Vol. 80 Tuesday, 

No. 139 July 21, 2015 

Part II 

Department of Energy 

10 CFR Part 431 

Energy Conservation Program: Energy Conservation Standards for 

Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps; 

Final Rule 


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43162 Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 

DEPARTMENT OF ENERGY 

10 CFR Part 431 

[Docket Number EERE–2012–BT–STD– 

0029] 

RIN 1904–AC82 

Energy Conservation Program: Energy 

Conservation Standards for Packaged 

Terminal Air Conditioners and 

Packaged Terminal Heat Pumps 

AGENCY: Office of Energy Efficiency and 

Renewable Energy, Department of 

Energy. 

ACTION: Final rule. 

SUMMARY: The Energy Policy and 

Conservation Act of 1975 (EPCA), as 

amended, prescribes energy 

conservation standards for various 

consumer products and certain 

commercial and industrial equipment, 

including packaged terminal air 

conditioner (PTAC) and packaged 

terminal heat pump (PTHP) equipment. 

EPCA requires the U.S. Department of 

Energy (DOE) to determine whether 

more-stringent standards for PTACs and 

PTHPs would be technologically 

feasible and economically justified, and 

would save a significant amount of 

energy. In this final rule, DOE is 

adopting amended energy conservation 

standards for PTACs equivalent to the 

PTAC standards in American National 

Standards Institute (ANSI)/American 

Society of Heating, Refrigerating, and 

Air-Conditioning Engineers (ASHRAE)/

Illuminating Engineering Society (IES) 

Standard 90.1–2013. DOE is not 

amending the current energy 

conservation standards for PTHPs, 

which are already equivalent to the 

PTHP standards in ANSI/ASHRAE/IES 

Standard 90.1–2013. DOE has 

determined that adoption of PTAC and 

PTHP standards more stringent than 

ANSI/ASHRAE/IES Standard 90.1–2013 

is not economically justified. 

DATES: The effective date of this rule is 

September 21, 2015. Compliance with 

the amended standards established for 

standard-sized PTACs in this final rule 

is required on January 1, 2017. 

ADDRESSES: The docket, which includes 

Federal Register notices, public meeting 

attendee lists and transcripts, 

comments, and other supporting 

documents/materials, is available for 

review at regulations.gov. All 

documents in the docket are listed in 

the regulations.gov index. However, 

some documents listed in the index, 

such as those containing information 

that is exempt from public disclosure, 

may not be publicly available. 

A link to the docket Web page can be 

found at: http://www.regulations.gov/

#!docketDetail;D=EERE-2012-BT-STD0029. This Web page contains a link to 

the docket for this document on the 

www.regulations.gov site. The 

www.regulations.gov Web page contains 

simple instructions on how to access all 

documents, including public comments, 

in the docket. 

For further information on how to 

review the docket, contact Ms. Brenda 

Edwards at (202) 586–2945 or by email: 

Brenda.Edwards@ee.doe.gov. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Ronald Majette, U.S. Department of 

Energy, Office of Energy Efficiency and 

Renewable Energy, Building 

Technologies Program, EE–5B, 1000 

Independence Avenue SW., 

Washington, DC 20585–0121. 

Telephone: (202) 586–7935. Email: 

PTACs@ee.doe.gov. 

Ms. Elizabeth Kohl, U.S. Department 

of Energy, Office of the General Counsel, 

GC–33, 1000 Independence Avenue 

SW., Washington, DC 20585–0121. 

Telephone: (202) 286–7796. Email: 

Elizabeth.Kohl@hq.doe.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Summary of the Final Rule 

A. National Benefits 

II. Introduction 

A. Authority 

B. Background 

1. Current Standards 

2. History of Standards Rulemaking for 

PTACs and PTHPs 

III. General Discussion 

A. Compliance Dates 

B. Equipment Classes and Scope of 

Coverage 

C. Test Procedure 

D. Technological Feasibility 

1. General 

2. Maximum Technologically Feasible 

Levels 

E. Energy Savings 

1. Determination of Savings 

2. Significance of Savings 

F. Economic Justification 

1. Specific Criteria 

a. Economic Impact on Manufacturers and 

Consumers 

b. Savings in Operating Costs Compared to 

Increase in Price 

c. Energy Savings 

d. Lessening of Utility or Performance of 

Equipment 

e. Impact of Any Lessening of Competition 

f. Need for National Energy Conservation 

g. Other Factors 

2. Rebuttable Presumption 

G. Additional Comments 

IV. Methodology and Discussion of Related 

Comments 

A. Market and Technology Assessment 

B. Screening Analysis 

C. Engineering Analysis 

1. Methodology 

2. Equipment Classes Analyzed 

3. Cost Model 

4. Baseline Efficiency Level 

5. Incremental Efficiency Levels 

6. Equipment Testing and Reverse 

Engineering 

7. Cost-Efficiency Results 

D. Markups to Determine Equipment Price 

E. Energy Use Analysis 

F. Life Cycle Cost and Payback Period 

Analyses 

1. Equipment and Installation Costs 

2. Unit Energy Consumption 

3. Electricity Prices and Electricity Price 

Trends 

4. Repair Costs 

5. Maintenance Costs 

6. Lifetime 

7. Discount Rate 

8. Base Case Efficiency Distribution 

9. Payback Period Inputs 

10. Rebuttable-Presumption Payback 

Period 

G. Shipments Analysis 

H. National Impact Analysis 

I. Consumer Subgroup Analysis 

J. Manufacturer Impact Analysis 

1. Overview 

2. Government Regulatory Impact Model 

a. Government Regulatory Impact Model 

Key Inputs 

b. Government Regulatory Impact Model 

Scenarios 

c. Manufacturer Interviews 

3. Discussion of Comments 

K. Emissions Analysis 

L. Monetizing Carbon Dioxide and Other 

Emissions Impacts 

1. Social Cost of Carbon 

a. Monetizing Carbon Dioxide Emissions 

b. Development of Social Cost of Carbon 

Values 

c. Current Approach and Key Assumptions 

2. Social Cost of Other Air Pollutants 

M. Utility Impact Analysis 

N. Employment Impact Analysis 

V. Analytical Results 

A. Trial Standard Levels 

B. Economic Justification and Energy 

Savings 

1. Economic Impacts on Commercial 

Consumers 

a. Life-Cycle Cost and Payback Period 

b. Consumer Subgroup Analysis 

c. Rebuttable Presumption Payback 

2. Economic Impacts on Manufacturers 

a. Industry Cash Flow Analysis Results 

b. Direct Impacts on Employment 

c. Impacts on Manufacturing Capacity 

d. Impacts on Subgroups of Manufacturers 

e. Cumulative Regulatory Burden 

3. National Impact Analysis 

a. Significance of Energy Savings 

b. Net Present Value of Consumer Costs 

and Benefits 

c. Indirect Impacts on Employment 

4. Impact on Utility or Performance of 

Equipment 

5. Impact of Any Lessening of Competition 

6. Need of the Nation To Conserve Energy 

7. Other Factors 

8. Summary of National Economic Impacts 

C. Conclusions 

VI. Procedural Issues and Regulatory Review 

A. Review Under Executive Orders 12866 

and 13563 


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1For editorial reasons, upon codification in the 

U.S. Code, Part C was redesignated Part A–1. 

2All references to EPCA in this document refer 

to the statute as amended through the American 

Energy Manufacturing Technical Corrections Act 

(AEMTCA), Public Law 112–210 (Dec. 18, 2012). 

3For editorial reasons, upon codification in the 

U.S. Code, Part C was re-designated Part A–1. 

4All references to EPCA in this document refer 

to the statute as amended through the American 

Energy Manufacturing Technical Corrections Act 

(AEMTCA), Public Law 112–210 (Dec. 18, 2012). 

B. Review Under the Regulatory Flexibility 

Act 

1. Description and Estimated Number of 

Small Entities Regulated 

a. Methodology for Estimating the Number 

of Small Entities 

b. Manufacturer Participation 

c. PTAC and PTHP Industry Structure and 

Nature of Competition 

2. Description and Estimate of Compliance 

Requirements 

3. Duplication, Overlap, and Conflict With 

Other Rules and Regulations 

4. Significant Alternatives to the Rule 

C. Review Under the Paperwork Reduction 

Act 

D. Review Under the National 

Environmental Policy Act of 1969 

E. Review Under Executive Order 13132 

F. Review Under Executive Order 12988 

G. Review Under the Unfunded Mandates 

Reform Act of 1995 

H. Review Under the Treasury and General 

Government Appropriations Act, 1999 

I. Review Under Executive Order 12630 

J. Review Under the Treasury and General 

Government Appropriations Act, 2001 

K. Review Under Executive Order 13211 

L. Review Under the Information Quality 

Bulletin for Peer Review 

M. Congressional Notification 

VII. Approval of the Office of the Secretary 

I. Summary of the Final Rule 

Title III, Part C1 of the Energy Policy 

and Conservation Act of 1975 (EPCA or 

the Act) (42 U.S.C. 6291, et. seq.) 

established the Energy Conservation 

Program for Certain Industrial 

Equipment.2 This equipment includes 

packaged terminal air conditioners 

(PTACs) and packaged terminal heat 

pumps (PTHPs), the subjects of this 

document. The current Federal energy 

conservation standards for PTAC and 

PTHP equipment were adopted in 2008. 

73 FR 58772 (October 7, 2008). 

EPCA, as amended, requires the U.S. 

Department of Energy (DOE) to consider 

amending the existing Federal energy 

conservation standard for certain types 

of listed commercial and industrial 

equipment, including packaged terminal 

air conditioners and heat pumps, each 

time the American Society of Heating, 

Refrigerating and Air-Conditioning 

Engineers (ASHRAE) Standard 90.1, 

Energy Standard for Buildings Except 

Low-Rise Residential Buildings, is 

amended with respect to such 

equipment. (42 U.S.C. 6313(a)(6)(A)) On 

October 9, 2013, ASHRAE Standard 

90.1–2013 raised the standards for 

standard-size PTAC equipment EPCA 

further directs that if ASHRAE Standard 

90.1 is amended, DOE must adopt 

amended energy conservation standards 

at the new efficiency level in ASHRAE 

Standard 90.1, unless clear and 

convincing evidence supports a 

determination that adoption of a morestringent efficiency level as a national 

standard would produce significant 

additional energy savings and be 

technologically feasible and 

economically justified. (42 U.S.C. 

6313(a)(6)(A)(ii)) 

Pursuant to EPCA, DOE must also, 

every six years, evaluate each class of 

covered equipment and publish either a 

notice of the determination that 

standards for the product do not need to 

be amended or a notice of proposed 

rulemaking including new proposed 

standards. (42 U.S.C. 6313(a)(6)(C)(i)) 

Under the six-year look back 

requirement, DOE must also 

demonstrate clear and convincing 

evidence supporting adoption of a 

national standard at a more-stringent 

efficiency level than that in ASHRAE 

Standard 90.1. (42 U.S.C. 6313(a)(6)(C)) 

Conduct of a rulemaking subsequent to 

ASHRAE action satisfies this six-year 

look back requirement. 

Based on the analysis supporting this 

final rule, DOE is not able to show with 

clear and convincing evidence that 

energy conservation standards for PTAC 

and PTHP equipment at any of the 

considered efficiency levels that are 

more stringent than the minimum level 

specified in the ANSI/ASHRAE/IES 

Standard 90.1–2013 are economically 

justified. Therefore, in accordance with 

these and other statutory provisions 

discussed in this document, DOE is 

amending energy conservation 

standards for standard-sized PTAC 

equipment to be equivalent to the 

standards for standard-sized PTAC 

equipment found in ANSI/ASHRAE/IES 

Standard 90.1–2013. 

The amended standards for PTACs, 

which are the minimum allowable 

cooling efficiency, are shown in Table 

I.1. These amended standards apply to 

all standard-sized PTAC equipment 

manufactured in, or imported into, the 

United States on or after the compliance 

date indicated in Table I.1. The 

standards for PTHP equipment remain 

unchanged. 

TABLE I.1—AMENDED ENERGY CONSERVATION STANDARDS FOR STANDARD-SIZED PTAC EQUIPMENT

Equipment class Minimum cooling 

efficiency * Compliance date *** 

Equipment Category Cooling capacity 

PTAC ................................. Standard Size ** ................ <7,000 Btu/h ..................... EER = 11.9 ....................... January 1, 2017. 

≥7,000 Btu/h and ≤15,000 

Btu/h.

EER = 14.0 ¥ (0.300 × 

Cap ††).

>15,000 Btu/h ................... EER = 9.5.

* For equipment rated according to the DOE test procedure, Air Conditioning, Heating, and Refrigeration Institute (AHRI) Standard 310/380– 

2014. 

** Standard size refers to PTAC equipment with wall sleeve dimensions greater than or equal to 16 inches high, or greater than or equal to 42 

inches wide. 

*** Amended standards shall become effective for equipment manufactured on or after a date which is two years after the effective date of the 

applicable minimum energy efficiency requirement in the amended ASHRAE/IES standard. (42 U.S.C. 6313(a)(6)(D)(i)) 

†† Cap means cooling capacity in thousand British thermal units per hour (Btu/h) at 95 °F outdoor dry-bulb temperature. 

II. Introduction 

The following section briefly 

discusses the statutory authority 

underlying this final rule, as well as 

some of the relevant historical 

background related to the establishment 

of standards for PTACs and PTHPs. 

A. Authority 

Title III, Part C3 of EPCA (42 U.S.C. 

6291, et. seq.), established the Energy 

Conservation Program for Certain 

Industrial Equipment, which includes 

the PTAC and PTHP equipment that is 

the subject of this final rule.4 In general, 

this program addresses the energy 

efficiency of certain types of commercial 


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and industrial equipment. Relevant 

provisions of the Act include definitions 

(42 U.S.C. 6311), energy conservation 

standards (42 U.S.C. 6313), test 

procedures (42 U.S.C. 6314), labeling 

provisions (42 U.S.C. 6315), and the 

authority to require information and 

reports from manufacturers (42 U.S.C. 

6316). 

EPCA contains mandatory energy 

conservation standards for commercial 

heating, air-conditioning, and waterheating equipment. Specifically, EPCA 

sets standards for small, large, and very 

large commercial package airconditioning and heating equipment, 

PTACs and PTHPs, warm-air furnaces, 

packaged boilers, storage water heaters, 

instantaneous water heaters, and 

unfired hot water storage tanks. (42 

U.S.C. 6313(a)) EPCA established 

Federal energy conservation standards 

that generally correspond to the levels 

in ASHRAE Standard 90.1, as in effect 

on October 24, 1992 (i.e., ASHRAE/

Illuminating Engineering Society of 

North America (IESNA) Standard 90.1– 

1989), for each type of covered 

equipment listed in 42 U.S.C. 6313(a). 

EPCA requires that DOE conduct a 

rulemaking to consider amended energy 

conservation standards for a variety of 

enumerated types of commercial 

heating, ventilating, and airconditioning equipment (including 

PTACs and PTHPs) each time ASHRAE 

Standard 90.1 is amended with respect 

to the standard levels or design 

requirements applicable to such 

equipment. (42 U.S.C. 6313(a)(6)(A)) 

Such review is to be conducted in 

accordance with the procedures 

established for ASHRAE equipment 

under 42 U.S.C. 6313(a)(6). According to 

42 U.S.C. 6313(a)(6)(A), for each type of 

equipment, EPCA directs that if 

ASHRAE Standard 90.1 is amended, 

DOE must publish in the Federal 

Register an analysis of the energy 

savings potential of amended energy 

efficiency standards within 180 days of 

the amendment of ASHRAE Standard 

90.1. (42 U.S.C. 6313(a)(6)(A)(i)) EPCA 

further directs that DOE must adopt 

amended standards at the new 

efficiency level specified in ASHRAE 

Standard 90.1, unless clear and 

convincing evidence supports a 

determination that adoption of a morestringent level would produce 

significant additional energy savings 

and be technologically feasible and 

economically justified. (42 U.S.C. 

6313(a)(6)(A)(ii)) In addition, EPCA 

requires DOE to review its alreadyestablished energy conservation 

standards for ASHRAE equipment every 

six years. (42 U.S.C. 6313(a)(6)(C)) 

If DOE proposes an amended standard 

for ASHRAE equipment at levels more 

stringent than those in ASHRAE 

Standard 90.1, DOE must determine, 

after receiving comments on the 

proposed standard, whether the benefits 

of the standard exceed its burdens by 

considering, to the maximum extent 

practicable, the following seven factors: 

(1) The economic impact of the 

standard on manufacturers and 

consumers of the products subject to the 

standard; 

(2) The savings in operating costs 

throughout the estimated average life of 

the product in the type (or class) 

compared to any increase in the price, 

initial charges, or maintenance expenses 

of the products likely to result from the 

standard; 

(3) The total projected amount of 

energy savings likely to result directly 

from the standard; 

(4) Any lessening of the utility or the 

performance of the products likely to 

result from the standard; 

(5) The impact of any lessening of 

competition, as determined in writing 

by the Attorney General, that is likely to 

result from the standard; 

(6) The need for national energy 

conservation; and 

(7) Other factors the Secretary 

considers relevant. 

(42 U.S.C. 6313(a)(6)(B)(ii)) 

Because ASHRAE did not update its 

efficiency levels for PTACs and PTHPs 

in ANSI/ASHRAE/IES Standard 90.1– 

2010, DOE began this rulemaking by 

analyzing amended standards consistent 

with the six-year look back procedures 

defined under 42 U.S.C. 6313(a)(6)(C). 

However, before DOE could finalize this 

rule, ASHRAE acted on October 9, 2013 

to adopt ANSI/ASHRAE/IES Standard 

90.1–2013. This revision of ASHRAE 

Standard 90.1 contained amended 

standard levels for PTACs, thereby 

triggering DOE’s statutory obligation 

under 42 U.S.C. 6313(a)(6)(A) to 

promulgate an amended uniform 

national standard at those levels unless 

DOE determines that there is clear and 

convincing evidence supporting the 

adoption of more-stringent energy 

conservation standards than the 

ASHRAE levels. Consequently, DOE 

prepared an analysis of the energy 

savings potential of amended standards 

at the ANSI/ASHRAE/IES Standard 

90.1–2013 levels (as required by 42 

U.S.C. 6313(a)(6)(A)(i)) and updated the 

proposed rule and its accompanying 

analyses to reflect appropriate statutory 

provisions, timelines, and compliance 

dates. 

ANSI/ASHRAE/IES Standard 90.1– 

2013 did not contain amended standard 

levels for PTHPs, and the PTHP 

standard levels published in ANSI/

ASHRAE/IES Standard 90.1–2013 are 

equivalent to the current Federal 

minimum standards for PTHPs. 

DOE is adopting amended standards 

for PTAC equipment equivalent to those 

set forth in ANSI/ASHRAE/IES 

Standard 90.1–2013. DOE is not 

adopting amended standards for PTHP 

equipment. 

EPCA, as codified, also contains what 

is known as an ‘‘anti-backsliding’’ 

provision, which prevents the Secretary 

from prescribing any amended standard 

that either increases the maximum 

allowable energy use or decreases the 

minimum required energy efficiency of 

a covered product. (42 U.S.C. 

6313(a)(6)(B)(iii)(I)) Also, the Secretary 

may not prescribe an amended or new 

standard if interested persons have 

established by a preponderance of the 

evidence that the standard is likely to 

result in the unavailability in the United 

States of any covered product type (or 

class) of performance characteristics 

(including reliability), features, sizes, 

capacities, and volumes that are 

substantially the same as those generally 

available in the United States. (42 U.S.C. 

6313(a)(6)(B)(iii)(II)) 

B. Background 

1. Current Standards 

In a final rule published on October 

7, 2008 (73 FR 58772), DOE prescribed 

the current energy conservation 

standards for all standard size PTAC 

and PTHP equipment manufactured on 

or after September 30, 2012, and for all 

non-standard size PTAC and PTHP 

equipment manufactured on or after 

September 30, 2010. (42 U.S.C. 

6313(a)(3)) The current energy 

conservation standards align with 

ANSI/ASHRAE/IES Standard 90.1– 

2010. These levels are expressed in 

energy efficiency ratio (EER) for the 

cooling mode and in coefficient of 

performance (COP) for the heating 

mode. EER is defined as ‘‘the ratio of the 

produced cooling effect of an air 

conditioner or heat pump to its net work 

input, expressed in Btu/watt-hour.’’ 10 

CFR 431.92. COP is defined as ‘‘the ratio 

of produced cooling effect of an air 

conditioner or heat pump (or its 

produced heating effect, depending on 

model operation) to its net work input, 

when both the cooling (or heating) effect 

and the net work input are expressed in 

identical units of measurement.’’ 10 

CFR 431.92. 

The current standards for PTACs and 

PTHPs are set forth in Table II.1. 


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5Prior to 1999, ASHRAE/IESNA Standard 90.1 

provided one efficiency standard for all PTAC and 

PTHP and did not have different standards by 

dimension. ASHRAE/IESNA Standard 90.1–1999 

increased the standards for all classes and 

established more stringent standards for ‘‘new 

construction’’ than for ‘‘replacements.’’ DOE energy 

conservation standards for PTACs and PTHPs did 

not distinguish between wall sleeve dimensions for 

standard and non-standard size units until 2010 (for 

non-standard size) and 2012 (for standard size). 

TABLE II.1—FEDERAL ENERGY EFFICIENCY STANDARDS FOR PTACS AND PTHPS

Equipment class 

Efficiency level * 

Equipment type Sub-category Cooling capacity 

PTAC ....................... Standard Size ** ................................... <7,000 Btu/h ......................................... EER = 11.7. 

≥7,000 Btu/h and ≤15,000 Btu/h .......... EER = 13.8 ¥ (0.300 × Cap ††). 

>15,000 Btu/h ....................................... EER = 9.3. 

Non-Standard Size † ............................ <7,000 Btu/h ......................................... EER = 9.4. 

≥7,000 Btu/h and ≤15,000 Btu/h .......... EER = 10.9 ¥ (0.213 × Cap ††). 

>15,000 Btu/h ....................................... EER = 7.7. 

PTHP ....................... Standard Size ** ................................... <7,000 Btu/h ......................................... EER = 11.9. 

COP = 3.3. 

≥7,000 Btu/h and ≤15,000 Btu/h .......... EER = 14.0 ¥ (0.300 × Cap ††). 

COP = 3.7 ¥ (0.052 × Cap ††). 

>15,000 Btu/h ....................................... EER = 9.5. 

COP = 2.9. 

Non-Standard Size † ............................ <7,000 Btu/h ......................................... EER = 9.3. 

COP = 2.7. 

≥7,000 Btu/h and ≤15,000 Btu/h .......... EER = 10.8 ¥ (0.213 × Cap ††). 

COP = 2.9 ¥ (0.026 × Cap ††). 

>15,000 Btu/h ....................................... EER = 7.6. 

COP = 2.5. 

* For equipment rated according to ARI standards, all EER values must be rated at 95 °F outdoor dry-bulb temperature for air-cooled products 

and evaporatively-cooled products and at 85 °F entering water temperature for water cooled products. All COP values must be rated at 47 °F 

outdoor dry-bulb temperature for air-cooled products, and at 70 °F entering water temperature for water-source heat pumps. 

** Standard size refers to PTAC or PTHP equipment with wall sleeve dimensions greater than or equal to 16 inches high, or greater than or 

equal to 42 inches wide. 

† Non-standard size refers to PTAC or PTHP equipment with wall sleeve dimensions less than 16 inches high and less than 42 inches wide. 

ASHRAE/IESNA Standard 90.1–1999 also includes a factory labeling requirement for non-standard size PTAC and PTHP equipment as follows: 

‘‘MANUFACTURED FOR REPLACEMENT APPLICATIONS ONLY; NOT TO BE INSTALLED IN NEW CONSTRUCTION PROJECTS.’’ 

†† Cap means cooling capacity in kBtu/h at 95 °F outdoor dry-bulb temperature. 

2. History of Standards Rulemaking for 

PTACs and PTHPs 

On October 29, 1999, ASHRAE 

adopted ASHRAE/IESNA Standard 

90.1–1999, ‘‘Energy Standard for 

Buildings Except Low-Rise Residential 

Building,’’ which included amended 

efficiency levels for PTACs and PTHPs. 

In amending the ASHRAE/IESNA 

Standard 90.1–1989 levels for PTACs 

and PTHPs, ASHRAE acknowledged the 

physical size constraints among the 

varying sleeve sizes on the market. 

Specifically, the wall sleeve dimensions 

of the PTAC and PTHP can limit the 

attainable energy efficiency of the 

equipment. Consequently, ASHRAE/

IESNA Standard 90.1–1999 used the 

equipment classes defined by EPCA, 

which are distinguished by equipment 

type (i.e., air conditioner or heat pump) 

and cooling capacity, and further 

separated these equipment classes by 

wall sleeve dimensions.5 Table II.2 

shows the efficiency levels in ASHRAE/ 

IESNA Standard 90.1–1999 for PTACs 

and PTHPs. 

TABLE II.2—ASHRAE/IESNA STANDARD 90.1–1999 ENERGY EFFICIENCY LEVELS FOR PTACS AND PTHPS

Equipment class ASHRAE/IESNA Standard 90.1–1999 

efficiency levels * Equipment Category Cooling capacity 

PTAC ....................... Standard Size ** ................................... <7,000 Btu/h ......................................... EER = 11.0. 

≥7,000 Btu/h and ≤15,000 Btu/h .......... EER = 12.5 ¥ (0.213 × Cap ††). 

>15,000 Btu/h ....................................... EER = 9.3. 

Non-Standard Size † ............................ <7,000 Btu/h ......................................... EER = 9.4. 

≥7,000 Btu/h and ≤15,000 Btu/h .......... EER = 10.9 ¥ (0.213 × Cap ††). 

>15,000 Btu/h ....................................... EER = 7.7. 

PTHP ....................... Standard Size ** ................................... <7,000 Btu/h ......................................... EER = 10.8. 

COP = 3.0. 

≥7,000 Btu/h and ≤15,000 Btu/h .......... EER = 12.3 ¥ (0.213 × Cap ††). 

COP = 3.2 ¥ (0.026 × Cap ††). 

>15,000 Btu/h ....................................... EER = 9.1. 

COP = 2.8. 

Non-Standard Size † ............................ <7,000 Btu/h ......................................... EER = 9.3. 

COP = 2.7. 

≥7,000 Btu/h and ≤15,000 Btu/h .......... EER = 10.8 ¥ (0.213 × Cap ††). 

COP = 2.9 ¥ (0.026 × Cap ††). 


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6 ‘‘Energy Conservation Program for Consumer 

Products: Screening Analysis for EPACT-Covered 

Commercial HVAC and Water-Heating Equipment 

Screening Analysis,’’ U.S. Department of Energy, 

Office of Energy Efficiency and Renewable Energy. 

April 2000. 

TABLE II.2—ASHRAE/IESNA STANDARD 90.1–1999 ENERGY EFFICIENCY LEVELS FOR PTACS AND PTHPS—Continued 

Equipment class ASHRAE/IESNA Standard 90.1–1999 

efficiency levels * Equipment Category Cooling capacity 

>15,000 Btu/h ....................................... EER = 7.6. 

COP = 2.5. 

* For equipment rated according to ARI standards, all EER values must be rated at 95 °F outdoor dry-bulb temperature for air-cooled products 

and evaporatively-cooled products and at 85 °F entering water temperature for water cooled products. All COP values must be rated at 47 °F 

outdoor dry-bulb temperature for air-cooled products, and at 70 °F entering water temperature for water-source heat pumps. 

** Standard size refers to PTAC or PTHP equipment with wall sleeve dimensions greater than or equal to 16 inches high, or greater than or 

equal to 42 inches wide. 

† Non-standard size refers to PTAC or PTHP equipment with wall sleeve dimensions less than 16 inches high and less than 42 inches wide. 

ASHRAE/IESNA Standard 90.1–1999 also includes a factory labeling requirement for non-standard size PTAC and PTHP equipment as follows: 

‘‘MANUFACTURED FOR REPLACEMENT APPLICATIONS ONLY; NOT TO BE INSTALLED IN NEW CONSTRUCTION PROJECTS.’’ 

†† Cap means cooling capacity in kBtu/h at 95 °F outdoor dry-bulb temperature. 

Following the publication of 

ASHRAE/IESNA Standard 90.1–1999, 

DOE analyzed whether more stringent 

levels would result in significant 

additional energy conservation of 

energy and be technologically feasible 

and economically justified. The report 

‘‘Screening Analysis for EPACT-Covered 

Commercial [Heating, Ventilating and 

Air-Conditioning] HVAC and WaterHeating Equipment’’ (commonly 

referred to as the 2000 Screening 

Analysis) 6 summarizes this analysis. On 

January 12, 2001, DOE published a final 

rule for commercial HVAC and water 

heating equipment, which concluded 

that the 2000 Screening Analysis 

indicated a reasonable possibility of 

finding ‘‘clear and convincing 

evidence’’ that more stringent standards 

for PTACs and PTHPs ‘‘would be 

technologically feasible and 

economically justified and would result 

in significant additional conservation of 

energy.’’ 66 FR 3336, 3349. Under 

EPCA, these are the criteria for DOE 

adoption of standards more stringent 

than those found in ASHRAE/IESNA 

Standard 90.1. (42 U.S.C. 

6313(a)(6)(A)(ii)(II)) 

In addition, on March 13, 2006, DOE 

issued a Notice of Availability (NOA), in 

which DOE revised the energy savings 

analysis from the 2000 Screening 

Analysis. 71 FR 12634. DOE stated that, 

even though the revised analysis 

reduced the potential energy savings for 

PTACs and PTHPs that might result 

from more stringent standards than the 

efficiency levels specified in ASHRAE/ 

IESNA Standard 90.1–1999, there was a 

possibility that clear and convincing 

evidence would support more stringent 

standards. Therefore, DOE stated in the 

NOA that it was considering more 

stringent standard levels than the 

efficiency levels specified in ASHRAE/ 

IESNA Standard 90.1–1999 for PTACs 

and PTHPs through a separate 

rulemaking. 71 FR 12639. On March 7, 

2007, DOE issued a final rule stating 

that DOE had decided to explore more 

stringent efficiency levels than those in 

ASHRAE/IESNA Standard 90.1–1999 

for PTACs and PTHPs through a 

separate rulemaking. 72 FR 10038, 

10044. 

In January 2008, ASHRAE published 

ANSI/ASHRAE/IESNA Standard 90.1– 

2007, which reaffirmed the definitions 

and efficiency levels for PTACs and 

PTHPs in ASHRAE/IESNA Standard 

90.1–1999. On October 7, 2008, DOE 

published a final rule amending energy 

conservation standards for PTACs and 

PTHPs (2008 final rule). 73 FR 58772. 

The 2008 final rule divided PTACs and 

PTHPs into two equipment classes, 

standard size and non-standard size, 

based on the wall sleeve dimensions of 

the equipment. Prior DOE energy 

conservation standards for PTACs and 

PTHPs had not distinguished between 

standard and non-standard size units. 

Table II.1 shows the energy 

conservation standards for PTACs and 

PTHPs, as amended by the 2008 final 

rule. Compared to ASHRAE/IESNA 

Standard 90.1–1999, the standards in 

the 2008 final rule were identical for 

non-standard sized PTACs and PTHPs, 

were more stringent for standard-size 

PTACs and PTHPs (except for standardsize PTACs with capacity greater than 

15,000 Btu/h, for which the standards in 

ASHRAE/IESNA Standard 90.1–1999 

and the 2008 final rule were equivalent). 

In October 2010, ASHRAE published 

ANSI/ASHRAE/IES Standard 90.1– 

2010, which reaffirmed the efficiency 

levels for non-standard size PTACs and 

PTHPs and increased the efficiency 

levels for standard size PTACs and 

PTHPs to match the DOE standards, 

effective as of October 8, 2012. Hence, 

DOE did not consider revision of PTAC 

and PTHP standards at that time. 

On February 22, 2013, DOE published 

a notice of public meeting and 

availability of the framework document 

(‘‘February 2013 Framework 

Document’’) regarding energy 

conservation standards for PTACs and 

PTHPs. 78 FR 12252. 

On October 9, 2013, ASHRAE 

published ANSI/ASHRAE/IES Standard 

90.1–2013, which reaffirmed the 

efficiency levels for standard size 

PTHPs and for nonstandard size PTACs 

and PTHPs, and which increased the 

cooling efficiency levels for standard 

size PTACs to equal the cooling 

efficiency levels for standard size 

PTHPs, effective as of January 1, 2015. 

The issuance of ANSI/ASHRAE/IES 

90.1–2013 triggered DOE’s statutory 

obligation under 42 U.S.C. 6313(a)(6)(A) 

to promulgate an amended uniform 

national standard for PTACs at those 

levels unless DOE determined that there 

is clear and convincing evidence 

supporting the adoption of morestringent energy conservation standards 

than the ASHRAE levels. 

On September 16, 2014, DOE 

published a notice of proposed 

rulemaking (‘‘September 2014 NOPR’’) 

with proposed energy conservation 

standards for PTACs and PTHPs. 79 FR 

55538. On October 29, 2014, DOE 

hosted a public meeting to discuss the 

proposed standards. DOE received a 

number of comments from interested 

parties; the parties are summarized in 

Table II.3. DOE considered these 

comments in the preparation of the final 

rule. Relevant comments, and DOE’s 

responses, are provided in the 

appropriate sections of this document. 


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7A notation in the form ‘‘Goodman, No. 31 at p. 

2–3’’ identifies a written comment: (1) Made by 

Goodman Manufacturing Company (‘‘Goodman’’); 

(2) recorded in document number 31 that is filed 

in the docket of the PTAC energy conservation 

standards rulemaking (Docket No. EERE–2012–BT– 

STD–0029) and available for review at 

www.regulations.gov; and (3) which appears on 

page 2–3 of document number 31. 

8See DOE’s discussion regarding shipment 

projections for standard and non-standard PTAC 

and PTHP equipment and the results of shipment 

projections in the PTAC and PTHP energy 

conservation standard technical support document 

at: http://www1.eere.energy.gov/buildings/

appliance_standards/commercial/pdfs/ptac_pthp_

tsd/chapter_10.pdf (Chapter 10, Section 10.5). 

TABLE II.3—INTERESTED PARTIES PROVIDING COMMENTS

Name Abbreviation Type * 

Air-Conditioning, Heating and Refrigeration Institute ......................................................................... AHRI ............................. IR 

The U.S. Chamber of Commerce, the American Chemistry Council, the American Forest & Paper 

Association, the American Fuel & Petrochemical Manufacturers, the American Petroleum Institute, the Council of Industrial Boiler Owners, the National Association of Manufacturers, the 

National Mining Association, the National Oilseed Processors Association, and the Portland 

Cement Association.

The Associations .......... TA 

Appliance Standards Awareness Project ........................................................................................... ASAP ............................ EA 

Appliance Standards Awareness Project, Alliance to Save Energy, American Council for an Energy-Efficient Economy, Natural Resources Defense Council, Northwest Energy Efficiency Alliance.ASAP et al. ................... EA 

Edison Electric Institute ...................................................................................................................... EEI ................................ U 

Environmental Defense Fund, Institute for Policy Integrity at New York University School of Law, 

Natural Resources Defense Council, Union of Concerned Scientists.

EDF et al. ..................... EA 

Environmental Investigation Agency International ............................................................................. EIAI ............................... EA 

General Electric .................................................................................................................................. GE ................................ M 

Goodman Manufacturing Company, L.P ............................................................................................ Goodman ...................... M 

Pacific Gas and Electric Company ..................................................................................................... PG&E ............................ U 

Pacific Gas and Electric Company, Southern California Gas Company, San Diego Gas and Electric, Southern California Edison.CA IOUs ....................... U 

Southern Company Services .............................................................................................................. SCS .............................. U 

* IR: Industry Representative; M: Manufacturer; EA: Efficiency/Environmental Advocate; TA: Trade Association; U: Utility 

III. General Discussion 

A. Compliance Dates 

ASHRAE adopted a revised ANSI/

ASHRAE/IES Standard 90.1–2013, 

which increases minimum efficiency 

standards for PTACs. The revision of the 

ANSI/ASHRAE/IES standard requires 

that the Federal standard for PTAC 

equipment become effective on or after 

a date two years after the effective date 

of the applicable minimum energy 

efficiency requirement in the amended 

ANSI/ASHRAE/IES standard. (42 U.S.C. 

6313(a)(6)(D)(i)) The effective date of the 

amended ANSI/ASHRAE/IES standards 

for PTACs is January 1, 2015. Therefore, 

PTAC equipment manufactured on or 

after January 1, 2017, will be required to 

meet the amended ANSI/ASHRAE/IES 

standard adopted as the Federal 

standard. 

B. Equipment Classes and Scope of 

Coverage 

When evaluating and establishing 

energy conservation standards, DOE 

divides covered equipment into 

equipment classes by the type of energy 

used or by capacity or other 

performance-related features that 

justifies a different standard. In making 

a determination whether a performancerelated feature justifies a different 

standard, DOE must consider such 

factors as the utility to the consumer of 

the feature and other factors DOE 

determines are appropriate. 

Existing energy conservation 

standards divide PTACs and PTHPs into 

twelve equipment classes based whether 

the equipment is an air conditioner or 

heat pump; the equipment’s cooling 

capacity; and the equipment’s wall 

sleeve dimensions, which fall into two 

categories: 

• Standard size (PTAC or PTHP 

equipment with wall sleeve dimensions 

greater than or equal to 16 inches high, 

or greater than or equal to 42 inches 

wide) 

• Non-standard size (PTAC or PTHP 

equipment with wall sleeve dimensions 

less than 16 inches high and less than 

42 inches wide) 

Goodman requested that DOE 

consider defining PTAC and PTHP 

equipment as ‘‘space-constrained 

products’’ in a manner similar to the 

current definition in 10 CFR 430.2. 

Goodman stated that the standard 

proposed in the September 2014 NOPR 

would likely not warrant an increase in 

the size of standard size PTACs and 

PTHPs. However, Goodman stated that 

if there is a continual increase in the 

energy conservation standard for PTACs 

and PTHPs, manufacturers likely would 

need to increase the physical size of the 

equipment, which would significantly 

impact consumer utility and/or the cost 

of installation. (Goodman, No. 31 at p. 

2–3) 7 DOE understands that the current 

definition of PTAC and PTHP 

equipment does not place limits on the 

physical dimensions of PTAC and PTHP 

equipment. (42 U.S.C. 6311(10)) Over 

the past 25 years, the industry has 

settled on conventional wall sleeve 

dimensions for PTACs and PTHPs that 

are 16 inches high by 42 inches wide. 

The installation cost for equipment that 

exceeds the conventional cross section 

would be high, because installation 

could require alterations to existing wall 

sleeve openings in building structures. 

DOE accounts for installation costs in 

the life cycle cost and payback period 

analyses used to evaluate increased 

standard levels. These analyses would 

account for any increased installation 

costs resulting from manufacturers 

increasing the cross section of their 

equipment. Therefore, DOE does not 

define PTACs and PTHPs as spaceconstrained equipment. 

DOE is not amending energy 

conservation standards for non-standard 

size PTAC and PTHP equipment in this 

rulemaking because this equipment 

class represents a small and declining 

portion of the market, and due to a lack 

of adequate information to analyze nonstandard size units. The shipments 

analysis conducted for the 2008 final 

rule projected that shipments of nonstandard size PTACs and PTHPs would 

decline from approximately 30,000 

units in 2012 (6.6% of the entire PTAC 

and PTHP market) to approximately 

16,000 units in 2042 (2.4% of the entire 

PTAC and PTHP market).8


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9 DOE also presents a sensitivity analysis that 

considers impacts for equipment shipped in a 9- 

year period. 

