Monday

July 15, 1996

Part III

Department of

Energy

Office of Energy Efficiency and

Renewable Energy

10 CFR Part 430

Procedures for Consideration of New or

Revised Energy Conservation Standards

for Consumer Products; Final Rule

E

36973

CE-RM-88-101 COMMENT 05
36974 Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations

DEPARTMENT OF ENERGY

Office of Energy Efficiency and

Renewable Energy

10 CFR Part 430

RIN [1904-AA83]

Energy Conservation Program for

Consumer Products : Procedures for

Consideration of New or Revised

Energy Conservation Standards for

Consumer Products

AGENCY : Office of Energy Efficiency and

Renewable Energy, Department of

Energy (DOE).

ACTION : Notice of final rulemaking.

SUMMARY : The Department of Energy

(DOE or Department) today promulgates

a rule to elaborate on the procedures,

interpretations and policies that will

guide the Department in establishing

new or revised energy efficiency

standards for consumer products. The

process described in this rule provides

for greatly enhanced opportunities for

public input, improved analytical

approaches, and encouragement of

consensus-based standards. This

enhanced approach was developed by

the Department on the basis of extensive

consultations with many stakeholders.

EFFECTIVE DATE : The procedures,

interpretations and policies established

in this rule take effect on August 14,

1996.

ADDRESSES : A copy of the report entitled

"Results of the Appliance Rulemaking

Process Improvement Effort," from

which much of the enhanced process

described in this rule is derived, may be

obtained from: U.S. Department of

Energy, Office of Energy Efficiency and

Renewable Energy, Forrestal Building,

EE-43, 1000 Independence Avenue,

SW, Washington, DC 20585, (202) 586-

7574. This report may be read at the

DOE Freedom of Information Reading

Room, U.S. DOE, Forrestal Building,

Room 1E-190, 1000 Independence

Avenue, SW, Washington, DC 20585,

(202) 586-6020, between the hours of 9

a.m. and 4 p.m., Monday through

Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT:

Michael J. McCabe, Office of Energy

Efficiency and Renewable Energy,

U.S. Department of Energy, Mail

Station EE-43, 1000 Independence

Avenue, SW, Washington, DC 20585-

0121, (202) 586-0371

Douglas W. Smith, Office of General

Counsel, U.S. Department of Energy,

Mail Station GC-70, 1000

Independence Avenue, SW,

Washington, DC 20585-0103, (202)

586-3410

Deborah E. Miller, Office of Energy

Efficiency and Renewable Energy,

U.S. Department of Energy, Mail

Station EE-1, 1000 Independence

Avenue, SW, Washington, DC 20585-

0121, (202) 586-8888.

SUPPLEMENTARY INFORMATION:

1. Background on Appliance Standards

Program

II. Process Leading to Development of this

Rule

III. Description of Rule

1. Objectives

2. Scope

3. Setting Priorities for Rulemaking

Activity

4. Process for Developing Efficiency

Standards and Factors to be Considered

5. Policies on Selection of Standards

6. Effective Date of a Standard

7. Test Procedures

8. Joint Stakeholder Recommendations

9. Principles for the Conduct of

Engineering Analysis

10. Principles for the Analysis of Impacts

on Manufacturers

11. Principles for the Analysis of Impacts

on Consumers

12. Consideration of Non -Regulatory

Approaches

13. Crosscutting Analytical Assumptions

14. Deviations, Revisions, and Judicial

Review

IV. Related DOE Actions to Implement

Process Improvements

1. Finalized process improvement report

2. Process to develop rulemaking priorities

3. Review of manufacturer impact analysis

4. Review of non-regulatory approaches

5. Creation of an advisory committee

V. Status of Ongoing Rulemakings

VI. Administrative Procedure

VII. Administrative Reviews

1. Background on Appliance Standards

Program

The Department of Energy's appliance

standards program is conducted

pursuant to Title III, Part B of the Energy

Policy and Conservation Act (EPCA). 42

U.S.C. 6291-6309. In 1987, EPCA was

amended to establish by law national

efficiency standards for certain

appliances and a schedule for DOE to

conduct rulemakings to periodically

review and update these standards.

National Appliance Energy

Conservation Act, Pub. L. 100-12

(1987). The products covered by these

standards included refrigerators and

freezers, room air conditioners, central

air conditioners and heat pumps, water

heaters, furnaces, dishwashers, clothes

washers and dryers, direct heating

equipment, ranges and ovens, pool

heaters, and fluorescent lamp ballasts.

In conducting the rulemakings to update

the standards, the Secretary of Energy is

to set standards at levels that achieve

the maximum improvement in energy

efficiency that is technologically

feasible and economically justified.

The Energy Policy Act of 1992

(EPACT) further amended EPCA to

expand the coverage of the standards

program to include certain commercial

and industrial equipment, including

commercial heating and airconditioning equipment, water heaters,

certain incandescent and fluorescent

lamps, distribution transformers, and

electric motors. Energy Policy Act of

1992, Pub. L. 102-486 (1992). EPACT

also established maximum water flowrate requirements for certain plumbing

products and provided for voluntary

testing and consumer information

programs for office equipment,

luminaires, and windows.

EPCA also provides for DOE to

establish test procedures to be used in

evaluating compliance with efficiency

standards. These test procedures are

revised periodically to reflect new

product designs or technologies.

As prescribed by EPCA, energy

efficiency standards are established by a

three-phase public process: Advance

Notice of Proposed Rulemaking

(ANOPR); Notice of Proposed

Rulemaking (NOPR); and Final Rule.

The process to develop test procedures

is similar, except that an Advance

Notice is not required.

In updating standards as required by

EPCA, DOE revised standards for

refrigerators and freezers in November

1989, with those standards becoming

effective in January 1993. 54 FR 47916

(Nov. 17, 1989). These standards

resulted in an approximately 25 percent

reduction in refrigerator energy use. In

May 1991, DOE issued revised energy

conservation standards for clothes

washers, clothes dryers, and

dishwashers which became effective on

May 14, 1994. 56 FR 22250 (May 14,

1991).

DOE has published notices of

proposed rulemaking on revised

standards for a number of covered

products. A NOPR for energy

conservation standards for eight

products (water heaters, room airconditioners, mobile-home furnaces,

direct-heating equipment, pool heaters,

kitchen ranges and ovens, fluorescent

lamp ballasts, and televisions) was

published in March 1994. 59 FR 10464

(March 4, 1994). DOE has since

withdrawn the proposal to establish

standards for television sets. 60 FR

32627 (June 23, 1995). With regard to

ballasts and electric water heaters, DOE

is gathering further inputs and

conducting further analysis. 60 FR 5880

(Jan. 31, 1995). In July 1995, the

Department issued a NOPR for energy

conservation standards for refrigerator

CE-RM-88-101 COMMENT 05
Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations

products which was based largely on a

proposal made by a coalition of

refrigerator manufacturers, electric

utilities, states and energy conservation

advocates. 60 FR 37388 (July 20, 1995).

The Department of the Interior and

Related Agencies Appropriations Act for

Fiscal Year 1996 included a moratorium

on proposing or issuing energy

conservation appliance standards for the

remainder of Fiscal Year 1996. See Pub.

L. 104-134. The Department is

continuing to work on the analyses

underlying proposed standards and on

test procedure revisions during this

fiscal year.

The appliance standards program

supports key objectives of the

Administration's Sustainable Energy

Strategy, which include: Increasing the

efficiency of energy use in order to

strengthen our economy and improve

living standards; reducing the adverse

environmental impacts associated with

energy production, delivery and use;

and keeping America secure by

reducing our vulnerability to global

energy market shocks. Although the

Department recognizes that policies that

rely on market forces or market-based

incentives are preferable in many

circumstances, appropriate regulatory

intervention can achieve efficiency

gains that will benefit consumers,

businesses, and the Nation. Existing

appliance standards are projected to

save 23 quadrillion BTUs of energy from

1993 to 2015, resulting in estimated

consumer savings of $1.7 billion per

year in 2000 and estimated annual

emission reductions of 107 million tons

of carbon dioxide and 280 thousand

tons on nitrogen oxides by 2000. An

aggressive program for promoting the

efficient use of energy resources,

including appliance efficiency

standards that are technically feasible

and economically justified, is a critical

element of the Sustainable Energy

Strategy.

II. Process Leading to Development of

This Rule

Since the National Performance

Review's recommendations on

Regulatory Reform were issued over two

years ago, the U.S. DOE has forged new

ways of carrying out its appliance

standards rulemaking responsibilities.

To supplement the traditional

rulemaking process established by law,

the Department has encouraged

consensus-based alternatives and

invited interest group participation in

the early stages of standards

development with mechanisms such as

technical sessions and workshops.

In September 1995, the Department

announced a formal effort to consider

further improvements to the process

used to develop appliance efficiency

standards, calling on energy efficiency

groups, manufacturers, trade

associations, state agencies, utilities,

and other interested parties to provide

input to guide the Department's work.

To date, the Department's process

improvement effort has consisted of

several elements:

-A series of preliminary meetings were

held with interested parties to

identify opportunities for

improvement in the rulemaking

process, standards priority setting,

analysis methods and Department

36975

The Department's many stakeholders

have contributed tremendously to this

effort to review the Department's

procedures. The Department appreciates

that sustained contribution, and is

committed to implement a process that

is more responsive to stakeholder

concerns.

III. Description of Rule

1. Objectives

Section 1 of the rule articulates the

Department's major objectives for the

enhanced process to be employed for

considering new or revised appliance

efficiency standards The Department's .

decision making; objectives were conducted with thirty ectives are to:

organizations that have participated (a) Provide for early input from

in past appliance rulemakings to stakeholders (b) Increase predictability of the solicit information regarding the rulemaking timetable

oerceived strengths and weaknesses (c) Increase use of outside technical

of the process;

-A preliminary draft "Process expertise

Improvement Plan" was developed (d) Eliminate problematic design

from these initial meetings and options early in the process

interviews; (e) Fully consider non-regulatory

-A public workshop was held to obtain approaches

broad-based input on the

Department's draft "Process

Improvement Plan" and other

elements of the Department's

proposed new approach;

-A draft report entitled "Results of the

Appliance Rulemaking Process

Improvement Effort" was prepared

and distributed for comment to the

workshop participants;

-Follow-up meetings were held with

interested parties on the issues raised

in the draft report; and

-Several drafts of today's rule were

shared with stakeholders, and the

Department addressed numerous

comments made by interested parties

in written submissions and during

two well-attended stakeholder

workshops.

The publication of this rule is an

important step in institutionalizing the

procedural improvements identified in

this process. It is not, however, the only

step. Other actions in the Department's

process improvement effort include: A

review of the manufacturing impact

analysis model and methodologies; a

review of non-regulatory approaches;

the prioritization of future rules; and the

creation of an advisory committee

consisting of a representative group of

interested parties, to oversee the

implementation of these commitments.

