APPENDIX J. MANUFACTURER IMPACT ANALYSIS INTERVIEW GUIDE AND 

GOVERNMENT REGULATORY IMPACT MODEL (GRIM) 

TABLE OF CONTENTS 

J.1 MANUFACTURER IMPACT ANALYSIS INTERVIEW GUIDE............................... J-1 

J.2 GOVERNMENT REGULATORY IMPACT MODEL ................................................ J-17 

J.2.1 Introduction and Purpose ................................................................................... J-17 

J.2.2 Model Description ............................................................................................. J-17 

J.2.3 Detailed Cash Flow Example............................................................................. J-20 

J-i 

EERE-2006-BT-STD-0126 COMMENT 52.2 
J-ii 

EERE-2006-BT-STD-0126 COMMENT 52.2 
APPENDIX J. MANUFACTURER IMPACT ANALYSIS INTERVIEW GUIDE AND 

GOVERNMENT REGULATORY IMPACT MODEL 

J.1 MANUFACTURER IMPACT ANALYSIS INTERVIEW GUIDE 

Commercial Refrigeration Equipment Rulemaking 

Manufacturer Impact Analysis Interview Guide
 

October 15, 2007 

J-1 

EERE-2006-BT-STD-0126 COMMENT 52.2 
1 KEY ISSUES 

The Department of Energy (DOE) is currently reviewing five efficiency levels for the 

commercial refrigeration equipment (CRE) rulemaking analyses. In responding to this 

questionnaire, please refer to the values described below. 

Table 1.1 CRE Efficiency Levels 

Equipment Class Efficiency 

Metric 

Baseline Efficiency 

Level 1 

Efficiency 

Level 2 

Efficiency 

Level 3 

Efficiency 

Level 4 

VOP.RC.M CDEC/TDA 

kWh/day/ft2 1.08 0.90 0.75 0.70 0.64 

VOP.RC.L CDEC/TDA 

kWh/day/ft2 2.93 2.61 2.47 2.46 2.39 

SVO.RC.M CDEC/TDA 

kWh/day/ft2 1.05 1.00 0.90 0.80 0.74 

HZO.RC.M CDEC/TDA 

kWh/day/ft2 0.16 0.16 0.14 0.11 0.10 

HZO.RC.L CDEC/TDA 

kWh/day/ft2 0.83 0.75 0.70 0.65 0.62 

VCT.RC.M CDEC/TDA 

kWh/day/ft2 0.54 0.42 0.38 0.24 0.19 

VCT.RC.L CDEC/TDA 

kWh/day/ft2 1.06 0.90 0.75 0.65 0.55 

SOC.RC.M CDEC/TDA 

kWh/day/ft2 0.95 0.76 0.74 0.71 0.60 

VOP.SC.M TDEC/TDA 

kWh/day/ft2 2.55 2.23 2.07 1.84 1.65 

SVO.SC.M TDEC/TDA 

kWh/day/ft2 2.24 1.99 1.87 1.62 1.54 

HZO.SC.M TDEC/TDA 

kWh/day/ft2 0.78 0.61 0.56 0.54 0.48 

HZO.SC.L TDEC/TDA 

kWh/day/ft2 2.05 1.80 1.52 1.33 1.32 

VCT.SC.I TDEC/TDA 

kWh/day/ft2 1.58 1.24 0.77 0.69 0.63 

VCS.SC.I TDEC/V 

kWh/day/ft3 0.27 0.19 0.18 0.17 0.17 

HCT.SC.I TDEC/TDA 

kWh/day/ft2 1.63 1.28 0.73 0.61 0.57 

1.1 What are the key issues for your company regarding energy conservation standards for 

CRE and this rulemaking? 

1.2 For the issues identified, how significant are they for each efficiency level? 

1.3 How can we most effectively incorporate these issues in the Manufacturer Impact 

Analysis (MIA)? 

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EERE-2006-BT-STD-0126 COMMENT 52.2 
2 COMPANY OVERVIEW AND ORGANIZATIONAL CHARACTERISTICS 

DOE is interested in understanding manufacturer impact at the plant or profit center level 

directly pertinent to CRE production. However, the context within which the plant operates and 

the details of plant production and costs are not readily available from the published literature. 

Therefore, DOE invites you to provide these details confidentially in your own words to the 

extent possible and practical. Understanding the organizational setting around the CRE industry 

profit center will help DOE understand the probable future of the CRE manufacturing activity 

with and without energy conservation standards. 

2.1 Do you have a parent company, and/or any subsidiaries relevant to the CRE industry? 

2.2 Do you manufacture any equipment other than CRE? If so, what other equipment do you 

manufacture? 