C. Test Procedure 

DOE’s current energy conservation 

standards for PTACs and PTHPs are 

expressed in terms of the energy 

efficiency ratio (EER, in Btu/Watt-hour) 

for cooling efficiency and coefficient of 

performance (COP, unitless) for heating 

efficiency. 

DOE’s test procedures for PTACs and 

PTHPs is codified at Title 10 of the Code 

of Federal Regulations (CFR), § 431.96. 

The test procedures were established on 

December 8, 2006 in a final rule that 

incorporated by reference the American 

National Standards Institute’s (ANSI) 

and AHRI Standard 310/380–2004, 

‘‘Standard for Packaged Terminal AirConditioners and Heat Pumps’’ (ANSI/ 

AHRI Standard 310/380). 71 FR 71340, 

71371. DOE amended the test 

procedures for PTACs and PTHPs on 

June 30, 2015 (80 FR 37136). 

The test procedures applicable to 

PTAC and/or PTHP equipment are 

incorporated by reference at 10 CFR 

431.95(a)(3). They include (1) AHRI 

Standard 310/380–2014, (2) ANSI/

ASHRAE Standard 16–1983 (RA 2014), 

‘‘Method of Testing for Rating Room Air 

Conditioners and Packaged Terminal 

Air Conditioners’’ (‘‘ANSI/ASHRAE 

16’’); (2) ANSI/ASHRAE Standard 58– 

1986 (RA 2014), ‘‘Method of Testing for 

Rating Room Air Conditioner and 

Packaged Terminal Air Conditioner 

Heating Capacity’’ (‘‘ANSI/ASHRAE 

58’’); and (3) ANSI/ASHRAE Standard 

37–2009, ‘‘Methods of Testing for Rating 

Electrically Driven Unitary AirConditioning and Heat Pump 

Equipment’’ (‘‘ANSI/ASHRAE 37’’). 

The California Utilities requested that 

the test procedure standard for PTAC 

and PTHP include testing of equipment 

in operation modes required by 

ASHRAE 90.1–2013. (CA IOUs, No. 33 

at p. 5) The California Utilities also 

commented that that PTHP equipment 

listing a COP should certify that it meets 

the requirements of ASHRAE 90.1–2013 

regarding control of the electric 

resistance strip heater during the ‘‘quick 

heating’’ mode. (CA IOUs, No. 33 at p. 

4–5) Goodman commented regarding 

the test procedure NOPR for PTACs and 

PTHPs and requested that DOE maintain 

psychrometric testing as an option 

within the federal test procedures. 

(Goodman, No. 31 at p. 4). DOE 

responded to these comments in the 

rulemaking to amend the PTAC and 

PTHP test procedures. The docket Web 

page for the PTAC and PTHP test 

procedure rulemaking can be found at: 

http://www.regulations.gov/

#!docketDetail;D=EERE-2012-BT-TP0032. 

D. Technological Feasibility 

1. General 

In each energy conservation standards 

rulemaking, DOE conducts a screening 

analysis based on information gathered 

on all current technology options and 

prototype designs that could improve 

the efficiency of the products or 

equipment that are the subject of the 

rulemaking. As the first step in such an 

analysis, DOE develops a list of 

technology options for consideration in 

consultation with manufacturers, design 

engineers, and other interested parties. 

DOE then determines which of those 

means for improving efficiency are 

technologically feasible. DOE considers 

technologies incorporated in 

commercially available equipment or in 

working prototypes to be 

technologically feasible. 10 CFR part 

430, subpart C, appendix A, section 

4(a)(4)(i). 

After DOE has determined that 

particular technology options are 

technologically feasible, it further 

evaluates each technology option in 

light of the following additional 

screening criteria: (1) Practicability to 

manufacture, install, and service; (2) 

adverse impacts on equipment utility or 

availability; and (3) adverse impacts on 

health or safety. 10 CFR part 430, 

subpart C, appendix A, section 

4(a)(4)(ii)–(iv). Section IV.B of this 

document discusses the results of the 

screening analysis for PTACs and 

PTHPs, particularly the designs DOE 

considered, those it screened out, and 

those that are the basis for the TSLs in 

this rulemaking. For further details on 

the screening analysis for this 

rulemaking, see chapter 4 of the final 

rule Technical Support Document 

(TSD). 

2. Maximum Technologically Feasible 

Levels 

When DOE adopts (or does not adopt) 

an amended energy conservation 

standard for a type or class of covered 

equipment, it must determine the 

maximum improvement in energy 

efficiency or maximum reduction in 

energy use that is technologically 

feasible for such equipment. DOE 

determined the maximum 

technologically feasible (‘‘max-tech’’) 

improvements in energy efficiency for 

PTACs and PTHPs in the engineering 

analysis using the design parameters 

that passed the screening analysis. The 

max-tech levels that DOE determined 

for this rulemaking are described in 

section IV.C.5 of this final rule and in 

chapter 5 of the final rule TSD. 

E. Energy Savings 

1. Determination of Savings 

For each TSL, DOE projected energy 

savings from the equipment that is the 

subject of this rulemaking purchased in 

the 30-year period that begins in the 

year of compliance with any amended 

standards. The specific compliance 

years used in this analysis are discussed 

in section III.A of this final rule.9 The 

savings are measured over the entire 

lifetime of equipment purchased in the 

30-year analysis period. DOE quantified 

the energy savings attributable to each 

TSL as the difference in energy 

consumption between each standards 

case and the base case. The base case 

represents a projection of energy 

consumption in the absence of amended 

efficiency standards, and it considers 

market forces and policies that affect 

demand for more efficient equipment. 

DOE uses its national impact analysis 

(NIA) spreadsheet models to estimate 

energy savings from amended standards 

for the equipment that is the subject of 

this rulemaking. The NIA spreadsheet 

model (described in section IV.H of this 

document) calculates energy savings in 

site energy, which is the energy directly 

consumed by equipment at the locations 

where they are used. For electricity, 

DOE calculates national energy savings 

in terms of primary energy savings, 

which is the savings in the energy that 

is used to generate and transmit the site 

electricity. For electricity and natural 

gas and oil, DOE also calculates fullfuel-cycle (FFC) energy savings. As 

discussed in DOE’s statement of policy 

and notice of policy amendment, the 

FFC metric includes the energy 

consumed in extracting, processing, and 

transporting primary fuels (i.e., coal, 

natural gas, petroleum fuels), and thus 

presents a more complete picture of the 

impacts of energy efficiency standards. 

76 FR 51281 (August 18, 2011), as 

amended at 77 FR 49701 (August 17, 

2012). 

To calculate primary energy savings, 

DOE derives annual conversion factors 

from the model used to prepare the 

Energy Information Administration’s 

(EIA) most recent Annual Energy 

Outlook (AEO). For FFC energy savings, 

DOE’s approach is based on the 

calculation of an FFC multiplier for 

each of the energy types used by 

covered products or equipment. For 

more information, see section IV.H. 


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2. Significance of Savings 

To adopt standards more stringent 

standards for PTACs and PTHPs than 

the amended levels in ASHRAE 

Standard 90.1, clear and convincing 

evidence must support a determination 

that the standards would result in 

significant additional energy savings. 

(42 U.S.C. 6313(a)(6)(A)(ii)(II)) This final 

rule does not adopt more stringent 

standards than the levels in ASHRAE 

Standard 90.1. 

F. Economic Justification 

1. Specific Criteria 

EPCA provides seven factors to be 

evaluated in determining whether a 

more stringent standard for PTACs and 

PTHPs is economically justified. (42 

U.S.C. 6313(a)(6)(B)(ii)) The following 

sections discuss how DOE has 

addressed each of those seven factors in 

this rulemaking. 

a. Economic Impact on Manufacturers 

and Consumers 

In determining the impacts of an 

amended standard on manufacturers, 

DOE conducts a manufacturer impact 

analysis (MIA), as discussed in section 

IV.J. DOE first uses an annual cash-flow 

approach to determine the quantitative 

impacts. This step includes both a shortterm assessment—based on the cost and 

capital requirements during the period 

between when a regulation is issued and 

when entities must comply with the 

regulation—and a long-term assessment 

over a 30-year period. The industrywide impacts analyzed include industry 

net present value (INPV), which values 

the industry on the basis of expected 

future cash flows; cash flows by year; 

changes in revenue and income; and 

other measures of impact, as 

appropriate. Second, DOE analyzes and 

reports the impacts on different types of 

manufacturers, including impacts on 

small manufacturers. Third, DOE 

considers the impact of standards on 

domestic manufacturer employment and 

manufacturing capacity, as well as the 

potential for standards to result in plant 

closures and loss of capital investment. 

Finally, DOE takes into account 

cumulative impacts of various DOE 

regulations and other regulatory 

requirements on manufacturers. 

For individual consumers, measures 

of economic impact include the changes 

in LCC and payback period (PBP) 

associated with new or amended 

standards. These measures are 

discussed further in the following 

section. For consumers in the aggregate, 

DOE also calculates the national net 

present value of the economic impacts 

applicable to a particular rulemaking. 

DOE also evaluates the LCC impacts of 

potential standards on identifiable 

subgroups of consumers that may be 

affected disproportionately by a national 

standard. 

b. Savings in Operating Costs Compared 

to Increase in Price 

EPCA requires DOE to consider the 

savings in operating costs throughout 

the estimated average life of the covered 

equipment compared to any increase in 

the price of the covered product that are 

likely to result from a standard. (42 

U.S.C. 6313(a)(6)(B)(ii)(II)) DOE 

conducts this comparison in its LCC and 

PBP analysis. 

The LCC is the sum of the purchase 

price of a product (including its 

installation) and the operating expense 

(including energy, maintenance, and 

repair expenditures) discounted over 

the lifetime of the equipment. To 

account for uncertainty and variability 

in specific inputs, such as equipment 

lifetime and discount rate, DOE uses a 

distribution of values, with probabilities 

attached to each value. For its analysis, 

DOE assumes that consumers will 

purchase the covered equipment in the 

first year of compliance with amended 

standards. 

The LCC savings and the PBP for the 

considered efficiency levels are 

calculated relative to a base case that 

reflects projected market trends in the 

absence of amended standards. DOE 

identifies the percentage of consumers 

estimated to receive LCC savings or 

experience an LCC increase, in addition 

to the average LCC savings associated 

with a particular standard level. DOE’s 

LCC analysis is discussed in further 

detail in section IV.F. 

c. Energy Savings 

Although significant conservation of 

energy is a separate statutory 

requirement for imposing an energy 

conservation standard, EPCA requires 

DOE, in determining the economic 

justification of a standard, to consider 

the total projected energy savings that 

are expected to result directly from the 

standard. (42 U.S.C. 

6313(a)(6)(B)(ii)(III)) As discussed in 

section IV.H, DOE uses the spreadsheet 

models to project national energy 

savings. 

d. Lessening of Utility or Performance of 

Equipment 

In establishing classes of equipment, 

and in evaluating design options and 

the impact of potential standard levels, 

DOE evaluates potential standards that 

would not lessen the utility or 

performance of the considered 

equipment. (42 U.S.C. 

6295(o)(2)(B)(i)(IV)) Based on data 

available to DOE, the standards adopted 

in this final rule would not reduce the 

utility or performance of the equipment 

under consideration in this rulemaking. 

e. Impact of Any Lessening of 

Competition 

EPCA directs DOE to consider the 

impact of any lessening of competition 

that is likely to result from energy 

conservation standards. It also directs 

the Attorney General of the United 

States (Attorney General) to determine 

the impact, if any, of any lessening of 

competition likely to result from a 

standard and to transmit such 

determination to the Secretary within 60 

days of the publication of a proposed 

rule, together with an analysis of the 

nature and extent of the impact. (42 

U.S.C. 6313(a)(6)(B)(ii)(IV)) DOE 

transmitted a copy of its proposed rule 

to the Attorney General with a request 

that the Department of Justice (DOJ) 

provide its determination on this issue. 

DOE received no adverse comments 

from DOJ regarding the proposed rule. 

f. Need for National Energy 

Conservation 

DOE also considers the need for 

national energy conservation in 

determining whether a new or amended 

standard is economically justified. (42 

U.S.C. 6313(a)(6)(B)(ii)(VI)) DOE expects 

that the energy savings from the 

amended standards are likely to provide 

improvements to the security and 

reliability of the nation’s energy system. 

Reductions in the demand for electricity 

also may result in reduced costs for 

maintaining the reliability of the 

nation’s electricity system. DOE 

conducts a utility impact analysis to 

estimate how standards may affect the 

nation’s needed power generation 

capacity, as discussed in section IV.M. 

Amended standards are also likely to 

result in environmental benefits in the 

form of reduced emissions of air 

pollutants and greenhouse gases 

associated with energy production and 

use. DOE conducts an emissions 

analysis to estimate how standards may 

affect these emissions, as discussed in 

section IV.K. DOE reports the emissions 

impacts from each TSL it considered, in 

section V.B.6 of this document. DOE 

also reports estimates of the economic 

value of emissions reductions resulting 

from the considered TSLs, in section 

IV.L of this document. 

g. Other Factors 

EPCA allows the Secretary of Energy, 

in determining whether a standard is 

economically justified, to consider any 

other factors that the Secretary deems to 


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43170 Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 

be relevant. (42 U.S.C. 

6295(o)(2)(B)(ii)(VII)) To the extent 

interested parties submit any relevant 

information regarding economic 

justification that does not fit into the 

other categories described above, DOE 

could consider such information under 

‘‘other factors.’’ No other factors were 

considered in this rule. 

2. Rebuttable Presumption 

EPCA creates a rebuttable 

presumption that an energy 

conservation standard is economically 

justified if the additional cost to the 

consumer of a product that meets the 

standard is less than three times the 

value of the first year’s energy savings 

resulting from the standard, as 

calculated under the applicable DOE 

test procedure. DOE’s LCC and PBP 

analyses generate values used to 

calculate the effects that potential 

amended energy conservation standards 

would have on the payback period for 

consumers. These analyses include, but 

are not limited to, the 3-year payback 

period contemplated under the 

rebuttable-presumption test. In addition, 

DOE routinely conducts an economic 

analysis that considers the full range of 

impacts to consumers, manufacturers, 

the nation, and the environment. The 

results of this analysis serve as the basis 

for DOE’s evaluation of the economic 

justification for a potential standard 

level (thereby supporting or rebutting 

the results of any preliminary 

determination of economic 

justification). The rebuttable 

presumption payback calculation is 

discussed in section V.B.1.c of this final 

rule. 

G. Additional Comments 

DOE received additional comments 

that are not classified in the discussion 

sections above. Responses to these 

additional comments are provided 

below. 

AHRI commented that, by proposing 

energy conservation standards for 

PTACs and PTHPs above the levels 

presented in ANSI/ASHRAE/IES 90.1– 

2013, DOE failed to recognize the 

Congressional intent for commercial 

standards-making to rely on the 

ASHRAE process. (AHRI, No. 35 at p. 2) 

EPCA authorizes the adoption of an 

energy conservation standard above the 

levels adopted by ASHRAE if clear and 

convincing evidence shows that 

adoption of such a more stringent 

standard would result in significant 

additional conservation of energy and 

be technologically feasible and 

economically justified. 42 U.S.C. 

6313(a)(6)(A)(ii)(II) AHRI commented 

that DOE’s economic justification in the 

NOPR falls short of the elevated ‘‘clear 

and convincing’’ requirement of proof. 

AHRI further commented that DOE 

failed to show with clear and 

convincing evidence that significant 

energy savings will result directly from 

the more stringent levels. (AHRI, No. 35 

at p. 2–4) Following the publication of 

the September 2014 NOPR, DOE revised 

its analysis to incorporate feedback 

received through stakeholder comments. 

Based on results of its revised analysis, 

DOE concludes that the trial standard 

levels above ASHRAE 90.1–2013 would 

not be economically justified. This final 

rule amends the energy conservation 

standards for PTACs to be equal to 

PTAC standard levels in ANSI/

ASHRAE/IES 90.1–2013. (42 U.S.C. 

6313(a)(6)(A)(ii)(I)) 

SCS commented that stakeholders 

should have an additional opportunity 

to comment on the analysis after DOE 

completes the analytical changes that 

SCS requested. SCS requested that DOE 

issue an SNOPR if ECS levels above the 

ASHRAE 90.1–2013 levels are selected. 

(SCS, No. 29 at p. 3) This final rule 

amends the energy conservation 

standards for PTACs to be equal to 

PTAC standard levels in ANSI/

ASHRAE/IES 90.1–2013. (42 U.S.C. 

6313(a)(6)(A)(ii)(I)) 

AHRI objects to the use by DOE of 

proprietary software such as Crystal Ball 

to conduct its analysis in a public notice 

and comment rulemaking with concerns 

that small businesses and consumer 

advocacy groups would find the 

software cost prohibitive and unable to 

evaluate the models DOE used for its 

analysis and assumptions. AHRI states 

that all of DOE’s models, process and 

software used in rulemaking under the 

Administrative Procedure Act should be 

fully and reasonably accessible. (AHRI, 

No. 35 at p. 4) The documentation in the 

TSD concerning the methods, data 

inputs, and assumptions used to 

generate LCC and PBP results provides 

stakeholders with sufficient information 

to adequately review DOE’s analysis. To 

make its analyses accessible, DOE will 

run Monte Carlo simulations with its 

LCC spreadsheets utilizing Crystal Ball 

and provide the results to any 

stakeholder interested in researching 

specific scenarios. 

IV. Methodology and Discussion of 

Related Comments 

This section addresses the analyses 

DOE has performed for this rulemaking 

with regard to PTAC and PTHP. 

Separate subsections address each 

component of DOE’s analyses. 

DOE used several analytical tools to 

estimate the impact of the standards 

considered in this document. The first 

tool is a spreadsheet that calculates the 

LCC and PBP of potential amended or 

new energy conservation standards. The 

national impacts analysis uses a second 

spreadsheet set that provides shipments 

forecasts and calculates national energy 

savings and net present value resulting 

from potential energy conservation 

standards. DOE uses the third 

spreadsheet tool, the Government 

Regulatory Impact Model (GRIM), to 

assess manufacturer impacts of potential 

standards. These three spreadsheet tools 

are available on the DOE docket Web 

page for this rulemaking: http://

www.regulations.gov/

#!docketDetail;D=EERE-2012-BT-STD0029. Additionally, DOE used output 

from the latest version of EIA’s Annual 

Energy Outlook (AEO), a widely known 

energy forecast for the United States, for 

the emissions and utility impact 

analyses. 

A. Market and Technology Assessment 

When beginning an energy 

conservation standards rulemaking, 

DOE develops information that provides 

an overall picture of the market for the 

equipment concerned, including the 

purpose of the equipment, the industry 

structure, and market characteristics. 

This activity includes both quantitative 

and qualitative assessments based 

primarily on publicly available 

information (e.g., manufacturer 

specification sheets, industry 

publications) and data submitted by 

manufacturers, trade associations, and 

other stakeholders. The market and 

technology assessment presented in the 

September 2014 NOPR discussed scope 

of coverage, equipment classes, types of 

equipment sold and offered for sale, and 

technology options that could improve 

the energy efficiency of the equipment 

under examination. See chapter 3 of the 

final rule TSD for further discussion of 

the market and technology assessment. 

AHRI commented that it planned to 

provide PTAC and PTHP shipments by 

capacity level for 2008 through 2013. 

(AHRI, No. 35 at p. 8) DOE did not 

receive further comments or information 

regarding the equipment definitions or 

market assessments for PTACs and 

PTHP equipment. 

GE commented that there are now 

PTACs on the market that incorporate a 

ventilation system attachment that takes 

in make-up air and provides 

supplemental conditioning for this 

make-up air: Dehumidification when 

outdoor humidity levels are high and 

also electric resistance heating when 

outdoor temperature is low. Admitting 

makeup air and provision of 

supplemental conditioning increases 

PTAC/PTHP energy use that is not 


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10Additional information regarding EPA’s SNAP 

Program is available online at: http://www.epa.gov/ 

ozone/snap/. 

11A notation in the form ‘‘EEI, NOPR Public 

Meeting Transcript, No. 37 at p. 47–8’’ identifies an 

oral comment that DOE received during the October 

29, 2014, PTAC energy conservation standards 

NOPR public meeting, that was recorded in the 

public meeting transcript in the docket for the 

PTAC energy conservation standards rulemaking 

(Docket No. EERE–2012–BT–STD–0029), and is 

maintained in the Resource Room of the Building 

Technologies Program. This particular notation 

refers to a comment (1) made by EEI during the 

public meeting; (2) recorded in document number 

37, which is the NOPR public meeting transcript 

that is filed in the docket of this energy 

conservation standards rulemaking; and (3) which 

appears on pages 47–8 of document number 37. 

captured in the current test procedures 

for PTACs and PTHPs. GE suggested 

that DOE address PTACs with add-on 

dehumidifiers as a separate equipment 

class. (GE, No. 34 at p. 1) DOE 

acknowledges that models with add-on 

or integrated dehumidification systems 

exist in the current market. DOE 

believes that PTAC and PTHP units 

with add-on or integrated 

dehumidification systems currently 

meet the definition of PTACs and 

PTHPs, respectively. Thus, models with 

add-on or integrated dehumidification 

systems should be tested using the 

current test procedure and should meet 

the current energy conservation 

standards. Currently, the DOE test 

procedure does not require that the 

dehumidification module on such 

models be energized during testing, so 

the energy use of the dehumidification 

system would not be measured or 

accounted for in the EER metric. If DOE 

considers future amendments to the test 

procedure to account for energy 

consumed by the dehumidification 

systems, then DOE could consider 

designating a separate equipment class 

for such equipment at that time. 

The September 2014 NOPR listed all 

of the potential technology options that 

DOE considered for improving energy 

efficiency of PTACs and PTHPs. 79 FR 

at 55553 (September 16, 2014). These 

technology options are listed in Table 

IV.1. 

TABLE IV.1—POTENTIAL TECHNOLOGY

OPTIONS FOR IMPROVING ENERGY

EFFICIENCY OF PTACS AND PTHPS

Compressor Improvements 

• Scroll Compressors 

• Variable-speed Compressors 

• Higher Efficiency Compressors. 

Complex Control Boards. 

Condenser and evaporator fan and fan motor 

improvements: 

• Higher Efficiency Fan Motors 

• Clutched Motor Fans. 

Microchannel Heat Exchangers. 

Rifled Interior Heat Exchanger Tube Walls. 

Increased Heat Exchanger Area. 

Hydrophobic Material Treatment of Heat Exchangers. 

Re-circuiting Heat Exchanger Coils. 

Improved Air Flow and Fan Design. 

Heat Pipes. 

Corrosion Protection. 

Thermostatic Expansion Valve. 

Alternate Refrigerants (such as HCFC–32). 

DOE received several comments 

regarding the technology options listed 

in Table IV.1, and these comments are 

addressed in the relevant sections of the 

screening analysis in section IV.B. DOE 

did not receive any comments regarding 

technology options not listed in Table 

IV.1. 

B. Screening Analysis 

After DOE identified the technologies 

that might improve the energy efficiency 

of PTACs and PTHPs, DOE conducted a 

screening analysis. The purpose of the 

screening analysis is to evaluate the 

technologies that improve equipment 

efficiency to determine which 

technologies to consider further and 

which to screen out. DOE uses four 

screening criteria to determine which 

design options are suitable for further 

consideration in a standards 

rulemaking. Namely, design options 

will be removed from consideration if 

they are not technologically feasible; are 

not practicable to manufacture, install, 

or service; have adverse impacts on 

product utility or product availability; 

or have adverse impacts on health or 

safety. (10 CFR part 430, subpart C, 

appendix A at 4(a)(4) and 5(b)) Details 

of the screening analysis are in chapter 

4 of the final rule TSD. 

Technologies that pass through the 

screening analysis are referred to as 

‘‘design options’’ in the engineering 

analysis. These four screening criteria 

do not include the propriety status of 

design options. DOE will only consider 

efficiency levels achieved through the 

use of proprietary designs in the 

engineering analysis if they are not part 

of a unique path to achieve that 

efficiency level. 

In view of the above factors, DOE 

screened out the following design 

options in the September 2014 NOPR: 

Scroll compressors, heat pipes, and 

alternate refrigerants. 79 FR at 55554 

(September 16, 2014). DOE received 

comments regarding alternative 

refrigerants, but did not receive 

comments regarding scroll compressors 

or heat pipes. 

Alternate Refrigerants 

Nearly all PTAC and PTHP equipment 

is designed with R–410A as the 

refrigerant. The Environmental 

Protection Agency’s (EPA’s) Significant 

New Alternatives Policy (SNAP) 

Program evaluates and regulates 

substitutes for the ozone-depleting 

chemicals (such as air conditioning 

refrigerants) that are being phased out 

under the stratospheric ozone protection 

provisions of the Clean Air Act (CAA). 

(42 U.S.C. 7401 et seq.) 10

On July 9, 2014, the EPA issued a 

notice of proposed rulemaking 

proposing to list three flammable 

refrigerants (HFC–32 (R–32), Propane 

(R–290), and R–441A) as new acceptable 

substitutes, subject to use conditions, 

for refrigerant in the Household and 

Light Commercial Air Conditioning 

class of equipment. 79 FR 38811 (July 9, 

2014). EIAI commented to suggest that 

DOE delay this PTAC/PTHP standards 

rulemaking until the EPA finalizes its 

proposed rule. (EIAI, No. 32 at p. 1) On 

April 10, 2015, the EPA published its 

final rule that allows the use of R–32, R– 

290, and R–441A in limited amounts in 

PTAC and PTHP applications. 80 FR 

19454 (April 10, 2015) EEI commented 

that the EPA’s proposed rule would 

allow flammable refrigerants to be used 

in PTACs in a limited amount. (EEI, 

NOPR Public Meeting Transcript, No. 37 

at p. 47–8) 11 EIAI commented citing 

several reports that favorably compare 

HC–290 to R–410A. (EIAI, No. 32 at p. 

4) EIAI requested that DOE fully analyze 

the direct mitigation impacts and the 

energy efficiency savings that can be 

achieved by using R–290 and R–441A. 

(EIAI, No. 32 at p. 1) EIAI commented 

that the amended standards for PTACs 

and PTHPs will not be as effective as 

possible if they exclude the alternative 

refrigerants under consideration for 

SNAP approval. (EIAI, No. 32 at p. 5) 

DOE considered the possibility of using 

the alternative refrigerants that EPA 

approved for limited use in PTAC and 

PTHP applications. The EPA’s final rule 

limits the maximum design charge 

amount of the alternative refrigerants in 

PTAC and PTHP applications. For 

instance, for a PTAC or PTHP with 

cooling capacity of 9,000 Btu/h, the EPA 

rule imposes a maximum design charge 

of 140 grams of R–290 or 160 grams of 

R–441A. 80 FR at 19500 (April 10, 2015) 

In comparison, DOE reverse engineered 

eleven units with cooling capacities 

around 9,000 Btu/h and found that these 

units had refrigerant charges ranging 

from 600 grams to 950 grams and all 

units used refrigerant R–410A. The 

refrigerant charges currently used in 

current PTAC and PTHP designs far 

exceed the maximum charges that are 

allowed for alternative refrigerants 

under EPA’s final rule. DOE 


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12EIAI’s comment referenced a White House fact 

sheet describing the Executive Action at: http://

www.whitehouse.gov/the-press-office/2014/09/16/

fact-sheet-obama-administration-partners-privatesector-new-commitments. 

13Currently, all PTAC and PTHP manufacturers 

incorporate rotary compressors into their 

equipment designs. DOE is referring to rotary 

compressors throughout this document unless 

specifically noted. 

acknowledges that it might be possible 

to incorporate the new refrigerants 

under consideration into PTAC designs 

through the use of microchannel heat 

exchangers or tube and fin heat 

exchangers with smaller tube diameters 

than what is currently on the market. 

However, DOE has not seen evidence 

that such designs are technologically 

feasible. Therefore, DOE did not further 

consider the R–290 and R–441A 

substitutes proposed by EPA. 

EIAI commented that DOE should 

include provisions in the rule that 

incentivize the use of HFC-free 

technologies that receive SNAP 

approval. (EIAI, No. 32 at p. 3) EPCA 

authorizes DOE to regulate the energy 

efficiency of certain equipment such as 

PTACs and PTHPs. (42 U.S.C. 6311– 

6317) EPCA does not authorize DOE to 

regulate or incentivize the use or 

substitution of alternative refrigerants. 

The California Utilities stated that 

DOE should research potential 

efficiency improvements, for future 

years, that can be achieved through the 

use of alternative refrigerants. (CA IOUs, 

No. 33 at p. 4) EIAI commented that the 

proposed rule does not address the 

executive action announced on 

September 16, 2014, that encourages 

research and development of next 

generation cooling technologies, 

including alternatives to 

hydrofluorocarbon (HFC) refrigerants.12

(EIAI, No. 32 at p. 1) DOE responds that 

the engineering analysis considers 

technology options that are 

technologically feasible. DOE considers 

technologies incorporated in 

commercially available equipment or in 

working prototypes to be 

technologically feasible. 10 CFR part 

430, subpart C, appendix A, section 

4(a)(4)(i). The research and development 

activities described by the California 

Utilities and EIAI do not include 

options that are technologically feasible 

at this time. 

EIAI suggested that DOE evaluate the 

commercialized PTACs and PTHPs 

using alternative refrigerants currently 

available in international markets. (EIAI, 

No. 32 at p. 6) ASAP et al. commented 

that manufacturers may have the option 

of utilizing alternative refrigerants to 

improve efficiency, even though the 

engineering analysis does not include 

alternative refrigerants as a technology 

option. (ASAP et al., No. 30 at p. 3) DOE 

is not aware of any PTAC or PTHP 

model that uses alternative refrigerants 

approved by the EPA SNAP Program 

and achieves higher efficiency than 

equipment using R–410A. 

DOE is not aware of any SNAPapproved refrigerants, or any 

refrigerants that have been proposed for 

SNAP approval, that are known to 

enable better efficiency than R–410A for 

PTAC and PTHP equipment. Hence, 

DOE did not consider alternate 

refrigerants for further analysis. 

Other Technologies Not Considered in 

the Engineering Analysis 

Typically, energy-saving technologies 

that pass the screening analysis are 

evaluated in the engineering analysis. 

However, some technologies are not 

included in the analysis for other 

reasons, including: (1) Available data 

suggest that the efficiency benefits of the 

technology are negligible; or (2) data are 

not available to evaluate the energy 

efficiency characteristics of the 

technology. Accordingly, in the 

September 2014 NOPR, DOE eliminated 

the following technologies from 

consideration in the engineering 

analysis based upon these three 

additional considerations: re-circuiting 

heat exchanger coils, rifled interior tube 

walls, microchannel heat exchangers, 

variable speed compressors, complex 

control boards, corrosion protection, 

hydrophobic material treatment of heat 

exchangers, clutched motor fans, and 

thermostatic expansion valves. 79 FR at 

55555 (September 16, 2014). DOE 

received a comment on variable speed 

compressors. 

Variable Speed Compressors 

SCS commented that variable speed 

operation would enable PTACs and 

PTHPs to provide better humidity 

control, and that the current efficiency 

measurement of EER does not provide 

incentive to go to variable speed 

operation. (SCS, NOPR Public Meeting 

Transcript, No. 37 at p. 164) While the 

efficiency measurement of EER would 

not capture the benefits of variable 

speed operation, the existing EER (full 

load) metric accurately reflects 

equipment efficiency during the year 

because PTACs and PTHPs are believed 

to more often operate at full load rather 

than part load conditions. Thus, DOE 

did not consider variable speed 

compressors further in this analysis. 

The technologies that DOE identified 

for consideration in the engineering 

analysis are listed in Table IV.2 and 

described briefly below. 

TABLE IV.2—DESIGN OPTIONS

RETAINED FOR ENGINEERING ANALYSIS

Compressor Improvements. 

• Higher Efficiency Compressors.13

TABLE IV.2—DESIGN OPTIONS RETAINED FOR ENGINEERING ANALYSIS—Continued 

Condenser and evaporator fan and fan motor 

improvements: 

• Higher Efficiency Fan Motors. 

Increased Heat Exchanger Area. 

Improved Air Flow and Fan Design. 

Higher Efficiency Compressors 

Manufacturers can improve the 

energy efficiency of PTAC and PTHP 

units by incorporating more efficient 

components, such as high efficiency 

compressors, into their designs. 

Goodman commented to ask whether 

DOE included predictions of efficiency 

increases over time for compressors. 

(Goodman, NOPR Public Meeting 

Transcript, No. 37 at p. 28) DOE did not 

include predictions of compressor 

efficiency changes over time. DOE 

observed in reverse engineering analysis 

that PTAC and PTHP manufacturers use 

several different compressor models 

with a wide range of efficiency ratings. 

The capacities and efficiencies of the 

different compressors observed in the 

reverse engineering analysis are 

presented in the revised Tables 5.6.1 

and 5.6.2 published in document 26 of 

the rulemaking docket at http://

www.regulations.gov/

#!documentDetail;D=EERE-2012-BTSTD-0029-0026. Manufacturers of 

PTACs and PTHPs may improve the 

unit efficiency of baseline models by 

selecting high efficiency compressors 

currently available in the market. 

Higher Efficiency Fan Motors 

Manufacturers of baseline PTACs and 

PTHPs use permanent split capacitor 

(PSC) fan motors due to their modest 

cost, compact design, and durability. 

DOE believes any further gains in PSC 

fan motor efficiency will be difficult to 

achieve, and has thus eliminated 

improvement of PSC fan motors as a 

potential avenue for efficiency 

improvement. PTAC and PTHP original 

equipment manufacturers (OEMs) can, 

however, use permanent magnet (PM) 

motors. Such motors typically offer 

higher efficiencies than PSC-based fan 

motors, but these improvements come 

with increased costs for the motor unit 

and control hardware. Several 

manufacturers use PM motors in their 

higher-efficiency PTAC and PTHP 

models. 


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Increased Heat Exchanger Area 

Manufacturers of PTACs and PTHPs 

increase unit efficiency by increasing 

heat exchanger size, either through 

elongating the face of the heat exchanger 

or increasing the number of heat 

exchanger tube rows. Standard size 

PTACs are dimensionally constrained 

by the standard 16′′ x 48′′ wall opening 

in which they fit. This constraint limits 

the size of heat exchanger that can fit in 

the unit and thus limits the efficiency 

gains that may be achieved by 

increasing heat exchanger size. At least 

one manufacturer has incorporated bent 

heat exchanger coils to increase the heat 

exchanger face area while remaining 

inside the standard size unit constraints. 

AHRI commented that DOE did not 

account for the additional pressure drop 

from bent heat exchangers in the 

analysis. (AHRI, No. 35 at p. 12) DOE 

interprets this comment to mean that 

AHRI expects bent heat exchangers to 

increase the airside pressure drop across 

the heat exchangers leading to increased 

fan power consumption and lower unit 

efficiency. DOE considered any pressure 

drop impacts associated with bent heat 

exchangers. In its analysis, DOE 

considered at least three units that 

contained a bent heat exchanger. DOE 

based its analysis on the measured 

performance of these units (one of 

which performed at the max-tech 

efficiency level). The measured 

performance of these units includes the 

impact of additional pressure drop 

associated with the bent heat 

exchangers. 

AHRI asked what the DOE analysis 

showed as the efficiency improvement 

from implementing improved air flow 

design and increased heat exchanger 

area. (AHRI, NOPR Public Meeting 

Transcript, No. 37 at p. 38) The 

combined efficiency level and cost 

assessment method used in this analysis 

does not separately evaluate the 

efficiency effects of individual design 

options. Among the units that DOE 

reverse engineered in the engineering 

analysis, the most efficient units had 

injection molded fan blades and volutes 

and achieved greater heat exchanger 

area within the constrained unit 

dimensions by incorporating a bent 

outdoor heat exchanger coil. 

Improved Air Flow and Fan Design 

Manufacturers of PTACs and PTHPs 

currently use several techniques to 

shape and direct airflow inside PTAC 

and PTHP units. Different equipment 

designs may have higher or lower 

resistance to air flow. Equipment 

designs with lower resistance to air flow 

will require lower fan power input, 

which would improve unit efficiency. 

Among the units that DOE reverse 

engineered in the engineering analysis, 

the most efficient units had injection 

molded fan blades and volutes to direct 

airflow. Manufacturers may improve 

unit efficiency improving fan blade 

designs, optimizing air paths, and 

optimizing fan selection. 

Goodman commented that utilizing 

design features such as improved 

airflow and fan design would lead to 

redesigned products larger than the wall 

footprints for standard size PTACs and 

PTHPs. (Goodman, No. 31 at p. 3) In 

contrast, Ebm-papst commented in the 

framework phase that efficiency gains 

may result in existing units from 

optimizing the fan selection and design 

so that the fan’s operational efficiency 

in the unit matches the fan’s peak 

efficiency exactly. (Ebm-papst, No. 8 at 

p. 1) DOE’s analysis did not consider 

any such larger PTAC/PTHP designs. 

Any improvement associated with 

improved airflow and fan design 

represented in the analysis is associated 

with the existing designs evaluated in 

the analysis, which conform to size of 

currently available PTACs and PTHPs. 

Goodman commented that the 

technology options of bent heat 

exchangers [to increase heat exchanger 

area] and improved air flow are 

contradictory because bent heat 

exchangers will restrict air flow. 

(Goodman, NOPR Public Meeting 

Transcript, No. 37 at p. 82) DOE notes 

that, among the units that DOE reverse 

engineered in the engineering analysis, 

the most efficient units at both 

representative capacities of 9,000 Btu/h 

and 15,000 Btu/h incorporated a bent 

outdoor heat exchanger coil. 

Based on all available information, 

DOE did not change the screening 

analysis between the September 2014 

NOPR and this final rule. Additional 

detail on the screening analysis is 

contained in chapter 4 of the final rule 

TSD. 

C. Engineering Analysis 

The engineering analysis establishes 

the relationship between an increase in 

energy efficiency of the equipment and 

the increase in manufacturer selling 

price (MSP) associated with that 

efficiency increase. This relationship 

serves as the basis for cost-benefit 

calculations for individual consumers, 

manufacturers, and the nation. In 

determining the cost-efficiency 

relationship, DOE estimates the increase 

in manufacturer cost associated with 

increasing the efficiency of equipment 

above the baseline up to the max-tech 

efficiency level for each equipment 

class. 

1. Methodology 

DOE has identified three basic 

methods for developing cost-efficiency 

curves: (1) The design-option approach, 

which provides the incremental costs of 

adding design options to a baseline 

model that will improve its efficiency 

(i.e., lower its energy use); (2) the 

efficiency-level approach, which 

provides the incremental costs of 

moving to higher energy efficiency 

levels, without regard to the particular 

design option(s) used to achieve such 

increases; and (3) the reverseengineering (or cost-assessment) 

approach, which provides ‘‘bottom-up’’ 

manufacturing cost assessments for 

achieving various levels of increased 

efficiency, based on teardown analyses 

(or physical teardowns) providing 

detailed data on costs for parts and 

material, labor, shipping/packaging, and 

investment for models that operate at 

particular efficiency levels. 

