CHAPTER 1. INTRODUCTION

TABLE OF CONTENTS

1.1 PURPOSE OF THE DOCUMENT

................................................................................. 1-1

1.2 OVERVIEW OF ENERGY CONSERVATION STANDARDS FOR RESIDENTIAL

CENTRAL AIR CONDITIONERS AND HEAT PUMPS

............................................. 1-1

1.2.1 Small-Duct, High-Velocity Systems

.................................................................... 1-2

1.2.2 Space-Constrained Products

................................................................................ 1-5

1.2.2.1 Single-Package Vertical Units (SPVUs)

.................................................. 1-5

1.2.2.2 Through-the-Wall Systems

...................................................................... 1-6

1.2.2.3 Single-Package Non-Weatherized Units

.................................................. 1-6

1.2.3 Ductless Split Systems

......................................................................................... 1-7

1.3 PROCESS FOR SETTING ENERGY C ONSERVATION STANDARDS

................... 1-7

1.4 STRUCTURE OF THE DOCUMENT

.......................................................................... 1-10

LIST OF TABLES

Table 1.3.1 Central Air Conditioning Analyses Under the Process Rule

................................... 1-2CHAPTER 1. INTRODUCTION

1.1 PURPOSE OF THE DOCUMENT

This preliminary technical support document (p reliminary TSD) is a stand-alone report that provides the technical analyses and resu lts supporting the information presented in the preliminary notice of public meeting (NOPM) and executive summary for residential clothes dryers and room air conditioners. This preliminary TSD reports on the preliminary activities and analyses conducted in the period preceding the no tice of proposed rulemaking (NOPR) of this rulemaking.

1.2 OVERVIEW OF ENERGY CONSERVATION STANDARDS FOR

RESIDENTIAL CENTRAL AIR CONDITIONERS AND HEAT PUMPS

The National Appliance Energy Conservati on Act of 1987 (NAECA) established energy

conservation standards for central air conditioners and heat pumps as well as requirements for determining whether these standards should be amended. Specifically, NAECA established energy conservation standards for central air conditioners and heat pumps in the form of minimum limits on the seasonal energy efficiency ratio (SEER) for air conditioners and for heat pumps operating in the cooling mode, and on the heating seasonal performance factor (HSPF) for heat pumps operating in the heating mode. NAECA established the following standards for central air conditioners and heat pum ps: 10.0 SEER/6.8 HSPF for split systems, 1 9.7 SEER/6.6 HSPF for single-package systems. 2 These standards became effective January 1, 1992 for split systems; standards for single-package systems came into effect one year later. See 42 U.S.C. 6295(d)(1)(A)-(B) and (2)(A)-(B). NAECA also required that DOE conduct two cycles of rulemakings to determine if more stringent standards are economically justified and technologically feasible. (42 U.S.C. 6295(d)(3)(A)-(B))

Pursuant to 42 U.S.C. 6295(d)(3)(A), DOE published a final rule in the Federal Register on January 22, 2001 (2001 final rule), amending the energy conservation sta ndards for central air conditioners and heat pumps. 66 FR 7170. The amended standards woul d have increased the

minimum SEER to 13 and the minimum HSPF to 7.7. Id. This final rule constituted the first cycle of revised standards for central air conditioners and heat pumps.

Shortly after the publication of the 2001 final rule, DOE postponed the effective date of

the rule to take time to reconsider the amended standards for central air conditioners and heat pumps. DOE eventually promulgated a 12 SEER standard in a final rule published May 23,

1 “Split systems” consist of outdoor and indoor units which are “split” from each other and connected via refrigerant tubing. The outdoor unit resides outdoors and consists of a compressor, heat exchanger coil, fan, and fan motor. The indoor unit, consisting of a heat exchanger coil, resides either within a furnace or blower-coil unit, and conditioned air is conveyed to the home via ducts

2 In “single-package systems,” all the components that comprise a split system, including the air circulation equipment, are placed in a single cabinet. The single-package system resides outdoors, and conditioned air is conveyed to the home via ducts.

