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[Federal Register Volume 76, Number 210 (Monday, October 31, 2011)]
[Rules and Regulations]
[Pages 67037-67051]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-28146]

========================================================================
Rules and Regulations
                                                Federal Register
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having general applicability and legal effect, most of which are keyed 
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under 50 titles pursuant to 44 U.S.C. 1510.

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Federal Register / Vol. 76, No. 210 / Monday, October 31, 2011 / 
Rules and Regulations

[[Page 67037]]

DEPARTMENT OF ENERGY

10 CFR Part 430

[Docket Number EERE-2011-BT-STD-0011]
RIN 1904-AC06

Energy Conservation Program: Energy Conservation Standards for 
Residential Furnaces and Residential Central Air Conditioners and Heat 
Pumps

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
Energy.

ACTION: Notice of effective date and compliance dates for direct final 
rule.

-----------------------------------------------------------------------

SUMMARY: The U.S. Department of Energy (DOE) published a direct final 
rule to establish amended energy conservation standards for residential 
furnaces and residential central air conditioners and heat pumps in the 
Federal Register on June 27, 2011. DOE has determined that the adverse 
comments received in response to the direct final rule do not provide a 
reasonable basis for withdrawing the direct final rule. Therefore, DOE 
provides this notice confirming adoption of the energy conservation 
standards for residential furnaces and residential central air 
conditioners and heat pumps established in the direct final rule and 
announcing the effective date of those standards.

DATES: The direct final rule published on June 27, 2011 (76 FR 37408) 
became effective on October 25, 2011. Compliance with the standards in 
the direct final rule will be required on May 1, 2013 for non-
weatherized furnaces and on January 1, 2015 for weatherized furnaces 
and central air conditioners and heat pumps.

ADDRESSES: The docket is available for review at http://www.regulations.gov, including Federal Register notices, framework 
documents, public meeting attendee lists and transcripts, comments, and 
other supporting documents/materials. All documents in the docket are 
listed in the http://www.regulations.gov index. Not all documents 
listed in the index may be publicly available, such as information that 
is exempt from public disclosure. A link to the docket Web page can be 
found at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: 

Mr. Mohammed Khan (furnaces) or Mr. Wesley Anderson (central air 
conditioners and heat pumps), U.S. Department of Energy, Office of 
Energy Efficiency and Renewable Energy, Building Technologies Program, 
EE-2J, 1000 Independence Avenue SW., Washington, DC 20585-0121. 
Telephone: (202) 586-7892 or (202) 586-7335. E-mail: 
Mohammed.Khan@ee.doe.gov or Wes.Anderson@ee.doe.gov.
Mr. Eric Stas or Ms. Jennifer Tiedeman, U.S. Department of Energy, 
Office of the General Counsel, GC-71, 1000 Independence Avenue SW., 
Washington, DC 20585-0121. Telephone: (202) 586-9507 or (202) 287-6111. 
Email: Eric.Stas@hq.doe.gov or Jennifer.Tiedeman@hq.doe.gov.

    For further information on how to submit or review public comments 
or view hard copies of the docket, contact Ms. Brenda Edwards at (202) 
586-2945 or email: Brenda.Edwards@ee.doe.gov.

SUPPLEMENTARY INFORMATION: 

I. Authority and Rulemaking Background

    The Energy Policy and Conservation Act of 1975 (EPCA; 42 U.S.C. 
6291-6309, as codified), as amended, authorizes DOE to issue a direct 
final rule (DFR) establishing an energy conservation standard on 
receipt of a statement submitted jointly by interested persons that are 
fairly representative of relevant points of view (including 
representatives of manufacturers of covered products, States, and 
efficiency advocates) as determined by the Secretary of Energy 
(Secretary). EPCA further requires that a statement contain 
recommendations with respect to an energy conservation standard that 
are in accordance with the provisions of 42 U.S.C. 6295(o). A notice of 
proposed rulemaking (NOPR) that proposes an identical energy 
conservation standard must be published simultaneously with the final 
rule, and DOE must provide a public comment period of at least 110 days 
on the direct final rule. 42 U.S.C. 6295(p)(4). Not later than 120 days 
after issuance of the direct final rule, if one or more adverse 
comments or an alternative joint recommendation are received relating 
to the direct final rule, the Secretary must determine whether the 
comments or alternative recommendation may provide a reasonable basis 
for withdrawal under 42 U.S.C. 6295(o) or other applicable law. If the 
Secretary makes such a determination, DOE must withdraw the direct 
final rule and proceed with the simultaneously published NOPR. DOE must 
publish in the Federal Register the reasons why the direct final rule 
was withdrawn. Id.
    During the rulemaking proceeding to consider amending energy 
conservation standards for residential furnaces and residential central 
air conditioners and heat pumps, DOE received the ``Agreement on 
Legislative and Regulatory Strategy for Amending Federal Energy 
Efficiency Standards, Test Procedures, Metrics and Building Code 
Provisions for Residential Central Air Conditioners, Heat Pumps, 
Weatherized and Non-Weatherized Furnaces and Related Matters'' (the 
``Joint Petition'' or ``Consensus Agreement''), a comment submitted by 
representatives of the American Heating and Refrigeration Institute 
(AHRI), American Council for an Energy-Efficient Economy (ACEEE), 
Alliance to Save Energy (ASE), Natural Resources Defense Council 
(NRDC), Appliance Standard Awareness Project (ASAP), Northeast Energy 
Efficiency Partnerships (NEEP), Northwest Power and Conservation 
Council (NPCC), California Energy Commission (CEC), Bard Manufacturing 
Company Inc., Carrier Residential and Light Commercial Systems, Goodman 
Global Inc., Lennox Residential, Mitsubishi Electric & Electronics USA, 
National Comfort Products, Rheem Manufacturing Company, and Trane 
Residential (collectively, the ``Joint Petitioners''). This collective 
set of comments \1\ recommends specific energy conservation standards 
for residential furnaces, central air conditioners, and

[[Page 67038]]

heat pumps that, in the commenters' view, would satisfy the EPCA 
requirements at 42 U.S.C. 6295(o). Numerous interested parties, 
including signatories of the Consensus Agreement, as well as other 
parties, expressed support for DOE adoption of the Consensus Agreement 
both at a public hearing and in written comments on the furnaces and 
central air conditioners rulemakings.
---------------------------------------------------------------------------

    \1\ DOE Docket No. EERE-2011-BT-STD-0011, Comment 16.
---------------------------------------------------------------------------

    After careful consideration of the Consensus Agreement, the 
Secretary determined that it was submitted by interested persons who 
are fairly representative of relevant points of view on this matter. 
DOE noted in the direct final rule that Congress provided some guidance 
within the statute itself by specifying that representatives of 
manufacturers of covered products, States, and efficiency advocates are 
relevant parties to any consensus recommendation. (42 U.S.C. 
6295(p)(4)(A)) As delineated above, the consensus agreement was signed 
and submitted by a broad cross-section of the manufacturers who produce 
the subject products, their trade associations, and environmental, 
energy efficiency, and consumer advocacy organizations. One State 
entity was a party to the Consensus Agreement, and no State expressed 
any opposition to the Consensus Agreement from the time of its 
submission to DOE through the close of the comment period on the direct 
final rule. Moreover, DOE stated in the direct final rule that it does 
not interpret the statute as requiring absolute agreement among all 
interested parties before DOE may proceed with issuance of a direct 
final rule. By explicit language of the statute, the Secretary has 
discretion to determine when a joint recommendation for an energy or 
water conservation standard has met the requirement for 
representativeness (i.e., ``as determined by the Secretary''). 
Accordingly, DOE determined that the consensus agreement was made and 
submitted by interested persons fairly representative of relevant 
points of view.
    Pursuant to 42 U.S.C. 6295(p)(4), the Secretary must also determine 
whether a jointly submitted recommendation for an energy or water 
conservation standard is in accordance with 42 U.S.C. 6295(o) or 42 
U.S.C. 6313(a)(6)(B), as applicable. As stated in the direct final 
rule, this determination is exactly the type of analysis DOE conducts 
whenever it considers potential energy conservation standards pursuant 
to EPCA. DOE applies the same principles to any consensus 
recommendations it may receive to satisfy its statutory obligation to 
ensure that any energy conservation standard that it adopts achieves 
the maximum improvement in energy efficiency that is technologically 
feasible and economically justified and will result in significant 
conservation of energy. Upon review, the Secretary determined that the 
Consensus Agreement submitted in the instant rulemaking comports with 
the standard-setting criteria set forth under 42 U.S.C. 6295(o). 
Accordingly, the Consensus Agreement levels, included as trial standard 
level (TSL) 4 for both residential furnaces and residential central air 
conditioners and heat pumps, were adopted as the amended standard 
levels in the direct final rule.
    In sum, as the relevant statutory criteria were satisfied, the 
Secretary adopted the amended energy conservation standards for 
residential furnaces and residential central air conditioners and heat 
pumps set forth in the direct final rule. These standards are set forth 
in Table I.1 and Table I.2. The standards apply to all products listed 
in Table I.1 and Table I.2 that are manufactured in, or imported into, 
the United States on or after May 1, 2013 for non-weatherized gas and 
oil-fired furnaces and mobile home furnaces and on or after January 1, 
2015 for weatherized gas furnaces and central air conditioners and heat 
pumps. These compliance dates were set forth in the direct final rule 
published in the Federal Register on June 27, 2011. 76 FR 37408. For a 
detailed discussion of DOE's analysis of the benefits and burdens of 
the amended standards pursuant to the criteria set forth in EPCA, 
please see the direct final rule. 76 FR 37408 (June 27, 2011).
    As required by EPCA, DOE also simultaneously published a NOPR 
proposing the identical standard levels contained in the direct final 
rule. As discussed in this section, DOE considered whether any adverse 
comment received during the 110-day comment period following the direct 
final rule provided a reasonable basis for withdrawal of the direct 
final rule and continuation of this rulemaking under the NOPR. As noted 
in the direct final rule, it is the substance, rather than the 
quantity, of comments that will ultimately determine whether a direct 
final rule will be withdrawn. To this end, DOE weighs the substance of 
any adverse comment(s) received against the anticipated benefits of the 
Consensus Agreement and the likelihood that further consideration of 
the comment(s) would change the results of the rulemaking. DOE notes 
that to the extent an adverse comment had been previously raised and 
addressed in the rulemaking proceeding, such a submission will not 
typically provide a basis for withdrawal of a direct final rule.