(See section IV of the Supplementary

Information.) The objective is to act

quickly to implement this enhanced

standards development process, and to

continue to invite extensive stakeholder

consultation in the implementation

phase.

(f) Conduct thorough analysis of

impacts

(g) Use transparent and robust

analytical methods

(h) Articulate policies to guide

selection of standards

(i) Support efforts to build consensus

on standards

(j) Reduce time and cost of developing

standards

2. Scope

Section 2 describes the applicability

of the enhanced process contained in

the rule. The Department has adopted a

common sense approach to the

transition to this enhanced process.

DOE will use the new approach for all

new rulemakings. With regard to

rulemakings that are already underway,

DOE and interested parties have

invested substantial effort and

resources. In balancing whether the

benefits of using this enhanced process

justify the delay of starting these

rulemakings anew, DOE has concluded

that the new process will be used, from

the start, with respect to rulemakings in

which a NOPR has not yet been

published. To the extent analytical work

has already been done or public

comment on an ANOPR has already

been provided, such analysis and

comment will be considered, as

appropriate, in proceeding under the

new process. A case-by-case review is

needed to determine how to proceed

(i.e., whether some or all of the

analytical or procedural steps should be

repeated) with respect to products for

which a NOPR has been issued and the

CE-RM-88-101 COMMENT 05
36976 Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations

analysis is nearly complete. DOE's

intentions concerning how to proceed

with those rulemakings that are beyond

the NOPR stage are discussed in some

detail in section V below. Note that the

rulemakings beyond the NOPR stage

include one rule based on a consensus

stakeholder recommendation and others

for which there has been shared analysis

and public workshops consistent with

the direction of this rule.

3. Setting Priorities for Rulemaking

Activity

Section 3 describes the process that

will be used in developing rulemaking

priorities, including factors to be

considered. The annual process invites

public input on the program's

rulemaking agenda for the coming year,

establishes factors to be considered in

establishing priorities, and provides, in

conjunction with the Department's

Regulatory Agenda, a clear set of

expectations about the scheduled

rulemaking activities.

4. Process for Developing Efficiency

Standards and Factors To Be

Considered

Section 4 establishes the process for

developing efficiency standards. This

process is designed to provide for

greater, and more productive,

interaction between the Department and

interested parties throughout the

process. It is also designed so that key

analyses are performed earlier in the

process, with early opportunities for

public input to and comment on the

analyses. The process is consistent with

the procedural requirements of law, but

adds some important steps to enhance

the process.

Building upon the National

Performance Review's regulatory reform

initiative, an effort has been underway

at the Department to increase

consultation with interested parties at

every stage of the rulemaking process. In

addition to holding the formal public

hearings and soliciting written

comments, the Department has

increased its use of public workshops

and other less formal tools to develop

more effective standards. The

Department has received broad support

for its recent efforts to open the

standards development process and its

commitment to obtain input from

interested parties early-well in

advance of the ANOPR-and often in

the rulemaking process.

Section 4 also articulates factors that

DOE will take into account in screening

design options, selecting candidate

standard levels, and selecting proposed

and final standard levels.

(a) Pre-ANOPR Screening and Analysis

of Design Options

As described in section 4(a), the first

step in a rulemaking will be a screening

analysis that will identify the product

categories and technologically feasible

design options and then narrow the

range of design options being

considered for the development of

candidate standard levels. This

screening analysis, along with the

engineering analysis and the selection of

candidate standard levels, will occur

before DOE publishes an ANOPR.

Some manufacturers have expressed

concern that the Department may devote

too much attention to consideration of

design options that: Are not practical to

mass manufacture, install or service;

have substantial impacts on consumer

utility; or raise significant safety

concerns. The screening step is

designed to address these concerns. The

Department will develop, with input

from interested parties, a list of design

options for further consideration. The

Department will eliminate from further

consideration a design option that: Is

not technologically feasible; is not

practicable to manufacture, install and

service; has significant adverse impact

on the utility of the product to

consumers; or adversely affects health

or safety. Consistent with Natural

Resources Defense Council v.

Herrington, 768 F.2d 1355 (D.C. Cir.

1985), the Department will evaluate

design options for technological

feasibility on the basis of whether the

options are in use by industry or

research has progressed to the

development of a prototype. However,

consideration of practicability to

manufacture, impacts on consumer

utility and health and safety effects at

this stage is designed to ensure that

commercially impractical designs, even

if technologically feasible, are screened

out on the basis of other statutory

criteria early in the process. This early

screening approach should reduce

uncertainty as to the direction of

standards development.

The Department will seek expert

input to conduct the necessary analyses.

The Department, with input from

interested parties, will identify issues

that will be examined in the engineering

analysis and the types of specialized

expertise that may be required. With

these specifications, DOE will select

appropriate contractors, subcontractors,

and as necessary, expert consultants to

perform the engineering analysis and

the impact analysis. DOE, in

consultation with interested parties,

also will identify technology/industry

experts who can provide independent,

expert review of the results of the

engineering analysis and the subsequent

impact analysis. The Department will

consider in the analyses, wherever

feasible, data, information and analyses

received from stakeholders.

After the screening of design options,

the DOE contractor will perform

engineering and initial economic

analysis of the design options. The

results of this analysis will be

distributed for review by experts and

interested parties. If appropriate, a

public workshop will be conducted to

review these results.

The process does not contemplate that

the early screening process will be the

final opportunity to gather and consider

input on whether a design option is

technologically feasible; is practicable to

manufacture, install and service; has

significant adverse impact on utility of

the product to consumers; or adversely

affects health or safety. Any new

information on these issues that is

provided in later stages of the

rulemaking will be considered, as

provided in sections 4(b)(4) and

4 (d) (7) (ix), and a preliminary

determination to include or exclude

consideration of a design option based

on the screening analysis may be

revised if supported by a reexamination

of these factors based on new

information.

This emphasis on the early stages of

the process is designed to enable

interested parties and DOE to engage in

a more productive, informative

interaction on standards issues prior to

the publication of the ANOPR, so that

the standards development process

starts with the best possible foundation

of common understanding.

(b) Factors in Selection of Proposed

Standard

Section 4(c) provides that following

review of comments on the ANOPR,

DOE's contractor will conduct specified

impact analyses to be used by DOE in

selecting proposed standards. The

factors to be considered by DOE in

selection of proposed standard levels

include:

(i) Consensus stakeholder

recommendations

(ii) Impacts on manufacturers

(iii) Impacts on consumers

(iv) Impacts on competition

(v) Impacts on utilities

(vi) National energy, economic and

employment impacts

(vii) Impacts on the environment and

energy security

(viii) Impacts of non-regulatory

approaches

(ix) New information relating to

factors use for screening design options.

CE-RM-88-101 COMMENT 05
Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations

The Department's approach to

analysis and consideration of several of

these key factors is discussed in sections

10, 11, and 12 of the rule.

(c) Enhanced Opportunities for the

Public to Receive Information and

Provide Input

Throughout the process, the

Department will provide interested

parties with opportunities to provide

data, recommendations and other

comments. DOE will share with the

public both analyses and preliminary

decisions to inform interested parties as

to the progress of standards

development. This information from the

Department will enable the public to

provide informed input to DOE at each

step of the process.

With the goal of better informing

stakeholders about DOE rulemaking

activities, the Department will use

various methods, in addition to Federal

Register notices, to notify interested

parties of upcoming meeting and

rulemaking notices, such as industry

publications, Inside Energy, Air

Conditioning News, Appliance

Magazine, Product Safety Letter, and the

Energy Efficiency and Renewable

Energy Network (EREN) located on the

Internet at http://www.eren.doe.gov.

(d) Timely Completion of Rulemakings

The Department's intent is to use a

process that will produce standards that

have sound analytical grounding and

have been subject to thorough review

and comment without making the

process unduly time-consuming. The

entire process provided for in section 4,

from the date of issuance of the listing

of priorities indicating that work is

about to begin on the development of a

new standard, to issuance of the final

rule, should take no more than three

years. The time required from issuance

of an ANOPR to issuance of a final rule

should be no more than 18 months.

Timely completion of rulemakings is

essential. If experience demonstrates

rulemakings are not being completed

within a 3-year timeframe using this

new process, DOE will reconsider this

process to explore how changes can be

made to expedite the process.

5. Policies on Selection of Standards

Section 5 describes Department

policies concerning the selection of new

or revised standards, and decisions

preliminary thereto. These policies are

intended to provide guidance for

making the determinations required by

section 325 of the EPCA, 42 U.S.C. 6295.

Section 5(b) states policy guidance for

screening design options. In particular,

it states that a design option will not be

considered further if it is determined

that the technology: is not incorporated

in a commercial product or a working

prototype; will not be capable of being

mass produced and installed and

serviced by persons serving the relevant

market at the time a standard would

take effect; will have significant adverse

impact on the utility of the product to

consumers, or result in the

unavailability of any product type

generally available in the U.S. market;

or will have significant adverse impacts

on health or safety.

Section 5(c) and (d) describe the

policies pertaining to the selection of

candidate standard levels.

Sections 5(e) and (I) describe

Department policies guiding selection of

proposed and final standard levels.

Section 325(o)(2) (A) of EPCA provides

that any new or revised standard must

be designed to achieve the maximum

improvement in energy efficiency that is

determined to be technologically

feasible and economically justified. A

candidate standard level will not be

proposed or promulgated if the

Department determines that it is not

technologically feasible and

economically justified. See EPCA

section 325(o)(3)(B). A standard level is

economically justified if the benefits

exceed the burdens. See EPCA section

325 (o) (2) (B) (i) .

The Department encourages efforts to

develop consensus among interested

parties on proposals for new or revised

standards as an effective mechanism for

balancing the economic, energy, and

environmental interests affected by

standards. Thus, notwithstanding any

other policy on selection of proposed

standards, a consensus recommendation

on an updated efficiency level

submitted by a group that represents all

interested parties will be proposed by

the Department if it is determined to

meet the statutory criteria.

Section 5(e) articulates a number of

policies to guide the application of

EPCA's economic justification criterion

in selecting a proposed standard.

Although many factors are pertinent to

the ultimate judgment about whether

the benefits of a standard level exceed

the burdens, these policies reflect

special concern about particular types of

significant adverse impacts on

consumers and manufacturers in

reaching that judgment.

The policies articulated in section

5(e)(3)(i) are stated as rebuttable

presumptions. Although these

presumptions reflect the great

significance DOE attaches to these

factors, DOE will consider evidence that

rebuts an applicable presumption that a

36977

standard level is not economically

justified. Any applicable presumption

will be rebutted if the Department

determines that specifically identified

expected benefits of the standard would

outweigh the expected adverse effects.