1-12002 (2002 final rule), 67 FR 36368, but the U.S. C ourt of Appeals for the Second Circuit ruled that DOE had done so improperly. Natural Resources Defense Council v. Abraham , 355 F.3d 179 (2d Cir. 2004). As a result, DOE publis hed a technical amendment on August 17, 2004,

which established a 13 SEER standard for all central air conditioners a nd heat pumps, excluding through-the-wall and space-cons trained systems. 69 FR 50997.

EPCA was further amended by the Energy Policy Act of 2005 (EPACT), Pub. L. 109-58. In Section 141 of EPACT, Congress directed DOE to submit an initial report regarding a plan for expeditiously prescribing new or revised standa rds. Pursuant to Section 141 of EPACT, DOE submitted an implementation report 3 to Congress in January 2006. This report specified a schedule for the completion of the second rulemaki ng cycle of revised standards for central air conditioners and heat pumps, requiring DOE to publish a final rule by June 2011, with a standards compliance effective date of J une 2016. In separate court proceedings ( New York v.

Bodman , No. 05 Civ. 7807 (S.D.N.Y. filed Sept. 7, 2005) and Natural Resources Defense

Council v. Bodman , No. 05 Civ. 7808 (S.D.N.Y. filed Sept. 7, 2005) the resulting consent decree (filed November 6, 2006) adopted the schedule for central air conditioners and heat pumps that DOE published in the January 2006 report to Congress ( i.e. , June 30, 2011).

More recently, EPCA was amended by the Energy Independence and Security Act of 2007 (EISA 2007), Pub. L. 110-140. In Section 306 of EISA 2007, Congress directed DOE to consider regional standards for central air cond itioners and heat pumps (among other products), for one or two regions in addition to a base na tional standard. (42 U.S.C. 6295(o)(6)) EISA 2007 states that in considering regional standa rds, DOE may consider regions made up of contiguous States only. Further, in Sec tion 310 of EISA 2007, Congress directed DOE to consider amended test proce dures and standards for standby-mode and off-mode energy consumption by covered equipment (such as ce ntral air conditioners and heat pumps) for any amended standard published after July 1, 2010. (42 U.S.C. 6295(gg)(3)) Because this energy conservation standards rulemaking for central air conditioners and heat pumps will be completed in 2011, the requirement to incorporate standby-m ode and off-mode energy use into the energy conservation standards analysis is applicable.

1.2.1 Small-Duct, High-Velocity Systems

DOE initially sought to create a separate pr oduct class for small-duct, high velocity (SDHV) systems. DOE reasoned that SDHV syst ems have design considerations (confined installation spaces, high pressure drops, and blower motor power) that warrant special consideration in the analytical and standards- setting process. In the 1999 Supplemental Advance Notice of Proposed Rulemaking (SANOPR) (1999 SANOPR; 64 FR 66306 (Nov. 24, 1999)) for central air conditioners, DOE proposed the creation of a separate class of “space-constrained” products that included SDHV systems and requeste d feedback from stakeholders on the proposal to create a separate product class for SDHV systems. However, DOE received feedback on the

1999 SANOPR that indicated some SDHV units were capable of reaching 12 SEER, and that manufacturers were making investments to produce more efficient SDHV systems.

3 Energy Conservation Standards Activities , January 2006. This document can be downloaded from the DOE website at: http://www.eere.energy.gov/buildings/appliance_standards/2006_schedule_setting.html.

1-2For these reasons, in the October 5, 2000, NOPR (2000 NOPR; 65 FR 59590), DOE proposed not to create a separate SDHV product class, instead requiring SDHV systems to meet

the standards for conventional split and single-package systems. 4 However, DOE also proposed to allow SDHV systems the option to test as coil- only products. This additional provision in the test procedure was estimated to provide an additional 1 to 2.5 SEER points for SDHV systems, making it easier for manufacturers to meet the standard. DOE again requested feedback from stakeholders on this proposal.

