87502 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

DEPARTMENT OF ENERGY 

10 CFR Part 430 

[EERE–2014–BT–STD–0031] 

RIN 1904–AD20 

Energy Conservation Program: Energy 

Conservation Standards for Consumer 

Furnaces 

AGENCY: Office of Energy Efficiency and 

Renewable Energy, Department of 

Energy. 

ACTION: Final rule. 

SUMMARY: The Energy Policy and 

Conservation Act, as amended 

(‘‘EPCA’’), prescribes energy 

conservation standards for various 

consumer products and certain 

commercial and industrial equipment, 

including consumer furnaces. EPCA 

also requires the U.S. Department of 

Energy (‘‘DOE’’ or ‘‘the Department’’) to 

determine periodically whether more 

stringent standards would be 

technologically feasible and 

economically justified, and would result 

in significant energy savings. In this 

final rule, DOE is adopting amended 

energy conservation standards for 

consumer furnaces, specifically nonweatherized gas furnaces and mobile 

home gas furnaces. The Department has 

determined that the amended energy 

conservation standards for the subject 

products would result in significant 

conservation of energy, and are 

technologically feasible and 

economically justified. 

DATES: 

Effective date: The effective date of 

this rule is February 16, 2024. 

Compliance date: Compliance with 

the amended standards established for 

the subject consumer furnaces in this 

final rule is required on and after 

December 18, 2028. 

ADDRESSES: The docket for this 

rulemaking, which includes Federal 

Register notices, public meeting 

attendee lists and transcripts, 

comments, and other supporting 

documents/materials, is available for 

review at www.regulations.gov. All 

documents in the docket are listed in 

the www.regulations.gov index. 

However, not all documents listed in 

the index may be publicly available, 

such as information that is exempt from 

public disclosure. 

The docket web page can be found at 

www.regulations.gov/docket/EERE2014-BT-STD-0031. The docket web 

page contains instructions on how to 

access all documents, including public 

comments, in the docket. 

FOR FURTHER INFORMATION CONTACT: Ms. 

Julia Hegarty, U.S. Department of 

Energy, Office of Energy Efficiency and 

Renewable Energy, Building 

Technologies Office, EE–5B, 1000 

Independence Avenue SW, Washington, 

DC 20585–0121. Telephone: (240) 597– 

6737. Email: 

ApplianceStandardsQuestions@

ee.doe.gov. 

Mr. Eric Stas, U.S. Department of 

Energy, Office of the General Counsel, 

GC–33, 1000 Independence Avenue SW, 

Washington, DC, 20585–0121. 

Telephone: (202) 586–5827. Email: 

Eric.Stas@hq.doe.gov. 

For further information on how to 

review the docket, contact the 

Appliance and Equipment Standards 

Program staff at (202) 287–1445 or by 

email: ApplianceStandardsQuestions@

ee.doe.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Synopsis of the Final Rule 

A. Benefits and Costs to Consumers 

B. Impact on Manufacturers 

C. National Benefits and Costs 

D. Conclusion 

II. Introduction 

A. Authority 

B. Background 

1. Current Standards 

2. History of Standards Rulemaking for 

Consumer Furnaces 

3. Current Standards in Canada 

III. General Discussion 

A. General Comments 

1. Comments Regarding Authority 

2. Comments Opposing the July 2022 

Proposal 

3. Comments Expressing Support for the 

July 2022 Proposal 

4. Regional Standards 

5. Recommendations for Analytical 

Changes 

6. Opportunity for Public Input 

7. Federal Financial Assistance 

8. Standby Mode and Off Mode Power 

Consumption Standards 

B. Product Classes and Scope of Coverage 

C. Test Procedure 

D. Technological Feasibility 

1. General 

2. Maximum Technologically Feasible 

Levels 

E. Energy Savings 

1. Determination of Savings 

2. Significance of Savings 

F. Economic Justification 

1. Specific Criteria 

a. Economic Impact on Manufacturers and 

Consumers 

b. Savings in Operating Costs Compared to 

Increase in Price (LCC and PBP) 

c. Energy Savings 

d. Lessening of Utility or Performance of 

Products 

e. Impact of Any Lessening of Competition 

f. Need for National Energy Conservation 

g. Other Factors 

2. Rebuttable Presumption 

G. Compliance Date 

H. Impact From Other Rulemakings 

IV. Methodology and Discussion of Related 

Comments 

A. Market and Technology Assessment 

1. Scope of Coverage and Product Classes 

a. General Approach 

b. Through-the-Wall Units 

c. Condensing and Non-Condensing 

Furnaces 

d. Mobile Home Gas Furnaces 

2. Technology Options 

B. Screening Analysis 

1. Screened-Out Technologies 

2. Remaining Technologies 

C. Engineering Analysis 

1. Efficiency Analysis 

a. Baseline Efficiency Level and Product 

Characteristics 

b. Higher Efficiency Levels 

2. Cost Analysis 

a. Teardown Analysis 

b. Cost Estimation Method 

c. Manufacturing Production Costs 

d. Cost-Efficiency Relationship 

e. Manufacturer Markup 

f. Manufacturer Interviews 

g. Electric Furnaces 

D. Markups Analysis 

E. Energy Use Analysis 

1. Building Sample 

2. Furnace Sizing 

3. Furnace Active Mode Energy Use 

a. Adjustments to Energy Use Estimates 

4. Furnace Electricity Use 

F. Life-Cycle Cost and Payback Period 

Analysis 

1. Product Cost 

2. Installation Cost 

a. Basic Installation Costs 

b. Additional Installation Costs for NonWeatherized Gas Furnaces 

c. Additional Installation Costs for Mobile 

Home Gas Furnaces 

d. Contractor Survey and DOE’s Sources 

e. Summary of Installation Costs 

3. Annual Energy Consumption 

4. Energy Prices 

5. Maintenance and Repair Costs 

6. Product Lifetime 

7. Discount Rates 

8. Energy Efficiency Distribution in the NoNew-Standards Case 

a. Condensing Furnace Market Share in 

Compliance Year 

b. Market Shares of Different Condensing 

Furnace Efficiency Levels 

c. Assignment of Furnace Efficiency to 

Sampled Households 

9. Alternative Size Thresholds for Small 

Consumer Gas Furnaces 

a. Accounting for Impacts of Downsized 

Equipment 

10. Accounting for Product Switching 

Under Potential Standards 

a. Product Switching Resulting From 

Amended Standards for NonWeatherized Gas Furnaces 

b. Product Switching Resulting From 

Amended Standards for Mobile Home 

Gas Furnaces 

11. Accounting for Furnace Repair as an 

Alternative to Replacement Under 

Potential Standards 

12. Payback Period Analysis 

G. Shipments Analysis 


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1All references to EPCA in this document refer 

to the statute as amended through the Energy Act 

of 2020, Public Law 116–260 (Dec. 27, 2020), which 

reflect the last statutory amendments that impact 

Parts A and A–1 of EPCA. 

2For editorial reasons, upon codification in the 

U.S. Code, Part B was redesignated Part A. 

3The average LCC savings refer to consumers that 

are affected by a standard and are measured relative 

to the efficiency distribution in the no-newstandards case, which depicts the market in the 

compliance year in the absence of new or amended 

standards (see section IV.F of this document). The 

simple PBP, which is designed to compare specific 

efficiency levels, is measured relative to the 

baseline product (see section IV.F of this 

document). 

1. Shipments Model and Inputs 

a. Historical Shipments Data 

b. Shipment Projections in No-NewStandards Case 

2. Impact of Potential Standards on 

Shipments 

a. Impact of Equipment Switching 

b. Impact of Repair vs. Replace 

H. National Impact Analysis 

1. Product Efficiency Trends 

2. National Energy Savings 

3. Net Present Value Analysis 

I. Consumer Subgroup Analysis 

1. Low-Income Households 

J. Manufacturer Impact Analysis 

1. Overview 

2. Government Regulatory Impact Model 

and Key Inputs 

a. Manufacturer Production Costs 

b. Shipments Projections 

c. Capital and Product Conversion Costs 

d. Manufacturer Markup Scenarios 

K. Emissions Analysis 

1. Air Quality Regulations Incorporated in 

DOE’s Analysis 

L. Monetizing Emissions Impacts 

1. Monetization of Greenhouse Gas 

Emissions 

a. Social Cost of Carbon 

b. Social Cost of Methane and Nitrous 

Oxide 

2. Monetization of Other Emissions 

Impacts 

M. Utility Impact Analysis 

N. Employment Impact Analysis 

V. Analytical Results and Conclusions 

A. Trial Standard Levels 

B. Economic Justification and Energy 

Savings 

1. Economic Impacts on Individual 

Consumers 

a. Life-Cycle Cost and Payback Period 

b. Consumer Subgroup Analysis 

c. Rebuttable Presumption Payback 

2. Economic Impacts on Manufacturers 

a. Industry Cash-Flow Analysis Results 

b. Direct Impacts on Employment 

c. Impacts on Manufacturing Capacity 

d. Impacts on Subgroups of Manufacturers 

e. Cumulative Regulatory Burden 

3. National Impact Analysis 

a. Significance of Energy Savings 

b. Net Present Value of Consumer Costs 

and Benefits 

c. Indirect Impacts on Employment 

4. Impact on Utility or Performance of 

Products 

5. Impact of Any Lessening of Competition 

6. Need of the Nation to Conserve Energy 

7. Other Factors 

8. Summary of National Economic Impacts 

C. Conclusion 

1. Benefits and Burdens of TSLs 

Considered for Non-Weatherized Gas 

Furnace and Mobile Home Gas Furnace 

AFUE Standards 

2. Annualized Benefits and Costs of the 

Adopted Standards 

VI. Procedural Issues and Regulatory Review 

A. Review Under Executive Orders 12866, 

13563, and 14094 

B. Review Under the Regulatory Flexibility 

Act 

C. Review Under the Paperwork Reduction 

Act 

D. Review Under the National 

Environmental Policy Act of 1969 

E. Review Under Executive Order 13132 

F. Review Under Executive Order 12988 

G. Review Under the Unfunded Mandates 

Reform Act of 1995 

H. Review Under the Treasury and General 

Government Appropriations Act, 1999 

I. Review Under Executive Order 12630 

J. Review Under the Treasury and General 

Government Appropriations Act, 2001 

K. Review Under Executive Order 13211 

L. Review Under the Information Quality 

Bulletin for Peer Review 

M. Congressional Notification 

VII. Approval of the Office of the Secretary 

I. Synopsis of the Final Rule 

The Energy Policy and Conservation 

Act, Public Law 94–163, (42 U.S.C. 

6291–6317, as codified) as amended 

(‘‘EPCA’’),1 authorizes DOE to regulate 

the energy efficiency of a number of 

consumer products and certain 

industrial equipment. Title III, Part B2

of EPCA established the Energy 

Conservation Program for Consumer 

Products Other Than Automobiles. (42 

U.S.C. 6291–6309) These products 

include non-weatherized gas furnaces 

(NWGFs) and mobile home gas furnaces 

(MHGFs), the subject of this rulemaking. 

(42 U.S.C. 6292(a)(5)) 

Pursuant to EPCA, any new or 

amended energy conservation standard 

must be designed to achieve the 

maximum improvement in energy 

efficiency that DOE determines is 

technologically feasible and 

economically justified. (42 U.S.C. 

6295(o)(2)(A)) Furthermore, the new or 

amended standard must result in 

significant conservation of energy. (42 

U.S.C. 6295(o)(3)(B)) EPCA specifically 

provides that DOE must conduct two 

rounds of energy conservation standard 

rulemakings for NWGFs and MHGFs. 

(42 U.S.C. 6295(f)(4)(B) and (C)) EPCA 

also provides that not later than six 

years after issuance of any final rule 

establishing or amending a standard, 

DOE must publish either a notice of 

determination that standards for the 

product do not need to be amended, or 

a notice of proposed rulemaking 

(‘‘NOPR’’) including new proposed 

energy conservation standards 

(proceeding to a final rule, as 

appropriate). (42 U.S.C. 6295(m)) This 

rulemaking is being undertaken 

pursuant to the statutorily-required 

second round of rulemaking for NWGFs 

and MHGFs, and it also satisfies the 

statutorily-required 6-year-lookback 

review. 

In accordance with these and other 

relevant statutory provisions discussed 

in this document, DOE is adopting 

amended energy conservation standards 

for the subject consumer furnaces (i.e., 

NWGFs and MHGFs). The adopted 

standards, which are expressed in terms 

of minimum annual fuel utilization 

efficiency (‘‘AFUE’’), are shown in Table 

I.1. These standards apply to all 

products listed in Table I.1 and 

manufactured in, or imported into, the 

United States starting on December 18, 

2028. For the reasons discussed in 

section III.A of this document, DOE is 

not adopting standby mode or off mode 

power consumption standards for 

NWGFs and MHGFs in this final rule. 

TABLE I.1—AFUE ENERGY CONSERVATION STANDARDS FOR NONWEATHERIZED GAS FURNACES AND

MOBILE HOME GAS FURNACES

[Compliance Starting December 18, 2028] 

Product class AFUE (%) 

Non-Weatherized Gas Furnaces ................................. 95.0 

Mobile Home Gas Furnaces 95.0 

A. Benefits and Costs to Consumers 

Table I.2 summarizes DOE’s 

evaluation of the economic impacts of 

the adopted standards on consumers of 

NWGFs and MHGFs, as measured by the 

average life-cycle cost (‘‘LCC’’) savings 

and the simple payback period 

(‘‘PBP’’).3 The average LCC savings are 

positive for all product classes, and the 

PBP is less than the average lifetime of 

both NWGFs and MHGFs, which is 

estimated to be 21.5 years (see section 

IV.F of this document). 


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4All monetary values in this document are 

expressed in 2022 dollars (2022$). 

5The quantity refers to full-fuel-cycle (FFC) 

energy savings. FFC energy savings include the 

energy consumed in extracting, processing, and 

transporting primary fuels (i.e., coal, natural gas, 

petroleum fuels), and, thus, presents a more 

complete picture of the impacts of energy efficiency 

standards. For more information on the FFC metric, 

see section IV.H.2 of this document. 

6A metric ton is equivalent to 1.1 short tons. 

Results for emissions other than CO2 are presented 

in short tons. 

7 DOE calculated emissions reductions relative to 

the no-new-standards-case, which reflects key 

assumptions in the Annual Energy Outlook 2023 

(AEO2023). AEO2023 represents current Federal 

and State legislation and final implementation of 

regulations as of the time of its preparation. See 

section IV.K of this document for further discussion 

of AEO2023 assumptions that effect air pollutant 

emissions. The increase in emissions of some 

pollutants is due to an increase in electricity 

consumption. 

8To monetize the benefits of reducing GHG 

emissions this analysis uses the interim estimates 

presented in the Technical Support Document: 

Social Cost of Carbon, Methane, and Nitrous Oxide 

Interim Estimates Under Executive Order 13990 

published in February 2021 by the IWG. (February 

2021 SC–GHG TSD) (Available at: 

www.whitehouse.gov/wp-content/uploads/2021/02/ 

TechnicalSupportDocument_

SocialCostofCarbonMethaneNitrousOxide.pdf) (Last 

accessed August 1, 2023). 

9 DOE did not monetize mercury emissions 

because the quantity is very small. 

10 DOE estimates the economic value of these 

emissions reductions resulting from the considered 

TSLs for the purpose of complying with the 

requirements of Executive Order 12866. 

TABLE I.2—IMPACTS OF ADOPTED ENERGY CONSERVATION STANDARDS ON CONSUMERS OF NON-WEATHERIZED GAS

FURNACES AND MOBILE HOME GAS FURNACES

Furnace class 

Average LCC 

savings 

(2022$) 

Simple payback period 

(years) 

Non-Weatherized Gas Furnaces ............................................................................................................................. 350 7.6 

Mobile Home Gas Furnaces .................................................................................................................................... 616 3.2 

DOE’s analysis of the impacts of the 

adopted standards on consumers is 

described in section IV.F of this 

document. 

B. Impact on Manufacturers 4

The industry net present value (INPV) 

is the sum of the discounted cash flows 

to the industry from the base year 

through the end of the analysis period 

(2023–2058). The change in INPV is the 

present value of all changes in industry 

cash flow, including changes in 

production costs, conversion costs, and 

manufacturer profit margins. Using a 

real discount rate of 6.4 percent, DOE 

estimates that the INPV for 

manufacturers of NWGFs and MHGFs in 

the case without amended standards is 

$1,371.8 million in 2022$. Under the 

adopted standards, DOE estimates the 

change in INPV to range from ¥26.8 

percent to ¥2.5 percent, which is a 

reduction of approximately ¥$367.3 

million to ¥$33.8 million. In order to 

bring products into compliance with 

amended standards, it is estimated that 

industry will incur total conversion 

costs of $162.0 million (which are 

incorporated into the calculation of 

INPV). 

DOE’s analysis of the impacts of the 

adopted energy conservation standards 

on manufacturers is described in 

sections IV.J and V.B.2 of this 

document. 

C. National Benefits and Costs 

DOE’s analyses indicate that the 

adopted AFUE energy conservation 

standards for NWGFs and MHGFs 

would save a significant amount of 

energy. Relative to the case without 

amended standards, the lifetime energy 

savings for NWGFs and MHGFs 

purchased in the 30-year period that 

begins in the anticipated year of 

compliance with the amended standards 

(2029–2058), are estimated to amount to 

4.77 quadrillion British thermal units 

(‘‘Btu’’), or quads.5 This represents a 

savings of 3.2 percent relative to the 

energy use of these products in the case 

without amended standards (referred to 

as the ‘‘no-new-standards case’’). 

The cumulative net present value 

(‘‘NPV’’) of total consumer benefits of 

the amended standards for NWGFs and 

MHGFs ranges from $4.8 billion (at a 7- 

percent discount rate) to $16.3 billion 

(at a 3-percent discount rate). This NPV 

expresses the estimated total value of 

future operating-cost savings minus the 

estimated increased product and 

installation costs for NWGFs and 

MHGFs purchased in years 2029 

through 2058. 

In addition, the adopted standards for 

NWGFs and MHGFs are projected to 

yield significant environmental benefits. 

DOE estimates that the amended 

standards will result in cumulative 

emission reductions (over the same 

period as for energy savings) of 332 

million metric tons (Mt) 6 of carbon 

dioxide (CO2), 4.3 million tons of 

methane (CH4), 0.38 thousand tons of 

nitrous oxide (N2O), and 0.9 million 

tons of nitrogen oxides (NOX). The 

amended standards will result in 

cumulative emission increases of 10.0 

thousand tons of sulfur dioxide (SO2) 

and 0.08 tons of mercury (Hg).7

DOE estimates the value of climate 

benefits from a reduction in greenhouse 

gases (GHG) using four different 

estimates of the social cost of CO2 (SC– 

CO2), the social cost of methane (SC– 

CH4), and the social cost of nitrous 

oxide (SC–N2O). Together these 

represent the social cost of GHG (SC– 

GHG). DOE used interim SC–GHG 

values developed by an Interagency 

Working Group on the Social Cost of 

Greenhouse Gases (IWG).8 The 

derivation of these values is discussed 

in section IV.L.1 of this document. For 

presentational purposes, the climate 

benefits associated with the average SC– 

GHG at a 3-percent discount rate are 

estimated to be $17.3 billion. DOE does 

not have a single central SC–GHG point 

estimate, and it emphasizes the 

importance and value of considering the 

benefits calculated using all four sets of 

SC–GHG estimates. 

DOE estimated the monetized net 

health benefits of NOX and SO2

emissions changes, using benefit per ton 

estimates from the scientific literature, 

as discussed in section IV.L of this 

document.9 DOE estimated the present 

value of the health benefits would be 

$8.7 billion using a 7-percent discount 

rate, and $26.6 billion using a 3-percent 

discount rate.10 DOE is currently only 

monetizing (for SO2 and NOX) 

particulate matter (PM2.5) precursor 

health benefits and (for NOX) ozone 

precursor health benefits, but will 

continue to assess the ability to 

monetize other effects such as health 

benefits from reductions in direct PM2.5

emissions. 

Table I.3 summarizes the monetized 

benefits and costs expected to result 

from the amended standards for NWGFs 

and MHGFs. There are other important 

unquantified effects, including certain 

unquantified climate benefits, 

unquantified public health benefits from 

the reduction of toxic air pollutants and 

other emissions, unquantified energy 

security benefits, and distributional 

effects, among others. 


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TABLE I.3—SUMMARY OF MONETIZED BENEFITS AND COSTS OF ADOPTED AFUE ENERGY CONSERVATION STANDARDS

FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

[Trial Standard Level (TSL) 8] 

Billion 2022$ 

3% discount rate 

Consumer Operating Cost Savings ..................................................................................................................................... 24.8 

Climate Benefits * ................................................................................................................................................................. 17.3 

Net Health Benefits ** .......................................................................................................................................................... 26.6 

Total Monetized Benefits † .................................................................................................................................................. 68.7 

Consumer Incremental Product Costs ‡ .............................................................................................................................. 8.5 

Net Monetized Benefits ....................................................................................................................................................... 60.2 

Change in Producer Cashflow (INPV‡‡) ............................................................................................................................ (0.37)—(0.03) 

7% discount rate 

Consumer Operating Cost Savings ..................................................................................................................................... 9.3 

Climate Benefits * (3% discount rate) .................................................................................................................................. 17.3 

Net Health Benefits ** .......................................................................................................................................................... 8.7 

Total Monetized Benefits † .................................................................................................................................................. 35.3 

Consumer Incremental Product Costs ‡ .............................................................................................................................. 4.5 

Net Monetized Benefits ................................................................................................................................................ 30.8 

Change in Producer Cashflow (INPV‡‡) ............................................................................................................................ (0.37)—(0.03) 

Note: This table presents the costs and benefits associated with the subject consumer furnaces shipped in 2029–2058. These results include 

benefits to consumers which accrue after 2058 from the products shipped in 2029–2058. 

* Climate benefits are calculated using four different estimates of the social cost of carbon (SC–CO2), methane (SC–CH4), and nitrous oxide 

(SC–N2O) (model average at 2.5-percent, 3-percent, and 5-percent discount rates; 95th percentile at 3-percent discount rate) (see section IV.L of 

this document). Together these represent the global SC–GHG. For presentational purposes of this table, the climate benefits associated with the 

average SC–GHG at a 3-percent discount rate are shown; however, DOE emphasizes the importance and value of considering the benefits calculated using all four sets of SC–GHG estimates. To monetize the benefits of reducing GHG emissions, this analysis uses the interim estimates 

presented in the Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive Order 

13990 published in February 2021 by the IWG. 

** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as 

health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. 

† Total and net benefits include those consumer, climate, and health benefits that can be quantified and monetized. For presentation purposes, 

total and net benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate. 

‡ Costs include incremental equipment costs as well as installation costs. 

‡‡ Operating Cost Savings are calculated based on the LCC analysis and national impact analysis as discussed in detail below. See sections 

IV.F and IV.H of this document. DOE’s national impact analysis includes all impacts (both costs and benefits) along the distribution chain beginning with the increased costs to the manufacturer to manufacture the product and ending with the increase in price experienced by the consumer. DOE also separately conducts a detailed analysis on the impacts on manufacturers (the MIA). See section IV.J of this document. In the 

detailed MIA, DOE models manufacturers’ pricing decisions based on assumptions regarding investments, conversion costs, cashflow, and margins. The MIA produces a range of impacts, which is the rule’s expected impact on the INPV. The change in INPV is the present value of all 

changes in industry cash flow, including changes in production costs, capital expenditures, and manufacturer profit margins. Change in INPV is 

calculated using the industry weighted average cost of capital value of 6.4 percent that is estimated in the MIA (see chapter 12 of the final rule 

technical support document (‘‘TSD’’) for a complete description of the industry weighted average cost of capital). For NWGFs and MHGFs, those 

values are ¥$367 million to ¥$34 million. DOE accounts for that range of likely impacts in analyzing whether a TSL is economically justified. 

See section V.C of this document. DOE is presenting the range of impacts to the INPV under two manufacturer markup scenarios: the Preservation of Gross Margin scenario, which is the manufacturer markup scenario used in the calculation of Consumer Operating Cost Savings in this 

table, and the Tiered scenario, which models a reduction of manufacturer markups due to reduced product differentiation as a result of amended 

standards. DOE includes the range of estimated INPV in the above table, drawing on the MIA explained further in section IV.J of this document, 

to provide additional context for assessing the estimated impacts of this final rule to society, including potential changes in production and consumption, which is consistent with the Office of Management and Budget’s (OMB) Circular A–4 and E.O. 12866. If DOE were to include the 

INPV into the net benefit calculation for this final rule, the net benefits would range from $59.83 billion to $60.17 billion at 3-percent discount rate 

and would range from $30.43 billion to $30.77 billion at 7-percent discount rate. Parentheses ( ) indicate negative values. 


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11To convert the time-series of costs and benefits 

into annualized values, DOE calculated a present 

value in 2029, the year used for discounting the 

NPV of total consumer costs and savings. For the 

benefits, DOE calculated a present value associated 

with each year’s shipments in the year in which the 

shipments occur (e.g., 2030), and then discounted 

the present value from each year to 2029. Using the 

present value, DOE then calculated the fixed annual 

payment over a 30-year period, starting in the 

compliance year, that yields the same present value. 

12As discussed in section IV.L.1 of this 

document, DOE agrees with the IWG that using 

consumption-based discount rates (e.g., 3 percent) 

is appropriate when discounting the value of 

climate impacts. Combining climate effects 

discounted at an appropriate consumption-based 

discount rate with other costs and benefits 

discounted at a capital-based rate (i.e., 7 percent) is 

reasonable because of the different nature of the 

types of benefits being measured. 

The benefits and costs of the adopted 

standards can also be expressed in terms 

of annualized values. The monetary 

values for the total annualized net 

benefits are: (1) the reduced consumer 

operating costs, minus (2) the increase 

in product purchase prices and 

installation costs, plus (3) the value of 

climate and health benefits of emission 

reductions, all annualized.11

The national operating cost savings 

are domestic private U.S. consumer 

monetary savings that occur as a result 

of purchasing the covered products and 

are measured for the lifetime of NWGFs 

and MHGFs shipped in 2029–2058. The 

health benefits associated with reduced 

emissions achieved as a result of the 

adopted standards are also calculated 

based on the lifetime of NWGFs and 

MHGFs shipped in 2029–2058. Total 

benefits for both the 3-percent and 7- 

percent cases are presented using the 

average GHG social costs with 3-percent 

discount rate.12 Estimates of total 

benefits are presented for all four SC– 

GHG discount rates in section V.B of 

this document. 

Table I.4 presents the total estimated 

monetized benefits and costs associated 

with the adopted standard, expressed in 

terms of annualized values. The results 

under the primary estimate are as 

follows. 

Using a 7-percent discount rate for 

consumer benefits and costs and health 

effects from changes in NOX and SO2

emissions, and the 3-percent discount 

rate case for climate benefits from 

reduced GHG emissions, the estimated 

cost of the standards adopted in this 

rule is $511 million per year in 

increased equipment costs, while the 

estimated annual benefits are $1,054 

million in reduced equipment operating 

costs, $1,021 million in climate benefits, 

and $987 million in net health benefits. 

In this case, the net benefit amounts to 

$2,551 million per year. 

Using a 3-percent discount rate for all 

benefits and costs, the estimated cost of 

the adopted standards is $500 million 

per year in increased equipment costs, 

while the estimated annual benefits are 

$1,467 million in reduced operating 

costs, $1,021 million in climate benefits, 

and $1,574 million in net health 

benefits. In this case, the net benefit 

amounts to $3,561 million per year. 

TABLE I.4—ANNUALIZED MONETIZED BENEFITS AND COSTS OF ADOPTED STANDARDS FOR NON-WEATHERIZED GAS

FURNACES AND MOBILE HOME GAS FURNACES

[TSL 8] 

Million 2022$/year 

Primary 

estimate 

Low-netbenefits 

estimate 

High-netbenefits 

estimate 

3% discount rate 

Consumer Operating Cost Savings ............................................................................................. 1,467 1,528 1,440 

Climate Benefits * ......................................................................................................................... 1,021 1,003 1,028 

Net Health Benefits ** .................................................................................................................. 1,574 1,546 1,585 

Total Monetized Benefits † ................................................................................................... 4,061 4,077 4,053 

Consumer Incremental Product Costs ‡ ...................................................................................... 500 520 489 

Net Monetized Benefits ............................................................................................................... 3,561 3,557 3,564 

Change in Producer Cashflow (INPV‡‡) .................................................................................... (27)–(2) (27)–(2) (27)–(2) 

7% discount rate 

Consumer Operating Cost Savings ............................................................................................. 1,054 1,094 1,051 

Climate Benefits * (3% discount rate) .......................................................................................... 1,021 1,003 1,028 

Health Benefits ** ......................................................................................................................... 987 972 994 

Total Monetized Benefits † .......................................................................................................... 3,062 3,069 3,073 

Consumer Incremental Product Costs ‡ ...................................................................................... 511 528 501 

Net Monetized Benefits ............................................................................................................... 2,551 2,541 2,572 

Change in Producer Cashflow (INPV‡‡) .................................................................................... (27)–(2) (27)–(2) (27)–(2) 

Note: This table presents the costs and benefits associated with the subject consumer furnaces shipped in 2029–2058. These results include 

consumer, health, and climate benefits which accrue after 2058 from the products shipped in 2029–2058. 

* Climate benefits are calculated using four different estimates of the global SC–GHG (see section IV.L of this document). For presentational 

purposes of this table, the climate benefits associated with the average SC–GHG at a 3-percent discount rate are shown; however, DOE emphasizes the importance and value of considering the benefits calculated using all four sets of SC–GHG estimates. To monetize the benefits of reducing GHG emissions, this analysis uses the interim estimates presented in the Technical Support Document: Social Cost of Carbon, Methane, 

and Nitrous Oxide Interim Estimates Under Executive Order 13990 published in February 2021 by the IWG. 

**Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and disbenefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. 

† Total benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate.

‡ Costs include incremental equipment costs as well as installation costs. 


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13The information on climate benefits is provided 

in compliance with Executive Order 12866. 14Procedures, Interpretations, and Policies for 

Consideration in New or Revised Energy 

Conservation Standards and Test Procedures for 

Consumer Products and Commercial/Industrial 

Equipment, 86 FR 70892, 70901 (Dec. 13, 2021). 

‡‡ Operating Cost Savings are calculated based on the LCC analysis and national impact analysis as discussed in detail below. See sections 

IV.F and IV.H of this document. DOE’s national impact analysis includes all impacts (both costs and benefits) along the distribution chain beginning with the increased costs to the manufacturer to manufacture the product and ending with the increase in price experienced by the consumer. DOE also separately conducts a detailed analysis on the impacts on manufacturers (the MIA). See section IV.J of this document. In the 

detailed MIA, DOE models manufacturers’ pricing decisions based on assumptions regarding investments, conversion costs, cashflow, and margins. The MIA produces a range of impacts, which is the rule’s expected impact on the INPV. The change in INPV is the present value of all 

changes in industry cash flow, including changes in production costs, capital expenditures, and manufacturer profit margins. The annualized 

change in INPV is calculated using the industry weighted average cost of capital value of 6.4 percent that is estimated in the manufacturer impact analysis (see chapter 12 of the final rule TSD for a complete description of the industry weighted average cost of capital). For NWGFs and 

MHGFs, those values are ¥$27 million to ¥$2 million. DOE accounts for that range of likely impacts in analyzing whether a TSL is economically 

justified. See section V.C of this document. DOE is presenting the range of impacts to the INPV under two manufacturer markup scenarios: the 

Preservation of Gross Margin scenario, which is the manufacturer markup scenario used in the calculation of Consumer Operating Cost Savings 

in this table, and the Tiered scenario, where DOE assumed amended standards would result in a reduction of product differentiation and a compression of the markup tiers. DOE includes the range of estimated annualized change in INPV in the above table, drawing on the MIA explained 

further in section IV.J of this document, to provide additional context for assessing the estimated impacts of this final rule to society, including potential changes in production and consumption, which is consistent with OMB’s Circular A–4 and E.O. 12866. If DOE were to include the INPV 

into the annualized net benefit calculation for this final rule, the annualized net benefits would range from $3,534 million to $3,559 million at 3- 

percent discount rate and would range from $2,524 million to $2,549 million at 7-percent discount rate. Parentheses ( ) indicate negative values. 

DOE’s analysis of the national impacts 

of the adopted standards is described in 

sections IV.H, IV.K, and IV.L of this 

document. 

D. Conclusion 

DOE concludes that the standards 

adopted in this final rule represent the 

maximum improvement in energy 

efficiency that is technologically 

feasible and economically justified, and 

would result in the significant 

conservation of energy. Specifically, 

with regards to technological feasibility, 

products achieving these standard levels 

are already commercially available for 

all product classes covered by this final 

rule. As for economic justification, 

DOE’s analysis shows that the benefits 

of the standards exceed, to a great 

extent, the burdens of the standards. 

Using a 7-percent discount rate for 

consumer benefits and costs and NOX

and SO2 emissions reduction benefits, 

and a 3-percent discount rate case for 

GHG social costs, the estimated cost of 

the standards for NWGFs and MHGFs is 

$511 million per year in increased 

product costs, while the estimated 

annual benefits are $1,054 million in 

reduced product operating costs, $1,021 

million in climate benefits, and $987 

million in health benefits. The net 

benefit amounts to $2,551 million per 

year. DOE notes that the net benefits are 

substantial even in the absence of the 

climate benefits,13 and DOE would 

adopt the same standards in the absence 

of such benefits. 

The significance of energy savings 

offered by a new or amended energy 

conservation standard cannot be 

determined without knowledge of the 

specific circumstances surrounding a 

given rulemaking.14 For example, some 

covered products and equipment have 

most of their energy consumption occur 

during periods of peak energy demand. 

The impacts of these products on the 

energy infrastructure can be more 

pronounced than products with 

relatively constant demand. 

Accordingly, DOE evaluates the 

significance of energy savings on a caseby-case basis. 

As previously mentioned, the 

standards are projected to result in 

estimated national energy savings of 

4.77 quad (full-fuel-cycle (‘‘FFC’’)), the 

equivalent of the primary annual energy 

use of 51 million homes. Based on these 

findings, DOE has determined that the 

energy savings from the standard levels 

adopted in this final rule are 

‘‘significant’’ within the meaning of 42 

U.S.C. 6295(o)(3)(B). A more detailed 

discussion of the basis for these 

conclusions is contained in the 

remainder of this document and the 

accompanying technical support 

document (‘‘TSD’’). 

II. Introduction 

The following section briefly 

discusses the statutory authority 

underlying this final rule, as well as 

some of the relevant historical 

background related to the amended 

standards for consumer NWGFs and 

MHGFs. 

A. Authority 

EPCA authorizes DOE to regulate the 

energy efficiency of a number of 

consumer products and certain 

industrial equipment. Title III, Part B of 

EPCA established the Energy 

Conservation Program for Consumer 

Products Other Than Automobiles. (42 

U.S.C. 6291–6309) These products 

include the consumer furnaces that are 

the subject of this document. (42 U.S.C. 

6292(a)(5)) EPCA prescribed energy 

conservation standards for these 

products (42 U.S.C. 6295(f)(1) and (2)), 

and directs DOE to conduct future 

rulemakings to determine whether to 

amend these standards. (42 U.S.C. 