2.3 What percentage of your total manufacturing corresponds to CRE? 

2.4 Where are your production facilities located, and what type of equipment is manufactured 

at each location? Could you provide figures for your company’s manufacturing at each location 

by equipment type (CRE or other), size, and efficiency (i.e., provide the equipment mix for each 

location). 

2.5 At a particular facility, would potential CRE redesigns be difficult to implement? If so, 

would your company modify the existing facility or develop a new facility? 

2.6 What are your employment levels at each of these facilities? 

2.7 What are your company’s total CRE production volumes (i.e., units per year, linear feet 

per year) for the past 5 years? What are the production volumes of your five highest volume 

equipment classes? 

2.8 What are your equipment lines, niches, and relative strengths in the CRE market? 

2.9 The Small Business Association (SBA) denotes a small business in the CRE industry as 

having less than 750 employees. By this definition, is your company considered a small 

business? 

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EERE-2006-BT-STD-0126 COMMENT 52.2 
2.10 Are there any niche manufacturers, small businesses, and/or component manufacturers 

(i.e., compressors) for which the adoption of new standards would have a severe impact? If so, 

would manufacturers of this equipment have different incremental impacts from implemented 

energy efficiency standards than from the rest of the industry? 

3 FINANCIAL PARAMETERS 

Navigant Consulting, Inc. (NCI) has developed a “strawman” model of the CRE industry 

financial performance called the Government Regulatory Impact Model (GRIM), using publicly 

available data on CRE manufacturers. This section attempts to understand how your company’s 

financial situation differs from our industry aggregate picture. 

3.1 Please compare your financial parameters to the GRIM parameters tabulated below. 

Table 3.1 Financial Parameters for CRE Manufacturers 

GRIM Input Definition CRE GRIM 

Estimated 

Value 

Your Actual (if 

significantly 

different from 

our estimate) 

Income Tax Rate Corporate (average) 

effective income tax paid 

(percentage of earnings 

before taxes, EBT) 

22.1% 

Discount Rate Weighted average cost of 

capital (inflation-adjusted 

weighted average of 

corporate cost of debt and 

return on equity) 

11.5% 

Working Capital Current assets less current 

liabilities (percentage of 

revenues) 

8.6% 

SG&A Selling, general, and 

administrative expenses 

(percentage of revenues) 

16.5% 

R&D Research and development 

expenses (percentage of 

revenues) 

2.3% 

Depreciation Amortization of fixed 

assets (percentage of 

revenues) 

2.6% 

Capital 

Expenditures 

Outlay of cash to acquire 

or improve capital assets 

(percentage of revenues, 

not including acquisition 

or sale of business units) 

2.0% 

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EERE-2006-BT-STD-0126 COMMENT 52.2 
 

3.2 How would you expect new energy conservation standards impact your company’s 

financial parameters? 

4 PRODUCTION COST BREAKDOWN 

DOE estimated the full production costs of various CRE units of different efficiencies for all 

equipment classes. With the combined data, DOE calculated the industry average percentage of 

each cost in the full production cost. 

4.1 Please compare your full production cost percentages to the estimated GRIM full 

production cost percentages tabulated below. Are the different percentages of each cost 

representative of your company or the CRE industry? Please explain any differences. 

Table 4.1 Breakdown by Percentage of Full Production Costs for Baseline CRE 

Components of Full 

Production Costs 

Estimated % of Full Production 

Cost 

Your Actual 

(if different from our estimate) 

Materials 86.16% 

Labor 9.61% 

Overhead 2.83% 

Depreciation 1.39% 

5 SHIPMENT PROJECTIONS AND MARKET SHARES 

A new energy conservation standard can change overall shipments by changing equipment 

attributes, marketing approaches, equipment availability, and price. The GRIM bases revenue 

projections on shipment projections obtained from the National Energy Savings Spreadsheet 

(NES) prepared by the Pacific Northwest National Laboratory (PNNL). The NES includes 

shipment forecasts for the baseline (absent new standards) and new standards at each efficiency 

level being analyzed. 

5.1 Please compare DOE’s projections of industry-wide shipments for CRE with your 

company’s projections of industry-wide shipments? 