In the February 2013 Framework 

Document and the September 2014 

NOPR, DOE described the approach for 

this engineering analysis that combines 

an efficiency-level approach with a costassessment approach to determine the 

relationship between cost and 

efficiency. 78 FR 12252 (February 22, 

2013) and 79 FR at 55556–9 (September 

14, 2014). The range of efficiency levels 

and costs considered were represented 

by the test data and/or ratings of specific 

PTAC and PTHP models available in the 

market that included different groups of 

design options. 

DOE identified the efficiency levels 

for the analysis based on the range of 

rated efficiencies of PTAC and PTHP 

equipment in the AHRI database. DOE 

selected PTAC and PTHP equipment 

that was representative of the market at 

different efficiency levels, then 

purchased, tested, and reverse 

engineered the selected equipment. DOE 

used the cost-assessment approach to 

determine the manufacturing 

production costs (MPCs) for PTAC and 

PTHP equipment across a range of 

efficiencies from the baseline to maxtech efficiency levels. DOE observed 

that manufacturers used different 

approaches to improve unit energy 

efficiency. AHRI commented that it is 

not clear what efficiency gains the 

equipment will achieve based on 

implementing the technology options 

that DOE has considered. (AHRI, NOPR 

Public Meeting Transcript, No. 37 at p. 

10) DOE notes that the combined 

efficiency level and cost-assessment 

approach does not separately evaluate 

the effects of individual design options 

and does not prescribe a particular set 

of design options for manufacturers to 


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14 DOE conducted interviews with high- and lowvolume PTAC and PTHP manufacturers, and 

collected information regarding shipments of 

PTACs and PTHPs at different cooling capacity 

levels. 

15 DOE’s estimates of potential energy savings 

from an amended energy conservation standard are 

further discussed in section IV.H. 

improve unit efficiency. Instead, it 

selects units spanning a range of 

efficiency levels, estimates MPCs for 

those units, and constructs a cost curve 

to define the relationship between 

energy efficiency and MPC. 

Where feasible, DOE selected models 

for reverse engineering with low and 

high efficiencies from a given 

manufacturer, at both representative 

cooling capacity levels and for both 

PTACs and PTHPs. The methodology 

used to perform reverse engineering 

analysis and derive the cost-efficiency 

relationship is described in chapter 5 of 

the final rule TSD. ASAP et al. 

commented to express their support for 

DOE’s approach to the engineering 

analysis. (ASAP et al., No. 30 at p. 3) 

2. Equipment Classes Analyzed 

DOE developed its engineering 

analysis for the six equipment classes 

associated with standard-size PTACs 

and PTHPs. As discussed in section III.B 

of this final rule, DOE did not amend 

energy efficiency standards for nonstandard size equipment classes because 

of their low and declining market share 

and because of a lack of adequate 

information to analyze these units. 

For the PTAC and PTHP equipment 

classes with a cooling capacity greater 

than or equal to 7,000 Btu/h and less 

than or equal to 15,000 Btu/h, the 

energy efficiency equation characterizes 

the relationship between the EER of the 

equipment and cooling capacity (i.e., 

EER is a function of the cooling capacity 

of the equipment) in which EER 

decreases as capacity increases. For all 

cooling capacities less than 7,000 Btu/ 

h and all cooling capacities greater than 

15,000 Btu/h, the EER is calculated 

based on the energy efficiency equation 

for 7,000 Btu/h or 15,000 Btu/h, 

respectively. 

For PTACs and PTHPs, DOE focused 

its analysis on high-shipment-volume 

cooling capacities spanning the range of 

available equipment. Based on 

manufacturer interviews,14 DOE found 

that the majority of shipments are in the 

classes with cooling capacity between 

7,000 Btu/h to 15,000 Btu/h (see chapter 

9 of the final rule TSD for more details 

on the shipments data). As described in 

the September 2014 NOPR, DOE 

selected two cooling capacities for 

analysis: 9,000 Btu/h and 15,000 Btu/h. 

79 FR at 55557. DOE selected 9,000 Btu/ 

h as a representative capacity because 

the AHRI Directory lists more PTAC 

models around the 9,000 Btu/h capacity 

level than any other capacity level. DOE 

selected 15,000 Btu/h as a 

representative capacity in response to 

manufacturer comments stating that it is 

technically challenging to achieve high 

efficiency in 15,000 Btu/h models and 

the analysis should explicitly analyze 

the 15,000 Btu/h capacity. AHRI 

commented that the two equipment 

sizes that DOE selected for testing and 

teardowns may not accurately represent 

the full capacity range of the product 

category. AHRI observed that a greater 

number of high-efficiency models are 

available at the 9,000 Btu/h capacity 

compared with other unit capacities. 

(AHRI, NOPR Public Meeting 

Transcript, No. 37 at p. 10) AHRI 

observation does not indicate that a 

cost/efficiency relationship determined 

based on the 9,000 Btu/h and 15,000 

Btu/h capacities would not be 

representative of the full range of 

cooling capacities. The design changes 

that DOE observed in units at the 

representative capacities of 9,000 Btu/h 

and 15,000 Btu/h can be interpolated 

and extrapolated to include other 

common capacities (such as 7,000 Btu/ 

h and 12,000 Btu/h) that were not 

directly analyzed in the reverse 

engineering analysis. It would not be 

feasible to conduct teardown analysis 

for every cooling capacity available in 

the market. DOE selected the 

representative cooling capacities of 

9,000 and 15,000 Btu/h in response to 

comments from the framework stage of 

this rulemaking; available information 

indicates that these capacities 

accurately represent the markets for 

PTAC and PTHP equipment. 

Using its analysis of two cooling 

capacities, DOE investigated the slope of 

the energy efficiency-capacity 

relationship. Further details on this 

relationship are provided in chapter 5 of 

the final rule TSD. 

3. Cost Model 

DOE developed a manufacturing cost 

model to estimate the MPCs of PTAC 

and PTHP units over a range of cooling 

efficiencies. The cost model is a 

spreadsheet model that converts the 

materials and components in the bills of 

materials for PTAC and PTHP 

equipment into dollar values based on 

the price of materials, average labor 

rates associated with fabrication and 

assembling, and the cost of overhead 

and depreciation, as determined based 

on manufacturer interviews and 

equipment cost information compiled 

by DOE. To convert the information in 

the bills of materials into dollar values, 

DOE collected information on labor 

rates, tooling costs, raw material prices, 

and other factors. For purchased parts, 

the cost model estimates the purchase 

price based on volume-variable price 

quotations and detailed discussions 

with manufacturers and component 

suppliers. For fabricated parts, the 

prices of raw metal materials (e.g., tube, 

sheet metal) are estimates on the basis 

of five-year averages (from 2009 to 

2014). DOE estimated the cost of 

transforming the raw materials into 

finished parts based on current industry 

pricing. Further details on the 

manufacturing cost analysis are 

provided in chapter 5 of the final rule 

TSD. 

Developing the cost model involved 

disassembling PTACs and PTHPs at 

various efficiencies, analyzing the 

materials and manufacturing processes, 

and estimating the costs of purchased 

components. DOE also collected 

supplemental component cost data from 

manufacturers of PTAC and PTHP 

equipment. DOE reports the MPCs in 

aggregated form to maintain 

confidentiality of sensitive component 

data. DOE obtained input from 

stakeholders on the MPC estimates and 

assumptions to confirm accuracy. DOE 

used the cost model for all of the 

representative cooling capacities within 

the PTAC and PTHP equipment classes. 

Chapter 5 of the final rule TSD provides 

details and assumptions of the cost 

model. 

4. Baseline Efficiency Level 

The engineering analysis estimates 

the incremental costs for equipment 

with efficiency levels above the baseline 

in each equipment class. For the 

purpose of the engineering analysis, 

DOE used the engineering baseline EER 

as the starting point to build the cost 

efficiency curves. As discussed in 

section III.A, ANSI/ASHRAE/IES 

Standard 90.1–2013 was issued in the 

course of this rulemaking, and this 

revised standard amended minimum 

efficiency levels for PTACs, raising 

standards by 1.8% above the Federal 

minimum energy conservation 

standards for PTACs. DOE is obligated 

either to adopt those standards 

developed by ASHRAE or to adopt 

levels more stringent than the ASHRAE 

levels if there is clear and convincing 

evidence in support of doing so. (42 

U.S.C. 6313(a)(6)(A)). For the purposes 

of calculating energy savings over the 

ANSI/ASHRAE/IES Standard 90.1– 

2013, DOE identified the ANSI/

ASHRAE/IES Standard 90.1–2013 as the 

baseline efficiency level.15 SCS agreed 

that it is correct to use ASHRAE 90.1– 


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16 DOE notes that these efficiency levels are 4%, 

8%, 12%, 16%, and 18% more efficient than the 

amended PTAC standards that became effective on 

October 8, 2012. 

2013 as the baseline for analysis. (SCS, 

NOPR Public Meeting Transcript, No. 37 

at p. 26–27) 

The baseline efficiency levels for each 

equipment class are presented in Table 

IV.3. 

TABLE IV.3—BASELINE EFFICIENCY LEVELS

Equipment type Equipment class Baseline efficiency equation Cooling capacity 

Baseline 

efficiency 

level 

PTAC .................. Standard Size ............................... EER = 14.0 ¥ (0.300 × Cap †/1000) ...................... 9,000 Btu/h .......

15,000 Btu/h .....

11.3 EER. 

9.5 EER. 

PTHP .................. Standard Size ............................... EER = 14.0 ¥ (0.300 × Cap †/1000) ...................... 9,000 Btu/h .......

15,000 Btu/h .....

11.3 EER. 

9.5 EER. 

† Cap means cooling capacity in Btu/h at 95 °F outdoor dry-bulb temperature. 

5. Incremental Efficiency Levels 

DOE examined performance data of 

standard size PTACs and PTHPs 

published in the AHRI Directory and on 

manufacturers’ Web sites to select 

efficiency levels for consideration in the 

rulemaking. DOE used Web sitepublished data as an initial screening 

mechanism to select units for reverse 

engineering; a third party test facility 

verified the actual performance of the 

units selected for analysis. 

DOE analyzed the baseline efficiency 

level and efficiency levels that are 2.2%, 

6.2%, 10.2%, 14.2%, and 16.2% more 

efficient than the ANSI/ASHRAE/IES 

Standard 90.1–2013 baseline.16 The 

rated efficiencies of PTACs listed in the 

AHRI Directory extend up to 17.5% 

above the ANSI/ASHRAE/IES Standard 

90.1–2013 baseline efficiency level. 

However, based on testing of individual 

units conducted for this rulemaking, 

DOE considered efficiencies up to only 

16.2% above the baseline level. DOE 

expects that PTAC equipment without a 

reversing valve should be able to attain 

the cooling mode efficiencies as least as 

high as PTHPs. This is because the 

reversing valve of a PTHP, which allows 

for reverse cycle (heat pump) operation 

and is not required in a PTAC, imposes 

pressure drop which would reduce 

PTHP efficiency. 

For the heating efficiency of PTHPs, 

DOE correlated the COP associated with 

each efficiency level with the efficiency 

level’s EER based on COP and EER 

ratings from the AHRI database. DOE 

established a representative curve based 

on this data to obtain a relationship for 

COP in terms of EER. DOE used this 

relationship to select COP values 

corresponding to each efficiency level. 

This approach considers the fact that a 

PTHP’s EER and COP are related and 

cannot be independently analyzed, 

while basing the analysis on a 

representative average relationship 

between the two efficiency metrics. To 

determine the typical relationship 

between EER and COP, DOE examined 

the entire database of rated equipment 

and determined a relationship based on 

the EER and COP ratings of the 

collective body of certified PTAC and 

PTHP equipment. 

The efficiency levels for each 

equipment class that DOE considered 

are presented in Table IV.4. The 

percentages associated with efficiency 

levels (ELs) indicate the percentage 

above the baseline level for PTACs and 

PTHPs. In the September 2014 NOPR, 

DOE presented efficiency levels using 

percentages relative to the current 

Federal standard for PTACs. 79 FR at 

55559. This method of presentation 

caused confusion among stakeholders. 

AHRI and SCS commented presenting 

efficiency increases as a percentage 

above current Federal minimum 

standards for PTACs was confusing. 

(AHRI, NOPR Public Meeting 

Transcript, No. 37 at p. 77; SCS, NOPR 

Public Meeting Transcript, No. 37 at p. 

78) In response to these comments, DOE 

has changed the base value used in 

determining the percentage increase of 

EER so that the percentages represents 

increases above the ASHRAE 90.1–2013 

efficiency level rather than increases 

above the current DOE standard. The 

EER values for this baseline are equal to 

those for the DOE PTHP standards and 

the ASHRAE 90.1–2013 PTHP 

standards. Table IV.4 presents 

percentages relative to the new baseline 

level, which is the same for PTACs and 

PTHPs. 

TABLE IV.4—INCREMENTAL EFFICIENCY LEVELS FOR STANDARD SIZE PTACS AND PTHPS

Equipment type Cooling 

capacity 

Efficiency levels (percentages relative to baseline) 

Current Federal 

PTAC ECS * 

EL1, 

Baseline ** EL2, 2.2% EL3, 6.2% EL4, 10.2% EL5, 14.2% EL6, 16.2% (MaxTech) 

PTAC ............... All, EER ........... 13.8 ¥ (0.300 

× Cap †).

14.0 ¥ (0.300 

× Cap †).

14.4 ¥ (0.312 

× Cap †).

14.9 ¥ (0.324 

× Cap †).

15.5 ¥ (0.336 

× Cap †).

16.0 ¥ (0.348 

× Cap †).

16.3 ¥ (0.354 × 

Cap †) 

9,000 Btu/h ...... 11.1 EER ......... 11.3 EER ......... 11.5 EER ......... 12.0 EER ......... 12.4 EER ......... 12.9 EER ......... 13.1 EER

15,000 Btu/h .... 9.3 EER ........... 9.5 EER ........... 9.7 EER ........... 10.0 EER ......... 10.4 EER ......... 10.8 EER ......... 11.0 EER 

Equipment type Cooling 

capacity 

N/A Baseline ** EL1, 2.2% EL2, 6.2% EL3, 10.2% EL4, 14.2% EL5, 16.2% 

(MaxTech) 

PTHP ............... All, EER ........... N/A .................. 14.0 ¥ (0.300 

× Cap †).

14.4 ¥ (0.312 

× Cap †).

14.9 ¥ (0.324 

× Cap †).

15.5 ¥ (0.336 

× Cap †).

16.0 ¥ (0.348 

× Cap †).

16.3 ¥ (0.354 × 

Cap †) 

All, COP .......... N/A .................. 3.7 ¥ (0.052 × 

Cap †).

3.8 ¥ (0.058 × 

Cap †).

4.0 ¥ (0.064 × 

Cap †).

4.1 ¥ (0.068 × 

Cap †).

4.2 ¥ (0.070 × 

Cap †).

4.3 ¥ (0.073 × 

Cap †) 

9,000 Btu/h ...... N/A .................. 11.3 EER .........

3.2 COP ..........

11.5 EER .........

3.3 COP ..........

12.0 EER .........

3.4 COP ..........

12.4 EER .........

3.5 COP ..........

12.9 EER .........

3.6 COP ..........

13.1 EER 

3.6 COP 


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TABLE IV.4—INCREMENTAL EFFICIENCY LEVELS FOR STANDARD SIZE PTACS AND PTHPS—Continued 

Equipment type Cooling 

capacity 

Efficiency levels (percentages relative to baseline) 

Current Federal 

PTAC ECS * 

EL1, 

Baseline ** EL2, 2.2% EL3, 6.2% EL4, 10.2% EL5, 14.2% EL6, 16.2% (MaxTech) 

15,000 Btu/h .... N/A .................. 9.5 EER ...........

2.9 COP ..........

9.7 EER ...........

2.9 COP ..........

10.0 EER .........

3.0 COP ..........

10.4 EER .........

3.1 COP ..........

10.8 EER .........

3.2 COP ..........

11.0 EER 

3.2 COP 

* This level represents the current Federal minimum for PTAC equipment. 

** This level represents the ANSI/ASHRAE/IES Standard 90.1–2013 minimum for PTAC and PTHP equipment. This level is used as the Baseline for PTAC and 

PTHP equipment since DOE is required to, at a minimum, adopt the ASHRAE levels as the Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)). DOE notes that the 

Baseline level is 1.8% higher than current Federal ECS for PTAC equipment, but is equivalent to current Federal ECS for PTHP equipment. For PTAC equipment, the 

Baseline level is also termed EL1, and is compared to current Federal ECS in the energy savings analysis in section V.B.3.a. 

† Cap means cooling capacity in thousand Btu/h at 95°F outdoor dry-bulb temperature. 

6. Equipment Testing and Reverse 

Engineering 

As discussed above, for the 

engineering analysis, DOE specifically 

analyzed representative capacities of 

9,000 Btu/h and 15,000 Btu/h to 

develop incremental cost-efficiency 

relationships. DOE selected twenty 

different models representing PTAC and 

PTHP equipment types at 9,000 Btu/h 

and 15,000 Btu/h capacities. DOE 

selected the models as a representative 

sample of the market at different 

efficiency levels. DOE based the 

selection of units for testing and reverse 

engineering on the efficiency data 

available in the AHRI certification 

database. Details of the key features of 

the tested units are presented in chapter 

5 of the final rule TSD. 

DOE conducted testing on each unit 

according to the DOE test procedure 

outlined at 10 CFR 431.96. At the time 

of testing, the DOE test procedure 

incorporated by reference AHRI 

Standard 310/380–2004, which itself 

incorporates ANSI/ASHRAE 16, ANSI/

ASHRAE 37, and ANSI/ASHRAE 58. In 

June, 2015, DOE revised the test 

procedure to incorporate by reference 

AHRI Standard 310/380–2014. The 

amendments adopted in the revised test 

procedure do not affect measured 

energy use. DOE then conducted 

physical teardowns on each test unit to 

develop a manufacturing cost model 

and to evaluate key design features (e.g., 

improved heat exchangers, compressors, 

fans/fan motors). 

7. Cost-Efficiency Results 

The results of the engineering analysis 

are reported as a set of cost-efficiency 

data (or ‘‘curves’’) in the form of MPC 

(in dollars) versus EER, which form the 

basis for other analyses in the final rule. 

DOE created cost-efficiency curves for 

the two representative cooling 

capacities within the two standard-size 

equipment classes of PTACs and PTHPs, 

as discussed in section IV.C.3. DOE 

developed the incremental costefficiency results shown in Table IV.5 

for each representative cooling capacity. 

These cost results are incremented from 

a baseline efficiency level equivalent to 

the ANSI/ASHRAE/IES Standard 90.1– 

2013. Details of the cost-efficiency 

analysis are presented in chapter 5 of 

the final rule TSD. 

TABLE IV.5—INCREMENTAL MANUFACTURING PRODUCTION COSTS (MPC) FOR STANDARD SIZE PTACS AND PTHPS

Equipment type Cooling capacity 

Efficiency levels 

EL1, baseline * EL2 EL3 EL4 EL5 EL6 

PTAC .................... 9,000 Btu/h ........... $0.00 $4.44 $13.08 $22.41 $32.45 $37.73 

15,000 Btu/h ......... 0.00 4.26 15.93 30.97 49.38 59.86 

Baseline * EL1 EL2 EL3 EL4 EL5 

PTHP .................... 9,000 Btu/h ........... $0.00 $4.44 $13.08 $22.41 $32.45 $37.73 

15,000 Btu/h ......... 0.00 4.26 15.93 30.97 49.38 59.86 

* This level represents the ANSI/ASHRAE/IES Standard 90.1–2013 minimum for PTAC and PTHP equipment. This level is used as the Baseline since DOE is required to, at a minimum, adopt the ASHRAE levels as the Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)). DOE notes that 

the Baseline level is 1.8% higher than current Federal ECS for PTAC equipment, but is equivalent to current Federal ECS for PTHP equipment. 

For PTAC equipment, the Baseline level is also termed EL1. 

AHRI commented that DOE should 

publish the design options associated 

with different energy efficiency levels. 

(AHRI, NOPR Public Meeting 

Transcript, No. 37 at p. 85) Goodman 

requested that DOE clarify exactly what 

designs can help achieve the energy 

savings associated with higher 

efficiency levels. (Goodman, NOPR 

Public Meeting Transcript, No. 37 at p. 

82) Goodman also commented that DOE 

should publish the efficiency 

improvements associated with 

individual design options, as DOE has 

done for previous rulemakings. 

(Goodman, NOPR Public Meeting 

Transcript, No. 37 at p. 86–87) For this 

rulemaking, DOE used a combined 

efficiency level and reverse engineering 

approach. This approach is unlike the 

design option approach in that it does 

not specify the options that 

manufacturers may use to achieve 

different efficiency levels. During the 

teardown analysis, DOE observed that 

different manufacturers use different 

design options to improve unit 

efficiency, and there is no single path to 

improved efficiency. Stakeholders 

interested in the specific design options 

used in different units should refer to 

chapter 5 of the final rule TSD, where 

DOE published the design options for 

each unit observed in the teardown 

analysis in Tables 5.6.1 and 5.6.2. 

Goodman commented that the 

analysis did not capture the design 

changes that manufacturers made to 

increase from the current Federal 

minimum to the minimum level in 

ANSI/ASHRAE/IES Standard 90.1– 

2013, which for PTAC equipment is 

1.8% more stringent than the current 

Federal minimum. (Goodman NOPR 

Public Meeting Transcript, No. 37 at p. 

28) The efficiency level approach used 

in this analysis does capture the design 

changes that manufacturers used to 


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Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 43177 

increase equipment efficiency from the 

current Federal minimum up to the 

ANSI/ASHRAE/IES Standard 90.1 level. 

Because DOE used an efficiency level 

approach rather than a design option 

approach, however, the design options 

used to attain the initial efficiency 

improvement are not specified in the 

analysis. DOE did examine units with 

efficiency levels above and below the 

ANSI/ASHRAE/IES Standard 90.1 level. 

DOE based its cost analysis on the 

observed differences in designs between 

these units. The engineering analysis 

does not account for the incremental 

manufacturing costs associated with an 

increase from the current Federal 

minimum up to the ANSI/ASHRAE/IES 

Standard 90.1-level. The analysis did 

not intend to capture these costs 

because DOE is required to, at a 

minimum, adopt the ANSI/ASHRAE/

IES Standard 90.1 level as the Federal 

standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)) 

DOE investigated what efficiency levels 

higher than the ASHRAE 90.1 level are 

cost effective, rather than evaluating 

whether the ASHRAE 90.1 level is cost 

effective as a step above the current 

DOE PTAC standard. DOE revised the 

MIA analysis in section IV.J to include 

an additional set of product conversion 

costs intended to capture the R&D and 

testing and certification burden of 

meeting amended ASHRAE standards in 

2015. The results of the MIA analysis 

can be found in chapter 12 of the final 

rule TSD. 

To convert the MPCs into 

manufacturer selling prices (MSPs), 

DOE applied non-production cost 

markups to the MPCs estimated in the 

engineering analysis for each equipment 

class and efficiency level. Based on 

publicly-available financial information 

for manufacturers of PTACs and PTHPs 

as well as feedback received from 

manufacturers during interviews, DOE 

assumed the average non-production 

cost baseline markup—which includes 

SG&A expenses, R&D expenses, interest, 

and profit—to be 1.27 for all PTAC and 

PTHP equipment classes. As part of its 

manufacturer impact analysis, DOE then 

modeled multiple markup scenarios to 

capture a range of potential impacts on 

manufacturers following 

implementation of amended energy 

conservation standards. These scenarios 

lead to different markup values, which, 

when applied to MPCs, result in varying 

revenue and cash flow impacts. Further 

details on manufacturer markups can be 

found in section IV.J.2 and in chapter 12 

of the final rule TSD. 

D. Markups To Determine Equipment 

Price 

The markups analysis develops 

appropriate markups in the distribution 

chain to convert the estimates of 

manufacturer selling price to consumer 

prices. (‘‘Consumer’’ refers to 

purchasers of the equipment being 

regulated.) DOE calculates overall 

baseline and incremental markups 

based on the equipment markups at 

each step in the distribution chain. The 

incremental markup relates the change 

in the manufacturer sales price of higher 

efficiency models (the incremental cost 

increase) to the change in the consumer 

price. 

DOE developed supply chain 

markups in the form of multipliers that 

represent increases above MSP and 

include distribution costs. DOE applied 

these markups to the MSPs it developed 

in the engineering analysis, and then 

added sales taxes to arrive at the 

equipment prices for baseline and 

higher efficiency equipment. See 

chapter 6 of the final rule TSD for 

additional details on markups. 

DOE identified and used four 

distribution channels for PTACs and 

PTHPs to describe how the equipment 

passes from the manufacturer to the 

consumer. Equipment is distributed to 

two end-use applications: New 

construction and replacement. In the 

new construction market, the 

manufacturer sells the equipment 

directly to the consumer through a 

national account. In the replacement 

market, the manufacturer sells to a 

wholesaler, who sells to a mechanical 

contractor, who in turn sells the 

equipment to the consumer or end user. 

In the third distribution channel, used 

in both the new construction and 

replacement markets, the manufacturer 

sells the equipment to a wholesaler. The 

wholesaler sells the equipment to a 

mechanical contractor, who sells it to a 

general contractor, who in turn sells the 

equipment to the consumer or end user. 

In the fourth distribution channel, also 

used in both the new construction and 

replacement markets, the manufacturer 

sells the equipment to a wholesaler, 

who directly sells to the purchaser. 

TABLE IV.6—DISTRIBUTION CHANNELS FOR PTAC AND PTHP EQUIPMENT

Channel 1 Channel 2 Channel 3 Channel 4 

Manufacturer (through national accounts).Manufacturer .................................

Wholesaler ....................................

Manufacturer .................................

Wholesaler ....................................

Manufacturer. 

Wholesaler. 

Mechanical Contractor .................. Mechanical Contractor. 

General Contractor. 

Consumer ...................................... Consumer ..................................... Consumer ..................................... Consumer. 

DOE also estimated percentages of the 

total sales in the new construction and 

replacement markets for each of the four 

distribution channels, as shown in 

Table IV.7. 

TABLE IV.7—SHARE OF MARKET BY DISTRIBUTION CHANNEL FOR PTAC AND PTHP EQUIPMENT

Distribution channel New construction 

(%) 

Replacement 

(%) 

Wholesaler-Consumer ......................................................................................................................... 30 15 

Wholesaler-Mech Contractor-Consumer ............................................................................................. 0 25 

Wholesaler-Mech Contractor-General Contractor-Consumer ............................................................. 38 60 

National Account .................................................................................................................................. 32 0 

Total .............................................................................................................................................. 100 100 


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17 ‘‘2012 Profit Report,’’ Heating Air Conditioning 

& Refrigeration Distributors International. February 

2012. Available online at: www.hardinet.org/ProfitReport. 

18 ‘‘2005 Financial Analysis for the HVACR 

Contracting Industry,’’ Air Conditioning Contractors 

of America. 2005. 

19 ‘‘Plumbing, Heating, and Air-Conditioning 

Contractors. Sector 23: 238220. Construction: 

Industry Series, Preliminary Detailed Statistics for 

Establishments, 2007,’’ U.S. Census Bureau. 2007. 

20 ‘‘2007 Economic Census, Construction Industry 

Series and Wholesale Trade Subject Series,’’ U.S. 

Census Bureau. Available online at https://

www.census.gov/newsroom/releases/archives/

construction_industries/2009-07-27_economic_

census.html. 

For each of the steps in the 

distribution channels presented above, 

DOE estimated a baseline markup and 

an incremental markup. DOE defines a 

baseline markup as a multiplier that 

converts the MSP of equipment with 

baseline efficiency to the consumer 

purchase price for that equipment. An 

incremental markup is defined as the 

multiplier to convert the incremental 

increase in MSP of higher efficiency 

equipment to the incremental consumer 

purchase price for that equipment. Both 

baseline and incremental markups are 

independent of the efficiency levels of 

the PTACs and PTHPs. 

DOE developed the markups for each 

step of the distribution channels based 

on available financial data. DOE utilized 

updated versions of the following data 

sources: (1) The Heating, Air 

Conditioning & Refrigeration 

Distributors International 2012 Profit 

Report 17 to develop wholesaler 

markups; (2) the Air Conditioning 

Contractors of America’s (ACCA) 2005 

Financial Analysis for the HVACR 

Contracting Industry 18 and U.S. Census 

Bureau economic data 19 to develop 

mechanical contractor markups; and (3) 

U.S. Census Bureau economic data for 

the commercial and institutional 

building construction industry to 

develop general contractor markups.20

DOE estimated an average markup for 

sales through national accounts to be 

one-half of the markup for the 

wholesaler-to-consumer distribution 

channel. DOE determined this markup 

for national accounts on an assumption 

that the resulting national account 

equipment price must fall somewhere 

between the MSP (i.e., a markup of 1.0) 

and the consumer price under a typical 

chain of distribution (i.e., a markup of 

wholesaler, mechanical contractor, or 

general contractor). 

The overall markup is the product of 

all the markups (baseline or incremental 

markups) for the different steps within 

a distribution channel. Replacement 

channels include sales taxes, which 

were calculated based on State sales tax 

data reported by the Sales Tax 

Clearinghouse. 

DOE requested comment regarding 

the selected channels and distribution 

of shipments through the channels in 

the NOPR. AHRI stated that some 

national accounts purchase 

replacements through direct sales. 

(AHRI, No. 35 at p. 14) DOE did not find 

any data to indicate the magnitude of 

PTAC/PTHP replacement sales through 

national accounts. However, DOE 

understands that in general replacement 

purchases of PTACs and PTHPs are not 

in large volume as one would expect in 

national accounts. Thus, DOE believes 

that this channel is likely to be a 

minimal part of the market. DOE 

therefore retained the set of markups 

used in the September 2014 NOPR. 

E. Energy Use Analysis 

The energy use analysis provides 

estimates of the annual unit energy 

consumption (UEC) of PTAC and PTHP 

equipment at the considered efficiency 

levels. The annual UECs are used in 

subsequent analyses. 

DOE adjusted the UECs for each 

equipment class of PTAC and PTHP 

from the 2008 standards rulemaking. 73 

FR 58772. DOE began with the cooling 

UECs for PTACs and the combined 

cooling and heating UECs for PTHPs 

utilized in the 2008 standards 

rulemaking. 73 FR 58772. The cooling 

and heating UECs for PTHPs were split, 

assuming equal cooling energy use for 

PTACs and PTHPs. In addition, DOE 

adjusted the base-year UECs to account 

for changes in climate (i.e., heating 

degree-days and cooling degree-days) 

between 2008 and 2013, based on a 

typical meteorological year (TMY) 

hourly weather data set (referred to as 

TMY2) and an updated TMY3 data set. 

Where identical efficiency levels and 

cooling capacities were available, DOE 

used the cooling or heating UEC directly 

from the previous rulemaking. For 

additional efficiency levels, DOE scaled 

the cooling UECs based on 

interpolations between EERs and scaled 

the heating UECs based on 

interpolations between COPs, both at a 

constant cooling capacity. Likewise, for 

additional cooling capacities, DOE 

scaled the UECs based on interpolations 

between cooling capacities at a constant 

EER. 

SCS expressed concern that DOE’s 

adjustments to UEC estimates for higher 

efficiency levels are based on sensible 

heat only. SCS recommended that the 

energy modeling be based on 

compliance with ASHRAE 62.1–2010 

ventilation standard. (SCS, No. 29 at p. 

2) DOE notes that UEC estimates for 

higher efficiency levels include latent 

heat because the UECs upon which 

estimates are based include latent heat. 

DOE appreciates SCS’s recommendation 

to comply with ventilation requirements 

in the simulation to ASHRAE 62.1– 

2010. As the simulations exceed the 

ventilation requirements of ASHRAE 

62.1–2010, DOE does not intend to 

make modifications. SCS also suggested 

that DOE examine the occupancy rates 

for buildings where PTACs and PTHPs 

would be installed, since that would 

affect their operating hours. (SCS, NOPR 

Public Meeting Transcript, No. 37 at p. 

103) The simulations account for 

variations in occupancy rates. 

AHRI asked why DOE included the 

space conditioning load of lobby and 

lounge spaces, which are typically not 

conditioned by PTACs and PTHPs, in 

the building load of the energy 

simulations, suggesting that this is 

something that DOE should correct. 

(AHRI, No. 35 at p. 8) While DOE’s 

whole-building simulations did include 

the energy consumption from the 

equipment conditioning the lobby and 

lounge zones, the per-unit energy 

consumption excluded from its total 

energy use the energy of such spaces 

prior to dividing by the number of 

PTAC or PTHP equipment conditioning 

the guest rooms. 

AHRI suggested that DOE account for 

changes to ASHRAE 90.1 in its energy 

use analysis, incorporating at a 

minimum the following control-related 

provisions from ASHRAE 90.1–2013: 

manual changeover or dual setpoint 

thermostat; controls that prevent 

supplemental electric resistance strip 

heating when the heating load can be 

met; and zone thermostatic controls for 

off-hour, automatic shutdown, and 

setback. (AHRI, No. 35 at p. 7; AHRI, 

NOPR Public Meeting Transcript, No. 37 

at p. 102) Similarly, SCS and Goodman 

stated that DOE did not include the 

control requirements from ASHRAE 

Standard 90.1–2013 and thus 

modifications to the simulations would 

ultimately reduce the UEC of PTACs 

and PTHPs. (SCS, No. 29 at p. 1; 

Goodman, No. 31 at p. 5) The control 

provisions of ASHRAE Standard 90.1– 

2013 would in certain situations save 

energy and were included in the energy 

use simulations performed for the 2008 

PTAC and PTHP final rule, which were 

in turn the basis for this analysis. PG&E 

also asked whether energy from defrost 

and from electric resistance heating 

below 40 °F was included in the 

simulations. (PG&E, NOPR Public 

Meeting Transcript, No. 37 at pp. 103– 

105) DOE notes that energy from defrost 

and from electric resistance heating 

below 40 °F were included in the energy 

use analysis. 


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Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 43179 

21Walker, I.S., et al., ‘‘System Effects of High 

Efficiency Filters in Homes,’’ Lawrence Berkeley 

National Laboratory, LBNL–6144E, 2013. 

22 ‘‘Producer Price Indexes,’’ Bureau of Labor 

Statistics (BLS). 2014. Available online at 

www.bls.gov/ppi/. 

23RS Means Company, Inc. RS Means Mechanical 

Cost Data 2013. 2013. Kingston, MA. 

For the LCC and PBP analyses, UECs 

were determined for the representative 

cooling capacities of 9,000 Btu/h and 

15,000 Btu/h for which cost-efficiency 

curves were developed, as discussed in 

section IV.C.7. For the NIA, UECs were 

determined for the cooling capacities of 

7,000 Btu/h, 9,000 Btu/h, and 15,000 

Btu/h for which aggregate shipments 

were provided by AHRI, as highlighted 

in section IV.G. National UEC estimates 

for PTACs and PTHPs for the above 

analyses are described in detail in 

chapter 8 of the final rule TSD. 

AHRI asked why national UEC 

estimates for PTACs are lower in the 

ASHRAE Standard 90.1–2013 notice of 

data availability and request for public 

comment (ASHRAE Standard 90.1–2013 

NODA) (79 FR 20114) than in the 

September 2014 NOPR. (AHRI, No. 35 at 

p. 9) For the analysis in the ASHRAE 

Standard 90.1–2013 NODA, DOE did 

not use a multiplier to account for the 

weather as the data were not finalized 

at the time. Taking these multipliers 

into account, energy use increased in 

the UECs submitted for the September 

2014 NOPR. 

In the framework stage of this 

rulemaking, AHRI and Goodman 

commented that new requirements for 

minimum air filter effectiveness 

finalized in 2013 for ASHRAE Standard 

62.1 would increase pressure drop and 

increase fan power. (AHRI, No. 11 at p. 

4; Goodman, No. 13 at p. 6) In the 

September 2014 NOPR, DOE cited a 

study 21 that found the extent of the 

impact on energy consumption due to 

the change in filter effectiveness at the 

levels finalized in ASHRAE Standard 

62.1 is less than 1%. Based on this 

finding, DOE concluded that the change 

in ASHRAE Standard 62.1 minimum air 

filter effectiveness requirements would 

not significantly impact the energy use 

outputs. 79 FR at 55561 (September 16, 

2014). AHRI commented that the study 

cited by DOE was for residential 

products and stated that the results 

showing negligible impact cannot be 

extrapolated to commercial equipment. 

As such, AHRI stated that DOE must 

consider the energy and monetary 

implications for manufacturers to 

comply with the increased filtration 

requirement. (AHRI, No. 35 at p. 14) 

DOE understands that manufacturers 

have thus far not used filters rated with 

a Minimum Efficiency Reporting Value 

(MERV) filters in their PTAC 

equipment, and there is no reason to 

believe that they will begin using 

MERV-rated filters in the near term. 

Thus, the shift in ASHRAE 62.1 from 

requiring MERV 6 filter to requiring 

MERV 8 filters would not impact the 

operation or energy use of PTAC 

equipment. The change in ASHRAE 

62.1 filtration requirements would also 

not affect the certification of PTAC 

equipment, since the PTAC and PTHP 

test procedures specify that equipment 

is to be tested using the filter that ships 

with it (or using a MERV 1 filter, if the 

equipment is shipped without a filter). 

F. Life Cycle Cost and Payback Period 

Analyses 

The purpose of the LCC and PBP 

analysis is to analyze the effects of 

potential amended energy conservation 

standards on consumers of PTAC and 

PTHP equipment by determining how a 

potential amended standard affects their 

operating expenses (usually decreased) 

and their total installed costs (usually 

increased). 

The LCC is the total consumer 

expense over the life of the equipment, 

consisting of equipment and installation 

costs plus operating costs over the 

lifetime of the equipment (expenses for 

energy use, maintenance, and repair). 

DOE discounts future operating costs to 

the time of purchase using consumer 

discount rates. The PBP is the estimated 

amount of time (in years) it takes 

consumers to recover the increased total 

installed cost (including equipment and 

installation costs) of a more efficient 

type of equipment through lower 

operating costs. DOE calculates the PBP 

by dividing the change in total installed 

cost (normally higher) due to a standard 

by the change in annual operating cost 

(normally lower) that results from the 

standard. 

For any given efficiency level, DOE 

analyzed these impacts for PTAC and 

PTHP equipment starting in the 

compliance years as set forth in section 

V.B.1.a by calculating the change in 

consumer LCCs likely to result from 

higher efficiency levels compared with 

the ASHRAE baseline efficiency levels 

for the PTAC and PTHP equipment 

classes discussed in the engineering 

analysis. 

DOE conducted the LCC and PBP 

analyses for the PTAC and PTHP 

equipment classes using a spreadsheet 

model developed in Microsoft Excel. 

When combined with Crystal Ball (a 

commercially available software 

program), the LCC and PBP model 

generates a Monte Carlo simulation to 

perform the analyses by incorporating 

uncertainty and variability 

considerations in certain of the key 

parameters as discussed below. Inputs 

to the LCC and PBP analysis are 

categorized as: (1) Inputs for 

establishing the total installed cost and 

(2) inputs for calculating the operating 

expense. Results of the LCC and PBP 

analyses were applied to other 

equipment classes through linear 

scaling of the results by the cooling 

capacity of the equipment class. 

