysis and Interview Guide

In Phase II, DOE performs a preliminary industry cash-flow analysis and prepares a 

questionnaire, or interview guide, for interviewing manufacturers.

12.2.2.1 Industry Cash-Flow Analysis

DOE uses the GRIM to analyze the financial impacts of amended energy conservation 

standards. Amended energy conservation standards may require additional investment, raise 

production costs, and/or affect revenue through higher prices and possibly lower shipments. The 

GRIM uses several factors to determine a series of annual cash flows for the year that amended 

energy conservation standards become effective and for several years after implementation.

These factors include annual expected revenues, costs of sales, selling and general administration 

costs, taxes, and capital expenditures. Inputs to the GRIM include financial information, 

manufacturing costs, shipment forecasts, and price forecasts developed in other analyses.

Financial information is developed based on publicly available data and confidentially submitted 

manufacturer information. DOE compares the GRIM results for standards case at each trial 

standard level against the results for the base case in which no amended energy conservation 

standards are in place. The financial impact of amended energy conservation standards is the 

difference between the two sets of discounted annual cash flows.

12.2.2.2 Interview Guide

DOE conducts interviews with manufacturers to gather information on the effects of 

amended energy conservation standards on revenues and finances, direct employment, capital 

assets, and industry competitiveness. These interviews take place during Phase III of the MIA.

Before the interviews, DOE distributes an interview guide that will help identify the impacts of 

amended energy conservation standards on individual manufacturers or subgroups of 

manufacturers. The interview guide covers production costs; shipment projections and market 

share; product mix; conversion costs; markups and profitability; assessment of the impact on 

competition, manufacturing capacity; and other topics that are relevant to assessing the impacts 

of amended energy conservation standards on the metal halide lamp fixture and ballast industry.
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12.2.3 Phase III: Subgroup Analysis

Phase III activities occur after publication of the preliminary analysis. These activities 

include manufacturer interviews; revision of the industry cash-flow analysis; a manufacturer 

subgroup analysis; an assessment of the impacts on industry competition, manufacturing 

capacity, direct employment, and the cumulative regulatory burden; and other qualitative 

impacts. 

12.2.3.1 Manufacturer Interviews

DOE supplements the information gathered in Phase I and the cash-flow analysis 

performed in Phase II with information gathered through interviews with manufacturers during 

Phase III. The interview process has a key role in the MIA because it provides an opportunity for 

interested parties to express their views privately on important issues.

DOE conducts detailed interviews with manufacturers to gain insight into the potential 

impacts of amended energy conservation standards on sales, direct employment, capital assets, 

and industry competitiveness. Interviews are scheduled well in advance to provide every 

opportunity for key individuals to be available for comment. Although a written response to the 

questionnaire is acceptable, DOE prefers interactive interviews, which help clarify responses and 

provide the opportunity to identify additional issues.

A non-disclosure agreement allows DOE to consider confidential or sensitive 

information in the decision-making process. However, confidential information is not made 

available in the public record. At most, sensitive or confidential information may be aggregated 

and presented in industry-wide representations.

12.2.3.2 Revised Industry Cash-Flow Analysis

During the interviews, DOE requests information about profitability impacts, necessary 

plant changes, and other manufacturing impacts. Following the interviews, DOE revises the 

preliminary GRIM prepared in Phase II based on the feedback it receives.

12.2.3.3 Manufacturer Subgroup Analysis

The use of average cost assumptions to develop an industry cash-flow estimate does not 

adequately assess differential impacts among manufacturer subgroups. Smaller manufacturers, 

niche players, and manufacturers exhibiting a cost structure that differs largely from the industry 

average could be more negatively affected. Ideally, DOE would consider the impact on every 

firm individually; however, it typically uses the results of the industry characterization to group 

manufacturers with similar characteristics. During the interviews, DOE discusses the potential 

subgroups that have been identified for the analysis. DOE asks manufacturers and other 

interested parties to suggest what subgroups or characteristics are most appropriate for the 

analysis.
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12.2.3.4 Competitive Impact Assessment

Section 342 (6)(B)(i)(V) of the Energy Policy Act of 1992 (EPCA) directs DOE to 

consider any lessening of competition likely to result from imposition of standards. EPCA 

further directs the U.S. Attorney General to determine the impacts, if any, of any decrease in 

competition. DOE makes a determined effort to gather firm-specific financial information and 

impacts and report the results in the competitive impact assessment. The competitive impact 

assessment is based on manufacturer cost data and information collected from the manufacturer 

interviews. The interviews focus on assessing asymmetrical cost increases to some 

manufacturers, the potential increase in business risks from an increased proportion of fixed 

costs, and potential barriers to market entry (e.g., proprietary technologies). The competitive 

impact analysis also focuses on assessing any differential impacts to smaller manufacturers. 