6. Effective Date of a Standard

Section 6 provides that the lead time

between the publication of a final rule

in the Federal Register and the effective

date of the new or revised standard will

be at least the period contemplated by

the rulemaking schedules contained in

EPCA. The Department will consider,

on a case-by-case basis, further

extending this lead time if the

circumstances warrant. For instance, the

lead time might be extended to mitigate

the cumulative burden of implementing

multiple product regulations or to

permit time for market acceptance of

new products. This section also

provides that the period between the

effective date of one standard and the

effective date of any revision to that

standard will be at least the period

contemplated by the rulemaking

schedules contained in EPCA. These

policies will ensure that the time

available for manufacturers to prepare

for implementation of a new or revised

standard and the time available for the

amortization of any fixed costs

associated with compliance will be no

less than anticipated in the statute.

7. Test Procedures

Section 7 states the Department's

commitment to ensure that revisions to

test procedure rules necessary to

evaluate revisions to standards are

developed and finalized in a timely

fashion.

Any necessary modifications in test

procedures will be proposed before

issuance of an ANOPR on revised

standards and will be finalized prior to

the issuance of a NOPR on revised

standards. Where significant test

procedure changes are needed, DOE will

attempt to finalize test procedure

revisions before the issuance of an

ANOPR on revised standards.

8. Joint Stakeholder Recommendations

Section 8 states that the Department

supports efforts by groups of interested

parties to develop and present

consensus recommendations on

standards to DOE. Throughout the

standards development process, and

especially following the issuance of the

ANOPR, interested parties are welcome

to develop common recommendations

to the Department on product categories

and standard levels as well as on more

specific analytical issues. The

CE-RM-88-101 COMMENT 05
36978 Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations

Department will seek to support these

efforts in whatever way possible.

9. Principles for the Conduct of

Engineering Analysis

Section 9 states the Department's

commitment to solicit input from

interested parties and experts in

conducting the engineering analysis.

The Department will use this input to

develop the design options to be

considered in the subsequent analyses,

identify any engineering models

necessary, and estimate the likely cost

and performance improvement potential

of design options. The Department will

use analytical methods that explicitly

account for uncertainty.

10. Principles for the Analysis of

Impacts on Manufacturers

Section 10 describes the approach

DOE will use in the analysis and

consideration of impacts on

manufacturers. The process addresses a

number of concerns raised in the

process improvement effort. First, the

process provides opportunities for

comments in the pre-ANOPR screening

process and at the beginning of the

impact assessment process. This will

focus attention on items of specific

concern to each individual regulatory

proceeding. Discussions on what data

are critical as well as the specific

approaches for generating those data

will be conducted in open proceedings.

Second, the Department will utilize an

annual cash flow approach to determine

quantitative impacts on manufacturers

including a short term assessment based

on the cost and capital requirements

during the period between the

announcement of a regulation and the

time when the regulation comes into

effect. Third, with input from

manufacturers and other interested

parties, the Department will develop

estimates of the critical variables

affecting manufacturers (such as

expected changes in product prices,

sales, and possible fuel switching)

drawing on multiple sources of data

both quantitative and qualitative.

Fourth, the Department will analyze the

impacts of a standard on different types

of manufacturers, with particular

attention to impacts on small

manufacturers. This will be done with

scenario analysis or other appropriate

methods. Fifth, the Department will use

models that: are clear and

understandable; feature accessible

calculations; and recognize and report

the range of uncertainty. Finally, the

Department will assess and describe the

effects on manufacturers of other

significant product-specific regulations

that will take effect within three years

of the effective date of the standard

under consideration and will affect

significantly the same manufacturers.

This assessment is intended to capture

the impacts of different DOE standards

affecting multiple products made by the

same manufacturing division.

With respect to overlapping efficiency

standards on a product and components

of the product, the Department will pay

special attention to the cumulative

regulatory burden being borne by the

manufacturer of finished products

containing that component. In such

cases, the Department will specifically

address the cost of potential component

standards plus the overlapping costs of

existing parallel standards on both the

component and the system in which the

component is installed.

11. Principles for the Analysis of

Impacts on Consumers

Section 11 describes the Department's

approach to consideration of consumer

impacts. First, in the very early stages of

standard development, DOE will

consider adverse impacts of design

options on consumer utility and will

identify other possible impacts on

consumers of updated efficiency

standards which may warrant closer

examination during the standards

development process. Second, DOE will

determine, on the basis of any

information submitted during the

standard development process, whether

a proposed standard is likely to result in

the unavailability of any covered

product type with performance

characteristics, features, sizes,

capacities, and volumes that are

substantially the same as products

generally available in the U.S. at the

time. Consistent with EPCA, DOE will

not promulgate a standard at a level

where it concludes that it would result

in such unavailability. Third, the

Department will consider the views of

the Department of Justice on any

impacts of a proposed standard on

competition, and will not issue a

standard determined to have significant

anticompetitive impacts. Fourth, the

Department will use regional analysis

and sensitivity analysis tools, as

appropriate, to evaluate the potential

distribution of impacts of candidate

standards levels on consumers. The

Department will consider impacts on

significant segments of society in

determining standards levels. Where

significant subgroups would be

expected to bear significant adverse

impacts, DOE will place increased

emphasis on voluntary programs to

bring about additional potential energy

savings.

The Department will be sensitive to

first cost increases and make greater use

of sensitivity analysis and scenario

analysis in reporting consumer LifeCycle Cost, Payback Period and Cost of

Conserved Energy. The Department

expects that the use of these methods

will result in more economically

efficient standards than reliance on payback period alone, while achieving the

similar result of avoiding negative

impacts to identifiable population

groups.

Substantial increases in product

prices may adversely affect low-income

households or cause shifts in product

purchasing patterns. Thus, if a

candidate standard level would cause a

substantial increase in the product first

costs to consumers or would not pay

back such additional first costs through

energy cost savings in less than three

years, Department will specifically

assess the likely impacts of such a

standard on low-income households,

product sales and fuel switching. The

results of this assessment will be

considered in the evaluation of

consumer and manufacturer impacts.

As noted during the process

improvement effort, consumers have

rarely participated directly in standards

development. In order to address

concerns about the lack of such direct

participation, DOE will seek to

strengthen its efforts to inform and

involve consumers and consumer

representatives in the process of

developing standards. This will include

expanded notification of consumer

representatives during the process of

developing updated efficiency standards

and, where appropriate, DOE may seek

the direct input of consumers.

The Department is committed to

improving the analysis of engineering

issues and consumer and manufacturer

impacts. The Department also is

cognizant that using ever more elaborate

quantitative approaches carries the risk

of unacceptable delays and

incomprehensible analysis and results.

For these reasons, the Department will

seek to balance appropriately the use of

quantitative and qualitative approaches,

with the goal of providing the most

useful information upon which to make

the required judgments.

12. Consideration of Non-Regulatory

Approaches

Section 12 states the Department's

commitment to consider fully the likely

effects of market forces and any nonregulatory initiatives in assessing the

incremental benefits of efficiency

standards. DOE considers voluntary

"market pull" programs to be an

CE-RM-88-101 COMMENT 05
Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations

important complement to its standards

program.

13. Crosscutting Analytical

Assumptions

Section 13 describes the principles

the Department intends to follow in

selecting the key assumptions which are

critical to the quantitative analysis of

the impacts of candidate standard

levels, including rates of economic

growth, energy price and demand

trends, product specific energy

efficiency trends, real discount rates and

emission rates. These cross-cutting

analytical assumptions will continue to

be specifically identified in all notices

of proposed rulemaking and will

continue to be subject to public

comment and review as part of each

such rulemaking.

Certain crosscutting analytical

assumptions will change regularly as

forecasts of economic growth, energy

price, demand, efficiency and other

trends are modified. In other cases, such

as the real discount rates used to assess

the present value of future costs or

savings for consumers, commercial

businesses, manufacturers or the Nation,

the Department hopes that the

crosscutting analytical assumptions will

remain relatively stable. For residential

consumers, the Department currently

uses real discount rates of 2, 6 and 15%

in the analysis of likely impacts of

appliance standards. For commercial

users, the Department currently uses 4,

8 and 12%. For manufacturers, the

Department currently uses 12%, but is

likely to develop a range of values for

future use. For National benefits, the

Department currently uses 7%.

With respect to the consideration of

the impacts of candidate standards on

the environment and energy security,

the Department can find no sound

analytical method for accurately

estimating the monetary value of such

environmental or energy security

benefits (or costs). Therefore, the

Department will not attempt to

incorporate the estimated monetary

value of such externalities into its

estimates of the national net present

values of candidate standard levels.

However, as required by the National

Environmental Policy Act, the

Department will continue to consider

the likely effects of candidate standard

levels on the environment and energy

security in reaching a decision as to

whether the benefits of the such

standard levels exceed their burdens.

EPCA provides that energy

conservation standards prescribed

under EPCA are to be based on energy

consumption at the point of use (i.e.,

site energy). See EPCA sections 321 (4),

(5) and (6). For purposes of estimating

energy savings in evaluating the benefits

of a proposed standard, DOE considers

the energy savings associated with the

production of the fuel used by the

appliance covered by the standard (i.e.,

source energy).

14. Deviations, Revisions and Judicial

Review

The Department has crafted this rule

to include procedures, interpretations

and policies that it believes will be

appropriate for general use in the future

conduct of the appliance standards

program. However, given the possibility

of unanticipated circumstances affecting

either particular rulemakings or the

program generally, the rule includes

provision for case-specific deviations

and modifications of the generally

applicable rule. If the Department

concludes that elements of this rule are

not appropriate in a particular standards

rulemaking, DOE will provide interested

parties with notice of the deviation and

an explanation of why such a deviation

was deemed appropriate. If the

Department concludes, based on

experience with this approach, that

changes in this Appendix are

appropriate, DOE will provide notice of

such modifications to the rule with an

accompanying explanation. DOE will

consult with interested parties, probably

through the advisory committee

(described in section IV.5 of this

Supplementary Information), prior to

any such modification to the rule. The

procedures, interpretations, and policies

stated in this Appendix are not intended

to establish any new cause of action or

right to judicial review. Judicial review

of final rules is provided for in section

336 of EPCA.

IV. Related DOE Actions To Implement

Process Improvements

In addition to promulgation of this

rule, DOE employed other activities to

address some of the concerns raised by

stakeholders during the process

improvement. These activities are

described below.

1. Finalized Process Improvement

Report

The Department will issue the final

report on "Results of the Appliance

Rulemaking Process Improvement

Effort" in August 1996.