The following sections contain brief 

discussions of comments on the inputs 

and key assumptions of DOE’s LCC and 

PBP analysis. They are also described in 

detail in chapter 8 of the final rule TSD. 

1. Equipment and Installation Costs 

The equipment costs faced by 

purchasers of PTAC and PTHP 

equipment are derived from the MSPs 

estimated in the engineering analysis 

and the markups estimated in the 

markups analysis. 

To develop an equipment price trend 

for the September 2014 NOPR, DOE 

derived an inflation-adjusted index of 

the producer price index (PPI) for ‘‘all 

other miscellaneous refrigeration and 

air-conditioning equipment’’ from 

1990–2014.22 Although the inflationadjusted index shows a declining trend 

from 1990 to 2004, and a rising trend 

from 2004–2008, data since 2008 have 

shown a flat-to-slightly rising trend. 

Given the uncertainty as to which of the 

trends will prevail in coming years, 

DOE applied a constant price trend 

(2014 levels) for each efficiency level in 

each equipment class for the September 

2014 NOPR. 

AHRI stated that DOE should utilize 

a trend based on the steady and 

significant price increase since 2004, a 

trend that has not been affected by the 

slowdown in activity since 2008. (AHRI, 

No. 35 at p. 5) While the historical data 

show an increasing price from 2004– 

2008, the data show a decreasing price 

trend from 1990 to 2004 and several 

years of constant prices after the 

economic slowdown. It is not clear if a 

new upward trend has been established. 

Given such uncertainty, DOE 

maintained its approach in the 

September 2014 NOPR to use a constant 

price assumption to project future PTAC 

and PTHP equipment prices. 

For installation costs, DOE used a 

specific cost from RS Means 23 for 

PTACs and PTHPs and linearly scaled 

the cost according to the cooling 

capacities of the equipment classes. 

2. Unit Energy Consumption 

The calculation of annual per-unit 

energy consumption at each considered 


asabaliauskas on DSK5VPTVN1PROD with RULES
43180 Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 

24Coughlin, K., C. Bolduc, R. Van Buskirk, G. 

Rosenquist and J. E. McMahon, ‘‘Tariff-based 

Analysis of Commercial Building Electricity 

Prices.’’ Lawrence Berkeley National Laboratory. 

LBNL–55551. 2008. 

25 ‘‘EEI Typical Bills and Average Rates Report 

(bi-annual, 2007–2012),’’ Edison Electric Institute, 

Washington, DC. 2012. 

26 ‘‘Annual Energy Outlook 2014,’’ U.S. Energy 

Information Administration. May, 2014. Available 

online at http://www.eia.gov/forecasts/aeo/. 

27RS Means Company, Inc. ‘‘RSMeans Facilities 

Maintenance & Repair Cost Data,’’ 2013. 

28RS Means Company, Inc. RSMeans Online. 

(Last accessed March 26, 2013.) http://

www.rsmeansonline.com. 

efficiency level and capacity is 

described in section IV.E. 

3. Electricity Prices and Electricity Price 

Trends 

DOE determined electricity prices for 

PTAC and PTHP users based on tariffs 

from a representative sample of electric 

utilities. Since air-conditioning loads 

are strongly peak-coincident, regional 

marginal prices were developed from 

the tariff data and then scaled to 

approximate 2014 prices. This approach 

calculates energy expenses based on 

actual commercial building marginal 

electricity prices that consumers are 

paying.24

The Commercial Buildings Energy 

Consumption Survey completed in 1992 

(CBECS 1992) and in 1995 (CBECS 

1995) provides monthly electricity 

consumption and demand for a large 

sample of buildings. DOE used these 

values to help develop usage patterns 

associated with various building types. 

Using these monthly values in 

conjunction with the tariff data, DOE 

calculated monthly electricity bills for 

each building. The average price of 

electricity is defined as the total 

electricity bill divided by total 

electricity consumption. From this 

average price, the marginal price for 

electricity consumption was determined 

by applying a 5 percent decrement to 

the average CBECS consumption data 

and recalculating the electricity bill. 

Using building location and the prices 

derived from the above method, a 

marginal price was determined for each 

region of the U.S. 

The tariff-based prices were updated 

to 2013 using the commercial electricity 

price index published in the AEO and 

then adjusted to 2014$. An examination 

of data published by the Edison Electric 

Institute 25 indicates that the rate of 

increase of marginal and average prices 

is not significantly different, so the same 

factor was used for both pricing 

estimates. DOE projected future 

electricity prices using trends in average 

U.S. commercial electricity price from 

AEO 2014.26 More information can be 

found in chapter 8 of the final rule TSD. 

4. Repair Costs 

Repair costs are associated with 

repairing or replacing components that 

have failed. In the September 2014 

NOPR, DOE determined the cost of 

repair costs by annualizing warranty 

contract’s prices and linearly scaling by 

cooling capacity and MSP to cover the 

equipment classes and considered 

efficiency levels. 

DOE received comments regarding 

repair costs. AHRI stated that repair 

costs are significantly more expensive 

after the warranty has expired and that 

DOE should account for repair costs 

after five years. (AHRI, No. 35 at p. 13; 

AHRI, NOPR Public Meeting Transcript, 

No. 37 at p. 154) Goodman 

recommended that DOE reevaluate the 

repair cost amounts specified in the 

NOPR TSD, adding that equipment 

lifetime can be substantially longer than 

the typical equipment warranty and that 

using warranty costs as a proxy for 

lifetime repair prices understates 

average annual repair costs. Goodman 

also recommended that DOE survey 

contractors to determine average labor 

costs associated with repair work. 

(Goodman, No. 31 at pp. 3–4) 

In response to these comments, DOE 

reevaluated the repair costs it had 

proposed in the September 2014 NOPR. 

For the final rule, DOE used the material 

and labor costs associated with repair of 

equipment components covered and not 

covered by a standard manufacturer 

warranty. Based on a report of 

component failure probability and 

warranty terms, and on component 

material and labor costs from RS Means 

data,27 DOE determined the expected 

value of the total cost of a repair and 

annualized it to determine the annual 

repair cost. Similar to the approach used 

in the September 2014 NOPR, DOE 

scaled by cooling capacity and MSP to 

determine repair costs for the 

equipment classes and considered 

efficiency levels. 

5. Maintenance Costs 

Maintenance costs are costs 

associated with general maintenance of 

the equipment (e.g., checking and 

maintaining refrigerant charge levels 

and cleaning heat-exchanger coils). In 

the September 2014 NOPR, DOE 

utilized estimates of annual 

maintenance cost from the previous 

rulemaking with the values adjusted to 

current material and labor rates to 

estimate maintenance cost for PTACs. 

For PTHPs, DOE scaled the adjusted 

estimate of PTAC maintenance costs 

with the ratio of PTHP to PTAC 

annualized maintenance costs from RS 

Means data.28 Since maintenance tasks 

do not change with efficiency level, 

DOE does not expect maintenance costs 

to scale with efficiency level. 

Maintenance costs were linearly scaled 

by cooling capacity to all equipment 

classes. For the final rule, DOE adopted 

the approach used in the September 

2014 NOPR to determine maintenance 

costs for PTAC and PTHP equipment. 

6. Lifetime 

Equipment lifetime is the age at 

which the equipment is retired from 

service. In the September 2014 NOPR, 

DOE used a median equipment lifetime 

of 10 years with a maximum lifetime of 

20 years. AHRI reminded DOE that 

ASHRAE had recommended the 15-year 

service life estimate based on a survey 

conducted in 1976 be used with 

caution. (AHRI, No. 35 at p. 7) AHRI 

questioned DOE’s use of ‘‘time-tofailure’’ instead of ‘‘service life’’ and 

thereby urged DOE to recalibrate the 

Weibull distribution to have a mean of 

5 years and a maximum of 12 years. 

(AHRI, No. 35 at p. 7) SCS commented 

that many hotel chains remodel their 

rooms and replace PTAC/PTHP 

equipment every seven to ten years. SCS 

believes that DOE is using a longer 

equipment lifetime than is applicable in 

real world use. (SCS, NOPR Public 

Meeting Transcript, No. 37 at pp. 123– 

124) 

The comments of manufacturers, 

prevalent practice of lodging business 

operators, observations of lenders to 

hotel real estate, and expert insight have 

led DOE to recognize that major 

renovations of lodging businesses occur 

on a seven to ten year cycle and consist 

of replacing, adding, removing, or 

altering fixed assets. As capital 

investments ultimately shorten 

equipment lifetime, the distribution of 

businesses that renovate within a cycle 

form the basis for the mean lifetime. The 

distribution of businesses that do not 

renovate within one cycle, performing 

belated renovations or observing 

eventual equipment failure at the actual 

maximum lifetime of the equipment, 

form the basis of the maximum lifetime. 

Based on these distributions, DOE used 

a mean of 8 years and a maximum of 15 

years in its analyses for the final rule. 

See chapter 8 of the final rule TSD for 

further discussion. 

7. Discount Rate 

The discount rate is the rate at which 

future expenditures are discounted to 

estimate their present value. The cost of 


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Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 43181 

29See www.ahridirectory.org/ahriDirectory/

pages/home.aspx. 

capital commonly is used to estimate 

the present value of cash flows to be 

derived from a typical company project 

or investment. Most companies use both 

debt and equity capital to fund 

investments, so the cost of capital is the 

weighted-average cost to the firm of 

equity and debt financing. DOE uses the 

capital asset pricing model (CAPM) to 

calculate the equity capital component, 

and financial data sources to calculate 

the cost of debt financing. 

DOE estimated the cost of capital of 

companies that purchase PTAC and 

PTHP equipment. The types of 

companies that DOE used are large 

hotel/motel chains, independent hotel/

motel, assisted living/health care, and 

small office. More details regarding 

DOE’s estimates of consumer discount 

rates are provided in chapter 8 of the 

final rule TSD. 

8. Base Case Efficiency Distribution 

For the LCC analysis, DOE analyzes 

the considered efficiency levels relative 

to a base case (i.e., the case without 

amended energy efficiency standards). 

This analysis requires an estimate of the 

distribution of equipment efficiencies in 

the base case (i.e., what consumers 

would have purchased in the 

compliance year in the absence of 

amended standards). DOE refers to this 

distribution of equipment energy 

efficiencies as the base case efficiency 

distribution. 

In the September 2014 NOPR, DOE 

reviewed the AHRI certified products 

directory 29 for relevant equipment 

classes to determine the distribution of 

efficiency levels for commerciallyavailable models within each equipment 

class analyzed. DOE bundled the 

efficiency levels into efficiency ranges 

and determined the percentage of 

models within each range. To estimate 

the change between the present and the 

compliance year, DOE applied a slightly 

increasing efficiency trend, as explained 

in section IV.H. For the final rule, DOE 

adopted the approach used in the 

September 2014 NOPR to determine the 

base case efficiency distribution for 

PTAC and PTHP equipment. 

The distribution of efficiencies in the 

base case for each equipment class can 

be found in Table IV.8 and Table IV.9. 

TABLE IV.8—COMPLIANCE YEAR BASE CASE EFFICIENCY MARKET SHARES FOR PACKAGED TERMINAL AIR CONDITIONING

EQUIPMENT

PTAC <12,000 Btu/h cooling capacity PTAC ≥12,000 Btu/h cooling capacity 

EER Market share 

(%) EER Market share (%) 

11.1–11.29 0.0 9.3–9.49 0.0 

11.3–11.49 43.6 9.5–9.69 25.8 

11.5–11.99 24.3 9.7–9.99 34.8 

12.0–12.39 29.5 10.0–10.39 34.7 

12.4–12.89 2.1 10.4–10.79 2.7 

12.9–13.09 0.5 10.8–10.99 1.4 

≥13.1 0.0 ≥11.0 0.7 

TABLE IV.9—COMPLIANCE YEAR BASE CASE EFFICIENCY MARKET SHARES FOR PACKAGED TERMINAL HEAT PUMP

EQUIPMENT

PTHP <12,000 Btu/h cooling capacity PTHP ≥12,000 Btu/h cooling capacity 

EER Market share 

(%) EER Market share (%) 

11.3–11.49 52.5 9.5–9.69 63.1 

11.5–11.99 8.9 9.7–9.99 0.0 

12.0–12.39 26.1 10.0–10.39 28.4 

12.4–12.89 12.4 10.4–10.79 7.2 

12.9–13.09 0.0 10.8–10.99 1.4 

≥13.1 0.0 ≥11.0 0.0 

9. Payback Period Inputs 

The payback period is the amount of 

time it takes the consumer to recover the 

additional installed cost of more 

efficient equipment, compared to 

baseline equipment, through energy cost 

savings. Payback periods are expressed 

in years. Payback periods that exceed 

the life of the equipment mean that the 

increased total installed cost is not 

recovered in reduced operating 

expenses. 

The inputs to the PBP calculation are 

the increase in the total installed cost of 

the equipment to the consumer for each 

efficiency level and the annual 

operating cost savings for each 

efficiency level. The PBP calculation 

uses the same inputs as the LCC 

analysis, except that discount rates are 

not needed. 

10. Rebuttable-Presumption Payback 

Period 

EPCA establishes a rebuttable 

presumption that a standard is 

economically justified if the Secretary 

finds that the additional cost to the 

consumer of purchasing a product 

complying with an energy conservation 

standard level will be less than three 

times the value of the energy (and, as 

applicable, water) savings during the 

first year that the consumer will receive 

as a result of the standard, as calculated 

under the test procedure in place for 

that standard. (42 U.S.C. 

6295(o)(2)(B)(iii) and 42 U.S.C. 6316(a)) 

For each considered efficiency level, 

DOE determines the value of the first 

year’s energy savings by calculating the 

quantity of those savings in accordance 

with the applicable DOE test procedure, 

and multiplying that amount by the 


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43182 Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 

30For the NIA, DOE adjusts the installed cost data 

from the LCC analysis to exclude sales tax, which 

is a transfer. 

average energy price forecast for the 

year in which compliance with the 

amended standards would be required. 

G. Shipments Analysis 

DOE uses projections of shipments for 

PTACs and PTHPs together to calculate 

equipment stock over the course of the 

analysis period, which in turn is used 

to determine the impacts of potential 

amended standards on national energy 

savings, net present value, and future 

manufacturer cash flows. DOE 

developed shipment projections based 

on historical data and an analysis of key 

market drivers for this equipment. 

Historical shipments data are used to 

build up an equipment stock and also to 

calibrate the shipments model. DOE 

separately calculated shipments 

intended for new construction and 

replacement applications. The sum of 

new construction and replacement 

shipments is the total shipments. 

New construction shipments were 

calculated using projected new 

construction floor space of healthcare, 

lodging, and small office buildings from 

AEO 2014 and historical PTAC and 

PTHP saturation in new buildings, 

which was estimated by dividing 

historical shipments by historical new 

construction floor space. Due to 

unrepresentative market conditions 

during the recession of 2008–2010, DOE 

used historical data from the analysis of 

the 2008 final rule to determine the 

value for the PTAC and PTHP 

saturation, which was used for each 

year of the analysis period. DOE then 

projected shipments based on the 

product of the saturation and AEO’s 

projected new floor space. 

Replacement shipments equal the 

number of units that fail in a given year. 

DOE used a retirement function in the 

form of a Weibull distribution with 

inputs based on lifetime values from the 

LCC analysis to estimate the number of 

units of a given age that fail in each 

year. When a unit fails, it is removed 

from the stock and a new unit is 

introduced in its stead. Replacement 

shipments account for the largest 

portion of total shipments. 

DOE determined the distribution of 

total shipments among the equipment 

classes using shipments data by 

equipment class provided by AHRI for 

the previous PTAC and PTHP 

rulemaking. 73 FR 58772. For the NIA, 

DOE considered the following 

equipment classes for which it received 

shipments data: 

• PTAC: <7,000 Btu/h cooling capacity, 

≥7000 and ≤15000 Btu/h cooling 

capacity, and ≥15000 Btu/h cooling 

capacity; and 

• PTHP: <7,000 Btu/h cooling capacity, 

≥7000 and ≤15000 Btu/h cooling 

capacity, and ≥15000 Btu/h cooling 

capacity. 

For further information on the 

shipments analysis, see chapter 9 of the 

final rule TSD. 

H. National Impact Analysis 

The NIA assesses the national energy 

savings (NES) and the national net 

present value (NPV) from a national 

perspective of total consumer costs and 

savings that would be expected to result 

from new or amended standards at 

specific efficiency levels. (‘‘Consumer’’ 

in this context refers to consumers of 

the equipment being regulated.) DOE 

calculates the NES and NPV based on 

projections of annual equipment 

shipments, along with the annual 

energy consumption and total installed 

cost data from the energy use and LCC 

analyses.30

DOE evaluates the impacts of new and 

amended standards by comparing a 

base-case projection with standards-case 

projections. The base-case projection 

characterizes energy use and consumer 

costs for each equipment class in the 

absence of new or amended energy 

conservation standards. For the basecase projection, DOE considers 

historical trends in efficiency and 

various forces that are likely to affect the 

mix of efficiencies over time. DOE 

compares the base-case projection with 

projections characterizing the market for 

each equipment class if DOE adopted 

new or amended standards at specific 

energy efficiency levels (i.e., the TSLs or 

standards cases) for that class. For the 

standards cases, DOE considers how a 

given standard would likely affect the 

market shares of equipment with 

efficiencies greater than the standard. 

DOE uses a spreadsheet model to 

calculate the energy savings and the 

national consumer costs and savings 

from each TSL. Interested parties can 

review DOE’s analyses by changing 

various input quantities within the 

spreadsheet. The NIA spreadsheet 

model uses typical values (as opposed 

to probability distributions) as inputs. 

To develop the NES, DOE calculates 

annual energy consumption for the base 

case and the standards cases. DOE 

calculates the annual energy 

consumption using per-unit annual 

energy use data multiplied by projected 

shipments. DOE calculated energy 

savings for TSLs more stringent than the 

levels specified by ANSI/ASHRAE/IES 

Standard 90.1–2013 in each year 

relative to a base case, defined as DOE 

adoption of the efficiency levels 

specified by ANSI/ASHRAE/IES 

Standard 90.1–2013. 

The inputs for determining the NPV 

of the total costs and benefits 

experienced by consumers are: (1) Total 

annual installed cost; (2) total annual 

savings in operating costs; and (3) a 

discount factor to calculate the present 

value of costs and savings. DOE 

calculates net savings each year as the 

difference between the base case and 

each standards case in terms of total 

savings in operating costs versus total 

increases in installed costs. DOE 

calculates operating cost savings over 

the lifetime of each product shipped 

during the forecast period. DOE used a 

discount factor based on real discount 

rates of 3 percent and 7 percent to 

discount future costs and savings to 

present values. 

As discussed in section IV.F.1, DOE 

applied a constant price trend (2014 

levels) for each efficiency level in each 

equipment class. 

A key component of the NIA is the 

equipment energy efficiency forecasted 

over time for the base case and for each 

of the standards cases. To estimate a 

base-case efficiency trend, DOE started 

with the base-case efficiency 

distribution described in section IV.F.8. 

For the equipment classes that were not 

covered in the LCC analysis, DOE used 

the same source (i.e., the AHRI 

Directory) to estimate the base-case 

efficiency distribution. 

The base case efficiency distributions 

are set forth in Table IV.10 and Table 

IV.11. 


asabaliauskas on DSK5VPTVN1PROD with RULES
Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 43183 

31See DOE’s technical support document 

underlying DOE’s July 29, 2004 ANOPR. (Available 

at: http://www.regulations.gov/

#!documentDetail;D=EERE-2006-STD-0103-0078). 

32For more information on NEMS, refer to The 

National Energy Modeling System: An Overview, 

DOE/EIA–0581 (98) (Feb.1998) (Available at: http:// 

www.eia.gov/oiaf/aeo/overview/). 

TABLE IV.10—BASE CASE EFFICIENCY MARKET SHARES IN COMPLIANCE YEAR FOR PACKAGED TERMINAL AIR

CONDITIONING EQUIPMENT

PTAC <7000 Btu/h cooling capacity PTAC ≥7000 to ≤15000 Btu/h cooling capacity PTAC ≥15000 Btu/h cooling capacity 

EER Market share 

(%) EER Market share (%) EER Market share (%) 

11.7 0 11.1 0 9.3 0 

11.9 0 11.3 38 9.5 65 

12.2 63 11.5 29 9.7 17 

12.6 37 12.0 29 10.0 18 

13.1 0 12.4 3 10.4 0 

13.6 0 12.9 1 10.8 0 

13.8 0 13.1 0 11.0 0 

TABLE IV.11—BASE CASE EFFICIENCY MARKET SHARES IN COMPLIANCE YEAR FOR PACKAGED TERMINAL HEAT PUMP

EQUIPMENT

PTHP <7000 Btu/h cooling capacity PTHP ≥7000 to ≤15000 Btu/h cooling capacity PTHP ≥15000 Btu/h cooling capacity 

EER Market share 

(%) EER Market share (%) EER Market share (%) 

11.9 72 11.3 56 9.5 72 

12.2 14 11.5 8 9.7 3 

12.6 14 12.0 26 10.0 25 

13.1 0 12.4 9 10.4 0 

13.6 0 12.9 1 10.8 0 

13.8 0 13.1 0 11.0 0 

For years after the compliance year, 

DOE applied a trend largely based on 

the trend from 2012 to 2035 that was 

used in the 2004 commercial unitary air 

conditioner Advance Notice of Proposed 

Rulemaking (ANOPR), which estimated 

an increase of approximately 1 EER 

every 35 years.31 69 FR 45460 (July 29, 

2004). DOE adjusted this trend for 

PTACs by assuming that a gradual 

replacement of equipment at the Federal 

minimum with equipment at the 

ASHRAE standard occurs over 10 years 

after the first year of expected 

compliance. 

To estimate the impact that amended 

energy conservation standards may have 

in the first year of compliance, DOE 

typically uses a ‘‘roll-up’’ scenario in its 

standards rulemakings. Under the ‘‘rollup’’ scenario, DOE assumes equipment 

efficiencies in the base case that do not 

meet the new or amended standard level 

under consideration would ‘‘roll up’’ to 

meet that standard level, and equipment 

shipments at efficiencies above the 

standard level under consideration 

would not be affected. AHRI asked how 

roll-up was possible if 100% of the 

market was already above a certain TSL, 

citing the example of the PTACs <7,000 

Btu/h equipment class that was already 

above TSL 3, as noted in the ASHRAE 

Standard 90.1–2013 NODA. (AHRI, No. 

35 at p. 8) For those cases where the 

market share is entirely at or above a 

given potential standard level, DOE did 

not perform a roll-up operation. 

After the compliance year, DOE 

applied the same rate of efficiency 

growth in the standards cases as in the 

base case. 

Using the distribution of efficiencies 

in the base case and in the standards 

cases for each equipment class 

analyzed, DOE calculated marketweighted average efficiency values for 

each year. The market-weighted average 

efficiency value represents the average 

efficiency of the total units shipped at 

a specified potential standard level. The 

market-weighted average efficiency 

values for the base case and the 

standards cases for each efficiency level 

analyzed for each equipment class is 

provided in chapter 10 of the final rule 

TSD. 

DOE converted the site electricity 

consumption and savings to primary 

energy (power sector energy 

consumption) using annual conversion 

factors derived from the AEO 2014 

version of the National Energy Modeling 

System (NEMS). Cumulative energy 

savings are the sum of the NES for each 

year in which equipment shipped 

during the analysis period continues to 

operate. 

In 2011, in response to the 

recommendations of a committee on 

‘‘Point-of-Use and Full-Fuel-Cycle 

Measurement Approaches to Energy 

Efficiency Standards’’ appointed by the 

National Academy of Sciences, DOE 

announced its intention to use full-fuelcycle (FFC) measures of energy use and 

greenhouse gas and other emissions in 

the national impact analyses and 

emissions analyses included in future 

energy conservation standards 

rulemakings. 76 FR 51281 (August 18, 

2011). After evaluating the approaches 

discussed in the August 18, 2011 

document, DOE published a statement 

of amended policy in which DOE 

explained its determination that EIA’s 

NEMS is the most appropriate tool for 

its FFC analysis and its intention to use 

NEMS for that purpose. 77 FR 49701 

(August 17, 2012). NEMS is a public 

domain, multi-sector, partial 

equilibrium model of the U.S. energy 

sector 32 that EIA uses to prepare its 

Annual Energy Outlook. The approach 

used for deriving FFC measures of 

energy use and emissions is described 

in appendix 10–B of the final rule TSD. 

I. Consumer Subgroup Analysis 

In analyzing the potential impacts of 

new or amended standards on 

commercial consumers, DOE evaluates 

impacts on identifiable groups (i.e., 

subgroups) of consumers that may be 

disproportionately affected by a national 

standard. For the September 2014 


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33U.S. Securities and Exchange Commission. 

Annual 10–K Reports. Various Years. <http://

www.sec.gov>. 

34 ‘‘Annual Survey of Manufacturers: General 

Statistics: Statistics for Industry Groups and 

Industries.’’ U.S. Census Bureau. 2014. Available at: 

http://factfinder2.census.gov/faces/nav/jsf/pages/

searchresults.xhtml?refresh=t. 

35Hoovers, Inc. Company Profiles. Various 

Companies. <http://www.hoovers.com>. 

NOPR, DOE evaluated impacts on a 

subgroup consisting of independentlyoperating lodging businesses using the 

LCC and PBP spreadsheet model. To the 

extent possible, it utilized inputs 

appropriate for this subgroup. 

SCS stated that consumers in the 

northern region of the U.S. should be 

considered as a separate subgroup 

because they may be disproportionally 

impacted by the proposed standard. SCS 

reasoned that the proportion of 

consumers using heat pumps is much 

less than in the southern U.S. (SCS, No. 

29 at p. 3) DOE does not have sufficient 

information for PTAC and PTHP 

equipment to define a separate subgroup 

for consumers in the northern region. 

However, the distribution of LCC and 

PBP results reflects the impacts for 

consumers located in different regions. 

The commercial consumer subgroup 

analysis is discussed in chapter 11 of 

the final rule TSD. 

J. Manufacturer Impact Analysis 

1. Overview 

DOE performed an MIA to estimate 

the financial impact of amended energy 

conservation standards on 

manufacturers of PTACs and PTHPs, 

and to calculate the potential impact of 

such standards on employment and 

manufacturing capacity. The MIA has 

both quantitative and qualitative 

aspects. The quantitative part of the 

MIA primarily relies on the Government 

Regulatory Impact Model (GRIM), an 

industry cash-flow model with inputs 

specific to this rulemaking. The key 

GRIM inputs are data on the industry 

cost structure, equipment costs, 

shipments, and assumptions about 

markups and conversion expenditures. 

The key output is the industry net 

present value (INPV). Different sets of 

assumptions (markup scenarios) will 

produce different results. The 

qualitative part of the MIA addresses 

factors such as equipment 

characteristics, impacts on particular 

subgroups of firms, and important 

market and equipment trends. The 

complete MIA is outlined in chapter 12 

of the final rule TSD. 

DOE conducted the MIA for this 

rulemaking in three phases. In Phase 1 

of the MIA, DOE conducted interviews 

with a representative cross-section of 

manufacturers and prepared a profile of 

the PTAC and PTHP industry. During 

manufacturer interviews, DOE 

discussed engineering, manufacturing, 

procurement, and financial topics to 

identify key issues or concerns and to 

inform and validate assumptions used 

in the GRIM. See section IV.J.2 for a 

description of the key issues 

manufacturers raised during the 

interviews. 

DOE used information obtained 

during these interviews to prepare a 

profile of the PTAC and PTHP industry, 

including a manufacturer cost analysis. 

Drawing on financial analysis 

performed as part of the 2008 energy 

conservation standard for PTACs and 

PTHPs as well as feedback obtained 

from manufacturers, DOE derived 

financial inputs for the GRIM (e.g., 

sales, general, and administration 

(SG&A) expenses; research and 

development (R&D) expenses; and tax 

rates). DOE also used public sources of 

information, including company SEC 

10–K filings,33 corporate annual reports, 

the U.S. Census Bureau’s Economic 

Census,34 and Hoover’s reports,35 to 

develop the industry profile. 

In Phase 2 of the MIA, DOE prepared 

an industry cash-flow analysis to 

quantify the potential impacts of an 

amended energy conservation standard 

on manufacturers of PTACs and PTHPs. 

In general, energy conservation 

standards can affect manufacturer cash 

flow in three distinct ways: (1) Create a 

need for increased investment; (2) raise 

production costs per unit; and (3) alter 

revenue due to higher per-unit prices 

and possible changes in sales volumes. 

To quantify these impacts, DOE used 

the GRIM to perform a cash-flow 

analysis for the PTAC and PTHP 

industry using financial values derived 

during Phase 1. 

In Phase 3 of the MIA, DOE evaluated 

subgroups of manufacturers that may be 

disproportionately impacted by 

amended energy conservation standards 

or that may not be represented 

accurately by the average cost 

assumptions used to develop the 

industry cash-flow analysis. For 

example, small manufacturers, niche 

players, or manufacturers exhibiting a 

cost structure that largely differs from 

the industry average could be more 

negatively affected. DOE identified two 

subgroups for separate impact analyses: 

(1) Manufacturers with production 

assets; and (2) small businesses. 

DOE initially identified 22 companies 

that sell PTAC and PTHP equipment in 

the U.S. However, most companies 

selling in the U.S. market do not own 

production assets; rather, they import 

and distribute PTACs and PTHPs 

manufactured overseas, primarily in 

China. DOE identified a subgroup of 

three U.S. manufacturers that own 

production assets. Together, these three 

manufacturers account for 

approximately 80 percent of the 

domestic PTAC and PTHP market. 

Because manufacturers with production 

assets will incur different costs to 

comply with amended energy 

conservation standards compared to 

their competitors who do not own 

production assets, DOE conducted a 

separate subgroup analysis to evaluate 

the potential impacts of amended 

energy conservation standards on 

manufacturers with production assets. 

The subgroup analysis of PTAC and 

PTHP manufacturers with production 

assets is discussed in chapter 12 of the 

final rule TSD and in section V.B.2 of 

this document. 

For the small businesses subgroup 

analysis, DOE applied the small 

business size standards published by 

the Small Business Administration 

(SBA) to determine whether a company 

is considered a small business. See 13 

CFR part 121. To be categorized as a 

small business under North American 

Industry Classification System (NAICS) 

code 333415, ‘‘Air-Conditioning and 

Warm Air Heating Equipment and 

Commercial and Industrial Refrigeration 

Equipment Manufacturing,’’ a PTAC 

and PTHP manufacturer and its 

affiliates may employ a maximum of 

750 employees. The 750-employee 

threshold includes all employees in a 

business’s parent company and any 

other subsidiaries. Based on this 

classification, DOE identified 12 

manufacturers that qualify as small 

businesses. The PTAC and PTHP small 

manufacturer subgroup is discussed in 

chapter 12 of the final rule TSD and in 

section VI.B of this document. 

2. Government Regulatory Impact Model 

DOE uses the GRIM to quantify the 

changes in cash flow due to amended 

standards that result in a higher or 

lower industry value. The GRIM 

analysis uses a standard, annual cashflow analysis that incorporates 

manufacturer costs, markups, 

shipments, and industry financial 

information as inputs. The GRIM 

models changes in costs, distribution of 

shipments, investments, and 

manufacturer margins that could result 

from an amended energy conservation 

standard. The GRIM spreadsheet uses 

the inputs to arrive at a series of annual 

cash flows, beginning in 2015 (the base 

year of the analysis) and continuing for 

a 30-year period that begins in the 

compliance year for each equipment 


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class. DOE calculated INPVs by 

summing the stream of annual 

discounted cash flows during this 

period. DOE used a real discount rate of 

8.5 percent, which was derived from 

industry financials and then modified 

according to feedback received during 

manufacturer interviews. 

The GRIM calculates cash flows using 

standard accounting principles and 

compares changes in INPV between a 

base case and each standards case. The 

difference in INPV between the base 

case and a standards case represents the 

financial impact of the amended energy 

conservation standard on 

manufacturers. 

DOE collected information on critical 

GRIM inputs from a number of sources, 

including publicly available data and 

interviews with manufacturers 

(described in the next section). The 

GRIM results are shown in section 

V.B.2. Additional details about the 

GRIM, the discount rate, and other 

financial parameters can be found in 

chapter 12 of the final rule TSD. 

a. Government Regulatory Impact Model 

Key Inputs 

Manufacturer Production Costs 

Manufacturing more efficient 

equipment is typically more expensive 

than manufacturing baseline equipment 

due to the use of more complex 

components, which are typically more 

costly than baseline components. The 

changes in the MPCs of the analyzed 

equipment can affect the revenues, gross 

margins, and cash flow of the industry, 

making these equipment cost data key 

GRIM inputs for DOE’s analysis. 

In the MIA, DOE used the MPCs for 

each considered efficiency level 

calculated in the engineering analysis, 

as described in section IV.C and further 

detailed in chapter 5 of the final rule 

TSD. In addition, DOE used information 

from its teardown analysis, described in 

chapter 5 of the final rule TSD, to 

disaggregate the MPCs into material, 

labor, and overhead costs. To calculate 

the MPCs for equipment above the 

baseline, DOE added the incremental 

material, labor, and overhead costs from 

the engineering cost-efficiency curves to 

the baseline MPCs. These cost 

breakdowns and equipment markups 

were validated and revised with 

manufacturers during manufacturer 

interviews. 

Shipments Forecasts 

The GRIM estimates manufacturer 

revenues based on total unit shipment 

forecasts and the distribution of these 

values by efficiency level. Changes in 

sales volumes and efficiency mix over 

time can significantly affect 

manufacturer finances. For this analysis, 

the GRIM uses the NIA’s annual 

shipment forecasts derived from the 

shipments analysis. See section IV.G 

above and chapter 10 of the final rule 

TSD for additional details. 

Product and Capital Conversion Costs 

An amended energy conservation 

standard would cause manufacturers to 

incur conversion costs to bring their 

production facilities and equipment 

designs into compliance. DOE evaluated 

the level of conversion-related 

expenditures that would be needed to 

comply with each considered efficiency 

level in each equipment class. For the 

MIA, DOE classified these conversion 

costs into two major groups: (1) Product 

conversion costs; and (2) capital 

conversion costs. Product conversion 

costs are investments in research, 

development, testing, marketing, and 

other non-capitalized costs necessary to 

make equipment designs comply with 

the amended energy conservation 

standard. Capital conversion costs are 

investments in property, plant, and 

equipment necessary to adapt or change 

existing production facilities such that 

new compliant equipment designs can 

be fabricated and assembled. 

To evaluate the level of capital 

conversion expenditures manufacturers 

would likely incur to comply with 

amended energy conservation 

standards, DOE used manufacturer 

interviews to gather data on the 

anticipated level of capital investment 

that would be required at each 

efficiency level. DOE validated 

manufacturer comments through 

estimates of capital expenditure 

requirements derived from the 

equipment teardown analysis and 

engineering analysis described in 

chapter 5 of the final rule TSD. 

DOE assessed the product conversion 

costs at each considered efficiency level 

by integrating data from quantitative 

and qualitative sources. DOE considered 

market-share-weighted feedback 

regarding the potential costs of each 

efficiency level from multiple 

manufacturers to estimate product 

conversion costs and validated those 

numbers against engineering estimates 

of redesign efforts. 

In general, DOE assumes that all 

conversion-related investments occur 

between the year of publication of the 

final rule and the year by which 

manufacturers must comply with the 

new standard. The conversion cost 

figures used in the GRIM can be found 

in section V.B.2 of this document. For 

additional information on the estimated 

product and capital conversion costs, 

see chapter 12 of the final rule TSD. 

b. Government Regulatory Impact Model 

Scenarios 

Markup Scenarios 

Manufacturer selling prices (MSPs) 

include direct manufacturing 

production costs (i.e., labor, materials, 

and overhead estimated in DOE’s MPCs) 

and all non-production costs (i.e., 

SG&A, R&D, and interest), along with 

profit. To calculate the MSPs in the 

GRIM, DOE applied non-production 

cost markups to the MPCs estimated in 

the engineering analysis for each 

equipment class and efficiency level. 

Modifying these markups in the 

standards case yields different sets of 

impacts on manufacturers. For the MIA, 

DOE modeled two standards-case 

markup scenarios to represent the 

uncertainty regarding the potential 

impacts on prices and profitability for 

manufacturers following the 

implementation of amended energy 

conservation standards: (1) A 

preservation of gross margin percentage 

markup scenario; and (2) a preservation 

of per unit operating profit markup 

scenario. These scenarios lead to 

different markup values that, when 

applied to the inputted MPCs, result in 

varying revenue and cash flow impacts. 

Under the preservation of gross 

margin percentage scenario, DOE 

applied a single uniform ‘‘gross margin 

percentage’’ markup across all efficiency 

levels, which assumes that 

manufacturers would be able to 

maintain the same amount of profit as 

a percentage of revenues at all efficiency 

levels within an equipment class. As 

production costs increase with 

efficiency, this scenario implies that the 

absolute dollar markup will increase as 

well. Based on publicly-available 

financial information for manufacturers 

of PTACs and PTHPs as well as 

comments from manufacturer 

interviews, DOE assumed the average 

non-production cost markup—which 

includes SG&A expenses, R&D 

expenses, interest, and profit—to be 

1.27 for all PTAC and PTHP equipment 

classes. 

Because this markup scenario 

assumes that manufacturers would be 

able to maintain their gross margin 

percentage markups as production costs 

increase in response to an amended 

energy conservation standard, it 

represents a high bound to industry 

profitability. 

In the preservation of per unit 

operating profit scenario, manufacturer 

markups are set so that operating profit 

one year after the compliance date of the 


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amended energy conservation standard 

is the same as in the base case on a per 

unit basis. Under this scenario, as the 

costs of production increase under an 

amended standards case, manufacturers 

are generally required to reduce their 

markups to a level that maintains basecase operating profit per unit. The 

implicit assumption behind this markup 

scenario is that the industry can only 

maintain its operating profit in absolute 

dollars per unit after compliance with 

the new standard is required. Therefore, 

operating margin in percentage terms is 

reduced between the base case and 

standards case. DOE adjusted the 

manufacturer markups in the GRIM at 

each TSL to yield approximately the 

same earnings before interest and taxes 

in the standards case as in the base case. 

This markup scenario represents a low 

bound to industry profitability under an 

amended energy conservation standard. 

c. Manufacturer Interviews 

As part of the MIA, DOE discussed 

the potential impacts of amended 

energy conservation standards with 

manufacturers of PTACs and PTHPs. 

DOE interviewed manufacturers 

representing approximately 90 percent 

of the market by revenue. Information 

gathered during these interviews 

enabled DOE to tailor the GRIM to 

reflect the unique financial 

characteristics of the industry. 

3. Discussion of Comments 

During the NOPR public comment 

period, interested parties commented on 

assumptions and results described in 

the September 2014 NOPR and 

accompanying TSD. Comments address 

several topics related to manufacturer 

impacts. These include: Multiple 

redesign cycles due to ASHRAE; 

conversion costs; impacts on the 

subgroup of manufacturers with 

production assets; and cumulative 

regulatory burden. 

a. Multiple Redesign Cycles 

AHRI and Goodman commented that 

DOE’s EPCA baseline analysis should 

account for the financial impacts on 

manufacturers of multiple redesign 

cycles, the first to comply with 

amended ASHRAE standards (2015) and 

the second to comply with amended 

federal energy conservation standards 

(2019). (AHRI, No. 35 at pp. 6 and 11; 

Goodman, No. 31 at pp. 1–2) Southern 

Company Services (SCS) also 

commented that the proposed level 

would entail an undue burden on 

manufacturers by requiring them to 

undertake multiple redesign cycles. 