J-5 

EERE-2006-BT-STD-0126 COMMENT 52.2 
 

 

 

 

 

 

 

Table 5.1 2012 Industry-Wide Shipment Projections for CRE (Number of Units) 

Equipment Class Baseline 

Shipments 

Comments or Your Company’s Projection 

VOP.RC.M 42300 

VOP.RC.L -

SVO.RC.M 32300 

HZO.RC.M 5000 

HZO.RC.L 15600 

VCT.RC.M 3000 

VCT.RC.L 42000 

SOC.RC.M 10125 

VOP.SC.M 7000 

SVO.SC.M 10750 

HZO.SC.M 1000 

HZO.SC.L 2000 

VCT.SC.I 2000 

VCS.SC.I 600 

HCT.SC.I 10000 

5.2 Based on the shipment data DOE received from ARI, the VOP.RC.L equipment class was 

listed as having 0 shipments. Manufacturers recommended that this equipment class be included 

in DOE’s analysis because they do, in fact, ship units that would fall into this equipment class. 

Are there any additional equipment classes, not listed in Table 5.1, for which DOE may have 

inaccurate shipment data? 

5.3 DOE assumed that total industry shipments for 2012 would not be affected by increasing 

standard levels (i.e., total industry shipments remain constant at the various analyzed standard 

levels in comparison to the base case). Could you provide your company’s estimates and/or any 

qualitative information on expected changes in total industry shipments at the different analyzed 

efficiency levels? 

J-6 

EERE-2006-BT-STD-0126 COMMENT 52.2 
 

 

 

Table 5.2 Changes in Remote Condensing CRE Shipments versus Baseline in 2012 

Efficiency Level VOP.RC.M VOP.RC.L SVO.RC.M HZO.RC.M 

CDEC/TDA 

kWh/day/ft2 

% 

Change 

CDEC/TDA 

kWh/day/ft2 

% 

Change 

CDEC/TDA 

kWh/day/ft2 

% 

Change 

CDEC/TDA 

kWh/day/ft2 

% 

Change 

Efficiency Level 1 0.90 2.61 1.00 0.16 

Efficiency Level 2 0.75 2.47 0.90 0.14 

Efficiency Level 3 0.70 2.46 0.80 0.11 

Efficiency Level 4 0.64 2.39 0.74 0.10 

HZO.RC.L VCT.RC.M VCT.RC.L SOC.RC.M 

CDEC/TDA 

kWh/day/ft2 

% 

Change 

CDEC/TDA 

kWh/day/ft2 

% 

Change 

CDEC/TDA 

kWh/day/ft2 

% 

Change 

CDEC/TDA 

kWh/day/ft2 

% 

Change 

Efficiency Level 1 0.75 0.42 0.90 0.76 

Efficiency Level 2 0.70 0.38 0.75 0.74 

Efficiency Level 3 0.65 0.24 0.65 0.71 

Efficiency Level 4 0.62 0.19 0.55 0.60 

Table 5.3 Changes in Open Self Contained CRE Shipments versus Baseline in 2012 

Efficiency Level VOP.SC.M SVO.SC.M HZO.SC.M HZO.SC.L 

TDEC/TDA 

kWh/day/ft2 

% 

Change 

TDEC/TDA 

kWh/day/ft2 

% 

Change 

TDEC/TDA 

kWh/day/ft2 

% 

Change 

TDEC/TDA 

kWh/day/ft2 

% 

Change 

Efficiency Level 1 2.23 1.99 0.61 1.80 

Efficiency Level 2 2.07 1.87 0.56 1.52 

Efficiency Level 3 1.84 1.62 0.54 1.33 

Efficiency Level 4 1.65 1.54 0.48 1.32 

Table 5.4 Changes in Ice-Cream Freezer Shipments versus Baseline in 2012 

Efficiency Level VCT.SC.I VCS.SC.I HCT.SC.I 

TDEC/TDA 

kWh/day/ft2 

% 

Change 

TDEC/V 

kWh/day/ft3 

% 

Change 

TDEC/TDA 

kWh/day/ft2 

% 

Change 

Efficiency Level 1 1.24 0.19 1.28 

Efficiency Level 2 0.77 0.18 0.73 

Efficiency Level 3 0.69 0.17 0.61 

Efficiency Level 4 0.63 0.17 0.57 

5.4 What is your company’s approximate market share of the CRE industry? 

5.5 Would you expect your market share to change once higher energy conservation 

standards become effective? 

6 EQUIPMENT MIX 

Current differences in equipment mix (distribution of equipment sales by efficiency level) among 

manufacturers can lead to different reactions to and impacts from new energy conservation 

standards. 