2. Process To Develop Rulemaking

Priorities

On June 14, 1996, the Department

held a public workshop on prioritysetting and DOE will make available a

draft priority listing based on the results

of our priority-setting analysis in late

36979

July. The draft rulemaking priority

listing and the accompanying analysis

will: Indicate for which covered

products DOE is proposing to initiate or

continue, during the next two years, the

development of updated standards;

document the priority-setting analysis

which DOE used to develop the draft

priority listing; indicate the next steps

for all currently active rulemakings;

describe any variations from the

enhanced process that will be followed

for specific products; and provide a

schedule for completion of each

rulemaking identified.

The final list of rulemaking priorities

will be available at the time that the

Regulatory Agenda is published in the

Federal Register in the fall of 1996.

During the summer, the Department will

obtain public comments on the draft

listing of rulemaking priorities.

3. Review of Manufacturer Impact

Analysis

In order to initiate the process of

developing new and substantially

improved methods for assessing the

impacts of standards on manufacturers,

DOE will review in detail the existing

analyses methodologies, develop a draft

work plan for the development of new

methods for assessing manufacturer

impact, and invite comments and

suggestions from interested parties.

4. Review of Non-Regulatory

Approaches

DOE has initiated a process for

developing methods for comparing the

likely benefits and costs of updated

efficiency standards to various nonregulatory alternatives. For instance,

DOE held a public workshop on June

20, 1996 which examined, among other

issues, alternatives and complements to

standards for fluorescent lamp ballasts.

DOE expects to hold one or more similar

workshops to examine these issues with

regard to other products.

5. Creation of an Advisory Committee

DOE is establishing an Advisory

Committee on Appliance Energy

Efficiency Standards. The Committee

will provide an official, organized forum

for interested parties to provide the

Department with advice, information,

and recommendations on the Appliance

Efficiency Standards rulemaking

process. Committee members will be

chosen to ensure an appropriately

balanced representation of various

points of view and functions of

interested parties and experts, such as

manufacturer trade associations,

manufacturers, energy efficiency groups,

consumers, utilities, retailers, and state

energy offices. The Assistant Secretary

CE-RM-88-101 COMMENT 05
36980 Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations

for Energy Efficiency and Renewable

Energy will chair the Committee.

It is anticipated that this advisory

committee will be a useful forum for

obtaining advice on the desirability of

making changes to the procedures,

interpretations and policies set out in

this rule, and on cross cutting analytical

issues affecting all product standards.

The Advisory Committee may

recommend that DOE undertake generic

proceedings relating to crosscutting

analytical issues.

V. Status of Ongoing Rulemakings

As stated in section 2 of the rule, the

Department will apply the new process

described in section 4 of the rule to all

rulemakings for which a NOPR has not

yet been published. To the extent

analytical work has already been done,

and public comment on an ANOPR

already has been provided, such

analysis and comment will be

considered, as appropriate, in

proceeding with the new process.

The Department is precluded through

September 1996 from using funds

appropriated under the Fiscal Year 1996

Interior Appropriations Act to propose

or promulgate new or revised efficiency

standards. With respect to rulemakings

for which a NOPR has already been

published, DOE currently intends to

proceed as follows:

Refrigerators. The analysis of

comments on the NOPR is complete. At

this time, DOE believes that no major

changes to the underlying analysis of

the proposed refrigerator standards is

necessary. However, the Department

expects to consult further with

interested parties to determine whether

it is appropriate to make alterations to

the proposed standards to take into

account the interaction between the

revised efficiency standards and Clean

Air Act and Montreal Protocol on

Substances that Deplete the Ozone

Layer regulations relating to

manufacture of HCFCs, which take

effect in 2003, as suggested by some

stakeholders. The Department expects

that any further consideration of this

issue would be consistent with the

approach taken in today's rule on

pertinent topics such as cumulative

regulatory burden.

Ballasts. The analysis underlying the

previously proposed standards has been

substantially revised and has been

circulated for technical review by

manufacturers and other interested

parties. A public workshop to review

this revised analysis was held on June

20, 1996.

Cooking Products and Room Air

Conditioners. The analyses underlying

the proposed standards for these two

product categories have been

substantially revised and are now being

circulated for technical review by

manufacturers and other interested

parties. On the basis of these analyses

and any comments received on these

analyses, the Department expects to

proceed to issue a final rule after the

current fiscal year 1996 moratorium

expires.

Water Heaters. The analyses for gas,

oil and electric water heaters are being

revised and will be completed and made

available for review depending on the

priority given this product. A revised

NOPR would be issued following the

new procedure.

Mobile Home Furnaces, Direct

Heating Equipment and Pool Heaters.

The analyses for these products have

been revised and will be made available

for review depending on the priority

given them. Revised NOPRs would be

issued following the new procedure.

In the near term, DOE will consider

these rulemakings among others in the

upcoming priority setting effort, and

will solicit and consider public

comment on how to proceed with these

rules in that process.

VI. Administrative Procedure

The rule published today describes

procedures, interpretations, and policies

DOE will follow in conducting

rulemakings on appliance standards.

DOE is not required to provide for prior

notice and opportunity for comment on

today's final regulations because they

fall within the Administrative

Procedure Act's exception for

"interpretative rules, general statements

of policy, or rules of agency

organization, procedure, or practice." 5

U.S.C. 553(b) (A). Moreover, these

procedures, interpretations and policies

were developed with extensive

consultation with representatives of all

of the interests that typically participate

in standards rulemakings. The

consultations to date are described in

detail in section II of this

Supplementary Information.

VII. Administrative Reviews

A. Review Under Executive Order 12866

This regulatory action is not a

significant regulatory action under

Executive Order 12866, "Regulatory

Planning and Review," October 4, 1993.

Accordingly, this action was not subject

to review under the Executive Order by

the Office of Information and Regulatory

Affairs.

B. Review Under Executive Order 12612

Executive Order 12612 requires that

regulations, rules, legislation, and any

other policy actions be reviewed for any

substantial direct effect on states, on the

relationship between the National

Government and states, or in the

distribution of power and

responsibilities among various levels of

government. If there are substantial

effects, then the Executive Order

requires preparation of a federalism

assessment to be used in all decisions

involved in promulgating and

implementing a policy action.

The final rules published today do not

regulate the states. They primarily will

affect the manner in which DOE

develops proposed rules to revise

consumer product energy efficiency

standards. Section 327 of the EPCA

provides for preemption of state

regulation in this area. The final rules

published today do not alter the

distribution of authority and

responsibility to regulate in this area.

Accordingly, DOE has determined that

preparation of a federalism assessment

is unnecessary.

C. 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," 61 FR 4729 (February 7, 1996),

imposes on Executive agencies the

general duty to adhere to the following

requirements: (1) Eliminate drafting

errors and ambiguity; (2) write

regulations to minimize litigation; and

(3) provide a clear legal standard for

affected conduct rather than a general

standard and promote simplification

and burden reduction. With regard to

the review required by section 3(a),

section 3(b) of the Executive Order

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 the Executive Order 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 reviewed today's final

regulations under the standards of

section 3 of the Executive Order and

determined that, to the extent permitted

CE-RM-88-101 COMMENT 05
Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations 36981

by law, they meet the requirements of

those standards.

D. Regulatory Flexibility Act

If an agency is required by law to

issue a general NOPR, and if a rule has,

or is likely to have, a significant

negative economic impact on a

substantial number of small entities,

then the Regulatory Flexibility Act, 5

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

of an initial and final regulatory

flexibility analysis to accompany

proposed and final rulemakings,

respectively. Because the rule published

today is exempt from notice and

comment rulemaking under the

Administrative Procedure Act, there is

no requirement to prepare a regulatory

flexibility analysis.

E. Review Under the National

Environmental Policy Act

The Department has concluded that

this rule falls into a class of actions that

are categorically excluded from review

under the National Environmental

Policy Act of 1969 (NEPA), 42 U.S.C.

4321, 4331-35, 4341-47, because they

would not individually or cumulatively

have a significant impact on the human

environment as determined by DOE's

regulations. 10 CFR part 1021, subpart

D. Therefore this rule does not require

preparation of an environmental impact

statement or environmental assessment

pursuant to NEPA.

F. Review Under Unfunded Mandates

Reform Act of 1995

Title II of the Unfunded Mandates

Reform Act of 1995, Pub.L. 104-4,

requires each Federal agency to assess

the possible effects of Federal regulatory

action on state, local, and tribal

governments, and the private sector of

Federal mandates. If a Federal mandate

is expected to have an impact of $100

million or more in any year, then the

mandate is significant and the issuing

agency is obliged to undertake a

detailed assessment of costs and

benefits. If the Federal mandate is a

significant intergovernmental mandate,

then the issuing agency is obliged to

provide a meaningful and timely

opportunity for affected governments to

participate in the development of the

rule. The final regulations in this notice

apply only to the conduct of DOE

officials and do not place regulatory

obligations on anyone outside of DOE.

Accordingly, there are no legal

requirements under the Unfunded

Mandates Reform Act of 1995 that apply

to this rulemaking.

G. Review Under Small Business

Regulatory Enforcement Fairness Act of

1996

Consistent with the Small Business

Regulatory Enforcement Fairness Act of

1996, DOE will submit to Congress a

report regarding the issuance of today's

final rule prior to the effective date set

forth at the outset of this notice. The

report will note the Office of

Management and Budget's

determination that this rule does not

constitute a "major rule " under that Act.

5 U.S.C. 801, 804.

List of Subjects in 10 CFR Part 430

Administrative practice and

procedure , Energy conservation,

Household appliances.

Issued in Washington, DC, on July 9, 1996.

Christine A. Ervin,

Assistant Secretary, Energy Efficiency and

Renewable Energy.

For the reasons set forth in the

preamble, Part 430 of Chapter II of Title

10, Code of Federal Regulations, is

amended as set forth below:

PART 430-ENERGY CONSERVATION

PROGRAM FOR CONSUMER

PRODUCTS

1. The authority cite continues to read

as follows:

Authority: 42 U.S.C. 6291-6309.