(SCS, No. 29 at p. 2) To better account 

for the impacts of multiple redesign 

cycles on manufacturers, DOE revised 

its EPCA baseline analysis to include an 

additional set of product conversion 

costs intended to capture the R&D and 

testing and certification burden of 

meeting amended ASHRAE standards in 

2015. See chapter 12 of the final rule 

TSD for more information on the EPCA 

baseline analysis. 

b. Conversion Costs 

AHRI commented that DOE 

underestimated the product conversion 

costs industry would incur to comply 

with amended standards. AHRI stated 

that DOE underestimated the number of 

PTAC and PTHP models that would 

require redesign and suggested that DOE 

should not assign one set of R&D costs 

to similar models of PTACs and PTHPs. 

(AHRI, No. 35 at pp. 9–11) DOE clarifies 

that it assigned separate product 

conversion costs for PTACs and PTHPs. 

DOE also based its product conversion 

cost model on the number of equipment 

platforms that would require redesign as 

opposed to the number of individual 

equipment listings, where equipment 

platforms were defined based on cooling 

capacity within a given equipment 

class. DOE assumed R&D costs ranging 

from $50,000 to $200,000 per platform 

based on the complexity of the redesign 

anticipated at each TSL. DOE further 

clarifies that it validated its conversion 

cost estimates against feedback received 

from manufacturers during interviews. 

c. Impacts on the Subgroup of 

Manufacturers With Production Assets 

EEI and AHRI expressed concern that 

the subgroup of three manufacturers 

with production assets would bear a 

disproportionate share of the costs 

associated with the proposed rule. (EEI, 

No. 37 at pp. 180–181; AHRI, NOPR 

Public Meeting Transcript, No. 37 at pp. 

183) Goodman also commented that this 

subgroup appears to be at a significant 

competitive disadvantage and further 

stated that this subgroup would have to 

absorb 90 percent of the industry’s 

conversion costs while producing only 

40 percent of equipment. Goodman 

referred to Chapter 16 of the NOPR TSD 

for the 40 percent figure. (Goodman, No. 

31 at pp. 4–5) 

To clarify, the subgroup of 

manufacturers with production assets 

evaluated as part of the MIA 

encompasses three U.S.-headquartered 

manufacturers that own PTAC and 

PTHP production facilities and tooling. 

These three companies’ production 

assets may be located within the U.S. or 

in other countries. At standard levels 

more stringent than ASHRAE, these 

manufacturers would be expected to 

incur capital conversion costs that their 

competitors who strictly import and/or 

private label would not. As described in 

section V.B.2.d of this document and 

Chapter 12 of the final rule TSD, DOE 

estimates that these three manufacturers 

account for 80 percent of PTAC and 

PTHP production. Under the standard 

proposed in the September 2014 NOPR, 

this subgroup would have incurred an 

estimated 89 percent of total industry 

conversion costs and experienced more 

severe INPV impacts than the industry 

as a whole, as commenters noted; this 

discrepancy in conversion costs and 

related INPV impacts was DOE’s reason 

for analyzing the subgroup as distinct 

from the industry as a whole. However, 

in this final rule, DOE is adopting 

standards for PTACs and PTHPs 

equivalent to those set forth in ANSI/

ASHRAE/IES Standard 90.1–2013. DOE 

is required to adopt minimum efficiency 

standards either equivalent to or more 

stringent than those set forth by 

ASHRAE. Because this rule adopts the 

baseline as the standards level, DOE’s 

modeling does not show any negative 

financial impacts on industry, including 

manufacturers with production assets, 

as a direct result of the standard. 

d. Cumulative Regulatory Burden 

Goodman stated that EPA’s refrigerant 

regulations contribute to manufacturers’ 

cumulative regulatory burden and urged 

DOE to account for refrigerant 

regulations in both its INPV analysis 

and its discussion of cumulative 

regulatory burden. (Goodman, No. 37 at 

pp. 46–47) SCS also stated that this rule 

combined with other pending 

rulemakings would pose an undue 

burden on manufacturers and could 

constrain capacity at testing and 

certification facilities. (SCS, No. 29 at p. 

2) DOE is required to adopt PTAC and 

PTHP standards as set forth in ASHRAE 

90.1–2013. DOE has added a discussion 

of EPA’s SNAP Program to its analysis 

of cumulative regulatory burden found 

in section V.B.2.e of this document. 

K. Emissions Analysis 

In the emissions analysis, DOE 

estimated the change in power sector 

emissions of carbon dioxide (CO2), 

nitrogen oxides (NOX), sulfur dioxide 

(SO2), and mercury (Hg) from potential 

energy conservation standards for PTAC 

and PTHP equipment. In addition, DOE 

estimated emissions impacts in 

production activities (extracting, 

processing, and transporting fuels) that 

provide the energy inputs to power 

plants. These are referred to as 

‘‘upstream’’ emissions. Together, these 

emissions account for the full-fuel-cycle 

(FFC). In accordance with DOE’s FFC 

Statement of Policy (76 FR 51281 


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36See http://www.epa.gov/climateleadership/

inventory/ghg-emissions.html. 

37 IPCC, 2013: Climate Change 2013: The Physical 

Science Basis. Contribution of Working Group I to 

the Fifth Assessment Report of the 

Intergovernmental Panel on Climate Change 

[Stocker, T.F., D. Qin, G.-K. Plattner, M. Tignor, 

S.K. Allen, J. Boschung, A. Nauels, Y. Xia, V. Bex 

and P.M. Midgley (eds.)]. Cambridge University 

Press, Cambridge, United Kingdom and New York, 

NY, USA. Chapter 8. 

38See North Carolina v. EPA, 550 F.3d 1176 (D.C. 

Cir. 2008); North Carolina v. EPA, 531 F.3d 896 

(D.C. Cir. 2008). 

39See EME Homer City Generation, LP v. EPA, 

696 F.3d 7, 38 (D.C. Cir. 2012), cert. granted, 81 

U.S.L.W. 3567, 81 U.S.L.W. 3696, 81 U.S.L.W. 3702 

(U.S. June 24, 2013) (No. 12–1182). 

40See EPA v. EME Homer City Generation, 134 

S.Ct. 1584, 1610 (U.S. 2014). The Supreme Court 

held in part that EPA’s methodology for quantifying 

emissions that must be eliminated in certain States 

due to their impacts in other downwind States was 

based on a permissible, workable, and equitable 

interpretation of the Clean Air Act provision that 

provides statutory authority for CSAPR. 

41See Georgia v. EPA, Order (D.C. Cir. filed 

October 23, 2014) (No. 11–1302). 

42CSAPR also applies to NOX and it would 

supersede the regulation of NOX under CAIR. As 

stated previously, the current analysis assumes that 

CAIR, not CSAPR, is the regulation in force. The 

difference between CAIR and CSAPR with regard to 

DOE’s analysis of NOX emissions is slight. 

(August 18, 2011), as amended at 77 FR 

49701 (August 17, 2012)), the FFC 

analysis includes impacts on emissions 

of methane (CH4) and nitrous oxide 

(N2O), both of which are recognized as 

greenhouse gases. 

DOE primarily conducted the 

emissions analysis using emissions 

factors for CO2 and most of the other 

gases derived from data in AEO 2014. 

Combustion emissions of CH4 and N2O 

were estimated using emissions 

intensity factors published by the 

Environmental Protection Agency (EPA) 

in its GHG Emissions Factors Hub.36

DOE developed separate emissions 

factors for power sector emissions and 

upstream emissions. The method that 

DOE used to derive emissions factors is 

described in chapter 13 of the final rule 

TSD. 

For CH4 and N2O, DOE calculated 

emissions reduction in tons and also in 

terms of units of carbon dioxide 

equivalent (CO2eq). Gases are converted 

to CO2eq by multiplying each ton of gas 

by the gas’ global warming potential 

(GWP) over a 100-year time horizon. 

Based on the Fifth Assessment Report of 

the Intergovernmental Panel on Climate 

Change,37 DOE used GWP values of 28 

for CH4 and 265 for N2O. 

Each Annual Energy Outlook 

incorporates the projected impacts of 

existing air quality regulations on 

emissions. AEO 2014 generally 

represents current legislation and 

environmental regulations, including 

recent government actions, for which 

implementing regulations were 

available as of October 31, 2013. Key 

regulations are discussed below. 

SO2 emissions from affected electric 

generating units (EGUs) are subject to 

nationwide and regional emissions capand-trade programs. Title IV of the 

Clean Air Act sets an annual emissions 

cap on SO2 for affected EGUs in the 48 

contiguous States and the District of 

Columbia (DC). (42 U.S.C. 7651 et seq.) 

SO2 emissions from 28 eastern States 

and DC were also limited under the 

Clean Air Interstate Rule (CAIR). 70 FR 

25162 (May 12, 2005). CAIR created an 

allowance-based trading program that 

operates along with the Title IV 

program. In 2008, CAIR was remanded 

to EPA by the U.S. Court of Appeals for 

the District of Columbia Circuit, but it 

remained in effect.38 In 2011, EPA 

issued a replacement for CAIR, the 

Cross-State Air Pollution Rule (CSAPR). 

76 FR 48208 (August 8, 2011). On 

August 21, 2012, the D.C. Circuit issued 

a decision to vacate CSAPR,39 and the 

court ordered EPA to continue 

administering CAIR. On April 29, 2014, 

the U.S. Supreme Court reversed the 

judgment of the D.C. Circuit and 

remanded the case for further 

proceedings consistent with the 

Supreme Court’s opinion.40 On October 

23, 2014, the D.C. Circuit lifted the stay 

of CSAPR.41 Pursuant to this action, 

CSAPR went into effect (and CAIR 

ceased to be in effect) as of January 1, 

2015. 

Because AEO 2014 was prepared prior 

to the Supreme Court’s opinion, it 

assumed that CAIR remains a binding 

regulation through 2040. Thus, DOE’s 

analysis used emissions factors that 

assume that CAIR, not CSAPR, is the 

regulation in force. However, the 

difference between CAIR and CSAPR is 

not relevant for the purpose of DOE’s 

analysis of emissions impacts from 

energy conservation standards. 

The attainment of emissions caps is 

typically flexible among EGUs and is 

enforced through the use of emissions 

allowances and tradable permits. Under 

existing EPA regulations, any excess 

SO2 emissions allowances resulting 

from the lower electricity demand 

caused by the adoption of an efficiency 

standard could be used to permit 

offsetting increases in SO2 emissions by 

any regulated EGU. In past rulemakings, 

DOE recognized that there was 

uncertainty about the effects of 

efficiency standards on SO2 emissions 

covered by the existing cap-and-trade 

system, but it concluded that negligible 

reductions in power sector SO2

emissions would occur as a result of 

standards. 

Beginning in 2016, however, SO2

emissions will fall as a result of the 

Mercury and Air Toxics Standards 

(MATS) for power plants. 77 FR 9304 

(Feb. 16, 2012). In the MATS rule, EPA 

established a standard for hydrogen 

chloride as a surrogate for acid gas 

hazardous air pollutants (HAP), and also 

established a standard for SO2 (a nonHAP acid gas) as an alternative 

equivalent surrogate standard for acid 

gas HAP. The same controls are used to 

reduce HAP and non-HAP acid gas; 

thus, SO2 emissions will be reduced as 

a result of the control technologies 

installed on coal-fired power plants to 

comply with the MATS requirements 

for acid gas. AEO 2014 assumes that, in 

order to continue operating, coal plants 

must have either flue gas 

desulfurization or dry sorbent injection 

systems installed by 2016. Both 

technologies, which are used to reduce 

acid gas emissions, also reduce SO2

emissions. Under the MATS, emissions 

will be far below the cap established by 

CAIR, so it is unlikely that excess SO2

emissions allowances resulting from the 

lower electricity demand would be 

needed or used to permit offsetting 

increases in SO2 emissions by any 

regulated EGU. Therefore, DOE believes 

that energy conservation standards will 

generally reduce SO2 emissions in 2016 

and beyond. 

CAIR established a cap on NOX

emissions in 28 eastern States and the 

District of Columbia.42 Energy 

conservation standards are expected to 

have little effect on NOX emissions in 

those States covered by CAIR because 

excess NOX emissions allowances 

resulting from the lower electricity 

demand could be used to permit 

offsetting increases in NOX emissions. 

However, standards would be expected 

to reduce NOX emissions in the States 

not affected by the caps, so DOE 

estimated NOX emissions reductions 

from the standards considered in this 

final rule for these States. 

The MATS limit mercury emissions 

from power plants, but they do not 

include emissions caps and, as such, 

DOE’s energy conservation standards 

would likely reduce Hg emissions. DOE 

estimated mercury emissions reduction 

using emissions factors based on AEO 

2014, which incorporates the MATS. 

EEI commented that things are 

changing dramatically in the power 

sector; new rules are changing the 

amount of emissions that power 

producers are allowed to emit, and DOE 

should include these changes in its 

analysis. (EEI, NOPR Public Meeting 

Transcript, No. 37 at pp. 196–197) SCS 

commented that DOE is likely 

overestimating the amount of emissions 


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43National Research Council, Hidden Costs of 

Energy: Unpriced Consequences of Energy 

Production and Use, National Academies Press: 

Washington, DC (2009). 

reductions by not accounting for the 

anticipated effects of new emissions 

rules that are currently under 

consideration. (SCS, NOPR Public 

Meeting Transcript, No. 37 at pp. 197– 

198) It would not be appropriate for 

DOE to account for regulations that are 

under consideration, because whether 

they will be adopted and their final 

form are matters of speculation at this 

time. 

L. Monetizing Carbon Dioxide and Other 

Emissions Impacts 

As part of the development of this 

rule, DOE considered the estimated 

monetary benefits from the reduced 

emissions of CO2 and NOX that are 

expected to result from each of the TSLs 

considered. In order to make this 

calculation analogous to the calculation 

of the NPV of consumer benefit, DOE 

considered the reduced emissions 

expected to result over the lifetime of 

equipment shipped in the forecast 

period for each TSL. This section 

summarizes the basis for the monetary 

values used for each of these emissions 

and presents the values considered in 

this final rule. 

For this final rule, DOE relied on a set 

of values for the social cost of carbon 

(SCC) that was developed by a Federal 

interagency process. The basis for these 

values is summarized in the next 

section, and a more detailed description 

of the methodologies used is provided 

as an appendix to chapter 14 of the final 

rule TSD. 

1. Social Cost of Carbon 

The SCC is an estimate of the 

monetized damages associated with an 

incremental increase in carbon 

emissions in a given year. It is intended 

to include (but is not limited to) changes 

in net agricultural productivity, human 

health, property damages from 

increased flood risk, and the value of 

ecosystem services. Estimates of the 

SCC are provided in dollars per metric 

ton of CO2. A domestic SCC value is 

meant to reflect the value of damages in 

the United States resulting from a unit 

change in CO2 emissions, while a global 

SCC value is meant to reflect the value 

of damages worldwide. 

Under section 1(b) of Executive Order 

12866, ‘‘Regulatory Planning and 

Review,’’ 58 FR 51735 (Oct. 4, 1993), 

agencies must, to the extent permitted 

by law, ‘‘assess both the costs and the 

benefits of the intended regulation and, 

recognizing that some costs and benefits 

are difficult to quantify, propose or 

adopt a regulation only upon a reasoned 

determination that the benefits of the 

intended regulation justify its costs.’’ 

The purpose of the SCC estimates 

presented here is to allow agencies to 

incorporate the monetized social 

benefits of reducing CO2 emissions into 

cost-benefit analyses of regulatory 

actions. The estimates are presented 

with an acknowledgement of the many 

uncertainties involved and with a clear 

understanding that they should be 

updated over time to reflect increasing 

knowledge of the science and 

economics of climate impacts. 

As part of the interagency process that 

developed these SCC estimates, 

technical experts from numerous 

agencies met on a regular basis to 

consider public comments, explore the 

technical literature in relevant fields, 

and discuss key model inputs and 

assumptions. The main objective of this 

process was to develop a range of SCC 

values using a defensible set of input 

assumptions grounded in the existing 

scientific and economic literatures. In 

this way, key uncertainties and model 

differences transparently and 

consistently inform the range of SCC 

estimates used in the rulemaking 

process. 

a. Monetizing Carbon Dioxide Emissions 

When attempting to assess the 

incremental economic impacts of CO2

emissions, the analyst faces a number of 

challenges. A report from the National 

Research Council 43 points out that any 

assessment will suffer from uncertainty, 

speculation, and lack of information 

about: (1) Future emissions of GHGs; (2) 

the effects of past and future emissions 

on the climate system; (3) the impact of 

changes in climate on the physical and 

biological environment; and (4) the 

translation of these environmental 

impacts into economic damages. As a 

result, any effort to quantify and 

monetize the harms associated with 

climate change will raise questions of 

science, economics, and ethics and 

should be viewed as provisional. 

Despite the limits of both 

quantification and monetization, SCC 

estimates can be useful in estimating the 

social benefits of reducing CO2

emissions. The agency can estimate the 

benefits from reduced (or costs from 

increased) emissions in any future year 

by multiplying the change in emissions 

in that year by the SCC values 

appropriate for that year. The NPV of 

the benefits can then be calculated by 

multiplying each of these future benefits 

by an appropriate discount factor and 

summing across all affected years. 

It is important to emphasize that the 

interagency process is committed to 

updating these estimates as the science 

and economic understanding of climate 

change and its impacts on society 

improves over time. In the meantime, 

the interagency group will continue to 

explore the issues raised by this analysis 

and consider public comments as part of 

the ongoing interagency process. 

b. Development of Social Cost of Carbon 

Values 

In 2009, an interagency process was 

initiated to offer a preliminary 

assessment of how best to quantify the 

benefits from reducing carbon dioxide 

emissions. To ensure consistency in 

how benefits are evaluated across 

Federal agencies, the Administration 

sought to develop a transparent and 

defensible method, specifically 

designed for the rulemaking process, to 

quantify avoided climate change 

damages from reduced CO2 emissions. 

The interagency group did not 

undertake any original analysis. Instead, 

it combined SCC estimates from the 

existing literature to use as interim 

values until a more comprehensive 

analysis could be conducted. The 

outcome of the preliminary assessment 

by the interagency group was a set of 

five interim values: Global SCC 

estimates for 2007 (in 2006$) of $55, 

$33, $19, $10, and $5 per metric ton of 

CO2. These interim values represented 

the first sustained interagency effort 

within the U.S. government to develop 

an SCC for use in regulatory analysis. 

The results of this preliminary effort 

were presented in several proposed and 

final rules. 

c. Current Approach and Key 

Assumptions 

After the release of the interim values, 

the interagency group reconvened on a 

regular basis to generate improved SCC 

estimates. Specially, the group 

considered public comments and 

further explored the technical literature 

in relevant fields. The interagency group 

relied on three integrated assessment 

models commonly used to estimate the 

SCC: The FUND, DICE, and PAGE 

models. These models are frequently 

cited in the peer-reviewed literature and 

were used in the last assessment of the 

Intergovernmental Panel on Climate 

Change (IPCC). Each model was given 

equal weight in the SCC values that 

were developed. 

Each model takes a slightly different 

approach to model how changes in 

emissions result in changes in economic 

damages. A key objective of the 

interagency process was to enable a 

consistent exploration of the three 

models, while respecting the different 

approaches to quantifying damages 


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44 It is recognized that this calculation for 

domestic values is approximate, provisional, and 

highly speculative. There is no a priori reason why 

domestic benefits should be a constant fraction of 

net global damages over time. 

45Social Cost of Carbon for Regulatory Impact 

Analysis Under Executive Order 12866. Interagency 

Working Group on Social Cost of Carbon, United 

States Government (February 2010) (Available at: 

www.whitehouse.gov/sites/default/files/omb/

inforeg/for-agencies/Social-Cost-of-Carbon-forRIA.pdf). 

46Technical Update of the Social Cost of Carbon 

for Regulatory Impact Analysis Under Executive 

Order 12866, Interagency Working Group on Social 

Cost of Carbon, United States Government (May 

2013; revised November 2013) (Available at: http:// 

www.whitehouse.gov/sites/default/files/omb/assets/

inforeg/technical-update-social-cost-of-carbon-forregulator-impact-analysis.pdf). 

taken by the key modelers in the field. 

An extensive review of the literature 

was conducted to select three sets of 

input parameters for these models: 

Climate sensitivity, socio-economic and 

emissions trajectories, and discount 

rates. A probability distribution for 

climate sensitivity was specified as an 

input into all three models. In addition, 

the interagency group used a range of 

scenarios for the socio-economic 

parameters and a range of values for the 

discount rate. All other model features 

were left unchanged, relying on the 

model developers’ best estimates and 

judgments. 

In 2010, the interagency group 

selected four sets of SCC values for use 

in regulatory analyses. Three sets of 

values are based on the average SCC 

from the three integrated assessment 

models, at discount rates of 2.5, 3, and 

5 percent. The fourth set, which 

represents the 95th percentile SCC 

estimate across all three models at a 3- 

percent discount rate, was included to 

represent higher-than-expected impacts 

from climate change further out in the 

tails of the SCC distribution. The values 

grow in real terms over time. 

Additionally, the interagency group 

determined that a range of values from 

7 percent to 23 percent should be used 

to adjust the global SCC to calculate 

domestic effects,44 although preference 

is given to consideration of the global 

benefits of reducing CO2 emissions. 

Table IV.12 presents the values in the 

2010 interagency group report,45 which 

is reproduced in appendix 14A of the 

final rule TSD. 

TABLE IV.12—ANNUAL SCC VALUES FROM 2010 INTERAGENCY REPORT, 2010–2050 

[2007$ per metric ton CO2] 

Year 

Discount rate 

5% 3% 2.5% 3% 

Average Average Average 95th percentile 

2010 ......................................................................................... 4.7 21.4 35.1 64.9 

2015 ......................................................................................... 5.7 23.8 38.4 72.8 

2020 ......................................................................................... 6.8 26.3 41.7 80.7 

2025 ......................................................................................... 8.2 29.6 45.9 90.4 

2030 ......................................................................................... 9.7 32.8 50.0 100.0 

2035 ......................................................................................... 11.2 36.0 54.2 109.7 

2040 ......................................................................................... 12.7 39.2 58.4 119.3 

2045 ......................................................................................... 14.2 42.1 61.7 127.8 

2050 ......................................................................................... 15.7 44.9 65.0 136.2 

The SCC values used for this 

document were generated using the 

most recent versions of the three 

integrated assessment models that have 

been published in the peer-reviewed 

literature.46

Table IV.13 shows the updated sets of 

SCC estimates from the 2013 

interagency update in 5-year increments 

from 2010 to 2050. The full set of 

annual SCC estimates between 2010 and 

2050 is reported in appendix 14B of the 

final rule TSD. The central value that 

emerges is the average SCC across 

models at the 3-percent discount rate. 

However, for purposes of capturing the 

uncertainties involved in regulatory 

impact analysis, the interagency group 

emphasizes the importance of including 

all four sets of SCC values. 

TABLE IV.13—ANNUAL SCC VALUES FROM 2013 INTERAGENCY REPORT, 2010–2050 

[2007$ per metric ton CO2] 

Year 

Discount rate 

5% 3% 2.5% 3% 

Average Average Average 95th percentile 

2010 ......................................................................................... 11 32 51 89 

2015 ......................................................................................... 11 37 57 109 

2020 ......................................................................................... 12 43 64 128 

2025 ......................................................................................... 14 47 69 143 

2030 ......................................................................................... 16 52 75 159 

2035 ......................................................................................... 19 56 80 175 

2040 ......................................................................................... 21 61 86 191 

2045 ......................................................................................... 24 66 92 206 

2050 ......................................................................................... 26 71 97 220 


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47U.S. Office of Management and Budget, Office 

of Information and Regulatory Affairs, 2006 Report 

to Congress on the Costs and Benefits of Federal 

Regulations and Unfunded Mandates on State, 

Local, and Tribal Entities (2006) (Available at: 

www.whitehouse.gov/sites/default/files/omb/assets/

omb/inforeg/2006_cb/2006_cb_final_report.pdf). 

It is important to recognize that a 

number of key uncertainties remain, and 

that current SCC estimates should be 

treated as provisional and revisable 

because they will evolve with improved 

scientific and economic understanding. 

The interagency group also recognizes 

that the existing models are imperfect 

and incomplete. The National Research 

Council report mentioned previously 

points out that there is tension between 

the goal of producing quantified 

estimates of the economic damages from 

an incremental ton of carbon and the 

limits of existing efforts to model these 

effects. There are a number of analytical 

challenges that are being addressed by 

the research community, including 

research programs housed in many of 

the Federal agencies participating in the 

interagency process to estimate the SCC. 

The interagency group intends to 

periodically review and reconsider 

those estimates to reflect increasing 

knowledge of the science and 

economics of climate impacts, as well as 

improvements in modeling. 

In summary, in considering the 

potential global benefits resulting from 

reduced CO2 emissions, DOE used the 

values from the 2013 interagency report 

adjusted to 2014$ using the implicit 

price deflator for gross domestic product 

(GDP) from the Bureau of Economic 

Analysis. For each of the four sets of 

SCC cases specified, the values for 

emissions in 2015 were $12.2, $41.2, 

$63.4, and $121 per metric ton avoided 

(values expressed in 2014$). DOE 

derived values after 2050 using the 

relevant growth rates for the 2040–2050 

period in the interagency update. 

DOE multiplied the CO2 emissions 

reduction estimated for each year by the 

SCC value for that year in each of the 

four cases. To calculate a present value 

of the stream of monetary values, DOE 

discounted the values in each of the 

four cases using the specific discount 

rate that had been used to obtain the 

SCC values in each case. 

2. Social Cost of Other Air Pollutants 

As noted previously, DOE has taken 

into account how considered energy 

conservation standards would reduce 

site NOX emissions nationwide and 

decrease power sector NOX emissions in 

those 22 States not affected by the CAIR. 

DOE estimated the monetized value of 

net NOX emissions reductions resulting 

from each of the TSLs considered for 

this final rule based on estimates found 

in the an OMB report to Congress.47

DOE calculated monetary benefits using 

an average value for reducing NOX from 

stationary sources of $2,727 per ton (in 

2014$), and real discount rates of 3 

percent and 7 percent. 

DOE is evaluating appropriate 

monetization of avoided SO2 and Hg 

emissions in energy conservation 

standards rulemakings. DOE has not 

included monetization of those 

emissions in the current analysis. 

In responding to the September 2014 

NOPR, AHRI, Goodman, and the 

Associations stated that DOE should 

refrain from using SCC values to 

establish monetary figures for emissions 

reductions until the SCC undergoes a 

more rigorous notice, review, and 

comment process. (AHRI, No. 35 at p. 

14; Goodman, No. 31 at p. 6; The 

Associations, No. 28 at p. 3) AHRI and 

Goodman cited several reasons why the 

SCC estimates should be withdrawn and 

not used in any rulemaking: (1) The SCC 

estimates fail in terms of process and 

transparency; (2) the modeling systems 

used for the SCC estimates and the 

subsequent analyses were not subject to 

peer review as appropriate; (3) the 

modeling conducted in this effort does 

not offer a reasonably acceptable range 

of accuracy for use in policymaking; (4) 

the Federal interagency working group 

has failed to disclose and quantify key 

uncertainties; and (5) by presenting only 

global SCC estimates and downplaying 

domestic SCC estimates, the interagency 

working group has severely limited the 

utility of the SCC for use in benefit-cost 

analysis and policymaking. (AHRI, No. 

35 at pp. 14–15; Goodman, No. 31 at p. 

6) 

In contrast, EDF et al. stated that the 

current SCC values are sufficiently 

robust and accurate to continue to be 

the basis for regulatory analysis going 

forward. They contended that current 

values are likely significant 

underestimates of the SCC. They stated 

that the interagency working group’s 

analytic process was science-based, 

open, and transparent, and that the SCC 

is an important and accepted tool for 

regulatory policy-making, based on 

well-established law and fundamental 

economics. (EDF et al., No. 22 at pp. 1– 

12) 

In conducting the interagency process 

that developed the SCC values, 

technical experts from numerous 

agencies met on a regular basis to 

consider public comments, explore the 

technical literature in relevant fields, 

and discuss key model inputs and 

assumptions. Key uncertainties and 

model differences transparently and 

consistently inform the range of SCC 

estimates. These uncertainties and 

model differences are discussed in the 

interagency working group’s reports, 

which are reproduced in appendix 14A 

and 14B of the final rule TSD, as are the 

major assumptions. Specifically, 

uncertainties in the assumptions 

regarding climate sensitivity, as well as 

other model inputs such as economic 

growth and emissions trajectories, are 

discussed and the reasons for the 

specific input assumptions chosen are 

explained. However, the three 

integrated assessment models used to 

estimate the SCC are frequently cited in 

the peer-reviewed literature and were 

used in the last assessment of the IPCC. 

In addition, new versions of the models 

that were used in 2013 to estimate 

revised SCC values were published in 

the peer-reviewed literature (see 

appendix 14B of the final rule TSD for 

discussion). Although uncertainties 

remain, the revised estimates that were 

issued in November, 2013 are based on 

the best available scientific information 

on the impacts of climate change. The 

current estimates of the SCC have been 

developed over many years, using the 

best science available, and with input 

from the public. In November 2013, 

OMB announced a new opportunity for 

public comment on the interagency 

technical support document underlying 

the revised SCC estimates. See 78 FR 

70586. The comment period for the 

OMB announcement closed on February 

26, 2014. OMB is currently reviewing 

comments and considering whether 

further revisions to the 2013 SCC 

estimates are warranted. DOE stands 

ready to work with OMB and the other 

members of the interagency working 

group on further review and revision of 

the SCC estimates as appropriate. 

AHRI and Goodman also stated that 

DOE does not conduct the cost-benefit 

analysis for NPV and SCC values over 

the same time frame and within the 

same scope, an important principle of 

cost-benefit analysis. They criticized 

DOE’s use of global rather than domestic 

SCC values. (AHRI, No. 35 at p. 15; 

Goodman, No. 31 at p. 6) 

For the analysis of national impacts of 

standards, DOE considers the lifetime 

impacts of equipment shipped in a 30- 

year period. With respect to energy and 

energy cost savings, impacts continue 

past 30 years until all of the equipment 

shipped in the 30-year period is retired. 

With respect to the valuation of CO2

emissions reductions, the SCC estimates 

developed by the interagency working 

group are meant to represent the full 

discounted value (using an appropriate 

range of discount rates) of emissions 


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48 Data on industry employment, hours, labor 

compensation, value of production, and the implicit 

price deflator for output for these industries are 

available upon request by calling the Division of 

Industry Productivity Studies (202–691–5618) or by 

sending a request by email to dipsweb@bls.gov. 49See Bureau of Economic Analysis, Regional 

Multipliers: A User Handbook for the Regional 

Input-Output Modeling System (RIMS II), U.S. 

Department of Commerce (1992). 

50 J.M. Roop, M.J. Scott, and R.W. Schultz, ImSET 

3.1: Impact of Sector Energy Technologies, PNNL– 

18412, Pacific Northwest National Laboratory 

(2009) (Available at: www.pnl.gov/main/

publications/external/technical_reports/PNNL18412.pdf). 

reductions occurring in a given year. 

DOE is thus comparing the costs of 

achieving the emissions reductions in 

each year of the analysis, with the 

carbon reduction value of the emissions 

reductions in those same years. DOE’s 

analysis estimates both global and 

domestic benefits of CO2 emissions 

reductions. The September 2014 NOPR 

and this final rule focus on a global 

measure of SCC. The issue of global 

versus domestic measures of the SCC is 

discussed in appendix 14A of the final 

rule TSD. 

AHRI and Goodman also stated that 

DOE fails to take into consideration EPA 

regulations on greenhouse gas emissions 

from power plants, which would affect 

the SCC values. (AHRI, No. 35 at pp. 

15–16; Goodman, No. 31 at p. 7) 

The SCC values are based on 

projections of global GHG emissions 

over many decades. Such projections 

are influenced by many factors, 

particularly economic growth rates and 

prices of different energy sources. In the 

context of these projections, the 

proposed EPA regulations of greenhouse 

gas emissions from new power plants 

are a minor factor. In any case, it would 

not be appropriate for DOE to account 

for regulations that are not currently in 

effect, because whether such regulations 

will be adopted and their final form are 

matters of speculation at this time. 

M. Utility Impact Analysis 

The utility impact analysis estimates 

several effects on the electric power 

industry that would result from the 

adoption of new or amended energy 

conservation standards. In the utility 

impact analysis, DOE analyzes the 

changes in installed electrical capacity 

and generation that would result for 

each trial standard level. The analysis is 

based on published output from NEMS, 

which is updated annually to produce 

the AEO Reference case, as well as a 

number of side cases that estimate the 

economy-wide impacts of changes to 

energy supply and demand. DOE uses 

published side cases that incorporate 

efficiency-related policies to estimate 

the marginal impacts of reduced energy 

demand on the utility sector. The output 

of this analysis is a set of timedependent coefficients that capture the 

change in electricity generation, primary 

fuel consumption, installed capacity 

and power sector emissions due to a 

unit reduction in demand for a given 

end use. These coefficients are 

multiplied by the stream of electricity 

savings calculated in the NIA to provide 

estimates of selected utility impacts of 

new or amended energy conservation 

standards. Chapter 15 of the final rule 

TSD describes the utility impact 

analysis in further detail. 

N. Employment Impact Analysis 

DOE considers employment impacts 

in the domestic economy as one factor 

in selecting a standard. Employment 

impacts from new or amended energy 

conservation standards include both 

direct and indirect impacts. Direct 

employment impacts are any changes in 

the number of employees of 

manufacturers of the equipment subject 

to standards, their suppliers, and related 

service firms. The MIA addresses those 

impacts. Indirect employment impacts 

are changes in national employment 

that occur due to the shift in 

expenditures and capital investment 

caused by the purchase and operation of 

more-efficient appliances. Indirect 

employment impacts from standards 

consist of the net jobs created or 

eliminated in the national economy, 

other than in the manufacturing sector 

being regulated, caused by: (1) Reduced 

spending by end users on energy; (2) 

reduced spending on new energy supply 

by the utility industry; (3) increased 

consumer spending on new equipment 

to which the new standards apply; and 

(4) the effects of those three factors 

throughout the economy. 

One method for assessing the possible 

effects on the demand for labor of such 

shifts in economic activity is to compare 

sector employment statistics developed 

by the Labor Department’s Bureau of 

Labor Statistics (BLS).48 BLS regularly 

publishes its estimates of the number of 

jobs per million dollars of economic 

activity in different sectors of the 

economy, as well as the jobs created 

elsewhere in the economy by this same 

economic activity. Data from BLS 

indicate that expenditures in the utility 

sector generally create fewer jobs (both 

directly and indirectly) than 

expenditures in other sectors of the 

economy.49 There are many reasons for 

these differences, including wage 

differences and the fact that the utility 

sector is more capital-intensive and less 

labor-intensive than other sectors. 

Energy conservation standards have the 

effect of reducing consumer utility bills. 

Because reduced consumer 

expenditures for energy likely lead to 

increased expenditures in other sectors 

of the economy, the general effect of 

efficiency standards is to shift economic 

activity from a less labor-intensive 

sector (i.e., the utility sector) to more 

labor-intensive sectors (e.g., the retail 

and service sectors). Thus, based on the 

BLS data alone, DOE believes net 

national employment may increase due 

to shifts in economic activity resulting 

from energy conservation standards. 

DOE estimated indirect national 

employment impacts for the standard 

levels considered in this final rule using 

an input/output model of the U.S. 

economy called Impact of Sector Energy 

Technologies version 3.1.1 (ImSET).50

ImSET is a special-purpose version of 

the ‘‘U.S. Benchmark National InputOutput’’ (I–O) model, which was 

designed to estimate the national 

employment and income effects of 

energy-saving technologies. The ImSET 

software includes a computer-based I–O 

model having structural coefficients that 

characterize economic flows among 187 

sectors most relevant to industrial, 

commercial, and residential building 

energy use. 

DOE notes that ImSET is not a general 

equilibrium forecasting model, and 

understands the uncertainties involved 

in projecting employment impacts, 

especially changes in the later years of 

the analysis. Because ImSET does not 

incorporate price changes, the 

employment effects predicted by ImSET 

may over-estimate actual job impacts 

over the long run for this rule. 

Therefore, DOE generated results for 

near-term timeframes, where these 

uncertainties are reduced. For more 

details on the employment impact 

analysis, see chapter 16 of the final rule 

TSD. 

V. Analytical Results 

The following section addresses the 

results from DOE’s analyses with 

respect to the considered energy 

conservation standards for PTAC and 

PTHP equipment. It addresses the TSLs 

examined by DOE and the projected 

impacts of each of these levels if 

adopted as energy conservation 

standards for PTAC and PTHP 

equipment. Additional details regarding 

DOE’s analyses are contained in the 

final rule TSD supporting this 

document. 

A. Trial Standard Levels 

In the September 2014 NOPR, DOE 

selected five TSLs above the baseline 

level for the PTAC and PTHP equipment 


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classes. 79 FR at 55573–73 The baseline 

level in this final rule corresponds to 

the energy efficiency equations in ANSI/ 

ASHRAE/IES Standard 90.1–2013 for 

PTACs and PTHPs. The TSL 1, 2, 3, 4 

efficiency levels represent matched 

pairs of efficiency levels at 2.2%, 6.2%, 

10.2%, and 14.2% above the baseline 

level. TSL 5, at 16.2% above the 

baseline level, represents the maximum 

technologically feasible (‘‘max tech’’) 

level for each class of equipment in 

DOE’s analysis, as discussed in section 

IV.C.5. 

In developing the TSLs, DOE used the 

same EERs for PTAC and PTHP. EEI 

supported setting PTAC and PTHP 

standards at the same level, and said 

that approach will lead to economies of 

scale and will align with the approach 

taken by ASHRAE and other DOE 

standards. (EEI, NOPR Public Meeting 

Transcript, No. 37 at p. 206–7) AHRI 

commented that certain PTACs and 

PTHPs may have unequal efficiency 

levels because the suction gas reheat 

provided by the reversing valve for 

PTHPs enables gain of evaporating 

capacity without added input power. 

(AHRI, No. 35 at p. 12) On the other 

hand, the California IOUs commented 

that PTACs should be held to higher 

standards than PTHPs for cooling 

efficiency, due to inherent mechanical 

advantages resulting from not having a 

reverse cycle valve. (CA IOUs, No. 33 at 

p. 3) 

DOE notes that the pressure drop 

associated with the reversing valve in a 

PTHP (and the associated lost energy 

that could have been used for space 

conditioning), a component not present 

in a PTAC, makes achieving high 

efficiency levels more challenging for a 

heat pump than for an air conditioner. 

The AHRI comment indicates that 

suction heating achieved in the 

reversing valve of a PTHP will improve 

efficiency; however, in cooling mode, 

the refrigerant flows passing through the 

reversing valve are the compressor 

discharge, which flows to the outdoor 

coil, and the suction gas, which 

approaches the valve from the indoor 

coil and passes to the compressor 

suction. AHRI’s comment does not 

explain how thermal exchange between 

compressor discharge and suction flows 

can improve efficiency. The additional 

pressure drop of the reversing valve 

reduces heat pump efficiency, and the 

potential thermal exchange between the 

refrigerant flows passing through the 

valve would also reduce efficiency. 