J-7 

EERE-2006-BT-STD-0126 COMMENT 52.2 
 

6.1 If your company offers multiple equipment lines with different efficiency levels, how 

does your mix of CRE sales by equipment efficiency compare to our projected 2012 Industry 

Average distribution for the baseline case as shown in Table 6.1 – Table 6.15? If your company 

does not offer multiple equipment lines with different efficiency levels, are the projected 

distributions representative of the CRE industry? A new energy conservation standard affects the 

equipment mix by eliminating the sale of equipment below the minimum efficiency level. The 

NES forecasts the distribution of CRE sales by efficiency level after standards. Are the NES 

forecasts described in the tables below for the year 2012 consistent with your own expectations 

for the industry? 

Table 6.1 Percentage of Total Shipments by Efficiency Level for VOP.RC.M in 2012 

Proposed Standard Level 

(CDEC/TDA - kWh/day/ft2

) 

1.08 0.90 0.75 0.70 0.64 

Baseline (1.08) 23.2% 43.0% 19.3% 7.9% 6.6% 

Level 1 (0.90) 66.2 19.3% 7.9% 6.6% 

Level 2 (0.75) 85.5% 7.9% 6.6% 

Level 3 (0.70) 93.4% 6.6% 

Level 4 (0.64) 100% 

Table 6.2 Percentage of Total Shipments by Efficiency Level for VOP.RC.L in 2012 

Proposed Standard Level 

(CDEC/TDA - kWh/day/ft2

) 

2.93 2.61 2.47 2.46 2.39 

Baseline (2.93) 17.6% 36.9% 16.9% 16.5% 12.1% 

Level 1 (2.61) 54.5% 16.9% 16.5% 12.1% 

Level 2 (2.47) 71.4% 16.5% 12.1% 

Level 3 (2.46) 87.9% 12.1% 

Level 4 (2.39) 100% 

Table 6.3 Percentage of Total Shipments by Efficiency Level for SVO.RC.M in 2012 

Proposed Standard Level 

(CDEC/TDA - kWh/day/ft2

) 

1.05 1.00 0.90 0.80 0.74 

Baseline (1.05) 20.3% 17.0% 29.4% 23.7% 9.6% 

Level 1 (1.00) 37.3% 29.4% 23.7% 9.6% 

Level 2 (0.90) 66.7% 23.7% 9.6% 

Level 3 (0.80) 90.4% 9.6% 

Level 4 (0.74) 100% 

Table 6.4 Percentage of Total Shipments by Efficiency Level for HZO.RC.M in 2012 

Proposed Standard Level 

(CDEC/TDA - kWh/day/ft2

) 

0.16 0.14 0.11 0.10 

Baseline (0.16) 24.8% 25.4% 25.2% 24.6% 

Level 1 (0.14) 50.2% 25.2% 24.6% 

Level 2 (0.11) 75.4% 24.6% 

Level 3 (0.10) 100% 

J-8 

EERE-2006-BT-STD-0126 COMMENT 52.2 
Table 6.5 Percentage of Total Shipments by Efficiency Level for HZO.RC.L in 2012 

Proposed Standard Level 

(CDEC/TDA - kWh/day/ft2

) 

0.83 0.75 0.70 0.65 0.62 

Baseline (0.83) 18.3% 35.2% 16.2% 15.4% 14.9% 

Level 1 (0.75) 53.5% 16.2% 15.4% 14.9% 

Level 2 (0.70) 69.7% 15.4% 14.9% 

Level 3 (0.65) 85.1% 14.9% 

Level 4 (0.62) 100% 

Table 6.6 Percentage of Total Shipments by Efficiency Level for VCT.RC.M in 2012 

Proposed Standard Level 

(CDEC/TDA - kWh/day/ft2) 

0.54 0.42 0.38 0.24 0.19 

Baseline (0.54) 15.7% 35.4% 34.7% 9.1% 5.1% 

Level 1 (0.42) 51.1% 34.7% 9.1% 5.1% 

Level 2 (0.38) 85.8% 9.1% 5.1% 

Level 3 (0.24) 94.9% 5.1% 

Level 4 (0.19) 100% 

Table 6.7 Percentage of Total Shipments by Efficiency Level for VCT.RC.L in 2012 

Proposed Standard Level 

(CDEC/TDA - kWh/day/ft2

) 

1.06 0.90 0.75 0.65 0.55 

Baseline (1.06) 17.6% 30.7% 24.8% 19.6% 7.3% 

Level 1 (0.90) 48.3% 24.8% 19.6% 7.3% 

Level 2 (0.75) 73.2% 19.6% 7.3% 

Level 3 (0.65) 92.7% 7.3% 

Level 4 (0.55) 100% 

Table 6.8 Percentage of Total Shipments by Efficiency Level for SOC.RC.M in 2012 

Proposed Standard Level 

(CDEC/TDA - kWh/day/ft2

) 