   Table I.1--Amended Energy Conservation Standards for Furnace, Central Air Conditioner, and Heat Pump Energy
                                                   Efficiency
----------------------------------------------------------------------------------------------------------------
                                                                                 Northern region ** standards
             Product class                   National standards (percent)                  (percent)
----------------------------------------------------------------------------------------------------------------
                                             Residential Furnaces *
----------------------------------------------------------------------------------------------------------------
Non-weatherized gas....................  AFUE = 80..........................  AFUE = 90.
Mobile home gas........................  AFUE = 80..........................  AFUE = 90.
Non-weatherized oil-fired..............  AFUE = 83..........................  AFUE = 83.
Weatherized gas........................  AFUE = 81..........................  AFUE = 81.
Mobile home oil-fired [Dagger][Dagger].  AFUE = 75..........................  AFUE = 75.
Weatherized oil-fired [Dagger][Dagger].  AFUE = 78..........................  AFUE = 78.
Electric[Dagger][Dagger]...............  AFUE = 78..........................  AFUE = 78.
----------------------------------------------------------------------------------------------------------------

[[Page 67039]]

 
----------------------------------------------------------------------------------------------------------------
                                                               Southeastern  region       Southwestern region
           Product class               National standards        [dagger][dagger]         [Dagger] standards
----------------------------------------------------------------------------------------------------------------
                                Central Air Conditioners and Heat Pumps [dagger]
----------------------------------------------------------------------------------------------------------------
Split-system air conditioners......  SEER = 13.............  SEER = 14..............  SEER = 14.
                                                                                      EER = 12.2 (for units with
                                                                                       a rated cooling capacity
                                                                                       less than 45,000 Btu/h).
                                                                                      EER = 11.7 (for units with
                                                                                       a rated cooling capacity
                                                                                       equal to or greater than
                                                                                       45,000 Btu/h).
Split-system heat pumps............  SEER = 14.............  SEER = 14..............  SEER = 14.
                                     HSPF = 8.2............  HSPF = 8.2.............  HSPF = 8.2.
Single-package air conditioners      SEER = 14.............  SEER = 14..............  SEER = 14.
 [Dagger][Dagger].
                                                                                      EER = 11.0.
Single-package heat pumps..........  SEER = 14.............  SEER = 14..............  SEER = 14.
                                     HSPF = 8.0............  HSPF = 8.0.............  HSPF = 8.0.
Small-duct, high-velocity systems..  SEER = 13.............  SEER = 13..............  SEER = 13.
                                     HSPF = 7.7............  HSPF = 7.7.............  HSPF = 7.7.
Space-constrained products--air      SEER = 12.............  SEER = 12..............  SEER = 12.
 conditioners [Dagger][Dagger].
Space-constrained products--heat     SEER = 12.............  SEER = 12..............  SEER = 12.
 pumps [Dagger][Dagger].
                                     HSPF = 7.4............  HSPF = 7.4.............  HSPF = 7.4.
----------------------------------------------------------------------------------------------------------------
* AFUE is annual fuel utilization efficiency.
** The Northern region for furnaces contains the following States: Alaska, Colorado, Connecticut, Idaho,
  Illinois, Indiana, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New
  Hampshire, New Jersey, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Utah,
  Vermont, Washington, West Virginia, Wisconsin, and Wyoming.
[dagger] SEER is Seasonal Energy Efficiency Ratio; EER is Energy Efficiency Ratio; HSPF is Heating Seasonal
  Performance Factor; and Btu/h is British thermal units per hour.
[dagger][dagger] The Southeastern region for central air conditioners and heat pumps contains the following
  States: Alabama, Arkansas, Delaware, Florida, Georgia, Hawaii, Kentucky, Louisiana, Maryland, Mississippi,
  North Carolina, Oklahoma, South Carolina, Tennessee, Texas, and Virginia, and the District of Columbia.
[Dagger] The Southwestern region for central air conditioners and heat pumps contains the States of Arizona,
  California, Nevada, and New Mexico.
[Dagger][Dagger] DOE is not amending energy conservation standards for these product classes in this rule.

  Table I.2--Amended Energy Conservation Standards for Furnace, Central
       Air Conditioner, and Heat Pump Standby Mode and Off Mode *
------------------------------------------------------------------------
                                      Standby mode and off mode standard
            Product class                           levels
------------------------------------------------------------------------
                         Residential Furnaces **
------------------------------------------------------------------------
Non-weatherized gas.................  PW,SB = 10 watts.
                                      PW,OFF = 10 watts.
Mobile home gas.....................  PW,SB = 10 watts.
                                      PW,OFF = 10 watts.
Non-weatherized oil-fired...........  PW,SB = 11 watts.
                                      PW,OFF = 11 watts.
Mobile home oil-fired...............  PW,SB = 11 watts.
                                      PW,OFF = 11 watts.
Electric............................  PW,SB = 10 watts.
                                      PW,OFF = 10 watts.
------------------------------------------------------------------------

 
                                           Off mode standard levels
            Product class                      [dagger][dagger]
------------------------------------------------------------------------
        Central Air Conditioners and Heat Pumps [dagger][dagger]
------------------------------------------------------------------------
Split-system air conditioners.......  PW,OFF = 30 watts.
Split-system heat pumps.............  PW,OFF = 33 watts.
Single-package air conditioners.....  PW,OFF = 30 watts.
Single-package heat pumps...........  PW,OFF = 33 watts.
Small-duct, high-velocity systems...  PW,OFF = 30 watts.
Space-constrained air conditioners..  PW,OFF = 30 watts.
Space-constrained heat pumps........  PW,OFF = 33 watts.
------------------------------------------------------------------------
* PW,SB is standby mode electrical power consumption, and PW,OFF is off
  mode electrical power consumption. For furnaces, DOE is proposing to
  change the nomenclature for the standby mode and off mode power
  consumption metrics for furnaces from those in the furnace and boiler
  test procedure final rule published on October 20, 2010. 75 FR 64621.
  DOE is renaming the PSB and POFF metrics as PW,SB and PW,OFF,
  respectively. However, the substance of these metrics remains
  unchanged.
** Standby mode and off mode energy consumption for weatherized gas and
  oil-fired furnaces is regulated as a part of single-package air
  conditioners and heat pumps.
[dagger] PW,OFF is off mode electrical power consumption for central air
  conditioners and heat pumps.
[dagger][dagger] DOE is not adopting a separate standby mode standard
  level for central air conditioners and heat pumps, because standby
  mode power consumption for these products is already regulated by SEER
  and HSPF.

[[Page 67040]]

II. Comments Concerning Withdrawal of the Direct Final Rule

A. General Comments

1. Joint Petition
    A number of commenters stated that DOE did not consider the views 
of all relevant parties, including appliance installers and energy 
suppliers. Some commenters also stated that DOE did not explain its 
process for determining whether the Joint Petition was submitted by 
relevant parties, including a determination of which parties are 
``not'' relevant.
    Specifically, UGI Distributors stated that there was not sufficient 
participation by interested persons. (UGI, No. 22 at p. 10) The 
American Public Gas Association (APGA) contended that the Consensus 
Agreement was not based on the most relevant sectors of the industry. 
(APGA, No. 24 at pp. 12-13) Metropolitan Utilities District of Omaha 
Nebraska (MUD) stated that the Consensus Agreement failed to represent 
consumer interests, because the Joint Petitioners (who submitted the 
Consensus Agreement) were comprised primarily of appliance 
manufacturers and various energy conservation groups, not individuals 
who deal with installation and inspection of these appliances on a 
daily basis. (MUD, No. 29 at p. 1) AGL Resources (AGL) commented that 
the petition did not include all relevant parties as required by the 
legislation granting authority for DFRs, and it recommended DOE should 
withdraw the DFR in favor of the NOPR process. Specifically, AGL cited 
appliance installers and energy suppliers as not being involved, noting 
that appliance installers could have provided more complete information 
regarding installation costs and that energy suppliers could have 
provided important information on consumer impacts. (AGL, No. 31 at p. 
3) Heating, Air-conditioning and Refrigeration Distributors 
International (HARDI) stated that the Consensus Agreement excludes the 
input of U.S. small business owners, who represent two-thirds of the 
heating, ventilation, and air-conditioning (HVAC) supply chain and 
32,264 HVAC contracting and distribution companies and branches 
nationwide. (HARDI, No. 39 at p. 1) The Air Conditioning Contractors of 
America (ACCA) stated that the Consensus Agreement represents the view 
of a minority of stakeholders, is an unsuitable use of the direct final 
rule process, and directly and adversely impacts several stakeholders 
not included in the Consensus Agreement. (ACCA, No. 50 at p. 2)
    Conversely, the Joint Comment from ASAP, NRDC, ACEEE, ASE, NPCC, 
NEEP, the Consumer Federation of America (CFA), and EarthJustice (Joint 
Comment) supported DOE's determination of what constitutes an agreement 
that is submitted jointly by interested persons that are fairly 
representative of relevant points of view. (Joint Comment, No. 47 at p. 
2) These stakeholders contend that DOE has properly exercised its 
authority to issue a direct final rule under 42 U.S.C. 6295(p)(4)(A).
    As explained above in section I, EPCA authorizes DOE to issue a 
direct final rule establishing an energy conservation standard on 
receipt of a statement that, in relevant part, is submitted jointly by 
interested persons that are fairly representative of relevant points of 
view (including representatives of manufacturers of covered products, 
States, and efficiency advocates) as determined by the Secretary. While 
providing some guidance by specifying that representatives of 
manufacturers of covered products, States, and efficiency advocates are 
relevant parties to any consensus recommendation, EPCA affords DOE 
significant discretion in determining whether this requirement has been 
met. (42 U.S.C. 6295(p)(4)(A)) DOE notes that EPCA does not require 
that ``all'' relevant parties be parties to any Consensus Agreement, 
nor does it allow a small number of interested parties to exercise a 
veto power over the DFR process. EPCA also does not require DOE to 
specify parties that it determines are ``not relevant'' to any 
Consensus Agreement.
    In the direct final rule, DOE explained how the Consensus Agreement 
met the requirement that it be submitted jointly by interested persons 
that are fairly representative of relevant points of view. DOE noted 
that the Consensus Agreement was signed and submitted by a broad cross-
section of the manufacturers who produce the subject products, their 
trade associations, and environmental and energy efficiency 
organizations. DOE further noted that one State entity was a party to 
the Consensus Agreement, and no State expressed any opposition to it. 
States also did not file any adverse comments during the comment period 
for the direct final rule.
    Moreover, DOE stated in the direct final rule that it does not 
interpret the statute as requiring absolute agreement among all 
interested parties before DOE may proceed with issuance of a direct 
final rule. By explicit language of the statute, the Secretary has 
considerable discretion to determine when a joint recommendation for an 
energy or water conservation standard has met the requirement for 
representativeness (i.e., ``as determined by the Secretary''). DOE 
acknowledges that appliance installers and energy suppliers may also be 
relevant parties within the meaning of 42 U.S.C. 6295(p)(4), but does 
not believe that the existence of other potentially relevant parties 
indicates that the Consensus Agreement was not submitted jointly by 
interested persons that are fairly representative of relevant points of 
view (including representatives of manufacturers of covered products, 
States, and efficiency advocates).
    For the reasons stated above, DOE affirms its conclusion in the 
direct final rule that the Joint Petition satisfies the requirement of 
42 U.S.C. 6295(p)(4) that it be a statement submitted jointly by 
interested persons that are fairly representative of relevant points of 
view (including representatives of manufacturers of covered products, 
States, and efficiency advocates) as determined by the Secretary.
2. Comments on Withdrawal of the Direct Final Rule
    As explained more fully below, DOE has determined that none of the 
comments requesting withdrawal, taken as a whole or individually, may 
provide a reasonable basis for the Secretary to withdraw the direct 
final rule. In setting efficiency standards such as those for furnaces, 
DOE uses a publicly-available, forward-looking model to evaluate the 
economic impact of several technically feasible energy efficiency 
levels pursuant to the criteria specified in 42 U.S.C. 6295(o). DOE 
runs its analysis starting at the most efficient technologically 
feasible level through progressively lower efficiency levels until its 
finds the most efficient trial standard level (TSL) that is 
economically justified. DOE has made its model and the data used in its 
model public on its Web site.
    The American Gas Association (AGA) \2\ and APGA submitted comments 
arguing that DOE used inappropriate data for several parameters in its 
life-cycle cost (LCC) model for furnaces, including future natural gas 
prices, the

[[Page 67041]]

lifetime of non-weatherized gas furnaces, installation costs, and 
future consumer costs for furnaces. DOE explains below why, contrary to 
these comments, it used appropriate data for each such parameter.
---------------------------------------------------------------------------

    \2\ Philadelphia Gas Works, Nicor, Piedmont, Consolidated Edison 
of New York, NW Natural Gas Company, Atmos Energy and Alabama Gas 
submitted comments expressing general support for the comments by 
the American Gas Association (AGA). (Philadelphia Gas Works, No. 23 
at pp. 1-2; Nicor, No. 32 at p. 1; Piedmont, No. 32 at p. 1; 
Consolidated Edison of New York, No. 32 at p. 1; NW Natural Gas 
Company, No. 32 at p. 1; Atmos Energy, No. 32 at p. 1; Alabama Gas, 
No. 32 at p. 1)
---------------------------------------------------------------------------