On January 22, 2001, DOE published the 2001 final rule, establishing a 13 SEER standard for conventional split and single-package systems and reiterating that th e characteristics of available SDHV systems did not warrant the creation of a separa te product class. 66 FR at 7197 DOE explained that revisions to the test proce dure would allow testing as coil-only products, and stated that SDHV systems were, therefore, subj ect to the 13 SEER standards being adopted for all split-system and single-package air conditioners and heat pumps.

On July 25, 2001, in response to a petition for r econsideration and as a result of review under the President’s Regulatory Review Plan, 5 DOE reopened the standards rulemaking and published a Supplemental Notice of Proposed Rule making (SNOPR), in which DOE proposed to withdraw its January 22, 2001 final rule. 66 FR 38822. As a substitute, DOE proposed standards in that SNOPR which would have set a 12 SEER standard for all split-system and single-package air conditioners and heat pumps, thereby resulting in a 20 percent increase in the minimum energy efficiency levels over prior levels. Again, DOE proposed not to establish a separate class for SDHV systems on the grounds that they would be able to meet the 12 SEER

standard.

In the subsequent May 23, 2002 final rule, DOE adopted the 12 SEER standard for splitsystem and single-package air conditioners a nd heat pumps, and responded to additional comments from stakeholders on SDHV systems. 67 FR 36368. Further information submitted by stakeholders led DOE to conclude that sepa rate standards for SDHV systems were indeed warranted, and DOE stated it would perform a se parate analysis to determine appropriate standard levels. A new produc t class and definition for SDHV systems were established, and standards were set at the 10 SEER NAECA level until a full analysis could be performed. Further, DOE stated it would consider stakeholde rs’ requests that the DOE test procedure be amended to allow special testin g provisions for SDHV products. At the time of drafting the 2002 final rule, DOE had begun a separate engineer ing and life-cycle cost analysis to determine appropriate standard levels for SDHV products.

However, DOE’s efforts to reopen its rulemaking setting energy conservation standard levels for central air conditioners and heat pum ps were challenged by a number of advocacy groups. In its decision in Natural Resources Defense Council, et al. v. Abraham , the Second

Circuit Court concluded that “the May 23, 2002, final rules promulgated by DOE withdrawing the standards it published as a final rule on January 22, 2001, and replacing them with less

4 Standards for conventional systems were proposed at 12 SEER for split and single-package air conditioners and 13 SEER for split-system and single-package heat pumps.

5 The Regulatory Review Plan, which called for agencies to (among other things) withdraw or postpone the effective dates of regulations pending review by the White House, was published in the Federal Register at 66 FR 7702 (Jan. 24, 2001).

1-3stringent standards, were not a valid exercise of DOE's authority under the EPCA,” in light of the “anti-backsliding” provision in 325(o)(1) of EPCA. Section 325(o)(1) of EPCA states that “[t]he Secretary may not prescribe any new or amended standard which increases the maximum allowable energy use...of a covered pr oduct.” 355 F.3d 179, 206 (2d Cir. 2004). Accordingly, DOE published a technical amendment on Augu st 17, 2004 (2004 Technical Amendment; 69 FR 50997). This technical amendment replaced standard levels esta blished by the 2002 final rule (12 SEER) with the 13 SEER standard s established in the 2001 final rule.