0.95 0.76 0.74 0.71 0.60 

Baseline (0.95) 16.5% 43.4% 16.4% 15.9% 16.7% 

Level 1 (0.76) 51.0% 16.4% 15.9% 16.7% 

Level 2 (0.74) 67.4% 15.9% 16.7% 

Level 3 (0.71) 83.3% 16.7% 

Level 4 (0.60) 100% 

Table 6.9 Percentage of Total Shipments by Efficiency Level for VOP.SC.M in 2012 

Proposed Standard Level 

(TDEC/TDA - kWh/day/ft2

) 

2.55 2.23 2.07 1.84 1.65 

Baseline (2.55) 14.5% 30.1% 28.7% 21.6% 5.1% 

Level 1 (2.23) 44.6% 28.7% 21.6% 5.1% 

Level 2 (2.07) 73.3% 21.6% 5.1% 

Level 3 (1.84) 94.9% 5.1% 

Level 4 (1.65) 100% 

J-9 

EERE-2006-BT-STD-0126 COMMENT 52.2 
Table 6.10 Percentage of Total Shipments by Efficiency Level for SVO.SC.M in 2012 

Proposed Standard Level 

(TDEC/TDA - kWh/day/ft2

) 

2.24 1.99 1.87 1.62 1.54 

Baseline (2.24) 13.9% 28.4% 27.2% 22.9% 7.6% 

Level 1 (1.99) 42.2% 27.2% 22.9% 7.6% 

Level 2 (1.87) 69.5% 22.9% 7.6% 

Level 3 (1.62) 92.4% 7.6% 

Level 4 (1.54) 100% 

Table 6.11 Percentage of Total Shipments by Efficiency Level for HZO.SC.M in 2012 

Proposed Standard Level 

(TDEC/TDA - kWh/day/ft2) 

0.78 0.61 0.56 0.54 0.48 

Baseline (0.78) 12.7% 38.8% 25.6% 12.3% 10.7% 

Level 1 (0.61) 51.5% 25.6% 12.3% 10.7% 

Level 2 (0.56) 77.0% 12.3% 10.7% 

Level 3 (0.54) 89.3% 10.7% 

Level 4 (0.48) 100% 

Table 6.12 Percentage of Total Shipments by Efficiency Level for HZO.SC.L in 2012 

Proposed Standard Level 

(TDEC/TDA - kWh/day/ft2

) 

2.05 1.80 1.52 1.33 1.32 

Baseline (2.05) 12.1% 25.0% 39.9% 11.6% 11.3% 

Level 1 (1.80) 37.1% 39.9% 11.6% 11.3% 

Level 2 (1.52) 77.1% 11.6% 11.3% 

Level 3 (1.33) 88.7% 11.3% 

Level 4 (1.32) 100% 

Table 6.13 Percentage of Total Shipments by Efficiency Level for VCT.SC.I in 2012 

Proposed Standard Level 

(TDEC/TDA - kWh/day/ft2

) 

1.58 1.24 0.77 0.69 0.63 

Baseline (1.58) 12.5% 29,0% 41.4% 10.1% 6.8% 

Level 1 (1.24) 41.6% 41.4% 10.1% 6.8% 

Level 2 (0.77) 83.0% 10.1% 6.8% 

Level 3 (0.69) 93.2% 6.8% 

Level 4 (0.63) 100% 

Table 6.14 Percentage of Total Shipments by Efficiency Level for VCS.SC.I in 2012 

Proposed Standard Level 

(TDEC/V - kWh/day/ft3

) 

0.27 0.19 0.18 0.17 0.17 

Baseline (0.27) 11.2% 51.2% 13.3% 13.0% 11.3% 

Level 1 (0.19) 62.4% 13.3% 13.0% 11.3% 

Level 2 (0.18) 75.7% 13.0% 11.3% 

Level 3 (0.17) 88.7% 11.3% 

Level 4 (0.17) 100% 

J-10 

EERE-2006-BT-STD-0126 COMMENT 52.2 
Table 6.15 Percentage of Total Shipments by Efficiency Level for HCT.SC.I in 2012 

Proposed Standard Level 

(TDEC/TDA - kWh/day/ft2

) 

1.63 1.28 0.73 0.61 0.57 

Baseline (1.63) 17.2% 36.0% 16.0% 15.5% 15.2% 

Level 1 (1.28) 53.3% 16.0% 15.5% 15.2% 

Level 2 (0.73) 69.3% 15.5% 15.2% 

Level 3 (0.61) 84.8% 15.2% 

Level 4 (0.57 100% 

6.2 Do you expect the equipment mix to change over time absent any new energy 

conservation standards? If so, please explain how it will change. 