    However, even if the commenters were correct with respect to all 
the data issues they raised, that would still not result in an 
efficiency standard for furnaces that is different than the one in the 
DFR. In response to the comments from AGA and APGA, DOE re-ran its 
model using the data and assumptions provided by those organizations in 
their comments. DOE's analytical results, which it has made public on 
its Web site, showed that the standard set for furnaces in the DFR (TSL 
4) still has a positive average LCC savings, even using all the 
commenters' data and assumptions. Because the commenters' objections, 
even if they were all correct, a scenario DOE does not believe likely, 
would not have resulted in a change to the efficiency standard for 
furnaces, they could not possibly provide a reasonable basis for 
withdrawing the rule.
    In their comments, AGA and APGA assert that, taken together, their 
data assumptions cause the standard for furnaces in the DFR to have an 
average LCC savings that is slightly negative in the northern region of 
the United States. However, they have not provided sufficient 
information to allow DOE to replicate their results. As indicated 
above, DOE has made its spreadsheet model publicly available on its Web 
site and no commenter--including AGA and APGA--has questioned the 
methodology underlying the spreadsheet model (as opposed to the data 
used in the model). Therefore, notwithstanding the results assertedly 
reached by AGA and APGA using DOE's model, DOE has concluded that its 
model (which remains unchallenged in terms of its methodology) supports 
the efficiency standard in the DFR, even using the data and assumptions 
provided by the adverse commenters.
    Further, as explained in the DFR (76 FR 37524), the consensus 
agreement represents the effort of diverse stakeholders representing 
widely varied interested parties to negotiate their differences, reach 
common ground, and expedite the rulemaking process. Those efforts, and 
the benefits they entail, were properly considered by the Secretary 
under 42 U.S.C. 6295(o)(2)(B)(i)(VII). DOE has encouraged stakeholders 
in all areas to work together to propose consensus agreements that can 
lead to DFRs where appropriate. Here, the benefits of the consensus 
agreement, reflected in the DFR, include additional energy savings 
resulting from accelerated compliance dates for covered products, as 
well as an increased likelihood for regulatory compliance and a 
decreased risk of litigation. The Secretary is cognizant of those 
benefits in analyzing the adverse comments, and in determining whether 
any of those comments may provide a reasonable basis for withdrawal of 
the DFR under 42 U.S.C. 6295(o).

B. Comments on Standards for Residential Furnaces

1. The Direct Final Rule Would Cause Certain Gas Furnaces in the 
Northern Region to Become Unavailable in Violation of the Act
    The American Gas Association (AGA) stated that: (1) Establishing a 
minimum efficiency standard of 90-percent AFUE for the northern region 
would prevent the installation in that region of a Category I \3\ gas 
furnace; (2) the regional standard, therefore, would necessarily result 
in the unavailability in the northern region of a covered product type 
with the performance characteristics of a non-positive vent static 
pressure, non-condensing (i.e., Category I) gas furnace; (3) the Act 
prohibits DOE from prescribing a standard that is likely to result in 
the unavailability in the U.S. in any covered product type (or class) 
of performance characteristics (including reliability), features, 
sizes, capacities, and volumes that are substantially the same as those 
generally available in the United States. (AGA, No. 27 at p. 5)
---------------------------------------------------------------------------

    \3\ A Category I vented appliance is an appliance that operates 
with a non-positive vent static pressure and with a vent gas 
temperature that avoids excessive condensate production in the vent. 
(National Fuel Gas Code, NFPA54/ANSI Z223.1, American Gas 
Association, 2006)
---------------------------------------------------------------------------

    AGA further noted that: (1) In light of the requirements of the gas 
codes, a Category I non-positive vent, non-condensing gas furnace 
cannot be replaced with a Category IV positive vent, condensing gas 
furnace without addressing the venting and condensate disposal issues; 
(2) accordingly, the performance features of a Category I gas furnace 
(including its ability to be vented through a chimney, common vented 
with other gas appliances, and common vented in multi-unit, multistory 
housing, as well as its ability to vent without having to address 
disposal of flue gas condensate) provide tangible and cost-saving 
benefits to consumers justifying separate minimum efficiency standards 
for Category I and Category IV gas furnaces. (AGA, No. 27 at p. 6) AGL 
made comments similar to those of AGA. (AGL, No. 31 at p. 6)
    AGA contends that DOE should withdraw the direct final rule and 
proceed with the notice of proposed rulemaking in this proceeding to 
consider establishing separate standards for Category I and Category IV 
gas furnaces based on their different venting and condensing 
characteristics. (AGA, No. 27 at p. 6)
    Conversely, AHRI stated that the furnace design dictates what types 
of venting systems are acceptable, not the converse, and any suggestion 
that a similar natural draft furnace must be provided to replace an old 
natural draft furnace in order to maintain a unique utility of the 
furnace reverses the relationship between the furnace and the vent 
system. AHRI also stated that the function of any furnace is to provide 
heat for residences, and DOE is required to address the utility or 
unique features of appliances and equipment only. AHRI noted that a new 
gas furnace using a different type of venting system can be installed 
as a replacement without changing the occupants' comfort level or the 
heating ability of the furnace, and that the venting system concerns 
are simply a matter of cost and the existence of an appropriate pathway 
for the venting system, which are issues that have been analyzed by DOE 
and others in the past. (AHRI, No. 46 at pp. 3-4)
    In response to these comments, DOE notes that, in evaluating and 
establishing energy conservation standards, EPCA directs DOE to divide 
covered products into classes based on differences including the type 
of energy used, capacity, or other performance-related feature that 
justifies a different standard for products having such feature. (42 
U.S.C. 6295(q)) In deciding whether a feature justifies a different 
standard, DOE must consider factors such as the utility of the feature 
to users. Id. In evaluating AGA's suggestion to consider separate 
product classes for furnaces using Category I and Category IV venting, 
DOE considered the utility to consumers of being able to use one 
venting type versus the other. DOE believes that the utility derived by 
consumers from furnaces is in the form of the space heating function 
that the furnace performs. DOE notes that a furnace requiring Category 
I venting and a furnace requiring Category IV venting are both capable 
of providing the same heating function to the consumer, and, thus, 
provide virtually the same utility with respect to that primary 
function. AGA contends that the ability to vent a furnace with Category 
I venting provides furnace consumers with a special utility, due to the 
cost-saving benefits as compared to having to

[[Page 67042]]

retrofit a venting system to accommodate a Category IV furnace. DOE 
does not agree with the characterization of reduced costs associated 
with Category I venting in certain installations as a special utility, 
but rather, it is an economic impact on consumers that must be 
considered in the rulemaking's cost-benefit analysis. Accordingly, DOE 
did not establish separate product classes for furnaces utilizing 
Category I and Category IV venting systems, but instead considered the 
additional costs of Category IV venting in its analyses performed for 
the DFR.
2. Causing the Unavailability of Category I Gas Furnaces in the 
Northern Region May Have Serious Adverse Consequences for Consumers and 
the Environment
    AGA stated that: (1) Causing the unavailability of Category I gas 
furnaces in the northern region has the potential to increase health 
and safety risks due to improper venting; (2) customers faced with 
having to replace an existing Category I non-condensing gas furnace 
with a Category IV condensing gas furnace may choose to repair the 
existing furnace to avoid expensive venting and condensate disposal 
modifications associated with the new furnace; (3) delayed replacement 
of equipment past their useful life has the potential to increase 
energy consumption and environmental impacts. (AGA, No. 27 at p. 6) 
AGL, CenterPoint Energy, Metropolitan Utilities District (MUD), 
National Fuel Gas Distribution Corporation (NFGD), and Questar Gas made 
comments similar to those of AGA. (AGL, No. 31 at p. 5; CenterPoint 
Energy, No. 33 at p. 2; MUD, No. 29 at p. 1; NFGD, No. 28 at p. 1; 
Questar Gas, No. 48 at p. 1)
    On the other hand, AHRI stated that the concerns about safety when 
establishing a standard at 90-percent annual fuel utilization 
efficiency (AFUE) are no different that those already present in 
situations where consumers do not repair faulty equipment or perform 
unsafe home repairs. (AHRI, No. 46 at p. 4) National Grid stated that 
the proposed standards would help their customers achieve their heating 
needs while using less energy and saving money. (National Grid, No. 30 
at p. 1)
    In response, proper venting of a condensing furnace, which is 
guided by the National Fuel Gas Code and, in many cases, by local 
building codes, is designed to alleviate health and safety risks. DOE 
notes that contractors currently have a legal responsibility to perform 
repairs according to the requirements of applicable codes. Problems 
associated with contractors not following proper procedures could occur 
in the case of replacing a gas furnace with a non-condensing furnace as 
well.
    Failure of the heat exchanger or combustion system is the event 
that is most likely to create a need for replacement. DOE believes that 
consumers faced with a furnace replacement situation would be unlikely 
to opt for repair because of the high cost of replacing these 
components, along with the possibility that further expensive repairs 
might be needed in the near future. Therefore, DOE believes that 
delayed replacement, and the associated environmental impacts, is 
unlikely.
    AGA stated that customers that replace a Category I gas furnace 
with a Category IV gas furnace may orphan a common-vented gas water 
heater. It could lead to improperly vented water heaters, which may 
pose serious health and safety risks. (AGA, No. 27 at p. 7) AGL, 
CenterPoint Energy and MUD made comments similar to those of AGA. (AGL, 
No. 31 at pp. 6-7; CenterPoint Energy, No. 33 at p. 5; MUD, No. 29 at 
p. 1)
    AHRI stated that: (1) In the past ten years, nearly 10 million 
condensing furnaces have been sold in the U.S., of which about 7.5 
million units were replacement installations; (2) some of those must 
have resulted in ``orphaned'' gas water heaters; (3) there is no 
evidence from the field over that time that consumers are incurring a 
higher safety risk because they chose to not address the water heater's 
venting system when the new condensing furnace was installed. (AHRI, 
No. 46 at p. 4)
    In response, proper venting of an orphaned water heater would 
alleviate the risks mentioned by the commenters. DOE again notes that 
proper venting of an orphaned water heater is guided by the National 
Fuel Gas Code and, in many cases, by local building codes. The same 
points made above about contractors apply in this case as well. DOE 
also notes that the above comment by AHRI suggests that serious health 
and safety risks are unlikely and that the service industry already has 
in place procedures for identifying and rendering unsafe equipment 
inoperable (red tag) to safeguard the consumer. In addition, DOE 
believes that through training and experience installing condensing 
furnaces, installers will become increasingly aware and skilled in the 
treatment of orphaned water heaters.
    AGA argued that the unavailability of Category I, non-condensing 
gas furnaces could lead customers to make less-efficient appliance 
choices. Specifically, AGA stated that fuel switching or different 
initial fuel choice could occur where customers select: (1) Electric 
furnaces instead of gas furnaces; (2) electric heat pumps instead of 
gas furnaces, especially where central air conditioning is already 
installed; (3) electric water heaters instead of gas water heaters; or 
(4) electric heat pumps and electric water heaters instead of gas 
furnaces and gas water heaters. AGA stated that by installing electric 
appliances rather than natural gas appliances, consumers are likely to 
pay more in annual operating costs while contributing to increased 
total energy consumption and environmental emissions when measured on a 
source or full-fuel-cycle basis. (AGA, No. 27 at p. 7)
    For the direct final rule, DOE did not explicitly quantify the 
potential for fuel switching from gas furnaces to electric heating 
equipment, based upon the following reasoning. DOE reviewed the 2005 
Residential Energy Consumption Survey (RECS) \4\ to assess the type of 
space-heating system utilized by consumers as a function of house 
heating load. Gas furnaces are primarily utilized in households with 
high heating loads, while electric space heating systems are almost 
exclusively used in households with low heating loads. Generally, this 
is because the operating costs of electric space heating systems are 
relatively high due to the price of electricity, so using an electric 
system in a cold climate is significantly more expensive than using a 
gas furnace. Based on the above finding, DOE inferred that few 
consumers in the northern region would be likely to switch to electric 
space heating systems as a result of the amended standard for gas 
furnaces.
---------------------------------------------------------------------------

    \4\ U.S. Department of Energy--Energy Information 
Administration, Residential Energy Consumption Survey: 2005 Public 
Use Data Files, 2008. http://www.eia.doe.gov/emeu/recs/recspubuse05/pubuse05.html.
---------------------------------------------------------------------------

    In addition, replacing a gas furnace with electric space heating 
incurs substantial costs, because of the complexity involved in 
modifying the installation. As described in appendix 9-B of the DFR 
technical support document (TSD),\5\ for a household with a gas furnace 
to switch to electric space heating, a separate circuit up to 120-amps 
would be needed, depending on the house heating design requirements.