However, the operation of a heat pump 

both in summer for cooling and in 

winter for heating leads to a far greater 

number of operating hours for heat 

pumps as compared to air conditioners. 

The greater operating hours mean that 

both energy use and potential savings 

are higher for heat pumps. 

Consequently, higher efficiency levels 

can often be more cost effective in heat 

pumps than in air conditioners, since 

the higher purchase cost can be 

recovered more rapidly in a heat pump. 

DOE considered both the technical and 

economic factors in selecting the 

efficiency level differential between 

PTACs and PTHPs, one which would 

suggest higher EER for PTHPs, the other 

lower EER. Based on the selection of 

equal EERs for the different equipment 

in addendum BK to ASHRAE 90.1– 

2010, much of which was adopted in 

ASHRAE 90.1–2013, DOE considered 

equal EERs for these equipment classes 

in the framework document. DOE 

sought comments on this issue, and 

AHRI commented that if DOE raises the 

standards for PTACs, then they should 

be equal to the efficiency level of 

PTHPs. (AHRI, Framework Public 

Meeting Transcript, No. 7 at p. 50) 

Table V.1 shows the mapping 

between TSLs and efficiency levels in 

each TSL. DOE notes that the baseline 

level is 1.8 percent higher than current 

Federal standards for PTAC equipment, 

but is equivalent to current Federal 

standards for PTHP equipment. 

TABLE V.1—MAPPING BETWEEN TSLS AND EFFICIENCY LEVELS

Equipment class 

Baseline (ANSI/ 

ASHRAE/IES 

Standard 

90.1–2013) * 

TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

Max-Tech 

PTAC Efficiency Level ....................................... EL1 EL2 EL3 EL4 EL5 EL6 

PTHP Efficiency Level ....................................... Current Federal 

ECS 

EL1 EL2 EL3 EL4 EL5 

* This level represents the ANSI/ASHRAE/IES Standard 90.1–2013 minimum for PTAC and PTHP equipment. This level is used as the Baseline since DOE is required to, at a minimum, adopt the ASHRAE levels as the Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)) DOE notes that 

the Baseline level is 1.8% higher than current Federal ECS for PTAC equipment, but is equivalent to current Federal ECS for PTHP equipment. 

For PTAC equipment, the Baseline level is also termed EL1. 

Current Federal energy conservation 

standards and the efficiency levels 

specified by ANSI/ASHRAE/IES 

Standard 90.1–2013 for PTACs and 

PTHPs are a function of the equipment’s 

cooling capacity. Both the Federal 

energy conservation standards and the 

efficiency standards in ANSI/ASHRAE/ 

IES Standard 90.1–2013 are based on 

equations to calculate the efficiency 

levels for PTACs and PTHPs with a 

cooling capacity greater than or equal to 

7,000 Btu/h and less than or equal to 

15,000 Btu/h for each equipment class. 

To derive the standards (i.e., efficiency 

level as a function of cooling capacity), 

DOE plotted the representative cooling 

capacities and the corresponding 

efficiency levels for each TSL. DOE then 

calculated the equation of the line 

passing through the EER values for 

9,000 Btu/h and 15,000 Btu/h for 

standard size PTACs and PTHPs. Table 

V.2 and Table V.3 identify the energy 

efficiency equations for each TSL for 

standard size PTACs and PTHPs. 

TABLE V.2—ENERGY-EFFICIENCY EQUATIONS (EER AS A FUNCTION OF COOLING CAPACITY) BY TSL FOR STANDARD SIZE

PTACS

Standard size ** PTACs Energy efficiency equation * 

Baseline *** (ANSI/ASHRAE/IES Standard 90.1–2013) ........................... EER = 14.0 ¥ (0.300 × Cap †/1000). 

TSL 1 ........................................................................................................ EER = 14.4 ¥ (0.312 × Cap †/1000). 

TSL 2 ........................................................................................................ EER = 14.9 ¥ (0.324 × Cap †/1000). 

TSL 3 ........................................................................................................ EER = 15.5 ¥ (0.336 × Cap †/1000). 


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TABLE V.2—ENERGY-EFFICIENCY EQUATIONS (EER AS A FUNCTION OF COOLING CAPACITY) BY TSL FOR STANDARD SIZE

PTACS—Continued 

Standard size ** PTACs Energy efficiency equation * 

TSL 4 ........................................................................................................ EER = 16.0 ¥ (0.348 × Cap †/1000). 

TSL 5—MaxTech ...................................................................................... EER = 16.3 ¥ (0.354 × Cap †/1000). 

* For equipment rated according to the DOE test procedure, all EER values must be rated at 95 °F outdoor dry-bulb temperature for air-cooled 

products and evaporatively-cooled products and at 85 °F entering water temperature for water cooled products. 

** Standard size refers to PTAC or PTHP equipment with wall sleeve dimensions greater than or equal to 16 inches high, or greater than or 

equal to 42 inches wide. 

*** This level represents the ANSI/ASHRAE/IES Standard 90.1–2013 minimum for PTAC and PTHP equipment. This level is used as the Baseline since DOE is required to, at a minimum, adopt the ASHRAE levels as the Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)).

† Cap means cooling capacity in Btu/h at 95 °F outdoor dry-bulb temperature. 

TABLE V.3—ENERGY-EFFICIENCY EQUATIONS (EER AND COP AS A FUNCTION OF COOLING CAPACITY) BY TSL FOR

STANDARD SIZE PTHPS

Standard size ** PTHPs Energy efficiency equation * 

Baseline *** (ANSI/ASHRAE/IES Standard 90.1–2013) ........................... EER = 14.0 ¥ (0.300 × Cap †/1000). 

COP = 3.7 ¥ (0.052 × Cap †/1000). 

TSL 1 ........................................................................................................ EER = 14.4 ¥ (0.312 × Cap †/1000). 

COP = 3.8 ¥ (0.058 × Cap †/1000). 

TSL 2 ........................................................................................................ EER = 14.9 ¥ (0.324 × Cap †/1000). 

COP = 4.0 ¥ (0.064 × Cap †/1000). 

TSL 3 ........................................................................................................ EER = 15.5 ¥ (0.336 × Cap †/1000). 

COP = 4.1 ¥ (0.068 × Cap †/1000). 

TSL 4 ........................................................................................................ EER = 16.0 ¥ (0.348 × Cap †/1000). 

COP = 4.2 ¥ (0.070 × Cap †/1000). 

TSL 5—MaxTech ...................................................................................... EER = 16.3 ¥ (0.354 × Cap †/1000). 

COP = 4.3 ¥ (0.073 × Cap †/1000). 

* For equipment rated according to the DOE test procedure, all EER values must be rated at 95 °F outdoor dry-bulb temperature for air-cooled 

products and evaporatively-cooled products and at 85 °F entering water temperature for water cooled products. All COP values must be rated at 

47 °F outdoor dry-bulb temperature for air-cooled products, and at 70 °F entering water temperature for water-source heat pumps. 

** Standard size refers to PTAC or PTHP equipment with wall sleeve dimensions greater than or equal to 16 inches high, or greater than or 

equal to 42 inches wide. 

*** This level represents the ANSI/ASHRAE/IES Standard 90.1–2013 minimum for PTAC and PTHP equipment. This level is used as the Baseline since DOE is required to, at a minimum, adopt the ASHRAE levels as the Federal standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)) 

† Cap means cooling capacity in Btu/h at 95 °F outdoor dry-bulb temperature. 

For PTACs and PTHPs with cooling 

capacity less than 7,000 Btu/h, DOE 

determined the EERs using a cooling 

capacity of 7,000 Btu/h in the 

efficiency-capacity equations. For 

PTACs and PTHPs with a cooling 

capacity greater than 15,000 Btu/h 

cooling capacity, DOE determined the 

EERs using a cooling capacity of 15,000 

Btu/h in the efficiency-capacity 

equations. This is the same method 

established in the Energy Policy Act of 

1992 and provided in ANSI/ASHRAE/

IES Standard 90.1–2013 for calculating 

the EER and COP of equipment with 

cooling capacities smaller than 7,000 

Btu/h and larger than 15,000 Btu/h. (42 

U.S.C. 6313(a)(3)(A)) 

In the September 2014 NOPR, DOE 

proposed the adoption of TSL 2, which 

would have raised efficiency levels for 

PTAC and PTHP equipment 6.2% above 

the ANSI/ASHRAE/IES Standard 90.1– 

2013 baseline levels. 79 FR at 55589–90. 

Stakeholders had mixed comments 

regarding the availability of models that 

meet the proposed TSL 2 across the 

range of cooling capacities. ASAP et al. 

commented to state their support for 

proposed standards and indicate that 

there are PTACs and PTHPs available 

today across the range of cooling 

capacities with efficiency levels that 

significantly exceed the proposed 

standard. (ASAP et al., No. 30 at p. 1– 

2) The CA IOUs commented that several 

products from a variety of 

manufacturers and across the range of 

capacities (at capacities of 7, 9, 12, and 

14 kBtu/h) meet or comfortably exceed 

the proposed standard levels. (CA IOUs, 

No. 33 at p. 1–2) Goodman commented 

that some cooling capacities, such as 

12,000 Btu/h, do not have product 

offerings that meet TSL 2. (Goodman, 

NOPR Public Meeting Transcript, No. 37 

at p.55) AHRI commented that the 

cooling capacities of 9 kBtu/h and 15 

kBtu/h are the only PTAC capacities 

with models available now that meet the 

proposed TSL 2, based on data from the 

AHRI Directory. (AHRI, NOPR Public 

Meeting Transcript, No. 37 at p. 14) In 

this final rule, DOE adopts the less 

stringent baseline level for PTAC and 

PTHP equipment. DOE determined that 

82% of the standard size PTAC models 

listed in the AHRI Directory will meet 

the baseline efficiency level for PTACs 

adopted in this rule. 

B. Economic Justification and Energy 

Savings 

As discussed in section II.A, EPCA 

provides seven factors to be evaluated in 

determining whether a more stringent 

standard for PTACs and PTHPs is 

economically justified. (42 U.S.C. 

6313(a)(6)(B)(ii)) The following sections 

generally discuss how DOE has 

addressed each of those factors in this 

rulemaking. 

1. Economic Impacts on Commercial 

Consumers 

DOE analyzed the economic impacts 

on PTAC and PTHP equipment 

consumers by looking at the effects that 

amended standards would have on the 

LCC and PBP. DOE also examined the 

impacts of potential standards on 

consumer subgroups. These analyses are 

discussed below. 

a. Life-Cycle Cost and Payback Period 

In general, higher-efficiency 

equipment affects consumers in two 

ways: (1) Purchase price increases, and 

(2) annual operating costs decrease. 

Inputs used for calculating the LCC and 

PBP include total installed costs (i.e., 


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equipment price plus installation costs), 

and operating costs (i.e., annual energy 

use, energy prices, energy price trends, 

repair costs, and maintenance costs). 

The LCC calculation also uses 

equipment lifetime and a discount rate. 

Chapter 8 of the final rule TSD provides 

detailed information on the LCC and 

PBP analyses. 

Table V.4 through Table V.7 show the 

LCC and PBP results for the TSL 

efficiency levels considered for each 

PTAC and PTHP equipment class. In the 

first of each pair of tables, the simple 

payback is measured relative to the 

baseline equipment. In the second table, 

the LCC savings are measured relative to 

the base-case efficiency distribution in 

the compliance year (see section IV.F.8 

of this document). 

TABLE V.4—AVERAGE LCC AND PBP RESULTS FOR STANDARD SIZE EQUIPMENT <12,000 Btu/h COOLING CAPACITY

[9,000 Btu/h cooling capacity] 

TSL 

Efficiency 

level 

(PTAC) 

Efficiency 

level 

(PTHP) 

Average costs (2014$) Simple 

payback 

(years) 

Average 

lifetime 

Installed cost (years) First year’s 

operating cost 

Lifetime 

operating cost LCC 

1 ............... 2 1 $1,492 $253 $1,546 $3,038 5.0 8 

2 ............... 3 2 1,509 251 1,534 3,043 5.6 

3 ............... 4 3 1,528 249 1,523 3,050 6.0 

4 ............... 5 4 1,548 247 1,511 3,059 6.3 

5 ............... 6 5 1,558 246 1,506 3,064 6.4 

Note: The results for each TSL are calculated assuming that all consumers use equipment with that efficiency level. The PBP is measured relative to the baseline equipment. 

TABLE V.5—LCC SAVINGS RELATIVE TO THE BASE CASE EFFICIENCY DISTRIBUTION FOR STANDARD SIZE EQUIPMENT

<12,000 Btu/h COOLING CAPACITY

[9,000 Btu/h cooling capacity] 

TSL Efficiency level 

(PTAC) 

Efficiency level 

(PTHP) 

Life-cycle cost savings 

Percentage of consumers that 

experience net cost ** 

Average savings 

(2014$) * 

1 ............... 2 1 27 $0 .17 

2 ............... 3 2 50 ($3 .26) 

3 ............... 4 3 78 ($9 .85) 

4 ............... 5 4 87 ($18 .50) 

5 ............... 6 5 88 ($23 .50) 

* Parentheses indicate negative values. 

** The calculation includes consumers with zero LCC savings (no impact). 

TABLE V.6—AVERAGE LCC AND PBP RESULTS FOR STANDARD SIZE EQUIPMENT ≥12,000 Btu/h COOLING CAPACITY

[9,000 Btu/h cooling capacity] 

TSL 

Efficiency 

level 

(PTAC) 

Efficiency 

level 

(PTHP) 

Average costs (2014$) Simple 

payback 

(years) 

Average 

lifetime 

Installed cost (years) First year’s 

operating cost 

Lifetime 

operating cost LCC 

1 ............... 2 1 $1,747 $316 $1,931 $3,678 6.0 8 

2 ............... 3 2 1,770 314 1,915 3,685 6.6 

3 ............... 4 3 1,800 311 1,899 3,700 7.5 

4 ............... 5 4 1,837 309 1,884 3,721 8.5 

5 ............... 6 5 1,858 307 1,877 3,735 9.0 

Note: The results for each TSL are calculated assuming that all consumers use equipment with that efficiency level. The PBP is measured relative to the baseline equipment. 

TABLE V.7—SAVINGS RELATIVE TO THE BASE CASE EFFICIENCY DISTRIBUTION FOR STANDARD SIZE EQUIPMENT ≥12,000 

Btu/h COOLING CAPACITY

[15,000 Btu/h cooling capacity] 

TSL Efficiency level 

(PTAC) 

Efficiency level 

(PTHP) 

Life-cycle cost savings 

Percentage of consumers that 

experience net cost ** Average savings (2014$) * 

1 ............... 2 1 34 ($0.95) 

2 ............... 3 2 51 ($5.51) 

3 ............... 4 3 85 ($19.24) 

4 ............... 5 4 93 ($40.53) 

5 ............... 6 5 95 ($54.01) 

* Parentheses indicate negative values. 

** The calculation includes consumers with zero LCC savings (no impact). 


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For PTACs and PTHPs with a cooling 

capacity less than 7,000 Btu/h, DOE 

established the proposed energy 

conservation standards using a cooling 

capacity of 7,000 Btu/h in the proposed 

efficiency-capacity equation. DOE 

believes the LCC and PBP impacts for 

equipment in this category will be 

similar to the impacts of the 9,000 Btu/ 

h units because the MSP and usage 

characteristics are in a similar range. 

Similarly, for PTACs and PTHPs with a 

cooling capacity greater than 15,000 

Btu/h, DOE established the proposed 

energy conservation standards using a 

cooling capacity of 15,000 Btu/h in the 

proposed efficiency-capacity equation. 

DOE believes the impacts for equipment 

in this category will be similar to units 

with a cooling capacity of 

15,000 Btu/h. 

b. Consumer Subgroup Analysis 

As described in section IV.I of this 

document, DOE estimated the impact of 

the considered TSLs on independentlyoperating lodging businesses. Table V.8 

shows the average LCC savings from 

potential energy conservation standards, 

and Table V.9 shows the simple 

payback period for this subgroup. In 

most cases, the average LCC savings and 

PBP for the subgroup at the considered 

efficiency levels are not substantially 

different from the average for all 

businesses. Chapter 11 of the final rule 

TSD presents the complete LCC and 

PBP results for the subgroup. 

TABLE V.8—MEAN LIFE-CYCLE COST SAVINGS FOR PTAC AND PTHP EQUIPMENT PURCHASED BY THE CONSIDERED

SUBGROUP

[2014$] 

Equipment class 

(cooling capacity) TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

Standard Size Equipment <12,000 Btu/

h Cooling Capacity (9,000 Btu/h 

Cooling Capacity) ............................... ($0.14) ($4.12) ($11.46) ($20.89) ($26.28) 

Standard Size Equipment ≥12,000 Btu/

h Cooling Capacity (15,000 Btu/h 

Cooling Capacity) ............................... ($1.14) ($6.38) ($21.10) ($43.42) ($57.41) 

* Parentheses indicate negative values. 

Note: The LCC savings for each TSL are calculated relative to the base case efficiency distribution. The calculation includes consumers with 

zero LCC savings (no impact). 

TABLE V.9—SIMPLE PAYBACK PERIOD FOR PTAC AND PTHP EQUIPMENT PURCHASED BY THE CONSIDERED SUBGROUP

[Years] 

Equipment class 

(cooling capacity) TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

Standard Size Equipment <12,000 Btu/

h Cooling Capacity (9,000 Btu/h 

Cooling Capacity) ............................... 5.0 5.6 6.0 6.3 6.4 

Standard Size Equipment ≥12,000 Btu/

h Cooling Capacity (15,000 Btu/h 

Cooling Capacity) ............................... 6.0 6.6 7.5 8.5 9.0 

Note: The simple payback period is calculated only for affected establishments. Establishments with no impact have an undefined payback period, and are therefore not included in calculating the median PBP. 

For PTACs and PTHPs with a cooling 

capacity less than 7,000 Btu/h, DOE 

believes that the subgroup LCC and PBP 

impacts will be similar to the impacts of 

the 9,000 Btu/h units because the MSP 

and usage characteristics are in a similar 

range. Similarly, for PTACs and PTHPs 

with a cooling capacity greater than 

15,000 Btu/h, DOE believes the impacts 

will be similar to units with a cooling 

capacity of 15,000 Btu/h. 

c. Rebuttable Presumption Payback 

As discussed above, EPCA establishes 

a rebuttable presumption that an energy 

conservation standard is economically 

justified if the increased purchase cost 

for equipment that meets the standard is 

less than three times the value of the 

first-year energy savings resulting from 

the standard. In calculating a rebuttable 

presumption payback period for each of 

the considered TSLs, DOE used discrete 

values rather than distributions for 

input values, and, as required by EPCA, 

based the energy use calculation on the 

DOE test procedures for PTAC and 

PTHP equipment. As a result, DOE 

calculated a single rebuttable 

presumption payback value, and not a 

distribution of payback periods, for each 

efficiency level. Table V.10 presents the 

rebuttable-presumption payback periods 

for the considered TSLs. While DOE 

examined the rebuttable-presumption 

criterion, it considered whether the 

standard levels considered for this rule 

are economically justified through a 

more detailed analysis of the economic 

impacts of those levels, pursuant to 42 

U.S.C. 6295(o)(2)(B)(i), that considers 

the full range of impacts to the 

consumer, manufacturer, nation, and 

environment. The results of that 

analysis serve as the basis for DOE to 

evaluate the economic justification for a 

potential standard level, thereby 

supporting or rebutting the results of 

any preliminary determination of 

economic justification. Table V.10 

shows the rebuttable presumption PBPs 

for the considered TSLs for PTAC and 

PTHP equipment. 


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TABLE V.10—REBUTTABLE-PRESUMPTION PAYBACK PERIOD (YEARS) FOR PTAC AND PTHP EQUIPMENT

Trial standard level 

1 2 3 4 5 

Standard Size Equipment (9,000 Btu/h) .............................. 5.0 5.6 6.0 6.3 6.4 

Standard Size Equipment (15,000 Btu/h) ............................ 6.0 6.6 7.5 8.5 9.0 

2. Economic Impacts on Manufacturers 

DOE performed a manufacturer 

impact analysis (MIA) to estimate the 

impact of amended energy conservation 

standards on PTAC and PTHP 

manufacturers. The following section 

describes the expected impacts on 

manufacturers at each considered TSL. 

Chapter 12 of the final rule TSD 

explains the analysis in further detail. 

a. Industry Cash Flow Analysis Results 

Table V.11 depicts the estimated 

financial impacts (represented by 

changes in industry net present value, 

or INPV) of amended energy 

conservation standards on 

manufacturers of PTACs and PTHPs, as 

well as the conversion costs that DOE 

expects manufacturers would incur for 

all equipment classes at each TSL. 

As discussed in section IV.J.2, DOE 

modeled two different markup scenarios 

to evaluate the range of cash flow 

impacts on the PTAC and PTHP 

industry: (1) The preservation of gross 

margin percentage markup scenario; and 

(2) the preservation of per unit operating 

profit markup scenario. 

To assess the less severe end of the 

range of potential impacts, DOE 

modeled a preservation of gross margin 

percentage markup scenario, in which a 

uniform ‘‘gross margin percentage’’ 

markup is applied across all potential 

efficiency levels. In this scenario, DOE 

assumed that a manufacturer’s absolute 

dollar markup would increase as 

production costs increase in the 

standards case. 

To assess the more severe end of the 

range of potential impacts, DOE 

modeled the preservation of per unit 

operating profit markup scenario, which 

reflects manufacturer concerns 

surrounding their inability to maintain 

margins as manufacturing production 

costs increase to meet more stringent 

efficiency levels. In this scenario, as 

manufacturers make the necessary 

investments required to convert their 

facilities to produce new standardscompliant equipment and incur higher 

costs of goods sold, their percentage 

markup decreases. Operating profit does 

not change in absolute dollars but 

decreases as a percentage of revenue. 

Each of the modeled scenarios results 

in a unique set of cash flows and 

corresponding industry values at each 

TSL. In the following discussion, the 

INPV results refer to the difference in 

industry value between the base case 

and each standards case that result from 

the sum of discounted cash flows from 

the base year (2015) through the end of 

the analysis period, which varies by 

equipment class and standard level. To 

provide perspective on the short-run 

cash flow impact, DOE includes in the 

discussion of results a comparison of 

free cash flow between the base case 

and the standards case at each TSL in 

the year before amended standards 

would take effect. This figure provides 

an understanding of the magnitude of 

the required conversion costs relative to 

the cash flow generated by the industry 

in the base case. 

The tables below present results for 

both the preservation of gross margin 

percentage markup scenario and the 

preservation of per-unit operating profit 

markup scenario. As noted, the 

preservation of operating profit scenario 

accounts for the more severe impacts 

presented. 

TABLE V.11—MANUFACTURER IMPACT ANALYSIS RESULTS FOR PTACS AND PTHPS, GROSS MARGIN PERCENTAGE

MARKUP SCENARIO

Units Base case 

Trial standard level * 

1 2 3 4 5 

INPV ................................................ 2014$M .............. 62.2 61.1 63.1 61.9 63.1 60.3 

Change in INPV .............................. 2014$M .............. .................... (1.1 ) 0.8 (0.3 ) 0.8 (1.9 ) 

% Change .......... .................... (1.8 ) 1.3 (0.5 ) 1.4 (3.1 ) 

Product Conversion Costs .............. 2014$M .............. .................... 2.2 4.8 7.3 8.6 13.7 

Capital Conversion Costs ............... 2014$M .............. .................... 2.3 2.9 7.2 7.2 7.5 

Total Conversion Costs ................... 2014$M .............. .................... 4.5 7.7 14.5 15.8 21.2 

Free Cash Flow ** ........................... 2014$M .............. 3.9 2.3 1.4 (1.3 ) (1.7 ) (3.4 ) 

% Change .......... .................... (40.6 ) (64.9 ) (133.2 ) (144.5 ) (188.5 ) 

* Parentheses indicate negative values. 

** DOE presents free cash flow impacts in 2018, the year before the 2019 compliance date for PTACs in the standards case. DOE estimates 

free cash flow impacts in the standards case will be most severe in 2018 and therefore presents those impacts here. 

TABLE V.12—MANUFACTURER IMPACT ANALYSIS RESULTS FOR PTACS AND PTHPS, PRESERVATION OF OPERATING

PROFIT MARKUP SCENARIO

Units Base case 

Trial standard level * 

1 2 3 4 5 

INPV ................................................ 2014$M .............. 62.2 60.7 61.8 59.3 58.9 55.6 

Change in INPV .............................. 2014$M .............. .................... (1.5 ) (0.5 ) (3.0 ) (3.4 ) (6.7 ) 

% Change .......... .................... (2.4 ) (0.8 ) (4.8 ) (5.4 ) (10.7 ) 

Product Conversion Costs .............. 2014$M .............. .................... 2.2 4.8 7.3 8.6 13.7 


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51 ‘‘Annual Survey of Manufacturers: General 

Statistics: Statistics for Industry Groups and 

Industries,’’ U.S. Census Bureau, 2011. Available at 

www.census.gov/manufacturing/asm/index.html. 

TABLE V.12—MANUFACTURER IMPACT ANALYSIS RESULTS FOR PTACS AND PTHPS, PRESERVATION OF OPERATING

PROFIT MARKUP SCENARIO—Continued 

Units Base case 

Trial standard level * 

1 2 3 4 5 

Capital Conversion Costs ............... 2014$M .............. .................... 2.3 2.9 7.2 7.2 7.5 

Total Conversion Costs ................... 2014$M .............. .................... 4.5 7.7 14.5 15.8 21.2 

Free Cash Flow ............................... 2014$M .............. 3.9 2.3 1.3 (1.4 ) (1.9 ) (3.6 ) 

% Change .......... .................... (41.1 ) (66.2 ) (135.6 ) (148.3 ) (192.8 ) 

* Parentheses indicate negative values. 

** DOE presents free cash flow impacts in 2018, the year before the 2019 compliance date for PTACs in the standards case. DOE estimates 

free cash flow impacts in the standards case will be most severe in 2018 and therefore presents those impacts here. 

At TSL 1, DOE estimates the impacts 

on INPV to range from ¥$1.5 million to 

¥$1.1 million, or a change of ¥2.4 

percent to ¥1.8 percent. Industry free 

cash flow is estimated to decrease by as 

much as $1.6 million, or a change of 

41.1 percent compared to the base-case 

value of $3.9 million in the year before 

the compliance date (2018). At TSL 1, 

DOE estimates industry conversion 

costs of $4.5 million. 

At TSL 2, DOE estimates impacts on 

INPV to range from ¥$0.5 million to 

$0.8 million, or a change in INPV of 

¥0.8 percent to 1.3 percent. At this 

level, industry free cash flow is 

estimated to decrease by as much as 

$2.6 million, or a change of 66.2 percent 

compared to the base-case value of $3.9 

million in the year before the 

compliance date (2018). DOE expects 

conversion costs at this level to increase 

to $7.7 million, reflecting the need for 

additional motor and control changes as 

well as a more significant R&D and 

testing burden. The INPV impacts at 

TSL 2 are slightly less severe than those 

at TSL 1 due to the interplay of 

conversion costs, manufacturer selling 

prices, and shipments. Specifically, the 

anticipated increase in per-unit 

purchase price at this level combined 

with steady shipments is expected to 

dampen the effects of conversion costs 

on INPV. 

At TSL 3, DOE estimates impacts on 

INPV to range from ¥$3.0 million to 

¥$0.3 million, or a change in INPV of 

¥4.8 percent to ¥0.5 percent. At this 

level, industry free cash flow is 

estimated to decrease by as much as 

$5.2 million, or a change of 135.6 

percent compared to the base-case value 

of $3.9 million in the year before the 

compliance date (2018). DOE estimates 

conversion costs at TSL 3 would 

increase to $14.5 million, nearly double 

the expected conversion costs at TSL 2. 

Anticipated conversion costs at this 

level include investing in new tooling 

and redesigning equipment to 

incorporate additional coils and/or 

formed coils. 

At TSL 4, DOE estimates impacts on 

INPV to range from ¥$3.4 million to 

$0.8 million, or a change in INPV of 

¥5.4 percent to 1.4 percent. At this 

level, industry free cash flow is 

estimated to decrease by as much as 

$5.7 million, or a change of 148.3 

percent compared to the base-case value 

of $3.9 million in the year before the 

compliance date (2018). DOE estimates 

conversion costs at TSL 4 would 

increase to $15.8 million. At this level, 

however, DOE does not anticipate 

capital conversion costs beyond those 

required at TSL 3. Rather, product 

conversion costs account for the full 

increase. Similar to TSL 2, the INPV 

impacts at TSL 4 are slightly less severe 

than those at TSL 3 due to the interplay 

of conversion costs, manufacturer 

selling prices, and shipments. The 

anticipated increase in per-unit 

purchase price at this level combined 

with steady shipments is expected to 

dampen the effects of conversion costs 

on INPV. 

TSL 5 represents the use of max-tech 

design options for each equipment class. 

At this level, DOE estimates impacts on 

INPV to range from ¥$6.7 million to 

¥$1.9 million, or a change in INPV of 

¥10.7 percent to ¥3.1 percent. Industry 

free cash flow is estimated to decrease 

by $7.5 million, or a change of 192.8 

percent compared to the base-case value 

of $3.9 million in the year before the 

compliance date (2018). At this level, 

DOE estimates conversion costs would 

increase to a $21.2 million. 

b. Direct Impacts on Employment 

To quantitatively assess the potential 

impacts of amended energy 

conservation standards on direct 

employment, DOE used the GRIM to 

estimate the domestic labor 

expenditures and number of direct 

employees in the base case and at each 

TSL from 2015 through 2048. DOE used 

statistical data from the U.S. Census 

Bureau’s 2011 Annual Survey of 

Manufacturers,51 the results of the 

engineering analysis, and interviews 

with manufacturers to determine the 

inputs necessary to calculate industrywide labor expenditures and domestic 

direct employment levels. Labor 

expenditures related to producing the 

equipment are a function of the labor 

intensity of producing the equipment, 

the sales volume, and an assumption 

that wages remain fixed in real terms 

over time. The total labor expenditures 

in each year are calculated by 

multiplying the MPCs by the labor 

percentage of MPCs. DOE estimates that 

50 percent of PTAC and PTHP units are 

produced domestically. 

The total labor expenditures in the 

GRIM were then converted to domestic 

production employment levels by 

dividing production labor expenditures 

by the annual payment per production 

worker (production worker hours times 

the labor rate found in the U.S. Census 

Bureau’s 2011 Annual Survey of 

Manufacturers). The production worker 

estimates in this section only cover 

workers up to the line-supervisor level 

who are directly involved in fabricating 

and assembling a product within an 

OEM facility. Workers performing 

services that are closely associated with 

production operations, such as materials 

handling tasks using forklifts, are also 

included as production labor. DOE’s 

estimates only account for production 

workers who manufacture the specific 

equipment covered by this rulemaking. 

To estimate an upper bound to 

employment change, DOE assumes all 

domestic manufacturers would choose 

to continue producing equipment in the 

U.S. and would not move production to 

foreign countries. To estimate a lower 

bound to employment, DOE estimates 

the maximum portion of the industry 

that would choose to leave the industry 

or relocate production overseas rather 

than make the necessary conversions at 


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43198 Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 

domestic production facilities. A 

complete description of the assumptions 

used to generate these upper and lower 

bounds can be found in chapter 12 of 

the final rule TSD. 

As noted above, DOE estimates that 

50 percent of PTAC and PTHP units 

sold in the United States are 

manufactured domestically. In the 

absence of amended energy 

conservation standards, DOE estimates 

that the PTAC and PTHP industry 

would employ 175 domestic production 

workers in 2019. 

Table V.13 shows the range of impacts 

of potential amended energy 

conservation standards on U.S. 

production workers of PTACs and 

PTHPs. The potential changes to direct 

employment in the standards case 

suggest that the PTAC and PTHP 

industry could experience anything 

from a slight gain in domestic direct 

employment to a loss of all domestic 

direct employment. However, since this 

rule maintains the standard at baseline 

(i.e., ASHRAE), DOE does not expect 

any loss in domestic direct employment. 

TABLE V.13—POTENTIAL CHANGES IN THE TOTAL NUMBER OF STANDARD SIZE PTAC AND PTHP PRODUCTION WORKERS

IN 2019 

Trial standard level * 

Base case † 1 2 3 4 5 

Potential Changes in Domestic Production Workers in 2019 ............................ ........................ (175) to 4 (175) to 10 (175) to 17 (175) to 22 (175) to 24 

* Parentheses indicate negative values. 

† Base case assumes 175 domestic production workers in the PTAC and PTHP industry in 2019. 

The upper end of the range estimates 

the maximum increase in the number of 

production workers in the PTAC and 

PTHP industry after implementation of 

an amended energy conservation 

standard. It assumes manufacturers 

would continue to produce the same 

scope of covered equipment within the 

United States and would require some 

additional labor to produce more 

efficient equipment. 

The lower end of the range represents 

the maximum decrease in total number 

of U.S. production workers that could 

result from an amended energy 

conservation standard. Throughout 

interviews, manufacturers stated their 

concerns about increasing offshore 

competition entering the market. If the 

cost of complying with amended 

standards significantly erodes the 

profitability of domestic manufacturers 

relative to their competitors who 

manufacture and/or import PTACs and 

PTHPs from overseas, manufacturers 

with domestic production could decide 

to exit the PTAC and PTHP market and/ 

or shift their production facilities 

offshore. The lower bound of direct 

employment impacts therefore assumes 

domestic production of PTACs and 

PTHPs ceases, as domestic 

manufacturers either exit the market or 

shift production overseas in search of 

reduced manufacturing costs. 

This conclusion is independent of any 

conclusions regarding indirect 

employment impacts in the broader 

United States economy, which are 

documented in chapter 15 of the final 

rule TSD. 

c. Impacts on Manufacturing Capacity 

According to PTAC and PTHP 

manufacturers interviewed, amended 

energy conservation standards would 

not significantly constrain 

manufacturing production capacity. 

Among manufacturers with production 

assets, some indicated that more 

stringent energy conservation standards 

could reduce sales volumes, thereby 

resulting in excess capacity. Among 

importers and distributors, amended 

energy conservation standards would 

not likely impact capacity. Since this 

rule maintains the standard at baseline 

(i.e., ASHRAE), DOE does not expect 

any change in production capacity as a 

result of this rule. 

d. Impacts on Subgroups of 

Manufacturers 

As discussed above, using average 

cost assumptions to develop an industry 

cash flow estimate is not adequate for 

assessing differential impacts among 

subgroups of manufacturers. Small 

manufacturers, niche players, or 

manufacturers exhibiting a cost 

structure that differs largely from the 

industry average could be affected 

differently. DOE used the results of the 

industry characterization to group 

manufacturers exhibiting similar 

characteristics. Specifically, DOE 

identified two subgroups of 

manufacturers for separate impact 

analyses: Manufacturers with 

production assets and small business 

manufacturers. 

DOE initially identified 22 companies 

that sell PTAC and PTHP equipment in 

the U.S. Among U.S. companies, few 

own production assets; rather, they 

import and distribute PTACs and PTHPs 

manufactured overseas, primarily in 

China. DOE identified a subgroup of 

three U.S.-headquartered manufacturers 

that own production assets. These 

manufacturers own tooling or 

manufacturing assets either in the U.S. 

or in foreign countries. Together, these 

three manufacturers account for 

approximately 80 percent of the 

domestic PTAC and PTHP market. 

Because manufacturers with production 

assets will incur different conversion 

costs to comply with amended energy 

conservation standards compared to 

their competitors who do not own 

production assets, DOE conducted a 

separate analysis to evaluate the 

potential impacts of an amended 

standard on this subgroup. 

As with the overall industry analysis, 

DOE modeled two different markup 

scenarios to evaluate the range of cash 

flow impacts on manufacturers with 

production assets: (1) The preservation 

of gross margin percentage markup 

scenario; and (2) the preservation of per 

unit operating profit markup scenario. 

See section IV.J.2 for a complete 

description of markup scenarios. 

Each of the modeled scenarios results 

in a unique set of cash flows and 

corresponding INPV values at each TSL. 

In the following discussion, the INPV 

results refer to the difference in value of 

manufacturers with production assets 

between the base case and standards 

cases as represented by the sum of 

discounted cash flows from the base 

year (2015) through, the end of the 

analysis period, which varies by 

equipment class and standard level. To 

provide perspective on the short-run 

cash flow impact, DOE includes in the 

discussion of results a comparison of 

free cash flow between the base case 

and the standards case at each TSL in 

the year before amended standards 

would take effect. This figure provides 

an understanding of the magnitude of 

the required conversion costs relative to 


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Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 43199 

the cash flow generated by 

manufacturers with production assets in 

the base case. 

The tables below present a range of 

results reflecting both the preservation 

of gross margin percentage markup 

scenario and the preservation of per unit 

operating profit markup scenario. As 

discussed in section IV.J.B, the 

preservation of operating profit scenario 

accounts for the more severe impacts 

presented. Estimated conversion costs 

do not vary with the markup scenario. 

TABLE V.14—MANUFACTURER IMPACT ANALYSIS RESULTS FOR THE SUBGROUP OF PTAC AND PTHP MANUFACTURERS

WITH PRODUCTION ASSETS, GROSS MARGIN PERCENTAGE MARKUP SCENARIO

Units Base case 

Trial standard level * 

1 2 3 4 5 

INPV ................................................ 2014$M .............. 49.8 48 .7 49 .9 48 .1 48 .9 46 .0 

Change in INPV .............................. 2014$M .............. .................... (1 .1) 0 .1 (1 .7) (0 .9) (3 .8) 

% Change .......... .................... (2 .1) 0 .3 (3 .4) (1 .8) (7 .5) 

Product Conversion Costs .............. 2014$M .............. .................... 1 .4 4 .0 6 .5 7 .8 12 .8 

Capital Conversion Costs ............... 2014$M .............. .................... 2 .3 2 .9 7 .2 7 .2 7 .5 

Total Conversion Costs ................... 2014$M .............. .................... 3 .7 6 .9 13 .7 15 .0 20 .4 

Free Cash Flow ** ........................... 2014$M .............. 3.1 1 .7 0 .8 (1 .9) (2 .3) (4 .0) 

% Change .......... .................... (43 .7) (74 .7) (160 .1) (173 .8) (228 .3) 

* Parentheses indicate negative values. 

** DOE presents free cash flow impacts in 2018, the year before the 2019 compliance date for PTACs in the standards case. As described in 

section IV.J.2, the base case (i.e., ASHRAE) compliance date for PTACs is 2017, and the compliance date for PTHPs in both the base case and 

the standards case is 2018. DOE estimates free cash flow impacts in the standards case will be most severe in 2018 and therefore presents 

those impacts here. 