7 CONVERSION COSTS 

An increase in energy conservation standards may cause your company to incur one-time capital 

and equipment conversion costs. DOE calls these conversion costs because they are the costs of 

changing your business to comply with new energy conservation standards. 

7.1 What level of conversion costs do you anticipate incurring under the different efficiency 

levels? What portion of your capital conversion expenditures do you expect to go towards 

replacing existing assets, which would become obsolete under a new energy conservation 

standard? Refer to the tables below to provide your company’s estimates. Please provide 

additional qualitative information to help DOE understand the nature of your investments. 

J-11 

EERE-2006-BT-STD-0126 COMMENT 52.2 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 7.1 Remote Condensing CRE Conversion Costs 

Efficiency 

Level 

(EL) 

VOP.RC.M VOP.RC.L 

Capital 

Conv. Exp.a 

Product 

Conv. Exp.b 

Stranded 

Assets 

Capital 

Conv. Exp. 

Product 

Conv. Exp. 

Stranded 

Assets 

Baseline 

EL 1 

EL 2 

EL 3 

EL 4 

SVO.RC.M HZO.RC.M 

Baseline 

EL 1 

EL 2 

EL 3 

EL 4 

HZO.RC.L VCT.RC.M 

Baseline 

EL 1 

EL 2 

EL 3 

EL 4 

VCT.RC.L SOC.RC.M 

Baseline 

EL 1 

EL 2 

EL 3 

EL 4 

a

 Capital Conversion Expenditures - One-time investments in plant, property, and equipment (PPE) necessitated by 

an energy conservation standard. These may be completely incremental to existing PPE or they could involve 

replacement of existing PPE. 

b

 Product Conversion Expenditures - One-time expenses in research, product development, testing, and marketing 

necessitated by an appliance energy conservation standard. 

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EERE-2006-BT-STD-0126 COMMENT 52.2 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 7.2 Open Self Contained CRE Conversion Costs 

Efficiency 

Level 

(EL) 

VOP.SC.M SVO.SC.M 

Capital 

Conv. Exp. 

Product 

Conv. Exp. 

Stranded 

Assets 

Capital 

Conv. Exp. 

Product 

Conv. Exp. 

Stranded 

Assets 

Baseline 

EL 1 

EL 2 

EL 3 

EL 4 

HZO.SC.M HZO.SC.L 

Baseline 

EL 1 

EL 2 

EL 3 

EL 4 

Table 7.3 Ice-Cream Freezer Conversion Costs 

Efficiency 

Level 

(EL) 

VCT.SC.I VCS.SC.I 

Capital 

Conv. Exp. 

Product 

Conv. Exp. 

Stranded 

Assets 

Capital 

Conv. Exp. 

Product 

Conv. Exp. 

Stranded 

Assets 

Baseline 

EL 1 

EL 2 

EL 3 

EL 4 

HCT.SC.I 

Baseline 

EL 1 

EL 2 

EL 3 

EL 4 

7.2 What is your depreciation period for the capital expenditures (building, equipment, and 

tooling)? 

8 MARKUPS AND PROFITABILITY 

One of the primary objectives of the MIA is to assess the impact of efficiency levels on industry 

profitability. In this section, DOE would like your assistance understanding how the efficiency 

levels would impact your company’s markups and profitability. 

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EERE-2006-BT-STD-0126 COMMENT 52.2 
 

 

8.1 Do profit levels vary by equipment class? Do profit levels vary by efficiency level? 

Please explain why or why not? 

8.2 The equipment price markup DOE calculated for the Engineering Analysis was 1.39. 

The equipment price markup DOE calculated for the Notice of Proposed Rulemaking (NOPR) 

Analysis was 1.44. Do these numbers seem accurate, or are they too high or low? 

8.3 Do you expect changes in your estimated profitability following the new energy 

conservation standard? If so, please explain why. 

9 CUMULATIVE REGULATORY BURDEN 

Cumulative regulatory burden refers to the burden that industry faces from overlapping effects of 

new or revised DOE standards, voluntary standards, and/or other regulatory actions affecting the 

same equipment or industry. 

9.1 Are there other recent or impending regulations, excluding the refrigerant phase-out, that 

CRE manufacturers face (from DOE or otherwise)? What level of expense are you expecting to 

incur as a result of these regulations? 

9.2 Under what circumstances would you be able to coordinate any expenditures related to 

these other regulations thereby lessening the cumulative burden? 

10 EXPORTS / FOREIGN COMPETITION / OUTSOURCING 

Disparity between domestic and foreign energy conservation standards could impact exports or 

imports. Labor content and material changes, resulting from energy conservation standards, may 

impact sourcing decisions. 