2. Appendix A to Subpart C of Part

430-Procedures, Interpretations and

Policies for Consideration of New or

Revised Energy Conservation Standards

for Consumer Products-is added as set

forth below:

Appendix A to Subpart C of Part 430-

Procedures, Interpretations and Policies for

Consideration of New or Revised Energy

Conservation Standards for Consumer

Products

1. Objectives

2. Scope

3. Setting Priorities for Rulemaking Activity

4. Process for Developing Efficiency

Standards and Factors to be Considered

5. Policies on Selection of Standards

6. Effective Date of a Standard

7. Test Procedures

8. Joint Stakeholder Recommendations

9. Principles for the Conduct of Engineering

Analysis

10. Principles for the Analysis of Impacts on

Manufacturers

11. Principles for the Analysis of Impacts on

Consumers

12. Consideration of Non-Regulatory

Approaches

13. Crosscutting Analytical Assumptions

14. Deviations, Revisions, and Judicial

Review

1. Objectives

This Appendix establishes procedures,

interpretations and policies to guide the DOE

in the consideration and promulgation of

new or revised appliance efficiency

standards under the Energy Policy and

Conservation Act (EPCA). The Department's

objectives in establishing these guidelines

include:

(a) Provide for early input from

stakeholders. The Department seeks to

provide opportunities for public input early

in the rulemaking process so that the

initiation and direction of rulemakings is

informed by comment from interested

parties. Under the guidelines established by

this Appendix, DOE will seek early input

from interested parties in setting rulemaking

priorities and structuring the analyses for

particular products. Interested parties will be

invited to provide input for the selection of

design options and will help DOE identify

analysis, data, and modeling needs. DOE will

gather input from interested parties through

a variety of mechanisms, including public

workshops.

(b) Increase predictability of the

rulemaking timetable. The Department seeks

to make informed, strategic decisions about

how to deploy its resources on the range of

possible standards development activities,

and to announce these prioritization

decisions so that all interested parties have

a common expectation about the timing of

different rulemaking activities. The

guidelines in this Appendix provide for

setting priorities and timetables for standards

development and test procedure modification

and reflect these priorities in the Regulatory

Agenda.

(c) Increase use of outside technical

expertise. The Department seeks to expand

its use of outside technical experts in

evaluating product-specific engineering

issues to ensure that decisions on technical

issues are fully informed. The guidelines in

this Appendix provide for increased use of

outside technical experts in developing,

performing and reviewing the analyses. Draft

analytical results will be distributed for peer

and stakeholder review.

(d) Eliminate problematic design options

early in the process. The Department seeks to

eliminate from consideration, early in the

process, any design options that present

unacceptable problems with respect to

manufacturability, consumer utility, or

safety, so that the detailed analysis can focus

only on viable design options. Under the

guidelines in this Appendix, DOE will

eliminate from consideration design options

if it concludes that manufacture, installation

or service of the design will be impractical,

or that the design option will adversely affect

the utility of the product, or if the design has

adverse safety or health impacts. This

screening will be done at the outset of a

rulemaking.

(e) Fully consider non-regulatory

approaches. The Department seeks to

understand the effects of market forces and

voluntary programs on encouraging the

purchase of energy efficient products so that

the incremental impacts of a new or revised

standard can be accurately assessed and the

Department can make informed decisions

about where standards and voluntary

"market pull" programs can be used most

effectively. Under the guidelines in this

CE-RM-88-101 COMMENT 05
36982 Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations

Appendix, DOE will solicit information on

the effectiveness of market forces and nonregulatory approaches for encouraging the

purchase of energy efficient products, and

will carefully consider this information in

assessing the benefits of standards. In

addition, DOE will continue to support

voluntary efforts by manufacturers, retailers,

utilities and others to increase product

efficiency.

(f) Conduct thorough analysis of impacts.

In addition to understanding the aggregate

costs and benefits of standards, the

Department seeks to understand the

distribution of those costs and benefits

among consumers, manufacturers and others,

and the uncertainty associated with these

analyses of costs and benefits, so that any

adverse impacts on significant subgroups and

uncertainty concerning any adverse impacts

can be fully considered in selecting a

standard. Under the guidelines in this

Appendix, the analyses will consider the

variability of impacts on significant groups of

manufacturers and consumers in addition to

aggregate costs and benefits, report the range

of uncertainty associated with these impacts,

and take into account cumulative impacts of

regulation on manufacturers.

(g) Use transparent and robust analytical

methods. The Department seeks to use

qualitative and quantitative analytical

methods that are fully documented for the

public and that produce results that can be

explained and reproduced, so that the

analytical underpinnings for policy decisions

on standards are as sound and well-accepted

as possible. Under the guidelines in this

Appendix, DOE will solicit input from

interested parties in identifying analysis,

data, and modeling needs with respect to

measurement of impacts on manufacturers

and consumers.

(h) Articulate policies to guide selection of

standards. The Department seeks to adopt

policies elaborating on the statutory criteria

for selecting standards, so that interested

parties are aware of the policies that will

guide these decisions. Under the guidelines

in this Appendix, policies for screening

design options, selecting candidate standard

levels, selecting a proposed standard level,

and establishing the final standard are

established.

(i) Support efforts to build consensus on

standards. The Department seeks to

encourage development of consensus

proposals for new or revised standards

because standards with such broad-based

support are likely to balance effectively the

economic, energy, and environmental

interests affected by standards. Under the

guidelines in this Appendix, DOE will

support the development and submission of

consensus recommendations for standards by

representative groups of interested parties to

the fullest extent possible.

0) Reduce time and cost of developing

standards. The Department seeks to establish

a clear protocol for initiating and conducting

standards rulemakings in order to eliminate

time-consuming and costly missteps. Under

the guidelines in this Appendix, increased

and earlier involvement by interested parties

and increased use of technical experts should

minimize the need for re-analysis. This

process should reduce the period between

the publication of an Advance Notice of

Proposed Rulemaking (ANOPR) and the

publication of a final rule to not more than

18 months, and should decrease the

government and private sector resources

required to complete the standard

development process.

2. Scope

(a) The procedures, interpretations and

policies described in this Appendix will be

fully applicable to:

(1) Rulemakings concerning new or revised

Federal energy conservation standards for

consumer products initiated after August 14,

1996, and

(2) Rulemakings concerning new or revised

Federal energy conservation standards for

consumer products that have been initiated

but for which a Notice of Proposed

Rulemaking (NOPR) has not been published

as of August 14, 1996.

(b) For rulemakings described in paragraph

(a) (2) of this section, to the extent analytical

work has already been done or public

comment on an ANOPR has already been

provided, such analyses and comment will

be considered, as appropriate, in proceeding

under the new process.

(c) With respect to incomplete rulemakings

concerning new or revised Federal energy

conservation standards for consumer

products for which a NOPR was published

prior to August 14, 1996, the Department will

conduct a case-by-case review to decide

whether any of the analytical or procedural

steps already completed should be repeated.

In any case, the approach described in this

Appendix will be used to the extent possible

to conduct any analytical or procedural steps

that have not been completed.

3. Setting Priorities for Rulemaking Activity

(a) Priority-setting analysis and

development of list of priorities. At least once

a year, the Department will prepare an

analysis of each of the factors identified in

paragraph (d) of this section based on

existing literature, direct communications

with interested parties and other experts, and

other available information. The results of

this analysis will be used to develop

rulemaking priorities and proposed

schedules for the development and issuance

of all rulemakings. The DOE analysis,

priorities and proposed rulemaking

schedules will be documented and

distributed for review and comment.

(b) Public review and comment. Each year,

DOE will invite public input to review and

comment on the priority analysis.

(c) Issuance of final listing of rulemaking

priorities. Each fall, the Department will

issue, simultaneously with the issuance of

the Administration's Regulatory Agenda, a

final set of rulemaking priorities, the

accompanying analysis, and the schedules

for all priority rulemakings that it anticipates

within the next two years.

(d) Factors for priority-setting. The factors

to be considered by DOE in developing

priorities and establishing schedules for

conducting rulemakings will include:

(1) Potential energy savings.

(2) Potential economic benefits.

(3) Potential environmental or energy

security benefits.

(4) Applicable deadlines for rulemakings.

(5) Incremental DOE resources required to

complete rulemaking process.

(6) Other relevant regulatory actions

affecting products.

(7) Stakeholder recommendations.

(8) Evidence of energy efficiency gains in

the market absent new or revised standards.

(9) Status of required changes to test

procedures.

(10) Other relevant factors.

4. Process for Developing Efficiency

Standards and Factors to be Considered

This section describes the process to be

used in developing efficiency standards and

the factors to be considered in the process.

The policies of the Department to guide the

selection of standards and the decisions

preliminary thereto are described in section

5.

(a) Identifying and screening design

options. Once the Department has initiated a

rulemaking for a specific product but before

publishing an ANOPR, DOE will identify the

product categories and design options to be

analyzed in detail, and identify those design

options eliminated from further

consideration. Interested parties will be

consulted to identify key issues, develop a

list of design options, and to help the

Department identify the expertise necessary

to conduct the analysis.

(1) Identification of issues for analysis. The

Department, in consultation with interested

parties, will identify issues that will be

examined in the standards development

process.

(2) Identification of experts and other

interested parties for peer review. DOE, in

consultation with interested parties, will

identify a group of independent experts and

other interested parties who can provide

expert review of the results of the

engineering analysis and the subsequent

impact analysis.

(3) Identification and screening of design

options. In consultation with interested

parties, the Department will develop a list of

design options for consideration. Initially,

the candidate design options will encompass

all those technologies considered to be

technologically feasible. Following the

development of this initial list of design

options, DOE will review each design option

based on the factors described in paragraph

(a) (4) of this section and the policies stated

in section 5(b). The reasons for eliminating

any design option at this stage of the process

will be fully documented and published as

part of the ANOPR. The technologically

feasible design options that are not

eliminated in this screening will be

considered further in the Engineering

Analysis described in paragraph (b) of this

section.

(4) Factors for screening of design options.

The factors for screening design options

include:

(i) Technological feasibility. Technologies

incorporated in commercial products or in

working prototypes will be considered

technologically feasible.

(ii) Practicability to manufacture, install

and service. If mass production of a

CE-RM-88-101 COMMENT 05
Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations 36983

technology in commercial products and

reliable installation and servicing of the

technology could be achieved on the scale

necessary to serve the relevant market at the

time of the effective date of the standard,

then that technology will be considered

practicable to manufacture, install and

service.

(iii) Adverse Impacts on Product Utility or

Product Availability.

(iv) Adverse Impacts on Health or Safety.

(5) Selection of contractors. Using the

specifications of necessary contractor

expertise developed in consultation with

interested parties, DOE will select

appropriate contractors, subcontractors, and

as necessary, expert consultants to perform

the engineering analysis and the impact

analysis.

(b) Engineering analysis of design options

and selection of candidate standard levels.

After design options are identified and

screened, DOE will perform the engineering

analysis and the benefit/cost analysis and

select the candidate standard levels based on

these analyses. The results of the analyses

will be published in a Technical Support

Document (TSD) to accompany the ANOPR.

(1) Identification of engineering analytical

methods and tools. DOE, in consultation

with outside experts, will select the specific

engineering analysis tools (or multiple tools,

if necessary to address uncertainty) to be

used in the analysis of the design options

identified as a result of the screening

analysis.

(2) Engineering and life-cycle cost analysis

of design options. The DOE and its contractor

will perform engineering and life-cycle cost

analyses of the design options.