12.2.3.5 Manufacturing Capacity Impact

One of the significant outcomes of amended energy conservation standards can be the 

obsolescence of existing manufacturing assets, including tooling and other investments. The 

manufacturer interview guide has a series of questions to help identify impacts on manufacturing 

capacity, specifically capacity utilization and plant location decisions in North America with and 

without an amended energy conservation standard; the ability of manufacturers to upgrade or 

remodel existing facilities to accommodate the new requirements; the nature and value of 

stranded assets, if any; and estimates for any one-time restructuring or other charges, where 

applicable.

12.2.3.6 Employment Impact

The impact of amended energy conservation standards on employment is an important 

consideration in the rulemaking process. To assess how domestic employment patterns might be 

affected, the manufacturer interviews explore current employment trends in the metal halide

lamp fixture and ballast industry and solicits manufacturer views on changes in employment 

patterns that may result from increased standard levels. The employment impacts section of the 

interview guide focuses on current employment levels at production facilities, expected future 

employment levels with and without an amended energy conservation standard, differences in 

workforce skills, and employee retraining.

12.2.3.7 Cumulative Regulatory Burden

DOE seeks to mitigate the overlapping effects on manufacturers of energy conservation 

standards and other regulatory actions affecting the same products or companies. DOE analyzes

and considers the impact on manufacturers of multiple, product-specific regulatory actions.

12.3 INDUSTRY OVERVIEW 

The following section summarizes publicly available industry data.
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12.3.1 Industry Cost Structure

DOE developed the metal halide lamp fixture and ballast industry cost structure from the 

U.S. Census Bureau, Annual Survey of Manufacturers: Statistics for Industry Groups and 

Industries with data from 2004 to 2008. Metal halide lamp fixture manufacturing is classified 

under the North American Industry Classification System (NAICS) code 335122 (Commercial, 

Industrial, and Institutional Electric Lighting Fixture Manufacturing). Metal halide ballast

manufacturing is classified as a subset under the NAICS code 335311 (Power, Distribution and 

Specialty Transformer Manufacturing).

DOE is unaware of any publicly available industry-wide cost data specific to only 

manufacturers of metal halide lamp fixtures and metal halide ballasts. DOE presents the data 

below as a broader industry proxy for the metal halide ballast industry. 

Table 12.3.1 presents the lighting fixture employment levels and payroll from 2004 to 

2008. The statistics show a 6.5 percent decrease in the number of production workers from 2004 

to 2008 with a corresponding 11.9 percent increase in the overall industry payroll.

Table 12.3.1 Commercial Lighting Fixture Industry Employment and Earnings

Year Production Workers All Employees Payroll for All Employees

thousand current year dollars

2004 32,253 48,148 1,723,059

2005 31,525 47,544 1,806,284

2006 31,677 47,123 1,869,487

2007 31,117 49,079 1,931,564

2008 30,167 46,026 1,928,830

U.S. Census Bureau. 2004 Annual Survey of Manufacturers: 2004 and Earlier Years. December 2005., 

2006 Annual Survey of Manufacturers: 2006 and 2005. November 2008., and 2008 Annual Survey of 

Manufacturers: 2008 and 2007. March 2010.

Table 12.3.2 presents the power, distribution and specialty transformer industry

employment levels and payroll from 2004 to 2008. The statistics illustrate a 19.6 percent increase 

in the number of production workers from 2004 to 2008 and a 28.2 percent increase in the 

industry payroll.