Because the 2001 final rule did not establish a separate class or separate standards for SDHV systems, and because SDHV systems are not considered “space constrained” (see discussion in 66 FR at 7197 and 65 FR at 59609-10), they are covered by the 13 SEER/7.7 HSPF standard adopted in that rule. The Court’s ru ling prohibits DOE from adopting a standard of less than 13 SEER for SDHV systems, despite DO E’s more recent conclusion that SDHV systems have a maximum technologically feasib le efficiency of just over 13 SEER. 6

Further, in the test procedures detailed in the October 11, 2005 final rule, DOE stated that test procedure revisions to allow SDHV system s to test as coil-only units would result in unrealistic SEER ratings and would discourage manufacturers from making efficiency improvements to blower motors. 70 FR at 59124. Therefore, DOE did not amend the test procedure to allow testing of SDHV systems as coil-only units, making it more likely that SDHV products would be unable to meet even the 12 S EER standard. DOE advi sed manufacturers of SDHV systems of the procedure available under section 504 of the DOE Organization Act (42

U.S.C. 7194), which allows them to request re lief from hardship or inequity caused by a regulation issued under EPCA.

On May 24, 2004, SpacePak and Unico, Inc., filed a joint application with the Office of Hearings and Appeals (OHA) for exception from th e 13 SEER standard, arguing that they would suffer a “serious hardship and unf air distribution of burdens” if forced to comply with the 13 SEER rule (case nos. TEE-0010 and TEE-0011) The OHA granted the exception to SpacePak and Unico, citing technological constraints (compact indoor coils, hi gh static-pressure losses, and higher fan motor power) that make it more di fficult for SDHV systems to increase energy efficiency. Also cited was the serious hardship to SpacePak and Unico that would result should exception relief not be granted, possibly resulting in “the loss of all sales within the United

States.” The OHA further noted that the unavailability of SDHV systems would negatively impact domestic consumers, and that granting exception relief would not have a significant impact upon competition in the air conditioner in dustry. On October 14, 2004, the OHA granted exception relief to SpacePak and Unico, Inc., au thorizing them to manufacture and sell SDHV systems that meet an 11 SEER/6.8 HSPF standa rd. This decision became effective January 23, 2006, and remains in effect until DOE establishe s a different standard for SDHV systems.

On September 28, 2005, Energy Savings Products , Ltd. (ESP), filed its own application for exception relief with the OHA (case no. TEE-0 026). ESP asserted that it would suffer a

6 In 2002, DOE performed a separate engineering analysis for SDHV systems by evaluating the incremental costs and efficiency improvements associated with design changes to blower coil units and pairing of existing SDHV blower coil units with higher-efficiency outdoor units. In that analysis, DOE found that the maximum technologically feasible (“max-tech”) efficiency of SDHV systems was just over 13 SEER. http://eere.energy.gov/buildings/appliance_standards/residential/pdfs/engineering_analysis_112602.pdf

1-4gross inequity, serious hardship, and an unfair dist ribution of burdens if forced to comply with the 13 SEER standard. On December 20, 2005, the OHA granted the exception relief to ESP, citing the same reasons given in the SpacePak/U nico decision and authorizing Energy Savings Products to manufacture and sell SDHV systems that meet an 11 SEER/6.8 HSPF standard. This decision also became effective January 23, 2006, a nd remains in effect until DOE establishes a different standard for SDHV systems.

1.2.2 Space-Constrained Products

In the 1999 SANOPR, DOE first suggested se parate product classes as a way to set standards for space-constrained niche products. 64 FR at 66310. Originally, these products included ductless split systems, SDHV systems, single-package vertical units (SPVU), and through-the-wall (TTW) split systems. In the subsequent 2000 NOPR, through-the-wall packaged and non-weatherized single-package products were also considered space constrained.

65 FR at 59597. DOE’s efforts to establish standards for each of these types of products is explained below.

In the 2004 Technical Amendment, DOE established a separate product class for spaceconstrained systems and required them to meet a 12 SEER/7.4 HSPF standard. Product classes were also set for split-system and single-pack age TTWs, with standards at 10.9 SEER/7.1 HSPF and 10.6 SEER/7.0 HSPF, respectively. The separa te product class for TTW products is set to expire January 23, 2010, which will return those products to the space-c onstrained product class and require them to meet the 12 SEER/7.4 HSPF standard.