(3) Review by expert group and

stakeholders. The results of the engineering

and life-cycle cost analyses will be

distributed for review by experts and

interested parties. If appropriate, a public

workshop will be conducted to review these

results. The analyses will be revised as

appropriate on the basis of this input.

(4) New information relating to the factors

used for screening design options. If further

information or analysis leads to a

determination that a design option, or a

combination of design options, has

unacceptable impacts based on the policies

stated in section 5(b), that design option or

combination of design options will not be

included in a candidate standard level.

(5) Selection of candidate standard levels.

Based on the results of the engineering and

life-cycle cost analysis of design options and

the policies stated in section 5(c), DOE will

select the candidate standard levels for

further analysis.

(c) Advance Notice of Proposed

Rulemaking.

(1) Documentation of decisions on

candidate standard selection. (i) If the

screening analysis indicates that continued

development of a standard is appropriate, the

Department will publish an ANOPR in the

Federal Register and will distribute a draft

TSD containing the analyses performed to

this point. The ANOPR will specify

candidate standard levels but will not

propose a particular standard. The ANOPR

will also include the preliminary analysis of

consumer life-cycle costs, national net

present value, and energy impacts for the

candidate standard levels based on the

engineering analysis.

(ii) If the preliminary analysis indicates

that no candidate standard level is likely to

meet the criteria specified in law, that

conclusion will be announced. In such cases,

the Department may decide to proceed with

a rulemaking that proposes not to adopt new

or amended standards, or it may suspend the

rulemaking and conclude that further action

on such standards should be assigned a low

priority under section 3.

(2) Public comment and hearing. There

will be 75 days for public comment on the

ANOPR with at least one public hearing or

workshop.

(3) Revisions based on comments. Based on

consideration of the comments received, any

necessary changes to the engineering analysis

or the candidate standard levels will be

made.

If major changes are required at this stage,

interested parties and experts will be given

an opportunity to review the revised

analysis.

(d) Analysis of impacts and selection of

proposed standard level. After the ANOPR,

economic analyses of the impacts of the

candidate standard levels will be conducted.

The Department will propose updated

standards based on the results of the impact

analysis.

(1) Identification of issues for analysis. The

Department, in consultation with interested

parties, will identify issues that will be

examined in the impacts analysis.

(2) Identification of analytical methods and

tools. DOE, in consultation with outside

experts, will select the specific economic

analysis tools (or multiple tools if necessary

to address uncertainty) to be used in the

analysis of the candidate standard levels.

(3) Analysis of impacts. DOE will conduct

the analysis of the impacts of candidate

standard levels including analysis of the

factors described in paragraphs (d) (7) (ii)-

(viii) of this section.

(4) Review by expert group and

stakeholders. The results of the analysis of

impacts will be distributed for review by

experts and interested parties. If appropriate,

a public workshop will be conducted to

review these results. The analysis will be

revised as appropriate on the basis of this

input.

(5) Efforts to develop consensus among

stakeholders. If a representative group of

interested parties undertakes to develop joint

recommendations to the Department on

standards, DOE will consider deferring its

impact analysis until these discussions are

completed or until participants in the efforts

indicate that they are unable to reach a

timely agreement.

(6) Selection of proposed standard level

based on analysis of impacts. On the basis of

the analysis of the factors described in

paragraph (d)(7) of this section and the

policies stated in section 5(e), DOE will

select a proposed standard level.

(7) Factors to be considered in selecting a

proposed standard. The factors to be

considered in selection of a proposed

standard include:

(i) Consensus stakeholder

recommendations.

(ii) Impacts on manufacturers. The analysis

of manufacturer impacts will include:

Estimated impacts on cash flow; assessment

of impacts on manufacturers of specific

categories of products and small

manufacturers; assessment of impacts on

manufacturers of multiple product-specific

Federal regulatory requirements, including

efficiency standards for other products and

regulations of other agencies; and impact on

manufacturing capacity, plant closures, and

loss of capital investment.

(iii) Impacts on consumers. The analysis of

consumer impacts will include: Estimated

impacts on consumers based on national

average energy prices and energy usage;

assessments of impacts on subgroups of

consumers based on major regional

differences in usage or energy prices and

significant variations in installation costs or

performance; sensitivity analyses using high

and low discount rates and high and low

energy price forecasts; consideration of

changes to product utility and other impacts

of likely concern to all or some consumers,

based to the extent practicable on direct

input from consumers; estimated life-cycle

cost with sensitivity analysis; and

consideration of the increased first cost to

consumers and the time required for energy

cost savings to pay back these first costs.

(iv) Impacts on competition.

(v) Impacts on utilities. The analysis of

utility impacts will include estimated

marginal impacts on electric and gas utility

costs and revenues.

(vi) National energy, economic and

employment impacts. The analysis of

national energy, economic and employment

impacts will include: Estimated energy

savings by fuel type; estimated net present

value of benefits to all consumers; and

estimates of the direct and indirect impacts

on employment by appliance manufacturers,

relevant service industries, energy suppliers

and the economy in general.

(vii) Impacts on the environment and

energy security. The analysis of

environmental and energy security impacts

will include estimated impacts on emissions

of carbon and relevant criteria pollutants,

impacts on pollution control costs, and

impacts on oil use.

(viii) Impacts of non-regulatory

approaches. The analysis of energy savings

and consumer impacts will incorporate an

assessment of the impacts of market forces

and existing voluntary programs in

promoting product efficiency, usage and

related characteristics in the absence of

updated efficiency standards.

(ix) New information relating to the factors

used for screening design options.

(e) Notice of Proposed Rulemaking.

(1) Documentation of decisions on

proposed standard selection. The

Department will publish a NOPR in the

Federal Register that proposes standard

levels and explains the basis for the selection

of those proposed levels, and will distribute

a draft TSD documenting the analysis of

impacts. As required by § 325(p) (2) of EPCA,

the NOPR also will describe the maximum

improvement in energy efficiency or

CE-RM-88-101 COMMENT 05
36984 Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations

maximum reduction in energy use that is

technologically feasible and, if the proposed

standards would not achieve these levels, the

reasons for proposing different standards.

(2) Public comment and hearing. There

will be 75 days for public comment on the

NOPR, with at least one public hearing or

workshop.

(3) Revisions to impact analyses and

selection of final standard. Based on the

public comments received and the policies

stated in section 5(0, DOE will review the

proposed standard and impact analyses, and

make modifications as necessary. If major

changes to the analyses are required at this

stage, interested parties and experts will be

given an opportunity to review the revised

analyses.

(f) Notice of Final Rulemaking. The

Department will publish a Notice of Final

Rulemaking in the Federal Register that

promulgates standard levels and explains the

basis for the selection of those standards,

accompanied by a final TSD.

5. Policies on Selection of Standards.

(a) Purpose. (1) Section 4 describes the

process that will be used to consider new or

revised energy efficiency standards and lists

a number of factors and analyses that will be

considered at specified points in the process.

Department policies concerning the selection

of new or revised standards, and decisions

preliminary thereto, are described in this

section.

These policies are intended to elaborate on

the statutory criteria provided in section 325

of the EPCA, 42 U.S.C. 6295.

(2) The policies described below are

intended to provide guidance for making the

determinations required by EPCA. This

statement of policy is not intended to

preclude consideration of any information

pertinent to the statutory criteria. The

Department will consider all pertinent

information in determining whether a new or

revised standard is consistent with the

statutory criteria. Moreover, the Department

will not be guided by a policy in this section

if, in the particular circumstances presented,

such a policy would lead to a result

inconsistent with the criteria in section 325

of EPCA.

(b) Screening design options. Section

4(a)(4) lists factors to be considered in

screening design options. These factors will

be considered as follows in determining

whether a design option will receive any

further consideration:

(1) Technological feasibility. Technologies

that are not incorporated in commercial

products or in working prototypes will not be

considered further.

(2) Practicability to manufacture, install

and service. If it is determined that mass

production of a technology in commercial

products and reliable installation and

servicing of the technology could not be

achieved on the scale necessary to serve the

relevant market at the time of the effective

date of the standard, then that technology

will not be considered further.

(3) Impacts on product utility to

consumers. If a technology is determined to

have significant adverse impact on the utility

of the product to significant subgroups of

consumers, or result in the unavailability of

any covered product type with performance

characteristics (including reliability),

features, sizes, capacities, and volumes that

are substantially the same as products

generally available in the U.S. at the time, it

will not be considered further.

(4) Safety of technologies. If it is

determined that a technology will have

significant adverse impacts on health or

safety, it will not be considered further.

(c) Identification of candidate standard

levels. Based on the results of the engineering

and cost and benefit analyses of design

options, DOE will identify the candidate

standard levels for further analysis.

Candidate standard levels will be selected as

follows:

(1) Costs and savings of design options.

Design options which have payback periods

that exceed the average life of the product or

which cause life-cycle cost increases relative

to the base case, using typical fuel costs,

usage and discount rates, will not be used as

the basis for candidate standard levels.

(2) Further information on factors used for

screening design options. If further

information or analysis leads to a

determination that a design option, or a

combination of design options, has

unacceptable impacts under the policies

stated in paragraph (b) of this section, that

design option or combination of design

options will not be included in a candidate

standard level.

(3) Selection of candidate standard levels.

Candidate standard levels, which will be

identified in the ANOPR and on which

impact analyses will be conducted, will be

based on the remaining design options.

(i) The range of candidate standard levels

will typically include:

(A) The most energy efficient combination

of design options;

(B) The combination of design options with

the lowest life-cycle cost; and

(C) A combination of design options with

a payback period of not more than three

years.

(ii) Candidate standard levels that

incorporate noteworthy technologies or fill in

large gaps between efficiency levels of other

candidate standard levels also may be

selected.

(d) Advance notice of proposed

rulemaking. New information provided in

public comments on the ANOPR will be

considered to determine whether any

changes to the candidate standard levels are

needed before proceeding to the analysis of

impacts. This review, and any appropriate

adjustments, will be based on the policies in

paragraph (c) of this section.

(e) Selection of proposed standard. Based

on the results of the analysis of impacts, DOE

will select a standard level to be proposed for

public comment in the NOPR. Section 4(d) (7)

lists the factors to be considered in selecting

a proposed standard level. Section

325 (o) (2) (A) of EPCA provides that any new

or revised standard must be designed to

achieve the maximum improvement in

energy efficiency that is determined to be

technologically feasible and economically

justified.

(1) Statutory policies. The fundamental

policies concerning selection of standards are

established in the EPCA, including the

following:

(i) A candidate standard level will not be

proposed or promulgated if the Department

determines that it is not technologically

feasible and economically justified. See

EPCA section 325(o) (3) (B). A standard level

is economically justified if the benefits

exceed the burdens. See EPCA section

325 (o) (2) (B) (i). A standard level is rebuttably

presumed to be economically justified if the

payback period is three years or less. See

EPCA section 325 (o) (2) (B) (iii).