6295(f)(4)) EPCA further provides that, 

not later than six years after the 

issuance of any final rule establishing or 

amending a standard, DOE must publish 

either a notice of determination that 

standards for the product do not need to 

be amended, or a NOPR including new 

proposed energy conservation standards 

(proceeding to a final rule, as 

appropriate). (42 U.S.C. 6295(m)(1)) 

The energy conservation program 

under EPCA consists essentially of four 

parts: (1) testing, (2) labeling, (3) the 

establishment of Federal energy 

conservation standards, and (4) 

certification and enforcement 

procedures. Relevant provisions of the 

EPCA specifically include definitions 

(42 U.S.C. 6291), coverage (42 U.S.C. 

6292), test procedures (42 U.S.C. 6293), 

labeling provisions (42 U.S.C. 6294), 

energy conservation standards (42 

U.S.C. 6295), and the authority to 

require information and reports from 

manufacturers (42 U.S.C. 6296). 

Federal energy efficiency 

requirements for covered products 

established under EPCA generally 

supersede State laws and regulations 

concerning energy conservation testing, 

labeling, and standards. (42 U.S.C. 

6297(a)–(c)) DOE may, however, grant 

waivers of Federal preemption in 

limited instances for particular State 

laws or regulations, in accordance with 

the procedures and other provisions set 

forth under EPCA. (42 U.S.C. 6297(d)) 

Subject to certain statutory criteria 

and conditions, DOE is required to 

develop test procedures that are 

reasonably designed to produce test 

results that measure the energy 

efficiency, energy use, or estimated 

annual operating cost of each covered 

product during a representative average 

use cycle and that are not unduly 

burdensome to conduct. (42 U.S.C. 

6293(b)(3), 6295(o)(3)(A), and 6295(r)) 

Manufacturers of covered products must 

use the prescribed Federal test 

procedure as the basis for: (1) certifying 

to DOE that their products comply with 


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15 DOE notes that the regional standards provision 

at 42 U.S.C. 6295(o)(6) also applies to central air 

conditioners and heat pumps, products for which 

the statute permits either one or two regional 

standards. This is in contrast to furnaces, for which 

EPCA permits only one regional standard. As a 

result, the statute frequently employs plural 

language in these provisions. 

the applicable energy conservation 

standards adopted pursuant to EPCA 

and (2) making representations 

regarding the energy use or efficiency of 

those products. (42 U.S.C. 6293(c) and 

6295(s)) Similarly, DOE must use these 

test procedures to determine whether 

the products comply with the relevant 

energy conservation standards 

promulgated under EPCA. (42 U.S.C. 

6295(s)) The DOE test procedures for 

consumer furnaces appear at title 10 of 

the Code of Federal Regulations (CFR), 

part 430, subpart B, appendix N. 

DOE must follow specific statutory 

criteria for prescribing new or amended 

energy conservation standards for 

covered products, including consumer 

furnaces. Any new or amended standard 

for a covered product must be designed 

to achieve the maximum improvement 

in energy efficiency that the Secretary of 

Energy determines is technologically 

feasible and economically justified. (42 

U.S.C. 6295(o)(2)(A) and 6295(o)(3)(B)) 

Furthermore, DOE may not adopt any 

standard that would not result in the 

significant conservation of energy. (42 

U.S.C. 6295(o)(3)) 

Moreover, DOE may not prescribe a 

standard: (1) for certain products, 

including NWGFs and MHGFs, if no test 

procedure has been established for the 

product, or (2) if DOE determines by 

rule that the standard is not 

technologically feasible or economically 

justified. (42 U.S.C. 6295(o)(3)(A)–(B)) 

In deciding whether a proposed 

standard is economically justified, DOE 

must determine whether the benefits of 

the standard exceed its burdens. (42 

U.S.C. 6295(o)(2)(B)(i)) DOE must make 

this determination after receiving 

comments on the proposed standard, 

and by considering, to the greatest 

extent practicable, the following seven 

statutory factors: 

(1) The economic impact of the 

standard on manufacturers and on 

consumers of the products subject to the 

standard; 

(2) The savings in operating costs 

throughout the estimated average life of 

the covered products in the type (or 

class) compared to any increase in the 

price of, initial charges for, or 

maintenance expenses of, the covered 

products which are likely to result from 

the imposition of the standard; 

(3) The total projected amount of 

energy (or as applicable, water) savings 

likely to result directly from the 

imposition of the standard; 

(4) Any lessening of the utility or the 

performance of the covered products 

likely to result from the imposition of 

the standard; 

(5) The impact of any lessening of 

competition, as determined in writing 

by the Attorney General, that is likely to 

result from the imposition of the 

standard; 

(6) The need for national energy and 

water conservation; and 

(7) Other factors the Secretary of 

Energy (Secretary) considers relevant. 

(42 U.S.C. 6295(o)(2)(B)(i)(I)–(VII)) 

Further, EPCA establishes a rebuttable 

presumption that a standard is 

economically justified if the Secretary 

finds that the additional cost to the 

consumer of purchasing a product 

complying with an energy conservation 

standard level will be less than three 

times the value of the energy savings 

during the first year that the consumer 

will receive as a result of the standard, 

as calculated under the applicable test 

procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) 

EPCA also contains what is known as 

an ‘‘anti-backsliding’’ provision, which 

prevents the Secretary from prescribing 

any amended standard that either 

increases the maximum allowable 

energy use or decreases the minimum 

required energy efficiency of a covered 

product. (42 U.S.C. 6295(o)(1)) Also, the 

Secretary may not prescribe an amended 

or new standard if the Secretary finds 

(and publishes such finding) that 

interested persons have established by a 

preponderance of the evidence that the 

standard is likely to result in the 

unavailability in the United States 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 at the time of the 

Secretary’s finding. (42 U.S.C. 

6295(o)(4)) 

Additionally, EPCA specifies 

requirements when promulgating an 

energy conservation standard for a 

covered product that has two or more 

subcategories that warrant separate 

product classes and energy conservation 

standards with a different level of 

energy efficiency or energy use than that 

which would apply for such group of 

covered products which have the same 

function or intended use. DOE must 

specify a different standard level for a 

type or class of products that has the 

same function or intended use if DOE 

determines that products within such 

group: (A) consume a different kind of 

energy from that consumed by other 

covered products within such type (or 

class); or (B) have a capacity or other 

performance-related feature which other 

products within such type (or class) do 

not have and such feature justifies a 

higher or lower standard. (42 U.S.C. 

6295(q)(1)) In determining whether a 

performance-related feature justifies a 

different standard for a group of 

products, DOE must consider such 

factors as the utility to the consumer of 

such a feature and other factors DOE 

deems appropriate. Id. Any rule 

prescribing such a standard must 

include an explanation of the basis on 

which such higher or lower level was 

established. (42 U.S.C. 6295(q)(2)) 

Pursuant to amendments contained in 

the Energy Independence and Security 

Act of 2007 (EISA 2007), Public Law 

110–140, DOE may consider the 

establishment of a regional energy 

conservation standard for furnaces 

(except boilers). (42 U.S.C. 6295(o)(6)) 

Specifically, in addition to a base 

national standard for a product, DOE 

may establish for furnaces a single 

more-restrictive regional standard. (42 

U.S.C. 6295(o)(6)(B)) The region must 

include only contiguous States (with the 

exception of Alaska and Hawaii, which 

may be included in a region with which 

they are not contiguous), and each State 

may be placed in only one region (i.e., 

an entire State cannot simultaneously be 

placed in two regions, nor can it be 

divided between two regions).15 (42 

U.S.C. 6295(o)(6)(C)) Further, DOE can 

establish the additional regional 

standard for furnaces only: (1) where 

doing so would produce significant 

energy savings in comparison to a single 

national standard; (2) if the regional 

standard is economically justified; and 

(3) after considering the impact of such 

standard on consumers, manufacturers, 

and other market participants, including 

product distributors, dealers, 

contractors, and installers. (42 U.S.C. 

6295(o)(6)(D)) 

Finally, pursuant to the amendments 

contained in EISA 2007, any final rule 

for new or amended energy 

conservation standards promulgated 

after July 1, 2010, is required to address 

standby mode and off mode energy use. 

(42 U.S.C. 6295(gg)(3)) Specifically, 

when DOE adopts a standard for a 

covered product after that date, it must, 

if justified by the criteria for adoption of 

standards under EPCA (42 U.S.C. 

6295(o)), incorporate standby mode and 

off mode energy use into a single 

standard, or, if that is not feasible, adopt 

a separate standard for such energy use 

for that product if doing so would be 

consistent with section 6295(o). (42 

U.S.C. 6295(gg)(3)(A)–(B)) DOE’s current 

test procedures for consumer furnaces 

address standby mode and off mode 


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16Although the November 2007 Final Rule did 

not explicitly state the standards for oil-fired 

furnaces were applicable only to non-weatherized 

oil-fired furnaces, the NOPR that preceded the final 

rule made clear that DOE did not perform analysis 

of and was not proposing standards for weatherized 

oil-fired furnaces or mobile home oil-fired furnaces. 

71 FR 59203, 52914 (Oct. 6, 2006). Thus, the 

proposed standards that were ultimately adopted in 

the November 2007 Final Rule only applied to nonweatherized oil-fired furnaces. 

17 DOE notes that prior to June 15, 1976, 

prefabricated homes that were built in a factory 

were commonly referred to as ‘‘mobile homes,’’ as 

reflected in the terminology used in EPCA. 

However, such dwellings built after that date came 

to be known as ‘‘manufactured homes’’ and have to 

meet specific construction standards required by 

the U.S. Department of Housing and Urban 

Development (HUD) Code. (24 CFR part 3280) 

DOE’s mobile home furnace standards apply to 

furnaces designed for and intended to be used in 

both mobile and manufactured homes that meet 

DOE’s ‘‘mobile home furnace’’ definition at 10 CFR 

430.2. 

18The November 2007 Final Rule adopted 

amended standards for ‘‘oil-fired furnaces’’ 

generally. However, on July 28, 2008, DOE 

published a final rule technical amendment in the 

Federal Register that clarified that the amended 

standards adopted in the November 2007 Final Rule 

for oil-fired furnaces did not apply to mobile home 

oil-fired furnaces and weatherized oil-fired 

furnaces; rather they were only applicable for nonweatherized oil-fired furnaces. 73 FR 43611, 43613. 

energy use for all covered consumer 

furnaces. DOE’s energy conservation 

standards address standby mode and off 

mode energy use only for nonweatherized oil-fired and electric 

furnaces. 10 CFR 430.32(e)(1)(iii). In the 

NOPR published in the Federal Register 

on July 7, 2022 (‘‘the July 2022 NOPR’’), 

DOE proposed to specify new energy 

conservation standards to address the 

standby mode and off mode energy use 

of NWGFs and MHGFs. 87 FR 40590, 

40706. However, for the reasons 

discussed in section III.A.8 of this 

document, DOE has concluded that it 

would not be consistent with section 

6295(o) to adopt standby mode and off 

mode energy standards for NWGFs and 

MHGFs in this final rule. DOE will 

continue to investigate and analyze 

appropriate standby mode and off mode 

energy consumption standards for these 

products in a future rulemaking. 

B. Background 

1. Current Standards 

The most recent energy conservation 

standards for NWGFs and MHGFs were 

adopted in a final rule published in the 

Federal Register on November 19, 2007 

(‘‘November 2007 Final Rule’’), in 

which DOE prescribed amended energy 

conservation standards for consumer 

furnaces manufactured on or after 

November 19, 2015. 72 FR 65136. The 

November 2007 Final Rule revised the 

energy conservation standards to 80- 

percent AFUE for NWGFs, to 81-percent 

AFUE for weatherized gas furnaces, to 

80-percent AFUE for MHGFs, and to 82- 

percent AFUE for non-weatherized oilfired furnaces.16 72 FR 65136, 65169. 

Based on market assessment and the 

standard levels under consideration 

(and that were ultimately adopted), the 

November 2007 Final Rule established 

standards without regard to the certified 

input capacity of a furnace. Id. 

Following a series of publications 

described in section II.B.2 of this 

document and discussed in further 

detail in the July 2022 NOPR (see 87 FR 

40590, 40601–40602 (July 7, 2022)), 

required compliance with the standards 

established in the November 2007 Final 

Rule for these products began on 

November 19, 2015. The standards 

currently applicable to all consumer 

furnaces, including the two product 

classes for which DOE is amending 

standards in this final rule, are set forth 

in DOE’s regulations at 10 CFR 

430.32(e)(1)(ii). Table II.1 presents the 

currently applicable standards for 

NWGFs and MHGFs and the date on 

which compliance with that standard 

was required. 

TABLE II.1—CURRENT FEDERAL ENERGY CONSERVATION STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND

MOBILE HOME GAS FURNACES

Product class 

Minimum 

annual fuel 

utilization 

efficiency 

(%) 

Compliance 

date 

Non-weatherized Gas .............................................................................................................................................. 80 11/19/2015 

Mobile Home Gas .................................................................................................................................................... 80 11/19/2015 

2. History of Standards Rulemaking for 

Consumer Furnaces 

Given the somewhat complicated 

interplay of recent DOE rulemakings 

and statutory provisions related to 

consumer furnaces, DOE provides the 

following regulatory history as 

background leading to this document. 

Amendments to EPCA in the National 

Appliance Energy Conservation Act of 

1987 (‘‘NAECA’’), Public Law 100–12, 

established EPCA’s original energy 

conservation standards for furnaces, 

consisting of the minimum AFUE levels 

for mobile home furnaces 17 and for all 

other furnaces except ‘‘small’’ gas 

furnaces. (42 U.S.C. 6295(f)(1)–(2)) The 

original standards established a 

minimum AFUE of 75 percent for 

mobile home furnaces and 78 percent 

for all other furnaces. Pursuant to 42 

U.S.C. 6295(f)(1)(B), in a final rule 

published in the Federal Register on 

November 17, 1989 (‘‘the November 

1989 Final Rule’’), DOE adopted a 

mandatory minimum AFUE level for 

‘‘small’’ furnaces. 54 FR 47916. The 

standards established by NAECA and 

the November 1989 Final Rule for 

‘‘small’’ gas furnaces are still in effect 

for mobile home oil-fired furnaces, 

weatherized oil-fired furnaces, and 

electric furnaces. 

Pursuant to EPCA, DOE was required 

to conduct two rounds of rulemaking to 

consider amended energy conservation 

standards for furnaces. (42 U.S.C. 

6295(f)(4)(B) and (C)) In satisfaction of 

this first round of amended standards 

rulemaking under 42 U.S.C. 

6295(f)(4)(B), as noted previously, DOE 

published the November 2007 Final 

Rule that revised these standards for 

most furnaces, but left them in place for 

two product classes (i.e., mobile home 

oil-fired furnaces and weatherized oilfired furnaces).18 The standards 

amended in the November 2007 Final 

Rule were to apply to furnaces 

manufactured or imported on and after 

November 19, 2015; this compliance 

date was consistent with the 8-year 

statutory lead time provided under 42 

U.S.C. 6295(f)(4)(B). 72 FR 65136 (Nov. 

19, 2007). The energy conservation 

standards in the November 2007 Final 

Rule consist of a minimum AFUE level 

for each of the six classes of furnaces. 

Id. at 72 FR 65169. As previously noted, 

based on the market analysis for the 

November 2007 Final Rule and the 

standards established under that rule, 

the November 2007 Final Rule 


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87510 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

19For NWGFs and MHGFs, the standards were 

amended to a level of 80-percent AFUE nationally 

with a more-stringent 90-percent AFUE requirement 

in the Northern region. For non-weatherized oilfired furnaces, the standard was amended to 83- 

percent AFUE nationally. 76 FR 37408, 37410 (June 

27, 2011). 

20After APGA filed its petition for review on 

December 23, 2011, various entities subsequently 

intervened. 

21This aligns with the direction provided in the 

final rule published in the Federal Register on 

December 13, 2021, regarding the procedures, 

interpretations, and policies for consideration in 

new or revised energy conservation standards and 

test procedures for consumer products and 

commercial/industrial equipment (December 2021 

Final Rule). 86 FR 70892, 70922. 

22 In terms of full-fuel-cycle energy, switching 

from gas to electricity increases energy use because 

of the losses in thermal electricity generation. 

eliminated the distinction between 

furnaces based on their certified input 

capacity (i.e., the standards applicable 

to ‘‘small’’ furnaces were established at 

the same level and as part of their 

appropriate class of furnace generally). 

Id. 

On June 27, 2011, DOE published a 

direct final rule (‘‘DFR’’) in the Federal 

Register (‘‘June 2011 DFR’’) revising the 

energy conservation standards for 

residential furnaces pursuant to the 

voluntary remand in State of New York, 

et al. v. Department of Energy, et al. 76 

FR 37408 (June 27, 2011). In the June 

2011 DFR, DOE considered the 

amendment of the same six product 

classes considered in the November 

2007 Final Rule analysis plus electric 

furnaces. Id. at 76 FR 37445. The June 

2011 DFR amended the existing AFUE 

energy conservation standards for 

NWGFs, MHGFs, and non-weatherized 

oil furnaces, and amended the 

compliance date (but left the existing 

standards in place) for weatherized gas 

furnaces.19 Id. at 76 FR 37410. The 

existing AFUE standards were left in 

place for three classes of consumer 

furnaces (i.e., weatherized oil-fired 

furnaces, mobile home oil-fired 

furnaces, and electric furnaces). The 

June 2011 DFR also established 

electrical standby mode and off mode 

energy conservation standards for 

NWGFs (including mobile home 

furnaces), non-weatherized oil furnaces 

(including mobile home furnaces), and 

electric furnaces. DOE confirmed the 

standards and compliance dates 

promulgated in the June 2011 DFR in a 

notice of effective date and compliance 

dates published in the Federal Register 

on October 31, 2011. 76 FR 67037. 

Compliance with the energy 

conservation standards promulgated in 

the June 2011 DFR was to be required 

on May 1, 2013, for non-weatherized 

furnaces and on January 1, 2015, for 

weatherized furnaces. 76 FR 37408, 

37547–37548 (June 27, 2011); 76 FR 

67037, 67051 (Oct. 31, 2011). The 

amended energy conservation standards 

and compliance dates in the June 2011 

DFR superseded those standards and 

compliance dates promulgated by the 

November 2007 Final Rule for NWGFs, 

MHGFs, and non-weatherized oil 

furnaces. Similarly, the amended 

compliance date for weatherized gas 

furnaces in the June 2011 DFR 

superseded the compliance date in the 

November 2007 Final Rule. 

Following DOE’s adoption of the June 

2011 DFR, the American Public Gas 

Association (‘‘APGA’’) filed a petition 

for review with the United States Court 

of Appeals for the District of Columbia 

Circuit (‘‘D.C. Circuit’’) to invalidate the 

DOE rule as it pertained to NWGFs. 

Petition for Review, American Public 

Gas Ass’n, et al. v. U.S. Dep’t of Energy, 

et al., No. 11–1485 (D.C. Cir. filed Dec. 

23, 2011).20 The parties to the litigation 

engaged in settlement negotiations 

which ultimately led to filing of an 

unopposed motion on March 11, 2014, 

seeking to vacate DOE’s rule in part and 

to remand to the agency for further 

rulemaking. On April 24, 2014, the 

Court granted a motion that approved a 

settlement agreement that was reached 

between DOE and APGA, in which DOE 

agreed to a partial vacatur and remand 

of the NWGFs and MHGFs portions of 

the June 2011 DFR in order to conduct 

further notice-and-comment 

rulemaking. Accordingly, the Court’s 

order vacated the June 2011 DFR in part 

(i.e., those portions relating to NWGFs 

and MHGFs) and remanded to the 

agency for further rulemaking. 

As part of the settlement, DOE agreed 

to use best efforts to issue a notice of 

proposed rulemaking within one year of 

the remand, and to issue a final rule 

within the later of two years of the 

issuance of remand, or one year of the 

issuance of the proposed rule, including 

at least a 90-day public comment 

period. Due to the extensive and recent 

rulemaking history for residential 

furnaces, as well as the associated 

opportunities for notice and comment 

described previously, DOE forwent the 

typical earlier rulemaking stages (e.g., 

framework document, preliminary 

analysis) and instead published a NOPR 

in the Federal Register on March 12, 

2015 (‘‘March 2015 NOPR’’). 80 FR 

13120. DOE concluded that there was a 

sufficient recent exchange of 

information between interested parties 

and DOE regarding the energy 

conservation standards for residential 

furnaces such as to allow for this 

proceeding to move directly to the 

NOPR stage. Moreover, under 42 U.S.C. 

6295(p) and 5 U.S.C. 553(b) and (c), 

EPCA requires that DOE publish only a 

notice of proposed rulemaking and 

accept public comments before 

amending energy conservation 

standards in a final rule (i.e., DOE is not 

required by statute to conduct any 

earlier rulemaking stages).21

In the March 2015 NOPR, DOE 

proposed adopting a national standard 

of 92-percent AFUE for all NWGFs and 

MHGFs. 80 FR 13120, 13198 (March 12, 

2015). In response, while some 

stakeholders supported the national 92- 

percent AFUE standard, others opposed 

the proposed standards and encouraged 

DOE to withdraw the March 2015 

NOPR. 

Multiple parties suggested that DOE 

should create a separate product class 

for furnaces based on input capacity and 

set lower standards for ‘‘small furnaces’’ 

in order to mitigate some of the negative 

impacts of the proposed standards. 

Among other reasons, commenters 

suggested that such an approach would 

reduce the number of low-income 

consumers switching to electric heat 

due to higher installation costs, because 

those consumers typically have smaller 

homes in which a furnace with a lower 

input capacity would be installed and, 

therefore, would not be impacted if a 

condensing standard were adopted only 

for higher-input-capacity furnaces. To 

explore the potential impacts of such an 

approach, DOE published a notice of 

data availability (‘‘NODA’’) in the 

Federal Register on September 14, 2015 

(‘‘September 2015 NODA’’). 80 FR 

55038. The September 2015 NODA 

contained analysis that considered 

thresholds for defining the small NWGF 

product class from 45 thousand British 

thermal units per hour (‘‘kBtu/h’’) to 65 

kBtu/h certified input capacity and 

maintaining a non-condensing 80- 

percent AFUE standard for that product 

class, while increasing the standard to a 

condensing level (i.e., either 90-percent, 

92-percent, 95-percent, or 98-percent 

AFUE) for large NWGFs. Id. at 80 FR 

55042. The results indicated that lifecycle cost savings increased and that the 

share of consumers with net costs 

decreased as a result of an 80-percent 

AFUE standard for a small NWGF 

product class. Id. at 80 FR 55042–55044. 

It also showed that national energy 

savings increased because fewer 

consumers switched to electric 

heat.22 Id. at 80 FR 55038, 55044. 

Therefore, DOE published a 

supplemental notice of proposed 

rulemaking (‘‘SNOPR’’) in the Federal 


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23 DOE initially provided 60 days for comment on 

the SNOPR, and subsequently reopened the 

comment period an additional 30 days. 81 FR 87493 

(Dec. 5, 2016). 

24 DOE published the Gas Industry Petition in the 

Federal Register for comment on November 1, 

2018. 83 FR 54838. 

25 DOE published a proposed interpretive rule 

(‘‘July 2019 Proposed Interpretive Rule’’) in the 

Federal Register for comment on July 11, 2019. 84 

FR 22011. DOE also published a supplemental 

proposed interpretive rule (‘‘September 2020 

Supplemental Proposed Interpretive Rule’’) in the 

Federal Register for comment on September 24, 

2020. 85 FR 60090. 

26 DOE published a proposed interpretive rule 

(‘‘August 2021 Proposed Interpretive Rule’’) in the 

Federal Register for comment on August 27, 2021. 

86 FR 48049. 

27Prior to the January 2021 Final Interpretive 

Rule, DOE had not had a formal interpretation of 

EPCA’s ‘‘features’’ provision at 42 U.S.C. 6295(o)(4), 

but instead, it had examined the consumer utility 

of potential appliance features in the context of 

individual energy conservation standards 

rulemakings. These rulemakings, which outline 

relevant DOE precedent prior to the January 2021 

Final Interpretive Rule, are presented in some detail 

in the December 2021 Final Interpretive Rule (see 

86 FR 73947, 73952–73958 (Dec. 29, 2021)). 

Register on September 23, 2016 

(‘‘September 2016 SNOPR’’) that 

proposed separate standards for small 

and large NWGFs.23 81 FR 65720. For 

NWGFs with input capacities of 55 

kBtu/h or less, DOE proposed to 

maintain the standard at 80-percent 

AFUE. Id. at 81 FR 65852. For all other 

NWGFs and for all MHGFs, DOE 

proposed a standard of 92-percent 

AFUE. Id. As was the case in the 

September 2015 NODA, a small NWGF 

product class was shown to reduce the 

number of consumers experiencing net 

costs due to higher installation costs for 

condensing furnaces or switching to 

electric heat. In the September 2016 

SNOPR, DOE initially determined that 

the combination of a 55 kBtu/h product 

class threshold and a 92-percent AFUE 

standard for all NWGFs above that size 

appropriately balanced the costs and 

benefits. DOE also noted in that SNOPR 

that a 60 kBtu/h threshold may also be 

economically justified based on the 

analysis, and sought further comment 

regarding the particular size threshold 

proposed. 81 FR 65720, 65755 (Sept. 23, 

2016). 

In addition, for the March 2015 NOPR 

and September 2016 SNOPR, DOE 

analyzed energy conservation standards 

for the standby mode and off mode 

energy use of NWGFs and MHGFs, as 

required by EPCA. (42 U.S.C. 

6295(gg)(3); 80 FR 13120, 13198; 81 FR 

65720, 65759–65760) In both the March 

2015 NOPR and the September 2016 

SNOPR, DOE proposed a maximum 

energy use of 8.5 watts (‘‘W’’) in both 

standby mode and off mode for NWGFs 

and MHGFs. 80 FR 13120, 13198 (March 

12, 2015) and 81 FR 65720, 65852 (Sept. 

23, 2016). 

On January 15, 2021, in response to a 

petition for rulemaking 24 submitted by 

the American Public Gas Association, 

Spire, Inc., the Natural Gas Supply 

Association, the American Gas 

Association, and the National Propane 

Gas Association (the ‘‘Gas Industry 

Petition’’), DOE published a final 

interpretive rule (‘‘January 2021 Final 

Interpretive Rule’’) 25 in the Federal 

Register, determining that, in the 

context of residential furnaces, 

commercial water heaters, and similarly 

situated products/equipment, use of 

non-condensing technology (and 

associated venting) constitutes a 

performance-related ‘‘feature’’ under 

EPCA that cannot be eliminated through 

adoption of an energy conservation 

standard. 86 FR 4776. Correspondingly, 

on the same day, DOE published in the 

Federal Register a notification 

withdrawing the March 2015 NOPR and 

the September 2016 SNOPR for NWGFs 

and MHGFs, because DOE determined 

that those rulemaking documents were 

inconsistent with its revised 

interpretation. 86 FR 3873 (Jan. 15, 

2021). 

The interpretation adopted by the 

January 2021 Final Interpretive Rule 

reflected a significant departure from 

DOE’s previous and long-standing 

interpretation (reflected in practice 

through decades of rulemaking and 

explicitly discussed in the December 

2021 Final Interpretive Rule, with 

examples) that the type of technology 

(e.g., non-condensing technology (and 

associated venting)) used to generate a 

furnace’s heat did not provide a distinct 

consumer utility as would constitute a 

performance-related ‘‘feature’’ pursuant 

to 42 U.S.C. 6295(o)(4) that DOE may 

not eliminate by way of an energy 

conservation standard. The January 

2021 Final Interpretive Rule justified 

this change by focusing on: (1) the 

potential space constraints arising from 

switching from non-condensing 

furnaces (and associated venting) to 

condensing furnaces (and associated 

venting) in replacement applications, 

including certain situations where such 

changes may not be possible; (2) the 

potential need for significant and 

unwelcome physical modifications to a 

home or business (e.g., by adding new 

venting into the living/commercial 

space or decreasing closet or other 

storage/retail space), thereby impacting 

consumer utility, and (3) a policy 

decision to remain neutral regarding 

competing energy sources in the 

marketplace and maintaining a broader 

range of consumer choice for the 

relevant appliances across fuel types. 86 

FR 4776, 4816 (Jan. 15, 2021). (See the 

January 2021 Final Interpretive Rule for 

a more complete discussion of DOE’s 

rationale for its changed interpretation.) 

The anticipated result of DOE’s change 

in interpretation was that the 

Department would set separate product 

classes and standards for condensing 

and non-condensing furnaces in its 

ongoing furnaces energy conservation 

standards rulemaking. 

On January 20, 2021, the President 

issued Executive Order 13990, 

‘‘Protecting Public Health and the 

Environment and Restoring Science to 

Tackle the Climate Crisis.’’ 86 FR 7037 

(Jan. 25, 2021). Section 1 of that order 

lists several policies related to the 

protection of public health and the 

environment, including reducing 

greenhouse gas emissions and bolstering 

the Nation’s resilience to climate 

change. Id. at 86 FR 7037. Section 2 of 

the order also asks all agencies to review 

‘‘existing regulations, orders, guidance 

documents, policies, and any other 

similar agency actions (‘‘agency 

actions’’) promulgated, issued, or 

adopted between January 20, 2017, and 

January 20, 2021, that are or may be 

inconsistent with, or present obstacles 

to, [these policies].’’ Id. Agencies are 

then directed, as appropriate and 

consistent with applicable law, to 

consider suspending, revising, or 

rescinding these agency actions and to 

immediately commence work to 

confront the climate crisis. Id. In light 

of the requirements under the EPCA, 

and in a manner consistent with E.O. 

13990, DOE undertook a re-evaluation 

of the final interpretation and 

withdrawal of proposed rulemakings 

published in the Federal Register on 

January 15, 2021, and DOE published a 

proposed interpretive rule in the 

Federal Register on August 27, 2021, to 

once again address this matter. 86 FR 

48049. 

Following the re-evaluation of the 

January 2021 Final Interpretive Rule 

and consideration of public comments, 

DOE published a final interpretive rule 

in the Federal Register on December 29, 

2021 (‘‘December 2021 Final 

Interpretive Rule’’),26 that returns to 

DOE’s previous and long-standing 

interpretation (in effect prior to the 

January 2021 Final Interpretive Rule).27

86 FR 73947. Residential furnaces were 

one of the two primary focuses of the 

December 2021 Final Interpretive Rule 

(along with commercial water heaters), 

and in that document, DOE offered an 

extensive explanation for why it does 

not view non-condensing technology 

and associated venting to be a 

performance-related feature warranting 


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28A number of States and municipalities filed a 

legal challenge to the January 2021 Final 

Interpretive Rule in the U.S. Circuit Court of 

Appeals for the Second Circuit on March 16, 2021. 

State of New York, et al. v. U.S. Dep’t of Energy, 

No. 21–602 (2d Cir. filed March 16, 2021). 

29Although the stakeholders who authored the 

comments EERE–2014–BT–STD–0031–0330, EERE– 

2014–BT–STD–0031–0345, EERE–2014–BT–STD– 

0031–0356, and EERE–2014–BT–STD–0031–0362 

refer to themselves as the ‘‘Joint Requestors,’’ Atmos 

Energy was not listed as a contributor to EERE– 

2014–BT–STD–0031–0330. Therefore, to 

distinguish the groups of authors, the authors of 

EERE–2014–BT–STD–0031–0330 are herein 

referred to as the ‘‘Joint Gas Commenters.’’ 

a separate product class for such 

furnaces. As noted previously, in the 

December 2021 Final Interpretive Rule, 

DOE also included examples in other 

rules that are consistent with DOE’s 

previous and long-standing 

interpretation. As DOE explained, noncondensing technology is not a 

performance-related feature because it 

does not affect the consumer utility of 

the product (i.e., providing heat, 

irrespective of venting type). DOE noted 

the availability of technological 

alternatives for difficult installation 

situations and explained that it would 

properly account for the costs of such 

installations when considering a 

standard’s economic justification. DOE 

has considered concerns regarding 

specific installation circumstances in 

the context of this product-specific 

rulemaking. See 86 FR 73947 (Dec. 29, 

2021). 

In conducting its review of the 

January 2021 Final Interpretive Rule 

under the requirements of EPCA and in 

a manner consistent with E.O. 13990, 

DOE ultimately arrived at a different 

determination in the December 2021 

Final Interpretive Rule, based on a 

policy that emphasizes furtherance of 

the congressional purpose of improving 

the energy efficiency of covered 

products and equipment. DOE reasoned 

that maintaining less-efficient 

technologies which do not provide 

distinct consumer utility is contrary to 

the purposes of EPCA ‘‘to conserve 

energy supplies through energy 

conservation programs, and, where 

necessary, the regulation of certain 

energy uses’’ (42 U.S.C. 6201(4)) and ‘‘to 

provide for improved energy efficiency 

of . . . major appliances, and certain 

other consumer products’’ (42 U.S.C. 

6201(5)). Such purposes are further 

reflected in the specific provisions of 

EPCA granting DOE authority to 

prescribe energy conservation standards 

designed to achieve the maximum 

improvement in energy efficiency, 

which are technologically feasible and 

economically justified. (42 U.S.C. 

6295(o)(2)(A)). As discussed more fully 

in the December 2021 Final Interpretive 

Rule, DOE concluded that the concerns 

motivating its changed interpretation 

reflected in the January 2021 Final 

Interpretive Rule (i.e., space constraints/ 

difficult installation situations, the 

potential for unwanted physical 

modifications, and maintaining 

consumer choice of appliances across 

fuel types) could be addressed by other 

means. DOE found that these issues 

could be resolved through available 

technological solutions or by switching 

to an appliance using alternative 

technologies (e.g., a heat pump). 86 FR 

73947, 73960 (Dec. 29, 2021). DOE 

further concluded that the potential for 

fuel switching is likely to be limited and 

that there will continue to be a range of 

product availability across fuel types. 

Id. at 86 FR 73964. 

Given the binary nature of the 

question at hand—whether noncondensing technology (and associated 

venting) is or is not a ‘‘feature’’ under 

42 U.S.C. 6295(o)(4)—DOE did not 

identify any other policy alternatives on 

this matter. DOE further notes that it 

does not anticipate any strong reliance 

interests associated with the rescinded 

January 2021 Final Interpretive Rule, 

given that it was rescinded less than a 

year after its issuance and the fact that 

it was never applied in the context of 

any energy conservation standards 

rulemaking for a specific appliance.28

On July 7, 2022, DOE published the 

July 2022 NOPR in the Federal Register. 

87 FR 40590. Consistent with the 

December 2021 Final Interpretive Rule, 

in conducting the analysis for the July 

2022 NOPR, DOE did not consider 

identifying separate product classes 

based on condensing technologies and 

associated venting systems when 

analyzing potential energy conservation 

standards. Based on the results of the 

NOPR analysis, DOE proposed amended 

AFUE standards at 95-percent AFUE for 

both NWGFs and MHGFs, as well as an 

8.5 W energy use standard for standby 

mode and off mode energy 

consumption. 87 FR 40590, 40706 (July 

7, 2022). Additionally, on August 30, 

2022, DOE published in the Federal 

Register a Notice of Data Availability 

(NODA) (August 2022 NODA) 

announcing an extension of the 

comment period, making available a 

revised version of the LCC spreadsheet 

supporting the July 2022 NOPR, and 

announcing a public meeting webinar 

on September 6, 2022, to assist 

stakeholders with operation of the LCC 

spreadsheet. 87 FR 52861. 