[[Page 67043]]

The cost to install such a circuit would vary from approximately $293 
to $608, and some installations would require a new panel board to 
serve this higher amp circuit, at a cost estimated at $985 to 
$2,625.\6\ Given the initial costs involved in replacing a gas furnace 
with electric space heating, combined with the much higher operating 
costs of an electric heating system, DOE believes that the approach 
used for the DFR is reasonable.
---------------------------------------------------------------------------

    \5\ See: http://www1.eere.energy.gov/buildings/appliance_standards/residential/residential_furnaces_central_ac_hp_direct_final_rule_tsd.html.
    \6\ Costs estimated using 2010 RS Means Residential Cost Data. 
(RS Means Company Inc., RS Means Residential Cost Data. 29th Annual 
Edition ed. 2010: Kingston, MA).
---------------------------------------------------------------------------

    With regard to initial fuel choice in new homes, DOE found fuel 
switching not to apply because the amended standard would not 
significantly change the situation currently faced by builders. On 
average, there is no total installed price differential between an 80-
percent AFUE gas furnace and a 90-percent AFUE gas furnace, so DOE 
reasoned that builders are unlikely to alter their current behavior on 
the basis of amended energy conservation standards.
    AGA stated that: (1) Replacing a non-condensing gas furnace with a 
condensing gas furnace may be infeasible for some homes where side-wall 
venting is not an option (e.g., in row houses, historic homes, or 
multi-story housing complexes), may be cost-prohibitive in other homes, 
may lead to orphaned water heaters, and, in all cases, would increase 
installation costs and require trained installers to ensure proper 
venting of all combustion appliances.; (2) DOE's analysis in this 
proceeding significantly underestimates the costs associated with 
installation of condensing gas furnaces that consumers would actually 
incur, both as a result of underestimating specific cost items and of 
failing to include specific cost items. (AGA, No. 27 at p. 7) MUD made 
a similar comment. (MUD, No. 29 at pp. 1-2) Questar Gas also stated 
that with many older homes and multi-family units, the venting 
modifications and condensate disposal requirements would be cost-
prohibitive and, in some cases, impossible. (Questar Gas, No. 48 at p. 
1)
    DOE acknowledges that there may be increased technical complexity 
associated with replacing a non-condensing gas furnace with a 
condensing gas furnace, but DOE disagrees with AGA's contention that 
replacing a non-condensing gas furnace with a condensing gas furnace 
may be infeasible for some homes where side-wall venting is not an 
option. Many condensing furnaces are vented using vertical vents, which 
provides an additional option to address cases where side-wall access 
in not available. Moreover, AGA has not demonstrated that trained 
installers are unavailable in the marketplace to handle installations 
under the amended standards at the time of compliance. Condensing 
furnaces have been available for more than 20 years, and in the north 
condensing furnaces represent 68 percent of the market. The large scale 
of installations demonstrates the availability of trained installers to 
handle installations under the amended standards.
    Regarding AGA's second point, DOE believes that it has included all 
relevant cost items. As further described below in section II.B.7, 
DOE's estimates of specific cost items are similar to those provided by 
AGA in several instances. Where they are lower, DOE believes that the 
available evidence (discussed below) supports the costs used by DOE.
3. DOE's Regional Standard Harms Consumers
    AGA stated that: (1) DOE's analysis shows that the 90-percent AFUE 
standard for the northern region would impose a net cost on 10 percent 
of consumers, have no impact on 71.4 percent of consumers, and have a 
net benefit for 18.6 percent of consumers; (2) the fact that a 
significant percentage of customers will experience a net cost reflects 
the substantial costs associated with replacing a Category I non-
condensing gas furnace with a Category IV condensing gas furnace; (3) 
DOE has failed to explain why the fact that some consumers will see a 
net benefit justifies imposing net costs on other consumers. (AGA, No. 
27 at p. 10)
    In selecting the standards in the DFR, DOE needed to determine 
whether the benefits of the standard exceed its burdens to the greatest 
extent practicable, in light of the seven statutory factors provided by 
EPCA. (42 U.S.C. 6295(o)(2)(B)(i)) Impacts on consumers are one of 
those factors. Under the amended standard for non-weatherized gas 
furnaces, nearly twice as many consumers would have a net benefit as 
would have a net cost. Further, the standard would provide average LCC 
savings of $155 and a median payback period of 10.1 years. DOE believes 
that on balance, the consumer impacts of the amended energy 
conservation standard qualify as positive impacts within the context 
DOE has used in past standards rulemakings.
4. DOE's Analysis of Natural Gas Prices Is Inadequate
    AGA and AGL stated that the direct final rule did not consider the 
impact that the regional standard would have on natural gas prices. 
(AGA, No. 27 at p. 11; AGL, No. 31 at 5) DOE did consider the impact of 
the chosen standards on natural gas prices, as described in section 
IV.G.6 of the DFR. As described in chapter 14 of the DFR TSD, the 
projected impact on natural gas prices is very small (0.14 to 0.21 
percent). Because the impact is so small, DOE did not use a separate 
price forecast for the selected TSL.
    AGA stated that: (1) DOE has not used the most recent version of 
the Energy Information Administration's (EIA) Annual Energy Outlook 
(i.e., AEO 2011) in support of the direct rule; (2) DOE has not 
explained why it could not have revised its analysis based on the most 
recent data; (3) EIA's AEO 2011 forecast of residential natural gas 
prices through 2030 is substantially reduced from the 2010 forecast; 
(4) EIA's price forecast has been trending downward over the last 
several years; (5) DOE's use of the AEO 2010 Reference Case in 
analyzing life-cycle-cost savings of gas furnaces overstates potential 
cost savings. (AGA, No. 27 at p. 11) APGA and MUD also objected to 
DOE's use of the AEO 2010 rather than the AEO 2011 projections. (APGA, 
No 24 at p. 2; MUD, No. 29 at p. 2)
    In contrast, the joint comment from ASAP, NRDC, ACEEE, CFA, ASE, 
NPCC, NEEP, and EJ (Joint Comment) stated that the furnace standards 
are cost-effective, even if AEO 2011 price trends are used in the LCC 
analysis. The Joint Comment noted that additional analysis published by 
DOE in response to a request from American Public Gas Association 
(APGA) showed average positive LCC savings for both replacement and new 
construction installations even if lower natural gas prices are used in 
the analysis. (Joint Comment, No. 47 at p. 4-5)
    In response, DOE notes that the Department uses the latest 
available version of AEO that is possible under its rulemaking 
schedule. The AEO 2011 was not available at the time the original DFR 
analysis was conducted. However, in response to comments on the DFR, 
DOE evaluated the impact of using the AEO 2011 price forecast on the 
LCC results. In this case, the average LCC benefit decreases from $155 
(using the AEO 2010 forecast) to $127.
    AGA contends that: (1) DOE should use a marginal price analysis 
when evaluating the impact of natural gas prices on the life-cycle-cost 
savings

[[Page 67044]]

associated with conservation standards; (2) a marginal price analysis 
reflects the incremental or decremental gas costs most closely 
associated with changes in the amount of gas consumed when comparing 
appliances of different efficiencies; (3) DOE uses marginal residential 
and commercial electricity prices in its life-cycle-cost analysis; (4) 
technical analysis by the Gas Technology Institute (GTI) includes a 
marginal price analysis for the 90-percent AFUE regional standard, by 
using citygate prices \7\ as a proxy for marginal price and reducing 
the residential gas price to reflect a removal of a portion of fixed 
costs. AGA stated that: (1) The results of GTI's analysis show that the 
life-cycle-cost savings of replacing a non-condensing gas furnace with 
a condensing gas furnace are negative in the northern region using 
citygate prices as a proxy for marginal price, based on AEO 2011 
forecasts of natural gas prices; (2) under the alternative method of 
removing fixed costs as a proxy for marginal prices, the analysis 
similarly shows that the life-cycle-cost savings of installations of 
90-percent AFUE condensing gas furnaces in the replacement market in 
the northern region are negative or only barely positive. (AGA, No. 27 
at p. 13)
---------------------------------------------------------------------------

    \7\ The ``city gate'' is generally the point where natural gas 
is transferred from an interstate or intrastate pipeline to a local 
natural gas utility. The ``city gate price'' is the sales price of 
the natural gas at this point; the price reflects the wholesale/
wellhead price, as well as the cost of transporting the natural gas 
by pipeline to the citygate.
---------------------------------------------------------------------------

    In contrast, the Joint Comment stated that DOE's approach for 
developing natural gas prices, which incorporates regional and seasonal 
variations, is appropriate and that the prices DOE derived reflect the 
prices faced by furnace users. (Joint Comment, No. 47 at pp. 4-5)
    In response, DOE believes that average natural gas prices are 
suitable for evaluating the impacts of furnace standards. DOE also used 
average natural gas prices in the 2010 final rule for energy 
conservation standards for residential water heaters, direct heating 
equipment, and pool heaters. 75 FR 20112, 20158 (April 16, 2010). 
Although marginal energy prices are in theory preferable when 
evaluating the life-cycle-cost savings associated with standards, past 
analysis found that marginal natural gas prices were only 4.4 percent 
lower than average prices in the winter, when furnaces are used.\8\ At 
the time of the DFR analyses, DOE was unable to obtain marginal gas 
prices for the following reasons. The RECS 2005 billing data that allow 
estimation of marginal prices were not available at that time due to 
EIA's concerns over maintaining confidentiality of the survey 
respondents. In the alternative, DOE investigated development of 
marginal prices from gas utility tariffs, but found that, in general, 
gas tariffs include provisions for modifying consumer prices on a 
monthly basis to account for changes in commodity price. Therefore, the 
tariffs themselves do not provide sufficient information to determine 
the consumer price.
---------------------------------------------------------------------------

    \8\ Chaitkin, S., J. McMahon, C. Dunham-Whitehead, R. van 
Buskirk and J. Lutz. 2000. Estimating Marginal Residential Energy 
Prices in the Analysis of Proposed Appliance Energy Efficiency 
Standards. Conference Paper, Proceedings of the ACEEE Summer Study 
on Energy Efficiency in Buildings.
---------------------------------------------------------------------------