(ii) If the Department determines that a

standard level is likely to result in the

unavailability of any covered product type

with performance characteristics (including

reliability), features, sizes, capacities, and

volumes that are substantially the same as

products generally available in the U.S. at the

time, that standard level will not be

proposed. See EPCA section 325(o)(4).

(iii) If the Department determines that a

standard level would not result in significant

conservation of energy, that standard level

will not be proposed. See EPCA section

325 (o) (3) (B).

(2) Selection of proposed standard on the

basis of consensus stakeholder

recommendations. Development of

consensus proposals for new or revised

standards is an effective mechanism for

balancing the economic, energy, and

environmental interests affected by

standards. Thus, notwithstanding any other

policy on selection of proposed standards, a

consensus recommendation on an updated

efficiency level submitted by a group that

represents all interested parties will be

proposed by the Department if it is

determined to meet the statutory criteria.

(3) Considerations in assessing economic

justification.

(i) The following policies will guide the

application of the economic justification

criterion in selecting a proposed standard:

(A) If the Department determines that a

candidate standard level would result in a

negative return on investment for the

industry, would significantly reduce the

value of the industry, or would cause

significant adverse impacts to a significant

subgroup of manufacturers (including small

manufacturing businesses), that standard

level will be presumed not to be

economically justified unless the Department

determines that specifically identified

expected benefits of the standard would

outweigh this and any other expected

adverse effects.

(B) If the Department determines that a

candidate standard level would be the direct

cause of plant closures, significant losses in

domestic manufacturer employment, or

significant losses of capital investment by

domestic manufacturers, that standard level

will be presumed not to be economically

justified unless the Department determines

that specifically identified expected benefits

of the standard would outweigh this and any

other expected adverse effects.

(C) If the Department determines that a

candidate standard level would have a

significant adverse impact on the

environment or energy security, that standard

level will be presumed not to be

CE-RM-88-101 COMMENT 05
Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations 36985

economically justified unless the Department

determines that specifically identified

expected benefits of the standard would

outweigh this and any other expected

adverse effects.

(D) If the Department determines that a

candidate standard level would not result in

significant energy conservation relative to

non-regulatory approaches, that standard

level will be presumed not to be

economically justified unless the Department

determines that other specifically identified

expected benefits of the standard would

outweigh the expected adverse effects.

(E) If the Department determines that a

candidate standard level is not consistent

with the policies relating to practicability to

manufacture, consumer utility, or safety in

paragraphs (b) (2), (3) and (4) of this section,

that standard level will be presumed not to

be economically justified unless the

Department determines that specifically

identified expected benefits of the standard

would outweigh this and any other expected

adverse effects.

(F) If the Department determines that a

candidate standard level is not consistent

with the policies relating to consumer costs

in paragraph (c)(l) of this section, that

standard level will be presumed not to be

economically justified unless the Department

determines that specifically identified

expected benefits of the standard would

outweigh this and any other expected

adverse effects.

(G) If the Department determines that a

candidate standard level will have significant

adverse impacts on a significant subgroup of

consumers (including low-income

consumers), that standard level will be

presumed not to be economically justified

unless the Department determines that

specifically identified expected benefits of

the standard would outweigh this and any

other expected adverse effects.

(H) If the Department or the Department of

Justice determines that a candidate standard

level would have significant anticompetitive

effects, that standard level will be presumed

not to be economically justified unless the

Department determines that specifically

identified expected benefits of the standard

would outweigh this and any other expected

adverse effects.

(ii) The basis for a determination that

triggers any presumption in paragraph

(e) (3) (i) of this section and the basis for a

determination that an applicable

presumption has been rebutted will be

supported by substantial evidence in the

record and the evidence and rationale for

making these determinations will be

explained in the NOPR.

(iii) If none of the policies in paragraph

(e) (3) (i) of this section is found to be

dispositive, the Department will determine

whether the benefits of a candidate standard

level exceed the burdens considering all the

pertinent information in the record.

(f) Selection of a final standard. New

information provided in the public

comments on the NOPR and any analysis by

the Department of Justice concerning impacts

on competition of the proposed standard will

be considered to determine whether any

change to the proposed standard level is

needed before proceeding to the final rule.

The same policies used to select the

proposed standard level, as described in

section 5(e) above, will be used to guide the

selection of the final standard level.

6. Effective Date of a Standard

The effective date for new or revised

standards will be established so that the

period between the publication of the final

rule and the effective date is not less than

any period between the dates for publication

and effective date provided for in EPCA. The

effective date of any revised standard will be

established so that the period between the

effective date of the prior standard and the

effective date of such revised standard is not

less than period between the two effective

dates provided for in EPCA.

7. Test Procedures

(a) Identifying the need to modify test

procedures. DOE, in consultation with

interested parties, experts, and the National

Institute of Standards and Technology, will

attempt to identify any necessary

modifications to established test procedures

when initiating the standards development

process.

(b) Developing and proposing revised test

procedures. Needed modifications to test

procedures will be identified in consultation

with experts and interested parties early in

the screening stage of the standards

development process. Any necessary

modifications will be proposed before

issuance of an ANOPR in the standards

development process.

(c) Issuing final test procedure

modification. Final, modified test procedures

will be issued prior to the NOPR on proposed

standards.

(d) Effective date of modified test

procedures. If required only for the

evaluation and issuance of updated

efficiency standards, modified test

procedures typically will not go into effect

until the effective date of updated standards.

8. Joint Stakeholder Recommendations

(a) Joint recommendations. Consensus

recommendations, and supporting analyses,

submitted by a representative group of

interested parties will be given substantial

weight by DOE in the development of a

proposed rule. See section 5(e)(2). If the

supporting analyses provided by the group

addresses all of the statutory criteria and uses

valid economic assumptions and analytical

methods, DOE expects to use this supporting

analyses as the basis of a proposed rule. The

proposed rule will explain any deviations

from the consensus recommendations from

interested parties.

(b) Breadth of participation. Joint

recommendations will be of most value to the

Department if the participants are reasonably

representative of those interested in the

outcome of the standards development

process, including manufacturers,

consumers, utilities, states and

representatives of environmental or energy

efficiency interest groups.

(c) DOE support of consensus

development, including impact analyses. In

order to facilitate such consensus

development, DOE will make available, upon

request, appropriate technical and legal

support to the group and will provide copies

of all relevant public documents and

analyses. The Department also will consider

any requests for its active participation in

such discussions, recognizing that the

procedural requirements of the Federal

Advisory Committee Act may apply to such

participation.

9. Principles for the Conduct of Engineering

Analysis

(a) The purpose of the engineering analysis

is to develop the relationship between

efficiency and cost of the subject product.

The Department will use the most

appropriate means available to determine the

efficiency/cost relationship, including an

overall system approach or engineering

modeling to predict the improvement in

efficiency that can be expected from

individual design options as discussed in the

paragraphs below. From this efficiency/cost

relationship, measures such as payback, life

cycle cost, and energy savings can be

developed. The Department, in consultation

with interested parties, will identify issues

that will be examined in the engineering

analysis and the types of specialized

expertise that may be required. With these

specifications, DOE will select appropriate

contractors, subcontractors, and expert

consultants, as necessary, to perform the

engineering analysis and the impact analysis.

Also, the Department will consider data,

information and analyses received from

interested parties for use in the analysis

wherever feasible.

(b) The engineering analysis begins with

the list of design options developed in

consultation with the interested parties as a

result of the screening process. In

consultation with the technology/industry

expert peer review group, the Department

will establish the likely cost and performance

improvement of each design option. Ranges

and uncertainties of cost and performance

will be established, although efforts will be

made to minimize uncertainties by using

measures such as test data or component or

material supplier information where

available. Estimated uncertainties will be

carried forward in subsequent analyses. The

use of quantitative models will be

supplemented by qualitative assessments as

appropriate.

(c) The next step includes identifying,

modifying or developing any engineering

models necessary to predict the efficiency

impact of any one or combination of design

options on the product. A base case

configuration or starting point will be

established as well as the order and

combination/blending of the design options

to be evaluated. The DOE, utilizing expert

consultants, will then perform the

engineering analysis and develop the cost

efficiency curve for the product. The cost

efficiency curve and any necessary models

will be subject to peer review before being

issued with the ANOPR.

10. Principles for the Analysis of Impacts on

Manufacturers

(a) Purpose. The purpose of the

manufacturer analysis is to identify the likely

CE-RM-88-101 COMMENT 05
36986 Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations

impacts of efficiency standards on

manufacturers. The Department will analyze

the impact of standards on manufacturers

with substantial input from manufacturers

and other interested parties. The use of

quantitative models will be supplemented by

qualitative assessments by industry experts.

This section describes the principles that will

be used in conducting future manufacturing

impact analysis.

(b) Issue identification. In the impact

analysis stage (section 4(d)), the Department,

in consultation with interested parties, will

identify issues that will require greater

consideration in the detailed manufacturer

impact analysis. Possible issues may include

identification of specific types or groups of

manufacturers and concerns over access to

technology. Specialized contractor expertise,

empirical data requirements, and analytical

tools required to perform the manufacturer

impact analysis also would be identified at

this stage.

(c) Industry characterization. Prior to

initiating detailed impact studies, the

Department will seek input on the present

and past industry structure and market

characteristics. Input on the following issues

will be sought:

(1) Manufacturers and their relative market

shares;

(2) Manufacturer characteristics, such as

whether manufacturers make a full line of

models or serve a niche market;

(3) Trends in the number of manufacturers;

(4) Financial situation of manufacturers;

(5) Trends in product characteristics and

retail markets; and

(6) Identification of other relevant

regulatory actions and a description of the

nature and timing of any likely impacts.

(d) Cost impacts on manufacturers. The

costs of labor, material, engineering, tooling,

and capital are difficult to estimate,

manufacturer-specific, and usually

proprietary. The Department will seek input

from interested parties on the treatment of

cost issues. Manufacturers will be

encouraged to offer suggestions as to possible

sources of data and appropriate data

collection methodologies. Costing issues to

be addressed include:

(1) Estimates of total cost impacts,

including product-specific costs (based on

cost impacts estimated for the engineering

analysis) and front-end investment/

conversion costs for the full range of product

models.

(2) Range of uncertainties in estimates of

average cost, considering alternative designs

and technologies which may vary cost

impacts and changes in costs of material,

labor and other inputs which may vary costs.

(3) Variable cost impacts on particular

types of manufacturers, considering factors

such as atypical sunk costs or characteristics

of specific models which may increase or

decrease costs.