DOE received 3,636 comments in 

response to the July 2022 NOPR and 

August 2022 NODA from the interested 

parties listed in Table II.2. (Note that of 

these total comments, 3,552 comments 

were ‘‘form letter’’ email submissions 

contained in docket entry EERE–2014– 

BT–STD–0031–0348. Additionally, 

several commenters submitted more 

than one comment to the docket.) 

TABLE II.2—JULY 2022 NOPR COMMENTS

Commenter(s) Abbreviation Comment number 

in the Docket Commenter type 

Eduardo Veiga ....................................................................... Veiga ..................................... 326 Individual. 

Scott Willis ............................................................................. Willis ...................................... 327 Individual. 

Johanna E. Neumann ............................................................ Neumann ............................... 328 Individual. 

Anonymous 1 ......................................................................... Anonymous 1 ........................ 329 Individual. 

American Public Gas Association; American Gas Association; Spire Inc.; Spire Missouri Inc.; Spire Alabama Inc.; 

National Propane Gas Association.

Joint Gas Commenters 29 ...... 330 Utilities and Utility Trade Associations. 

A. Kessler Consulting, LLC ................................................... A. Kessler Consulting ............ 331 Industry Representative. 

Natalie Guarin ........................................................................ Guarin .................................... 332 Individual. 

Hayes Arnold ......................................................................... Arnold .................................... 333 Individual. 

Christina Haag ....................................................................... Haag ...................................... 334 Individual. 

Adelita G. Cantu .................................................................... Cantu ..................................... 335 Individual. 

Kim Marcellini ........................................................................ Marcellini ............................... 336 Individual. 

Kaitlynn Liset ......................................................................... Liset ....................................... 338 Individual. 

Raelene Shippee-Rice ........................................................... Shippee-Rice ......................... 339 Individual. 


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TABLE II.2—JULY 2022 NOPR COMMENTS—Continued 

Commenter(s) Abbreviation Comment number 

in the Docket Commenter type 

Lee’s Air, Plumbing, & Heating ............................................. Lee’s Air, Plumbing, & Heating.342 Industry Representative. 

Natural Gas Supply Association ............................................ NGSA .................................... 343 Utility Trade Association. 

Manufactured Housing Institute ............................................. MHI ........................................ 344; 363; 365 Trade Association. 

American Public Gas Association; American Gas Association; Spire Inc.; Spire Missouri Inc.; Spire Alabama Inc.; 

National Propane Gas Association; Atmos Energy.

Joint Requesters ................... 345; 356; 362 Utilities and Utility Trade Associations. 

Anonymous 2 ......................................................................... Anonymous 2 ........................ 346 Individual. 

Ohio Partners for Affordable Energy ..................................... OPAE ..................................... 347 Efficiency Advocate. 

Individual Commenters .......................................................... Individual Commenters .......... 348 Individual. 

Todd Snyder .......................................................................... Snyder ................................... 349 Individual. 

Middle Tennessee Natural Gas Utility District ...................... MTNGUD ............................... 350 Utility. 

Watertown Municipal Utilities ................................................ WMU ...................................... 351 Utility. 

Southwest Gas Corporation .................................................. Southwest Gas Corporation .. 353 Utility. 

Consumer Energy Alliance .................................................... Consumer Energy Alliance .... 354 Efficiency Advocate. 

Lake Apopka Natural Gas District ......................................... LANGD .................................. 355 Utility. 

Christopher Lish .................................................................... Lish ........................................ 358 Individual. 

National Caucus of Environmental Legislators ..................... National Caucus of Environmental Legislators.359 State/Local Government Officials. 

Theodore Trampe .................................................................. Trampe .................................. 361 Individual. 

Consumer Federation of America ......................................... CFA ....................................... 363 Consumer Advocate. 

Edison Electric Institute ......................................................... Edison Electric Institute ......... 363; 4099 Trade Association. 

Environment America ............................................................ Environment America ............ 363 Efficiency/Environmental Advocate. 

National Consumer Law Center ............................................ NCLC ..................................... 363 Consumer Advocate. 

Natural Resources Defense Council ..................................... NRDC .................................... 363 Efficiency/Environmental Advocate. 

Philadelphia Solar Energy Association ................................. PSEA ..................................... 363 Efficiency/Environmental Advocate. 

Physicians for Social Responsibility ...................................... Physicians for Social Responsibility.363 Consumer Advocate. 

Evergreen Action ................................................................... Evergreen Action ................... 364 Environmental Advocate. 

Mark Strauch ......................................................................... Mark Strauch ......................... 366 Individual. 

Municipal Gas Authority of Georgia ...................................... Georgia Gas Authority ........... 367 Utility. 

Northwest Energy Efficiency Alliance .................................... NEEA ..................................... 368 Efficiency/Environmental Advocates. 

Competitive Enterprise Institute, Consumers’ Research, 

Center for the American Experiment, JunkScience.com, 

Project 21, Caesar Rodney Institute, Rio Grande Foundation, Committee for a Constructive Tomorrow, 

FreedomWorks Foundation, Heartland Institute, Thomas 

Jefferson Institute, Independent Women’s Forum, Independent Women’s Voice, and Institute for Energy Research.

Joint Market and Consumer 

Organizations.

369, 373 Other Stakeholders. 

National Comfort Products .................................................... NCP ....................................... 370 Manufacturer. 

Green & Healthy Homes Initiative ......................................... GHHI ...................................... 363; 371 Efficiency/Environmental Advocates. 

Distribution Contractors Association ..................................... DCA ....................................... 372 Trade Association. 

Napoleon (aka Wolf Steel Limited) ....................................... Napoleon ............................... 374 Manufacturer. 

Pennsylvania Department of Environmental Protection; 

State of Nevada; New Jersey Board of Public Utilities; 

New York State Energy Research and Development Authority; Washington State Department of Commerce; Colorado Energy Office; New Mexico Energy, Minerals, and 

Natural Resources Department; California Energy Commission; Vermont Department of Public Service; Hawai’i 

State Energy Office.

State Agencies ...................... 375 State Agencies. 

The Heartland Institute .......................................................... The Heartland Institute .......... 376 Other Stakeholder. 

Carrier Global Corporation .................................................... Carrier .................................... 377 Manufacturer. 

The Manufactured Housing Institute; National Apartment 

Association; National Association of Home Builders; National Leased Housing Association; National Multifamily 

Housing Council.

The Coalition ......................... 378 Trade Associations. 

New York State Energy Research and Development Authority.NYSERDA ............................. 379 State Agency. 

The Natural Gas Association of Georgia .............................. NGA of Georgia ..................... 380 Utility Trade Association. 


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TABLE II.2—JULY 2022 NOPR COMMENTS—Continued 

Commenter(s) Abbreviation Comment number 

in the Docket Commenter type 

The Appliance Standards Awareness Project; American 

Council for Energy-Efficient Economy, CLASP, Consumer Federation of America, Government of the District 

of Columbia—Department of Energy & Environment, National Consumer Law Center; Natural Resources Defense Council; Northeast Energy Efficiency Partnerships; 

Southwest Energy Efficiency Project.

Joint Efficiency Commenters 381 Efficiency/Environmental Advocates. 

California Energy Commission .............................................. CEC ....................................... 382 State Agency. 

The National Consumer Law Center on behalf of its low-income clients: Alliance for Affordable Energy; Pennsylvania Utility Law Project; Consumer Federation of America; Southface; Massachusetts Energy Directors’ Association; Green Energy Consumers Alliance; Georgia 

Watch; North Carolina Justice Center; Texas Legal Services Center; Consumers Council of Missouri; Wildfire; 

Renew Missouri; Virginia Citizens Consumer Council.

NCLC et al. ............................ 383 Consumer Advocates. 

Heating, Air-conditioning & Refrigeration Distributors International.HARDI ................................... 384 Trade Association. 

Gas Analytic & Advocacy Services ....................................... GAS ....................................... 385 Other Stakeholder. 

Weil-McLain; Williamson-Thermoflo; Marley Engineered 

Products, LLC; Patterson-Kelley, LLC.

The Marley Companies ......... 386 Manufacturers. 

American Public Gas Association ......................................... APGA ..................................... 387 Utility Trade Association. 

Center for Climate and Energy Solutions; Institute for Policy 

Integrity, New York University School of Law; Montana 

Environmental Information Center; Natural Resources 

Defense Council; Sierra Club; Union of Concerned Scientists.

Climate Commenters ............. 388 Efficiency/Environmental Advocates. 

Lennox International Inc. ....................................................... Lennox ................................... 389 Manufacturer. 

Jack Spencer and Kevin Dayaratna, Ph.D. .......................... Spencer and Dayaratna ........ 390 Other Stakeholder. 

American Gas Association American; Pipeline Contractors 

Association; American Public Gas Association; American 

Society of Gas Engineers; American Supply Association; 

Arkansas Gas Association; Consumer Energy Alliance; 

Distribution Contractors Association; Hearth, Patio & Barbecue Association; Hispanics in Energy; Louisiana Gas 

Association; Manufactured Housing Institute; National 

Apartment Association; National Association of Home 

Builders; National Leased Housing Association; National 

Multifamily Housing Council; National Propane Gas Association; National Utility Contractors Association; Natural 

Gas Supply Association; Northeast Gas Association; 

Plastics Pipe Institute; Plumbing-Heating-Cooling Contractors Association; Rinnai America Corporation; Thermo Products LLC; U.S. Chamber of Commerce; Utility 

Workers Union of America, AFL–CIO; Williams Furnace 

Co. dba Williams Comfort Products or Williams.

AGA et al. .............................. 391 Manufacturers, Trade Associations, and Other Stakeholders. 

American Coke and Coal Chemicals Institute; American 

Gas Association; American Public Gas Association; Independent Petroleum Association of America; National Mining Association; Plumbing-Heating-Cooling Contractors— 

National Association; U.S. Chamber of Commerce.

The Associations ................... 392 Trade Associations. 

Climate Smart Missoula; Environmental Defense Fund; Elevate Energy; Energy Efficiency Alliance of New Jersey; 

Campaign for 100% Renewable Energy; Evergreen Action; Green Energy Consumers Alliance; Green & 

Healthy Homes Initiative; Keystone Energy Efficiency Alliance; Montana Environmental Info Center; New Buildings 

Institute; New York Geothermal Energy Organization; Climate & Clean Energy Program; Rewiring America; RMI; 

Sealed; Sierra Club; Union of Concerned Scientists; 

Urban Green Council; Utah Clean Energy.

Climate Smart Missoula et al. 393 Efficiency/Environmental Advocates. 

Rheem Manufacturing Company ........................................... Rheem ................................... 394 Manufacturer.

National Propane Gas Association ....................................... NPGA .................................... 395 Utility Trade Association. 


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30The parenthetical reference provides a 

reference for information located in the docket of 

DOE’s rulemaking to develop energy conservation 

standards for NWGFs and MHGFs. (Docket No. 

EERE–2014–BT–STD–0031, which is maintained at 

www.regulations.gov) The references are arranged 

as follows: (commenter name, comment docket ID 

number, page of that document). 

31The transcript for the August 3, 2022, public 

meeting can be found at Docket No. EERE–2014– 

BT–STD–0031–0363, which is maintained at 

www.regulations.gov. 

32The transcript for the September 6, 2022, 

public meeting can be found at Docket No. EERE– 

2014–BT–STD–0031–4099, which is maintained at 

www.regulations.gov. 

TABLE II.2—JULY 2022 NOPR COMMENTS—Continued 

Commenter(s) Abbreviation Comment number 

in the Docket Commenter type 

ACTION-Housing Inc.; Audubon Mid-Atlantic; Clean Air 

Council; Community Action Association of Pennsylvania; 

Conservation Voters of Pennsylvania; Energy Coordinating Agency; Environmental Justice Center of Chestnut 

Hill United Church; Evangelical Environmental Network; 

Green Building United; Green & Healthy Homes Initiative; 

Housing Alliance of Pennsylvania; Keystone Energy Efficiency Alliance; National Housing Trust; PA Jewish Earth 

Alliance; PennEnvironment; Pennsylvania Council of 

Churches; Pennsylvania Interfaith Power and Light; 

Pennsylvania Utility Law Project; Performance Systems 

Development; Philadelphia Energy Authority; Philadelphia 

Solar Energy Association; Physicians for Social Responsibility Pennsylvania; Schuylkill Community Action; Vote 

Solar; Working for Justice Ministry.

ACTION-Housing Inc. et al. 396 Other Stakeholders. 

Black Hills Energy ................................................................. Black Hills Energy ................. 397 Utility. 

Air Condition Contractors of America .................................... ACCA ..................................... 398 Trade Association. 

Allergy & Asthma Network; Alliance of Nurses for Healthy 

Environments; American Geophysical Union; American 

Lung Association; American Public Health Association; 

American Thoracic Society; Asthma and Allergy Foundation of America; Children’s Environmental Health Network; Climate for Health/ecoAmerica; National Carbon 

Monoxide Awareness Association; Oregon Physicians for 

Social Responsibility; Physicians for Social Responsibility; Physicians for Social Responsibility Florida; Physicians for Social Responsibility Pennsylvania; Texas Physicians for Social Responsibility; Washington Physicians 

for Social Responsibility.

Climate and Health Coalition 399 Efficiency/Environmental Advocates. 

Pacific Gas and Electric Company, San Diego Gas and 

Electric, and Southern California Edison; collectively referred to as ‘‘the California Investor-Owned Utilities’’.

The CA IOUs ......................... 400 Utilities. 

Sierra Club and Earthjustice ................................................. Sierra Club et al. ................... 401 Efficiency/Environmental Advocates. 

Avangrid; Consolidated Edison; Eversource; Exelon; Liberty 

Utilities; National Grid; Unitil; PG&E Corporation; Xcel.

The Joint Utilities ................... 402 Utilities. 

Plumbing-Heating-Cooling Contractors—National Association.PHCC .................................... 403 Trade Association. 

Plastics Pipe Institute ............................................................ PPI ......................................... 404 Trade Association. 

American Gas Association .................................................... AGA ....................................... 405 Utility Trade Association. 

Nortek Global HVAC, LLC ..................................................... Nortek .................................... 406 Manufacturer. 

National Grid .......................................................................... National Grid ......................... 407 Utility. 

Offices of the Attorney General for the States of Illinois, 

Maine, Maryland, Minnesota, Nevada, New Jersey, New 

Mexico, New York, Oregon, and Vermont, Washington, 

The Commonwealth of Massachusetts, the District of Columbia, and the City of New York.

Attorneys General ................. 408 State/Local Government 

Agencies. 

State of Washington, Department of Commerce .................. State of Washington .............. 409 State Agency. 

Mortex Products, Inc. ............................................................ Mortex .................................... 410 Manufacturer. 

Johnson Controls ................................................................... JCI ......................................... 411 Manufacturer. 

Trane Technologies ............................................................... Trane ..................................... 412 Manufacturer. 

Spire Inc.; Spire Alabama Inc.; Spire Missouri Inc. .............. Spire ...................................... 413; 4099 Utilities. 

Air-Conditioning, Heating, & Refrigeration Institute .............. AHRI ...................................... 414 Trade Association. 

Atmos Energy Corporation .................................................... Atmos Energy ........................ 415 Utility. 

Daikin Comfort Technologies Manufacturing, L.P. ................ Daikin ..................................... 416 Manufacturer 

A parenthetical reference at the end of 

a comment quotation or paraphrase 

provides the location of the item in the 

public record.30 To the extent that 

interested parties have provided written 

comments that are substantively 

consistent with any oral comments 

provided during the public meetings 

held on August 3, 2022,31 or September 

6, 2022,32 DOE cites the written 

comments throughout this final rule. 

3. Current Standards in Canada 

Although climate and fuel prices 

differ between the United States and 

Canada and will yield different results 


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33See Canada Gazette, Part II, Vol. 142, No. 26, 

pp. 2512–2570. (Available at: www.gazette.gc.ca/rppr/p2/2008/2008-12-24/pdf/g2-14226.pdf) (Last 

accessed Feb. 15, 2022) 

34See Canada Gazette, Part II, Vol. 153, No. 12, 

pp. 2423–2517. (Available at www.gazette.gc.ca/rppr/p2/2019/2019-06-12/pdf/g2-15312.pdf) (Last 

accessed Feb. 15, 2022) 

35 ‘‘Gas furnace for relocatable buildings’’ is 

defined in that regulation as a gas furnace that is 

intended for use in a temporary modular building 

that can be relocated from one site to another and 

is marked for use in relocatable buildings. 

36 DOE notes that EPCA set a deadline of 

December 31, 2013, for the Department to prescribe 

an energy conservation standard or energy use 

standard for electricity used for purposes of 

circulating air through ductwork (colloquially 

referred to as ‘‘furnace fans’’). (42 U.S.C. 

6295(f)(4)(D)) EPCA likewise set deadlines for the 

Department to set standards for certain motors, 

including a five-years lead time for compliance. (42 

U.S.C. 6313(b)(4)(B)) These deadlines are 

independent of the standard-setting provisions for 

consumer furnaces at 42 U.S.C. 6295(f) and the sixyear-lookback provisions at 42 U.S.C. 6295(m). 

in terms of costs and benefits of the 

standard, there are similarities in the 

equipment and venting materials used 

in both the United States and Canada 

with respect to NWGFs. Because the 

stock of buildings using NWGFs in 

Canada has many similarities to the 

stock using NWGFs in northern parts of 

the United States, the Canadian 

experience in terms of installation of 

condensing furnaces has relevance to 

the United States. As such, multiple 

stakeholders discussed the Canadian 

standards in their comments on the July 

2022 NOPR, and DOE references these 

standards several times later in this 

document. Further, as discussed in 

section V.C.1 of this document, the 

standard levels adopted for NWGFs by 

this final rule align with the Canadian 

regulations. 

Consumer furnaces are a regulated 

product in Canada and are subject to 

energy efficiency regulations. On 

December 24, 2008, Natural Resources 

Canada published regulations in the 

Canada Gazette, Part II amending the 

energy efficiency regulations for 

consumer furnaces, among other 

appliances and equipment.33 The 

revised regulation, required on or after 

December 31, 2009, sets a minimum 

efficiency of 90-percent AFUE for gas 

furnaces. This standard is applicable to 

gas furnaces, other than those with an 

integrated cooling component that are 

outdoor or through-the-wall gas 

furnaces, that have an input rate no 

greater than 65.92 kilowatts (‘‘kW’’) 

(225,000 Btu/h), and that use singlephase electric current. 

On June 12, 2019, Natural Resources 

Canada published regulations in the 

Canada Gazette, Part II amending the 

energy efficiency regulations for 

consumer furnaces, among other 

appliances and equipment.34 In 

addition to the definition of ‘‘gas 

furnaces,’’ Natural Resources Canada 

added a separate definition for ‘‘gas 

furnaces for relocatable buildings’’ (e.g., 

MHGFs). The revised regulation, which 

applies to covered gas furnaces 

(excluding gas furnaces for relocatable 

building, replacement gas furnaces, 

outdoor furnaces with an integrated 

cooling component, and through-the 

wall furnaces with an integrated cooling 

component) manufactured for sale or 

import into the Canadian market on or 

after July 3, 2019, sets a minimum 

efficiency of 95-percent AFUE. 

Furthermore, the revised regulation also 

sets a minimum efficiency of 80-percent 

AFUE for gas furnaces for relocatable 

buildings.35

III. General Discussion 

DOE developed this final rule after 

considering comments, data, and 

information from interested parties that 

represent a variety of interests. The 

following discussion addresses issues 

raised by these commenters regarding 

rulemaking timing and process, product 

classes and scope of coverage, the test 

procedure, technological feasibility, 

significance of energy savings, economic 

justification, the compliance date, and 

impacts from other rulemakings. 

A. General Comments 

This section summarizes general 

comments received from interested 

parties regarding rulemaking timing and 

process. 

1. Comments Regarding Authority 

The Marley Companies commented 

that the regulation of multiple levels of 

components (e.g., motors and furnace 

fans, which are themselves covered 

products under EPCA) internal to an 

appliance limits the utility of the 

appliance, because the specifications for 

such components (necessary for 

compliance with DOE energy 

conservation standards for those 

components as covered products) place 

constraints on the covered product’s 

design and operation. (The Marley 

Companies, No. 386 at pp. 7–9) The 

Marley Companies argued that changes 

to the efficiency of a component, 

prescriptive requirements, and test 

procedures are all cumulatively subject 

to the 6-year window between standards 

provided to manufacturers per 42 U.S.C. 

6295(m)(4)(B), so according to the 

commenter, any change to the standard 

for a covered product, to the standard 

for an internal component of that 

product, or to the test procedure should 

preclude further regulation of that 

product for six years pursuant to 42 

U.S.C. 6295(m)(4)(B). (Id. at p. 7) 

Further, Marley asserted that the 

cumulative impact of multiple 

component efficiency regulations within 

a regulated appliance is that the 

operating range of the entire product is 

reduced. (Id.) The Marley Companies 

commented that the definition of 

‘‘energy conservation standard’’ 

includes a reference to 42 U.S.C. 

6295(r), which discusses the inclusion 

in standards of test procedures and 

other requirements, and, therefore, the 

term ‘‘standard’’ includes test 

procedures used to determine the 

efficiency of covered products. (Id. at p. 

9) The Marley Companies commented 

that 42 U.S.C. 6293(e)(4) conveys that 

Congress realized and stated in EPCA 

that test procedures should not be 

altered at the same time as appliance 

level efficiencies, and, therefore, the 

Marley Companies asserted that 

Congress established that any change in 

an efficiency of any component, 

combination of components, or the 

entire covered product, as well as any 

required construction change through 

prescriptive requirements and any 

change in the test procedure used to 

determine efficiency, would reset the 6- 

year timeframe established by 42 U.S.C. 

6295(m)(4)(B). (Id. at p. 9) In contrast, 

Sierra Club et al. commented that DOE 

correctly interprets furnaces and 

furnaces fan as two separate products 

for the purposes of the ‘‘6-year lock-out’’ 

provision at 42 U.S.C. 6295(m)(4)(B). 

(Sierra Club et al., No. 401 at p. 3) 

There are two products that can be 

found as a component of a consumer 

furnace and which are separately 

regulated by DOE: consumer furnace 

fans and certain types of electric motors. 

In response to comments from Marley 

Companies and the Sierra Club, DOE 

notes that consumer furnaces, consumer 

furnace fans, and electric motors are all 

separately covered products under 

EPCA. (42 U.S.C. 6292(a)(5); 42 U.S.C. 

6295(f)(4)(D); 42 U.S.C. 6311(1)(A)) As 

such, DOE considers their timelines 

separately in the context of the 

requirement established by 42 U.S.C. 

6295(m)(4)(B) that a manufacturer ‘‘shall 

not be required to apply new standards 

to a product with respect to which other 

new standards have been required 

during the prior 6-year period.’’ 36 The 

6-year period applies to covered 

products individually, and ECPA does 

not provide exceptions to the review 

requirements when related products or 

components have overlapping review 

timeframes. Furthermore, DOE notes 

that 42 U.S.C. 6295(m) applies to energy 

conservation standards, not test 


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37For example, DOE previously published in the 

Federal Register a direct final rule establishing new 

energy conservation standards for consumer 

furnaces on June 27, 2011 (76 FR 37408), and then 

published in the Federal Register a final rule 

amending the test procedure for consumer furnaces 

on January 15, 2016 (81 FR 2628). DOE previously 

published in the Federal Register a final rule 

amending the test procedure for furnace fans on 

January 3, 2014 (79 FR 500), and then published in 

the Federal Register a final rule establishing new 

energy conservation standards for furnace fans on 

July 3, 2014 (79 FR 38130). 

procedures. Under this provision, DOE 

is directed to amend energy 

conservation standards for a covered 

product if such standards would be 

technologically feasible, economically 

justified, and result in significant 

conservation of energy. (42 U.S.C. 

6295(m)(1)(B); 42 U.S.C. 6295(o)) As 

such, DOE does not agree with the 

Marley Companies’ contention that this 

statutory provision applies more 

broadly to test procedure changes, and 

the Department has concluded that the 

Marley Companies have advanced an 

incorrect reading of 42 U.S.C. 6295(r) to 

support their point. That provision of 

EPCA simply acknowledges that most 

energy conservation standards (i.e., 

performance-based ones) will require an 

accompanying test procedure and may 

necessitate additional ancillary 

requirements to facilitate compliance. 

Further, 42 U.S.C. 6295(r) specifically 

refers to test procedures prescribed in 

accordance with 42 U.S.C. 6293. As 

such, there simply is no statutory basis 

for applying the 6-year timeframe, 

which applies to standards prescribed 

under 42 U.S.C. 6295(m), to test 

procedures prescribed under 42 U.S.C. 

6293.37

NPGA stated that DOE has failed to 

provide a fair and transparent 

rulemaking process. (NPGA, No. 395 at 

p. 3) NPGA and AGA both commented 

that they believe the proposal to be 

unlawful because DOE is not authorized 

to create design standards for furnaces, 

but NPGA and AGA suggested that is 

what the proposed rule effectively does. 

(NPGA, No. 395 at p. 9; AGA, No. 405 

at pp. 50–51) NPGA stated that the 

proposal sets a de facto standard for 

building design by requiring the 

alteration of building venting systems. 

(NPGA, No. 395 at p. 22) Additionally, 

NPGA and AGA stated that the 

necessity to include condensing 

technology, as well as other associated 

design elements, including new venting, 

electric fans, and a condensate drainage 

system, is effectively enforcing a design 

requirement. (NPGA, No. 395 at pp. 9– 

10; AGA, No. 405 at pp. 50–51) AGA 

further commented that Congress’s 

decision to exclude furnaces from the 

list of products for which DOE can 

include design requirements, as 

outlined in 42 U.S.C. 6291(6)(B), 

demonstrates that DOE may not develop 

design requirements for furnaces. (AGA, 

No. 405 at pp. 50–52) 

In response, DOE is not creating a 

prescriptive design requirement for 

consumer furnaces in this final rule. In 

its definition of ‘‘energy conservation 

standard’’ at 42 U.S.C. 6291(6), EPCA 

provides that a performance standard is 

one which prescribes a minimum level 

of energy efficiency or a maximum 

quantity of energy use for a covered 

product, determined in accordance with 

test procedures developed under 42 

U.S.C. 6293. (42 U.S.C. 6291(6)(A)) In 

this case, the standards adopted in this 

final rule are set in terms of AFUE, 

which is a performance metric and is 

determined through testing consumer 

furnaces under the applicable DOE test 

procedure, as discussed in section III.C 

of this document. DOE does not 

mandate any specific design for 

achieving compliance with the amended 

standard, as would constitute a design 

requirement under 42 U.S.C. 6291(6)(B). 

Thus, the final rule complies with the 

statutory requirements for setting a 

performance standard under EPCA. The 

possibility that some technologies may 

not be sufficient to achieve compliance 

is true for any performance standard, 

and does not transform a performance 

standard into a de facto design 

requirement. DOE acknowledges that 

the NWGFs and MHGFs that currently 

achieve 95-percent AFUE do employ 

condensing technology. However, the 

performance-based standards adopted in 

this final rule do not preclude new or 

alternative heat exchanger designs, 

venting systems, or materials from being 

used in future furnace product designs, 

which may provide additional avenues 

(alone or in combination) for increasing 

furnace AFUE. In addition, this final 

rule provides a five-year lead time 

before compliance with the amended 

standards is required, so further 

innovation may be possible during that 

time. DOE’s approach has been 

explained at length and in detail in both 

the July 2022 NOPR and this final rule, 

as well as the TSDs accompanying those 

documents. 

2. Comments Opposing the July 2022 

Proposal 

This section summarizes comments 

opposing the July 2022 proposal. 

Several commenters stated that DOE 

should withdraw the proposed rule. 

(Georgia Gas Authority, No. 367 at p. 1; 

MHI, No. 365 at p. 1; DCA, No. 372 at 

p. 2; The Heartland Institute, No. 376 at 

p. 1; HARDI, No. 384 at p. 2; Nortek, No. 

406 at pp. 5–6) Plastics Pipe Institute 

commented that it opposes the proposed 

rule due to negative impacts on 

consumers (including senior and lowincome households), small businesses, 

the overall gas furnace market, and the 

gas industry. (Plastics Pipe Institute, No. 

404 at p. 1) Spire commented that the 

proposed standards place undue burden 

on consumers because many homes are 

not set up so as to be compatible with 

condensing gas furnaces. (Spire, No. 413 

at pp. 20–21) The Heartland Institute 

commented that this rule is 

unnecessary. (The Heartland Institute, 

No. 376 at pp. 1–2) HARDI stated 

disagreement with the methodology and 

conclusions used to support the 

proposed standards. (HARDI, No. 384 at 

p. 2) A number of individuals urged 

DOE to reject the proposed rule on gasburning residential furnaces because of 

considerations such as individual 

preferences, higher upfront costs, and 

higher maintenance costs. (Veiga, No. 

326 at p. 1; Willis, No, 327 at p. 1; 

Anonymous 1, No. 329 at p. 1) PHCC 

commented that it does not support the 

proposed standards for NWGFs and 

MHGFs, as there are parts of the NOPR 

that are overly optimistic, do not reflect 

current market conditions, make 

inaccurate assumptions, minimize 

installation issues for condensing-type 

products, and would generally create 

negative impacts for manufacturers and 

consumers. (PHCC, No. 403 at p. 1) 

Strauch recommended that both 

condensing and non-condensing 

furnaces remain available on the market. 

(Strauch, No. 366 at p. 2) Spencer and 

Dayaratna stated that the standards 

proposed in the July 2022 NOPR are 

unnecessary because condensing 

furnaces are readily available in the 

marketplace and have already achieved 

significant market penetration. (Spencer 

and Dayaratna, No. 390 at p. 10) 

The Heartland Institute expressed 

concern that the proposed standard 

would negatively impact energy 

consumption, emissions, and the 

economy. (The Heartland Institute, No. 

376 at p. 1) The Heartland Institute 

further stated that there is a lack of 

economic justification. (Id. at p. 2) 

Additionally, the Heartland Institute 

argued that, while the highest-efficiency 

products may produce long-run savings 

for consumers under ideal laboratory 

settings, these gains from an increased 

efficiency are often not replicated in the 

real world. (Id. at p. 1) Atmos Energy 

similarly commented that the technical 

analyses do not reasonably consider 

economic impacts, particularly those on 

affordability and the potential 

disruption to highly-effective energy 


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38The ‘‘Process Rule’’ refers to 10 CFR part 430, 

subpart C, appendix A, ‘‘Procedures, 

Interpretations, and Policies for Consideration of 

New or Revised Energy Conservation Standards and 

Test Procedures for Consumer Products and Certain 

Commercial/Industrial Equipment’’. 

conservation programs. (Atmos Energy, 

No. 415 at p. 2) 

As discussed in section II.A of this 

document, EPCA provides DOE with the 

authority to regulate the energy 

efficiency of a number of consumer 

products, including NWGFs and 

MHGFs, which are a subset of consumer 

furnaces. (42 U.S.C. 6292(a)(5)) EPCA 

prescribed energy conservation 

standards for these products (42 U.S.C. 

6295(f)(1) and (2)) and directs DOE to 

conduct future rulemakings to 

determine whether to amend these 

standards (42 U.S.C. 6295(f)(4) and 42 

U.S.C. 6295(m)(1)). Any such new 

standards for NWGFs and MHGFs must, 

under 42 U.S.C. 6295(o)(2)(A), be 

designed to achieve the maximum 

improvement in energy efficiency that is 

technologically feasible and 

economically justified. DOE’s analyses 

supporting its conclusion that it has met 

these criteria for the standards adopted 

in this final rule are presented in section 

IV and section V of this document, 

respectively. 

Atmos Energy disagreed that the 

proposed standards would ‘‘represent 

the maximum improvement in energy 

efficiency that is technologically 

feasible and economically justified,’’ 

alleging that DOE’s underlying technical 

analyses do not reasonably consider 

relevant economic impacts. (Atmos 

Energy, No. 415 at p. 2) Atmos Energy 

also disagreed with the July 2022 

NOPR’s tentative conclusion that the 

benefits of the proposed standards 

greatly exceed the burdens. (Id.) Atmos 

Energy commented that DOE should 

improve the accuracy of its analysis by 

tailoring its consideration of consumer 

behavior, life-cycle evaluations, and 

costs. (Id. at p. 5) Atmos Energy further 

commented that the proposed rule uses 

unsupported and broad assumptions 

that are not reflective of actual 

consumer behavior and information. 

(Id.) Similarly, the Coalition commented 

that DOE has failed to adequately 

consider the cost impacts of the 

proposed standards and has failed to 

properly assess the balancing of benefits 

and burdens. (The Coalition, No. 378 at 

p. 5) Spencer and Dayaratna stated that 

the standards proposed in the July 2022 

NOPR do not meet the ‘‘economically 

justified’’ criteria for prescribing new or 

amended standards. (Spencer and 

Dayaratna, No. 390 at pp. 1–2) 

Specifically, Spencer and Dayaratna 

stated that the analysis in the July 2022 

NOPR is questionable regarding all 

seven of the factors set by EPCA. (Id.) 

Spencer and Dayaratna suggested that 

DOE did not present sufficient rationale 

for factors 5 (i.e., the effect of any 

lessening of competition, as determined 

in writing by the Attorney General, that 

is likely to result from the standard) and 

6 (i.e., the need for national energy and 

water conservation). (Id.) AGA 

commented that the NOPR suffers from 

many evidentiary shortcomings that fail 

to meet the statutory requirement that 

energy conservation standards must be 

‘‘supported by substantial evidence’’ on 

the record. (AGA, No. 405 at pp. 29–30) 

AGA commented that the NOPR’s 

conclusion that the proposed standards 

would be economically justified and 

technically feasible relies on 

unexplained assumptions and 

conclusions. (Id.) AGA asserted that the 

NOPR fundamentally fails to adhere to 

the Process Rule,38 and specifically 

found fault with DOE’s LCC model and 

the lack of sufficient time for public 

comment. (Id. at pp. 21–23) AGA 

commented that particularly in the LCC 

model, the qualitative and quantitative 

analytical methods are not fully 

documented for the public and do not 

produce results that can be explained 

and reproduced. (Id.) AGA commented 

that these issues prevent stakeholders 

from evaluating compliance with other 

aspects of EPCA’s and the Process 

Rule’s requirements, and the commenter 

encouraged DOE to correct these 

deficiencies. (Id.) Trampe commented 

that he does not support the proposed 

95-percent AFUE standard, and that the 

standard should be maintained at 80- 

percent AFUE. (Trampe, No. 361 at p. 1) 

Lennox suggested that DOE should 

reconsider whether a 92-percent AFUE 

standard is an appropriate minimum 

efficiency level for NWGFs. (Lennox, 

No. 389 at p. 2) Lennox also commented 

that, based on DOE’s analysis, AFUE 

levels above 95 percent are not 

economically justified and have 

significant negative consumer impacts. 

(Id.) 

In regard to the proposed MHGF 

standards, Nortek and JCI commented 

that they do not support the proposed 

95-percent AFUE standard for MHGFs. 

(Nortek, No. 406 at p. 2; JCI, No. 411 at 

p. 1) Nortek commented that DOE 

should maintain the 80-percent AFUE 

requirement for MHGFs. (Nortek, No. 

406 at pp. 5–6) JCI added that the 95- 

percent AFUE standard for MHGFs 

would impose costs on consumers with, 

on average, lower household incomes. 

