17 -i CHAPTER 17. REGULATORY IMPACT ANALYSIS

TABLE OF CONTENTS

17.1 INTRODUCTION ......................................................................................................... 17-1 17.2 METHODOLOGY ........................................................................................................ 17-1

LIST OF TABLES

Table 17.1.1 Non-Regulatory Alternatives to Standards ........................................................... 17-117 -1 CHAPTER 1 7. REGULATORY IMPACT ANALYSIS

17.1 INTRODUCTION

Under the Process Rule ( Procedures for Consideration of New or Revised Energy Conservation Standards for Consumer Products , 61 FR 36974 (July 15, 1996)), the U.S. Department of Energy (DOE) is committed to continually explore non- regulatory alternatives to standards. DOE will prepare a draft regulatory impact analysis pursuant to Executive Order 12866, Regulatory Planning and Review , which will be subject to review under the Executive Order by the Office of Management and Budget’s Office of Information and Regulatory Affairs. 58 FR 51735 (Sept. 30, 1993).

DOE has identified six major alternatives to standards that represent feasible policy options to reduc e commercial equipment energy consumption. It will evaluate each alternative in terms of its ability to achieve significant energy savings at a reasonable cost, and will compare the effectiveness of each one to the effectiveness of the proposed standards rule.

The non- regulatory means of achieving energy savings that DOE proposes to analyze are listed in Table 17.1.1 . The technical support document (TSD) in support of DOE’s notice of proposed rulemaking will include a complete quantitative analysis of each alternative, the methodology for which is discussed briefly in this chapter.

Table 17.1.1 Non -Regulatory Alternatives to Standards No new regulatory action
Business tax credits
Manufacturer tax credits
Performance Standards
Rebates Voluntary energy efficiency targets Early replacement

17.2 METHODOLOGY

DOE will use the national impact analysis (NIA) spreadsheet models to calculate the national energy savings and the net present value (NPV) corresponding to each alternative to the proposed standards. The NIA model is discussed in chapter 10 of the TSD. To compare each alt ernative quantitatively to the proposed energy conservation standards, DOE will need to quantify the effect of each alternative on the purchase and use of energy efficient automatic commercial ice

- making equipment . Once it has quantified each alternative, DOE will make the appropriate revisions to the inputs in the NIA models. Key inputs that DOE may revise in these models include the following:

• e nergy prices and escalation factors

• i mplicit market discount rates for trading off purchase price against operating expense when choosing product efficiency

• b usiness purchase price s , operating cost s , and income elasticities

• p urchase price -versus- efficiency relationships

• product stock data (purchase of new products or turnover rates for inventories)17 -2 The key mea sures of the impact of each alternative will be as follows:

• Energy use reflects the c umulative energy use of the product from the effective date of the new standar d to the year 2045 . DOE will report energy

.

• National energy savings reflects the c umulative national energy use from the base

case projection minus the alternative policy- case projection.

• N PV represents t he value of future operating cost savings from products bought in the period from the effective date of the new standard 2015to the year 2045. D OE will calculate the NPV as the difference between the present value of product and operating expenditures (including energy) in the base case, and the present value of expenditures in each alternative policy case. DOE will discount future operating and product expenditures to 2010 using a 7- percent and a 3- percent real discount rate. It will calculate operating expenses (including energy costs) for the life of the products.