(e) Impacts on product sales, features,

prices and cost recovery. In order to make

manufacturer cash flow calculations, it is

necessary to predict the number of products

sold and their sale price. This requires an

assessment of the likely impacts of price

changes on the number of products sold and

on typical features of models sold. Past

analyses have relied on price and shipment

data generated by economic models. The

Department will develop additional estimates

of prices and shipments by drawing on

multiple sources of data and experience

including: actual shipment and pricing

experience, data from manufacturers,

retailers and other market experts, financial

models, and sensitivity analyses. The

possible impacts of candidate standard levels

on consumer choices among competing fuels

will be explicitly considered where relevant.

(f) Measures of impact. The manufacturer

impact analysis will estimate the impacts of

candidate standard levels on the net cash

flow of manufacturers. Computations will be

performed for the industry as a whole and for

typical and atypical manufacturers. The exact

nature and the process by which the analysis

will be conducted will be determined by

DOE, in conjunction with interested parties.

Impacts to be analyzed include:

(1) Industry net present value, with

sensitivity analyses based on uncertainty of

costs, sales prices and sales volumes;

(2) Cash flows, by year;

(3) Other measures of impact, such as

revenue, net income and return on equity, as

appropriate;

The characteristics of atypical

manufacturers worthy of special

consideration will be determined in

consultation with manufacturers and other

interested parties and may include:

manufacturers incurring higher or lower than

average costs; and manufacturers

experiencing greater or fewer adverse

impacts on sales. Alternative scenarios based

on other methods of estimating cost or sales

impacts also will be performed, as needed.

(g) Cumulative impacts of other Federal

regulatory actions. (1) The Department will

recognize and seek to mitigate the

overlapping effects on manufacturers of new

or revised DOE standards and other

regulatory actions affecting the same

products. DOE will analyze and consider the

impact on manufacturers of multiple

product-specific regulatory actions. These

factors will be considered in setting

rulemaking priorities, assessing manufacturer

impacts of a particular standard, and

establishing the effective date for a new or

revised standard. In particular, DOE will seek

to propose effective dates for new or revised

standards that are appropriately coordinated

with other regulatory actions to mitigate any

cumulative burden.

(2) If the Department determines that a

proposed standard would impose a

significant impact on product manufacturers

within three years of the effective date of

another DOE standard that imposes

significant impacts on the same

manufacturers (or divisions thereof, as

appropriate), the Department will, in

addition to evaluating the impact on

manufacturers of the proposed standard,

assess the joint impacts of both standards on

manufacturers.

(3) If the Department is directed to

establish or revise standards for products that

are components of other products subject to

standards, the Department will consider the

interaction between such standards in setting

rulemaking priorities and assessing

manufacturer impacts of a particular

standard. The Department will assess, as part

of the engineering and impact analyses, the

cost of components subject to efficiency

standards.

(h) Summary of quantitative and

qualitative assessments. The summary of

quantitative and qualitative assessments will

contain a description and discussion of

uncertainties. Alternative estimates of

impacts, resulting from the different potential

scenarios developed throughout the analysis,

will be explicitly presented in the final

analysis results.

(i) Key modeling and analytical tools. In its

assessment of the likely impacts of standards

on manufacturers, the Department will use

models which are clear and understandable,

feature accessible calculations, and have

assumptions that are clearly explained. As a

starting point, the Department will use the

Government Regulatory Impact Model

(GRIM). The Department will consider any

enhancements to the GRIM that are suggested

by interested parties. If changes are made to

the GRIM methodology, DOE will provide

notice and seek public input. The

Department will also support the

development of economic models for price

and volume forecasting. Research required to

update key economic data will be

considered.

11. Principles for the Analysis of Impacts on

Consumers

(a) Early consideration of impacts on

consumer utility. The Department will

consider at the earliest stages of the

development of a standard whether

particular design options will lessen the

utility of the covered products to the

consumer. See section 4(a).

(b) Impacts on product availability. The

Department will determine, based on

consideration of information submitted

during the standard development process,

whether a proposed standard is likely to

result in the unavailability of any covered

product type with performance

characteristics (including reliability),

features, sizes, capacities, and volumes that

are substantially the same as products

generally available in the U.S. at the time.

DOE will not promulgate a standard if it

concludes that it would result in such

unavailability.

(c) Department ofjustice review. As

required by law, the Department will solicit

the views of the Justice Department on any

lessening of competition that is likely to

result from the imposition of a proposed

standard and will give the views provided

full consideration in assessing economic

justification of a proposed standard. In

addition, DOE may consult with the

Department of justice at earlier stages in the

standards development process to seek to

obtain preliminary views on competitive

impacts.

(d) Variation in consumer impacts. The

Department will use regional analysis and

sensitivity analysis tools, as appropriate, to

evaluate the potential distribution of impacts

of candidate standards levels among different

subgroups of consumers. The Department

will consider impacts on significant segments

CE-RM-88-101 COMMENT 05
Federal Register / Vol. 61, No. 136 / Monday, July 15, 1996 / Rules and Regulations

of consumers in determining standards

levels. Where there are significant negative

impacts on identifiable subgroups, DOE will

consider the efficacy of voluntary approaches

as a means to achieve potential energy

savings.

(e) Payback period and first cost. (1) In the

assessment of consumer impacts of

standards, the Department will consider LifeCycle Cost, Payback Period and Cost of

Conserved Energy to evaluate the savings in

operating expenses relative to increases in

purchase price. The Department intends to

increase the level of sensitivity analysis and

scenario analysis for future rulemakings. The

results of these analyses will be carried

throughout the analysis and the ensuing

uncertainty described.

(2) If, in the analysis of consumer impacts,

the Department determines that a candidate

standard level would result in a substantial

increase in the product first costs to

consumers or would not pay back such

additional first costs through energy cost

savings in less than three years, Department

will specifically assess the likely impacts of

such a standard on low-income households,

product sales and fuel switching.

12. Consideration of Non-Regulatory

Approaches

(a) The Department recognizes that

voluntary or other non-regulatory efforts by

manufacturers, utilities and other interested

parties can result in substantial efficiency

improvements. The Department intends to

consider fully the likely effects of nonregulatory initiatives on product energy use,

consumer utility and life cycle costs,

manufacturers, competition, utilities and the

environment, as well as the distribution of

these impacts among different regions,

consumers, manufacturers and utilities. DOE

will attempt to base its assessment on the

actual impacts of such initiatives to date, but

also will consider information presented

regarding the impacts that any existing

initiative might have in the future. Such

information is likely to include a

demonstration of the strong commitment of

manufacturers, distribution channels,

utilities or others to such voluntary efficiency

improvements. This information will be used

in assessing the likely incremental impacts of

establishing or revising standards, in

assessing appropriate effective dates for new

or revised standards and in considering DOE

support of non-regulatory initiatives.

(b) DOE believes that non-regulatory

approaches are valuable complements to the

standards program. In particular, DOE will

consider pursuing voluntary programs where

it appears that highly efficient products can

obtain a significant market share but less

efficient products cannot be eliminated

altogether because, for instance, of

unacceptable adverse impacts on a

significant subgroup of consumers. In making

this assessment, the Department will

consider the success more efficient designs

have had in the market, their acceptance to

date, and their potential market penetration.

13. Crosscutting Analytical Assumptions

In selecting values for certain crosscutting

analytical assumptions, DOE expects to

continue relying upon the following sources

and general principles:

(a) Underlying economic assumptions. The

appliance standards analyses will generally

use the same economic growth and

development assumptions that underlie the

most current Annual Energy Outlook (AEO)

published by the Energy Information

Administration (EIA).

(b) Energy price and demand trends.

Analyses of the likely impact of appliance

standards on typical users will generally

adopt the mid-range energy price and

demand scenario of the EIA's most current

AEO. The sensitivity of such estimated

impacts to possible variations in future

energy prices are likely to be examined using

the EIA's high and low energy price

scenarios.

(c) Product-specific energy-efficiency

trends, without updated standards. Product

specific energy-efficiency trends will be

based on a combination of the efficiency

trends forecast by the EIA's residential and

commercial demand model of the National

Energy Modeling System (NEMS) and

product-specific assessments by DOE and its

contractors with input from interested

parties.

(d) Discount rates. For residential and

commercial consumers, ranges of three

different real discount rates will be used. For

residential consumers, the mid-range

discount rate will represent DOE's

approximation of the average financing cost

(or opportunity costs of reduced savings)

experienced by typical consumers.

Sensitivity analyses will be performed using

discount rates reflecting the costs more likely

to be experienced by residential consumers

with little or no savings and credit card

financing and consumers with substantial

savings. For commercial users, a mid-range

discount rate reflecting the DOE's

approximation of the average real rate of

return on commercial investment will be

used, with sensitivity analyses being

performed using values indicative of the

range of real rates of return likely to be

experienced by typical commercial

36987

businesses. For national net present value

calculations, DOE would use the

Administration's approximation of the

average real rate of return on private

investment in the U.S. economy. For

manufacturer impacts, DOE plans to use a

range of real discount rates which are

representative of the real rates of return

experienced by typical U.S. manufacturers

affected by the program.

(e) Environmental impacts. The emission

rates of carbon, sulfur oxides and nitrogen

oxides used by DOE to calculate the physical

quantities of emissions likely to be avoided

by candidate standard levels will be based on

the current average carbon emissions of the

U.S. electric utilities and on the projected

rates of emissions of sulfur and nitrogen

oxides. Projected rates of emissions, if

available, will be used for the estimation of

any other environmental impacts. The

Department will consider the effects of the

proposed standards on these emissions in

reaching a decision about whether the

benefits of the proposed standards exceed

their burdens but will not determine the

monetary value of these environmental

externalities.

14. Deviations, Revisions, and Judicial

Review

(a) Deviations. This Appendix specifies

procedures, interpretations and policies for

the development of new or revised energy

efficiency standards in considerable detail.

As the approach described in this Appendix

is applied to the development of particular

standards, the Department may find it

necessary or appropriate to deviate from

these procedures, interpretations or policies.

If the Department concludes that such

deviations are necessary or appropriate in a

particular situation, DOE will provide

interested parties with notice of the deviation

and an explanation.

(b) Revisions. If the Department concludes

that changes to the procedures,

interpretations or policies in this Appendix

are necessary or appropriate, DOE will

provide notice in the Federal Register of

modifications to this Appendix with an

accompanying explanation. DOE expects to

consult with interested parties prior to any

such modification.

(c) Judicial review. The procedures,

interpretations, and policies stated in this

Appendix are not intended to establish any

new cause of action or right to judicial

review.

[FR Doc. 96-17886 Filed 7-12-96; 8:45 am]

BILLING CODE 6450-01-P

CE-RM-88-101 COMMENT 05