(JCI, No. 411 at p. 1) JCI recommended 

that DOE should exclude MHGFs from 

this rulemaking and gather additional 

data on that product class, particularly 

in replacement applications. (Id.) AHRI 

also stated that DOE should reconsider 

active mode energy conservation 

standards for MHGFs. (AHRI, No. 414– 

2 at p. 2) Mortex commented that it too 

does not believe that DOE’s proposed 

95-percent AFUE standard is 

economically justified for MHGFs, and 

that DOE should retain the current 

standard for MHGFs. (Mortex, No. 410 

at p. 1) In support of its 

recommendation, Mortex pointed to the 

two-tiered standards that Canada has 

developed for furnaces, with a 95- 

percent AFUE level for most residential 

gas furnaces and 80-percent AFUE level 

for gas furnaces in relocatable buildings 

and replacements in manufactured 

housing. (Mortex, No. 410 at p. 4) 

Mortex recommended this structure as a 

model for DOE to utilize. (Id.) MHI 

commented that the current MHGF 

AFUE standards strike a balance 

between energy savings and 

affordability, and the commenter urged 

DOE to withdraw the NOPR or replace 

the proposed 95-percent AFUE level for 

MHGF with a standard at 80-percent 

AFUE for gas furnaces used in 

manufactured homes. (MHI, No. 365 at 

pp. 2–3) 

As discussed in section II.A of this 

document, EPCA provides specific 

statutory criteria for amending energy 

conservation standards. EPCA generally 

requires a public notice-and-comment 

process (see 42 U.S.C. 6295(p)), which 

affords members of the public the 

opportunity to comment on the 

rulemaking, and DOE makes all relevant 

documents publicly available at 

www.regulations.gov. As part of the 

process for this rulemaking, DOE 

convened two public meetings, 

including one aimed at helping 

stakeholders understand its analytical 

models, to ensure the transparency of its 

process. Additionally, DOE carefully 

considers the benefits and burdens of 

amended standards to determine 

whether the amended standards are the 

maximum standard levels that are 

technologically feasible and 

economically justified, and would 

conserve a significant amount of energy, 

as required by EPCA (see 42 U.S.C. 

6295(o)(2)–(3)). Section IV of this 

document outlines DOE’s approach to 

analyzing various potential amended 

standard levels, and section V of this 

document provides the results of those 

analyses, as well as a detailed 

explanation of DOE’s weighing of the 

benefits and burdens and the rationale 

for the amended standards adopted by 

this final rule. As detailed in those 

sections, DOE has determined that its 

rulemaking process for the subject 


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furnaces has satisfied the applicable 

requirements of EPCA and the Process 

Rule and that the adopted standards are 

supported by substantial evidence in the 

record. Further, DOE notes that the 

webinar held on September 6, 2022, 

provided further opportunity for 

clarification regarding the LCC model 

and extended the comment period to 

provide sufficient time to provide 

written comments. 

Plastics Pipe Institute expressed 

concern with the precedent that would 

accompany this rule change, adding that 

it would open the door for future 

restrictions on natural gas. (Plastics Pipe 

Institute, No. 404 at p. 3) In response, 

DOE notes that the amended energy 

conservation standards for NWGFs and 

MHGFs do not prohibit the sale and use 

of gas-fired furnaces, nor do they restrict 

the use of natural gas, but instead, they 

improve the energy efficiency of those 

gas-burning products. 

3. Comments Expressing Support for the 

July 2022 Proposal 

This section summarizes comments 

expressing support for the July 2022 

proposal. 

DOE received comments from the 

OPAE, NCEL, State of Washington, 

NEEA, the Joint Utilities, the National 

Grid, Climate Smart Missoula et al., 

Evergreen Action, the CA IOUs, the 

PSEA, the NCLC et al., and the NRDC 

expressing support for the proposed 

energy conservation standards for 

NWGFs and MHGFs. (OPAE, No. 347 at 

p. 1; NCEL, No. 359 at p. 1; State of 

Washington, No. 409 at pp. 1–2; NEEA, 

No. 368 at pp. 1–2; the Joint Utilities, 

No. 402 at p. 1; National Grid, No. 407 

at p. 1; Climate Smart Missoula et al., 

No. 393 at pp. 1–2; Evergreen Action, 

No. 364 at p. 1; The CA IOUs, No. 400 

at p. 1; PSEA, Public Meeting Webinar 

Transcript, No. 363 at p. 37; NCLC et al., 

No. 383 at p. 9; NRDC, Public Meeting 

Webinar Transcript, No. 363 at p. 30;) 

GHHI, the Attorneys General, and Sierra 

Club et al. further encouraged DOE to 

adopt the proposed efficiency standards 

for consumer gas furnaces. (GHHI, No. 

371 at p. 1; Attorneys General, No. 408 

at pp. 1–2; Sierra Club et al., No. 401 at 

p. 1) The Joint Efficiency Commenters 

added that they strongly support DOE’s 

proposed standards for minimum 

efficiency of NWGFs and MHGFs and 

standby mode and off mode power 

consumption. (Joint Efficiency 

Commenters, No. 381 at p. 1) The CA 

IOUs further explained that the 

proposed rule would allow consumers 

to have greater access to energy-efficient 

products that are technologically 

feasible and economically justified. (The 

CA IOUs, No. 400 at p. 1) Daikin stated 

that despite some concerns regarding 

the accuracy of some portions of the 

TSD concerning costs due to the 

confidential nature of some 

manufacturer cost data, the company 

generally finds that DOE’s analysis is 

reasonable in most areas based on the 

data that is publicly available. (Daikin, 

No. 416 at p. 3) The Joint Utilities stated 

that they support common-sense, costsaving improvements to existing 

efficiency standards coupled with 

programs to provide the financial 

resources to enable customers to make 

the transition to higher-efficiency 

furnace products and minimize the 

impact of upfront costs. (The Joint 

Utilities, No. 402 at p. 1) National Grid 

stated that Federal energy conservation 

standards ensure that the benefits of 

efficiency gains can reach all customer 

segments, including renters who often 

do not make decisions about appliances. 

(National Grid, No. 407 at p. 1) The 

State of Washington added that it 

understands the cost savings and 

emissions benefits that more efficient 

standards can provide. (State of 

Washington, No. 409 at pp. 1–2) 

DOE also received over 3,000 

submissions of a form letter encouraging 

DOE to enact strong efficiency standards 

for furnaces that phase out the leastefficient furnace models. (Individual 

Commenters, No. 348 at pp. 1–3552) 

The commenters stated that heating 

homes should not produce pollution, 

and they stated that outdated and 

inefficient gas furnaces are emitting 

millions of tons of avoidable climate 

emissions and other harmful pollutants. 

(Id.) A number of other individual 

commenters expressed similar views. 

(Neumann, No. 328 at p. 1; Guarin, No. 

332 at p. 1; Haag, No. 334 at p. 1; Cantu, 

No. 335 at p. 1; Marcellini, No. 336 at 

p. 1; Liset, No. 338 at p. 1; Snyder, No. 

349 at p. 1; Lish, No. 358 at p. 1) In 

addition to expressing support for the 

standards via the form letter, Guarin, 

Haag, Cantu, Marcellini, NCEL, and 

Liset all commented that by requiring 

furnaces to use about 15-percent less 

energy, the proposed standard would 

cut 373 million metric tons of carbon 

emissions and 833 thousand tons of 

NOX over 30 years of sales, as outlined 

in the July 2022 NOPR. (Guarin, No. 332 

at p. 1; Haag, No. 334 at p. 1; Cantu, No. 

335 at p. 1; Marcellini, No. 336 at p. 1; 

NCEL, No. 359 at p. 1; Liset, No. 338 at 

p. 1) These commenters added that the 

proposed standard would help with 

breathing since it would reduce 

needless greenhouse gas emissions. 

(Guarin, No. 332 at p. 1; Haag, No. 334 

at p. 1; Cantu, No. 335 at p. 1; 

Marcellini, No. 336 at p. 1; Liset, No. 

338 at p. 1) The CA IOUs similarly 

stated that this standard will 

significantly improve ambient and 

indoor air quality in the United States. 

(The CA IOUs, No. 400 at p. 2) 

Other commenters similarly discussed 

the beneficial impacts that the proposed 

standards would have on health and the 

environment. Arnold asked DOE to help 

work toward a cleaner and more 

sustainable future by increasing the 

efficiency standards for furnaces. 

(Arnold, No. 333 at p. 1) Shippee-Rice 

urged DOE to enact these ‘‘long 

overdue’’ standards, stating that doing 

so will decrease pollutants that threaten 

human, animal, and plant health. 

Shippee-Rice also noted that this 

proposed standard will help to decrease 

the harmful effects of current climate 

change dangers. (Shippee-Rice, No. 339 

at p. 1) Daikin agreed with DOE’s 

initiatives to address emission 

reductions and set higher standards 

with climate change, decarbonization, 

and electrification in mind. (Daikin, No. 

416 at pp. 2–3) Lee’s Air, Plumbing & 

Heating commented that a higher 

standard would eliminate pollution and 

wasted energy. (Lee’s Air, Plumbing & 

Heating, No. 342 at p. 1) The Physicians 

for Social Responsibility commented 

that pollutants from gas furnaces may be 

back-drafted into homes when indoor 

air pressure is reduced. Alternatively, 

they stated that pollutants can be vented 

out into the surrounding community. 

The commenter added that those 

pollutants from gas appliances can lead 

to the development of childhood 

asthma, increase susceptibility to other 

respiratory infections, decrease general 

cognitive and neurological functioning, 

and exacerbate cardiovascular disease. 

The commenter also stated that these 

pollutants can cause community-wide 

harm, particularly among low-income 

communities and communities of color. 

(The Physicians for Social 

Responsibility, Public Meeting Webinar 

Transcript, No. 363 at pp. 5–6) The 

commenter further argued that the 

proposed standards can help lower 

utility bills, which on its own can 

positively impact consumers’ health. 

The commenter concluded that higher 

efficiency standards will reduce the 

health effects from air pollution and 

limit the impacts of climate change such 

as extreme heat, population 

displacement, and injuries and fatalities 

due to natural disasters. (Id. at p. 7) 

Evergreen Action noted that residential 

heating is the biggest utility in most U.S. 

households. Evergreen Action stated 

that gas heating appliances account for 

two-thirds of on-site household 

greenhouse gas emissions, and that gas 


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furnaces are a significant source of NOX.

(Evergreen Action, No. 364 at p. 1) 

Climate Smart Missoula et al. also stated 

that furnaces have lifespans of 20 years 

or more and suggested that adopting 

updated standards will lead to benefits 

for consumers’ pocketbooks, as well as 

the planet, through emission reduction. 

(Climate Smart Missoula et al., No. 393 

at p. 2) Environment America 

commented that the proposed standards 

would reduce pollution that causes 

climate change and negatively impacts 

health. (Environment America, Public 

Meeting Webinar Transcript, No. 363 at 

pp. 18–19) Environment America 

suggested that, based on the reduced 

energy use and emissions, along with 

reduced annual home heating bills, DOE 

should finalize the proposed standards. 

(Id.) The National Caucus of 

Environmental Legislators 

recommended that DOE not to give in to 

industry-delaying tactics because action 

has been delayed and stymied 

numerous times in the past 30 years. 

They further commented in support of 

the proposal to increase the efficiency 

level of gas furnaces to 95-percent 

AFUE. (National Caucus of 

Environmental Legislators, No. 359 at p. 

1) 

NEEA supported DOE’s finding in the 

July 2022 NOPR that implementing a 

95-percent AFUE standard for NWGFs 

and MHGFs would lead to significant, 

cost-effective energy savings. (NEEA, 

No. 368 at pp. 1–2) NEEA stated that the 

consumer furnace market is ready for a 

furnace standard set at a condensing 

level, as evidenced by the market 

maturity and the lack of insurmountable 

barriers. (Id. at pp. 2–3) NEEA noted 

that condensing furnaces make up the 

majority of sales in the Northwest and 

their market share is growing. (Id.) 

NEEA stated that a study commissioned 

by NEEA and other stakeholders 

demonstrated the lack of barriers as 

would prevent a condensing furnace 

installation. (Id.) Additionally, NEEA 

commented that a 5-year transition time 

would allow sufficient time for 

manufacturers to convert their 

production and close the remaining 

sales gap. (Id.) 

Daikin commented that it believes the 

results of DOE’s analysis would not 

substantially change even if DOE were 

provided additional data, and, therefore, 

it expressed support for the proposed 

95-percent standard for NWGFs. 

(Daikin, No. 416 at p. 3) Carrier and 

Trane also expressed support for the 95- 

percent AFUE standard for NWGF, and 

Trane added that this level will provide 

significant CO2 savings. (Carrier, No. 

377 at p. 1; Trane, No. 412 at p. 1) AHRI 

stated that DOE has conducted 

sufficient analysis to amend active 

mode energy conservation standards for 

NWGFs and recommended that DOE 

finalize this rulemaking to bring 

resolution to the process and to bring 

certainty to the marketplace. (AHRI, No. 

414–1 at p. 1) The CEC commented that 

it supports DOE’s proposed standard for 

consumer furnaces at 95-percent AFUE 

and 8.5 W, and that DOE should finalize 

these standards. (CEC, No. 382 at pp. 1– 

2) AHRI and Rheem agreed with DOE’s 

conclusion that a 98-percent AFUE 

standard would be unreasonable and 

not economically justified for NWGFs. 

(AHRI, No. 414–1 at pp. 1–2; Rheem, 

No. 394 at p. 2) 

The State Agencies supported the 

proposed TSL 8 standard and 

methodology and encouraged DOE to 

adopt the rule. (State Agencies, No. 375 

at pp. 1–2) The State Agencies further 

commented that the proposed TSL 8 

standard is technologically achievable, 

beneficial to American consumers’ 

physical and financial health, and is an 

important step in reducing emissions. 

(Id. at p. 1) NYSERDA supported DOE’s 

proposal to adopt TSL 8 for MHGFs and 

NWGFs and recommended that DOE 

consider an even more stringent 

standard at 96-percent AFUE for NWGF. 

(NYSERDA, No. 379 at pp. 1–2) 

NYSERDA further commented that TSL 

8 leads to significant energy and 

economic savings over the lifetime of 

the equipment. (Id.) The NCLC et al. and 

the Joint Efficiency Commenters also 

stated that the proposed TSL 8 

efficiency levels promise substantial 

financial benefits to consumers and 

added that these financial benefits are 

especially promising for low-income 

consumers. (NCLC et al., No. 383 at p. 

4; Joint Efficiency Commenters, No. 381 

at p. 2) The NCLC commented that lowincome rental properties are more likely 

to have less-efficient furnaces and to 

pass the associated larger energy bills on 

to tenants. (NCLC, Public Meeting 

Webinar Transcript, No. 363 at pp. 8– 

10) NCLC noted that this could amount 

to $2,000 to $3,000 in incremental costs 

for tenants over the life of the furnace. 

(Id. at p. 9) The commenter also stated 

that low-income consumers have the 

fewest resources to address the harms of 

rising temperatures and would be 

further adversely impacted. The NCLC 

commented that this presents an equity 

issue and accordingly concluded that 

DOE should adopt a strong furnace 

efficiency standard. (Id. at p. 10) 

The Philadelphia Solar Energy 

Association commented in support of 

the proposed standards, stating that 

high-efficiency furnaces help lowincome consumers in Philadelphia 

reduce their energy costs, as well as 

indoor air pollution from atmospheric 

furnaces. (Philadelphia Solar Energy 

Association, Public Meeting Webinar 

Transcript, No. 363 at p. 37) 

The Joint Efficiency Commenters 

stated that DOE should not adopt TSL 

7 as an alternative to TSL 8, adding that 

the percentage of low-income 

consumers benefitting from the 

potential standards is significantly 

greater at TSL 8 compared to TSL 7. 

(Joint Efficiency Commenters, No. 381 at 

p. 2) 

In response to the July 2022 NOPR, 

The NCLC et al. commented that if the 

standard is set too high, many 

consumers will be saddled with 

purchasing expensive products where 

energy savings do not outweigh initial 

costs. However, the NCLC et al. 

commented that, if the standard is set 

too low, then the percentage of 

customers who end up with higher LCC 

will increase. (NCLC et al., No. 383 at 

p. 6) Therefore, the NCLC et al. 

commented that DOE should not reject 

a standard because some consumers will 

experience net costs over the life of the 

product. (Id.) NCLC et al. noted that, at 

TSL 8, the average net benefits are more 

significant than the average net costs for 

NWGFs. (Id.) 

As discussed in section II.A of this 

document, DOE is directed by EPCA to 

conduct periodic rulemakings to 

determine whether to amend the 

standards for various products, 

including consumer furnaces. (42 U.S.C. 

6295(f)(4) and 42 U.S.C. 6295(m)(1)) The 

standards adopted by this final rule, 

which include the same AFUE levels as 

those proposed in the July 2022 NOPR, 

adhere to the requirements of EPCA in 

that they are designed to achieve the 

maximum improvement in energy 

efficiency that DOE determines is 

technologically feasible and 

economically justified. (42 U.S.C. 

6295(o)(2)(A) and 42 U.S.C. 

6295(o)(3)(B)) The analytical results 

showing both the benefits and burdens 

of the standards, along with DOE’s 

rationale for adopting these amended 

standards, are discussed in section V of 

this document. 

4. Regional Standards 

Nortek, AHRI, and MHI encouraged 

DOE to consider regional standards that 

align with the U.S. Department of 

Housing and Urban Development 

(‘‘HUD’’) zones. (Nortek, No. 406 at p. 6; 

AHRI, No. 414–2 at pp. 3–4; MHI, No. 

365 at pp. 1–2) MHI commented that the 

HUD code for manufactured homes 

prescribes energy efficiency features 

that are specific to the region where the 

home will be sited. (MHI, No. 365 at pp. 

1–2) MHI suggested that consulting with 


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HUD will assist DOE in understanding 

how furnace standards impact consumer 

access to affordable housing, including 

manufactured housing. (Id.) PHCC 

commented that DOE’s early efforts for 

this consumer furnace rulemaking 

considered creating regional standards 

to establish a pathway for higherefficiency products that could not be 

justified on a national scale due to 

differences in usage and energy 

consumption of different climate zones. 

(PHCC, No. 403 at pp. 1–2) Trampe 

commented that the entire United States 

should not have to follow the same 

standard and added that what applies in 

Minnesota may not apply in Kansas, 

Tennessee, Texas, or other States. 

(Trampe, No. 361 at p. 1) Nortek pointed 

to NRCan’s standards, which were set at 

95-percent AFUE for NWGFs and 80- 

percent AFUE for MHGFs in 2019. 

Nortek noted that the climate in Canada 

has more severe winters than many 

parts of the United States. Nortek also 

stated that setting standards at a 

condensing level disproportionately 

impacts southern homeowners because 

most manufactured homes are in the 

South where mild winters allow 

furnaces to run for only 3 months a year. 

(Nortek, No. 406 at pp. 3–4) Like Nortek, 

the Heartland Institute also discussed 

regional differences, stating that in 

Northern States, such as Minnesota or 

Wisconsin, most residential natural gas 

furnaces already meet 95-percent AFUE. 

In Southern States, such as Texas, 

Georgia, and Florida, a smaller 

percentage of homeowners have 

adopted higher-efficiency furnace 

models. The Heartland Institute further 

offered that condensing models are 

already installed in regions where 

furnaces are heavily used, which 

mitigates the need for this mandate. 

(The Heartland Institute, No. 376 at p. 

2) JCI commented that it believes a 

regional standard with a condensing 

level for the Northern region and a noncondensing level for the Southern 

region would be more economically 

justified and would align with the 

existing central air conditioning/heat 

pump standards. JCI commented that, in 

southern installations, the additional 

installation cost would result in a 

negative LCC using the amended values 

JCI supplied for manufacturer 

production costs (‘‘MPCs’’). (JCI, No. 

411 at p. 2) 

Conversely, Daikin commented that 

there are logistical and operational 

challenges associated with regional 

standards; therefore, Daikin supported a 

national energy conservation standard, 

stating that it does not support TSL 4. 

(Daikin, No. 416 at p. 2) Similarly, 

Rheem commented that DOE should 

maintain a single, nationwide and 

capacity-wide standard for NWGFs to 

avoid costly supply and inventory 

planning problems for manufacturers, 

distributors, and contractors. (Rheem, 

No. 394 at p. 3) The CFA commented 

that DOE should consider a uniform 

standard, arguing that certain furnaces 

no longer need to be exempted from the 

standard. (CFA, Public Meeting Webinar 

Transcript, No. 363 at p. 22) 

In response, DOE’s analyses of each 

considered efficiency level accounts for 

regional differences (e.g., in terms of 

climate data, shipments) when 

appropriate, as discussed throughout 

this document. For the July 2022 NOPR 

and for this final rule, in addition to 

considering uniform national standard, 

DOE included consideration of a 

potential regional standard (i.e., TSL 4; 

see section V.A of this document) 

consisting of efficiency levels at 95- 

percent AFUE for the Northern region 

and 80-percent AFUE for the rest of the 

country, for both NWGFs and MHGFs. 

However, as discussed in section V of 

this document, DOE conducts a walkdown analysis to determine the TSL that 

represents the maximum improvement 

in energy efficiency that is 

technologically feasible and 

economically justified, as required 

under EPCA. In this final rule, DOE has 

found that a national standard for both 

NWGFs and MHGFs corresponding to 

95-percent AFUE (i.e., TSL 8) meets 

those statutory criteria, and, therefore, 

DOE is adopting a national standard 

rather than regional standards. 

5. Recommendations for Analytical 

Changes 

Atmos Energy commented that DOE 

should supplement its technical 

analysis in accordance with consumer 

welfare recommendations identified by 

the National Academy of Science peer 

review report before proceeding with a 

final rule, arguing that this would 

increase the accuracy of the technical 

analysis and have a material impact on 

the final standards. (Atmos Energy, No. 

415 at p. 5) AGA commented that DOE 

should follow, or at a minimum respond 

to, the National Academies of Sciences, 

Engineering, and Medicine’s (NAS) 

Recommendations (the NAS Report) on 

its process. (AGA, No. 405 at pp. 25–27) 

AGA stated that DOE should revisit the 

proposed rule to address NAS’s 

recommendations and allow 

stakeholders an opportunity to comment 

on the revisions. (Id.) APGA stated that 

many months after the NAS Report, 

DOE does not reflect the NAS findings 

in the NOPR but merely states that DOE 

‘‘is in the process of evaluating the 

resulting report.’’ (APGA, No. 387 at p. 

56) APGA pointed out that the 

residential furnace rulemaking was one 

of the three rulemakings studied in 

depth by the NAS committee. (Id.) 

APGA noted that NAS came to 

conclusions about consumer behavior 

that are extremely critical to the NOPR. 

APGA cited the NAS Report’s 

recommendation that ‘‘[f]or some 

commercial goods in particular, there 

should be a presumption that the market 

actors behave rationally unless DOE can 

provide evidence or argument to the 

contrary.’’ (Id.) 

In response, DOE notes that the 

rulemaking process for energy 

conservation standards for covered 

products and equipment are outlined in 

appendix A to subpart C of 10 CFR part 

430, and DOE periodically examines 

and revises these provisions in separate 

rulemaking proceedings. DOE notes that 

discussion of the recommendations of 

the NAS report, which pertain to the 

processes by which DOE analyzes 

energy conservation standards, will be 

addressed as part of a separate noticeand-comment process. 

Rheem commented that DOE should 

consider a simplified analysis and 

reproducible model for future 

rulemakings. (Rheem, No. 394 at p. 2) 

Specifically, Rheem encouraged DOE to 

adopt a consistent and predictable 

approach to quantifying energy savings 

to ensure the recommendations will 

result in the estimated savings. (Id.) 

GAS argued that ‘‘Uncertainties . . . 

include numerous variables contained 

within DOE’s overly complex 

‘determination’ apparatus,’’ and that 

DOE has failed to ‘‘use transparent and 

robust analytical methods.’’ (GAS, No. 

385 at pp. 4–5) AHRI suggested that, for 

future rulemakings, DOE should modify 

the way that it analyzes consumer 

economic impact to look at the 

probability that individual consumers 

will benefit from standards rather than 

whether the aggregate benefit is positive 

and stated that these changes would be 

best accomplished in an open review 

process. (AHRI, No. 414–1 at p. 2) 

Although DOE understands the desire 

for simplicity, the Department notes that 

its analysis is informed by the Process 

Rule and includes a number of 

modifications in response to comments 

from interested parties on prior notices, 

which recommended that DOE consider 

a variety of additional factors when 

evaluating the impacts of potential 

standards. These additional 

considerations, while adding 

complexity to the analysis, are 

responsive to commenters and increase 

the granularity of results. A simplified 

analysis would run counter to those 


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39For example, sections 12 through 16 of the 

Process Rule outlines factors to be considered in the 

process for developing energy conservation 

standards, including delineating several factors 

relating to identification of candidate standard 

levels and other factors to be considered in the 

selection of proposed standards, as well as the 

subsequent selection of a final standard. These 

analyses, along with the accompanying sensitivity 

analyses, are necessary to ensure the robustness of 

the Energy Conservation Standards amendment 

process. 

recommendations,39 which have proven 

to have merit. In response to AHRI’s 

comment that consumer impacts should 

be assessed individually, DOE notes that 

as discussed in section IV.F of this 

document, the LCC includes a Monte 

Carlo analysis that allows DOE to assess 

impacts on a wide range of installations. 

DOE uses this information to assess and 

consider how consumers would likely 

be impacted by potential standards. 

DOE also conducts a consumer 

subgroup analysis (described in section 

IV.I of this document) that evaluates the 

economic impacts of standards on 

specific groups. DOE further notes that 

its analysis is designed to be 

reproducible to interested parties, and 

DOE provides a range of statistics, 

including the percentage of consumers 

that will be negatively and positively 

impacted by an amended energy 

conservation standard. Therefore, for 

this final rule, DOE continued to 

conduct the energy savings and 

economic rulemakings using largely the 

same methodologies used in the July 

2022 NOPR of this rulemaking, which 

are generally consistent with those used 

for prior rulemakings. 

ACCA suggested that DOE should 

focus its attention on efficiency 

improvements, such as installing 

heating, ventilation, and airconditioning (HVAC) systems according 

to the industry’s recommended 

standards (including proper equipment 

sizing, duct re-design and sealing, and 

appropriate refrigerant charge levels), 

that would reduce peak electricity 

demand without requiring revised 

installation or design standards. (ACCA, 

No. 398 at p. 2) 

As discussed in section IV.F.4 of this 

document, DOE’s analysis accounts for 

the electricity consumption of NWGFs 

and MHGFs. Although reducing peak 

electricity demand can be a benefit of 

energy conservation standards, as 

discussed in section II.A of this 

document, EPCA provides specific 

factors that DOE must consider when 

establishing or amending energy 

conservation standards. One of these 

factors is the total projected energy 

savings that would result from the 

standard (see 42 U.S.C. 

6295(o)(2)(B)(i)(III)), and DOE includes 

impacts on electricity consumption 

when evaluating the projected energy 

savings. DOE follows the statutory 

obligations laid out in EPCA when 

evaluating the potential for energy 

savings, technological feasibility, and 

economic justification. 

6. Opportunity for Public Input 

MTNGUD, Watertown Municipal 

Utilities, and LANGD recommended 

that DOE hold a workshop to further 

discuss this rulemaking. (MTNGUD, No. 

350 at pp. 1–2; WMU, No. 351 at p. 1; 

LANGD, No. 355 at p. 2) MTNGUD and 

LANGD specifically noted that at the 

workshop, DOE should further discuss 

its LCC analysis with stakeholders in 

order to achieve a common 

understanding, and these parties added 

that the LCC is a central part of the 

proposed standard. (MTNGUD, No. 350 

at p. 1; WMU, No. 351 at p. 2; Consumer 

Energy Alliance, No. 354 at p. 1, 

LANGD, No. 355 at p. 2) MTNGUD, 

Watertown Municipal Utilities, and 

Joint Requesters stated that holding a 

workshop and extending the associated 

comment period would be in 

accordance with the objectives of the 

Process Rule. (MTNGUD, No. 350 at pp. 

1–2; WMU, No. 351 at pp. 1–2; Joint 

Requesters, No. 356 at pp. 1–4) Joint 

Requesters requested another webinar to 

cover comments and questions related 

to DOE’s LCC model that were not 

addressed during the webinar held on 

September 6, 2022. (Joint Requesters, 

No. 362 at p. 2) Additionally, the 

Consumer Energy Alliance urged that an 

extension of the comment period by 

DOE and hosting the requested 

workshop would allow for sufficient 

time for all stakeholders to analyze the 

NOPR so as to develop meaningful 

comments. (Consumer Energy Alliance, 

No. 354 at pp. 1–2) 

MTNGUD, Watertown Municipal 

Utilities, Consumer Energy Alliance, 

and LANGD also encouraged DOE to 

extend the comment period at least 45 

days after the workshop to give 

commenters additional time to 

effectively comment on the July 2022 

NOPR. (MTNGUD, No. 350 at p. 2; 

WMU, No. 351 at p. 2; Consumer Energy 

Alliance, No. 354 at 2; LANGD, No. 355 

at p. 2) LANGD and Watertown 

Municipal Utilities stated that more 

time is needed to evaluate the impacts 

on low-income households, seniors, and 

energy insecure consumers. (LANGD, 

No. 355 at p. 1; WMU, No. 351 at p. 1) 

Consumer Energy Alliance commented 

that the proposal and supporting 

documents are highly technical and 

voluminous, so it will take additional 

time to sufficiently analyze everything 

DOE has issued, adding that DOE’s 

proposal will impact millions of 

consumers while also raising complex 

legal, regulatory, economic, and 

technical issues. (Consumer Energy 

Alliance, No. 354 at p. 1) Consumer 

Energy Alliance further commented that 

stakeholders should have a sufficient 

opportunity to evaluate the various 

issues raised in the NOPR, including 

how such issues may impact the 

stakeholders’ members/customers. (Id.) 

Consumer Energy Alliance requested 

that an extension of the comment period 

be granted by DOE, and the commenter 

argued that hosting the requested 

workshop would allow for sufficient 

time for all stakeholders to analyze the 

NOPR and develop meaningful 

comments. (Id. at p. 2) 

Several parties requested an extension 

of at least 60 days to sufficiently analyze 

the NOPR and the related documents. 

(Joint Commenters, No. 330 at p. 1; 

NGSA, No. 343, at p. 1; MHI, No. 344, 

at p. 1). They stated that DOE did not 

follow the Process Rule, and that the 60- 

day comment period made meaningful 

comment impossible. (Joint 

Commenters, No. 330 at p. 1; NPGA, No. 

395 at pp. 26–27) Similarly, LANGD and 

the Consumer Energy Alliance 

commented that the 60-day comment 

period does not allow for a meaningful 

opportunity to verify DOE’s analysis 

and provide substantive comments to 

aid in a productive rulemaking process. 

(LANGD, No. 355 at p. 1; Consumer 

Energy Alliance, No. 354 at p. 1) APGA 

and AGA noted that the Administrative 

Procedure Act (APA) requires that 

agencies provide a ‘‘meaningful’’ 

opportunity for comment. (APGA, No. 

387 at p. 65; AGA, No. 405 at p. 24) 

APGA commented that DOE has 

violated the APA due to the deviation 

from past public comment periods and 

the complexities of the models in this 

rulemaking. (APGA, No. 387 at p. 65) 

APGA stated that DOE’s justifications 

for fewer days to comment are 

unavailing, and that it appears DOE is 

rushing to judgment by denying APGA 

and other stakeholders a reasonable 

process to comment. (APGA, No. 387 at 

p. 67) AGA also commented that 

stakeholders have been denied a 

meaningful opportunity to evaluate the 

NOPR. (AGA, No. 405 at pp. 24–25) 

Conversely, AHRI stated that by 

holding the webinar focused on the LCC 

model on September 6, 2022 and 

extending the comment period for the 

July 2022 NOPR, DOE provided all 

commenters with sufficient opportunity 

to review its models and make 

thoughtful comments. (AHRI, No. 414– 

1 at p. 1) Sierra Club et al. commented 

that the deviations from the Process 

Rule are justified in light of the long 


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delay on these standards, which is in 

violation of the statutory deadline for 

this action and the schedule to which 

DOE agreed as part of a settlement 

agreement. (Sierra Club et al., No. 401 

at p. 1) 

In response, DOE conducts all 

appliance standards rulemakings in 

accordance with its authority under 

EPCA, which involves making its 

analyses publicly available and 

providing the public an opportunity to 

comment on the rulemaking. (42 U.S.C. 

6295(m)(2)) As explained in the July 

2022 NOPR, DOE initially found it 

necessary and appropriate to provide a 

60-day comment period given the 

overdue statutory deadline and because 

the analytical methods used for the 

NOPR were similar to those used in 

previous rulemaking notices regarding 

the subject furnaces. 87 FR 40590, 

40607 (July 7, 2022). DOE held a public 

meeting webinar to discuss the July 

2022 NOPR on August 3, 2022. 

Subsequently, as stakeholders 

requested, DOE held a second public 

meeting webinar on September 6, 2022 

focused on helping stakeholders 

understand and operate the 

Department’s analytical models. DOE 

also extended the comment period by 30 

days, which totaled 90 days for 

stakeholders to provide input. 87 FR 

52861 (August 30, 2022). As mentioned, 

interested parties such as AHRI and 

Sierra Club, et al. attested to the 

adequacy of the comment opportunity 

which DOE provided. (AHRI, No. 414– 

1, at p. 1; Sierra Club et al., No. 401, at 

p. 1) As a result, DOE concludes that 

stakeholders have had ample time and 

opportunity to provide input on the 

rulemaking analyses and process related 

to the amended energy conservation 

standards for NWGFs and MHGFs. 

7. Federal Financial Assistance 

The Attorneys General commented 

that with new Federal funding available 

under the Infrastructure Investment and 

Jobs Act and the Inflation Reduction 

Act, the transition to more-efficient 

space heating will be cost-effective and 

affordable. (Attorneys General, No. 408 

at p. 2) The Attorneys General added 

that the multibillion-dollar 

Congressional investment in 

weatherization, energy efficiency, and 

beneficial electrification programs will 

help alleviate equipment cost concerns 

for low- to moderate-income households 

and small businesses. (Id.) Similarly, 

Trane commented that aid should be 

provided through the Inflation 

Reduction Act to homeowners to offset 

any costs incurred from this standard 

due to increased purchase and 

installation costs. (Trane, No. 412 at pp. 

1–2) Trane further stated that this 

assistance could help with the necessary 

advancements in venting technology 

that will accompany the standard. (Id.) 

The Joint Utilities commented that 

they believe DOE can help Americans 

achieve meaningful cost savings while 

benefitting the environment by 

establishing rebates and incentive 

programs that could be used to support 

State-regulated efficiency and rebate 

programs. Furthermore, the Joint 

Utilities stated that this would assist 

electric and natural gas customers by 

reducing the upfront costs of achieving 

greater home heating efficiency. (The 

Joint Utilities, No. 402 at p. 1) 

DOE agrees that Federal funding, 

specifically funding available through 

the Inflation Reduction Act, may be able 

to assist in the transition to moreefficient space heating. However, DOE 

also notes that such funding is separate 

from this rulemaking process and has 

yet to be fully implemented. 

Consequently, while DOE agrees that 

the costs of more-efficient furnaces 

could be reduced for certain consumers, 

DOE did not include impacts of any 

Federal funding in its reference case 

analysis. However, as discussed in 

section IV.F.10 of this document, DOE 

performed a sensitivity analysis in 

which tax credits significantly reduce 

the cost of a heat pump system as an 

alternative space-heating option, 

thereby incentivizing some consumers 

to switch from gas furnaces to heat 

pumps. The results of this sensitivity 

analysis are available in appendices 8J 

and 10E of the final rule TSD. 