Table 12.3.2 Power, Distribution, and Specialty Transformer Industry Employment and 

Earnings

Year Production Workers All Employees Payroll for All Employees

thousand current year dollars

2004 13,825 18,958 748,483

2005 14,529 19,509 781,440

2006 15,438 20,642 863,266

2007 16,538 22,307 976,611

2008 16,529 22,096 959,372

U.S. Census Bureau. 2004 Annual Survey of Manufacturers: 2004 and Earlier Years. December 2005., 

2006 Annual Survey of Manufacturers: 2006 and 2005. November 2008., and 2008 Annual Survey of 

Manufacturers: 2008 and 2007. March 2010.
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Table 12.3.3 presents the costs of lighting fixture materials and industry payroll as a 

percentage of shipment value from 2004 to 2008. The cost of materials has slightly increased by 

1.7 percent from 2004 to 2008. Both the cost of payroll for production workers and the cost of 

total payroll declined as a percentage of shipment value over that timeframe.

Table 12.3.3 Commercial Lighting Fixture Industry Material and Payroll Costs

Year Cost of Materials 

percent of shipment value

Cost of Payroll 

for Production Workers 

percent of shipment value

Cost of Payroll

for All Employees

percent of shipment value

2004 46.4 9.5 18.0

2005 46.1 9.0 17.5

2006 45.9 8.6 17.1

2007 45.2 7.7 17.2

2008 47.2 7.8 16.5

U.S. Census Bureau. 2004 Annual Survey of Manufacturers: 2004 and Earlier Years. December 2005., 

2006 Annual Survey of Manufacturers: 2006 and 2005. November 2008., and 2008 Annual Survey of 

Manufacturers: 2008 and 2007. March 2010.

Table 12.3.4 presents the costs of metal halide lamp ballast materials and industry payroll 

as a percentage of shipment value from 2004 to 2008. The cost of materials has decreased 

slightly by 0.8 percent from 2004 to 2008. As with the lighting fixture industry, both the cost of 

payroll for production workers and the cost of total payroll declined as a percentage of shipment 

value over that timeframe.

Table 12.3.4 Power, Distribution, and Specialty Transformer Industry Material and Payroll 

Costs

Year Cost of Materials 

percent of shipment value

Cost of Payroll 

for Production Workers 

percent of shipment value

Cost of Payroll

for All Employees

percent of shipment value

2004 51.3 11.6 19.5

2005 51.2 11.2 18.5

2006 51.9 10.4 17.2

2007 52.3 7.8 13.2

2008 50.9 7.7 13.0

U.S. Census Bureau. 2004 Annual Survey of Manufacturers: 2004 and Earlier Years. December 2005., 

2006 Annual Survey of Manufacturers: 2006 and 2005. November 2008., and 2008 Annual Survey of 

Manufacturers: 2008 and 2007. March 2010.

12.3.2 Inventory Levels

Table 12.3.5 shows the year-end inventory for the commercial lighting fixture industry 

obtained from the U.S. Census Bureau, and Annual Survey of Manufacturers: Value of 

Manufacturers' Inventories by Stage of Fabrication for Industry Groups and Industries and

Annual Survey of Manufacturers: Statistics for Industry Groups and Industries. The industry’s 

end-of-year inventory from 2004 to 2008 increased 22.4 percent when expressed in dollars, and

grew slightly when expressed as a percentage of shipment value.
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Table 12.3.5 Commercial Lighting Fixture Industry End-of-Year Inventory

Year End-of-Year Inventory 

thousand current year dollars

End-of-Year Inventory 

percent of shipment value

2004 1,252,574 12.8

2005 1,345,360 13.0

2006 1,476,874 13.5

2007 1,532,345 13.1

2008 1,532,823 13.1

U.S. Census Bureau. 2005 Annual Survey of Manufacturers: Beginning and End of Year 2005 and Earlier 

Years. November 2006., 2004 Annual Survey of Manufacturers: 2004 and Earlier Years. December 

2005., 2006 Annual Survey of Manufacturers: 2006 and 2005. November 2008., and 2008 Annual Survey 

of Manufacturers: 2008 and 2007. March 2010.