Currently, ductless split systems are not considered a space-constrained product and are not given special consideration. They are, ther efore, required to meet the 13 SEER/7.7 HSPF standards for split-system and single-package ai r conditioners and heat pumps. SDHV systems are also not considered space constrained, a nd are required to meet the 13 SEER/7.7 HSPF

standards.

In this rulemaking, DOE is reevaluating whet her to give special consideration to these space-constrained products. Below, the history of each type of product is reviewed, and DOE’s approach for how to handle each type in this rulemaking is presented.

1.2.2.1 Single-Package Vertical Units (SPVUs)

In the 2000 NOPR, DOE stated that SPVUs ar e not covered by standards for residential products. 65 FR at 59610. EISA 2007 added definitions 7 and standards 8 for SPVUs. While

7 Section 314 of EISA 2007 codifies definitions for “singl e package vertical air conditioner” and “single package vertical heat pump.” The term “single package vertical air conditioner” means “air-cooled commercial package air conditioning and heating equipment that (A) is factory-assemb led as a single package that (i) has major components that are arranged vertically; (ii) is an encased combinatio n of cooling and optional heating components; and (iii) is intended for exterior mounting on, adj acent interior to, or through an outside wall; (B) is powered by a single- or 3

- phase current; (C) may contain 1 or more separate indoor grilles, outdoor louvers, various ventilation options, indoor free air discharges, ductwork, well plenum, or sleeves; and (D) has heating components that may include electrical resistance, steam, hot water, or gas, but may not include reverse cycle refrigeration as a heating means.” The term “single package vertical heat pump” means “a single pack age vertical air conditioner th at (A) uses reverse cycle

1-5EISA 2007 defined SPVUs as commercial equipmen t, residential single-package TTW products are still considered a part this rulemaking.

1.2.2.2 Through-the-Wall Systems

In the 2000 NOPR, DOE recognized TTW products as being a niche category of products with space constraints, and proposed adopting an 11 SEER standard for them. 65 FR at 59610. However, in light of stakeholders’ concerns that TTW products would not be able to meet the 13 SEER standard, the 2001 Final Rule did not set standards for TTW products, pending completion of later rulemaking proceedings. Prior to the subsequent 2001 SNOPR, DOE performed engineering and life-cycle cost analyses for TTW products to determine appropriate standard levels. Based on those analyses, DOE conc luded that 10.9 SEER/7.1 HSPF and 10.6 SEER/7.0 HSPF were the appropriate standards for sp lit-system and single-package TTW products, respectively, and adopted those standards in the 2002 final rule. 67 FR 36368 In the 2004 Technical Amendment, DOE expl ained that the standards for TTW products, which fall within the definition of “space-constrained product,” would be those set in the 2002 final rule.

The definition of “through-the-wall air conditioner and heat pump” that DOE adopted in 10 CFR 430.2 provides that this product class exis ts only for products manufactured prior to January 23, 2010. After that date, the standards for space-constrained products (12 SEER/7.4 HSPF) will apply to TTW split-system and packag ed air conditioners and heat pumps. Because this “sunset” provision takes place well before the effective date of this rule (2016), DOE will evaluate standards for TTW products based on an assumed baseline of 12 SEER/7.4 HSPF. Manufacturers will have six years between the time TTW products must meet the 12 SEER/7.4 HSPF standard and the time new standards adopted in this ru lemaking become effective.

1.2.2.3 Single-Package Non-Weatherized Units

In the 2000 NOPR, DOE recognized single-package non-weatherized units as having space constraints, but due to the availability of models at the 12 SEER level (the proposed

standard level for conventiona l air conditioners in that rulemaking), DOE did not propose a separate product class for them. 65 FR at 59610. Additionally, DOE concluded it would be difficult to define these products in such a way that would avoid the creation of a loophole whereby conventional products coul d take advantage of lower standards. In the 2001 final rule, DOE again made mention of single-package non-w eatherized units, but DOE decided to include them as a type of space-constrained product. The 2001 final rule established a new product class for space-constrained products, but did not set sta ndards in that rule pendi ng completion of later rulemaking proceedings. In the subsequent 2001 SNOPR and the 2002 final rule, no specific mention was made of single-package non-weatherize d units, but DOE still considered them as a type of space-constrained product. In the 2002 final rule, DOE concluded that space-constrained products (excluding TTW products) would be able to meet the 12 SEER standard for conventional products, and did not adopt separate standards for those considered space constrained. Ultimately, in the 2004 Technical Amendment, DOE explained that the ruling by