Additionally, any potential incentives 

for more-efficient gas furnaces would 

only improve the consumer benefits as 

determined in the final rule analysis. 

Therefore, as discussed in section V of 

this document, DOE concludes that the 

amended standards are justified, and 

this decision is not dependent on 

whether additional Federal subsidies or 

investments are available. 

8. Standby Mode and Off Mode Power 

Consumption Standards 

As discussed in section II.A of this 

document, EPCA requires any final rule 

for new or amended energy 

conservation standards promulgated 

after July 1, 2010, to address standby 

mode and off mode energy use. (42 

U.S.C. 6295(gg)(3)) 

‘‘Standby mode’’ and ‘‘off mode’’ 

energy use are defined in the DOE test 

procedure for residential furnaces and 

boilers (i.e., ‘‘Uniform Test Method for 

Measuring the Energy Consumption of 

Consumer Furnaces Other Than 

Boilers,’’ 10 CFR part 430, subpart B, 

appendix N). In that test procedure, 

DOE defines ‘‘standby mode’’ as any 

mode in which the furnace is connected 

to a mains power source and offers one 

or more of the following space heating 

functions that may persist: (a) To 

facilitate the activation of other modes 

(including activation or deactivation of 

active mode) by remote switch 

(including thermostat or remote 

control), internal or external sensors, 

and/or timer; and (b) Continuous 

functions, including information or 

status displays or sensor based 

functions. 10 CFR part 430, subpart B, 

appendix N, section 2. ‘‘Off mode’’ for 

consumer furnaces is defined as a mode 

in which the furnace is connected to a 

mains power source and is not 

providing any active mode or standby 

mode function, and where the mode 

may persist for an indefinite time. The 

existence of an off switch in off position 

(a disconnected circuit) is included 

within the classification of off mode. 10 

CFR part 430, subpart B, appendix N, 

section 2. An ‘‘off switch’’ is defined as 

the switch on the furnace that, when 

activated, results in a measurable 

change in energy consumption between 

the standby and off modes. 10 CFR part 

430, subpart B, appendix N, section 2. 

As discussed previously, DOE does not 

currently prescribe standby mode or off 

mode standards for NWGFs and 

MHGFs. 

In the July 2022 NOPR, DOE analyzed 

new standby mode and off mode power 

standards for NWGFs and MHGFs and 

proposed that the maximum allowable 

standby mode and off mode power 

consumption should be 8.5 W for 

NWGFs and MHGFs. 87 FR 40590, 

40592 (July 7, 2022). Table IV.5 of the 

July 2022 NOPR shows the standby 

mode and off mode efficiency levels that 

DOE analyzed, along with a description 

of the design options anticipated to be 

used to achieve each efficiency level 

above baseline. The baseline efficiency 

level was determined to be 11 W, and 

it corresponds to the use of a linear 

power supply and a 40VA linear 

transformer (LTX). Other technology 

options that were analyzed to achieve 

efficiency levels above baseline include 

a low-loss LTX (‘‘LL–LTX’’) and two 

types of switching mode power supply 

(SMPS). 87 FR 40590, 40619 (July 7, 

2022). 

In response to DOE’s proposed 

technology options and watt levels 

associated with each efficiency level for 

standby mode and off mode standards, 

Carrier commented that it agreed with 

DOE’s statement that most furnaces use 

40VA transformers, and further 

described that 40VA transformers 

provide power to sensors and 

components in the furnace, as well as a 


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variety of external devices. (Carrier, No. 

377 at p. 2) Carrier also commented that 

it does not believe the use of an SMPS 

will lower the transformer size without 

limiting the external devices and 

sensors that can be powered by the 

furnace, which would impact consumer 

experience and product performance. 

The commenter stated that DOE only 

considered thermostats, but noted that 

there are other devices that could be 

powered by the transformer. (Carrier, 

No. 377 at pp. 2–3) Carrier encouraged 

DOE to defer the standby mode and off 

mode power standards, asserting that 

the 8.5W level has the potential to 

reduce the utility of consumer furnaces, 

and therefore would not meet the 

requirements of 42 U.S.C. 

6295(o)(2)(B)(iv). (Carrier, No. 377 at pp. 

1–2) Carrier asserted that its analysis 

found that a maximum standby watt 

limit of 8.5 is achievable in only their 

furnaces with the lowest AFUE 

efficiency and least features. (Carriers, 

No. 377 at p. 2) Carrier argued that 

products that incorporate a 20VA 

transformer do not meet DOE’s 

screening criteria of product utility or 

availability, nor will they have the 

ability to support the safety sensors that 

will or could be required in the future 

such as those that may be needed due 

to the Consumer Protection Safety 

Commission’s stated intention to 

establish a requirement for carbon 

monoxide sensors on furnaces. (Carrier, 

No. 377 at p. 3) Carrier explained that 

efficiency level (EL) 1 is the only 

feasible technology option to support 

the safety sensors that will be required 

in the future. (Carrier, No. 377 at pp. 3– 

4) Carrier explained that potential 

requirements for new safety sensors 

would mean that a standard lower than 

11 W could create an adverse impact on 

product utility. (Carrier, No. 377 at pp. 

3–4) Carrier asserted that contractors 

would need to install larger 

transformers to maintain utility, which 

defeats the purpose of having a standby 

power limit and adds additional 

installation complexity. (Carrier, No. 

377 at pp. 2–3) Therefore, Carrier 

commented that it opposed DOE’s 

proposed 8.5W standby mode and off 

mode power standard for NWGFs. 

(Carrier, No. 377 at pp. 1–2) Carrier 

explained that it conducted an analysis 

of standby mode and off mode power on 

their furnaces and found that the limit 

of 8.5W is achievable for their lowerefficiency furnaces, but not for their 

mid-tier and deluxe furnaces without 

lessening the utility. (Carrier, No. 377 at 

p. 2) Overall, Carrier recommended that 

DOE defer standby mode and off mode 

power standards until further testing 

and analysis is conducted. (Carrier, No. 

377 at pp. 3–4) 

Trane also commented that DOE’s 

assumption that furnaces would 

transition to a 20VA transformer at 

standby mode and off mode ELs 2 and 

3 is inaccurate, because the transformer 

supplies power not only to the furnace 

but also to the attached air conditioner 

or heat pump, as well as the thermostat 

and other accessories. (Trane, No. 412 at 

p. 2) Trane commented that setting the 

standard at 8.5W would result in 

manufacturers adding transformers to 

supply power to the needed features; 

therefore, Trane recommended 

maintaining a standard of 11W. (Id.) 

Lennox stated that 40VA transformers 

are utilized to provide adequate low 

voltage power for components and 

accessory items. (Lennox, No. 389 at pp. 

4–5) Lennox commented that it offers 

transformers ranging up to 70VA to 

accommodate situations where several 

accessories are included in the HVAC 

system. (Lennox, No. 389 at p. 4) 

Lennox argued that DOE’s assumption 

of a unit with SMPS having a 

transformer sized at 20VA is incorrect, 

since a 20VA transformer often does not 

provide sufficient power capability to 

drive the internal components necessary 

for all furnace/air conditioner/heat 

pump functions and a thermostat. 

(Lennox, No. 389 at p. 4) Lennox 

explained that SMPS are currently used 

in Lennox products controls, and the 

company is not aware of ways to further 

reduce standby mode and off mode 

power consumption. (Id.) Lennox also 

stated that the proposed standby mode 

and off mode standard level would 

inhibit implementation of additional 

safety features. (Lennox, No. 389 at pp. 

3–4) 

Lennox commented that the 8.5W 

limit for consumer furnaces will prevent 

advances in communicating controls, 

installation and diagnostic features, and 

zoning. (Lennox, No. 389 at p. 4) 

Lennox further stated that programs, 

including ENERGY STAR, are 

considering measures that would 

require these monitoring, diagnostic, 

and prognostic features that would 

require additional standby power, but 

would save more energy overall. (Id.) 

The commenter argued that future 

innovations and safety requirements 

(e.g., thermostats, WiFi controls, extra 

power supplies) may force the power 

usage to rise above the 11W limit. 

(Lennox, No. 389 at p. 6) Lennox 

commented that DOE should not 

mandate standby mode and off mode 

power levels with de minimis energy 

savings that prevent the integration of 

controls and other features that enable 

significantly larger energy savings at the 

furnace and HVAC systems level. 

(Lennox, No. 389 at pp. 4–5) Lennox 

commented that DOE should not only 

reconsider the proposed standby mode 

and off mode standard of 8.5W but 

should also consider whether an 11W 

baseline would be sufficient. (Lennox, 

No. 389 at p. 6) Lennox further 

commented that the analysis for DOE’s 

proposed standard for standby mode 

and off mode also does not consider 

system level impacts. (Lennox, No. 389 

at p. 5) 

Nortek commented that DOE should 

not implement a standby mode and off 

mode standard lower than 11W. 

(Nortek, No. 406 at pp. 1–2) Nortek 

commented that they do not support 

DOE’s proposed standard of 8.5 W for 

standby mode and off mode, as it would 

limit necessary innovation in furnace 

controls, programming and usage 

displays, thermostats, and other devices. 

(Nortek, No. 406 at p. 1) 

Rheem commented that DOE should 

adjust its proposed standby mode and 

off mode energy standards for NWGF. 

Rheem asserted that 8.5W may be overly 

limiting due to the previously 

mentioned shift toward smart products, 

and the shift to low global warming 

potential (GWP) refrigerants that require 

additional power for supporting 

communication and safety controls. The 

commenter warned that reductions in 

standby wattage limits potential 

diagnostic and installation 

functionality, advancements which 

could also result in energy savings. 

(Rheem, No. 394 at p. 1) Rheem 

commented that DOE should maintain a 

baseline standby mode and off mode 

power level of 11W, as would allow 

future improvements such as safety and 

communicating controls to be 

incorporated into future furnace 

designs. (Rheem, No. 394 at p. 2) 

Daikin commented that it does not 

support DOE’s proposed 8.5W standard 

for standby mode and off mode. (Daikin, 

No. 416 at p. 1) Daikin also stated that 

DOE has significantly underestimated 

the incremental MPCs for each of the 

standby mode and off mode efficiency 

levels, and that the cost increase for a 

Low-Loss Linear Transformer is more 

likely to be five to ten times higher than 

DOE’s estimate. (Id. at p. 4) Daikin 

noted that many manufacturers offer a 

70VA transformer as an accessory or 

service part to provide adequate low 

voltage power to all system components, 

and that manufacturers would likely 

need to limit accessory items to meet 

the proposed standby mode/off mode 

standards. (Id. at p. 5) Daikin 

recommended that DOE establish a 

standby mode and off mode criteria of 

15W for condensing NWGFs with 


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Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 87525 

40National Academies of Sciences, Engineering, 

and Medicine, Review of Methods Used by the U.S. 

Department of Energy in Setting Appliance and 

Equipment Standards. (2021) Washington, DC: The 

National Academies Press. pp. 2–3; 111–113. 

doi.org/10.17226/25992. 

41The comment submitted by AHRI was in 

response to a separate proceeding, and can be found 

at: www.regulations.gov/document/EERE-2018-BTPET-0017-0002. 

communicating features, multiple 

heating stages, ultra-low NOX, an 

electrically commutated (ECM) motor, 

and controls associated with alternate 

refrigerants. (Daikin, No. 416 at p. 6) 

AHRI explained that a maximum level 

of 8.5W of standby power would limit 

necessary innovation in furnaces and 

related connected devices powered 

through the furnace and could possibly 

prohibit significant energy-saving 

features. (AHRI, No. 414–1 at p. 2) AHRI 

stated that DOE should reconsider the 

standby mode and off mode energy 

standards proposed for NWGFs, as well 

as the max-tech level based upon the 

use of a 20VA low-loss linear 

transformer (‘‘LL–LTX’’) and SMPS. 

(AHRI, No. 414–1 at p. 3) 

AHRI also noted that the NAS Peer 

Review Report 40 mentions the need to 

not stifle innovation, particularly 

regarding connected products. (AHRI, 

No. 414–1 at p. 2) AHRI stated that if the 

standby mode and off mode standards 

for furnaces are set too low, then 

connected products such as thermostats 

and Wi-Fi controls will use add-on 

power supplies, mentioning that such 

auxiliary power supplies are already 

available on the market. (AHRI, No. 

414–1 at p. 3) AHRI expressed concern 

that the current baseline value of 11W 

may need to be adjusted in the future to 

remove the effects of safety and other 

control measures. (AHRI, No. 414–1 at 

p. 3) 

AHRI likewise stated that DOE should 

reconsider the standby mode and off 

mode energy standards proposed for 

MHGFs, referencing the comments it 

submitted for NWGFs. Specifically, 

AHRI stated that the proposed 

maximum of 8.5 watts would stifle 

innovation and could reduce energy 

savings from connected products, and is 

inadequate to power safety and 

communication controls necessary for 

consumer utility. (AHRI, No. 414–2 at p. 

3) Mortex commented that DOE’s 

proposed 8.5W limit for standby mode 

and off mode would not be adequate to 

power safety and communicating 

controls necessary for consumer utility 

and that 11W should be retained. 

(Mortex, No. 410 at p. 4) 

JCI commented that the 8.5W limit for 

standby mode and off mode power of 

NWGFs and MHGFs is too restrictive 

due to the additional requirements 

associated with the new A2L refrigerant 

requirement and other future 

communication and monitoring 

advancements. (JCI, No. 411 at p. 3) 

Several commenters argued that 

furnaces will need to incorporate safety 

sensors for controlling components such 

as carbon monoxide, carbon dioxide, 

refrigerant leak detectors and/or low 

GWP along with other changes in the 

future, and they noted that such 

functionalities must be accounted for in 

meeting the currently proposed limit for 

standby mode and off mode power. 

(Lennox, No. 389 at pp. 4–5; Rheem, No. 

394 at pp. 1–2; Carrier, No. 377 at pp. 

3–4; Daikin, No. 416 at pp. 5–6; AHRI, 

No. 414–1 at pp. 2–3) 

Daikin, Lennox, Trane and AHRI 

listed numerous components that are 

powered by transformers in consumer 

furnaces. The combined list of 

components includes: integrated 

furnace control board, indoor and 

outdoor air conditioning/heat pump 

(AC/HP) fan motors, gas valves, 

combustion air inducers, thermostats, 

ultraviolet (UV) germicidal lights, 

humidifiers, AC/HP outdoor control 

board, AC/HP defrost controls, AC/HP 

heat pump reversing valve, indoor air 

circulating blowers, indoor and outdoor 

electronic expansion valves, condensate 

pumps, communicating controls that aid 

in proper commissioning, AC/HP IoT 

devices, system performance monitoring 

and reporting, identification of faults, 

zoning systems consumer interface, 

temperature sensors, air pressure 

sensors, refrigerant pressure sensors, gas 

pressure sensors, proprietary diagnostic 

sensors, refrigerant leak detection 

systems for A2L refrigerants, carbon 

monoxide (CO) sensors, CO2 sensors, 

and dual fuel HPs that require more 

power. (Daikin, No. 416 at p. 6; Lennox, 

No. 389 at pp. 4–5; Trane, No. 412 at p. 

2; AHRI, No. 414–1 at pp. 2–3) AHRI 

stated that it is impossible at this time 

to determine the power draw from these 

components that may be added to 

furnaces in the future and suggested that 

DOE reevaluate these proposed 

standards for NWGFs in the next round 

of standards. (AHRI, No. 414–1 at p. 3) 

Trane argued that a 20VA transformer is 

inadequate to power all these items. 

(Trane, No. 412 at p. 2) Daikin 

recommended taking these future 

requirements into account, as these 

standards will not come into effect until 

after the new A2L refrigerant is 

required. (Daikin, No. 416 at pp. 5–6) 

The CA IOUs commented that they 

analyzed the dataset of ten consumer 

furnaces shared by AHRI in which they 

found that 50 percent of the furnaces 

with AFUEs of 97 or higher would not 

meet the proposed standby mode and 

off mode requirement. They further 

stated that 70 percent would meet a 

standard of 9 W and that 100 percent 

would meet a standard of 10 W. (The 

CA IOUs, No. 400 at p. 3) 

The CA IOUs requested that DOE 

confirm that the proposed standby mode 

and off mode energy conservation 

standard would not significantly reduce 

the market availability of the most 

efficient consumer furnaces and would 

preserve design flexibility for future 

products. The CA IOUs suggested that 

these design flexibilities could include 

diagnostic features to verify installation 

and monitor ongoing performance or 

additional safety features or reduce 

consumer costs through higher 

operational energy savings. The CA 

IOUs suggested that DOE should 

consider a separate standby mode and 

off mode adder for furnaces with higher 

energy efficiency than baseline furnaces. 

(The CA IOUs, No. 400 at p. 3) 

The CA IOUs commented in support 

of a standby mode and off mode energy 

conservation standard; however, they 

stated that, in their experience, products 

with higher operational efficiencies 

sometimes have higher standby mode 

and off mode energy requirements. (The 

CA IOUs, No. 400 at pp. 2–3) They 

commented that, as an example, furnace 

fans with ECMs have higher standby 

mode energy consumption compared 

with furnaces fans outfitted with lower 

efficiency motors. (Id.) 

CEC commented that consumer 

products in the marketplace already 

meet the proposed DOE standard of 

8.5W in standby mode. The commenter 

conducted an analysis on AHRI’s 

condensing data set, which showed 74 

percent of condensing furnaces as using 

an ECM motor, and only 8 percent of 

those furnaces were shown to have a 

standby energy consumption greater 

than 8.5W. CEC stated that the average 

of this data was 6.1W and that the 

median was 5.7W for condensing 

furnaces with ECM motors. Therefore, 

CEC claimed that the 8.5W limit is both 

realistic and leaves room for additional 

functionality to be added. (CEC, No. 382 

at p. 3) 

NYSERDA expressed support for 

DOE’s proposed standards for standby 

mode and off mode power consumption 

and agreed with DOE’s findings that 

more-efficient transformers are realistic 

and attainable. (NYSERDA, No. 379 at 

pp. 7–8) NYSERDA also noted that the 

sample of condensing furnaces from the 

data set provided by AHRI to DOE in 

2018 41 supports DOE’s proposed 

standby mode and off mode power 


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standards. (NYSERDA, No. 379 at p. 8) 

According to NYSERDA, the majority of 

models tested at the time had standby 

mode and off mode power efficiencies at 

or below the proposed standard levels, 

thereby demonstrating the proposed 

standards to be technologically feasible 

and readily available. (Id.) 

After considering this feedback, DOE 

understands that typical and baseline 

levels of power consumption of NWGFs 

and MHGFs in standby mode or off 

mode are likely to increase in the future 

as manufacturers continue to build 

increasingly complex controls into 

consumer furnaces, and that many of 

the likely changes are related to features 

such as safety sensors or to other 

improvements in functionality that 

would provide utility for the consumer. 

In addition, DOE understands that 

manufacturers may be introducing more 

sophisticated controls for furnaces that 

are intended to get paired with central 

heat pumps in the field, whose 

operation can be optimized for efficient 

performance. DOE takes Carrier’s point 

that such innovations could contribute 

to the overall utility or performance of 

the covered product, an important 

consideration when assessing the 

economic justification of a potential 

standard (see 42 U.S.C. 

6295(o)(2)(B)(i)(IV)). However, DOE 

further notes that this one EPCA factor 

in isolation is not dispositive of a 

potential standard’s economic 

justification or lack thereof, but instead, 

the Department must weigh all seven 

factors under 42 U.S.C. 6295(o)(2)(B)(i) 

before setting any standby mode and off 

mode power standards. 

Based on the totality of these 

comments, DOE has found that there is 

some degree of uncertainty that exists 

with respect to the appropriateness of 

the standby mode/off mode efficiency 

levels analyzed in the July 2022 

NOPR—particularly for products that 

are in development but also possibly in 

some products already on the market. 

Consequently, DOE has determined that 

it lacks the necessary information to set 

appropriate standby mode and off mode 

standards pursuant to 42 U.S.C. 

6295(gg)(3) at this time. Particularly 

since some of the functionalities at issue 

could have significant safety or energysavings benefits, DOE does not wish to 

stymie such developments through 

well-intentioned but ultimately 

counterproductive standby mode/off 

mode standards. Instead, DOE needs to 

have a better understanding of the 

legitimate power consumption needs of 

the subject furnaces when operating in 

these modes. The Department has 

concluded that it does not currently 

have the requisite evidence to support 

standby mode and off mode standards 

under the applicable statutory criteria in 

42 U.S.C. 6295(o)(2)(B)(i). Therefore, 

DOE is not adopting the standby mode/ 

off mode power standards for NWGFs/ 

MHGFs proposed in the July 2022 

NOPR at this time, but instead, the 

Department will continue to investigate 

these issues and may consider such 

standards in a future rulemaking. In 

summary, based on the stakeholder 

feedback received, DOE concludes that 

more data is necessary to determine the 

appropriate baseline level for standby 

mode and off mode energy usage to 

allow for safety features, features that 

reduce active mode energy use, or other 

features that would provide additional 

functionality for consumers. 

In response to the July 2022 NOPR, 

Daikin commented that it does not 

support DOE’s proposed standby mode 

and off mode standard because the 

consumer life-cycle savings are 

negligible, the energy savings potential 

is extremely small, the burden on 

manufacturers is high, and there is a 

need to address low-voltage power 

supply for components in the future. 

(Daikin, No. 416 at p. 4) Similarly, 

PHCC commented that standby mode 

and off mode energy use cannot be 

considered in comparison to the overall 

energy consumption of the equipment 

because those potential savings are de 

minimis. (PHCC, No. 403 at p. 2) 

Daikin disagreed with DOE’s 

statement that current mounting 

brackets are sufficient to support the 

slight increase in size and weight of an 

LL–LTX. The commenter asserted that, 

according to ASTM D4728 (Standard 

Test Method for Random Vibration 

Testing of Shipping Containers and 

Systems), even small increases in mass 

can cause breaks, cracks, and 

deformation that mandate strengthening 

supports and brackets. Finally, Daikin 

stated that such modifications would 

lead to significant cost increases. 

(Daikin, No. 416 at p. 4) 

As discussed previously in this 

section, DOE is not finalizing its 

previous proposal to set new standby 

mode and off mode power standards for 

NWGFs and MHGFs in this final rule. 

However, DOE will continue to monitor 

the standby mode and off mode power 

consumption of the subject consumer 

furnaces and may address such 

standards in a future rulemaking. The 

Department may consider these 

comments further at that time, as 

appropriate. 

B. Product Classes and Scope of 

Coverage 

When evaluating and establishing 

energy conservation standards for a type 

(or class) of covered products, DOE 

divides covered products into product 

classes by the type of energy used, or by 

capacity or other performance-related 

features which other products within 

such type (or class) do not have and that 

justify differing standards. In making a 

determination whether a performancerelated feature justifies a different 

standard, DOE must consider such 

factors as the utility of the feature to the 

consumer and other factors DOE 

determines are appropriate. (42 U.S.C. 

6295(q)) 

In this rule, DOE is only analyzing a 

subset of consumer furnace classes. DOE 

agreed to the partial vacatur and remand 

of the June 2011 direct final rule (DFR), 

specifically as it related to energy 

conservation standards for NWGFs and 

MHGFs in the settlement agreement to 

resolve the litigation in American Public 

Gas Ass’n v. U.S. Dept. of Energy (No. 

11–1485, D.C. Cir. Filed Dec. 23, 2011). 

80 FR 13120, 13130–13132 (March 12, 

2015). Therefore, in this rule, DOE is 

only amending the energy conservation 

standards for NWGFs and for MHGFs. 

See section IV.A.1 of this document for 

a more detailed discussion of the 

product classes analyzed in this final 

rule. 

C. Test Procedure 

EPCA sets forth generally applicable 

criteria and procedures for DOE’s 

adoption and amendment of test 

procedures. (42 U.S.C. 6293) 

Manufacturers of covered products must 

use these test procedures to certify to 

DOE that their product complies with 

energy conservation standards and to 

quantify the efficiency of their product. 

(42 U.S.C. 6295(s)) DOE’s current energy 

conservation standards for consumer 

furnaces are expressed in terms of 

AFUE. (See 10 CFR 430.32(e)(1)) AFUE 

is an annualized fuel efficiency metric 

that accounts for fossil fuel 

consumption in active, standby, and off 

modes. The existing DOE test procedure 

for determining the AFUE of consumer 

furnaces is located at 10 CFR part 430, 

subpart B, appendix N. The DOE test 

procedure for consumer furnaces was 

originally established by a May 12, 

1997, final rule, which incorporates by 

reference the American Society of 

Heating, Refrigerating and AirConditioning Engineers (ASHRAE)/ 

American National Standards Institute 

(ANSI) Standard 103–1993, Method of 

Testing for Annual Fuel Utilization 

Efficiency of Residential Central 

Furnaces and Boilers (1993). 62 FR 

26140, 26157. 

Since the initial adoption of the 

consumer furnaces test procedure, DOE 

has undertaken a number of additional 


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42 DOE also presents a sensitivity analysis that 

considers impacts for products shipped in a 9-year 

period. 

43The FFC metric is discussed in DOE’s 

statement of policy and notice of policy 

amendment. 76 FR 51282 (August 18, 2011), as 

amended at 77 FR 49701 (August 17, 2012). 

rulemakings related to that test 

procedure, including ones to account for 

measurement of standby mode and off 

mode energy use (see 75 FR 64621 (Oct. 

20, 2010); 77 FR 76831 (Dec. 31, 2012)) 

and to supply necessary equations 

related to optional heat-up and cooldown tests (see 78 FR 41265 (July 10, 

2013)). 

Most recently, DOE published a final 

rule in the Federal Register on January 

15, 2016, that further amended the test 

procedure (TP) for consumer furnaces 

(January 2016 TP Final Rule). 81 FR 

2628. The revisions included: 

1. Clarification of the electrical power 

term ‘‘PE’’; 

2. Adoption of a smoke stick test for 

determining use of minimum default 

draft factors; 

3. Allowance for the measurement of 

condensate under steady-state 

conditions; 

4. Reference to manufacturer’s 

installation and operation manual and 

clarifications for when that manual does 

not specify test set-up; 

5. Specification of duct-work 

requirements for units that are installed 

without a return duct; and 

6. Revision of the requirements 

regarding AFUE reporting precision. 

81 FR 2628, 2629–2630. 

As such, the most current version of 

the test procedure (published in January 

2016) has now been in place for several 

years. 

Daikin commented that the test 

procedure should add clarity for the 

terms ‘‘electrical auxiliaries’’ and 

‘‘single auxiliary.’’ (Daikin, No. 416 at p. 

6) In response, DOE notes that 

amendments to the test procedure, 

including associated terminology, are 

not in scope for this analysis of 

amended energy conservation 

standards. However, DOE may consider 

this issue further in its next review of 

the consumer furnaces test procedure, 

which would occur in a separate test 

procedure rulemaking proceeding. 

D. Technological Feasibility 

1. General 

In each energy conservation standards 

rulemaking, DOE conducts a screening 

analysis based on information gathered 

on all current technology options and 

prototype designs that could improve 

the efficiency of the products or 

equipment that are the subject of the 

rulemaking. As the first step in such an 

analysis, DOE develops a list of 

technology options for consideration in 

consultation with manufacturers, design 

engineers, and other interested parties. 

DOE then determines which of those 

means for improving efficiency are 

technologically feasible. DOE considers 

technologies incorporated in 

commercially-available products or in 

working prototypes to be 

technologically feasible. See 10 CFR 

part 430, subpart C, appendix A 

(Process Rule), sections 6(b)(3)(i) and 

7(b)(1). 

After DOE has determined that 

particular technology options are 

technologically feasible, it further 

evaluates each technology option in 

light of the following additional 

screening criteria: (1) practicability to 

manufacture, install, and service; (2) 

adverse impacts on product utility or 

availability; (3) adverse impacts on 

health or safety, and (4) unique-pathway 

proprietary technologies. Sections 

6(b)(3)(ii)–(v) and 7(b)(2)–(5) of the 

Process Rule. Section IV.B of this 

document discusses the results of the 

screening analysis for NWGFs and 

MHGFs, particularly the designs DOE 

considered, those it screened out, and 

those that are the basis for the standards 

considered in this rulemaking. For 

further details on the screening analysis 

for this rulemaking, see chapter 4 of the 

final rule TSD. 

2. Maximum Technologically Feasible 

Levels 

When DOE proposes to adopt an 

amended standard for a type or class of 

covered product, it must determine the 

maximum improvement in energy 

efficiency or maximum reduction in 

energy use that is technologically 

feasible for such product. (42 U.S.C. 

6295(p)(1)) Accordingly, in the 

engineering analysis, DOE determined 

the maximum technologically feasible 

(‘‘max-tech’’) improvements in energy 

efficiency for NWGFs and MHGFs, 

using the design parameters for the most 

efficient products available on the 

market or in working prototypes. The 

max-tech levels that DOE determined 

for this rulemaking are described in 

section IV.C of this final rule and in 

chapter 5 of the final rule TSD. 

E. Energy Savings 

1. Determination of Savings 

For each trial standard level (TSL), 

DOE projected energy savings from 

application of the TSL to NWGFs and 

MHGFs purchased in the 30-year period 

that begins in the expected first year of 

compliance with the amended standards 

(2029–2058).42 The savings are 

measured over the entire lifetime of 

products purchased in the 30-year 

analysis period. DOE quantified the 

energy savings attributable to each TSL 

as the difference in energy consumption 

between each standards case and the nonew-standards case. The no-newstandards case represents a projection of 

energy consumption that reflects how 

the market for a product would likely 

evolve in the absence of amended 

energy conservation standards. 

DOE used its national impact analysis 

(NIA) spreadsheet models to estimate 

national energy savings (NES) from 

potential amended standards for 

NWGFs and MHGFs. The NIA 

spreadsheet model (described in section 

IV.H of this document) calculates energy 

savings in terms of site energy, which is 

the energy directly consumed by 

products at the locations where they are 

used. For electricity, DOE reports 

national energy savings in terms of 

primary (source) energy savings, which 

is the savings in the energy that is used 

to generate and transmit the site 

electricity. For natural gas, the primary 

energy savings are considered to be 

equal to the site energy savings. To 

calculate the primary energy impacts, 

DOE derives annual conversion factors 

from the model used to prepare the 

Energy Information Administration’s 

(EIA) most recent Annual Energy 

Outlook (AEO) currently AEO2023. DOE 

also calculates NES in terms of FFC 

energy savings. The FFC metric includes 

the energy consumed in extracting, 

processing, and transporting primary 

fuels (i.e., coal, natural gas, petroleum), 

and, thus, presents a more complete 

picture of the impacts of energy 

conservation standards.43 DOE’s 

approach is based on the calculation of 

an FFC multiplier for each of the energy 

types used by covered products or 

equipment. For more information on 

FFC energy savings, see section IV.H.2 

of this document. 

2. Significance of Savings 

To adopt any new or amended 

standards for a covered product, DOE 

must determine that such action would 

result in significant energy savings. (42 

U.S.C. 6295(o)(3)(B)) 

The significance of energy savings 

offered by a new or amended energy 

conservation standard cannot be 

determined without knowledge of the 

specific circumstances surrounding a 

given rulemaking. For example, some 

covered products and equipment have 

most of their energy consumption occur 

during periods of peak energy demand. 

The impacts of these products on the 


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44Equivalencies based on: www.epa.gov/energy/ 

greenhouse-gas-equivalencies-calculator (last 

accessed Sept. 15, 2023). 

45Energy Information Administration, Annual 

Energy Outlook 2023, Table 1 (available at: 

www.eia.gov/outlooks/aeo/tables_ref.php). 

energy infrastructure can be more 

pronounced than products with 

relatively constant demand. 

Accordingly, DOE evaluates the 

significance of energy savings on a caseby-case basis, taking into account the 

significance of cumulative FFC national 

energy savings, the cumulative FFC 

emissions reductions, and the need to 

confront the global climate crisis, among 

other factors. 

The standard levels adopted in this 

final rule are projected to result in 

national energy savings of 4.77 quad 

(FFC) over 30 years of shipments, with 

GHG emissions savings equivalent to 

the energy use of 42 million homes in 

one year.44 Based on the amount of FFC 

savings, the corresponding reduction in 

emissions, and need to confront the 

global climate crisis, DOE has 

determined (based on the methodology 

described in section IV.E of this 

document and the analytical results 

presented in section V.B.3.a of this 

document) that there is substantial 

evidence that the energy savings from 

the standard levels adopted in this final 

rule are ‘‘significant’’ within the 

meaning of 42 U.S.C. 6295(o)(3)(B). 

APGA commented that the purpose of 

EPCA is to reduce energy consumption. 

APGA stated that the energy savings for 

the proposed TSL 8 (of 5.48 quad) was 

significantly higher than all other TSLs 

except TSL 9. APGA stated that the 

analysis is extremely complex, but even 

with that complexity, the estimated 

savings represents just 3.5 percent 

relative to the energy use of these 

products in the no-new-standards case. 

APGA also added that DOE’s estimates 

of energy savings are tainted based on 

flawed modeling in the LCC analysis. 

(APGA, No. 387 at p. 28) 

DOE addresses APGA’s comments 

with regard to the modeling 

assumptions in the LCC analysis in 

section IV.F of this document. With 

regard to the significance of savings, 

DOE is not required to consider the 

percentage of savings when considering 

significance. In particular, 42 U.S.C. 

6295(o)(2)(B)(i)(III) refers to the total 

projected amount of energy savings, not 

the percentage savings. While those 

percentage savings have previously been 

considered as a test when overall energy 

savings are small, in this case, overall 

energy savings are quite large, 

particularly when aggregated over the 

30-year analysis period. Therefore, DOE 

continues to maintain that the energy 

savings estimated for this final rule of 

4.77 quads are significant. 

The DCA commented that the 

unpredictable nature of renewable 

energy sources, such as solar and wind, 

demonstrate that these energy sources 

alone will not meet current and future 

demand. (DCA, No. 372 at pp. 1–2) The 

DCA commented that the United States 

will not be able to achieve its clean 

energy ambitions without substantial 

growth of natural gas production and a 

large expansion of natural gas 

distribution pipelines. (Id.) The DCA 

commented that natural gas enables the 

use of renewable energy sources. (Id. at 

p. 2) 

With respect to DCA’s comment 

regarding the mix of fuels needed to 

meet future energy demand, DOE notes 

that the EIA’s AEO2023 projects natural 

gas to account for 35 percent of all 

domestic energy production in 

2050.45 AEO’s projections of future 

energy systems in the U.S. are based on 

a robust and comprehensive 

macroeconomic model, taking into 

account a wealth of factors and data, 

and those projections are the best 

available to DOE. 

F. Economic Justification 

1. Specific Criteria 

As noted previously, EPCA provides 

seven factors to be evaluated in 

determining whether a potential energy 

conservation standard is economically 

justified. (42 U.S.C. 6295(o)(2)(B)(i)(I)- 

(VII)) The following sections discuss 

how DOE has addressed each of those 

seven factors in this rulemaking. 

a. Economic Impact on Manufacturers 

and Consumers 

In determining the impacts of 

potential amended standards on 

manufacturers, DOE conducts a 

manufacturer impact analysis (‘‘MIA’’), 

as discussed in section IV.J of this 

document. DOE first uses an annual 

cash-flow approach to determine the 

quantitative impacts. This step includes 

both a short-term assessment—based on 

the cost and capital requirements during 

the period between when a regulation is 

issued and when entities must comply 

with the regulation—and a long-term 

assessment over a 30-year period. The 

industry-wide impacts analyzed 

include: (1) INPV, which values the 

industry on the basis of expected future 

cash flows; (2) cash flows by year; (3) 

changes in revenue and income; and (4) 

other measures of impact, as 

appropriate. Second, DOE analyzes and 

reports the impacts on different types of 

manufacturers, including impacts on 

small manufacturers. Third, DOE 

considers the impact of standards on 

domestic manufacturer employment and 

manufacturing capacity, as well as the 

potential for standards to result in plant 

closures and loss of capital investment. 