Table 12.3.6 shows the year-end inventory for the power, distribution, and specialty

transformer industry obtained from the U.S. Census Bureau, and Annual Survey of 

Manufacturers: Value of Manufacturers' Inventories by Stage of Fabrication for Industry 

Groups and Industries and Annual Survey of Manufacturers: Statistics for Industry Groups and 

Industries. The industry’s end-of-year inventory from 2004 to 2008 experienced increase of 

102.3 percent when expressed in dollars, and remained roughly flat as a percentage of shipment 

value.

Table 12.3.6 Power, Distribution, and Specialty Transformer Industry End-of-Year 

Inventory

Year End-of-Year Inventory 

thousand current year dollars

End-of-Year Inventory 

percent of shipment value

2004 427,802 11.6

2005 520,976 12.3

2006 637,235 12.7

2007 799,074 10.8

2008 865,396 11.7

U.S. Census Bureau. 2005 Annual Survey of Manufacturers: Beginning and End of Year 2005 and Earlier 

Years. November 2006., 2004 Annual Survey of Manufacturers: 2004 and Earlier Years. December 2005., 

2006 Annual Survey of Manufacturers: 2006 and 2005. November 2008., and 2008 Annual Survey of 

Manufacturers: 2008 and 2007. March 2010.

12.4 INTERVIEW TOPICS AND PRELIMINARY FINDINGS

The following section summarizes information gathered during interviews held in 

August, September and October of 2010 for the preliminary MIA.

12.4.1 Market Shares and Industry Consolidation

Amended energy conservation standards can alter the competitive dynamics of the 

marketplace, prompting companies to enter the market, exit the market, or merge with other 

companies. The preliminary MIA interview questions asked manufacturers to share their 

perspectives on industry consolidation both in the absence of amended energy conservation
12-8

standards and assuming amended standards at various efficiency levels. The interview questions 

focused on gathering information that assessed:

• disproportionate cost increases to some manufacturers;

• increased proportion of fixed costs potentially increasing business risks; and

• potential barriers to market entry (e.g., proprietary technologies).

The need to assess anti-competitive effects of proposed amended energy conservation 

standards comes from the need to protect consumer interests. During the interviews, DOE 

solicited information to determine whether amended energy conservation standards could result 

in disproportionate economic or performance penalties for particular consumer or user 

subgroups. Manufacturers were also asked if amended energy conservation standards could 

result in equipment that will be more or less desirable to consumers due to changes in equipment 

functionality, utility, or other features.

Market Shares: DOE inquired about the current market shares of manufacturers in the 

metal halide lamp fixture and ballast industries and how those shares might change after

amended energy conservation standards. Most manufacturers expected their market share to 

remain the same upon the imposition of amended energy standards. Some manufacturers stated 

that more stringent energy standards could positively impact their market share. According to 

these manufacturers, as lower wattage high intensity discharge (HID) products are pushed 

toward a more cost effective solution, manufacturers whose production lines are already built 

around electronic ballast production would be better positioned and therefore expected to 

maintain if not gain market share. 

Industry Consolidation: Although both the metal halide lamp fixture and ballast 

industries are composed of a large number of manufacturers, both industries present high levels 

of concentration. As described in preliminary TSD chapter 3, eight manufacturers hold the 

majority of the domestic market share of metal halide lamp fixtures and five manufacturers hold 

the majority of the domestic market share of metal halide lamp ballasts. 

The lighting divisions of some of these companies manufacture products other than metal 

halide lamp fixtures and ballasts, such as fluorescent lighting, high intensity discharge (HID) 

lighting, and light emitting diode (LED) lighting.

Most interviewed manufacturers did not think there would be significant consolidation in 

their respective industry in the absence of standards. For the most part, they also agreed that new 

standards most likely would not lead to additional consolidation, although one manufacturer 

expected consolidation to occur. Another manufacturer commented on the possible expansion of 

the market. 

12.4.2 Production and Product Mix 

DOE requested manufacturers’ feedback on what they perceived to be the possible 

impact of amended energy conservation standards on cash flow and profitability. For instance, 

the capital and equipment conversion outlays needed to upgrade or redesign equipment before 

they have reached the end of their useful life may create significant conversion costs, resulting in 
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reduced cash flow and stranded investments. Higher energy conservation standards could also 

result in higher per-unit costs that could cause consumers to shift to less expensive equipment.