    In response to comments on the DFR, DOE estimated marginal natural 
gas prices using newly-available RECS 2005 billing data. Using this 
data in DOE's model, the average LCC benefits decrease from $155 (using 
average energy prices) to $128 (using marginal energy prices).
5. DOE Has Not Justified Its Use of Experience Curve Price Effects
    AGA stated that: (1) DOE's use of experience curves to support the 
direct final rule is premature; and (2) DOE has not yet issued a final 
rule or policy regarding the use of experience curve or learning curve 
analyses or responded to the comments submitted in that proceeding. 
(AGA, No. 27 at p. 14)
    To clarify, on February 22, 2011, DOE published a Notice of Data 
Availability (NODA, 76 FR 9696) in the Federal Register stating that 
DOE may consider changes to how it addresses equipment price trends, as 
part of DOE's ongoing efforts to keep improving its regulatory 
analyses. DOE responded to comments on the NODA and outlined its 
refined policy regarding the use of experience curves in the direct 
final rule in this proceeding and several other rulemakings mentioned 
below. In the DFR, DOE presented a range of estimates for product price 
trends, including trends derived using the experience curve approach.
    AGA and APGA stated that DOE's experience curve analysis in the 
direct final rule is unexplained and unjustified. (AGA, No. 27 at p. 
14; APGA, No. 24 at p. 3) AGA stated that DOE has not adequately shown 
that, based on historical price data, the price trend for Category IV 
condensing gas furnaces would continue to trend downward over time at 
the rate that DOE has assumed. Nor is there any justification, 
according to those commenters, as to why such curves should be so much 
greater for gas equipment than for electric equipment. (AGA, No. 27 at 
pp. 14-15) Laclede Gas also stated that the experience rates used by 
DOE were overstated. (Laclede Gas, No. 27 at pp. 2-3)
    On the other hand, the Joint Comment supported DOE's use of 
learning rates in the analysis. (Joint Comment, No. 47 at p. 3) It 
stated that the incorporation of learning rates in this rulemaking is 
consistent with recent DOE final rules on refrigerators, clothes 
dryers, and room air conditioners, where DOE also applied learning 
rates. 76 FR 57516, 57548-50 (Sept. 15, 2011); 76 FR 52852-52854 (Aug. 
24, 2011).
    In response, DOE's derivation of price trends for central air 
conditioners, heat pumps, and furnaces is described in detail in 
appendix 8-J of the DFR TSD. The essential justification for using the 
experience curve approach is that it yields a statistically robust 
method for analyzing the long-term declining real price trend, based on 
Producer Price Indexes (PPI), observed for central air conditioners and 
furnaces. There exists an extensive economic literature on learning and 
experience curves, based on robust observations spanning many 
decades.\9\ The concept was pioneered for the manufacturing sector, and 
it has since been applied to a diverse set of products and 
services.\10\ Learning and experience curves are now regularly 
incorporated into economic modeling, including in the National Energy 
Modeling System (NEMS). Broader discussion of the reasons why DOE 
believes use of the experience curve approach is reasonable is provided 
in the final rule for refrigerators, refrigerator-freezers, and 
freezers. 76 FR 57516, 57548-50 (Sept. 15, 2011).
---------------------------------------------------------------------------

    \9\ A draft paper, ``Using the Experience Curve Approach for 
Appliance Price Forecasting,'' posted on the DOE Web site at http://www.eere.energy.gov/buildings/appliance_standards, summarizes the 
data and literature currently available to DOE that is relevant to 
price forecasts for selected appliances and equipment.
    \10\ Weiss, M., Junginger, M., Patel, M.K., Blok, K., 2010a. ``A 
review of experience curve analyses for energy demand 
technologies.'' Technological Forecasting and Social Change 77, 411-
428.
---------------------------------------------------------------------------

    DOE did not have historical price data specific to condensing gas 
furnaces. However, the growing share of condensing furnaces over the 
past two decades (from approximately 23 percent in 1990 to 
approximately 50 percent in 2010) \11\ is reflected in the PPI series 
that DOE used to derive an experience rate for furnaces.
---------------------------------------------------------------------------

    \11\ Gas Appliance Manufacturers Association (GAMA). Historical 
Shipment Data (1987-2003), provided to DOE April 10, 2005. AHRI. 
Historical Shipment Data (2004-2009), provided to DOE June 20, 2010.

---------------------------------------------------------------------------

[[Page 67045]]

    For warm-air furnaces, the medium estimated learning rate (defined 
as the fractional reduction in price expected from each doubling of 
cumulative production) is 30.6 percent. For unitary air conditioners, 
the medium estimated learning rate is 18.1 percent. The higher rate for 
furnaces results from the steeper decline in the inflation-adjusted 
historic price index for warm air furnaces.\12\
---------------------------------------------------------------------------

    \12\ See appendix 8-J of the DFR TSD.
---------------------------------------------------------------------------

    In response to comments on the DFR, DOE evaluated the impact of not 
using the learning rate on the LCC results. Using this input in DOE's 
model, the average LCC benefits decrease from $155 (using medium 
estimated learning rates) to $148 (not using the learning rates).
6. DOE's Estimate of Expected Furnace Lifetime Is Unsupported
    AGA stated that: (1) DOE's estimate of a 23.68 year lifetime for a 
gas furnace is contradicted by other DOE and manufacturer estimates; 
(2) in its latest DOE Multi-Year Program Plan, updated in October 2010, 
DOE estimated that the lifetime of a non-weatherized gas furnaces is 16 
years; (3) according to GTI's recent technical analysis, the 16-year 
useful life estimate is consistent with other manufacturer estimates of 
useful life; (4) GTI's analysis shows that using a 16-year useful life 
estimate substantially reduces the life-cycle-cost savings for the 90-
percent AFUE gas furnace in the northern region. (AGA, No. 27 at pp. 
15-16) Laclede Gas Company made a similar comment. (Laclede, No. 27 at 
p. 4)
    The Joint Comment stated that the fixed 16-year lifetime was 
unreasonable for non-weatherized gas furnaces. It noted that DOE used a 
distribution of lifetimes to reflect expected failure rates in the 
field and that DOE derived the average lifetime of 23.7 years for non-
weatherized gas furnaces from a combination of sources. (Joint Comment, 
No. 47 at pp. 4-5)
    In response, the value in DOE's 2010 Multi-Year Program Plan \13\ 
was an estimate from the published literature, rather than the result 
of empirical analysis. DOE's DFR methodology utilized a more rigorous 
product lifetime analysis, including historical data on appliance 
shipments, total appliance stock, and the fraction of surviving 
appliances to estimate the mean life and mortality shape factor using 
the best-fitting Weibull survival function.\14\ Changing the average 
lifetime to 16 years results in projected shipments that are 
approximately 30 percent to 40 percent greater than the forecast in the 
DFR. In this case, the NIA model's `backcast' diverges significantly 
from historical shipments. That is, a 16-year average lifetime is 
inconsistent with historical data on furnace shipments. Consequently, 
DOE has confirmed that the DFR's estimated average lifetime of 23.7 
years for non-weatherized gas furnaces remains the best estimate of 
that value. However, in response to comments on the DFR, DOE evaluated 
the impact of using the average fixed 16-year lifetime on the LCC 
results. Using that input in DOE's model, the average LCC benefits 
decrease from $155 (using DOE's lifetime methodology) to $72 (using a 
16-year lifetime).
---------------------------------------------------------------------------

    \13\ U.S. Department of Energy Efficiency and Renewable Energy 
Building Technologies Program. Multi-Year Program Plan, Building 
Regulatory Programs: 2010-2015 (Oct. 2010). (http://apps1.eere.energy.gov/buildings/publications/pdfs/corporate/regulatory_programs_mypp.pdf)
    \14\ DOE's lifetime methodology is described in: Lutz, J. A. 
Hopkins, V. Letschert, V. Franco, and A. Sturges. ``Using national 
survey data to estimate lifetimes of residential appliances'' 
published in HVAC&R Research (Volume 17, Issue 5, 2011). (URL: 
http://www.tandfonline.com/doi/abs/10.1080/10789669.2011.558166)
---------------------------------------------------------------------------

7. DOE Has Not Justified Its Assumptions Regarding Installation Costs
    AGA stated that: (1) DOE has not adequately supported the specific 
installation cost adders and distribution of occurrences that it has 
used; (2) DOE's analysis significantly underestimates the costs 
associated with installation of condensing gas furnaces that consumers 
would actually incur, both as a result of underestimating specific cost 
items and failing to include specific cost items; (3) AGA submitted 
data in this proceeding showing that the cost for installation of 
condensing furnaces in commonly-vented systems in total would range 
from $1,500 to $2,200 (in 2005$) based on a survey of its members. AGA 
recommended that DOE apply a probability distribution for each 
installation cost adder and include that variation as an independent 
variable in the calculation. (AGA, No. 27 at p. 16) ACCA also stated 
that the standard mandating condensing furnaces in the northern region 
is based on incomplete or inaccurate assumptions on the costs for 
retrofitting homes. (ACCA, No. 27 at p. 4) The UGI Distribution 
Companies commented that DOE's installation cost estimates for 
accommodating high-efficiency gas furnace and orphaned gas water heater 
venting issues seem unrealistically low, particularly for row homes, 
multi-family dwellings, and older urban structures with high masonry 
chimneys. (UGI Distribution Companies, No. 22 at p. 4)
    In contrast, the Joint Comment stated that DOE had considered the 
comments from interested parties and conducted a thorough analysis of 
installation costs for both replacement and new construction 
installations. (Joint Comment, No. 47 at p. 2)
    In response to AGA's first point, the sources and methods used to 
derive the specific installation cost adders and distribution of 
occurrences are described in detail in appendix 8-B of the DFR TSD. DOE 
believes that it has included all relevant cost items.
    The range of $1,500 to $2,200 mentioned by AGA (in $2005; 
equivalent to $1,648 to $2,417 in 2009$) refers to the added cost for 
installation of condensing furnaces in common vented systems.\15\ As 
shown in Table II.1, the range of many of DOE's specific costs are 
similar to the ranges given in AGA's survey. For the relining of an 
existing chimney or resizing of a vent to accommodate the remaining 
appliance, DOE believes that AGA's relining costs are more typical for 
long vertical vent lengths (households with two floors or more), 
whereas the costs used by DOE represent a wide range of installations. 
In terms of installing a drain pan for condensate, DOE's estimate is 
based on the material cost of the drain pan from two retail Web 
sites.\16\ Despite these differences, DOE's total estimated average 
cost ($1,596) is close to the lower end of AGA's estimate. (DOE applied 
the structural modifications and the relining costs in Table II.1 to 
all commonly-vented systems that require venting modifications to 
satisfy the safety requirements. DOE estimated that such modifications 
are required for about 36 percent of all commonly-vented systems.) In 
summary, DOE concludes that its analysis of installation costs included 
all relevant items and used an appropriate range of costs for each 
item. In response to comments on the DFR, DOE evaluated the impact of 
using AGA's installation costs. Using these inputs in DOE's model, the 
average LCC benefits increase from $155 (using DOE's installation cost 
estimates) to $168 (using AGA's installation cost estimates). The main 
reason why the LCC benefits based on AGA's assumptions increase is that 
under DOE's estimates, performance of structural modifications is 
applied to all

[[Page 67046]]

installations and has higher cost, whereas AGA's assumptions regarding 
relining chimney/resizing vents and condensate installation issues are 
applied to only a fraction of installations.
---------------------------------------------------------------------------

    \15\ AGA Comment Letter to DOE on NOPR Furnace Rulemaking and 
TSD (Nov. 10, 2010). (Docket Number: EE-2009-BT-STD-0022)
    \16\ Alpine Home Air (URL: http://www.alpinehomeair.com/viewproduct.cfm?productID=453056758); Comfort Gurus (URL: http://www.comfortgurus.com/product_info.php/products_id/5368)

   Table II.1--Installation Costs for Condensing Furnaces in Commonly-
                             Vented Systems
------------------------------------------------------------------------
                                    AGA cost range    DOE cost range for
   Additional venting system/      (average) (2009$)    northern region
    installation requirements              *           (average) (2009$)
------------------------------------------------------------------------
Perform structural modifications    $330-$494 ($412)   $131-$1887 ($518)
 (including boring holes in
 interior walls, floors,
 exterior walls for vents and
 new vent termination kit)......
Reline existing chimney or         $659-$1098 ($879)    $95-$1404 ($548)
 resize vent to accommodate the
 remaining appliance (code
 requirement for proper vent
 sizing)........................
Install drain pan for condensate    $165-$275 ($220)       $45-$45 ($45)
 from condensing furnace (code
 requirement to avoid structural
 damage)........................
Install freeze protection for       $220-$220 ($220)    $101-$272 ($184)
 condensate line to ensure
 reliability of disposal (for
 installation outside of
 conditioned space).............
Install condensate drain, pump,     $275-$330 ($302)    $216-$455 ($300)
 acid neutralizer, etc..........
------------------------------------------------------------------------
* Cost adjusted using CPI from 2005$ to 2009$.