TABLE V.15—MANUFACTURER IMPACT ANALYSIS RESULTS FOR THE SUBGROUP OF PTAC AND PTHP MANUFACTURERS

WITH PRODUCTION ASSETS, PRESERVATION OF OPERATING PROFIT MARKUP SCENARIO

Units Base case 

Trial standard level * 

1 2 3 4 5 

INPV ................................................ 2014$M .............. 49.8 48 .5 48 .9 46 .0 45 .5 42 .3 

Change in INPV .............................. 2014$M .............. .................... (1 .3) (0 .9) (3 .8) (4 .3) (7 .5) 

% Change .......... .................... (2 .7) (1 .8) (7 .7) (8 .6) (15 .1) 

Product Conversion Costs .............. 2014$M .............. .................... 1 .4 4 .0 6 .5 7 .8 12 .8 

Capital Conversion Costs ............... 2014$M .............. .................... 2 .3 2 .9 7 .2 7 .2 7 .5 

Total Conversion Costs ................... 2014$M .............. .................... 3 .7 6 .9 13 .7 15 .0 20 .4 

Free Cash Flow ** ........................... 2014$M .............. 3.1 1 .7 0 .7 (1 .9) (2 .4) (4 .1) 

% Change .......... .................... (44 .2) (76 .0) (162 .6) (177 .7) (232 .6) 

* Parentheses indicate negative values. 

** DOE presents free cash flow impacts in 2018, the year before the 2019 compliance date for PTACs in the standards case. As described in 

section IV.J.2, the base case (i.e., ASHRAE) compliance date for PTACs is 2017, and the compliance date for PTHPs in both the base case and 

the standards case is 2018. DOE estimates free cash flow impacts in the standards case will be most severe in 2018 and therefore presents 

those impacts here. 

In the standards case, manufacturers 

with production assets experience 

financial impacts more negative than 

those facing the industry as a whole, 

discussed in section V.B.2.a. These 

impacts derive primarily from the 

conversion costs manufacturers with 

production assets would incur to 

comply with an amended standard. In 

particular, manufacturers with 

production assets would face capital 

conversion costs not shared by their 

competitors who import and distribute 

PTACs and PTHPs and do not require 

tooling investments. In interviews, 

manufacturers with production assets 

indicated that more stringent standards 

could require significant investment in 

new tooling to support new coil designs. 

In addition, manufacturers with 

production assets would face product 

conversion costs in the form of design 

engineering, product development, 

testing, certification, marketing, and 

related costs. Because this rule 

maintains the standard at baseline (i.e., 

ASHRAE), DOE’s modeling does not 

show any negative financial impacts on 

industry, including manufacturers with 

production assets, as a direct result of 

the standard. 

For the small business subgroup 

analysis, DOE applied the small 

business size standards published by 

the Small Business Administration 

(SBA) to determine whether a company 

is considered a small business. 65 FR 

30836, 30848 (May 15, 2000), as 

amended at 65 FR 53533, 53544 

(September 5, 2000) and codified at 13 

CFR part 121. To be categorized as a 

small business under North American 

Industry Classification System (NAICS) 

code 333415, ‘‘Air-Conditioning and 

Warm Air Heating Equipment and 

Commercial and Industrial Refrigeration 

Equipment Manufacturing,’’ a PTAC 

and PTHP manufacturer and its 

affiliates may employ a maximum of 

750 employees. The 750-employee 

threshold includes all employees in a 

business’s parent company and any 

other subsidiaries. Based on this 

classification, DOE identified 12 

manufacturers that qualify as small 

businesses. The PTAC and PTHP small 

business subgroup analysis is discussed 

in chapter 12 of the final rule TSD and 

in section VI.B of this document. 

e. 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 some 

manufacturers, groups of manufacturers, 

or an entire industry. Assessing the 

impact of a single regulation may 


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43200 Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 

52ENERGY STAR is a U.S. EPA voluntary 

program designed to identify and promote energyefficient products to reduce greenhouse gas 

emissions. For more information on the ENERGY 

STAR program, please visit www.energystar.gov. 

overlook this cumulative regulatory 

burden. Multiple regulations affecting 

the same manufacturer can strain profits 

and can lead companies to abandon 

product lines or markets with lower 

expected future returns than competing 

products. For these reasons, DOE 

conducts an analysis of cumulative 

regulatory burden as part of its 

rulemakings pertaining to appliance 

efficiency. 

For the cumulative regulatory burden 

analysis, DOE looks at other regulations 

that could affect PTAC and PTHP 

manufacturers that will take effect 

approximately three years before or after 

the 2017 compliance date of this final 

rule. In interviews, manufacturers cited 

federal regulations on equipment other 

than PTACs and PTHPs that contribute 

to their cumulative regulatory burden. 

The compliance years and expected 

industry conversion costs of relevant 

amended energy conservation standards 

are indicated in the table below: 

TABLE V.16—COMPLIANCE DATES AND EXPECTED CONVERSION EXPENSES OF FEDERAL ENERGY CONSERVATION

STANDARDS AFFECTING PTAC AND PTHP MANUFACTURERS

Federal energy conservation standards 

Approximate 

compliance 

date 

Estimated total industry conversion 

expense 

2011 Room Air Conditioners: 

76 FR 22454 (April 21, 2011); 76 FR 52854 (August 24, 2011) ......................... 2014 $171M (2009$) 

2007 Residential Furnaces & Boilers: 

72 FR 65136 (November 19, 2007) ...................................................................... 2015 $88M (2006$) * 

2011 Residential Furnaces: 

76 FR 37408 (June 27, 2011); 76 FR 67037 (October 31, 2011) ....................... 2015 $2.5M (2009$) ** 

2011 Residential Central Air Conditioners and Heat Pumps: 

76 FR 37408 (June 27, 2011); 76 FR 67037 (October 31, 2011) ....................... 2015 $26.0M (2009$) ** 

2010 Gas Fired and Electric Storage Water Heaters: 

75 FR 20112 (April 16, 2010) ............................................................................... 2015 $95.4M (2009$) 

Dishwashers *** ............................................................................................................ 2018 TBD 

Commercial Packaged Air-Conditioning and Heating Equipment: *** 

79 FR 58948 (September 30, 2014) ..................................................................... 2018 $226.4M (2013$) 

Commercial Warm-Air Furnaces *** ............................................................................. 2018 $19.9M (2013$)

Furnace Fans: 

79 FR 38129 (July 3, 2014) .................................................................................. 2019 $40.6M (2013$)

Miscellaneous Residential Refrigeration *** ................................................................. 2019 TBD 

Single Packaged Vertical Units: 

79 FR 78614 (December 30, 2014) ...................................................................... 2019 $16.1M (2013$) 

Commercial Water Heaters *** ..................................................................................... 2019 TBD 

Commercial Packaged Boilers *** ................................................................................ 2020 TBD 

* Conversion expenses for manufacturers of oil-fired furnaces and gas-fired and oil-fired boilers associated with the November 2007 final rule 

for residential furnaces and boilers are excluded from this figure. The 2011 direct final rule for residential furnaces sets a higher standard and 

earlier compliance date for oil-fired furnaces than the 2007 final rule. As a result, manufacturers will be required to design to the 2011 direct final 

rule standard. The conversion costs associated with the 2011 direct final rule are listed separately in this table. EISA 2007 legislated more stringent standards and earlier compliance dates for residential boilers than were required by the November 2007 final rule. As a result, gas-fired and 

oil-fired boiler manufacturers were required to design to the EISA 2007 standard beginning in 2012. The conversion costs listed for residential 

gas-fired and oil-fired boilers in the November 2007 residential furnaces and boilers final rule analysis are not included in this figure. 

** Estimated industry conversion expense and approximate compliance date reflect a court-ordered April 24, 2014 remand of the residential 

non-weatherized and mobile home gas furnaces standards set in the 2011 Energy Conservation Standards for Residential Furnaces and Residential Central Air Conditioners and Heat Pumps. The costs associated with this rule reflect implementation of the amended standards for the remaining furnace product classes (i.e., oil-fired furnaces). 

*** The final rule for this energy conservation standard has not been published. The compliance date and analysis of conversion costs have not 

been finalized at this time. (If a value is provided for total industry conversion expense, this value represents an estimate from the September 

2014 NOPR.) 

Additionally, manufacturers cited 

increasing ENERGY STAR52 standards 

for room air conditioners and ductless 

heating and cooling systems as a source 

of regulatory burden. However, DOE 

does not consider ENERGY STAR in its 

presentation of cumulative regulatory 

burden, because ENERGY STAR is a 

voluntary program and is not federally 

mandated. 

Manufacturers also cited the U.S. EPA 

SNAP Program as a source of regulatory 

burden. The SNAP Program evaluates 

and regulates substitutes for ozonedepleting chemicals (such as air 

conditioning refrigerants) that are being 

phased out under the stratospheric 

ozone protection provisions of the CAA. 

On July 9, 2014, the EPA issued a notice 

of proposed rulemaking proposing to 

list three flammable refrigerants (HFC– 

32 (R–32), Propane (R–290), and R– 

441A) as new acceptable substitutes, 

subject to use conditions, for refrigerant 

in the Household and Light Commercial 

Air Conditioning class of equipment. 79 

FR 38811 (July 9, 2014). On April 10, 

2015, the EPA published its final rule 

that allows the use of R–32, R–290, and 

R–441A in limited amounts in PTAC 

and PTHP applications. 80 FR 19454 

(April 10, 2015) EIAI commented that 

R–410A is a candidate for delisting in 

some sectors under the EPA’s SNAP 

program. (EIAI, No. 32 at p. 3) SCS 

commented that, with the antibacksliding rule, it is critical to not set 

a standard level so high that it may not 

be technically possible to meet the 

standard in the future with a change 

such as delisting refrigerants. (SCS, 

NOPR Public Meeting Transcript, No. 37 

at p. 42) DOE notes that the EPA did not 

delist R–410A for use in new 

production in the Household and Light 

Commercial Air Conditioning class of 

equipment (which includes PTAC and 

PTHP equipment). DOE also notes that 

the use of alternate refrigerants by 

manufacturers of PTACs and PTHPs 

would not be required as a direct result 

of this rule. As a result, alternate 


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53 ‘‘Circular A–4: Regulatory Analysis,’’ U.S. 

Office of Management and Budget, September, 

2003. Available at: www.whitehouse.gov/omb/

circulars_a004_a-4/. 

54EPCA requires DOE to review its standards at 

least once every 6 years, and requires, for certain 

equipment, a 3-year period after any new standard 

is promulgated before compliance is required, 

except that in no case may any new standards be 

required within 6 years of the compliance date of 

the previous standards. (42 U.S.C. 6313(a)(6)(C)(i)) 

While adding a 6-year review to the 3-year 

compliance period adds up to 9 years, DOE notes 

that it may undertake reviews at any time within 

the 6 year period and that the 3-year compliance 

date may yield to the 6-year backstop. 

refrigerants were not considered in this 

analysis. 

3. National Impact Analysis 

a. Significance of Energy Savings 

For each TSL, DOE projected energy 

savings for PTAC and PTHP equipment 

purchased in the respective 30-year 

period that begins in the year of 

anticipated compliance with amended 

standards. The savings are measured 

over the entire lifetime of equipment 

purchased in the 30-year period. DOE 

quantified the energy savings 

attributable to each TSL as the 

difference in energy consumption 

between each standards case and the 

base case represented by ANSI/

ASHRAE/IES Standard 90.1–2013. DOE 

also determined energy savings for 

PTAC equipment with the ANSI/

ASHRAE/IES Standard 90.1–2013 

minimum efficiency level by comparing 

with the energy consumption of PTAC 

equipment meeting the Federal 

minimum efficiency level. Table V.17 

shows the estimated primary energy 

savings for PTACs and PTHPs at each of 

the TSLs, and Table V.18 presents the 

estimated full-fuel-cycle energy savings 

for each TSL. The approach for 

estimating national energy savings is 

further described in section IV.H. 

TABLE V.17—CUMULATIVE PRIMARY ENERGY SAVINGS FOR PTAC SOLD FROM 2019 TO 2048 AND PTHP SOLD FROM

2018 TO 2047 

ASHRAE 

Standard 

90.1–2013 * 

Trial standard level 

1 2 3 4 5 

(quads) 

Standard Size Equipment, 7,000 Btu/h ... 0.000 0.000 0.002 0.004 0.006 0.006 

Standard Size Equipment, 9,000 Btu/h ... 0.000 0.012 0.044 0.087 0.110 0.113 

Standard Size Equipment, 15,000 Btu/h 0.001 0.001 0.005 0.009 0.011 0.011 

Total All Classes ............................... 0.001 0.013 0.052 0.100 0.127 0.130 

* Energy savings determined from comparing PTAC energy consumption at the ANSI/ASHRAE/IES Standard 90.1–2013 efficiency level to that 

at the Federal minimum efficiency level. 

Note: Values of 0.000 represent non-zero energy savings but is as appears due to rounding. 

TABLE V.18—CUMULATIVE FULL-FUEL-CYCLE ENERGY SAVINGS FOR PTAC SOLD FROM 2019 TO 2048 AND PTHP SOLD

FROM 2018 TO 2047 

ASHRAE 

Standard 

90.1–2013 * 

Trial standard level 

1 2 3 4 5 

(quads) 

Standard Size Equipment, 7,000 Btu/h ... 0.000 0.000 0.002 0.005 0.006 0.006 

Standard Size Equipment, 9,000 Btu/h ... 0.000 0.012 0.045 0.088 0.112 0.115 

Standard Size Equipment, 15,000 Btu/h 0.001 0.001 0.005 0.009 0.011 0.011 

Total All Classes ............................... 0.001 0.014 0.052 0.102 0.129 0.133 

* Energy savings determined from comparing PTAC energy consumption at the ANSI/ASHRAE/IES Standard 90.1–2013 efficiency level to that 

at the Federal minimum efficiency level. 

Note: Values of 0.000 represent non-zero energy savings but is as appears due to rounding. 

Each TSL that is more stringent than 

the corresponding levels in ANSI/

ASHRAE/IES Standard 90.1–2013 

results in additional energy savings. 

OMB Circular A–4 53 requires 

agencies to present analytical results, 

including separate schedules of the 

monetized benefits and costs that show 

the type and timing of benefits and 

costs. Circular A–4 also directs agencies 

to consider the variability of key 

elements underlying the estimates of 

benefits and costs. For this rulemaking, 

DOE also undertook a sensitivity 

analysis using nine rather than 30 years 

of equipment shipments. The choice of 

a nine-year period is a proxy for the 

timeline in EPCA for the review of 

certain energy conservation standards 

and potential revision of and 

compliance with such revised 

standards.54 The review timeframe 

established in EPCA is generally not 

synchronized with the equipment 

lifetime, equipment manufacturing 

cycles, or other factors specific to 

PTACs and PTHPs. Thus, such results 

are presented for informational 

purposes only and are not indicative of 

any change in DOE’s analytical 

methodology. The NES results based on 

a 9-year analytical period are presented 

in Table V.19. 


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43202 Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 

55 ‘‘OMB Circular A–4, section E,’’ U.S. Office of 

Management and Budget, September, 2003. 

Available online at http://www.whitehouse.gov/

omb/circulars_a004_a-4. 

TABLE V.19—CUMULATIVE PRIMARY ENERGY SAVINGS FOR PTAC SOLD IN 2019–2027 AND PTHP SOLD IN 2018–2026 

ASHRAE 

Standard 

90.1–2013 * 

Trial standard level 

1 2 3 4 5 

(quads) 

Standard Size Equipment, 7,000 Btu/h ... 0.000 0.000 0.001 0.001 0.002 0.002 

Standard Size Equipment, 9,000 Btu/h ... 0.000 0.004 0.013 0.026 0.040 0.043 

Standard Size Equipment, 15,000 Btu/h 0.000 0.000 0.001 0.003 0.004 0.004 

Total All Classes ............................... 0.000 0.004 0.015 0.030 0.046 0.049 

* Energy savings determined from comparing PTAC energy consumption at the ANSI/ASHRAE/IES Standard 90.1–2013 efficiency level to that 

at the Federal minimum efficiency level. 

Note: Values of 0.000 represent non-zero energy savings but is as appears due to rounding. 

b. Net Present Value of Consumer Costs 

and Benefits 

DOE estimated the cumulative NPV of 

the total costs and savings for 

consumers that would result from the 

TSLs considered for PTAC and PTHP 

equipment. In accordance with OMB’s 

guidelines on regulatory analysis,55

DOE calculated the NPV using both a 7- 

percent and a 3-percent real discount 

rate. 

Table V.20 shows the NPV results for 

each TSL considered for PTAC and 

PTHP equipment. 

TABLE V.20—NET PRESENT VALUE OF CONSUMER BENEFITS FOR PTAC SOLD IN 2019–2048 AND PTHP SOLD IN 2018– 

2047 

Equipment class Discount 

rate 

Trial standard level * 

(millions 2014$) 

1 2 3 4 5 

<7,000 Btu/h .................................................................... 3% 0.1 (1.7) (5.4) (8.3) (8.8) 

7,000–15,000 Btu/h 6.4 0.9 (20.6) (43.0) (47.6) 

>15,000 Btu/h (0.6) (5.2) (13.7) (20.2) (21.4) 

Total—All Classes .................................................... .................... 5.9 (6.0) (39.7) (71.5) (77.7) 

<7,000 Btu/h .................................................................... 7% (0.1) (1.5) (4.1) (6.4) (6.9) 

7,000–15,000 Btu/h 0.6 (12.0) (36.3) (60.1) (65.3) 

>15,000 Btu/h (0.6) (3.9) (9.7) (14.9) (16.0) 

Total—All Classes .................................................... .................... (0.1) (17.3) (50.2) (81.4) (88.1) 

* Parentheses indicate negative values. 

Note: Values of 0.0 represent a non-zero NPV that cannot be displayed due to rounding. Numbers may not sum to total due to rounding. 

The NPV results based on the 

aforementioned nine-year analytical 

period are presented in Table V.21. As 

mentioned previously, this information 

is presented for informational purposes 

only and is not indicative of any change 

in DOE’s analytical methodology or 

decision criteria. 

TABLE V.21—NET PRESENT VALUE OF CONSUMER BENEFITS FOR PTAC SOLD IN 2019–2027AND PTHP SOLD IN 2018– 

2026 

Equipment class Discount 

rate 

Trial standard level * 

(millions 2013$) 

1 2 3 4 5 

<7,000 Btu/h .................................................................... 3% 0.1 (0.3) (1.5) (3.0) (3.5) 

7,000–15,000 Btu/h 6.1 6.8 1.8 (9.2) (13.7) 

>15,000 Btu/h 0.1 (0.4) (2.6) (6.7) (7.8) 

Total–All Classes ...................................................... .................... 6.3 6.2 (2.4) (18.9) (25.1) 

<7,000 Btu/h .................................................................... 7% 0.0 (0.5) (1.8) (3.2) (3.6) 

7,000–15,000 Btu/h 2.3 (2.2) (12.4) (27.2) (32.4) 

>15,000 Btu/h (0.1) (1.0) (3.4) (7.0) (8.1) 

Total—All Classes ............................................................ .................... 2.2 (3.7) (17.6) (37.4) (44.1)

* Parentheses indicate negative values. 

Note: Values of 0.0 represent a non-zero NPV that cannot be displayed due to rounding. Numbers may not sum to total due to rounding. 


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c. Indirect Impacts on Employment 

As described in section IV.N, DOE 

used an input/output model of the U.S. 

economy to estimate indirect 

employment impacts of the TSLs that 

DOE considered in this rulemaking. 

DOE understands that there are 

uncertainties involved in projecting 

employment impacts, especially 

changes in the later years of the 

analysis. Therefore, DOE generated 

results for near-term time frames (2019– 

2024), where these uncertainties are 

reduced. 

The results suggest that the adopted 

standards are likely to have negligible 

impact on the net demand for labor in 

the economy. The net change in jobs is 

so small that it would be imperceptible 

in national labor statistics and might be 

offset by other, unanticipated effects on 

employment. Chapter 16 of the final 

rule TSD presents detailed results 

regarding anticipated indirect 

employment impacts. 

4. Impact on Utility or Performance of 

Equipment 

In performing the engineering 

analysis, DOE considered efficiency 

levels that may be achieved using 

design options that would not lessen the 

utility or performance of the individual 

classes of equipment. (42 U.S.C. 

6313(a)(6)(B)(ii)(IV)) As presented in 

section III.C of this document, DOE 

concluded that the efficiency levels 

proposed for standard size equipment in 

this document are technologically 

feasible and would not reduce the 

utility or performance of PTACs and 

PTHPs. PTAC and PTHP manufacturers 

currently offer equipment that meet or 

exceed the amended standard levels. 

5. Impact of Any Lessening of 

Competition 

EPCA directs DOE to consider any 

lessening of competition that is likely to 

result from standards. It also directs the 

Attorney General of the United States 

(Attorney General) to determine the 

impact, if any, of any lessening of 

competition likely to result from a 

proposed standard and to transmit such 

determination in writing to the 

Secretary within 60 days of the 

publication of a proposed rule, together 

with an analysis of the nature and 

extent of the impact. 

To assist the Attorney General in 

making such determination, DOE 

provided the Department of Justice 

(DOJ) with copies of the September 2014 

NOPR and the accompanying TSD for 

review. In its assessment letter 

responding to DOE, DOJ concluded that 

the proposed energy conservation 

standards for PTAC and PTHP 

equipment are unlikely to have a 

significant adverse impact on 

competition. DOE is publishing the 

Attorney General’s assessment at the 

end of this final rule. 

6. Need of the Nation To Conserve 

Energy 

Enhanced energy efficiency, where 

economically justified, improves the 

nation’s energy security, strengthens the 

economy, and reduces the 

environmental impacts or costs of 

energy production. Reduced electricity 

demand due to energy conservation 

standards is also likely to reduce the 

cost of maintaining the reliability of the 

electricity system, particularly during 

peak-load periods. As a measure of this 

reduced demand, chapter 15 of the final 

rule TSD presents the estimated 

reduction in generating capacity for the 

TSLs that DOE considered in this 

rulemaking. 

Energy savings from amended 

standards for PTAC and PTHP 

equipment may yield environmental 

benefits in the form of reduced 

emissions of air pollutants and 

greenhouse gases. Table V.22 provides 

DOE’s estimate of cumulative emissions 

reductions expected to result from the 

TSLs considered in this rulemaking. 

The table includes both power sector 

emissions and upstream emissions. The 

emissions were calculated using the 

multipliers discussed in section IV.K. 

DOE reports annual emissions 

reductions for each TSL in chapter 13 of 

the final rule TSD. 

TABLE V.22—SUMMARY OF EMISSIONS REDUCTIONS FOR PTAC SOLD FROM 2019 TO 2048 AND PTHP SOLD FROM

2018 TO 2047 

Trial standard level 

ASHRAE ** 1 2 3 4 5 

Power Sector Emissions 

CO2 (million metric tons) .......................... 0.05 0.79 3.04 5.90 7.57 7.80 

SO2 (thousand tons) ................................ 0.04 0.65 2.50 4.85 6.28 6.50 

NOX (thousand tons) ............................... 0.04 0.61 2.34 4.53 5.84 6.03 

Hg (tons) .................................................. 0.00 0.00 0.01 0.01 0.02 0.02 

N2O (thousand tons) ................................ 0.00 0.01 0.04 0.08 0.10 0.11 

CH4 (thousand tons) ................................ 0.00 0.08 0.30 0.58 0.73 0.75 

Upstream Emissions 

CO2 (million metric tons) .......................... 0.00 0.04 0.17 0.34 0.42 0.44 

SO2 (thousand tons) ................................ 0.00 0.01 0.03 0.06 0.08 0.08 

NOX (thousand tons) ............................... 0.04 0.64 2.47 4.79 6.04 6.20 

Hg (tons) .................................................. 0.00 0.00 0.00 0.00 0.00 0.00 

N2O (thousand tons) ................................ 0.00 0.00 0.00 0.00 0.00 0.00 

CH4 (thousand tons) ................................ 0.22 3.70 14.39 27.88 35.17 36.09 

Total FFC Emissions 

CO2 (million metric tons) .......................... 0.05 0.83 3.21 6.24 7.99 8.24 

SO2 (thousand tons) ................................ 0.04 0.66 2.53 4.91 6.36 6.58 

NOX (thousand tons) ............................... 0.08 1.24 4.81 9.32 11.87 12.23 

Hg (tons) .................................................. 0.00 0.00 0.01 0.02 0.02 0.02 


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43204 Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 

TABLE V.22—SUMMARY OF EMISSIONS REDUCTIONS FOR PTAC SOLD FROM 2019 TO 2048 AND PTHP SOLD FROM

2018 TO 2047—Continued 

Trial standard level 

ASHRAE ** 1 2 3 4 5 

N2O (thousand tons) ................................ 0.00 0.01 0.04 0.09 0.11 0.11 

N2O (thousand tons CO2eq) * .................. 0.18 3.01 11.66 22.61 28.71 29.52 

CH4 (thousand tons) ................................ 0.23 3.78 14.69 28.46 35.90 36.84 

CH4 (million tons CO2eq) * ....................... 6.42 105.87 411.21 796.84 1005.20 1031.56 

* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP) as the subject emission. 

** Emissions reductions determined from comparing PTAC emissions at the ANSI/ASHRAE/IES Standard 90.1–2013 efficiency level to that at 

the Federal minimum efficiency level. 

Note: Values of 0.00 represent non-zero emissions savings but is as appears due to rounding. 

As part of the analysis for this rule, 

DOE estimated monetary benefits likely 

to result from the reduced emissions of 

CO2 and NOX that DOE estimated for 

each of the considered TSLs for PTAC 

and PTHP equipment. As discussed in 

section IV.L of this document, for CO2, 

DOE used the most recent values for the 

SCC developed by an interagency 

process. The four sets of SCC values for 

CO2 emissions reductions in 2015 

resulting from that process (expressed in 

2014$) are represented by $12.2/metric 

ton (the average value from a 

distribution that uses a 5-percent 

discount rate), $41.2/metric ton (the 

average value from a distribution that 

uses a 3-percent discount rate), $63.4/

metric ton (the average value from a 

distribution that uses a 2.5-percent 

discount rate), and $121/metric ton (the 

95th-percentile value from a 

distribution that uses a 3-percent 

discount rate). The values for later years 

are higher due to increasing damages 

(public health, economic and 

environmental) as the projected 

magnitude of climate change increases. 

Table V.23 presents the global value 

of CO2 emissions reductions at each 

TSL. For each of the four cases, DOE 

calculated a present value of the stream 

of annual values using the same 

discount rate as was used in the studies 

upon which the dollar-per-ton values 

are based. DOE calculated domestic 

values as a range from 7 percent to 23 

percent of the global values, and these 

results are presented in chapter 14 of 

the final rule TSD. 

TABLE V.23—ESTIMATES OF GLOBAL PRESENT VALUE OF CO2 EMISSIONS REDUCTION UNDER PTAC AND PTHP TRIAL

STANDARD LEVELS

TSL 

SCC Case * (million 2014$) 

5% Discount rate, 

average * 

3% Discount rate, 

average * 

2.5% Discount 

rate, average * 

3% Discount rate, 

95th percentile * 

Power Sector Emissions 

1 ............................................................................................... 5.60 25.65 40.71 79.28 

2 ............................................................................................... 21.36 98.34 156.20 304.08 

3 ............................................................................................... 41.70 191.50 304.04 592.22 

4 ............................................................................................... 55.18 249.89 395.67 771.97 

5 ............................................................................................... 57.33 258.78 409.48 799.04 

Upstream Emissions 

1 ............................................................................................... 0.31 1.43 2.28 4.44 

2 ............................................................................................... 1.19 5.54 8.81 17.14 

3 ............................................................................................... 2.32 10.77 17.13 33.34 

4 ............................................................................................... 3.02 13.84 21.95 42.80 

5 ............................................................................................... 3.12 14.25 22.60 44.08 

Total FFC Emissions 

1 ............................................................................................... 5.91 27.09 42.99 83.71 

2 ............................................................................................... 22.55 103.87 165.01 321.22 

3 ............................................................................................... 44.02 202.27 321.17 625.56 

4 ............................................................................................... 58.20 263.72 417.62 814.77 

5 ............................................................................................... 60.46 273.03 432.09 843.12 

* For each of the four cases, the corresponding SCC value for emissions in 2015 is $12.2, $41.2, $63.4, and $121 per metric ton (2014$). The 

values are for CO2 only (i.e., not CO2eq of other greenhouse gases). 

DOE is well aware that scientific and 

economic knowledge about the 

contribution of CO2 and other GHG 

emissions to changes in the future 

global climate and the potential 

resulting damages to the world economy 

continues to evolve rapidly. Thus, any 

value placed on reduced CO2 emissions 

in this rulemaking is subject to change. 

DOE, together with other Federal 

agencies, will continue to review 

various methodologies for estimating 

the monetary value of reductions in CO2

and other GHG emissions. This ongoing 

review will consider the comments on 

this subject that are part of the public 

record for this and other rulemakings, as 

well as other methodological 


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Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 43205 

56The atmospheric lifetime of CO2 is estimated of 

the order of 30–95 years. Jacobson, MZ, ‘‘Correction 

to ‘Control of fossil-fuel particulate black carbon 

and organic matter, possibly the most effective 

method of slowing global warming,’’’ J. Geophys. 

Res. 110. pp. D14105 (2005). 

assumptions and issues. However, 

consistent with DOE’s legal obligations, 

and taking into account the uncertainty 

involved with this particular issue, DOE 

has included in this rule the most recent 

values and analyses resulting from the 

interagency review process. 

DOE also estimated the cumulative 

monetary value of the economic benefits 

associated with NOX emissions 

reductions anticipated to result from 

amended standards for PTACs and 

PTHPs. The dollar-per-ton values that 

DOE used are discussed in section 

IV.L.1. Table V.24 presents the 

cumulative present values for NOX

emissions for each TSL calculated using 

the average dollar-per-ton value and 7- 

percent and 3-percent discount rates. 

TABLE V.24—ESTIMATES OF PRESENT

VALUE OF NOX EMISSIONS REDUCTION FOR PTAC SOLD FROM 2019 

TO 2048 AND PTHP SOLD FROM

2018 TO 2047 

TSL 

(Million 2014$) 

3% Discount 

rate 

7% Discount 

rate 

Power Sector Emissions 

1 0.87 0.43 

2 3.30 1.58 

3 6.45 3.11 

4 8.63 4.34 

5 9.01 4.60 

Upstream Emissions 

1 0.87 0.40 

2 3.34 1.51 

3 6.53 2.97 

4 8.56 4.07 

5 8.87 4.27 

Total FFC Emissions 

1 1.74 0.83 

2 6.64 3.10 

3 12.97 6.08 

4 17.20 8.42 

5 17.88 8.87 

7. Other Factors 

The Secretary of Energy, in 

determining whether a standard is 

economically justified, may consider 

any other factors that the Secretary 

deems to be relevant. (42 U.S.C. 

6313(a)(6)(B)(ii)(VII)) No other factors 

were considered in this analysis. 

8. Summary of National Economic 

Impacts 

The NPV of the monetized benefits 

associated with emissions reductions 

can be viewed as a complement to the 

NPV of the consumer savings calculated 

for each TSL considered in this 

rulemaking. Table V.25 presents the 

NPV values that result from adding the 

estimates of the potential economic 

benefits resulting from reduced CO2 and 

NOX emissions in each of four valuation 

scenarios to the NPV of consumer 

savings calculated for each TSL 

considered in this rulemaking, at both a 

7-percent and 3-percent discount rate. 

The CO2 values used in the columns of 

each table correspond to the four sets of 

SCC values discussed above. 

TABLE V.25—NET PRESENT VALUE OF CONSUMER SAVINGS COMBINED WITH PRESENT VALUE OF MONETIZED BENEFITS

FROM CO2 AND NOX EMISSIONS REDUCTIONS

TSL 

million 2014$ 

SCC Case 

$12.2/metric 

ton and medium NOX

value 

SCC Case 

$41.2/metric 

ton and medium NOX

value 

SCC Case 

$63.4/metric 

ton and medium NOX

value 

SCC Case 

$121/metric 

ton and medium NOX

value 

Consumer NPV at 3% Discount Rate added with: 

1 ................................................................................................................ 13.5 34.7 50.6 91.4 

2 ................................................................................................................ 23.2 104.5 165.7 321.9 

3 ................................................................................................................ 17.3 175.6 294.5 598.8 

4 ................................................................................................................ 3.9 209.4 363.3 760.4 

5 ................................................................................................................ 0.6 213.2 372.2 783.3 

Consumer NPV at 7% Discount Rate added with: 

1 ................................................................................................................ 6.7 27.8 43.7 84.5 

2 ................................................................................................................ 8.3 89.6 150.8 307.0 

3 ................................................................................................................ (0.1) 158.2 277.1 581.5 

4 ................................................................................................................ (14.8) 190.7 344.6 741.8 

5 ................................................................................................................ (18.8) 193.8 352.8 763.9 

* These label values represent the global SCC in 2015, in 2014$. 

Although adding the value of 

consumer savings to the values of 

emission reductions provides a valuable 

perspective, two issues should be 

considered. First, the national operating 

cost savings are domestic U.S. monetary 

savings that occur as a result of market 

transactions, while the value of CO2

reductions is based on a global value. 

Second, the assessments of operating 

cost savings and the SCC are performed 

with different methods that use different 

time frames for analysis. The national 

operating cost savings is measured for 

the lifetime of equipment shipped in 

2019 to 2048. Because CO2 emissions 

have a very long residence time in the 

atmosphere,56 the SCC values in future 

years reflect future climate-related 

impacts resulting from the emission of 

CO2 that continue beyond 2100. 

C. Conclusions 

Any new or amended energy 

conservation standard for any class of 

PTAC and PTHP equipment must 

demonstrate that adoption of a uniform 

national standard more stringent than 

the amended ASHRAE/IES Standard 

90.1 for PTAC and PTHP equipment 


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43206 Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 

would result in significant additional 

conservation of energy, is 

technologically feasible and 

economically justified, and is supported 

by clear and convincing evidence. (42 

U.S.C. 6313(a)(6)(A)(i)(II)) In 

determining whether a standard is 

economically justified, the Secretary 

must determine whether the benefits of 

the standard exceed its burdens, 

considering, to the greatest extent 

practicable, the seven statutory factors 

discussed previously. (42 U.S.C. 

6313(a)(6)(B)(ii)) 

DOE considered the impacts of 

potential standards at each TSL, 

beginning with the maximum 

technologically feasible level, to 

determine whether that level met the 

evaluation criteria. If the max-tech level 

was not justified, DOE then considered 

the next most-efficient level and 

undertook the same evaluation until it 

reached the highest efficiency level that 

is both technologically feasible and 

economically justified, results in 

significant additional conservation of 

energy, and is supported by clear and 

convincing evidence. 

To aid the reader in understanding 

the benefits and/or burdens of each TSL, 

Table V.26 and Table V.27 summarize 

the quantitative impacts estimated for 

each TSL for PTAC and PTHP 

equipment, based on the assumptions 

and methodology discussed herein. The 

national impacts are measured over the 

lifetime of PTAC and PTHP equipment 

purchased in the 30-year period that 

begins in the anticipated year of 

compliance with amended standards. 

The energy savings, emissions 

reductions, and value of emissions 

reductions refer to full-fuel-cycle 

results. The efficiency levels contained 

in each TSL are described in section 

V.A. In addition to the quantitative 

results presented in the tables, DOE also 

considers other burdens and benefits 

that affect economic justification. These 

include the impacts on identifiable 

subgroups of consumers that may be 

disproportionately affected by a national 

standard (see section V.B.1.b), and 

impacts on employment. DOE discusses 

the impacts on employment in PTAC 

and PTHP manufacturing in section 

V.B.2, and discusses the indirect 

employment impacts in section V.B.3.c. 

TABLE V.26—SUMMARY OF ANALYTICAL RESULTS FOR PTAC AND PTHP EQUIPMENT: NATIONAL IMPACTS

Category ASHRAE † TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

Cumulative National FFC Energy Savings (quads) .......................................... 0.001 0.014 0.052 0.102 0.129 0.133 

NPV of Consumer Costs and Benefits *** 

(2014$ million): 

3% discount rate ............................... ........................ 5.9 (6.0) (39.7) (71.5) (77.7) 

7% discount rate ............................... ........................ (0.1) (17.3) (50.2) (81.4) (88.1) 

Cumulative Emissions Reduction (Total 

FFC Emissions): 

CO2 million metric tons ..................... 0.05 0.83 3.21 6.24 7.99 8.24 

SO2 thousand tons ........................... 0.04 0.66 2.53 4.91 6.36 6.58 

NOX thousand tons ........................... 0.08 1.24 4.81 9.32 11.87 12.23 

Hg tons ............................................. 0.00 0.00 0.01 0.02 0.02 0.02 

N2O thousand tons ........................... 0.00 0.01 0.04 0.09 0.11 0.11 

N2O thousand tons CO2eq * ............. 0.18 3.01 11.66 22.61 28.71 29.52 

CH4 thousand tons ........................... 0.23 3.78 14.69 28.46 35.90 36.84 

CH4 thousand tons CO2eq * ............. 6.42 105.87 411.21 796.84 1005.20 1031.56 

Value of Emissions Reduction (Total 

FFC Emissions): 

CO2 2014$ million ** ......................... 5.9 to 83.7 22.5 to 321.2 44.0 to 625.6 58.2 to 814.8 60.5 to 843.1 

NOX—3% discount rate 2014$ million ................................................. 1.74 6.64 12.97 17.20 17.88 

NOX—7% discount rate 2014$ million ................................................. 0.83 3.10 6.08 8.42 8.87 

* CO2eq is the quantity of CO2 that would have the same global warming potential (GWP) as the subject emission. 

** Range of the economic value of CO2 reductions is based on estimates of the global benefit of reduced CO2 emissions. 

*** Parentheses indicate negative values. 

† Energy and emissions savings determined from comparing PTAC energy consumption and emissions at the ANSI/ASHRAE/IES Standard 

90.1–2013 efficiency level to that at the Federal minimum efficiency level. 

Note: Values of 0.00 represent non-zero emissions savings but is as appears due to rounding. 

TABLE V.27—SUMMARY OF ANALYTICAL RESULTS FOR PTAC AND PTHP EQUIPMENT: MANUFACTURER AND CONSUMER

IMPACTS

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

Industry Impacts *** 

Change in Industry NPV (2013$M) .............................. (1.5) to (1.1) (0.5) to 0.8 (3.0) to (0.3) (3.4) to 0.8 (6.7) to (1.9) 

Industry NPV (% Change) ............................................ (2.4) to (1.8) (0.8) to 1.3 (4.8) to (0.5) (5.4) to 1.4 (10.7) to (3.1) 

Consumer Mean LCC Savings *** (2014$) 

Standard Size Equipment, 9,000 Btu/h ........................ 0.17 (3.26) (9.85) (18.50) (23.50) 

Standard Size Equipment, 15,000 Btu/h ...................... (0.95) (5.51) (19.24) (40.53) (54.02) 

Weighted Average * ...................................................... 0.09 (3.43) (10.52) (20.08) (25.69) 

Consumer Median PBP (years) 

Standard Size Equipment, 9,000 Btu/h ........................ 7.67 8.84 9.84 10.53 10.87 

Standard Size Equipment, 15,000 Btu/h ...................... 9.69 10.49 12.30 14.07 14.98 

Weighted Average * ...................................................... 7.62 8.65 9.19 0.00 0.00 

Standard Size Equipment 9,000 Btu/h ** 

Consumers with Net Cost % ........................................ 27 50 78 87 88 


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TABLE V.27—SUMMARY OF ANALYTICAL RESULTS FOR PTAC AND PTHP EQUIPMENT: MANUFACTURER AND CONSUMER

IMPACTS—Continued 

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 

Consumers with No Impact % ...................................... 52 34 7 0 0 

Consumers with Net Benefit % .................................... 21 16 15 13 12 

Standard Size Equipment 15,000 Btu/h ** 

Consumers with Net Cost % ........................................ 34 51 85 93 95 

Consumers with No Impact % ...................................... 58 39 7 2 0 

Consumers with Net Benefit % .................................... 8 10 9 5 4 

Weighted Average ** 

Consumers with Net Cost % ........................................ 28 50 79 87 89 

Consumers with No Impact % ...................................... 9 2 1 1 1 

Consumers with Net Benefit % .................................... 17 21 37 46 65 

* Weighted by shares of each equipment class in total projected shipments in 2019 for PTAC and 2018 for PTHP. 