12.4.2.1 Impact on Product Mix

Manufacturers believed that amended energy conservation standards would affect the 

product mix of metal halide lamp fixtures and ballasts. Manufacturers commented that changes 

in energy conservation standards could consolidate product offerings and lower profits. 

Manufacturers also stated that if the rulemaking increases efficiency levels significantly, certain 

models would incur exponential cost increases, likely diminishing their presence in the current 

price sensitive market. Specifically, manufacturers speculated that lower wattage magnetic 

ballasts could be eliminated because the price increase necessary to reach particular efficiency 

levels would exceed the currently higher electronic ballast prices. Additionally, size and thermal 

constraints of some fixture and ballast combinations make increasing efficiency of certain 

equipment impracticably expensive. Certain manufacturers commented that if the rulemaking 

increases efficiency levels significantly, they might exit the metal halide lamp fixture or ballast 

market altogether in favor of LED technology.

12.4.2.1 Product Utility

Certain manufacturers expressed concern that amended energy conservation standards 

might require changes in equipment functionality, utility, and other features that would make 

equipment less desirable to consumers. The major area of concern related to ballasts used in 

harsh environments and in applications where complete reliability is required. Specifically, 

manufacturers cited outdoor and temperature-sensitive applications, which may be better served 

by magnetic ballasts due to their inherent higher tolerance for transient spikes and high 

temperature reliability.

12.4.3 Conversion Costs

In some instances, manufacturers may be able to meet proposed standard levels by 

modifying existing equipment. In other cases, the necessary changes may entail a complete 

product-line redesign. In either case, more stringent energy conservation standards would cause 

manufacturers to incur one-time capital and equipment conversion costs. Capital conversion 

costs are one-time investments in property, plant and equipment. Equipment conversion costs

include one-time investments in research, product development, testing and marketing.

All manufacturers stated that the conversion costs associated with amended standards 

would depend on the efficiency level established by those standards. However, based on past 

experience related to compliance with recently enacted regulation, interviewed manufacturers, 

who are typically large producers, provided estimated conversion cost figures. According to 

these manufacturers, potential conversion costs would range from one to twenty million. The 

wide range is due to the fact that some manufacturers assumed all product families, in some 

cases up to fifty products, will be affected to a similar degree. 

The estimated conversion cost figures would include new production machinery 

purchases (welding, winding, dykes and tools) and equipment conversion cost such as testing,

product development and marketing. 
12-10

12.4.4 Cumulative Regulatory Burden

While any one regulation may not impose a significant burden on manufacturers, the 

combined effects of several impending regulations may have serious consequences for individual 

manufacturers, groups of manufacturers, or entire industries. Assessing the impact of a single 

regulation may overlook this cumulative regulatory burden.

Expenditures associated with meeting other regulations are an important aspect of DOE’s 

consideration of the cumulative regulatory burden the industry faces. The manufacturer 

interviews helped DOE identify the level and timing of investments manufacturers are expecting 

to incur because of these regulations. Manufacturers were also asked under what circumstances 

they might be able to make expenditures related to regulations and energy conservation 

standards.

Several Federal and international regulatory programs may affect the markets for metal 

halide lamp fixtures and ballasts. The market and technology assessment discusses some of the 

notable initiatives that characterize recent developments in the lighting market. See chapter 3 for 

a list and description of the regulatory requirements DOE identified.

In the interviews, some manufacturers expressed concern about the compliance date for 

the upcoming regulation on fluorescent lamp ballasts being less than a year away from this 

rulemaking’s effective date. Manufacturers stated that adapting to two new regulations at the 

same time would be difficult and probably not possible given the strain on research and 

development. Additionally, manufacturers spoke of compliance enforcement issues with the

Energy Independence and Security Act of 2007 (EISA 2007) (Pub. L. 110-140), California Title 

20, California Title 24, and American Society of Heating, Refrigerating, and Air-Conditioning 

Engineers (ASHRAE) standards. Manufacturers felt that adding another regulation could punish 

compliant manufacturers while potentially driving others to noncompliance. Some manufacturers 

predicted they may have to reallocate resources to have staff dedicated to compliance matters. 