refrigeration as its primary heat source; and (B) may incl ude secondary supplemental heating by means of electrical resistance, steam, hot water, or gas.’’ (42 U.S.C. 6311(22)-(23))

8 Section 314 of EISA 2007 set standards at 9.0 EER for si ngle-package vertical air conditioners and 9.0 EER/3.0 coefficient of performance (COP) for single-package vertical heat pumps.

1-6the Second Circuit Court of Appeals in Natural Resources Defense Council v. Abraham did not affect the standards established for space-cons trained products in the 2002 final rule, since the 2001 final rule did not establish any standards fo r space-constrained products. Therefore, the 12

SEER standard established in the 2002 final rule was adopted for all space-constrained products, except those with TTW condensers.

1.2.3 Ductless Split Systems

Ductless split systems were included in the revisions to the DOE test procedure in the March 14, 1987 final rule. 53 FR 8304. In the 1999 SANOPR, DOE first suggested separate product classes as a way to set standards for niche products, incl uding ductless split systems. 64 FR at 66310. Since consumers may consider the in terior units of mini- and multi-splits to be more intrusive than ducted systems, manufacturers strive to make them as compact as possible. After receiving stakeholder feedback, DOE deci ded that a separate product class was not warranted, and ultimately in the final rule that set the current standards, ductless split systems were required to meet the 13 S EER standards developed for regu lar split-system air conditioners and heat pumps. 66 FR at 7197.

Prior to the latest revision to the test procedure, manufacturers of ductless split systems applied for and received waivers from the test procedure because of the differences between multi-split systems and traditional split-system air conditioners and heat pumps. In the most recent final rule revising the central air c onditioner and heat pump test procedure, DOE responded to stakeholder comments regarding chan ges to the test procedure for multi-splits. 72 FR at 59906, 59908-11 and 59913-14 (Oct. 22, 2007). Stakeholders asserted that multi-split systems should be rated using EER if those systems compete primarily with room air conditioners and SEER if they compete primarily with ducted residential systems. DOE responded in the October 2007 rule that it believes resi dential-size multi-split systems compete primarily with ducted systems, and that consumers will best be served if multi-split systems are rated using SEER. This will allow consumers to make direct comparisons of efficiency levels when considering system options.

1.3 PROCESS FOR SETTING ENER GY CONSERVATION STANDARDS

Under EPCA, when DOE studies new or amen ded standards, it must consider to the greatest extent practicable the following seven factors:

(1) the economic impact of the standard on the manufacturers and consumers of the products subject to the standard;

(2) the savings in operating costs throughout the estimated average life of the products in the type (or class) compared to any increases in the price, initial charges, or maintenance expense for the products that are likely to result from the imposition of the standard;

(3) the total projected amount of energy savings likely to result directly from the imposition of the standard;

1-7(4) any lessening of the utility or the performance of the products likely to result from the imposition of the standard;

(5) the impact of any lessening of compe tition, as determined in writing by the Attorney General, that is likely to result from the imposition of the standard;

(6) the need for national energy conservation; and

(7) other factors the Secretary considers relevant. (42 U.S.C. 6295(o)(2)(B)(i))

Other statutory requirements are set forth in 42 U.S.C. 6295(o)(1)-(2)(A), (2)(B)(ii)-(iii), and (3)-(4).

DOE considers the participation of interested parties a very important part of the process for setting energy conservation standards. Thro ugh formal public notifications (i.e., Federal Register notices), DOE encourages the participation of all interested parties during the comment period in each stage of the rulemaking. Beginning with the framework document and during subsequent comment periods, in teractions among interested parties provide a balanced

discussion of the information that is required for the standards rulemaking.