Finally, DOE takes into account 

cumulative impacts of various DOE 

regulations and other regulatory 

requirements on manufacturers. 

For individual consumers, measures 

of economic impact include the changes 

in LCC and PBP associated with new or 

amended standards. These measures are 

discussed further in the following 

section. For consumers in the aggregate, 

DOE also calculates the national net 

present value of the consumer costs and 

benefits expected to result from 

particular standards. DOE also evaluates 

the LCC impacts of potential standards 

on identifiable subgroups of consumers 

that may be affected disproportionately 

by a standard. 

b. Savings in Operating Costs Compared 

To Increase in Price (LCC and PBP) 

EPCA requires DOE to consider the 

savings in operating costs throughout 

the estimated average life of the covered 

product in the type (or class) compared 

to any increase in the price of, or in the 

initial charges for, or maintenance 

expenses of, the covered product that 

are likely to result from a standard. (42 

U.S.C. 6295(o)(2)(B)(i)(II)) DOE conducts 

this comparison in its LCC and PBP 

analysis. 

The LCC is the sum of the purchase 

price of a product (including its 

installation) and the operating cost 

(including energy, maintenance, and 

repair expenditures) discounted over 

the lifetime of the product. The LCC 

analysis requires a variety of inputs, 

such as product prices, product energy 

consumption, energy prices, 

maintenance and repair costs, product 

lifetime, and discount rates appropriate 

for consumers. To account for 

uncertainty and variability in specific 

inputs, such as product lifetime and 

discount rate, DOE uses a distribution of 

values, with probabilities attached to 

each value. 

The PBP is the estimated amount of 

time (in years) it takes consumers to 

recover the increased purchase cost 

(including installation) of a moreefficient product through lower 

operating costs. DOE calculates the PBP 

by dividing the change in purchase cost 

due to a more-stringent standard by the 

change in annual operating cost for the 

year that standards are assumed to take 

effect. 

The LCC and PBP analyses focus on 

consumers who will purchase the 

covered products in the first year of 


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compliance with new or amended 

standards. The LCC savings for the 

considered efficiency levels are 

calculated relative to the case that 

reflects projected market trends in the 

absence of new or amended standards. 

DOE’s LCC and PBP analysis is 

discussed in further detail in section 

IV.F of this document. 

c. Energy Savings 

Although significant conservation of 

energy is a separate statutory 

requirement for adopting an energy 

conservation standard, EPCA requires 

DOE, in determining the economic 

justification of a standard, to consider 

the total projected energy savings that 

are expected to result directly from the 

standard. (42 U.S.C. 6295(o)(2)(B)(i)(III)) 

As discussed in section IV.H of this 

document, DOE uses the NIA 

spreadsheet models to project national 

energy savings. 

d. Lessening of Utility or Performance of 

Products 

In establishing product classes, and in 

evaluating design options and the 

impact of potential standard levels, DOE 

evaluates potential standards that would 

not lessen the utility or performance of 

the considered products. (42 U.S.C. 

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

available to DOE, the standards adopted 

in this document would not reduce the 

utility or performance of the products 

under consideration in this rulemaking. 

e. Impact of Any Lessening of 

Competition 

EPCA directs DOE to consider the 

impact of any lessening of competition, 

as determined in writing by the 

Attorney General, that is likely to result 

from a standard. (42 U.S.C. 

6295(o)(2)(B)(i)(V)) It also directs the 

Attorney General to determine the 

impact, if any, of any lessening of 

competition likely to result from a 

standard and to transmit such 

determination to the Secretary within 60 

days of the publication of a proposed 

rule, together with an analysis of the 

nature and extent of the impact. (42 

U.S.C. 6295(o)(2)(B)(ii)) To assist the 

Department of Justice (DOJ) in making 

such a determination, DOE transmitted 

copies of its proposed rule and the 

NOPR TSD to the Attorney General for 

review, with a request that the DOJ 

provide its determination on this issue. 

In its assessment letter responding to 

DOE, DOJ concluded that the proposed 

energy conservation standards for 

NWGFs and MHGFs are unlikely to 

substantially lessen competition in any 

particular product or geographic market. 

DOJ added that in the course of its 

review, it was told that the MHGF 

market may be more highly 

concentrated than DOE’s analysis 

suggests. DOJ stated that given the 

necessarily short time-frame for its 

review, it is not in a position to confirm 

the level of concentration increase that 

may be caused by the rule, but it 

encouraged DOE to closely examine and 

consider potential competitive issues 

that commenters may raise with respect 

to this rulemaking. The Department is 

publishing the Attorney General’s 

assessment at the end of this final rule. 

DOE notes that it has carefully 

considered the issues mentioned by DOJ 

in arriving at the standards adopted in 

this final rule. 

NGA of Georgia stated that the NOPR 

analysis indicated that nearly 32 percent 

of current furnaces in Georgia would be 

converted to an alternate fuel source 

under the proposed standard, which 

would have implications for the 

competitive balance of natural gas 

utilities, contractors that specialize in 

gas piping and appliances, and 

manufacturers that only make gas 

equipment or venting. (NGA of Georgia, 

No. 380 at p. 3) GAS asserted that DOE 

has ignored anti-competitive effects of 

its energy conservation standards 

rulemakings. (GAS, No. 385 at p. 6) 

APGA commented that the rulemaking 

record created by DOE does not do a 

good job of quantifying the impact on 

competition, and noted that APGA 

addressed the competition issue in 

comments to the Department of Justice 

dated August 19, 2022. (APGA, No. 387 

at pp. 64–65) APGA asserted that 

establishing a 95-percent AFUE 

standard could have a profound impact 

on competition, as consumers may shift 

to alternative methods of home heating 

equipment due to the higher up-front 

cost of a 95-percent AFUE furnace 

(compared to a 90-percent AFUE 

furnace). (APGA, No. 387 at p. 65) 

Spencer and Dayaratna asserted that the 

proposed standard ‘‘would effectively 

remove a technology from the 

marketplace and reduce competition.’’ 

(Spencer and Dayaratna, No. 390 at p. 2) 

They claim that the proposed standard 

will remove an entire technology from 

the market, limiting the incentive for 

condensing furnace manufacturers to 

lower prices or to increase efficiency 

further. (Id. at 3) Mortex submitted 

written comments specific to 

competition in the MHGF marketplace, 

asserting that one MHGF manufacturer 

is dominant and sells both to mobile 

home manufacturers and into the 

replacement market. Additionally, 

Mortex raised concerns about the 

availability of 20′′ wide and 24′′ deep 

MHGFs if DOE adopts a condensing 

standard and the financial impacts that 

lessened competition in the MHGF 

market could have on low-income 

consumers. (Mortex, No. 410 at pp. 3– 

4) In addition to dimensional 

differences between MHGFs and 

NWGFs, JCI stated that there are product 

configuration differences (i.e., MHGFs 

typically utilize a downflow 

configuration and NWGFs typically 

utilize an upflow configuration). JCI 

raised concerns about the availability of 

downflow condensing MHGFs. JCI 

questioned the feasibility of retrofitting 

an upflow MHGF into a manufactured 

home constructed to make use of a 

downflow furnace. Specifically, JCI 

asserted that the costs of reconfiguring 

ductwork, filling voids, and making 

other necessary structural changes 

would prevent such a change. (JCI, No. 

411 at pp. 2–3) 

In response to stakeholders’ 

comments and DOJ’s comment 

regarding the MHGF industry, DOE 

reviewed the manufacturer landscape of 

NWGFs and the manufacturer landscape 

of MHGFs separately. In the NWGF 

market, DOE notes that the 10 original 

equipment manufacturers (OEMs) of 

non-condensing NWGFs also 

manufacture condensing NWGFs that 

meet or exceed the adopted level (95- 

percent AFUE). Additionally, DOE 

identified three OEMs that only 

manufacture condensing NWGFs. These 

three NWGF OEMs also all offer models 

that meet or exceed the adopted level. 

Thus, a variety of companies already 

participate in the condensing NWGF 

market. Given that the number of 

competitors is not decreased at the 

adopted levels, DOE does not anticipate 

lessening of competition in the NWGF 

market. Compared to the NWGF market, 

the MHGF market is smaller (i.e., lower 

annual shipments) and is served by 

fewer OEMs. DOE estimates that 

NWGFs account for approximately 97 

percent of shipments covered by this 

rulemaking (around 3.1 million units in 

2029) and that MHGFs account for the 

remaining 3 percent of shipments 

(around 0.1 million units in 2029). In 

the July 2022 NOPR, DOE identified 

seven OEMs of MHGFs. For this final 

rule, DOE further researched the furnace 

market and refreshed its database of 

model listings to include the most upto-date information on NWGF and 

MHGF models currently available on 

the market. Through its review of the 

updated product database and other 

public sources, DOE determined that 

one MHGF OEM no longer offers 

products covered by this rulemaking. At 

the time of the July 2022 NOPR, this 


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OEM offered one condensing MHGF 

model, which has since been 

discontinued. Therefore, through its 

careful review of the MHGF market, 

DOE has determined that six OEMs 

manufacture MHGFs for the U.S. 

market. Of these six OEMs, one OEM 

only manufactures non-condensing 

MHGFs, two OEMs only manufacture 

condensing MHGFs, and the remaining 

three OEMs manufacture both noncondensing and condensing MHGFs. All 

five OEMs of condensing MHGFs offer 

models that meet or exceed the adopted 

level (95-percent AFUE). Furthermore, 

all OEMs of condensing MHGFs offer 

downflow condensing models. Given 

the existing availability of downflow 

condensing models, DOE finds that a 

market shift to condensing furnaces 

would not eliminate downflow 

configurations from the market. 

Similarly, DOE found a range of 

condensing MHGF models that fit into 

compact footprints. The availability of 

such models from Burnham Holdings 

(Thermo Pride) and Madison Industries 

(Nortek) suggest there is no technical 

constraint to offering condensing 

MHGFs that fit a compact footprint. 

DOE recognizes that one manufacturer 

dominates the MHGF space in sales 

volume, and the remaining competitors 

have small market shares. As a result, 

the MHGF market is concentrated. 

However, DOE does not expect the 

adopted standard would significantly 

alter the level of concentration. DOE 

notes that consumers have access to a 

range of alternate heating solutions and 

that those alternatives limit price 

increases in a market where one 

manufacturer already dominates the 

space. As discussed earlier in this 

section, in a September 6, 2022, letter 

written in response to the NOPR, DOJ 

stated that ‘‘[b]ased on our review of the 

information currently available, we do 

not believe that the proposed energy 

conservation standards for consumer 

furnaces are likely to substantially 

lessen competition in any particular 

product or geographic market.’’ 

f. Need for National Energy 

Conservation 

DOE also considers the need for 

national energy and water conservation 

in determining whether a new or 

amended standard is economically 

justified. (42 U.S.C. 6295(o)(2)(B)(i)(VI)) 

Spencer and Dayaratna asserted that 

DOE’s NOPR fails to establish the need 

for national energy conservation as 

would justify the proposed standard 

under 42 U.S.C. 6295(o)(2)(B)(i)(VI). 

These commenters argued that there is 

not a current and pressing problem 

concerning conservation, as the United 

States is in a time of energy abundance 

(citing EIA estimates of U.S. oil and gas 

reserves equating to nearly 100 years of 

supply, uranium reserves, as well as the 

potential for new energy discoveries 

such as oil shale). Spencer and 

Dayaratna also challenged the proposed 

standards’ anticipated reductions in 

toxic air emissions as a weak reason for 

showing the need for national energy 

conservation; the commenters argued 

that air pollutant concentration levels 

have declined significantly since 1990, 

so with the air clean and getting cleaner, 

they asserted that the costs and benefits 

of the regulation are outweighed by its 

impacts on consumer choice, family 

finances, and broad inconvenience. 

(Spencer and Dayaratna, No. 390 at pp. 

4–6) 

DOE disagrees with this comment 

from Spencer and Dayaratna. DOE finds 

this comment to start from the flawed 

premise that further improvements in 

energy efficiency and reduced emissions 

are unnecessary or would not provide 

substantial benefits to consumers and 

the Nation. As discussed in section I.C 

of this final rule, the amended standards 

for the subject consumer furnaces are 

expected to save 4.77 quad of energy 

over 30 years and the cumulative NPV 

of total consumer benefits of the 

amended standards for NWGFs and 

MHGFs ranges from $4.8 billion (at a 7- 

percent discount rate) to $16.3 billion 

(at a 3-percent discount rate) over the 

same time period. In DOE’s view, the 

presence of an abundant energy supply 

neither precludes DOE’s approach nor 

justifies the approach suggested by the 

commenters, which would result in 

waste of significant amounts of energy 

when more-efficient options are 

technologically feasible and 

economically justified. 

Likewise, DOE does not agree that the 

Nation and its citizens (particularly 

children) would not benefit from the 

reduction in toxic air emissions 

associated with the amended energy 

conservation standards for the subject 

consumer furnaces. Despite the Nation’s 

substantial progress in reducing 

emissions in recent years, DOE does not 

believe that further efforts in terms of 

environmental and human health 

protection are unnecessary. DOE 

maintains that environmental and 

public health benefits associated with 

the more efficient use of energy are 

important to take into account when 

considering the need for national energy 

conservation. The adopted standards are 

likely to result in environmental 

benefits in the form of reduced 

emissions of air pollutants and 

greenhouse gases (GHGs) associated 

with energy production and use. DOE 

conducts an emissions analysis to 

estimate how potential standards may 

affect these emissions, as discussed in 

section IV.K of this document; the 

estimated emissions impacts are 

reported in section V.B.6 of this 

document. DOE also estimates the 

economic value of emissions reductions 

resulting from the considered TSLs, as 

discussed in section IV.L of this 

document. These positive economic and 

health benefits are set forth in detail in 

section V.B.6 of this document. 

Furthermore, DOE notes that the 

energy savings from the adopted 

standards are likely to provide 

improvements to the security and 

reliability of the Nation’s energy system. 

Reductions in the demand for electricity 

also may result in reduced costs for 

maintaining the reliability of the 

Nation’s electricity system. DOE 

conducts a utility impact analysis to 

estimate how standards may affect the 

Nation’s needed power generation 

capacity, as discussed in section IV.M of 

this document. 

g. Other Factors 

In determining whether an energy 

conservation standard is economically 

justified, DOE may consider any other 

factors that the Secretary deems to be 

relevant. (42 U.S.C. 6295(o)(2)(B)(i)(VII)) 

To the extent DOE identifies any 

relevant information regarding 

economic justification that does not fit 

into the other categories described 

previously, DOE could consider such 

information under ‘‘other factors.’’ 

Spencer and Dayaratna stated that one 

other factor to consider is how the 

proposed standard meaningfully 

advances EPCA’s intent, given the 

abundant energy sources that the United 

States enjoys today that were not 

contemplated in 1975. (Spencer and 

Dayaratna, No. 390 at p. 11) They add 

that given the change in the value 

proposition for energy efficiency since 

1975, setting efficiency standards no 

longer has the same impact on energy 

availability as it did during times of 

perceived energy scarcity, concluding 

that the proposed standards do not 

meaningfully advance the intent of 

EPCA and do not justify the restrictions 

that they state the proposed rule will 

impose on consumer choice. (Id. at p. 

11–12) 

DOE’s response here is similar to that 

made in the preceding section in 

response to Spencer and Dayaratna’s 

argument regarding establishing the 

need for national energy conservation. 

Again, DOE disagrees with the 

commenters’ assertion that an abundant 

energy supply somehow ends DOE’s 

statutory mandate to pursue further 


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46See amendments to EPCA contained in the 

Energy Independence and Security Act of 2007 

(EISA 2007), Public Law 110–140 (enacted Dec. 19, 

2007), and in the American Energy Manufacturing 

Technical Corrections Act (AEMTCA), Public Law 

112–210 (enacted Dec. 18, 2012). 

47See Docket EERE–2020–BT–STD–0007. DOE 

initially used the term small, non-small electric 

motors (SNEMs) to designate ESEMs. 

improvements in energy efficiency and 

reduced emissions, despite the fact that 

such actions would provide substantial 

benefits to consumers and the Nation. 

Additionally, the consideration of total 

projected energy savings is only one of 

the seven factors enumerated in EPCA. 

(42 U.S.C. 6295(o)(2)(B)(i)). Energy 

savings have value both in times of 

scarcity and abundance, and 

particularly in light of the EPCA 

amendments in recent years mandating 

review of existing conservation 

standards on a six-year cycle,46 it is 

apparent that Congress intends for DOE 

to continue to pursue energy efficiency 

gains that meet the applicable statutory 

criteria—even in times of energy 

abundance. As discussed in section I.C 

of this final rule, the amended standards 

for the subject consumer furnaces are 

expected to save 4.77 quad of energy 

over 30 years and the cumulative NPV 

of total consumer benefits of the 

amended standards for NWGFs and 

MHGFs ranges from $4.8 billion (at a 7- 

percent discount rate) to $16.3 billion 

(at a 3-percent discount rate) over the 

same period. DOE has determined that 

the full measure of anticipated energy 

and cost savings from amended energy 

conservation standards for the subject 

furnaces are unlikely to be realized in 

the absence of amended standards. 

Furthermore, as discussed in section 

III.F.1.f of this document, DOE 

maintains that environmental and 

public health benefits associated with 

the more efficient use of energy are 

important to take into account. Again, in 

DOE’s view, the presence of an 

abundant energy supply neither 

precludes DOE’s approach nor justifies 

the approach suggested by the 

commenters, which would result in 

waste of significant amounts of energy 

when more-efficient options are 

technologically feasible and 

economically justified. 

2. Rebuttable Presumption 

As set forth in 42 U.S.C. 

6295(o)(2)(B)(iii), EPCA creates a 

rebuttable presumption that an energy 

conservation standard is economically 

justified if the additional cost to the 

consumer of a product that meets the 

standard is less than three times the 

value of the first year’s energy savings 

resulting from the standard, as 

calculated under the applicable DOE 

test procedure. DOE’s LCC and PBP 

analyses generate values used to 

calculate the effect potential amended 

energy conservation standards would 

have on the payback period for 

consumers. These analyses include, but 

are not limited to, the three-year 

payback period contemplated under the 

rebuttable-presumption test. In addition, 

DOE routinely conducts an economic 

analysis that considers the full range of 

impacts to consumers, manufacturers, 

the Nation, and the environment, as 

required under 42 U.S.C. 

6295(o)(2)(B)(i). The results of this 

analysis serve as the basis for DOE’s 

evaluation of the economic justification 

for a potential standard level (thereby 

supporting or rebutting the results of 

any preliminary determination of 

economic justification). The rebuttable 

presumption payback calculation is 

discussed in section IV.F of this final 

rule. 

G. Compliance Date 

In the July 2022 NOPR, DOE 

discussed in some detail the relevant 

provisions of EPCA related to 

calculation of the requisite lead time 

between publication of a final rule and 

compliance with amended standards, 

and the Department ultimately proposed 

a five-year lead time for compliance 

with any amended energy conservation 

standards for NWGFs and MHGFs. 87 

FR 40590, 40611 (July 7, 2022). 

Additionally, as explained in the July 

2022 NOPR, furnaces and furnace fans 

are separate products under EPCA, and, 

therefore, the required six-year period 

under 42 U.S.C. 6295(m)(4)(B) is not 

relevant because it applies only in the 

context of standards directly pertinent 

to the product in question. As such, the 

energy conservation standards for 

furnace fans are not a consideration 

when applying the six-year spacing 

period to new or amended standards for 

furnaces. Id. at 87 FR 40611–40612. 

DOE did not receive any comments 

related to the proposed five-year lead 

time for compliance presented in the 

July 2022 NOPR and is adopting a fiveyear lead time in this final rule. 

H. Impact From Other Rulemakings 

Veiga commented that home 

appliances have energy-efficiency 

standards that collectively make homes 

more expensive. (Veiga, No. 326 at p. 1) 

Lennox commented that DOE needs to 

consider the total cumulative regulatory 

burden for consumer furnaces, as there 

are multiple concurrent DOE, 

Environmental Protection Agency 

(EPA), and other regulatory actions 

undergoing updates. (Lennox, No. 389 at 

p. 8) Lennox stated that the NOPR’s 

cumulative regulatory burden analysis 

was inadequate and did not include all 

relevant regulations. The commenter 

provided the following list of relevant 

regulations: ‘‘2023 DOE Energy 

Conservation Standards (‘‘ECS’’) change 

for central air conditioners; 2023 DOE 

Energy Conservation Standard change 

for commercial air conditioners; 2023 

DOE ECS change for commercial warm 

air furnaces (‘‘CWAFs’’); EPA phasedown to lower GWP refrigerants to meet 

the American Innovation and 

Manufacturing (‘‘AIM’’) Act objectives; 

National and Regional Cold Climate 

Heat Pump Specifications; 2025 DOE 

ECS change for Three-Phase, Below 

65,000 Btu/h; DOE Test procedure for 

VRF [Variable Refrigerant Flow] 

Systems; EPA Energy Star 6.0+ for 

Residential HVAC; EPA Energy Star 4.0 

for Light Commercial HVAC, and DOE 

ECS changes for electric motors, 

commercial fans and blowers, furnace 

fans, oil and weatherized gas furnaces, 

and walk-in coolers and freezers’’. (Id.) 

Lennox stated that the significant 

cumulative regulatory burdens are 

stressing technical and laboratory 

resources within the industry. (Id. at p. 

9) 

Many of the rules listed by Lennox are 

not finalized. Regulations that are not 

yet finalized are not considered in 

cumulative regulatory burden, as the 

timing, cost, and impacts of unfinalized 

rules are speculative. However, to aid 

stakeholders in identifying potential 

cumulative regulatory burden, DOE 

does list rulemakings that have 

proposed rules, which have tentative 

compliance dates, compliance levels, 

and compliance cost estimates. In 

addition, the commercial fans and 

blowers, furnace fans, and oil and 

weatherized gas furnaces, and air-cooled 

unitary air conditioners rulemakings 

identified by Lennox have not yet been 

proposed. The walk-in coolers and 

freezer (‘‘WICF’’) rulemaking was not 

proposed at the time of the July 2022 

NOPR. A proposed rule for WICFs has 

since been published, and DOE added 

the WICF ECS NOPR rulemaking to its 

list of appliance standards that could 

contribute to cumulative regulatory 

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

document. 88 FR 60746 (Sept. 5, 2023). 

The expanded scope electric motors 

(ESEMs) rulemaking was also still in 

development at the time of the July 2022 

NOPR.47 In the ESEM rulemaking, DOE 

is considering including expanded 

scope electric motors including certain 

permanent split capacitor (PSC) motors 

that exceed 0.25 horsepower and are 

single-speed. DOE understands that the 


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48 In this analysis, DOE uses ‘‘improved PSC 

motors’’ to refer to PSC motors with at least three 

airflow-control settings. 

vast majority of furnace fans used in 

MHGFs use either electrically 

commutated motors (i.e., ‘‘ECMs’’ which 

are also referred to as BPM motors in 

this rulemaking) or are multiple-speed 

PSC motors, both of which are out of the 

preliminary scope of the ESEM 

rulemaking. Thus, furnace fans used in 

MHGFs are not likely to be impacted by 

the ESEM rulemaking. In addition, DOE 

does not expect that any potential 

efficiency standard for ESEMs would 

impact NWGFs because the furnace fans 

used in those products use BPM motors, 

for which standards were not analyzed 

in the ESEMs rulemaking. 

As discussed in section IV.C.2.c. of 

this document, the MHGF MPCs that 

were developed for this analysis were 

normalized to represent the cost of the 

furnace units with furnace fans that 

include improved PSC motors 48 at all 

ELs. Using the same furnace fan motor 

at all ELs ensures that the incremental 

costs between ELs are proportional only 

to the addition of the specific 

technologies associated with achieving 

each next-higher EL. Thus, should a 

baseline technology for SNEMs be 

finalized that is higher than the 

assumed improved PSC motors, this 

new technology would be implemented 

at each efficiency level. Any changes in 

furnace fan motor costs would impact 

the cost of each efficiency level for 

MHGFs equally. Therefore, while DOE 

acknowledges the potential for a small 

increase in MPCs for MHGFs as a result 

of the SNEMs rulemaking (if finalized), 

DOE expects that the incremental costs 

of MHGFs between ELs would not be 

impacted. Similarly, installed costs for 

consumers would likely increase 

slightly due to the increased motor cost, 

but an equivalent impact would be 

expected across all efficiency levels. 

Additionally, an increase in furnace fan 

motor efficiency would decrease the 

total electrical energy consumption of 

each MHGF in the field, but it is not 

expected to impact the performance of 

the overall furnace as measured by 

AFUE, and, therefore, the efficiency 

levels included in this analysis would 

not be impacted. Therefore, the 

conclusion of economic justification for 

the amended standards adopted in this 

final rule would be unchanged by a 

potential new standard for SNEMs. 

In the analysis of cumulative 

regulatory burden, DOE considers 

Federal, product-specific regulations 

that have compliance dates within three 

years of one another. The compliance 

date for this final rule is in 2029. The 

compliance dates for the central air 

conditioners in 2023, commercial 

unitary air conditioners standards in 

2023, commercial warm air furnace 

standards in 2023, VRF system test 

procedures in 2024, and the ‘‘air-cooled, 

three-phase equipment with cooling 

capacity less than 65,000 Btu/h’’ in 2025 

occur outside the cumulative regulatory 

burden timeframe and are not explicitly 

considered in the selection of the 

adopted standard. The EPA ENERGY 

STAR programs for residential HVAC 

and light commercial HVAC, as well as 

the ENERGY STAR Cold Climate Heat 

Pump Controls Verification Procedure, 

are voluntary programs and are not 

considered in DOE’s analysis of 

cumulative regulatory burden. See 

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

chapter 12 of the final rule TSD for 

additional information on cumulative 

regulatory burden. 

HARDI commented that the proposed 

standards also do not meet the 

requirements under the Regulatory 

Flexibility Act, as DOE only assessed 

the impact on four small manufacturers, 

but not on distributors, contractors, or 

manufacturers of furnace supplies. 

HARDI stated that there are a number of 

small businesses that serve as furnace 

suppliers. (HARDI, No. 384 at pp. 3–4) 

NGA of Georgia similarly stated that the 

proposal fails to capture the negative 

effects on small businesses that 

manufacture venting and accessories for 

non-condensing furnaces. (NGA of 

Georgia, No. 380 at p. 2) 

In response, DOE conducted an initial 

regulatory flexibility analysis in support 

of the July 2022 NOPR. See 87 FR 

40590, 40698–40701 (July 7, 2022). 

However, NGA of Georgia and HARDI 

have misinterpreted the requirements of 

the Regulatory Flexibility Act, which 

requires an agency to perform a 

regulatory flexibility analysis of small 

entity impacts when a rule directly 

regulates the small entities, rather than 

a broader array of entities which may be 

indirectly impacted. This final rule 

regulates manufacturers of consumer 

furnaces, not the other types of 

businesses to which NGA of Georgia 

and HARDI refer. The impacts on small 

manufacturers of the subject consumer 

furnaces are presented in the final 

regulatory flexibility analysis, found in 

section VI.B of this document. 

IV. Methodology and Discussion of 

Related Comments 

This section addresses the analyses 

DOE has performed for this rulemaking 

with regard to NWGFs and MHGFs. 

Separate subsections address each 

component of DOE’s analyses. 

Comments on the methodology and 

DOE’s responses are presented in each 

section. 

DOE used several analytical tools to 

estimate the impact of the standards 

considered in this document on 

consumers and manufacturers. The first 

tool is a spreadsheet that calculates the 

LCC savings and PBP of potential 

amended or new energy conservation 

standards. The national impacts 

analysis uses a second spreadsheet set 

that provides shipments projections and 

calculates national energy savings and 

net present value of total consumer 

costs and savings expected to result 

from potential energy conservation 

standards. DOE uses the third 

spreadsheet tool, the Government 

Regulatory Impact Model (GRIM), to 

assess manufacturer impacts of potential 

standards. These three spreadsheet tools 

are available on the DOE website for this 

rulemaking: www1.eere.energy.gov/ 

buildings/appliance_standards/ 

standards.aspx?productid=59&action

=viewlive. Additionally, DOE used 

output from the latest version of the 

EIA’s Annual Energy Outlook for the 

emissions and utility impact analyses. 

A. Market and Technology Assessment 

DOE develops information in the 

market and technology assessment that 

provides an overall picture of the 

market for the products concerned, 

including the purpose of the products, 

the industry structure, manufacturers, 

market characteristics, and technologies 

used in the products. This activity 

includes both quantitative and 

qualitative assessments, based primarily 

on publicly-available information. The 

subjects addressed in the market and 

technology assessment for this 

rulemaking include: (1) a determination 

of the scope of the rulemaking and 

product classes; (2) manufacturers and 

industry structure; (3) existing 

efficiency programs; (4) shipments 

information; (5) market and industry 

trends, and (6) technologies or design 

options that could improve the energy 

efficiency of NWGFs and MHGFs. The 

key findings of DOE’s market 

assessment are summarized in the 

following sections. See chapter 3 of the 

final rule TSD for further discussion of 

the market and technology assessment. 

1. Scope of Coverage and Product 

Classes 

a. General Approach 

EPCA defines a ‘‘furnace’’ as a 

product which utilizes only singlephase electric current, or single-phase 

electric current or DC current in 

conjunction with natural gas, propane, 

or home heating oil, and which: 


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(1) Is designed to be the principal 

heating source for the living space of a 

residence; 

(2) Is not contained within the same 

cabinet with a central air conditioner 

whose rated cooling capacity is above 

65,000 Btu per hour; 

(3) Is an electric central furnace, 

electric boiler, forced-air central 

furnace, gravity central furnace, or low 

pressure steam or hot water boiler; and 

(4) Has a heat input rate of less than 

300,000 Btu per hour for electric boilers 

and low pressure steam or hot water 

boilers and less than 225,000 Btu per 

hour for forced-air central furnaces, 

gravity central furnaces, and electric 

central furnaces. 

(42 U.S.C. 6291(23)) 

DOE has incorporated this definition 

into its regulations in the Code of 

Federal Regulations (CFR) at 10 CFR 

430.2. 

EPCA’s definition of a ‘‘furnace’’ 

covers the following types of products: 

(1) gas furnaces (non-weatherized and 

weatherized); (2) oil-fired furnaces (nonweatherized and weatherized); (3) 

mobile home furnaces (gas and oilfired); (4) electric resistance furnaces; 

(5) hot water boilers (gas and oil-fired); 

(6) steam boilers (gas and oil-fired), and 

(7) combination space/water heating 

appliances (water-heater/fancoil 

combination units and boiler/tankless 

coil combination units). As discussed in 

section II.B.2 of this document, DOE 

agreed to the partial vacatur and remand 

of the June 2011 DFR, specifically as it 

related to energy conservation standards 

for NWGFs and MHGFs in the 

settlement agreement to resolve the 

litigation in American Public Gas Ass’n 

v. U.S. Dept. of Energy (No. 11–1485, 

D.C. Cir. Filed Dec. 23, 2011). For a 

more complete discussion of the history 

of this litigation and its impacts on this 

rulemaking, see 80 FR 13120, 13130– 

13132 (March 12, 2015). Therefore, in 

this rulemaking, DOE is only amending 

the energy conservation standards for 

these two product classes of residential 

furnaces (i.e., NWGFs and MHGFs). 

When evaluating and establishing 

energy conservation standards, DOE 

divides covered products into product 

classes by the type of energy used. DOE 

will also establish separate product 

classes if a group of products has a 

capacity or other performance-related 

feature that other products within such 

type do not have and such feature 

justifies a different standard. (42 U.S.C. 

6295(q)) In determining whether a 

performance-related feature justifies a 

different standard, DOE considers such 

factors as the utility to the consumers of 

the feature and other factors DOE 

determines are appropriate. 

At various rulemaking stages, 

interested parties have raised concerns 

pertaining to potential impacts of a 

nation-wide standard corresponding to 

condensing efficiency levels for NWGFs 

and MHGFs on certain consumers as a 

result of either increased installation 

costs (due to the increased cost of the 

condensing furnace itself and/or related 

venting modifications) or switching to 

electric heat (potentially resulting in 

higher monthly bills). In response to 

these concerns, DOE first published the 

September 2015 NODA, which 

contained analyses examining the 

potential impacts of a separate product 

class for furnaces with a lower input 

capacity, one of the statutory bases for 

establishing a separate product class. 

Such an approach was suggested by 

stakeholders as a potential way to 

reduce negative impacts on some 

furnace consumers while maintaining 

the overall economic and environmental 

benefits of amended standards for 

consumer furnaces. 80 FR 55038, 

55038–55039 (Sept. 14, 2015). In 

response to the September 2015 NODA, 

DOE received further comments from 

several stakeholders recommending that 

DOE establish separate product classes 

based on furnace capacity in order to 

preserve the availability of noncondensing NWGFs for buildings with 

lower heating loads, thereby helping to 

alleviate the negative impacts of the 

proposed standards. DOE responded to 

these comments in the since withdrawn 

September 2016 SNOPR, in which DOE 

tentatively concluded that the 

establishment of a small furnace class 

would have merit. Accordingly, after 

considering the energy savings and 

economic benefits of several potential 

input capacity thresholds, DOE 

proposed to establish a separate product 

class for small NWGFs, defined as those 

furnaces with a certified input capacity 

of less than or equal to 55 kBtu/h, and 

DOE proposed to retain a minimum 

standard of 80-percent AFUE for this 

class. 81 FR 65720, 65752 and 65837 

(Sept. 23, 2016). 

For the July 2022 NOPR analysis, DOE 

again considered whether a ‘‘small 

furnace’’ product class would be 

justified for NWGFs and MHGFs and 

evaluated several input capacity 

thresholds, including the 55 kBtu/h 

threshold that was proposed in the 

withdrawn September 2016 SNOPR, 

along with several others. However, 

DOE did not propose to divide furnace 

product classes by capacity. 87 FR 

40590, 40665 and 40706 (July 7, 2022). 

NCP commented that 95-percent 

AFUE standards for large NWGFs and 

80-percent AFUE for small NWGFs will 

lead to significant energy savings while 

reducing the number of consumers that 

would experience net costs. NCP 

pointed to the withdrawn September 

2016 SNOPR as rationale for splitting 

NWGFs into these two groups, where 

large NWGFs with input capacities 

greater than 55 kBtu/h have a 95-percent 

AFUE standard and small NWGFs with 

input capacities less than 55 kBtu/h 

have a standard of 80 percent. (NCP, No. 

370 at pp. 2–3) PHCC commented that 

after the litigation against these regional 

standards, several stakeholders came to 

the consensus that there should be a 

category of small capacity noncondensing furnaces, as well as a 

category of larger-capacity condensing 

furnaces. PHCC commented that the 

industry submitted a proposal regarding 

this issue, but that the NOPR does not 

place much value on this proposal. (Id.) 