10.1 What percentage of your company’s CRE sales are domestic? Absent standards, are 

production facilities being relocated to foreign countries? Would new energy conservation 

standards impact your domestic vs. foreign manufacturing decision? 

10.2 If applicable, to what foreign countries or regions do you export your equipment? What 

percentage of sales can be attributed to each? 

10.3 Would a new standard be expected to affect your export sales? What would the resulting 

impact be, if any, on your manufacturing operations and profitability? 

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EERE-2006-BT-STD-0126 COMMENT 52.2 
 

 

 

10.4 Are your foreign exports affected by energy efficiency standards in other countries? 

10.5 What percentage of the U.S. market for CRE has been captured by foreign competition? 

Would standards have an impact on foreign competition? 

10.6 What is your outlook for the future operation of your company and the CRE industry 

with regard to exports? 

11 DIRECT EMPLOYMENT IMPACT ASSESSMENT 

The impact of new energy conservation standards on employment is an important consideration 

in the rulemaking process. This section of the interview guide seeks to explore current trends in 

CRE production employment and solicit manufacturer views on how domestic employment 

patterns might be affected by new energy conservation standards. 

11.1 Would your domestic employment levels be expected to change significantly under new 

energy conservation standards? If so, please explain how they would change. 

11.2 Would the workforce skills necessary under new energy conservation standards require 

extensive retraining or replacement of employees? 

11.3 Would mandating higher efficiency levels result in larger sized equipment to compensate 

for larger, more efficient components? Have you found direct labor costs to be proportional to 

material costs? 

12 CONSOLIDATION 

New energy conservation standards can alter the competitive dynamics of the market. This can 

include prompting companies to enter or exit the market, or to merge. DOE and the Department 

of Justice are both interested in any potential reduction in competition that would result from a 

new energy conservation standard. 

12.1 Please comment on industry consolidation and related trends over the last 5 years. 

12.2 In the absence of new standards, do you expect any further industry consolidation? 

Please describe your expectations. 

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EERE-2006-BT-STD-0126 COMMENT 52.2 
12.3 How would new standards affect your ability to compete? 

13 BASELINE PRODUCTS AND DESIGN OPTIONS 

13.1 What lighting configurations are generally incorporated into baseline open cases 

(vertical, semivertical, and horizontal)? Canopy, front ledge, shelf, other? 

13.2 Should electric defrost be included in baseline open cases (vertical, semivertical, and 

horizontal)? 

13.3 Is insulation thickness increase a feasible design option? What equipment classes that 

your company makes would this be viable for? Would there be a significant issues with a 1/4" or 

1/8” insulation thickness increase? 

13.4 DOE intends to develop offset factors for all standard equations to account for the 

disproportionate energy use of small cases. These factors will be based on “end effects” such as 

conduction through end panels and fixed lighting level in door cases such that an equitable 

standard level in terms of CDEC or TDEC (equating to a similar set of component changes to the 

baseline model) is defined across different length equipment of the same basic design. Is this 

approach reasonable? 

13.5 Does your company have data that would help DOE develop factors to extend standards 

to low-shipment equipment classes using the methodology described in section 5.8 of the CRE 

TSD? 

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EERE-2006-BT-STD-0126 COMMENT 52.2 
J.2 GOVERNMENT REGULATORY IMPACT MODEL 

J.2.1 Introduction and Purpose 

The purpose of the Government Regulatory Impact Model (GRIM) is to help quantify the 

impacts of energy conservation standards and other regulations on manufacturers. The basic 

mode of analysis is to estimate the change in value of the industry or manufacturers(s) following 

a regulation or a series of regulations. The model structure also allows an analysis of multiple 

equipment types with regulations taking effect over a period of time, and of multiple regulations 

on the same equipment. 

Industry net present value is defined, for the purpose of this analysis, as the discounted 

sum of industry free cash flows plus a discounted terminal value. The model calculates the 

actual cash flows by year and then determines the present value of those cash flows both without 

an energy conservation standard (i.e., the base case) and under different trial standard levels 

(TSLs). 

Output from the model consists of summary financial metrics, graphs of major variables, 

and, when appropriate, access to the complete cash flow calculation. 

J.2.2 Model Description 

The basic structure of the GRIM is a standard annual cash flow analysis that uses 

manufacturer selling prices, manufacturing costs, a shipments forecast, and financial parameters 

as inputs and accepts a set of regulatory conditions as changes in costs and investments. The 

cash flow analysis is separated into two major blocks: income and cash flow. The income 

calculation determines net operating profit after taxes. The cash flow calculation converts net 

operating profit after taxes into an annual cash flow by including investment and non-cash items. 