Before DOE determines whether to adopt a proposed energy conservation standard, it must first solicit comments on the proposed sta ndard. (42 U.S.C 6313(a)(6)(B)(i)) Any new or amended standard must be designed to achieve significant additional conservation of energy and be technologically feasible and economically justified. (42 U.S.C. 6313( a)(6)(A)) To determine whether economic justification exists, DOE must review comments on the proposal and determine that the benefits of the proposed sta ndard exceed its burdens to the greatest extent practicable, weighing the seven factors listed above. (42 U.S.C. 6295(o)(2)(B)(i))

After the publication of the framework docum ent, the energy conservation standards rulemaking process involves thr ee additional, formal public notices, which DOE publishes in the Federal Register. The first of the rulemaking no tices is a NOPM, which is designed to publicly vet the models and tools used in the preliminary rulemaking and to facilitate public pa rticipation before the NOPR stage. The second notice is the NOPR, which presents a discussion of comments received in response to the NOPM and th e preliminary analyses and analytical tools; analyses of the impacts of potential amended energy conservation standards on consumers, manufacturers, and the Nation; DOE’s weigh ting of these impacts of amended energy conservation standards; and the proposed energy conservation standards for each product. The third notice is the final rule, which presents a discussion of the comments received in response to the NOPR; the revised analyses; DOE’s weighting of these impacts; the amended energy conservation standards DOE is adopting for each product; and the effective dates of the amended energy conservation standards.

In June 2008, DOE published a notice of public meeting and availability of the framework document. 73 FR 32243 (June 6, 2008) The framework document, Rulemaking Framework for

Residential Central Air Conditioners and Heat Pumps , describes the procedural and analytical approaches DOE anticipated using to evaluate the establishment of energy conservation

standards for CAC. This document is available at:

1-8http://www1.eere.energy.gov/buildings/app liance_standards/residential/central_ac_hp_standard

s.html.

Subsequently, DOE held a public meeting on June 12, 2008, to discuss procedural and analytical approaches to the rulemaking, and to inform and facilitate st akeholders’ involvement in the rulemaking process. The analytical fr amework presented at the public meeting described different analyses, such as the engineering analysis and the life-cycle cost (LCC) and payback period (PBP) analyses, the methods proposed fo r conducting them, and the relationships among the various analyses. See for all the analyses discussed at the public m eeting to be undertaken in each of the formal public rulemaking documents.

Table 1.3.1 Analyses During Each Rulemaking Stage

Preliminary Analyses NOPR Final Rule* Market and Technology Assessment Revised Preliminary Analyses Revised NOPR Analyses

Screening Analysis Life-Cycle Cost Sub-Group Analysis Engineering Analysis Manufacturer Impact Analysis Energy Use Characterization Utility Impact Analysis Markups to Determine Equipment Price Employment Impact Analysis Life-Cycle Cost and Payback Period Analyses Environmental Assessment

Shipments Analysis Regulatory Impact Analysis National Impact Analysis

Preliminary Manufacturer Impact Analysis

* During the Final Rule phase, DOE considers the comments submitted by the U.S. Department of Justice in the NOPR phase concerning the impact of any lessening of competition that is likely to result from the imposition of the standard. (42 U.S.C. 6295(o)(2)(B)(v))

As part of the information gathering and sharing process, DOE organized and held

interviews with CAC manufacturers. DOE select ed companies that repr esented production of alltypes of CAC equipment, ranging from small to large manufacturers, and including both AirConditioning, Heating and Refrigeration Institu te (AHRI) member companies and non-AHRI member companies. DOE had four objectives for these interviews: (1) solicit feedback on the draft engineering analysis (including methodolog y, production costs, ma nufacturing processes, and findings); (2) solicit feedback on topics related to the preliminary manufacturer impact analysis; (3) provide an opportunity, early in the rulemaking process, to express specific concerns to DOE; and (4) foster cooper ation between the manufacturers and DOE.