For the current final rule analysis, 

DOE again considered whether a ‘‘small 

furnace’’ product class is justified for 

NWGFs and MHGFs and evaluated 

several input capacity thresholds, 

including at 55 kBtu/h. DOE analyzed a 

range of potential input capacity cut-offs 

and considered the benefits and burdens 

of each. As discussed in section V.C.1 

of this document, after considering the 

benefits and burdens of the various 

approaches, DOE is finalizing its 

proposal to adopt a single standard level 

for NWGFs and a single standard level 

MHGFs that cover all capacities within 

the scope of each class. 

b. Through-the-Wall Units 

In response to the July 2022 NOPR, 

NCP commented that if DOE concludes 

that the separate levels for large and 

small NWGFs are not justified, there 

should be a separate class for spaceconstrained through-the-wall units to 

accommodate unique conditions for 

multi-family buildings. (NCP, No. 370 at 

p. 3) NCP noted that space-constrained 

through-the-wall systems are often 55 

kBtu/h or less, and are installed in 

unique, often more expensive ways. 

NCP asserted that multi-family 

buildings with space-constrained 

through-the-wall HVAC systems have 

their condensate stacks plumbed to 

grade for drainage of the air 

conditioning portion of the unit in 

cooling mode and are not set up for 

condensate removal during heating in 

cold ambient conditions. NCP 

commented that the modifications 

necessary for condensing furnaces 

would not be feasible in new or existing 

multi-family constructions. (Id. at pp. 2– 

3) Additionally, NCP stated that while 

it makes space-constrained through-thewall HVAC systems at 95-percent 


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87534 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

49See app.salsify.com/catalogs/73d44623-0667- 

454c-a453-3b3faaf8d4d1/products/P-S26A-F12A-A 

and app.salsify.com/catalogs/73d44623-0667-454ca453-3b3faaf8d4d1/products/P-C50A-F18A-A (last 

accessed May 31, 2023). 

AFUE, such systems are relatively early 

in their commercialization phase and 

cannot be used in all applications. Also, 

NCP commented that these systems are 

a relatively new technology that 

originated in 2015–2016. Since 2016, 

NCP noted that it has encountered 

several challenges with this technology, 

including freezing in low temperatures 

and high wind conditions. (Id. at p. 3) 

Napoleon commented that DOE 

should align its standards for new 

installations with NRCAN’s standards 

and create a separate category for 

‘‘through the wall’’ furnaces. Napoleon 

suggested that DOE should require a 

minimum efficiency of 90-percent 

AFUE for these products because of 

their cabinet size limitations. 

(Napoleon, No. 374 at p. 2) Napoleon 

stated that it is not reasonable to require 

the same efficiency from ‘‘through the 

wall furnaces with integrated cooling 

module’’ products as other products that 

have larger cabinets because these 

products would likely not have the 

ability to produce the higher airflows 

that are necessary for higher 

efficiencies. (Id.) 

In response, DOE notes that throughthe-wall furnaces are currently included 

within the broader consumer furnace 

product classes to the extent that they 

meet the definitions for consumer 

furnaces discussed in section IV.A.1.a of 

this document. As discussed in section 

III.B of this document, when evaluating 

and establishing energy conservation 

standards, DOE may establish separate 

standards for a group of covered 

products (i.e., establish a separate 

product class) if DOE determines that 

separate standards are justified based on 

the type of energy used, or if DOE 

determines that a product has a capacity 

or other performance-related feature that 

other products within such type (or 

class) do not have and such feature 

justifies a different standard. In making 

a determination of whether a 

performance-related feature justifies a 

different standard, DOE must consider 

factors such as the utility to the 

consumer of the feature and other 

factors DOE determines are appropriate. 

(42 U.S.C. 6295(q)(1)) Historically, DOE 

has viewed utility as an aspect of the 

product that is accessible to the 

layperson and is based on user 

operation and interaction with the 

product. 

DOE has identified through-the-wall 

furnaces rated above 96 percent AFUE 

that have the same dimensions as 

comparable non-condensing (i.e., 80 

percent AFUE) through-the-wall 

furnaces and that are marketed for the 

same applications.49 Therefore, DOE 

concludes that 80-percent AFUE units 

could be readily replaced with 95- 

percent AFUE units (i.e., the minimum 

efficiency level adopted in this final 

rule) because substitutes are available 

on the market having the same cabinet 

size. Regarding NCP’s concerns about 

the technical challenges associated with 

condensate drainage and freezing, DOE 

notes that while certain multi-family 

applications may be difficult, there are 

installation methods to avoid freezing 

such as using heat tape. As discussed in 

section IV.F.2.b of this document, DOE 

accounted for additional costs for 

condensate drainage in these difficult 

installations. Consequently, DOE is not 

creating a separate product class for 

through-the-wall furnaces. 

c. Condensing and Non-Condensing 

Furnaces 

In response to the July 2022 NOPR, 

APGA, AGA, and NPGA all stated that 

DOE’s failure to establish a separate 

product class for non-condensing 

residential natural gas furnaces is a 

violation of EPCA. (APGA, No. 387 at 

pp. 42–45; AGA, No. 405 at pp. 46–49; 

NPGA, No. 395 at p. 19) APGA 

expressed that it disagreed with the 

NOPR’s conclusion to set standards at 

condensing levels because the legal 

interpretation upon which the NOPR 

relies to avoid EPCA’s Unavailability 

Provisions is unreasonable and contrary 

to law. APGA instead argued that, if 

standards specific to condensing 

products are justified, DOE should 

recognize that the compatibility of a 

NWGF with existing atmospheric 

venting systems is a ‘‘performancerelated feature’’ that requires separate 

standards for condensing and 

non-condensing furnaces. (APGA, No. 

387 at pp. 42–45) APGA further cited 

EPCA provisions requiring that the 

standards not deprive purchasers of 

‘‘product choices and characteristics, 

features, sizes, etc.,’’ and that energy 

savings are achieved ‘‘without 

sacrificing the utility or convenience of 

appliances to consumers.’’ (APGA, No. 

387 at p. 42–45) AGA commented that 

the new proposed rule wrongfully 

asserts that the differing constraints and 

functionality between condensing and 

non-condensing appliances do not 

constitute performance-related features. 

AGA further urged DOE to correct its 

‘‘flawed interpretation’’ of EPCA to treat 

condensing and non-condensing 

products as being in the same class. 

(AGA, No. 405 at pp. 32–38) AGA 

encouraged DOE to follow its past 

practices by continuing to recognize 

non-condensing furnaces that function 

in homes constrained by existing 

exhaust and plumbing systems as a 

separate class from condensing 

products. (AGA, No. 405 at pp. 46–49) 

NPGA stated that there have been other 

instances of DOE creating separate 

product classes where standards would 

otherwise deprive purchasers of 

products that could not be installed 

without the need to change the space 

provided for an appliance and cited 

these as precedent for separate noncondensing and condensing product 

classes (e.g., ‘‘space-constrained’’ 

central air conditioners, package 

terminal air conditioners (PTACs), and 

ventless clothes dryers). (NPGA, No. 395 

at pp. 21–22) NPGA stated that the 

NOPR sets a de facto standard for 

building design by requiring the 

alteration of building venting systems, 

which is beyond the scope of DOE’s 

statutory authority. (NPGA, No. 395 at 

p. 22) NPGA suggested that the 

proposed standard will make furnaces 

incompatible with millions of homes 

without substantial renovations. (NPGA, 

No. 395 at pp. 9–10) 

Spire commented that DOE should 

recognize that the compatibility of a 

product with existing atmospheric 

venting systems is a ‘‘performancerelated feature,’’ which would require 

separate standards for condensing and 

non-condensing products if standards 

specific to condensing products are 

justified. (Spire, No. 413 at p. 21) Spire 

and AGA formally requested that any 

final rule in this proceeding include a 

written finding that interested persons 

have established that the proposed 

standards are likely to result in the 

unavailability in the United States of 

residential furnaces with ‘‘performance 

characteristics (including reliability, 

features, sizes, capacities, and volumes) 

that are substantially the same as those 

generally available in the United 

States.’’ (Spire, No. 413 at p. 20; AGA, 

No. 405 at pp. 49–50) 

HARDI commented that the proposed 

standards will have an adverse impact 

on consumers in terms of utility. 

(HARDI, No. 384 at p. 4) HARDI stated 

its opposition to DOE’s decision to 

revert to its prior interpretation related 

to non-condensing technology (and 

associated venting), as expressed in the 

December 2021 Final Interpretive Rule. 

(Id.) HARDI commented that, for many 

existing homes and some new 

construction applications, condensing 

furnaces provide negative utility for 

consumers because the venting system 

will need to be changed, which, in turn, 


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50The commenter included a citation to 42 U.S.C. 

6295(o)(4) for the referenced provision. 

changes the living spaces; HARDI stated 

that this could negatively impact 

consumers. HARDI also commented that 

non-condensing furnaces prevent the 

consumer from needing heat tape and 

other freeze-mitigation equipment, and 

added that the need to constantly heat 

the venting system would be impractical 

for consumers who only use heating 

equipment part-time. (HARDI, No. 384 

at pp. 4–5) 

The Joint Market and Consumer 

Organizations also commented that they 

oppose the elimination of noncondensing products and stated that 

EPCA prohibits any new or amended 

standard if the Secretary finds, by a 

preponderance of evidence, that it is 

‘‘likely to result in the unavailability in 

the United States. . . of performance 

characteristics (including reliability), 

features, sizes, capacities, and volumes 

that are substantially the same as those 

generally available in the United States 

at the time of the Secretary Finding.’’ 50

(Joint Market and Consumer 

Organizations, No. 373 at p. 3) The Joint 

Market and Consumer Organizations 

stated that this provision can be 

interpreted to disallow natural gas 

furnace standards so stringent that they 

effectively force non-condensing 

versions off the market in favor of 

condensing furnaces with very different 

characteristics that make them 

incompatible with some homes. (Id. at 

p. 3) AGA, Spire, and the Marley 

Companies also stated a belief that 

EPCA 42 U.S.C. 6295(o)(4) prohibits the 

elimination of non-condensing fuelfired appliances. (AGA No. 405 at pp. 

49–50; Spire, No. 413 at pp. 2–5; The 

Marley Companies, No. 386 at p. 5) 

Spire commented that the proposed 

standards would ultimately require 

efficiencies that only condensing 

furnaces can achieve and claimed that 

the proposed rulemaking would also 

violate EPCA 42 U.S.C. 6295(o)(2). 

(Spire, No. 413 at pp. 2–5) Spire also 

noted that the Unavailability Provision 

of EPCA cannot be avoided by simply 

adjusting installation costs within the 

economic analysis. (Spire, No. 413 at 

pp. 20–21) The Marley Companies 

commented that non-condensing 

products utilizing natural draft venting 

provide advantages and must remain 

available for several reasons related to 

product continuity, utility, and 

availability. (The Marley Companies, 

No. 386 at p. 5) 

With respect to product availability, 

the Marley Companies commented that 

many residential applications cannot 

support upgrading the existing venting 

system as would be required for nonnatural draft venting or higherefficiency products. (The Marley 

Companies, No. 386 at p. 5) PHCC 

commented that it opposes the 

elimination of non-condensing products 

due to venting issues, difficult 

installations, and some questions PHCC 

has regarding the accuracy of DOE’s 

analysis. (PHCC, No. 403 at p. 6) The 

Coalition commented that the need to 

use condensing furnaces will require 

physical design changes of some 

housing types that can become more 

problematic in multifamily and entrylevel homes. (The Coalition, No. 378 at 

p. 4) The Coalition added that 

condensing furnaces typically require 

larger cabinets, different and larger 

venting/combustion air intake systems, 

and condensate drain systems. (Id.) 

APGA and Spire commented they have 

demonstrated that condensing products 

are incompatible with many existing 

buildings in which non-condensing 

natural gas furnaces are installed. 

(APGA, No. 387 at p. 43–45; Spire, No. 

413 at p. 3) 

In response, when evaluating and 

establishing energy conservation 

standards, DOE is required to establish 

product classes based on: (1) the type of 

energy used; and (2) capacity or other 

performance-related feature which other 

products within such type (or class) do 

not have and that DOE determines 

justify a different standard. In making a 

determination of whether a 

performance-related feature justifies a 

different standard, the Department must 

consider factors such as the utility to the 

consumer of the feature and other 

factors DOE determines are appropriate. 

(42 U.S.C. 6295(q)) 

With respect to commenters’ 

statements that category I venting itself 

is a performance-related feature that 

justifies a separate product class, DOE 

first notes that venting, like a gas burner 

or heat exchanger, is one of the basic 

components found in every gas-fired 

furnace (condensing or noncondensing). 

As such, assuming venting is a 

performance-related feature, it’s a 

feature that all gas-fired furnaces 

possess. As a result, it cannot be the 

basis for a product class. See 42 U.S.C. 

6295(q)(1)(B). Thus, in order to meet the 

product class requirements in 42 U.S.C. 

6295(q)(1)(B), APGA and other 

commenters are requesting DOE 

determine that a specific type of venting 

is a performance-related feature. 

In response, DOE first notes that 

almost every component of a covered 

product could be broken down further 

by any of a number of factors. For 

example, heat exchangers, which are 

used in a variety of covered products, 

could be divided further by geometry or 

material; refrigerator compressors could 

be further divided by single-speed or 

variable-speed, and air-conditioning 

refrigerants could be further divided by 

global warming potential. As a general 

matter, energy conservation standards 

save energy by removing the leastefficient technologies and designs from 

the market. For example, DOE set 

energy conservation standards for 

furnace fans at a level that effectively 

eliminated permanent split capacitor 

(PSC) motors from several product 

classes, but which could be met by 

brushless permanent magnet (BPM) 

motors, which are more efficient. 79 FR 

38130 (July 3, 2014). As another 

example, DOE set energy conservation 

standards for microwave oven standby 

mode and off mode at a level that 

effectively eliminated the use of linear 

power supplies, but which could be met 

by switch-mode power supplies, which 

exhibit significantly lower standby 

mode and off mode power consumption. 

78 FR 36316 (June 17, 2013). The 

energy-saving purposes of EPCA would 

be completely frustrated if DOE were 

required to set standards that maintain 

less-efficient covered products and 

equipment in the market based simply 

on the fact that they use a specific type 

of (less efficient) heat exchanger, motor, 

power supply, etc. 

As discussed in the December 2021 

final interpretive rule, DOE believes that 

a consumer would be aware of 

performance-related features of a 

covered product or equipment and 

would recognize such features as 

providing additional benefits during 

operation of the covered product or 

equipment. 86 FR 73955. Using the 

previous example of furnace fan motors, 

if an interested person had wanted to 

preserve furnace fans with PSC motors 

in the market, they would have had to 

show that furnace fans with PSC motors 

offered some additional benefit during 

operation as compared to furnace fans 

with BPM motors. Refrigerator-freezers, 

on the other hand, are an example of 

where DOE determined that a specific 

type of performance-related feature 

offered additional benefit during 

operation. Some refrigerator-freezers 

have automatic icemakers. Additionally, 

some automatic icemakers offer 

through-the-door ice service, which 

provides consumers with an additional 

benefit during operation. As such, DOE 

further divided refrigerator-freezers into 

product classes based on the specific 

type of automatic icemaker (i.e., 

whether the automatic icemaker offers 

through-the-door ice service). See 10 

CFR 430.32(a). 


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Commenters have not pointed to any 

additional benefits during operation 

offered by furnaces that use category I 

venting as compared to furnaces that 

use other types of venting. Instead, these 

commenters generally cite compatibility 

with existing venting and other 

economic considerations as reasons why 

category I venting should be considered 

a performance-related feature for the 

purposes of EPCA’s product class 

provision. unavailability provision. 

As stated previously, DOE’s 

performance-related feature analysis is 

not based on considerations (including 

design parameters) that do not provide 

the consumer additional benefit during 

operation. Nor does it account for costs 

that anyone, including the consumer, 

manufacturer, installer, or utility 

companies, may bear. DOE has reasoned 

that this approach is consistent with 

EPCA’s requirement for a separate and 

extensive analysis of economic 

justification for the adoption of any new 

or amended energy conservation 

standard (see 42 U.S.C. 6295(o)(2)(A)– 

(B) and (3)). Specifically with regard to 

venting, DOE has determined that 

differences in cost or complexity of 

installation between different methods 

of venting (e.g., a condensing furnace 

versus a non-condensing furnace) do not 

make specific methods of venting a 

performance-related feature under 42 

U.S.C. 6295(o)(4), as would justify 

separating the products/equipment into 

different product/equipment classes 

under 42 U.S.C. 6295(q)(1). 86 FR 

73947, 73951 (Dec. 29, 2021). 

Accordingly, because DOE views the 

issues related to condensing vs. 

noncondensing technology (and 

associated methods of venting) to be 

matters of cost, the Department finds it 

appropriate under the statute to address 

these issues through the rulemaking’s 

economic analysis. 86 FR 73947, 73951 

(Dec. 29, 2021). This interpretation is 

consistent with EPCA’s requirement for 

a separate and extensive analysis of 

economic justification for the adoption 

of any new or amended energy 

conservation standard (see 42 U.S.C. 

6295(o)(2)–(3); 42 U.S.C. 6313(a)(6)(A)– 

(C); 42 U.S.C. 6316(a)). Comments on 

the July 2022 Furnaces NOPR have 

provided no new arguments or other 

information that were not already 

considered as part of the December 2021 

Final Interpretive Rule. As such, DOE 

continues to find that there is no basis 

for altering the Department’s approach 

regarding the establishment of product 

classes for this rulemaking. 

DOE has found in its analysis of 

installation costs (as discussed in 

further detail in section IV.F.2 of this 

document) that thanks to various 

technological solutions, virtually all 

homes can accommodate a condensing 

furnace, although some small 

percentage may face significant 

installation costs. DOE accounts for 

these costs in its economic analysis. In 

all cases, consumers have a variety of 

choices to meet their space-heating 

needs, and the standards promulgated 

in this final rule do not eliminate any 

‘‘performance-related features.’’ 

Thus, for the reasons previously 

explained, DOE declines the requests of 

AGA and Spire that in this final rule the 

agency include a written finding that 

interested persons have established by a 

preponderance of the evidence that the 

proposed standards are likely to result 

in the unavailability in the U.S. of 

residential furnaces with performance 

characteristics (including reliability), 

features, sizes, capacities, and volumes 

that are substantially the same as those 

generally available in the United States 

on the date any such rule issues, 

because that burden of proof has not 

been met in the present case. See 42 

U.S.C. 6295(o)(4). For similar reasons, 

DOE declines Spire’s request that DOE 

recognize that the compatibility of a 

product with existing atmospheric 

venting systems is a ‘‘performancerelated feature’’ that would require 

separate standards for condensing and 

non-condensing products. Because DOE 

has determined that non-condensing 

technology (and associated venting) 

does not constitute a performancerelated feature for consumer furnaces, 

such actions would not be appropriate 

pursuant to EPCA. 

As DOE has stated previously, EPCA 

directs DOE to regulate the energy 

efficiency of a multitude of disparate 

covered products and equipment that 

are not always directly comparable. 

Consequently, consideration of classsetting and performance-related features 

tends to be product-specific. NPGA’s 

assertion that DOE’s proposed furnace 

standards would amount to a de facto 

building design standard is incorrect 

and a mischaracterization of DOE’s 

rulemaking, as is its contention that 

furnace installation costs are different in 

nature from those of other appliances. 

Installation costs are always unique to 

location, and DOE has a well-developed 

methodology for estimation of 

installation costs that has been used for 

many years (see chapter 8 and appendix 

8D of the final rule TSD). DOE has 

concluded that in most cases, a 

condensing furnace may be installed 

with reasonable installation costs, and 

there would almost always be a 

technological solution to accomplish 

that (e.g., such as through use of 

DuraVent FasNSeal or a draft inducer 

paired with a chimney liner). In cases 

where the consumer perceives such 

costs to be too high, the consumer may 

opt to convert to another type of spaceheating appliance (e.g., a heat pump or 

electric resistance heating). 

As mentioned, NPGA has pointed to 

other DOE rulemakings involving spaceconstrained products and equipment 

(e.g., central air conditioners, package 

terminal air conditioners (PTACs), and 

ventless clothes dryers) as analogous to 

consumer furnaces. AGA similarly 

mentioned DOE’s prior furnace fans 

rulemaking as analogous. However, the 

present case of non-condensing gas-fired 

residential furnaces is distinguishable 

from these other products cited by these 

commenters for the reasons that follow. 

Regarding ventless clothes dryers, 

DOE established separate product 

classes because some clothes dryers had 

a performance-related feature (ventless 

operation) that other clothes dryers 

(vented) did not, and such feature 

justified a different standard. As stated 

previously, condensing and noncondensing gas furnaces both require 

venting. As such, establishing separate 

product classes for vented and ventless 

clothes dryers is simply not analogous 

to establishing separate product classes 

for gas furnaces based on specific types 

of venting. 

With regard to compact clothes 

dryers, the ‘‘compact’’ delineation 

relates directly to the size and capacity 

of the product—two attributes explicitly 

listed in the ‘‘features’’ provision. (See 

42 U.S.C. 6295(o)(4)) This difference in 

size and capacity is recognized by the 

consumer in operation of the product 

(i.e., by limiting the amount of wet 

clothes which can be processed per 

cycle). Moreover, DOE determined that 

compact-size clothes dryers have 

inherently different energy consumption 

than standard-size clothes dryers. 76 FR 

22454, 22485 (April 21, 2011). 

Consistent with the specific recognition 

that size and capacity are relevant 

features, DOE has routinely set product 

classes based on size or capacity, 

including standards for consumer water 

heaters, 10 CFR 430.32(d), which 

separate standards by storage volume 

and input capacity; standards for room 

air conditioners, 10 CFR 430.32(b), 

which distinguish several product 

classes by cooling capacity; and 

standards for dishwashers and clothes 

washers, 10 CFR 430.32(f) and (g), 

respectively, which both distinguish 

between standard and compact 

products. 

In establishing a separate product 

class for space-constrained central air 

conditioners, DOE recognized the space 

constraints faced by these products and 


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51 DOE surveyed the dimensions of consumer 

furnaces and found the height and diameter 

dimensions comparable. See chapter 5 of the TSD. 

52The commenter was referring to DOE’s test 

method for measuring the energy consumption of 

central air conditioners and heat pumps, located at 

10 CFR part 430, subpart B, appendix M1. 

that the efficiency of such products is 

limited by physical dimensions that are 

rigidly constrained by the intended 

application. 76 FR 37408, 37446 (June 

27, 2011). Space-constrained central air 

conditioners have an indoor or outdoor 

unit that is limited in size due to the 

location in which the unit operates. As 

a result, space-constrained central air 

conditioners lack the flexibility of other 

central air conditioners to increase the 

physical size of the unit, thereby 

limiting the ability of space-constrained 

units to achieve improved efficiency 

through use of a larger coil. Id. In 

establishing standards for spaceconstrained central air conditioners, 

DOE discussed the expense of 

modifying an exterior opening to 

accommodate a larger unit, but such 

discussion did not abrogate DOE’s 

determination that space-constrained 

central air conditioners provide 

centralized air conditioning in locations 

with space constraints that would 

preclude the use of other types of 

central air conditioners. Id. In contrast, 

the subject non-condensing residential 

furnaces are not significantly different 

in overall footprint, size, or heating 

capacity from their condensing 

counterparts 51 (although the 

composition of the venting used may be 

different), and the energy efficiency 

differences are a result of the technology 

used, a design parameter that is dictated 

by considerations other than size. 

With regard to the equipment classes 

for PTACs, in its prior rulemaking, DOE 

found that the size of the heat exchanger 

directly affects the energy efficiency of 

the equipment. 73 FR 58772, 58782 

(Oct. 7, 2008). Like space-constrained 

central air conditioners, the location of 

operation of a PTAC directly influences 

the size of the equipment, which 

impacts the size of the heat exchanger 

and has a corresponding direct effect on 

the energy efficiency of the equipment. 

Id. DOE acknowledged the potentially 

high costs that would be associated with 

installing a non-standard sized PTAC in 

an existing building due to the need to 

increase the wall opening (i.e., the wall 

sleeve) in which a replacement PTAC is 

installed. Id. As explained in a 

subsequent rulemaking for PTACs, DOE 

further clarified that it accounts for 

installation costs in the life-cycle cost 

(LCC) and payback period (PBP) 

analyses used to evaluate increased 

standard levels, which is a separate and 

distinct consideration from whether 

separate product classes are justified. 80 

FR 43162, 43167 (July 21, 2015). 

Consideration of installation costs in the 

LCC and PBP analysis used for 

evaluating an increased energy 

conservation standard level is consistent 

with the application of 42 U.S.C. 

6295(o)(4) and 6295(q)(1) adopted in the 

December 2021 Final Interpretive Rule. 

The furnace fan product classes also 

are not analogous to residential furnaces 

that rely on non-condensing technology. 

Furnace fans are electrically powered 

devices used in consumer products for 

the purpose of circulating air through 

ductwork. 10 CFR 430.2. A furnace fan 

operates to allow the furnace in which 

it is installed to function. The references 

to condensing and non-condensing in 

the furnace fan product classes do not 

reflect a difference in utility between 

condensing and non-condensing 

furnaces, but rather reflect the 

differences between the operation of a 

furnace fan installed in a condensing 

furnace as compared to a furnace fan 

installed in a non-condensing furnace. 

In establishing the energy conservation 

standards for furnace fans, DOE 

differentiated between furnace fan 

product classes based on internal 

structure and application-specific 

design differences that impact furnace 

fan energy consumption. 79 FR 38130, 

38142 (July 3, 2014). The internal 

structures differ for a furnace fan 

installed in a condensing furnace, as 

compared to a furnace fan installed in 

a non-condensing furnace. The presence 

of an evaporator coil or secondary heat 

exchanger, as in a condensing furnace, 

significantly impacts the internal 

structure of an HVAC product, and in 

turn, the energy performance of the 

furnace fan integrated in that HVAC 

product. Id. These differences result in 

different energy use profiles for furnace 

fans suitable for installation in 

condensing furnaces, as compared to 

furnace fans suitable for installation in 

non-condensing furnace, which justifies 

the separate product classes. 

Overall, the examples of ventless 

dryers, space-constrained air 

conditioners, PTACs, and furnace fans 

involved subsets of the product or 

equipment type in question that had 

different physical and energyconsumption characteristics and that 

were designed to address specific 

applications. DOE determined that these 

situations met the applicable statutory 

requirements and, accordingly, 

warranted separate product/equipment 

classes. In contrast, the consumer 

furnaces rulemaking involves products 

of essentially the same size that could 

operate in any space-heating 

application. Maintaining a separate 

product class for non-condensing 

furnaces would allow the less-efficient 

furnaces to remain available not only to 

consumers facing difficult installation 

situations, but to all consumers. 

Establishment of a separate product 

class for non-condensing furnaces 

would run counter to EPCA’s purposes 

to ‘‘conserve energy supplies’’ and for 

‘‘improved energy efficiency of . . . 

major appliances.’’ (42 U.S.C. 6201(4) 

and (5)) 

NPGA, PHCC, the Coalition, Marley 

Companies, Spire, HARDI, and AGA 

have not provided estimates as to the 

number of installation situations they 

would consider to be problematic, 

instead choosing to focus on the 

qualitative impact of what DOE assesses 

to be a relatively small number of cases. 

DOE disagrees with AGA’s assertion 

that the Department has not properly 

accounted for the necessary changes 

related to venting of consumer furnaces 

or common venting of multiples 

appliances, including consumer water 

heaters. Further details regarding DOE’s 

estimates of total installation costs are 

provided in section IV.F.2 of this 

document and in chapter 8 and 

appendix 8D of the final rule TSD. 

d. Mobile Home Gas Furnaces 

In response to the July 2022 NOPR, 

AHRI commented that several design 

differences between MHGFs and 

NWGFs make it possible for DOE to 

establish different AFUE standards for 

MHGFs and NWGFs without 

meaningful risk that MHGFs would be 

used outside of mobile homes or create 

a ‘‘loophole’’ for NWGFs. (AHRI, No. 

414–2 at pp. 2–3) AHRI stated that 

MHGFs are specialized products meant 

to be operated only in mobile home 

applications under the U.S. Department 

of Housing and Urban Development 

(‘‘HUD’’) code, adding that no interior 

air is used for the combustion process 

and that non-condensing MHGFs are 

mostly all downflow. (AHRI, No. 414– 

2 at p. 2) 

Nortek encouraged DOE to withdraw 

the NOPR and consult with HUD, MHI, 

and the Manufactured Housing 

Consensus Committee (MHCC) in 

setting standards for MHGFs. (Nortek, 

No. 406 at p. 6) Nortek commented that 

it does not find a problem with different 

standard levels for manufactured 

housing and NWGFs because physical 

size differences prevent MHGFs from 

being installed in NWGF applications. 

Additionally, Nortek mentioned that the 

new M1 52 labeling requirements state 

that equipment designed for 


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53However, DOE has also identified MHGFs that 

are essentially identical to a corresponding NWGF 

model and require only a conversion kit to be 

installed as an MHGF. 

manufactured housings must be labelled 

‘‘for installation only in HUD 

manufactured home[s]. . . .’’ Nortek 

also stated that there are application 

differences between MHGFs and 

NWGFs (e.g., downflow versus upflow); 

therefore, Nortek is not concerned that 

manufactured home gas furnaces will be 

utilized in other residential applications 

if the minimum efficiency levels differ. 

(Nortek, No. 406 at pp. 4–5) JCI 

similarly commented that there are 

dimensional and configuration 

differences between MHGFs and 

NWGFs (upflow airflow versus 

downflow airflow). JCI provided an 

example, where the MHGF is 23 inches 

(in.) deep by 76 in. high by 19.5 in. wide 

and has a downflow configuration, but 

the NWGF is 29 in. deep by 33 in. high 

and between 14.5 in. and 24.5 in. wide 

for various configurations. JCI asserted 

that NWGFs could not reasonably be 

applied in mobile home applications 

without overcoming significant 

structural barriers and voiding the 

warranty. (JCI, No. 411 at pp. 2–3) 

Mortex added that the typical downflow 

furnace footprint for MHGFs is 24 in. 

deep by 20 in. wide, which is very 

different from standard residential 

furnaces that tend to be 29 in. deep by 

17, 21, or 24 in. wide. (Mortex, No. 410 

at p. 2) 

The CA IOUs commented that a 

review of manufacturer literature on 

MHGFs suggests that the proposed 

standard level will not increase product 

size or adversely affect the range of 

available input capacities. (The CA 

IOUs, No. 400 at p. 2) Additionally, 

Sierra Club et al. commented that 

nothing in EPCA obligates DOE to seek 

input or approval from the Department 

of Housing and Urban Development or 

the Manufactured Housing Consensus 

Committee. Sierra Club et al. 

commented that any assertions to the 

contrary ignore DOE’s obligation under 

EPCA to review and update its existing 

standards for mobile home gas furnaces. 

(Sierra Club et al., No. 401 at p. 3) 

DOE is aware of the different 

applications served by MHGFs and 

NWGFs and agrees with stakeholders 

that there are specific requirements that 

must be met for classification as an 

MHGF and that some MHGFs have a 

different footprint than is typical of 

NWGFs.53 Because NWGFs and MHGFs 

are separate product classes, they have 

been analyzed separately for this final 

rule. However, as discussed in section 

V.A DOE groups products into TSLs 

because use of TSLs allows DOE to 

identify and consider manufacturer cost 

interactions between the product 

classes, to the extent that there are such 

interactions, and national-level market 

cross-elasticity from consumer 

purchasing decisions that may change 

when different standard levels are set. 

In the present case, DOE evaluated 

similar levels in each TSL for NWGFs 

and MHGFs and considered the TSL as 

a whole, but also weighed the merits of 

the adopted 95-percent AFUE levels for 

each class separately. Therefore, while 

DOE is cognizant of interactions 

between the classes, the primary 

motivation for adopting 95-percent 

AFUE for MHGFs was not to avoid a 

‘‘loophole’’ whereby NWGF consumers 

would choose to install MHGFs if they 

were available at lower efficiencies and 

costs. Rather, it was because the 95- 

percent AFUE level is technologically 

feasible and economically justified for 

both NWGFs and MHGFs. See section V 

of this document for further discussion 

on the selection of the final standard 

levels for this final rule. 

In response to comments regarding 

consultation with HUD, MHI, and 

MHCC, DOE notes that all stakeholders, 

including trade associations, have the 

opportunity to provide DOE with 

comments, data, and other input 

through both the public webinars and 

written comment periods throughout 

the duration of the rulemaking. DOE 

takes all input received into 

consideration in the analysis for 

amending standards, and therefore does 

not consult with individual groups in its 

rulemaking process. 

2. Technology Options 

In the market analysis and technology 

assessment for the July 2022 NOPR, 

DOE identified 12 technology options 

that would be expected to improve the 

AFUE efficiency of NWGFs and MHGFs, 

as measured by the DOE test procedure: 

(1) using a condensing secondary heat 

exchanger; (2) increasing the heat 

exchanger surface area; (3) heat 

exchanger baffles; (4) heat exchanger 

surface feature improvements; (5) twostage combustion; (6) step-modulating 

combustion; (7) pulse combustion; (8) 

premix burners; (9) burner de-rating; 

(10) insulation improvements; (11) offcycle dampers; and (12) direct venting. 

(In the July 2022 NOPR, DOE also 

considered three technology options 

that could potentially reduce the 

standby mode and off mode energy 

consumption of NWGFs and MHGFs. 

However, for the reasons explained in 

section III.A.8 of this document, DOE 

has determined that it cannot establish 

standby mode and off mode standards 

that meet the criteria of EPCA at this 

time, so such technologies and 

standards are not considered further in 

this final rule.) 87 FR 40590, 40615 (July 

7, 2022). DOE did not identify any 

additional technology options between 

the publication of the July 2022 NOPR 

and this final rule. A detailed 

discussion of each technology option 

identified is contained in chapter 3 of 

the final rule TSD. 

DOE considered each technology 

further in the screening analysis (see 

section IV.B of this document or chapter 

4 of the final rule TSD) to determine 

which could be considered further in 

the analysis and which should be 

eliminated. 

B. Screening Analysis 

DOE uses the following five screening 

criteria to determine which technology 

options are suitable for further 

consideration in an energy conservation 

standards rulemaking: 

(1) Technological feasibility. 

Technologies that are not incorporated 

in commercial products or in 

commercially viable, existing prototypes 

will not be considered further. 

(2) Practicability to manufacture, 

install, and service. If it is determined 

that mass production of a technology in 

commercial products and reliable 

installation and servicing of the 

technology could not be achieved on the 

scale necessary to serve the relevant 

market at the time of the projected 

compliance date of the standard, then 

that technology will not be considered 

further. 

(3) Impacts on product utility. If a 

technology is determined to have a 

significant adverse impact on the utility 

of the product to subgroups of 

consumers, or result in the 

unavailability of any covered product 

type with performance characteristics 

(including reliability), features, sizes, 

capacities, and volumes that are 

substantially the same as products 

generally available in the United States 

at the time, it will not be considered 

further. 

(4) Safety of technologies. If it is 

determined that a technology would 

have significant adverse impacts on 

health or safety, it will not be 

considered further. 

(5) Unique-pathway proprietary 

technologies. If a technology has 

proprietary protection and represents a 

unique pathway to achieving a given 

efficiency level, it will not be 

considered further, due to the potential 

for monopolistic concerns. 

10 CFR part 430, subpart C, appendix A, 

sections 6(b)(3) and 7(b). 


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54 ‘‘Ultra low NOX’’ furnaces produce no more 

than 14 nanograms of NOX per Joule. 