    AHRI pointed out that the 1994 Gas Research Institute (GRI) Gas 
Furnace Survey \17\ found that as more condensing furnaces were sold in 
a specific area, the cost of installation became lower, suggesting that 
this could occur in the case of the standard for the northern region 
(AHRI, No. 46 at p. 4). DOE agrees that the trend mentioned by AHRI 
could occur and potentially result in lower installation costs than 
those estimated for the DFR.
---------------------------------------------------------------------------

    \17\ Jakob, F. E., J. J. Crisafulli, J. R. Menkedick, R. D. 
Fischer, D. B. Philips, R. L. Osbone, J. C. Cross, G. R. Whitacre, 
J. G. Murray, W. J. Sheppard, D. W. DeWirth, and W. H. Thrasher, 
Assessment of Technology for Improving the Efficiency of Residential 
Gas Furnaces and Boilers, Volume I and II--Appendices, September, 
1994. Gas Research Institute. AGA Laboratories, Chicago, IL. Report 
No. GRI-94/0175.
---------------------------------------------------------------------------

    AGA stated that: (1) The 2007 Furnace Rule \18\ relied on data from 
a 1994 GRI furnace survey to determine the percentage of homes in which 
gas appliances were commonly-vented; (2) DOE changed the data set in 
the direct final rule proceeding, relying instead on an older 1991 GRI 
water heater survey; \19\ (3) DOE has not explained the basis for the 
change in the data set. (AGA, No. 27 at p. 16)
---------------------------------------------------------------------------

    \18\ U.S. Department of Energy--Energy Efficiency & Renewable 
Energy, Technical Support Document: Energy Efficiency Standards for 
Consumer Products: Residential Furnaces and Boilers, 2007. 
Washington, DC.
    \19\ D.D. Paul et al., Assessment of Technology for Improving 
the Efficiency of Residential Gas Water Heaters, December, 1991. 
Battelle. Columbus. Report No. GRI-91/0298.
---------------------------------------------------------------------------

    In response, to determine the fraction of installations with common 
venting, DOE used both the 1994 GRI furnace survey and a 1991 GRI water 
heater survey. DOE used the 1990 survey to develop regional fractions 
of the common venting installations, primarily because it is a larger 
survey (32,000 data points) compared to the 1994 survey (1,300 data 
points). On average, both surveys produce similar results: The 1990 
survey showed 57 percent of households with a gas water heater had 
common venting, while the 1994 GRI study showed 52 percent of gas 
furnaces had common venting. Combining these fractions with the RECS 
2005 household sample resulted in a nationwide estimate that 50 percent 
of gas furnaces are commonly vented with gas water heaters. For the 
northern region this fraction is 57 percent.
    AGA stated that according to GTI, DOE appears to have used a 
national average figure of the percent of housing stock that would 
require the chimney to be relined when installing a condensing gas 
furnace as opposed to a northern regional fraction, potentially 
understating installation costs associated with chimney relining that 
would support a regional standard. (AGA, No. 27 at p. 17) DOE used the 
1994 GRI furnace survey data to derive the fraction of households with 
chimney venting for the northern region. This survey showed that 72 
percent of the northern installations utilize chimney venting (see TSD, 
appendix 8-B for details).
8. DOE Failed To Conduct an Adequate Analysis of Fuel Switching Between 
Natural Gas and Electric Appliances
    AGA stated that: (1) DOE's analysis of the potential for fuel 
switching is cursory and ignores the problems consumers face when 
having to install a condensing gas furnace; (2) DOE's analysis fails to 
consider the wide range of options consumers actually face in making 
appliance choices; (3) consumers are sensitive to the relative 
differences in the total upfront cost of purchasing the appliance and 
having it installed, and often undervalue the differences in annual 
operating costs; (4) even assuming that switching from a gas furnace to 
an electric furnace will require additional installation costs for 
electrical circuitry, consumers will be encouraged to fuel switch where 
the total equipment and installation costs of a 90-percent AFUE 
condensing gas furnace exceed the total equipment and installation 
costs of a comparable electric furnace. (AGA, No. 27 at pp. 18-20) 
Concerns that the condensing furnace standard could lead consumers to 
switch to electric heating were also raised by AGL, APGA, CenterPoint 
Energy, the UGI Distribution Companies, City Utilities of Springfield, 
Laclede Gas Company, and Questar Gas. (AGL, No. 27 at pp. 7-8; APGA, 
No. 24 at p. 8; CenterPoint Energy, No. 33 at p. 3; UGI Distribution 
Companies, No. 22 at p. 4; City Utilities of Springfield, No. 26 at p. 
1; Laclede, No. 44 at p. 3; Questar Gas, No. 48 at p. 1)
    DOE agrees that consumers are sensitive to the relative differences 
in the total upfront cost of purchasing the appliance and having it 
installed, and often undervalue the differences in annual operating 
costs. However, AGA's contention that consumers will be encouraged to 
fuel switch where the total installed costs of a 90-percent AFUE 
condensing gas furnace exceed the total equipment and installation 
costs of a comparable electric furnace seems to take the extreme (and 
unsubstantiated) view that consumers place little value on differences 
in operating costs at all. Further, the difference in annual operating 
costs between a condensing gas furnace and an electric furnace in the 
northern region are very large. A household using 40 MMBtu/year of 
natural gas, which is the estimated average for a condensing furnace in 
the northern region, would incur annual costs of $400 to $600, while an 
electric furnace satisfying the same heating load would incur costs

[[Page 67047]]

ranging from $800 to $1,700. Even in parts of the northern region where 
the heating load is half of the above average, the operating cost 
differential is still significant.
    Given the initial costs involved in replacing a gas furnace with 
electric space heating, combined with the much higher operating costs 
of an electric heating system, DOE believes that the approach used for 
the DFR is reasonable.
    AGA stated that: (1) DOE acknowledges but fails to address the 
possibility that requiring the replacement of a non-condensing gas 
furnace with a 90-percent AFUE condensing gas furnace will lead to an 
orphaned water heater, thereby encouraging consumers to replace the gas 
water heater with an electric resistance water heater; (2) consumers 
will be encouraged to switch to an electric water heater where the 
costs of addressing the venting issues associated with an orphaned gas 
water heater exceed the total equipment and installation costs of an 
electric water heater. (AGA, No. 27 at p. 19)
    DOE believes that consumers are unlikely to engage in large-scale 
switching from a gas-fired water heater to an electric water heater. If 
the gas water heater is near the end of its useful lifetime, the 
consumer may elect to purchase a new power vent gas water heater rather 
than incur the expense of re-lining. Some consumers could elect to 
replace the gas water heater with an electric water heater to avoid the 
cost of relining, but estimates of electric water heater installation 
cost plus electrical service installation plus the extra energy cost 
indicate that the total is higher than the cost of relining, so this 
possibility is unlikely.\20\
---------------------------------------------------------------------------

    \20\ See Appendix C of the final rule TSD for the 2007 furnace 
and boiler rulemaking. http://www1.eere.energy.gov/buildings/appliance_standards/residential/fb_tsd_0907.html.
---------------------------------------------------------------------------

9. DOE Has Not Considered the Costs of Enforcement
    AGA stated that: (1) The technical support documents in this 
proceeding do not contain any analysis of the impacts of enforcement 
costs on consumers, manufacturers, or other market participants, 
including other entities that may additionally be required to enforce 
the regional standard, such as equipment distributor or installers; and 
(2) without an assessment of enforcement costs, the economic 
justification of the standards in this proceeding is incomplete. (AGA, 
No. 27 at p. 21) Concerns that DOE did not consider enforcement costs 
were also expressed by ACCA, AGL, HARDI, Laclede Gas Company, and NPGA. 
(ACCA, No. 50 at p. 5; AGL, No. 31 at p. 4; HARDI, No. 39 at p. 2; 
Laclede, No. 44 at p. 12; NPGA, No. 49 at p. 3)
    In contrast, AHRI stated that: (1) DOE should act quickly to open a 
rulemaking on regional standards enforcement; and (2) the fact that DOE 
has not yet considered standards enforcement is not a defect in the 
final rule. (AHRI, No. 46 at p. 5) The Joint Comment stated that the 
enforcement plan proceeding, required after adoption of a regional 
standard, would be an appropriate time for consideration of a DOE 
Office of Hearings and Appeals (OHA) waiver process designed to address 
any special hardship situations. (Joint Comment, No. 47 at pp. 4-5)
    In response, DOE does not believe that the cost of enforcement of 
regional standards impacts the life-cycle cost, payback period, or 
other factors considered in the establishment of energy conservation 
standards differently than the costs of enforcement of national energy 
conservation standards. Rather, enforcement costs will depend on the 
specific enforcement framework mechanism that is put in place. EPCA 
requires DOE to ``initiate'' an enforcement rulemaking not later than 
90 days after the issuance of a final rule establishing regional 
standards and to complete the rulemaking not later than 15 months 
following the issuance of the rule. (42 U.S.C. 6295(o)(6)(G)(ii)). 
Clearly, the express provisions of the statute contemplate the 
rulemaking on enforcement of regional standards commencing after the 
energy conservation standards rulemaking has been completed. Having the 
standards in place is a necessary precursor to evaluating potential 
enforcement efforts. DOE plans to incorporate all feedback from this 
standards rulemaking process into the enforcement rulemaking, and will 
assess the impact of that enforcement regime in the context of the 
enforcement rulemaking.
10. Impact on Low-Income Consumers
    UGI and CenterPoint Energy stated that the standard for the 
northern region could harm low-income consumers due to the higher first 
cost of installing a condensing furnace. (CenterPoint Energy, No. 33 at 
p. 6; UGI, No. 22 at p. 4)
    On the other hand, CFA and NCLC highlighted the benefits that 
higher furnace standards would bring to low-income households, who are 
predominately renters. They stated that heating bills place a large 
burden on moderate-income and low-income families, and the standard 
would reduce their energy bills and reduce the demand for natural gas, 
thereby moderating future price increases for consumers. (CFA and NCLC, 
No. 36 at p. 2)
    DOE's consumer subgroup analysis (described in chapter 11 of the 
DFR TSD) estimated that low-income households show somewhat higher LCC 
savings from more-efficient furnaces than the general population. 
Regarding the first cost, DOE agrees that because many low-income 
consumers are renters, the cost of replacing a furnace would be 
incurred by the landlord and would likely be passed on to the consumer 
gradually in the form of increased rent. DOE believes that these 
factors moderate the impacts of amended standards on low-income 
consumers.
11. Sensitivity Analysis of the Standard for Residential Gas Furnaces 
in the Northern Region
    DOE believes that the analysis documented in the DFR and the 
accompanying TSD provides sufficient justification for its 
determination that TSL 4 achieves the maximum improvement in energy 
efficiency that is technologically feasible and economically justified 
and will result in significant conservation of energy. DOE further 
notes that it did not receive comments critical of the models it used 
in its analysis. However, because some of the commenters devoted 
considerable effort to developing recommendations for alternatives to 
some of the inputs that DOE used in its DFR analysis, DOE conducted a 
new analysis to assess the impact on consumers from using the 
recommended alternatives. The assumptions that DOE used in this 
sensitivity analysis were the same as the assertions made by AGA in its 
comment as follows: (1) A furnace lifetime of 16 years for all 
households; (2) no decline in furnace prices based on experience curve 
analysis; (3) the ranges for the added cost for installing condensing 
furnaces in commonly-vented systems recommended by AGA (see Table 
II.1); (4) a natural gas price forecast based on the AEO 2011 Reference 
case; and (5) use of marginal natural gas prices (based on analysis of 
RECS 2005 billing data).\21\ These assumptions reflect key comments 
made by AGA (described above) and a request made by APGA. (APGA, No. 20 
at pp. 1-2)
---------------------------------------------------------------------------

    \21\ Documentation of the sensitivity analysis may be found at 
DOE's Residential Furnaces and Boilers Web site--APGA Life-Cycle 
Cost Scenarios at: http://www1.eere.energy.gov/buildings/appliance_standards/residential/residential_furnaces_cac_hp_direct_final_rule.html.

