16 -i CHAPTER 16. REGULATORY IMPACT ANALYSIS

TABLE OF CONTENTS

16.1 INTRODUCTION ............................................................................................................ 16-1 16.2 METHODOLOGY ........................................................................................................... 16-116 -1 CHAPTER 1 6. REGULATORY IMPACT ANALYSIS

16.1 INTRODUCTION As part of the notice of proposed rulemaking (NOPR) for metal halide lamp fixtures, the U.S Department of Energy ( DOE ) will draft a regulatory impact analysis in compliance with Executive Order 12866, “Regulatory Planning and Review,” which will be subject to review by the Office of Management and Budget’s Office of Information and Regulatory Affairs (ORIA). 58 FR 51735 ( Sept . 30, 1993).

16.2 METHODOLOGY As part of the regulatory impact analysis, and as discussed in preliminary technical support document (TSD) chapt er 12, Manufacturer Impact Analysis , DOE will identify and seek to mitigate the overlapping effects on manufacturers of new or revised DOE standards and other regulatory actions affecting the same products. Through manufacturer interviews and literature searches, DOE will compile information on burdens from existing and impending regulations affecting metal halide lamp fixtures. The regulatory impact analysis will also address the potential for non-regulatory approaches to supplant or augment energy conservation standards to improve the effic iency of metal halide lamp fixtures. The NOPR analysis will include a complete quantitative analysis of alternatives to the proposed conservation standards. DOE will use the national energy savings ( NES ) spreadsheet model (as discussed in preliminary TSD chapter 10, National Impact Analysis) to calculate the NES and net present value ( NPV ) for the alternatives to the proposed conservation standards. Listed below are some of the alternative ways to achiev e energy efficiency improvements that DOE has used in prior rulemakings. The TSD in support of DOE’s NOPR will include a complete analysis of each alternative . Some possible non-regulatory alternatives include:

• n o new regulatory action , • consumer tax incentives,

• m anufacturer tax incentives , • p erformance standa rds , • consumer r ebates , • m anufacturer rebates , • v oluntary energy efficiency targets , • e arly replacement ( i.e. , retrofit) , and

• bulk government purchases. To compare each alternative quantitatively to proposed energy conservation standards, DOE will need to quan tify the effect of each alternative on the purchase and use of more efficient metal halide lamp fixtures. Once DOE estimates the effects of alternatives on the standard, DOE will run these non-regulatory alternative scenarios in the NIA spreadsheet model. Key inputs that DOE may adjust in the NIA spreadsheet model for this analysis include:16 -2 • e nergy prices and escalation factors,

• implicit market discount rates for trading off purchase price against operating expense when choosing equipment efficiency,

• custom er purchase price, operating cost , and shipment scenarios,

• c ustomer price versus efficiency relationships, and

• equipment stock data (purchase of new equipment or turnover rates for inventories). The output from the NIA spreadsheet model for each alternative considered will be as follows:

• Energy use ( in quadrillion British thermal units ) is the cumulative energy use of the equipment from the effective date of the new standard to 2044 . DOE will report electricity use as source energy.

• National energy savings is the cumulative national energy use from the base case projection less the alternative policy case projection.

• Net present value is the value of future operating cost savings from metal halide lamp fixture s bought in the period between the effective date of the new standard and the close of the analysis period. DOE calculates the NPV as the difference between the present value of equipment and operating expenditures ( e.g. , energy usage ) in the base case, and the present value of equipment and operating expenditures in the various non-regulatory alternative cases. These differences will be discounted to 2011 using two discount rates: 7 and 3 percent. DOE will also calculate operating expenses (including energy consumption) over the life of the equipment.