** Rounding may cause some items to not total 100 percent. 

*** Parentheses indicate negative values. 

DOE first considered TSL 5, which 

represents the max-tech efficiency 

levels. TSL 5 would save 0.13 quads of 

energy, an amount DOE considers 

significant. Under TSL 5, the NPV of 

consumer benefit would be negative 

$88.1 million using a discount rate of 7 

percent, and negative $77.7 million 

using a discount rate of 3 percent. 

The cumulative emissions reductions 

at TSL 5 are 8.2 Mt of CO2, 6.6 thousand 

tons of SO2, 12.2 thousand tons of NOX, 

36.8 thousand tons of CH4, and 0.1 

thousand tons of N2O. The estimated 

monetary value of the CO2 emissions 

reduction at TSL 5 ranges from $61 

million to $843 million. 

At TSL 5, the weighted-average LCC 

impact is an expenditure (i.e., negative 

savings) of $25.68 for purchasers of 

PTAC and PTHP equipment. For these 

purchasers, the simple payback period 

is 6.6 years. The fraction of consumers 

experiencing a net LCC cost is 89 

percent. 

At TSL 5, the projected change in 

INPV ranges from a decrease of $6.7 

million to a decrease of $1.9 million, 

which correspond to decreases of 10.7 

percent and 3.1 percent, respectively. 

Currently, there is only one PTHP 

equipment line being manufactured at 

TSL 5 efficiency levels. Available 

information indicates that PTAC and 

PTHP manufacturers would be able to 

design and produce equipment at TSL 5, 

based on the existence of a unit that 

achieves TSL 5 levels without the use of 

proprietary technologies. 

The Secretary concluded that at TSL 

5 for PTAC and PTHP equipment, the 

benefits of energy savings, emission 

reductions, and the estimated monetary 

value of the emissions reductions would 

be outweighed by the negative NPV of 

consumer benefits, the economic burden 

on many consumers, and the impacts on 

manufacturers, including the conversion 

costs and profit margin impacts that 

could result in a large reduction in 

INPV. Consequently, the Secretary has 

concluded that TSL 5 is not 

economically justified. 

DOE then considered TSL 4, which 

would save an estimated 0.13 quads of 

energy, an amount DOE considers 

significant. Under TSL 4, the NPV of 

consumer benefit would be negative 

$81.4 million using a discount rate of 7 

percent, and negative $71.5 million 

using a discount rate of 3 percent. 

The cumulative emissions reductions 

at TSL 4 are 8.0 Mt of CO2, 6.4 thousand 

tons of SO2, 11.9 thousand tons of NOX, 

35.9 thousand tons of CH4, and 0.1 

thousand tons of N2O. The estimated 

monetary value of the CO2 emissions 

reduction at TSL 4 ranges from $58 

million to $815 million. 

At TSL 4, the weighted-average LCC 

impact is an expenditure of $20.07 for 

purchasers of PTAC and PTHP 

equipment. For these purchasers, the 

simple payback period is 6.4 years. The 

fraction of consumers experiencing a net 

LCC cost is 87 percent. 

At TSL 4, the projected change in 

INPV ranges from a decrease of $3.4 

million to an increase of $0.8 million, 

which represent a decrease of 5.4 

percent and an increase of 1.4 percent, 

respectively. 

The Secretary concluded that at TSL 

4 for PTAC and PTHP equipment, the 

benefits of energy savings, emission 

reductions, and the estimated monetary 

value of the emissions reductions would 

be outweighed by the negative NPV of 

consumer benefits, economic burden on 

many consumers, and the impacts on 

manufacturers, including the conversion 

costs and profit margin impacts that 

could result in a large reduction in 

INPV. Consequently, the Secretary has 

concluded that TSL 4 is not 

economically justified. 

DOE then considered TSL 3, which 

would save an estimated 0.10 quads of 

energy, an amount DOE considers 

significant. Under TSL 3, the NPV of 

consumer benefit would be negative 

$50.2 million using a discount rate of 7 

percent, and negative $39.7 million 

using a discount rate of 3 percent. 

The cumulative emissions reductions 

at TSL 3 are 6.2 Mt of CO2, 4.9 thousand 

tons of SO2, 9.3 thousand tons of NOX, 

28.5 thousand tons of CH4, and 0.1 

thousand tons of N2O. The estimated 

monetary value of the CO2 emissions 

reduction at TSL 3 ranges from $44 

million to $626 million. 

At TSL 3, the weighted-average LCC 

impact is an expenditure of $10.52 for 

purchasers of PTAC and PTHP 

equipment. For these purchasers, the 

simple payback period is 6.1 years. The 

fraction of consumers experiencing a net 

LCC cost is 79 percent. 

At TSL 3, the projected change in 

INPV ranges from a decrease of $3.0 

million to a decrease of $0.3 million, 

which represent decreases of 4.8 percent 

and 0.5 percent, respectively. 

The Secretary concluded that at TSL 

3 for PTAC and PTHP equipment, the 

benefits of energy savings, emission 

reductions, and the estimated monetary 

value of the emissions reductions would 

be outweighed by the negative NPV of 

consumer benefits, economic burden on 

many consumers, and the impacts on 

manufacturers, including the conversion 

costs and profit margin impacts that 

could result in a large reduction in 

INPV. Consequently, the Secretary has 

concluded that TSL 3 is not 

economically justified. 

DOE then considered TSL 2, which 

would save an estimated 0.05 quads of 

energy, an amount DOE considers 

significant. Under TSL 2, the NPV of 

consumer benefit would be negative 

$17.3 million using a discount rate of 7 

percent, and negative $6.0 million using 

a discount rate of 3 percent. 

The cumulative emissions reductions 

at TSL 2 are 3.2 Mt of CO2, 2.5 thousand 

tons of SO2, 4.8 thousand tons of NOX, 

and 14.7 thousand tons of CH4. The 


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estimated monetary value of the CO2

emissions reduction at TSL 2 ranges 

from $23 million to $321 million. 

At TSL 2, the weighted-average LCC 

impact is an expenditure of $3.43 for 

purchasers of PTAC and PTHP 

equipment. For these purchasers, the 

simple payback period is 5.7 years. The 

fraction of consumers experiencing a net 

LCC cost is 50 percent. 

At TSL 2, the projected change in 

INPV ranges from a decrease of $0.5 

million to an increase of $0.8 million, 

which represent a decrease of 0.8 

percent and an increase of 1.3 percent, 

respectively. 

The Secretary concluded that at TSL 

2 for PTAC and PTHP equipment, the 

benefits of energy savings, emission 

reductions, and the estimated monetary 

value of the emissions reductions would 

be outweighed by the negative NPV of 

consumer benefits, economic burden on 

some consumers, and the impacts on 

manufacturers, including the conversion 

costs and profit margin impacts that 

could result in a large reduction in 

INPV. Consequently, the Secretary has 

concluded that TSL 2 is not 

economically justified. 

DOE then considered TSL 1, which 

would save an estimated 0.01 quads of 

energy, an amount DOE considers 

significant. Under TSL 1, the NPV of 

consumer benefit would be negative 

$0.1 million using a discount rate of 7 

percent, and $5.9 million using a 

discount rate of 3 percent. 

The cumulative emissions reductions 

at TSL 1 are 0.8 Mt of CO2, 0.7 thousand 

tons of SO2, 1.2 thousand tons of NOX, 

and 3.8 thousand tons of CH4. The 

estimated monetary value of the CO2

emissions reduction at TSL 1 ranges 

from $6 million to $84 million. 

At TSL 1, the weighted-average LCC 

impact is a savings of $0.09 for 

purchasers of PTAC and PTHP 

equipment. For these purchasers, the 

simple payback period is 5.1 years. The 

fraction of consumers experiencing a net 

LCC cost is 28 percent. 

At TSL 1, the projected change in 

INPV ranges from a decrease of $1.1 

million to a decrease of $1.5 million, 

which represent decreases of 1.8 percent 

and 2.4 percent, respectively. 

The Secretary concluded that at TSL 

1 for PTAC and PTHP equipment, the 

benefits of energy savings, emission 

reductions, estimated monetary value of 

the emissions reductions, and the 

economic benefit for some consumers 

would be outweighed by the negative 

NPV of consumer benefits at 7-percent 

discount rate, the negative average LCC 

savings for standard size equipment, 

15,000 Btu/h, and the negative impacts 

on manufacturers, including the 

conversion costs and profit margin 

impacts that could result in a large 

reduction in INPV. Consequently, the 

Secretary has concluded that TSL 1 is 

not economically justified. 

Therefore, based on the above 

considerations, DOE is not able to show 

with clear and convincing evidence that 

energy conservation standards for PTAC 

and PTHP equipment based on any of 

the considered TSLs are economically 

justified. Therefore, pursuant to 42 

U.S.C. 6313(6)(A)(ii)(I), which states 

that unless adoption of a uniform 

national standard more stringent than 

the amended ASHRAE/IES Standard 

90.1 for the equipment would result in 

significant additional conservation of 

energy and is technologically feasible 

and economically justified and is 

supported by clear and convincing 

evidence, DOE is establishing amended 

energy efficiency standards for PTAC 

equipment at the minimum efficiency 

level specified in the ANSI/ASHRAE/

IES Standard 90.1–2013 for PTAC 

equipment. The amended energy 

conservation standards for PTAC 

equipment are shown in Table V.28. 

The standards for PTHP equipment 

remain unchanged. 

TABLE V.28—AMENDED ENERGY CONSERVATION STANDARDS FOR STANDARD SIZE PTAC EQUIPMENT

Equipment type Cooling capacity Efficiency level Compliance date: Products manufactured on and after . . . 

PTAC .................. <7,000 Btu/h ............................................................. EER = 11.9 ................................... January 1, 2017. 

≥7,000 Btu/h and ≤15,000 Btu/h .............................. EER = 14.0 ¥ (0.3 × Cap 1).

>15,000 Btu/h ........................................................... EER = 9.5 

1 Cap means cooling capacity in thousand British thermal units per hour (Btu/h) at 95 °F outdoor dry-bulb temperature. 

VI. Procedural Issues and Regulatory 

Review 

A. Review Under Executive Orders 

12866 and 13563 

Section 1(b)(1) of Executive Order 

12866, ‘‘Regulatory Planning and 

Review,’’ 58 FR 51735 (Oct. 4, 1993), 

requires each agency to identify the 

problem that it intends to address, 

including, where applicable, the failures 

of private markets or public institutions 

that warrant new agency action, as well 

as to assess the significance of that 

problem. This final rule addresses the 

following problems: 

(1) Insufficient information and the 

high costs of gathering and analyzing 

relevant information leads some 

consumers to miss opportunities to 

make cost-effective investments in 

energy efficiency. 

(2) In some cases the benefits of more 

efficient equipment are not realized due 

to misaligned incentives between 

purchasers and users. An example of 

such a case is when the equipment 

purchase decision is made by a building 

contractor or building owner who does 

not pay the energy costs. 

(3) There are external benefits 

resulting from improved energy 

efficiency of equipment that are not 

captured by the users of such 

equipment. These benefits include 

externalities related to public health, 

environmental protection and national 

energy security that are not reflected in 

energy prices, such as reduced 

emissions of air pollutants and 

greenhouse gases that impact human 

health and global warming. DOE 

attempts to qualify some of the external 

benefits through use of social cost of 

carbon values. 

In addition, DOE has determined that 

this regulatory action is not a 

‘‘significant regulatory action’’ under 

section 3(f) of Executive Order 12866. 

Section 6(a)(3)(A) of the Executive 

Order states that absent a material 

change in the development of the 

planned regulatory action, regulatory 

action not designated as significant will 

not be subject to review under the 

aforementioned section unless, within 

10 working days of receipt of DOE’s list 

of planned regulatory actions, the 

Administrator of OIRA notifies the 

agency that OIRA has determined that a 

planned regulation is a significant 

regulatory action within the meaning of 

the Executive order. 

DOE has also reviewed this regulation 

pursuant to Executive Order 13563, 

issued on January 18, 2011. 76 FR 3281 

(Jan. 21, 2011). EO 13563 is 

supplemental to and explicitly reaffirms 

the principles, structures, and 

definitions governing regulatory review 


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established in Executive Order 12866. 

To the extent permitted by law, agencies 

are required by Executive Order 13563 

to: (1) Propose or adopt a regulation 

only upon a reasoned determination 

that its benefits justify its costs 

(recognizing that some benefits and 

costs are difficult to quantify); (2) tailor 

regulations to impose the least burden 

on society, consistent with obtaining 

regulatory objectives, taking into 

account, among other things, and to the 

extent practicable, the costs of 

cumulative regulations; (3) select, in 

choosing among alternative regulatory 

approaches, those approaches that 

maximize net benefits (including 

potential economic, environmental, 

public health and safety, and other 

advantages; distributive impacts; and 

equity); (4) to the extent feasible, specify 

performance objectives, rather than 

specifying the behavior or manner of 

compliance that regulated entities must 

adopt; and (5) identify and assess 

available alternatives to direct 

regulation, including providing 

economic incentives to encourage the 

desired behavior, such as user fees or 

marketable permits, or providing 

information upon which choices can be 

made by the public. 

DOE emphasizes as well that 

Executive Order 13563 requires agencies 

to use the best available techniques to 

quantify anticipated present and future 

benefits and costs as accurately as 

possible. In its guidance, OIRA has 

emphasized that such techniques may 

include identifying changing future 

compliance costs that might result from 

technological innovation or anticipated 

behavioral changes. For the reasons 

stated in the preamble, DOE believes 

that this final rule is consistent with 

these principles, including the 

requirement that, to the extent 

permitted by law, benefits justify costs 

and that net benefits are maximized. 

B. Review Under the Regulatory 

Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) requires preparation 

of a regulatory flexibility analysis for 

any rule that by law must be proposed 

for public comment, unless the agency 

certifies that the rule, if promulgated, 

will not have a significant economic 

impact on a substantial number of small 

entities. As required by Executive Order 

13272, ‘‘Proper Consideration of Small 

Entities in Agency Rulemaking,’’ 67 FR 

53461 (August 16, 2002), DOE 

published procedures and policies on 

February 19, 2003, to ensure that the 

potential impacts of its rules on small 

entities are properly considered during 

the rulemaking process. 68 FR 7990. 

DOE has made its procedures and 

policies available on the Office of the 

General Counsel’s Web site (http://

energy.gov/gc/office-general-counsel). 

1. Description and Estimated Number of 

Small Entities Regulated 

a. Methodology for Estimating the 

Number of Small Entities 

For manufacturers of PTACs and 

PTHPs, the Small Business 

Administration (SBA) has set a size 

threshold, which defines those entities 

classified as ‘‘small businesses’’ for the 

purposes of the statute. DOE used the 

SBA’s small business size standards to 

determine whether any small entities 

would be subject to the requirements of 

the rule. See 13 CFR part 121. The size 

standards are listed by North American 

Industry Classification System (NAICS) 

code and industry description and are 

available at http://www.sba.gov/sites/

default/files/files/Size_Standards_

Table.pdf. PTAC and PTHP 

manufacturing is classified under 

NAICS 333415, ‘‘Air-Conditioning and 

Warm Air Heating Equipment and 

Commercial and Industrial Refrigeration 

Equipment Manufacturing.’’ The SBA 

sets a threshold of 750 employees or less 

for an entity to be considered as a small 

business for this category. 

DOE reviewed the potential standard 

levels considered in this final rule 

under the provisions of the Regulatory 

Flexibility Act and the procedures and 

policies published on February 19, 

2003. DOE conducted a market survey 

to determine whether any companies 

could be small business manufacturers 

of equipment covered by this 

rulemaking. DOE used available public 

information to identify potential small 

manufacturers. DOE’s research involved 

industry trade association membership 

directories (e.g., AHRI), information 

from previous rulemakings, individual 

company Web sites, and market 

research tools (e.g., Hoover’s reports) to 

create a list of companies that 

manufacture or sell PTAC and PTHP 

equipment covered by this rulemaking. 

DOE also asked stakeholders and 

industry representatives if they were 

aware of any additional small 

manufacturers during manufacturer 

interviews and at DOE public meetings. 

DOE reviewed publicly available data 

and contacted various companies on its 

list of manufacturers, as necessary, to 

determine whether they met the SBA’s 

definition of a small business 

manufacturer. DOE screened out 

companies that do not offer equipment 

impacted by this rulemaking, do not 

meet the definition of a ‘‘small 

business,’’ or are foreign owned and 

operated. 

DOE initially identified 22 companies 

that sell PTAC and PTHP equipment 

that would be affected by this proposal. 

Of these 22 companies, DOE identified 

12 as small businesses. 

b. Manufacturer Participation 

DOE contacted the identified small 

businesses to invite them to take part in 

a manufacturer impact analysis 

interview. Of the 12 small businesses 

contacted, DOE was able to reach and 

discuss potential standards with two. 

DOE also obtained information about 

small businesses and potential impacts 

on small businesses while interviewing 

large manufacturers. 

c. PTAC and PTHP Industry Structure 

and Nature of Competition 

Three major manufacturers supply 

approximately 80 percent of the U.S. 

market for standard-size PTACs and 

PTHPs. DOE estimates that the 

remaining 20 percent of the market is 

served by a combination of small 

businesses and large businesses that are 

foreign owned and operated. None of 

the major manufacturers of PTACs and 

PTHPs affected by this rulemaking is a 

domestic small business. 

Further, the small businesses 

identified are not original equipment 

manufacturers of standard-size PTACs 

and PTHPs affected by this rulemaking. 

Rather, they import, rebrand, and 

distribute PTACs and PTHPs 

manufactured overseas by foreign 

companies. Some small businesses 

identified are original equipment 

manufacturers of non-standard size 

PTACs and PTHPs. However, energy 

conservation standards for non-standard 

units are not being amended by this 

rulemaking. As a result, manufacturers 

of non-standard equipment are not 

considered in this small business 

analysis. 

2. Description and Estimate of 

Compliance Requirements 

In this rule, DOE is adopting amended 

energy conservation standards for PTAC 

equipment that are equivalent to the 

standards set forth in ANSI/ASHRAE/

IES Standard 90.1–2013. In line with 

ANSI/ASHRAE/IES Standard 90.1– 

2013, DOE is not amending energy 

conservation standards for PTHP 

equipment. DOE is required to adopt 

minimum efficiency standards either 

equivalent to or more stringent than 

those set forth by ASHRAE. 

Since this rule adopts the baseline as 

the standards level, DOE’s modeling 

does not show any negative financial 

impacts on industry, including small 


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manufacturers, as a direct result of the 

standard. 

3. Duplication, Overlap, and Conflict 

With Other Rules and Regulations 

DOE is not aware of any rules or 

regulations that duplicate, overlap, or 

conflict with this final rule. 

4. Significant Alternatives to the Rule 

The discussion above analyzes 

impacts on small businesses that would 

result from DOE’s rule adopting the 

ASHRAE levels. EPCA requires DOE to 

adopt the levels adopted by ASHRAE 

unless clear and convincing evidence 

supports adopting a higher standard. 

Therefore, in reviewing alternatives to 

the proposed rule, DOE considered the 

ASHRAE levels and levels above those 

adopted by ASHRAE. After considering 

comments on the proposal, DOE 

determined that it did not have clear 

and convincing evidence that levels 

above those adopted by ASHRAE were 

economically justified, and so DOE is 

adopting the ASHRAE levels in this 

final rule. 

In addition to the other TSLs being 

considered, the final rule TSD includes 

a regulatory impact analysis (RIA). For 

PTAC and PTHP equipment, the RIA 

discusses the following policy 

alternatives: (1) No change in standard; 

(2) consumer rebates; (3) consumer tax 

credits; (4) manufacturer tax credits; (5) 

voluntary energy efficiency targets; and 

(6) bulk government purchases. While 

these alternatives may mitigate to some 

varying extent the economic impacts on 

small entities compared to the adopted 

standards, DOE does not intend to 

consider these alternatives further 

because in several cases, they would not 

be feasible to implement without 

authority and funding from Congress, 

and in all cases, DOE has determined 

that the energy savings of these 

alternatives are significantly smaller 

than those that would be expected to 

result from adoption of the standards 

(ranging from approximately 1 percent 

to 22 percent of the energy savings from 

the adopted standards). Accordingly, 

DOE is declining to adopt any of these 

alternatives and is adopting the 

standards set forth in this rulemaking. 

(See chapter 17 of the final rule TSD for 

further detail on the policy alternatives 

DOE considered.) 

Additional compliance flexibilities 

may be available through other means. 

EPCA provides that a manufacturer 

whose annual gross revenue from all of 

its operations does not exceed 

$8,000,000 may apply for an exemption 

from all or part of an energy 

conservation standard for a period not 

longer than 24 months after the effective 

date of a final rule establishing the 

standard. Additionally, Section 504 of 

the Department of Energy Organization 

Act, 42 U.S.C. 7194, provides authority 

for the Secretary to adjust a rule issued 

under EPCA in order to prevent ‘‘special 

hardship, inequity, or unfair 

distribution of burdens’’ that may be 

imposed on that manufacturer as a 

result of such rule. 

C. Review Under the Paperwork 

Reduction Act 

Manufacturers of PTACs and PTHPs 

must certify to DOE that their 

equipment complies with any 

applicable energy conservation 

standards. In certifying compliance, 

manufacturers must test their 

equipment according to the DOE test 

procedures for PTACs and PTHPs, 

including any amendments adopted for 

those test procedures. DOE has 

established regulations for the 

certification and recordkeeping 

requirements for all covered consumer 

products and commercial equipment, 

including PTACs and PTHPs. See 

generally 10 CFR part 429. The 

collection-of-information requirement 

for the certification and recordkeeping 

is subject to review and approval by 

OMB under the Paperwork Reduction 

Act (PRA). This requirement has been 

approved by OMB under OMB control 

number 1910–1400. Public reporting 

burden for the certification is estimated 

to average 30 hours per response, 

including the time for reviewing 

instructions, searching existing data 

sources, gathering and maintaining the 

data needed, and completing and 

reviewing the collection of information. 

Notwithstanding any other provision 

of the law, no person is required to 

respond to, nor shall any person be 

subject to a penalty for failure to comply 

with, a collection of information subject 

to the requirements of the PRA, unless 

that collection of information displays a 

currently valid OMB Control Number. 

D. Review Under the National 

Environmental Policy Act of 1969 

Pursuant to the National 

Environmental Policy Act (NEPA) of 

1969, DOE has determined that the rule 

fits within the category of actions 

included in Categorical Exclusion (CX) 

B5.1 and otherwise meets the 

requirements for application of a CX. 

See 10 CFR part 1021, appendix B, 

B5.1(b); 1021.410(b) and appendix B, 

B(1)–(5). The rule fits within the 

category of actions because it is a 

rulemaking that establishes energy 

conservation standards for consumer 

products or industrial equipment, and 

for which none of the exceptions 

identified in CX B5.1(b) apply. 

Therefore, DOE has made a CX 

determination for this rulemaking, and 

DOE does not need to prepare an 

Environmental Assessment or 

Environmental Impact Statement for 

this rule. DOE’s CX determination for 

this rule is available at http://

cxnepa.energy.gov/. 

E. Review Under Executive Order 13132 

Executive Order 13132, ‘‘Federalism.’’ 

64 FR 43255 (August 10, 1999) imposes 

certain requirements on Federal 

agencies formulating and implementing 

policies or regulations that preempt 

State law or that have Federalism 

implications. The Executive Order 

requires agencies to examine the 

constitutional and statutory authority 

supporting any action that would limit 

the policymaking discretion of the 

States and to carefully assess the 

necessity for such actions. The 

Executive Order also requires agencies 

to have an accountable process to 

ensure meaningful and timely input by 

State and local officials in the 

development of regulatory policies that 

have Federalism implications. On 

March 14, 2000, DOE published a 

statement of policy describing the 

intergovernmental consultation process 

it will follow in the development of 

such regulations. 65 FR 13735. DOE has 

examined this rule and has determined 

that it would not have a substantial 

direct effect on the States, on the 

relationship between the national 

government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. EPCA governs and 

prescribes Federal preemption of State 

regulations as to energy conservation for 

the equipment that are the subject of 

this final rule. States can petition DOE 

for exemption from such preemption to 

the extent, and based on criteria, set 

forth in EPCA. (42 U.S.C. 6297) 

Therefore, no further action is required 

by Executive Order 13132. 

F. Review Under Executive Order 12988 

With respect to the review of existing 

regulations and the promulgation of 

new regulations, section 3(a) of 

Executive Order 12988, ‘‘Civil Justice 

Reform,’’ imposes on Federal agencies 

the general duty to adhere to the 

following requirements: (1) Eliminate 

drafting errors and ambiguity; (2) write 

regulations to minimize litigation; (3) 

provide a clear legal standard for 

affected conduct rather than a general 

standard; and (4) promote simplification 

and burden reduction. 61 FR 4729 (Feb. 

7, 1996). Regarding the review required 

by section 3(a), section 3(b) of Executive 


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Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 43211 

Order 12988 specifically requires that 

Executive agencies make every 

reasonable effort to ensure that the 

regulation: (1) Clearly specifies the 

preemptive effect, if any; (2) clearly 

specifies any effect on existing Federal 

law or regulation; (3) provides a clear 

legal standard for affected conduct 

while promoting simplification and 

burden reduction; (4) specifies the 

retroactive effect, if any; (5) adequately 

defines key terms; and (6) addresses 

other important issues affecting clarity 

and general draftsmanship under any 

guidelines issued by the Attorney 

General. Section 3(c) of Executive Order 

12988 requires Executive agencies to 

review regulations in light of applicable 

standards in section 3(a) and section 

3(b) to determine whether they are met 

or it is unreasonable to meet one or 

more of them. DOE has completed the 

required review and determined that, to 

the extent permitted by law, this final 

rule meets the relevant standards of 

Executive Order 12988. 

G. Review Under the Unfunded 

Mandates Reform Act of 1995 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA) requires 

each Federal agency to assess the effects 

of Federal regulatory actions on State, 

local, and Tribal governments and the 

private sector. Public Law 104–4, sec. 

201 (codified at 2 U.S.C. 1531). For a 

regulatory action likely to result in a 

rule that may cause the expenditure by 

State, local, and Tribal governments, in 

the aggregate, or by the private sector of 

$100 million or more in any one year 

(adjusted annually for inflation), section 

202 of UMRA requires a Federal agency 

to publish a written statement that 

estimates the resulting costs, benefits, 

and other effects on the national 

economy. (2 U.S.C. 1532(a), (b)) The 

UMRA also requires a Federal agency to 

develop an effective process to permit 

timely input by elected officers of State, 

local, and Tribal governments on a 

‘‘significant intergovernmental 

mandate,’’ and requires an agency plan 

for giving notice and opportunity for 

timely input to potentially affected 

small governments before establishing 

any requirements that might 

significantly or uniquely affect them. On 

March 18, 1997, DOE published a 

statement of policy on its process for 

intergovernmental consultation under 

UMRA. 62 FR 12820. DOE’s policy 

statement is also available at http://

energy.gov/sites/prod/files/gcprod/

documents/umra_97.pdf. 

DOE has concluded that this final rule 

is not expected to require expenditures 

of $100 million or more on the private 

sector. As a result, the analytical 

requirements of UMRA described above 

are not applicable. 

H. Review Under the Treasury and 

General Government Appropriations 

Act, 1999 

Section 654 of the Treasury and 

General Government Appropriations 

Act, 1999 (Pub. L. 105–277) requires 

Federal agencies to issue a Family 

Policymaking Assessment for any rule 

that may affect family well-being. This 

rule would not have any impact on the 

autonomy or integrity of the family as 

an institution. Accordingly, DOE has 

concluded that it is not necessary to 

prepare a Family Policymaking 

Assessment. 

I. Review Under Executive Order 12630 

Pursuant to Executive Order 12630, 

‘‘Governmental Actions and Interference 

with Constitutionally Protected Property 

Rights’’ 53 FR 8859 (March 18, 1988), 

DOE has determined that this rule 

would not result in any takings that 

might require compensation under the 

Fifth Amendment to the U.S. 

Constitution. 

J. Review Under the Treasury and 

General Government Appropriations 

Act, 2001 

Section 515 of the Treasury and 

General Government Appropriations 

Act, 2001 (44 U.S.C. 3516, note) 

provides for Federal agencies to review 

most disseminations of information to 

the public under information quality 

guidelines established by each agency 

pursuant to general guidelines issued by 

OMB. OMB’s guidelines were published 

at 67 FR 8452 (February 22, 2002), and 

DOE’s guidelines were published at 67 

FR 62446 (October 7, 2002). DOE has 

reviewed this final rule under the OMB 

and DOE guidelines and has concluded 

that it is consistent with applicable 

policies in those guidelines. 

K. Review Under Executive Order 13211 

Executive Order 13211, ‘‘Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use’’ 66 FR 28355 (May 

22, 2001), requires Federal agencies to 

prepare and submit to OIRA at OMB, a 

Statement of Energy Effects for any 

significant energy action. A ‘‘significant 

energy action’’ is defined as any action 

by an agency that promulgates or is 

expected to lead to promulgation of a 

final rule, and that: (1) Is a significant 

regulatory action under Executive Order 

12866, or any successor order; and (2) 

is likely to have a significant adverse 

effect on the supply, distribution, or use 

of energy, or (3) is designated by the 

Administrator of OIRA as a significant 

energy action. For any significant energy 

action, the agency must give a detailed 

statement of any adverse effects on 

energy supply, distribution, or use 

should the proposal be implemented, 

and of reasonable alternatives to the 

action and their expected benefits on 

energy supply, distribution, and use. 

DOE has concluded that this 

regulatory action, which sets forth 

amended energy conservation standards 

for PTAC and PTHP equipment, is not 

a significant energy action because the 

standards are not likely to have a 

significant adverse effect on the supply, 

distribution, or use of energy, nor has it 

been designated as such by the 

Administrator at OIRA. Accordingly, 

DOE has not prepared a Statement of 

Energy Effects on this final rule. 

L. Review Under the Information 

Quality Bulletin for Peer Review 

On December 16, 2004, OMB, in 

consultation with the Office of Science 

and Technology Policy (OSTP), issued 

its Final Information Quality Bulletin 

for Peer Review (the Bulletin). 70 FR 

2664 (January 14, 2005). The Bulletin 

establishes that certain scientific 

information shall be peer reviewed by 

qualified specialists before it is 

disseminated by the Federal 

Government, including influential 

scientific information related to agency 

regulatory actions. The purpose of the 

bulletin is to enhance the quality and 

credibility of the Government’s 

scientific information. Under the 

Bulletin, the energy conservation 

standards rulemaking analyses are 

‘‘influential scientific information,’’ 

which the Bulletin defines as ‘‘scientific 

information the agency reasonably can 

determine will have, or does have, a 

clear and substantial impact on 

important public policies or private 

sector decisions.’’ Id. at FR 2667. 

In response to OMB’s Bulletin, DOE 

conducted formal in-progress peer 

reviews of the energy conservation 

standards development process and 

analyses and has prepared a Peer 

Review Report pertaining to the energy 

conservation standards rulemaking 

analyses. Generation of this report 

involved a rigorous, formal, and 

documented evaluation using objective 

criteria and qualified and independent 

reviewers to make a judgment as to the 

technical/scientific/business merit, the 

actual or anticipated results, and the 

productivity and management 

effectiveness of programs and/or 

projects. The ‘‘Energy Conservation 

Standards Rulemaking Peer Review 

Report’’ dated February 2007 has been 

disseminated and is available at the 

following Web site: 


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43212 Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 

www1.eere.energy.gov/buildings/

appliance_standards/peer_review.html. 

M. Congressional Notification 

As required by 5 U.S.C. 801, DOE will 

report to Congress on the promulgation 

of this rule prior to its effective date. 

The report will state that it has been 

determined that the rule is not a ‘‘major 

rule’’ as defined by 5 U.S.C. 804(2). 

VII. Approval of the Office of the 

Secretary 

The Secretary of Energy has approved 

publication of this final rule. 

List of Subjects in 10 CFR Part 431 

Administrative practice and 

procedure, Confidential business 

information, Energy conservation, 

Household appliances, Imports, 

Intergovernmental relations, Reporting 

and recordkeeping requirements, Small 

businesses. 

Issued in Washington, DC, on June 30, 

2015. 

David T. Danielson, 

Assistant Secretary, Energy Efficiency and 

Renewable Energy. 

For the reasons set forth in the 

preamble, DOE amends part 431 of 

chapter II, subchapter D, of title 10 of 

the Code of Federal Regulations as set 

forth below: 

PART 431—ENERGY EFFICIENCY 

PROGRAM FOR CERTAIN 

COMMERCIAL AND INDUSTRIAL 

EQUIPMENT 

■ 1. The authority citation for part 431 

continues to read as follows: 

Authority: 42 U.S.C. 6291–6317. 

■ 2. Amend § 431.97 by revising 

paragraph (c) to read as follows: 

§ 431.97 Energy efficiency standards and 

their compliance dates. 

* * * * * 

(c) Each non-standard size packaged 

terminal air conditioner (PTAC) and 

packaged terminal heat pump (PTHP) 

manufactured on or after October 7, 

2010 must meet the applicable 

minimum energy efficiency standard 

level(s) set forth in Table 4 of this 

section. Each standard size PTAC 

manufactured on or after October 8, 

2012, and before January 1, 2017 must 

meet the applicable minimum energy 

efficiency standard level(s) set forth in 

Table 4 of this section. Each standard 

size PTHP manufactured on or after 

October 8, 2012 must meet the 

applicable minimum energy efficiency 

standard level(s) set forth in Table 4 of 

this section. Each standard size PTAC 

manufactured on or after January 1, 

2017 must meet the applicable 

minimum energy efficiency standard 

level(s) set forth in Table 5 of this 

section. 

TABLE 4 TO § 431.97—MINIMUM EFFICIENCY STANDARDS FOR PTAC AND PTHP 

Equipment 

type Category Cooling capacity Efficiency level 

Compliance date: products 

manufactured on and after 

. . . 

PTAC ........... Standard 

Size.

<7,000 Btu/h ........................................... EER = 11.7 ............................................. October 8, 2012.2

≥7,000 Btu/h and ≤15,000 Btu/h ............ EER = 13.8 ¥ (0.3 × Cap 1) ................... October 8, 2012.2

>15,000 Btu/h ......................................... EER = 9.3 ............................................... October 8, 2012.2

Non-Standard Size.<7,000 Btu/h ........................................... EER = 9.4 ............................................... October 7, 2010.

≥7,000 Btu/h and ≤15,000 Btu/h ............ EER = 10.9 ¥ (0.213 × Cap 1) ............... October 7, 2010. 

>15,000 Btu/h ......................................... EER = 7.7 ............................................... October 7, 2010. 

PTHP ........... Standard 

Size.

<7,000 Btu/h ........................................... EER = 11.9 .............................................

COP = 3.3 ...............................................

October 8, 2012. 

≥7,000 Btu/h and ≤15,000 Btu/h ............ EER = 14.0 ¥ (0.3 × Cap 1) ...................

COP = 3.7 ¥ (0.052 × Cap 1) ................

October 8, 2012. 

>15,000 Btu/h ......................................... EER = 9.5 ...............................................

COP = 2.9 ...............................................

October 8, 2012. 

Non-Standard Size.<7,000 Btu/h ........................................... EER = 9.3 ...............................................

COP = 2.7 ...............................................

October 7, 2010. 

≥7,000 Btu/h and ≤15,000 Btu/h ............ EER = 10.8 ¥ (0.213 × Cap 1) ...............

COP = 2.9 ¥ (0.026 × Cap 1) ................

October 7, 2010. 

>15,000 Btu/h ......................................... EER = 7.6 ...............................................

COP = 2.5 ...............................................

October 7, 2010. 

1 ‘‘Cap’’ means cooling capacity in thousand Btu/h at 95 °F outdoor dry-bulb temperature. 2And manufactured before January 1, 2017. See Table 5 of this section for updated efficiency standards that apply to this category of equipment manufactured on and after January 1, 2017. 

TABLE 5 TO § 431.97—UPDATED MINIMUM EFFICIENCY STANDARDS FOR PTAC 

Equipment 

type Category Cooling capacity Efficiency level 

Compliance date: products 

manufactured on and after 

. . . 

PTAC ........... Standard 

Size.

<7,000 Btu/h ........................................... EER = 11.9 ............................................. January 1, 2017. 

≥7,000 Btu/h and ≤15,000 Btu/h ............ EER = 14.0 ¥ (0.3 × Cap 1) ................... January 1, 2017. 

>15,000 Btu/h ......................................... EER = 9.5 ............................................... January 1, 2017. 

1 ‘‘Cap’’ means cooling capacity in thousand Btu/h at 95 °F outdoor dry-bulb temperature. 

* * * * * Note: The following letter will not 

appear in the Code of Federal 

Regulations. 

May 15, 2015 

Anne Harkavy 

Deputy General Counsel 


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Federal Register / Vol. 80, No. 139 / Tuesday, July 21, 2015 / Rules and Regulations 43213 

For Litigation, Regulation and Enforcement 

Department of Energy 

Washington, DC 20585 

Dear Deputy General Counsel Harkavy: 

I am responding to your letter of March 

seeking the views of the Attorney General 

about the potential impact on competition of 

proposed amended energy conservation 

standards for standard-size packaged 

terminal air conditioners and standard-size 

packaged terminal heat pumps. Your request 

was submitted under Section (o)(2)(B)(i)(V) of 

the Energy Policy and Conservation Act, as 

amended (EPCA), 42 U.S.C. 

6295(o)(2)(B)(i)(V), which requires the 

Attorney General to make a determination of 

the impact of any lessening of competition 

that is likely to result from the imposition of 

proposed energy conservation standards. The 

Attorney General’s responsibility for 

responding to requests from other 

departments about the effect of a program on 

competition has been delegated to the 

Assistant Attorney General for the Antitrust 

Division in 28 CFR 0.40(g). 

In conducting its analysis, the Antitrust 

Division examines whether a proposed 

standard may lessen competition, for 

example, by substantially limiting consumer 

choice or increasing industry concentration. 

A lessening of competition could result in 

higher Prices to manufacturers and 

consumers. 

We have reviewed the proposed standards 

contained in the Notice of Proposed 

Rulemaking published in the Federal 

Register (79 FR at 55538–55601, September 

2014) (NOPR). We have also reviewed 

supplementary information submitted to the 

Attorney General by the Department of 

Energy, including the Technical Support 

Document, and reviewed industry source 

material. Based on this review, our 

conclusion is that the proposed amended 

energy conservation standards set forth in the 

NOPR for standard-size packaged terminal air 

conditioners and standard-size packaged 

terminal heat pumps are unlikely to have a 

significant adverse impact on competition. 

Sincerely, 

William J. Baer 

[FR Doc. 2015–16897 Filed 7–20–15; 8:45 am] 

BILLING CODE 6450–01–P 


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