---------------------------------------------------------------------------

[[Page 67048]]

    Under the sensitivity analysis, the average LCC savings for 
consumers in the Northern region are $44. This value is less than the 
average cited in the DFR ($155), but is still positive. Regardless, 
this lower, but still positive, LCC savings value is sufficient to 
demonstrate economic justification of TSL 4 under the criteria in 42 
U.S.C. 6295(o). Thus, even under the assumptions favored by AGA and 
APGA, even if they were all correct, a scenario DOE does not believe 
likely, the amended standard still have a positive impact on consumers 
in the northern region.

C. Comments on Standards for Residential Central Air Conditioners and 
Heat Pumps

    The People's Republic of China (China) commented that the EER 
standards should be cancelled and that DOE should only adopt the SEER 
as the air conditioner's energy efficiency evaluation ratio. China 
noted that SEER reflects an air conditioner's efficiency over a whole 
season and in varying conditions, while EER only reflects performance 
under specific conditions and, therefore, cannot reflect the energy 
efficiency over an entire season. (China, No. 8 at p. 3) For this 
reason, China suggested that DOE only use SEER as the regulating 
metric. (China, No. 8 at p. 3)
    As noted in the direct final rule, DOE believes that it has the 
authority to set dual metrics when considering a consensus agreement, 
and consequently, DOE analyzed setting an EER standard in the Hot-Dry 
region. 76 FR 37408, 37423 (June 27, 2011). DOE agrees with China that 
SEER is more representative of seasonal performance, but DOE also 
believes that there is merit to having an EER standard, because the 
conditions at which EER is measured are common for the Hot-Dry region. 
By using both SEER and EER as metrics, DOE will have standards for both 
seasonal efficiency and peak efficiency, which it believes will lead to 
additional energy savings in the Hot-Dry region. Therefore, DOE will 
not withdraw the EER standard levels from the Hot-Dry region.
    China further commented that differences between DOE and 
international standards for definitions and test methods for off mode, 
as well the classification of air conditioners, will lead to increased 
costs for manufacturers, and suggested that DOE should harmonize its 
regulations with international standards. Specifically, China 
referenced International Standards IEC 62301,\22\ ISO 5151 and ISO 
13253.\23\ (China, No. 8 at p. 3)
---------------------------------------------------------------------------

    \22\ The comment from China references ``IEC 60321.'' However, 
DOE believes this was an error and that the comment was intended to 
reference IEC 62301, Household Electrical Appliances--Measurement of 
Standby Power.
    \23\ ISO 5151: Non-ducted air conditioners and heat pumps--
testing and rating for performance, and ISO 13253: Ducted air-
conditioners and air to air heat pumps--Testing and rating for 
performance.
---------------------------------------------------------------------------

    IEC Standard 62301 is a test method for measuring standby mode and 
off mode energy consumption of household appliances. As discussed in 
detail in the April 1, 2011 central air conditioner and heat pump test 
procedure SNOPR (76 FR 18105, 18108), DOE believes that the IEC 62301 
definitions and test method are too broad to be applicable to 
residential central air conditioners and heat pumps. In response to 
China's concern about how DOE classifies air conditioners as compared 
to ISO 5151 and ISO 13253, DOE notes its definitions of residential 
``central air conditioner'' and ``heat pump'' are determined by EPCA. 
(42 U.S.C. 6291(21) and 42 U.S.C. 6291(24)) DOE determines the product 
classes for central air conditioners and heat pumps subject to the 
criteria in 42 U.S.C. 6295(q) and cannot alter these criteria to align 
its definitions with international standards.

D. Comments on Standby Mode and Off Mode Standard Levels

1. Standby Mode and Off Mode Levels for Residential Furnaces
    In response to the standby mode and off mode energy conservation 
standards promulgated for residential furnaces, DOE received several 
comments.
    AHRI supported the standby mode and off mode standards for 
residential furnaces. (AHRI, No. 46 at p. 5) AHRI, EarthJustice, and 
ACEEE commented there is consensus agreement for the standby mode and 
off mode standards for furnaces promulgated in the DFR. (AHRI and 
EarthJustice, No. 52 at p. 1; ACEEE, No. 53 at p. 1)
    Conversely, Horizon Plastics stated that the standby mode and off 
mode energy consumption requirements for residential furnaces are too 
high and will not drive any meaningful energy conservation. (Horizon 
Plastics, No. 15 at p. 1) Further, Horizon Plastics referenced Lawrence 
Berkeley National Laboratory (LBNL) test data on 16 residential 
furnaces that showed standby mode and off mode energy consumption 
values ranging from 0 to 9.8 watts (W) as evidence that lower levels 
are readily achievable. (Horizon Plastics, No. 15 at p. 1) Horizon 
Plastics also described an innovation developed by their company that 
requires only an additional capacitor, relay, and proprietary code to 
reduce standby mode and off mode power to 0 W, while adding minimal 
cost to the furnace. Given that their new technology would 
significantly reduce standby mode and off mode power consumption, 
Horizon Plastics asserted that the standby mode and off mode 
requirements for furnaces should be removed from the subject standard 
and moved to a separate rulemaking. (Horizon Plastics, No. 15 at pp. 2-
3)
    DOE agrees with Horizon Plastics that many furnace models already 
available on the market are capable of meeting the standby mode and off 
mode standards promulgated in the DFR. In preparation for the DFR, DOE 
tested a number of furnaces, many of which met the standby mode and off 
mode requirements in the DFR. However, DOE found that products with 
lower standby mode and off mode power consumption typically have less 
sophisticated designs and controls and are often less efficient when 
operating in active mode. Removing certain components, such as an 
electronically-commutated motor or sophisticated control systems (if 
equipped) will allow a furnace to achieve lower standby mode and off 
mode energy consumption, but it may also increase active mode energy 
consumption and reduce consumer utility (in the form of reduced comfort 
if certain controls are eliminated), which is contrary to the purpose 
of the DFR. In its analysis of standby mode and off mode levels, DOE 
did not consider levels that would limit manufacturer design choices 
when trying to achieve greater efficiency in the active mode, or that 
would reduce consumer utility. DOE started at the baseline (i.e., the 
highest standby mode and off mode energy consuming) level, and 
implemented design options of which DOE was aware at the time of the 
analysis that would not impact the ability of the furnace to achieve 
greater active mode efficiency and would not reduce consumer utility.
    Regarding the new design presented by Horizon Plastics, DOE is 
encouraged by innovations that reduce standby mode and off mode energy 
consumption to 0 W, and hopes that the minimum standards for standby 
mode and off mode consumption promulgated by the DFR spur further 
innovation in reducing standby mode and off mode consumption. However, 
DOE notes that it generally does not consider proprietary designs in 
its analysis, as it may unfairly skew the market to give one company an 
advantage over

[[Page 67049]]

competitors. For this reason, DOE believes that although the technology 
presented by Horizon Plastics may be a viable technology, it cannot be 
considered in DOE's rulemaking analysis, and does not provide a 
reasonable basis for withdrawal of the standby mode and off mode 
standards for residential furnaces.
2. Off Mode Levels for Central Air Conditioners and Heat Pumps
    On August 24, 2011, AHRI, EarthJustice, and ACEEE submitted letters 
to DOE urging DOE to sever the central air conditioner and heat pumps 
off mode standards from the DFR for several reasons. (AHRI and 
EarthJustice, No. 52 at pp. 1-4; ACEEE, No. 53 at p. 1) Specifically, 
the commenters asserted that the test procedure had not yet been 
finalized, which was in violation of EPCA section 325(gg)(3), and 
consequently, DOE had not done the necessary background work for 
inclusion of these standards in the direct final rule. (AHRI and 
EarthJustice, No. 52 at pp. 2-3) AHRI and EarthJustice also commented 
that EPCA section 336(b)(3) provides DOE with the authority to 
partially withdraw a direct final rule and referenced several direct 
final rules from other Federal agencies that were partially withdrawn. 
(AHRI and EarthJustice, No. 52 at pp. 3, 5-10) In a supporting comment, 
ACEEE noted that off mode standards were not included in the Consensus 
Agreement which was submitted to DOE, and that while consensus among 
stakeholders had subsequently been reached for the furnace standby mode 
and off mode standards, no similar agreement had been reached on the 
central air conditioner and heat pump off mode standards. Consequently, 
ACEEE recommended that the off mode standards for central air 
conditioners and heat pumps be severed from the DFR and withdrawn 
pending further rulemaking. (ACEEE, No. 53 at p.1) Similarly, ACCA 
argued that this direct final rule is an unsuitable use of the direct 
final rule process, because it includes standby mode and off mode 
standards which were not part of the submitted Consensus Agreement. 
(ACCA, No. 50 at p. 2)
    AHRI submitted a supplemental comment, which reiterated their 
concerns about the lack of a finalized test procedure for central air 
conditioners and heat pumps address standby mode and off mode energy 
consumption, and it also wrote that the off mode standards levels were 
too stringent and would eliminate the majority of products on the 
market by effectively outlawing crankcase heaters. Crankcase heaters 
are used to prevent lubrication oil from mixing with liquid refrigerant 
and are responsible for the bulk of an air conditioner or heat pumps 
off mode power consumption. AHRI believes that without crankcase 
heaters, the reliability of units will be decreased because this mixing 
will result in compressors seizing due to a lack of lubrication, and 
noted that according to EPCA, DOE cannot prescribe standards which 
would decrease the utility or performance of a product (42 U.S.C. 
6295(o)(2)(B)(i)(IV)). (AHRI, No. 46 at pp. 5-7)
    DOE published a supplementary notice of proposed rulemaking (SNOPR) 
for the residential central air conditioner and heat pump test 
procedure in the Federal Register on October 24, 2011. 76 FR 65616. DOE 
believes that AHRI's concerns regarding off mode would be addressed by 
adoption after public comment of the SNOPR. Regarding AHRI's comments 
about crankcase heaters, DOE believes that its proposed test procedure 
(as detailed in the October 2011 SNOPR) and energy conservation 
standards will not disallow the use of crankcase heaters. DOE notes 
that there is potential confusion because a 40-watt crankcase heater is 
commonly used in the industry, and the standard is lower than 40 watts. 
However, because the proposed method for calculating off mode energy 
consumption in DOE's test procedure is an average of the off mode 
energy consumption at multiple operating conditions, it is possible for 
a unit with a 40-watt crankcase heater to achieve a rating lower than 
40 watts if the crankcase heater is controlled such that it is not 
always on when the unit is in off mode. Testing conducted by DOE for 
this SNOPR indicated that there are products with controlled crankcase 
heaters, which can already meet the proposed standard levels. 76 FR 
65616, 65620 (Oct. 24, 2011). Therefore, DOE believes that the off-mode 
testing procedures proposed in the SNOPR would, if adopted in final, 
alleviate AHRI's concerns about product reliability stemming from not 
being able to find a crankcase heater that allows manufacturers to meet 
the standard. Further, DOE notes that the issues brought up by AHRI 
pertain specifically to the test method rather than to the standard 
levels promulgated in the direct final rule. As a result, these issues 
are better suited to be addressed in the test procedure rulemaking, and 
DOE is, in fact, doing so. DOE encourages AHRI, EarthJustice and ACEEE 
to submit written comments on the October 2011 SNOPR so that DOE can 
consider any additional issues with the off mode test procedure and 
resolve them as a part of that rulemaking process. As a result, DOE is 
confirming the off mode standard levels for central air conditioners 
and heat pumps that were originally promulgated in the direct final 
rule.