Manufacturers also mentioned the impact of the pending Outdoor Lighting Efficiency Act (HR

1732); the legislation, still under development, would affect some applications of outdoor metal 

halide lamp fixtures, potentially creating conflicting standards. In addition, manufacturers 

commented that if this rulemaking included a system approach involving lamp efficacy, it could 

possibly conflict with the July 1, 2010 HID lamp final determination. 75 FR 37975.

12.5 OVERALL KEY ISSUES

One important aspect of the preliminary MIA is the opportunity it creates for DOE to 

identify key manufacturer issues early in the development of amended energy conservation 

standards. During preliminary interviews manufacturers identified seven major areas of concern: 

(1) system approach, (2) absence of electronic ballast American National Standards Institute 

(ANSI) standards, (3) testing burden, (4) technology shift, (5) impacts on profitability, (6) 

conversion costs, and (7) product innovation.
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12.5.1 System Approach

Many manufacturers were conflicted on the issue of whether a ballast or system 

efficiency metric would be superior when determining fixture efficiency. While a few ballast 

manufacturers favored a system approach, fixture and ballast manufacturers generally preferred 

exclusively using ballast efficiency. Manufacturers were concerned that a metric considering the 

lamp and ballast together could possibly favor specific combinations and penalize companies 

that did not package lamps with their ballasts. Developing specific lamp and ballast 

combinations could also mean that the consumer would be forced to replace lamps exactly as 

prescribed, possibly requiring more effort to be spent on consumer education. Furthermore, 

current fixture-level metrics are complicated and ambiguous. Although several candidates (e.g.,

FTE, TER) have been discussed in past, the industry has yet to settle on a useful common 

metric.

12.5.2 Absence of Electronic Ballast ANSI standards

Some manufacturers worried about setting efficiency standards for electronic ballasts 

when ANSI currently has no standards for such high frequency ballasts. ANSI has attempted to 

address the issue, but as yet has been unable to reach a consensus. Manufacturers observed that 

without a standard, efficiency measurement for these ballasts poses challenges and requires

special, expensive equipment.

12.5.3 Testing Burden

When mentioning regulatory burden, manufacturers spoke of the accompanying testing 

burden. There are already numerous testing requirements for certifications and compliance, and 

many manufacturers asserted that there are major problems with labeling and enforcement. 

Manufacturers estimated another standard would require thousands of hours and dollars worth

of testing for product development and redesign. Manufacturers also expressed concerns over 

additional testing for further requirements, such as optics and thermal testing. If the rulemaking 

uses a lamp-and-ballast efficiency approach, some manufacturers felt they would be pressured 

into additional lamp compatibility testing as well.

12.5.4 Technology Shift

Manufacturers also noted that there is already a market shift away from metal halide 

technology in general. According to manufacturers, LEDs and fluorescent technologies are 

capturing significant market share of new construction in both indoor and outdoor applications. 

Manufacturers are concerned that standards in general will accelerate this migration to 

alternative technologies due to price increases of standard compliant equipment. 

12.5.5 Impacts on Profitability

Some manufacturers commented that profit margins would decrease with the 

implementation of amended energy conservation standards due to higher product costs and the 

inability to pass on those costs to their customers. This could be a particularly acute problem in

the original equipment manufacturer (OEM) distribution channel, which are typically very price 
12-12

sensitive and first-cost focused. In turn, a higher standard could cause business to shift to 

overseas companies who can compete on a cheaper level.

12.5.6 Product Conversion Costs

Certain manufacturers commented that amended energy conservation standards would 

force them to invest in more expensive and energy efficient components, improve existing 

product lines, and design new product lines. The majority of these product conversion costs 

would be attributed to engineering and testing, plant equipment, finer grade materials, production 

personnel and sales retraining, and consumer education. Those manufacturers that expected 

significant product conversion costs commented that the large investments would ultimately 

result in more expensive products for consumers.

12.5.7 Product Innovation

Manufacturers also expressed concern over the impact of amended energy conservation

standards on product innovation. Employees may need to spend more time redesigning products 

to comply with standards rather than developing new products. This concern especially involves 

some manufacturers’ efforts in researching and developing LED technology, to which the market 

is transitioning already in many applications. An amended standard may force them to reallocate 

resources away from LED to make expensive changes to their metal halide products that could 

then drive consumers into the LED market.