There were six general topics related to the preliminary manufacturer impact analysis discussed during each of the interviews: (1) ge neral key issues, (2) CAC shipment projections, (3) capital conversion costs, (4) product mix and profitability, (5) market shares and industry consolidation, and (6) cumulative regulatory burden.

DOE incorporated the information gathered at the meetings into its engineering analysis (see chapter 5) and the preliminary manufacturer impact analysis (see chapter 12). Following the publication of the preliminary analysis and the preliminary analysis public meeting, DOE intends

1-9to hold additional meetings with manufacturers as part of the consultative process for the manufacturer impact analysis conducted dur ing the NOPR phase of the rulemaking.

DOE developed spreadsheets for the LCC, PBP, and national impact analyses. DOE developed an LCC spreadsheet that calculates the LCC and PBP at various energy efficiency levels. DOE also developed a national impact anal ysis spreadsheet that calculates the national energy savings (NES) and national net present values (NPVs) at various energy efficiency levels. This spreadsheet includes a model that forecasts the impacts of amended energy conservation

standards at various leve ls on product shipments.

1.4 STRUCTURE OF THE DOCUMENT

This preliminary TSD outlines the analytical approaches used in this rulemaking. The TSD consists of 17 chapters, an environmental assessment, a regulatory impact analysis, and appendices.

Chapter 1 Introduction: provides an overview of the appliance and equipment standards program and how it applies to the CAC rulemaking, and outlines

the structure of the document.

Chapter 2 Analytical Framework, Comme nts from Interested Parties, and DOE Responses: describes the rulemaking process step by step, summarizes comments made from interested parties during the framework document comment period, and provides DOE responses to those comments.

Chapter 3 Market and Technology Assessm ent: characterizes the CAC equipment market and the technologies available for increasing equipment efficiency.

Chapter 4 Screening Analysis: determines which technology options are viable for consideration in the engineering analysis.

Chapter 5 Engineering Analysis: discu sses the methods used for developing the relationship between increased ma nufacturer price and increased efficiency.

Chapter 6 Markups to Dete rmine Product Price: discusses the methods used for establishing markups for converting manufacturer prices to customer product prices.

Chapter 7 Energy Use Characterization: discusses the process used for generating energy-use estimates of CAC for a variety of product classes, climate locations, and standard levels.

Chapter 8 Life-Cycle Cost and Payback Period Analyses: discusses the economic

effects of standards on individual cust omers and users of the products and compares the LCC and PBP of pr oducts with and without higher efficiency standards.

1-10Chapter 9 Shipments Analysis: discusses the methods used for forecasting shipments with and without higher efficiency standards.

Chapter 10 National Impact Analysis: di scusses the methods used for forecasting national energy consumption and national economic impacts based on annual product shipments and estimates of future product efficiency distributions in the absence and presen ce of higher efficiency standards.

Chapter 11 Life-Cycle Cost Sub-Group Anal ysis: discusses the effects of standards on a subgroup of CAC customers and compares the LCC and PBP of products with and without higher effici ency standards for these customers.

Chapter 12 Preliminary Manufacturer Impact Analysis: discusses the effects of standards on the finances and profitability of product manufacturers.

Chapter 13 Utility Impact Analysis: discusses the effects of standards on the installed generation capacity of electric utilities.

Chapter 14 Employment Impact Analysis: discusses the effects of standards on National employment.

Chapter 15 Environmental Assessment: di scusses the effects of standards on air

borne emissions of electric utilities.

Chapter 16 Regulatory Impact Analysis: discusses the present regulatory actions as well as the impact of non-regulatory alternatives to setting energy efficiency standards.

Chapter 17 Regional Standards Impacts on Mark et Participants: discusses the effects of regional standards on distributors, d ealers, contractors, and installers.

1-11