E. Other Comments

1. Adverse Impacts on States
    AGL stated that by adopting the standards set forth in the DFR, 
States and local jurisdictions would be preempted from adopting more-
stringent restrictions on less-efficient technology, thereby penalizing 
progressive local jurisdictions and discouraging them from being 
proactive and innovative. AGL further stated that the minimum 
efficiency for electric furnaces will preempt States/localities from 
restricting less-efficient technologies, specifically electric 
furnaces. (AGL, No. 31 at p. 10) Although DOE agrees that Federal 
energy efficiency standards preempt State regulations under 42 U.S.C. 
6297, DOE does not believe that the requirements in the DFR will 
penalize States and local authorities. This situation is typical of all 
EPCA rulemakings calling upon DOE to consider amended energy 
conservation standards, not only for residential furnaces, central air 
conditioners, and heat pumps. However, DOE would remind interested 
parties that it is authorized to grant waivers from preemption for 
particular State laws or regulations, if such action is warranted in 
accordance with the procedures and provisions set forth in section 
327(d) of EPCA. (42 U.S.C. 6297(d)) Therefore, DOE does not consider 
the inability of States to adopt regulations for the products subject 
to this rulemaking to be a significant adverse impact that would 
necessitate withdrawal of the direct final rule.
    APGA stated that the adverse safety impacts from requiring 
condensing furnaces place a burden on local governments, because there 
may be additional costs imposed upon the cities (e.g., for training of 
staff in codes and enforcements and the costs of additional 
inspections) to address the potential serious harm presented by 
improper venting. APGA contends that this represents an unfunded 
mandate that will have an impact on the cities/communities served by 
its members. (APGA, No. 24 at p. 9) In response, DOE notes that 
enforcement of building codes currently falls to local authorities, 
which is unchanged by the DFR. Further, DOE notes that a significant

[[Page 67050]]

portion of furnace installations in the northern region are already 
condensing furnaces, and as such, local inspectors should already be 
well trained in the venting code requirements for those products and 
should not require additional training from local jurisdictions as a 
result of the DFR. As a result, the 90-percent AFUE minimum standard in 
the northern region promulgated by the DFR would not add any additional 
burden on local authorities, beyond what is already required in terms 
of enforcing building codes.
2. Evaluation of Adverse Comments
    AGL asserted that DOE has stated that ``adverse'' impacts will be 
weighed against benefits of the DFR in its evaluation of whether to 
withdraw the DFR, and it believes that DOE does not have the statutory 
authority to weigh ``adverse'' impacts against the benefit of minimum 
efficiencies because the statutory language does not grant this power. 
AGL contends that the statute requires DOE to weigh adverse comments 
independent of other outcomes anticipated from the rule. AGL also 
argued that adverse comments may present issues previously unaddressed 
by DOE. AGL believes that weighing new issues against DOE's current 
analysis would be inappropriate, because the issues may not have been 
examined by the DOE. AGL stated that DOE must evaluate the ``adverse'' 
nature of all comments raised outside of the current analysis, except 
where the comments conflict with the current analysis as published by 
DOE. (AGL, No. 31 at p. 3)
    In reviewing the statute, DOE notes that EPCA directs the Secretary 
to withdraw the direct final rule if one or more adverse public 
comments is received and, based on the rulemaking record, the Secretary 
determines that such adverse public comments provide a reasonable basis 
for withdrawing the direct final rule. (42 U.S.C. 6295(p)(4)(C)) DOE 
believes, therefore, that EPCA provides DOE the discretion to weigh the 
significance and credibility of the adverse comments received. When 
evaluating adverse comments, DOE weighed the significance of each 
comment individually and all comments cumulatively to determine whether 
they provided a reasonable basis for withdrawal of the final rule. DOE 
considered each adverse comment based on its merits and the background 
data and information that supported that comment. DOE notes that this 
weighting is done separately from the weighting of the benefits and 
burdens imposed by minimum efficiency standards, which weight the 
adverse impacts (i.e., burdens) of standards against the benefits to 
consumers in determining which standard level is justified, as directed 
by EPCA (42 U.S.C. 6295(o)(2)(B)(i)) .
3. Time Allowed for Public Input
    MUD commented that the rulemaking process was conducted too quickly 
to allow for input from the general public and the jurisdictions 
responsible for furnace installation. (MUD, No. 29 at p. 1)
    In response, DOE notes that the Consensus Agreement was submitted 
to DOE on January 15, 2010. DOE subsequently posted the document on its 
Web site \24\ and requested comment on the agreement in its March 2010 
rulemaking analysis plan for residential furnaces \25\ and in its March 
2010 preliminary analysis for central air conditioners and heat pumps 
(75 FR 14368). After considering comments received in response to the 
rulemaking analysis plan for furnaces and preliminary analysis for 
central air conditioners and heat pumps, DOE performed an in depth 
analysis of the Consensus Agreement efficiency levels and other 
efficiency levels, and ultimately proposed the levels contained in the 
agreement as Federal energy conservation standard levels in the DFR. 
Then, as directed by EPCA, DOE accepted comments for 110 days. (42 
U.S.C. 6295(p)(4)(B)) DOE notes that in the typical standards 
rulemaking procedure, the statute requires and DOE provides a 60-day 
comment period. Thus, the 110-day comment period was longer than usual 
for a similar rulemaking. Moreover, at the time of the close of the 
110-day DFR comment period, the Consensus Agreement had been publicly 
available on DOE's Web site for more than one and a half years, and DOE 
has formally requested comments on the agreement in three separate 
rulemaking notices. Therefore, DOE believes that there has been ample 
opportunity for input from the general public and other interested 
parties on the Consensus Agreement and does not agree with MUD's 
assertion that it was implemented too quickly to allow for input from 
the general public or other interested parties.
---------------------------------------------------------------------------

    \24\ For more information see: http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/furnaces_framework_jointstakeholdercomments.pdf
    \25\ The rulemaking analysis plan was published on DOE's Web 
site and announced through the publication of a notice of public 
meeting in the Federal Register. 75 FR 12144 (March 15, 2010).
    For more information see: http://www1.eere.energy.gov/buildings/appliance_standards/residential/pdfs/furnaces_framework_rap.pdf.
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    In addition, the National Propane Gas Association (NPGA) and APGA 
requested that DOE extend the comment period on the DFR. NPGA cited 
delayed access to the technical support document, difficulties 
obtaining the software used to run the LCC analysis and lack of an 
enforcement plan as reasons that DOE should extend the comment period. 
(NPGA, No. 6 at pp. 1-2; APGA, No. 24, pp. 14-15).
    DOE notes that EPCA provides that not later than 120 days after 
issuance of the DFR, DOE must publish a determination in the Federal 
Register whether the rule should take effect or be withdrawn based upon 
significant adverse comment. (42 U.S.C. 6295(p)(4)(C)) Given the 
statutory limitation on the time period provided in EPCA, DOE could not 
extend the comment period to allow interested parties additional time 
without jeopardizing its ability to meet the requirements of EPCA. As 
such, DOE was not able to extend the comment period on the DFR.

III. Department of Justice Analysis of Competitive Impacts

    EPCA directs DOE to consider any lessening of competition that is 
likely to result from new or amended standards. It also directs the 
Attorney General of the United States (Attorney General) to determine 
the impact, if any, of any lessening of competition likely to result 
from a proposed standard and to transmit such determination to the 
Secretary within 60 days of the publication of a proposed rule, 
together with an analysis of the nature and extent of the impact. (42 
U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii)) DOE published a NOPR containing 
energy conservation standards identical to those set forth the direct 
final rule and transmitted a copy of the direct final rule and the 
accompanying TSD to the Attorney General, requesting that the U.S. 
Department of Justice (DOJ) provide its determination on this issue. 
DOE has published DOJ's comments at the end of this notice.
    DOJ reviewed the amended standards in the direct final rule and the 
final TSD provided by DOE. As a result of its analysis, DOJ concluded 
that the amended standards issued in the direct final rule are unlikely 
to have a significant adverse impact on competition. DOJ further noted 
that the amended standards established in the direct final rule were 
the same as recommended standards submitted in the Consensus Agreement, 
which was

[[Page 67051]]

signed by a broad cross-section of industry participants.

IV. National Environmental Policy Act

    Pursuant to the National Environmental Policy Act and the 
requirements of 42 U.S.C. 6295(o)(2)(B)(i)(VI), DOE prepared an 
environmental assessment (EA) of the impacts of the standards for 
residential furnaces, central air conditioners, and heat pumps in the 
direct final rule, which was included as chapter 15 of the direct final 
rule TSD. DOE found that the environmental effects associated with the 
standards for furnaces and central air conditioners and heat pumps were 
not significant. Therefore, after consideration of the comments 
received on the direct final rule, DOE issued a Finding of No 
Significant Impact (FONSI) pursuant to NEPA, the regulations of the 
Council on Environmental Quality (40 CFR parts 1500-1508), and DOE's 
regulations for compliance with NEPA (10 CFR part 1021). The FONSI is 
available in the docket for this rulemaking at http://www.regulations.gov.

V. Conclusion

    In summary, based on the discussion above, DOE has determined that 
the comments received in response to the direct final rule for amended 
energy conservation standards for residential furnaces, central air 
conditioners, and heat pumps do not provide a reasonable basis for 
withdrawal of the direct final rule. As a result, the amended energy 
conservation standards set forth in the direct final rule become 
effective on October 25, 2011. Compliance with these standards is 
required on May 1, 2013 for non-weatherized gas and oil-fired furnaces 
and mobile home gas furnaces and on January 1, 2015 for weatherized gas 
furnaces and central air conditioners and heat pumps.

    Issued in Washington, DC, on October 24, 2011.
Kathleen B. Hogan,
Deputy Assistant Secretary for Energy Efficiency, Energy Efficiency and 
Renewable Energy.

U.S. Department of Justice

Antitrust Division

Sharis A. Pozen,
Acting Assistant Attorney General,
RFK Main Justice Building,
950 Pennsylvania Avenue, NW.,
Washington, DC 20530-0001,
(202) 514-24011 (202) 616-2645 (Fax)

August 25, 2011

Mr. Eric Fygi, Deputy General Counsel, Department of Energy, 
Washington, DC 20585
    Dear Deputy General Counsel Fygi: I am responding to your June 
27, 2011 letter seeking the views of the Attorney General about the 
potential impact on competition of proposed energy conservation 
standards for residential furnaces, central air conditioners, and 
heat pumps. Your request was submitted under Section 
325(o)(2)(B)(i)(V) of the Energy Policy and Conservation Act, as 
amended (ECPA), 42 U.S.C. 6295(o)(2)(B)(i)(5) and 42 U.S.C. 6316(a), 
which requires the Attorney General to make a determination of the 
impact of any lessening of competition that is likely to result from 
the imposition of proposed energy conservation standards. The 
Attorney General's responsibility for responding to requests from 
other departments about the effect of a program on competition has 
been delegated to the Assistant Attorney General for the Antitrust 
Division in 28 CFR 0.40(g).
    In conducting its analysis the Antitrust Division examines 
whether a proposed standard may lessen competition, for example, by 
substantially limiting consumer choice, by placing certain 
manufacturers at an unjustified competitive disadvantage, or by 
inducing avoidable inefficiencies in production or distribution of 
particular products. A lessening of competition could result in 
higher prices to consumers, and perhaps thwart the intent of the 
revised standards by inducing substitution to less efficient 
products.
    We have reviewed the proposed standards contained in the Direct 
Final Rule (76 Fed. Reg. 37408, June 27, 2011). We have also 
reviewed supplementary information submitted to the Attorney General 
by the Department of Energy. Based on this review, our conclusion is 
that the proposed energy conservation standards for residential 
furnaces, residential central air conditioners and heat pumps are 
unlikely to have a significant adverse impact on competition. In 
reaching our conclusion, we note that these proposed energy 
standards were adopted from a Consensus Agreement signed by a broad 
cross-section of industry participants.
    Sincerely,

Sharis A. Pozen

[FR Doc. 2011-28146 Filed 10-28-11; 8:45 am]
BILLING CODE 6450-01-P
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