Below are definitions of listed items on the printout of the output sheet (see Section I.3). 

(1)	 Unit Sales: Total annual shipments for the industry were obtained from the National 

Energy Savings Spreadsheet. The distribution of shipments by efficiency level was 

modified based on feedback from manufacturers regarding the ability to sell baseline and 

premium products depending on the standard level proposed; 

(2)	 Revenues: Annual revenues - computed by multiplying equipment unit price at each 

efficiency level by the appropriate manufacturer markup; 

(3)	 Labor: The portion of cost of goods sold (COGS) that includes direct labor, commissions, 

dismissal pay, bonuses, vacation, sick leave, social security contributions, fringe, and 

assembly labor up-time; 

(4)	 Material: The portion of COGS that includes materials; 

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EERE-2006-BT-STD-0126 COMMENT 52.2 
 

(5)	 Overhead: The portion of COGS that includes indirect labor, indirect material, energy use, 

maintenance, depreciation, property taxes, and insurance related to assets. While included 

in overhead, the depreciation is shown as a separate line item; 

(6)	 Depreciation: Annual depreciation computed as a percentage of COGS. While included in 

overhead, the depreciation is shown as a separate line item; 

(7)	 Stranded Assets: In the year the standard becomes effective, a one time write-off of 

stranded assets is accounted for; 

(8)	 Standard SG&A: Selling, general, and administrative costs are computed as a percentage 

of Revenues (2); 

(9)	 R&D: GRIM separately accounts for ordinary research and development (R&D) as a 

percentage of Revenues (2); 

(10) Equipment Conversion Expense: Equipment conversion expenses are one-time 

investments in research, development, testing, and marketing focused on making product 

designs comply with the new efficiency standard. GRIM allocates these costs over the 

period between the standard’s announcement and effective dates; 

(11) Earnings Before Interest and Taxes (EBIT): Includes profits before deductions for 

interest paid and taxes; 

(12) EBIT as a Percentage of Sales: GRIM calculates EBIT as a percentage of sales to 

compare with the industry’s average reported in financial statements; 

(13) Taxes: Taxes on EBIT (11) are calculated by multiplying the tax rate contained in Major 

Assumptions by EBIT (11). 

(14) Net Operating Profits After Taxes (NOPAT): Computed by subtracting Cost of Goods 

Sold ((3) to (6)), SG&A (8), R&D (9), Equipment Conversion Expense (10), and Taxes 

(13) from Revenues (2). 

(15) NOPAT repeated: NOPAT is repeated in the Statement of Cash Flows; 

(16) Depreciation repeated: Depreciation is added back in the Statement of Cash Flows 

including stranded assets because both are non-cash expenses; 

(17) Change in Working Capital: Change in cash tied up in accounts receivable, inventory, and 

other cash investments necessary to support operations is calculated by multiplying 

working capital (as a percentage of revenues) by the change in annual revenues. 

(18) Cash Flow From Operations: Calculated by taking NOPAT (15), adding back non-cash 

items such as a Depreciation (16), and subtracting out Change in Working Capital (17); 

(19) Ordinary Capital Expenditures: Ordinary investments in property, plant, and equipment to 

maintain and replace existing production assets, computed as a percentage of Revenues (2); 

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EERE-2006-BT-STD-0126 COMMENT 52.2 
 

(20) Conversion Capital Expenditures: Conversion capital expenditures are one-time 

investments in property, plant, and equipment to adapt or change existing production 

facilities so that new equipment designs can be fabricated and assembled under the new 

regulation; 

(21) Capital Investment: Total investments in property, plant, and equipment are computed by 

adding Ordinary Capital Expenditures (19) and Conversion Capital Expenditures (20); 

(22) Free Cash Flow: Annual cash flow from operations and investments; computed by 

subtracting Capital Investment (21) from Cash Flow from Operations (18); 

(23) Terminal Value: Estimate of the continuing value of the industry after 2042. Computed 

by growing the Free Cash Flow in year 2042 at a constant rate in perpetuity; 

(24) Present Value Factor: Factor used to calculate an estimate of the present value of an 

amount to be received in the future; 

(25) Discounted Cash Flow: Free Cash Flows (22) multiplied by the Present Value Factor 

(24). For 2042 the discounted cash flow includes the discounted Terminal Value (23); and 

(26) Industry Value thru 2042: The sum of Discounted Cash Flows (25). 

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J.2.3 Detailed Cash Flow Example 

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