55The baseline cost reflects the expenses 

associated with a baseline model. DOE defines a 

‘‘baseline model’’ as a model in each product class 

that represents the characteristics of products 

typical of that class (e.g., capacity, physical size) 

and that has an efficiency equal to the current 

Federal energy conservation standard. 

In sum, if DOE determines that a 

technology, or a combination of 

technologies, fails to meet one or more 

of the listed five criteria, it will be 

excluded from further consideration in 

the engineering analysis. The reasons 

for eliminating any technology are 

discussed in the following sections. 

The subsequent sections include 

DOE’s evaluation of each technology 

option against the screening analysis 

criteria, and whether DOE determined 

that a technology option should be 

excluded (‘‘screened out’’) based on the 

screening criteria. DOE did not receive 

any comments pertaining to the 

screening analysis in response to the 

July 2022 NOPR. 

1. Screened-Out Technologies 

For this analysis of amended AFUE 

standards, DOE has screened out the 

following technologies: pulse 

combustion and burner de-rating. Each 

of these will be discussed in turn. 

Pulse combustion furnaces use selfsustaining pressure waves to draw a 

fresh fuel-air mixture into the 

combustion chamber, heat it by way of 

compression, and then ignite it using a 

spark. This technology option was 

screened out due to past reliability and 

safety issues, which have resulted in 

manufacturers generally not considering 

pulse combustion as a viable option to 

improve efficiency. In addition, furnace 

manufacturers can achieve similar or 

greater efficiencies through the use of 

other technologies that do not operate 

with positive pressure in the heat 

exchanger, such as those relying on 

induced draft. 

DOE also screened out burner derating. Burner de-rating reduces the 

burner firing rate while maintaining the 

same heat exchanger geometry/surface 

area and fuel-air ratio, which increases 

the ratio of heat transfer surface area to 

energy input, which increases 

efficiency. This technology option was 

screened out because it reduces the 

burner firing rate while maintaining the 

same heat exchanger geometry/surface 

area and fuel-air ratio, resulting in less 

heat being provided to the user than is 

provided using conventional burner 

firing rates. 

It is noted that in earlier rulemaking 

analyses (e.g., for the since withdrawn 

September 2016 SNOPR), DOE had 

screened out premix burners from 

further analysis because premix burners 

had not yet been successfully 

incorporated into a consumer furnace 

design, raising concerns about the 

technological feasibility of premix 

burners in furnaces. Incorporating this 

technology into furnaces on a large scale 

at that time would have required further 

research and development due to the 

technical constraints imposed by 

current furnace burner and heat 

exchanger design. However, in 

conducting the market and technology 

assessment and screening analysis for 

the July 2022 NOPR, DOE identified 

NWGF furnaces with premix burners on 

the market and, therefore, did not screen 

this technology option out of its 

analysis, because the technological 

feasibility and practicability to 

manufacture such designs has been 

demonstrated. However, DOE notes that 

the premix burner designs observed on 

the market were implemented in ultra 

low NOX 54 models, indicating that the 

development of premix burner designs 

has been primarily driven by NOX

requirements. The efficiencies of these 

models are the same as those achieved 

by more conventional non-premix 

burner designs used in furnaces. 

Therefore, while the use of premix 

burners was not screened out, it was not 

considered a primary driver for 

improving efficiency. 

The technology options assumed to be 

implemented to achieve each efficiency 

level are discussed further in section 

IV.C.1 of this finale rule. Chapter 4 of 

the TSD includes additional information 

on the screening analysis. 

2. Remaining Technologies 

Through a review of each technology, 

DOE concludes that all of the other 

identified technologies listed in section 

IV.A.2 met all five screening criteria to 

be examined further as design options 

in DOE’s final rule analysis. In 

summary, DOE did not screen out the 

following technology options to 

improve AFUE: (1) condensing 

secondary heat exchanger; (2) increased 

heat exchanger face area; (3) heat 

exchanger baffles; (4) heat exchanger 

surface feature improvements; (5) twostage combustion; (6) step-modulating 

combustion; (7) insulation 

improvements; (8) off-cycle dampers; (9) 

direct venting; and (10) premix burners. 

DOE has determined that these 

technology options are technologically 

feasible because they are being used or 

have previously been used in 

commercially-available products or 

working prototypes. DOE also finds that 

all of the remaining technology options 

meet the other screening criteria (i.e., 

practicable to manufacture, install, and 

service and do not result in adverse 

impacts on consumer utility, product 

availability, health, or safety, and do not 

involve a proprietary technology that is 

a unique pathway to meeting a given 

efficiency level). For additional details, 

see chapter 4 of the final rule TSD. 

C. Engineering Analysis 

The purpose of the engineering 

analysis is to establish the relationship 

between the efficiency and cost of 

NWGFs and MHGFs. There are two 

elements to consider in the engineering 

analysis: (1) the selection of efficiency 

levels to analyze (i.e., the ‘‘efficiency 

analysis’’) and (2) the determination of 

product cost at each efficiency level 

(i.e., the ‘‘cost analysis’’). In determining 

the performance of higher-efficiency 

products, DOE considers technologies 

and design option combinations not 

eliminated by the screening analysis. 

For each product class, DOE estimates 

the baseline cost,55 as well as the 

incremental cost for the product at 

efficiency levels above the baseline 

efficiency. The output of the 

engineering analysis is a set of costefficiency ‘‘curves’’ that are used in 

downstream analyses (i.e., the LCC and 

PBP analyses and the NIA). 

The methodology for the efficiency 

analysis and the cost analysis is 

described in detail in the sections that 

immediately follow (sections IV.C.1 and 

IV.C.2, respectively, of this document). 

DOE uses its methodology, which 

consists of the engineering analysis and 

mark-ups analysis (see section IV.D of 

this document), to determine the final 

price of the furnace to the consumer for 

several reasons. The sales prices of 

furnaces currently seen in the 

marketplace, which include both an 

MPC and various mark-ups applied 

through the distribution chain, are not 

necessarily indicative of what the sales 

prices of those furnaces would be 

following the implementation of a morestringent energy conservation standard. 

At a given efficiency level, MPC 

depends in part on the production 

volume. In general, for efficiency levels 

above the current baseline efficiency, 

the price to the consumer at that level 

may be high relative to what it would 

be under a more-stringent standard, due 

to the increase in production volume 

(and, thus, improved economies of scale 

and purchasing power for furnace 

components), which would occur at that 

level if a Federal standard made it the 

new baseline efficiency. 

DOE notes that the engineering 

analysis incorporated both condensing 

furnaces without ‘‘premium’’ features 


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and condensing furnaces are more likely 

to be equipped with ‘‘premium’’ 

features in today’s market. One would 

expect increased designs (and/or sales) 

with minimal ‘‘premium’’ features to 

cater to cost-sensitive consumers, as 

compared to the current market, and 

perhaps redesigns where possible, to 

minimize costs. In its analysis of AFUE 

levels, DOE sought to minimize or 

normalize the presence of additional 

designs or features that do not affect 

AFUE, as additional designs or features 

can increase costs while not affecting 

the measured AFUE efficiency. In other 

words, DOE’s analysis of the costefficiency relationship is for a product 

that provides only the basic utility (i.e., 

heat) without other special features that 

consumers may find beneficial (e.g., 

sound reduction or humidity control). 

Although it may be possible to identify 

prices for products without premium 

features, simply aggregating a collection 

of current furnace sales price 

information could lead to a higher 

consumer price than would be expected 

under an amended-standards scenario, 

as many condensing products available 

on the market today are bundled with 

‘‘premium’’ features, but under an 

amended-standards scenario, 

condensing products without as many 

‘‘premium’’ features may become more 

common so to provide consumers with 

a lowest-cost option with only essential 

functionality. This approach aligns with 

feedback received during manufacturer 

interviews that manufacturers would 

continue to differentiate between 

premium and value units to best serve 

all segments of the market, and would 

invest in optimizing the cost of certain 

product offerings for consumers that are 

highly sensitive to the upfront cost. 

Therefore, DOE concluded that 

increasing AFUE energy conservation 

standards would not necessarily 

increase the presence of ‘‘premium’’ 

features on furnaces in the market. 

DOE’s analysis and decision are 

based, in part, on the aggregated data 

generated during the engineering 

analysis. The process by which the 

aggregated data have been generated is 

discussed in this document and is the 

result of the engineering analyses 

described in chapter 5 of the final rule 

TSD. The primary inputs to the 

engineering analysis are data from the 

market and technology assessment, 

input from manufacturers, furnace 

specifications, and production cost 

estimates developed based on teardown 

analysis and consultation with 

manufacturers. DOE’s treatment of 

confidential business information is 

governed by the Freedom of Information 

Act (FOIA) and 10 CFR 1004.11 (5 

U.S.C. 552(b)(4)) Accordingly, bills of 

materials (BOMs) are generated by a 

DOE contractor using the manufacturerspecific and product-specific data to 

estimate the industry-aggregate MPCs. 

DOE’s contractor conducts interviews 

with manufacturers under nondisclosure agreements (‘‘NDAs’’) to 

determine whether the MPCs developed 

by the analysis reflect the industry 

average manufacturing costs. In 

addition, because the cost estimation 

methodology uses data supplied by 

manufacturers under the NDAs (such as 

raw material and purchased part prices), 

the resulting individual model cost 

estimates themselves cannot be 

published and are not released outside 

the aggregated form to DOE or its 

National Labs. This approach allows 

manufacturers to provide candid and 

detailed feedback under NDA, thereby 

improving the quality of the analysis. 

DOE notes that manufacturers that 

participated in manufacturer interviews 

had access to the raw material and 

purchased-part price data underlying 

the MPC estimates for those models at 

the time the interviews were conducted. 

The data resulting from the engineering 

analysis and which DOE has used as 

inputs to its modeling were published 

in the July 2022 NOPR and available to 

the public for review and comment. 87 

FR 40590, 40621 (July 7, 2022). 

1. Efficiency Analysis 

DOE typically uses one of two 

approaches to develop energy efficiency 

levels for the engineering analysis: (1) 

relying on observed efficiency levels in 

the market (i.e., the efficiency-level 

approach), or (2) determining the 

incremental efficiency improvements 

associated with incorporating specific 

design options to a baseline model (i.e., 

the design-option approach). Using the 

efficiency-level approach, the efficiency 

levels established for the analysis are 

determined based on the market 

distribution of existing products (in 

other words, based on the range of 

efficiencies and efficiency level 

‘‘clusters’’ that already exist on the 

market). Using the design option 

approach, the efficiency levels 

established for the analysis are 

determined through detailed 

engineering calculations and/or 

computer simulations of the efficiency 

improvements from implementing 

specific design options that have been 

identified in the technology assessment. 

DOE may also rely on a combination of 

these two approaches. For example, the 

efficiency-level approach (based on 

actual products on the market) may be 

extended using the design option 

approach to interpolate to define ‘‘gap 

fill’’ levels (i.e., to bridge large gaps 

between other identified efficiency 

levels) and/or to extrapolate to the 

‘‘max-tech’’ level (particularly in cases 

where the ‘‘max-tech’’ level exceeds the 

maximum efficiency level currently 

available on the market). 

For the AFUE engineering analysis, 

DOE generally employed an efficiency 

level approach, which identified the 

intermediate efficiency levels (i.e., 

levels between baseline and max-tech) 

for analysis based on the most common 

efficiency levels on the market. One 

exception is that DOE analyzed a 90- 

percent AFUE level for NWGFs and 

MHGFs despite relatively few models at 

that level, as it would serve as a 

minimum condensing level. 

a. Baseline Efficiency Level and Product 

Characteristics 

For each product/equipment class, 

DOE generally selects a baseline model 

as a reference point for each class, and 

measures anticipated changes to the 

product resulting from potential energy 

conservation standards against the 

baseline model. The baseline model in 

each product/equipment class 

represents the characteristics of a 

product/equipment typical of that class 

(e.g., capacity, physical size). Generally, 

a baseline model is one that just meets 

current energy conservation standards, 

or, if no standards are in place, the 

baseline is typically the most common 

or least-efficient unit on the market. 

DOE selected baseline units for the 

NWGF and MHGF product classes that 

include characteristics typical of the 

least-efficient commercially-available 

consumer furnaces. The baseline unit in 

each product class represents the basic 

characteristics of products in that class. 

Baseline units serve as reference points, 

against which DOE measures changes 

resulting from potential amended 

energy conservation standards. 

Additional details on the selection of 

baseline units are in chapter 5 of the 

final rule TSD. 

Table IV.1 presents the baseline AFUE 

levels identified for each product class 

of furnaces addressed by this 

rulemaking. The baseline AFUE levels 

are the same as the current Federal 

minimum AFUE standards for the 

subject furnaces, as established by the 

November 2007 Final Rule. 10 CFR 

430.32(e)(1)(ii); 72 FR 65136, 65169 

(Nov. 19, 2007). 


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56U.S. Department of Energy Compliance 

Certification Management System (‘‘CCMS’’) 

(available at www.regulations.doe.gov/certificationdata/) (last accessed March 22, 2023). 

TABLE IV.1—BASELINE RESIDENTIAL

FURNACE AFUE EFFICIENCY LEVELS

Product class AFUE 

(percent) 

Non-Weatherized Gas Furnaces ................................. 80 

Mobile Home Gas Furnaces 80 

b. Higher Efficiency Levels 

As part of DOE’s analysis, the 

maximum available efficiency level is 

the highest efficiency unit currently 

available on the market. DOE also 

defines a ‘‘max-tech’’ efficiency level to 

represent the maximum possible 

efficiency for a given product. Tables 

IV.2 and IV.3 show the efficiency levels 

DOE selected for analysis of amended 

AFUE standards for NWGFs and 

MHGFs, respectively, up to the 

maximum available efficiency level, 

along with a description of the typical 

technological change at each level. 

Since the July 2022 NOPR, DOE has 

identified new models of NWGFs 

certified in DOE’s Compliance 

Certification Database (CCD) 56 with 

efficiencies up to 99-percent AFUE and 

of MHGFs certified with efficiencies up 

to 97-percent AFUE. However, there is 

only one model of NWGF at 99-percent 

AFUE, at only one input size. Several 

other models from the same model 

family do not achieve 99-percent AFUE. 

Therefore, at the time of this final rule 

analysis, it is unclear whether 99 

percent would be an appropriate maxtech level for all NWGFs that is 

achievable across a range of input 

capacities, and, as a result, DOE 

maintained the same maximum 

efficiency level for NWGFs as in the July 

2022 NOPR (i.e., 98-percent AFUE). 

Similarly, there are only two input 

capacities of MHGFs that would exceed 

a 97-percent efficiency level, and these 

models are from the same model line, 

but several other models at other input 

capacities within that same model line 

do not achieve 97-percent AFUE. 

Therefore, it is at present uncertain as 

to whether 97-percent AFUE would be 

an appropriate max-tech level for all 

MHGFs, so DOE maintained the same 

maximum efficiency level for MHGFs as 

in the July 2022 NOPR (i.e., 96-percent 

AFUE). Therefore, the maximum 

efficiency level analyzed for both 

NWGFs and MHGFs has been 

maintained at a level representing the 

highest-efficiency models available on 

the market when DOE began this 

analysis as outlined in chapter 3 of the 

final rule TSD. 

TABLE IV.2—AFUE EFFICIENCY LEVELS FOR NON-WEATHERIZED GAS FURNACES

Efficiency level 

(EL) 

AFUE 

(%) Technology options 

0—Baseline ......... 80 Baseline. 

1 ........................... 90 EL 0 + Secondary condensing heat exchanger. 

2 ........................... 92 EL 1 + Increased heat exchanger area. 

3 ........................... 95 EL 2 + Increased heat exchanger area. 

4—Max-Tech ....... 98 EL 3 + Increased heat exchanger area + Step-modulating combustion + Constant-airflow BPM blower motor. 

TABLE IV.3—AFUE EFFICIENCY LEVELS FOR MOBILE HOME GAS FURNACES

Efficiency level 

(EL) 

AFUE 

(%) Technology options 

0—Baseline ......... 80 Baseline. 

1 ........................... 90 EL 0 + Secondary condensing heat exchanger. 

2 ........................... 92 EL 1 + Increased heat exchanger area. 

3 ........................... 95 EL 2 + Increased heat exchanger area. 

4—Max-Tech ....... 96 EL 3 + Increased heat exchanger area. 

2. Cost Analysis 

The cost analysis portion of the 

engineering analysis is conducted using 

one or a combination of cost 

approaches. The selection of cost 

approach depends on a suite of factors, 

including the availability and reliability 

of public information, characteristics of 

the regulated product, and the 

availability and timeliness of 

purchasing the product on the market. 

The cost approaches are summarized as 

follows: 

• Physical teardowns: Under this 

approach, DOE physically dismantles a 

commercially available product, 

component-by-component, to develop a 

detailed bill of materials for the product. 

• Catalog teardowns: In lieu of 

physically deconstructing a product, 

DOE identifies each component using 

parts diagrams (available from 

manufacturer websites or appliance 

repair websites, for example) to develop 

the bill of materials for the product. 

• Price surveys: If neither a physical 

nor catalog teardown is feasible (e.g., for 

tightly integrated products such as 

fluorescent lamps, which are infeasible 

to disassemble and for which parts 

diagrams are unavailable), costprohibitive, or otherwise impractical 

(e.g., large commercial boilers), DOE 

conducts price surveys using publiclyavailable pricing data published on 

major online retailer websites and/or by 

soliciting prices from distributors and 

other commercial channels. 

In the present case, DOE conducted 

its cost analysis using a combination of 

physical and catalog teardowns to assess 

how manufacturing costs change with 

increased product efficiency. Products 

were selected for physical teardown 

analysis that have characteristics of 

typical products on the market at a 

representative input capacity of 80,000 

Btu/h (determined based on market data 

and discussions with manufacturers). 

Selections spanned the range of 

efficiency levels analyzed and included 

most manufacturers. The teardown 

analysis allowed the creation of detailed 

BOMs for each product torn down, 

which included all components and 

processes used to manufacture the 

products. DOE used the BOMs from the 

teardowns as inputs to calculate the 

MPCs for products at various efficiency 

levels spanning the full range of 


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57U.S. Securities and Exchange Commission’s 

Electronic Data Gathering, Analysis, and Retrieval 

system (EDGAR) database. (Available at: 

www.sec.gov/edgar/search/) (Last accessed Feb. 4, 

2022). 

58For more information on MEPS Intl, please visit 

www.mepsinternational.com/gb/en (last accessed 

March 21, 2023). 

59For more information on PolymerUpdate, 

please visit www.polymerupdate.com (last accessed 

March 21, 2023). 

60For more information on USGS metal price 

statistics, please visit www.usgs.gov/centers/ 

national-minerals-information-center/commoditystatistics-and-information (last accessed March 21, 

2023). 

61For more information on the BLS producer 

price indices, please visit www.bls.gov/ppi/ (last 

accessed March 21, 2023). 

efficiencies from the baseline to the 

maximum technology achievable level. 

During the development of the sincewithdrawn March 2015 NOPR, 

interviews were held with NWGF and 

MHGF manufacturers to gain insight 

into the residential furnace industry, 

and to request feedback on the 

engineering analysis. In advance of the 

July 2022 NOPR, a second round of 

interviews was held in 2021, in part to 

gain additional insight for updating the 

cost analysis to reflect current 

conditions. DOE used the information 

gathered from these interviews, along 

with the information obtained through 

the teardown analysis, to develop its 

updated MPC estimates. For this final 

rule, DOE updated its analysis to 

incorporate the most recent input data 

(e.g., raw materials, purchased 

components, labor) in its BOMs (and, 

correspondingly, in the MPC estimates 

derived from those BOMs). DOE 

performed an additional 23 physical 

teardowns for the July 2022 NOPR. DOE 

also incorporated additional physical 

teardowns from previous analyses into 

the analysis for this rulemaking when 

the designs and components of those 

units reflect those observed in products 

currently available on the market. For 

additional detail about the models used 

for teardowns, see chapter 5 of the final 

rule TSD. 

To account for manufacturers’ nonproduction costs and profit margin, DOE 

applies a non-production cost multiplier 

(the manufacturer mark-up) to the MPC. 

The resulting manufacturer selling price 

(‘‘MSP’’) is the price at which the 

manufacturer distributes a unit into 

commerce. DOE initially developed an 

average manufacturer mark-up by 

examining the annual Securities and 

Exchange Commission (‘‘SEC’’) 10–K 57

reports filed by publicly-traded 

manufacturers primarily engaged in 

consumer furnace manufacturing and 

whose product range includes NWGFs 

and MHGFs. DOE refined its 

understanding of manufacturer markups by using information obtained 

during manufacturer interviews. The 

manufacturer mark-ups were used to 

convert the MPCs into MSPs. Further 

information on this analytical 

methodology is presented in the 

following subsections. 

a. Teardown Analysis 

To assemble BOMs and to calculate 

manufacturing costs for the different 

components in residential furnaces, 

multiple units were disassembled into 

their base components, and DOE 

estimated the materials, processes, and 

labor required to manufacture each 

individual component, a process 

referred to as a ‘‘physical teardown.’’ 

Using the data gathered from the 

physical teardowns, each component 

was characterized according to its 

weight, dimensions, material, quantity, 

and the manufacturing processes used 

to fabricate and assemble it. 

For supplementary catalog teardowns, 

product data were gathered, such as 

dimensions, weight, and design features 

from publicly-available information, 

such as manufacturer catalogs. Such 

‘‘virtual teardowns’’ allowed DOE to 

estimate the major physical differences 

between a product that was physically 

disassembled and a similar product that 

was not. For this final rule, data from 

physical and virtual teardowns of 

residential furnaces were used to 

calculate industry MPCs in the 

engineering analysis. 

The teardown analysis allowed DOE 

to identify the technologies that 

manufacturers typically incorporate into 

their products, along with the efficiency 

levels associated with each technology 

or combination of technologies. The end 

result of each teardown is a structured 

BOM that incorporates all materials, 

components, and fasteners (classified as 

either raw materials or purchased parts 

and assemblies), and characterizes the 

materials and components by weight, 

manufacturing processes used, 

dimensions, material, and quantity. The 

BOMs from the teardown analysis were 

then used as inputs to calculate the 

MPC for each product that was torn 

down. The MPCs resulting from the 

teardowns were then used to develop an 

industry average MPC for each 

efficiency level of each product class 

analyzed. 

As discussed in section IV.C.2.c of 

this document, DOE also performed 

several physical and catalog teardowns 

of units at input capacities other than 

the representative input capacity (i.e., 

40, 60, 100, and 120 kBtu/h in addition 

to 80 kBtu/h). These teardowns allowed 

DOE to develop cost-efficiency curves 

for NWGFs and MHGFs at different 

input capacities. For more detailed 

information on the teardown analysis, 

see chapter 5 of the final rule TSD. 

b. Cost Estimation Method 

The costs of individual models are 

estimated using the content of the BOMs 

(i.e., relating to materials, fabrication, 

labor, and all other aspects that make up 

a production facility) to generate MPCs. 

The resulting MPCs include costs such 

as overhead and depreciation, in 

addition to materials and labor costs. 

DOE collected information on labor 

rates, tooling costs, raw material prices, 

and other factors to use as inputs into 

the cost estimates. For purchased parts, 

DOE estimates the purchase price based 

on volume-variable price quotations and 

detailed discussions with manufacturers 

and component suppliers. 

For parts fabricated in-house, the 

prices of the underlying ‘‘raw’’ metals 

(e.g., tube, sheet metal) are estimated on 

the basis of five-year averages to smooth 

out spikes in demand. Other raw 

materials, such as plastic resins and 

insulation materials, are estimated on a 

current-market basis. The costs of raw 

materials are determined based on 

manufacturer interviews, quotes from 

suppliers, and secondary research. Past 

results are updated periodically and/or 

inflated to present-day prices using 

indices from resources such as MEPS 

Intl.,58 PolymerUpdate,59 the U.S. 

geologic survey (‘‘USGS’’),60 and the 

Bureau of Labor Statistics (‘‘BLS’’).61

The cost of transforming the 

intermediate materials into finished 

parts is estimated based on current 

industry pricing. 

c. Manufacturing Production Costs 

DOE estimated the MPC at each 

efficiency level considered for each 

product class, from the baseline through 

the max-tech, and then calculated the 

fractions of the MPC (in percentages) 

attributable to each cost component (i.e., 

materials, labor, depreciation, and 

overhead). These percentages were used 

to validate analytical inputs by 

comparing them to manufacturers’ 

actual financial data published in 

annual reports, along with feedback 

obtained from manufacturers during 

interviews. DOE uses these production 

cost percentages in the MIA (see section 

IV.J of this document). 

Tables IV.4 and IV.5 present DOE’s 

estimates of the MPCs by AFUE 

efficiency level at the representative 

input capacity (80 kBtu/h) for both 

NWGFs and MHGFs. The MPCs at each 

efficiency level incorporate the design 

characteristics of NWGFs and MHGFs 

shown in Tables IV.2 and IV.3. DOE 


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observed in its market analysis that 

products are available on the market 

with a mix of blower motor 

technologies, including constant torque 

brushless permanent magnet (‘‘BPM’’) 

motors, constant airflow BPM motors, 

and (for MHGFs), PSC motors. To 

account for the variety of blower motors 

available on the market, DOE developed 

cost adjustment factors (‘‘adders’’) for 

each type of blower motor and at each 

input capacity analyzed (i.e., 40, 60, 80, 

100, and 120 kBtu/h) to normalize the 

blower costs between the individual 

units torn down and across efficiency 

levels and allow for estimation of the 

cost differences between models with 

different blower technologies. DOE 

normalized the costs of the blower 

assemblies in its teardown models, and 

then used these adders in its LCC 

analysis to account for the distribution 

of blower motor technologies expected 

to be sold on the market (see section 

IV.F of this document). For NWGFs, 

DOE used constant-torque BPM motors 

as the baseline design option for all 

efficiency levels except the max-tech 

level, which was always assumed to use 

a constant airflow BPM motor. All 

MHGFs were modeled with improved 

PSC motors as the normalized design 

option. These adders are discussed in 

more detail in chapter 5 of the TSD 

accompanying this rule. 

Similarly, in its market analysis and 

teardown analysis, DOE observed 

models with single-stage, two-stage, and 

modulating operation. Therefore, DOE 

normalized its engineering analysis 

costs to reflect single-stage designs (with 

the exception of max-tech NWGFs, 

which were all assumed to use 

modulating designs) but also developed 

a cost adder for two-stage and 

modulating combustion systems (as 

compared to single-stage models) that 

was used in the LCC analysis to account 

for the distribution of models with twostage and modulating combustion. The 

cost to change from a single-stage to a 

two-stage combustion system includes 

the cost of a two-stage gas valve, a twospeed inducer assembly, upgraded 

pressure switch/tubing assembly, and 

additional controls and wiring. 

Similarly, the cost to change from a 

single-stage to a modulating combustion 

system includes the cost of a 

modulating gas valve, an upgraded 

inducer assembly, upgraded pressure 

switch/tubing assembly, and additional 

controls and wiring. These cost adders 

are discussed in more detail in chapter 

5 of the TSD. DOE similarly normalized 

the costs, when necessary, to account 

for the presence any premium controls 

or features that would increase cost but 

are not needed for improving efficiency. 

For MHGFs, DOE performed physical 

teardowns of several MHGF models and 

compared them to NWGF teardowns 

from a common manufacturer and 

similar design, in order to determine the 

typical design differences between the 

two product classes. (A detailed 

description of the typical differences 

between MHGF and NWGF is provided 

in chapter 5 of the final rule TSD.) 

Using this information, DOE then 

developed cost adders to reflect the cost 

difference between NWGF and MHGF 

models, and applied this cost adder to 

the NWGF MPCs in order to estimate 

the MPCs of MHGFs at each of the 

MHGF efficiency levels. 

Table IV.4 presents the MPCs for 

NWGFs with a constant-torque BPM and 

single-stage combustion (except for the 

max-tech level which, as previously 

noted, includes a constant airflow BPM 

and modulating combustion). Table IV.5 

presents the MPCs for MHGFs with an 

improved PSC and single-stage 

combustion. DOE has determined that 

these designs are likely the most 

representative of furnaces on the current 

market, although DOE recognizes there 

are some exceptions. As discussed in 

this section, DOE has observed that a 

variety of blower motor technologies 

and burner system stages exist on the 

market, so DOE developed adders to 

translate MPCs across various 

technologies. 

TABLE IV.4—MANUFACTURER PRODUCTION COST FOR NON-WEATHERIZED GAS FURNACES AT THE REPRESENTATIVE

INPUT CAPACITY OF 80 kBtu/h 

Efficiency level Efficiency level 

(AFUE) (%) 

MPC 

(2022$) 

Incremental 

cost above 

baseline 

(2022$) 

Baseline ....................................................................................................................................... 80 335 ........................

EL1 ............................................................................................................................................... 90 420 85 

EL2 ............................................................................................................................................... 92 428 93 

EL3 ............................................................................................................................................... 95 444 109 

EL4 ............................................................................................................................................... 98 572 216 

TABLE IV.5—MANUFACTURER PRODUCTION COST FOR MOBILE HOME GAS FURNACES AT THE REPRESENTATIVE INPUT

CAPACITY OF 80 kBtu/h 

Efficiency level Efficiency level 

(AFUE) (%) 

MPC 

(2022$) 

Incremental 

cost above 

baseline 

(2022$) 

Baseline ....................................................................................................................................... 80 360 ........................

EL1 ............................................................................................................................................... 90 441 81 

EL2 ............................................................................................................................................... 92 450 90 

EL3 ............................................................................................................................................... 95 466 106 

EL4 ............................................................................................................................................... 96 471 111 

JCI commented that DOE should work 

with MHI and HUD to get cost and 

buyer data for MHGF replacements and 

reevaluate whether a 95-percent AFUE 

standard is appropriate based on those 

findings. (JCI, No. 411 at p. 2) 

In response, DOE notes that it 

conducted the engineering analysis for 

this final rule using a combination of 

physical and catalog teardowns. As 

discussed in section IV.C.2 of this 

document, DOE only relies on price 


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surveys as the basis for the engineering 

analysis if neither physical nor catalog 

teardowns are feasible, or if these 

options are cost-prohibitive and 

otherwise impractical. The resulting 

MPCs do not include manufacturer 

mark-ups and will not reflect prices 

seen by consumers. DOE estimates and 

applies additional markups to its MPCs, 

as discussed in sections IV.C.2.e and 

IV.D of this document. Additionally, as 

described in section IV.D of this 

document, under a more-stringent 

standard, the mark-ups incorporated 

into the sales price may also change 

relative to current mark-ups. Therefore, 

DOE has concluded that using prices of 

furnaces as currently seen in the 

marketplace, as JCI suggested, would 

not be an accurate method of estimating 

future furnace prices following an 

amended standard and, in turn, 

validating DOE’s approach of 

conducting an engineering analysis and 

mark-ups analysis for this final rule. 

Daikin commented that there is a 

higher burden on manufacturers than 

DOE estimated because DOE does not 

consider that NWGFs with higher AFUE 

take more time to assemble due to: (1) 

more components, (2) higher 

complexity, (3) tighter assembly 

requirements, and (4) more end-of-line 

testing. (Daikin, No. 416 at p. 3) 

JCI commented that the DOE fan 

energy rating (FER) rule and recent 

supply chain issues have increased 

MHGF MPCs by more than 42 percent 

between 2018 and 2021, and by 36 

percent for NWGFs. (JCI, No. 411 at p. 

2) 

Lennox commented that it found that 

DOE’s MPCs generally reflect the correct 

costs in 2020, except for the difference 

between EL 2 at 92-percent AFUE and 

EL 3 at 95-percent AFUE, which it 

believes to be too low. (Lennox, No. 389 

at p. 7) Lennox stated that this cost 

difference should be increased by 50 to 

70 percent. (Id.) Lennox further 

commented that inflation has increased 

these costs more than 15 percent since 

2020. (Id.) 

In response to Daikin, DOE notes that 

its estimates for labor costs associated 

with higher-efficiency NWGFs are based 

on available industry data, as well as 

manufacturer feedback received during 

confidential interviews. Increased 

assembly and fabrication time, different 

components and processes, and all other 

change associated with higher efficiency 

levels for NWGFs are accounted for and 

reflected in the cost estimates for labor 

and, in turn, the overall MPC estimates. 

In addition, DOE agrees with JCI and 

Lennox that furnace MPCs have 

increased in recent years, and notes that 

the MPCs developed for this NOPR are 

higher than those in the NOPR, 

primarily due to changes in component 

and raw material prices. 

In the July 2022 NOPR, DOE 

requested comment on the designs of 

the secondary heat exchanger (including 

any recent design changes), as well as 

the cost of AL29–4C stainless steel. 87 

FR 40590, 40705 (July 7, 2022). In 

response, Lennox stated that it regards 

AL29–4C stainless steel, which is used 

in Lennox condensing furnaces, as the 

standard for secondary heat exchangers 

due to its corrosive-resistant properties. 

(Lennox, No. 389 at p. 7) As discussed 

in chapter 5 of the TSD accompanying 

this final rule, DOE did assume AL29– 

4C is used in the construction of 

secondary heat exchangers for 

condensing furnaces. Because no 

additional comments were received, 

DOE did not make any changes to its 

cost models for condensing furnace heat 

exchangers compared to what was used 

for the July 2022 NOPR analysis, other 

than updating prices to reflect the most 

recent five-year average materials prices 

available. 

Chapter 5 of the final rule TSD 

presents more information regarding the 

development of DOE’s estimates of the 

MPCs. 

d. Cost-Efficiency Relationship 

DOE created cost-efficiency curves 

representing the cost-efficiency 

relationships for the product classes that 

it examined (i.e., NWGFs and MHGFs). 

To develop the cost-efficiency 

relationships for NWGFs at the 

representative capacity (80 kBtu/h), 

DOE calculated a market-share weighted 

average MPC for each efficiency level 

analyzed, based on the units torn down 

at that efficiency level. As discussed in 

section IV.C.2.a of this document, DOE 

performed several physical and catalog 

teardowns across a range of input 

capacities in order to develop costefficiency curves for NWGFs and 

MHGFs that are representative of the 

various input capacities available on the 

market. These cost-efficiency curves 

were then used in the downstream 

analyses. The cost-efficiency curves 

developed for input capacities other 

than the representative input capacity 

are presented in chapter 5 of the final 

rule TSD. As discussed in section 

IV.C.2.c of this document, DOE used 

information from teardowns of MHGF 

and NWGF to developed cost adders for 

MHGF as compared to NWGF, which 

were applied to the NWGF MPCs to 

estimate the MPCs of MHGFs at each of 

the MHGF efficiency levels. Additional 

details on how DOE developed the costefficiency relationships and related 

results are available in chapter 5 of the 

final rule TSD. 

As displayed in Tables IV.4 and IV.5 

of this document, the results show that 

the cost-efficiency relationships for 

NWGFs and MHGFs are nonlinear. For 

both product classes, the cost increase 

between the non-condensing (80- 

percent AFUE) and condensing (90- 

percent AFUE) efficiency levels is due 

to the addition of a secondary heat 

exchanger, so there is a large step in 

both AFUE and MPC. For NWGFs, a 

significant cost increase also occurs 

between the 95-percent and 98-percent 

AFUE levels due to the addition of 

modulating combustion components 

paired with a constant airflow BPM 

indoor blower motor at 98-percent 

AFUE. 

e. Manufacturer Markup 

DOE calculates the manufacturer 

selling price (MSP) by multiplying the 

MPC and the manufacturer markup. The 

MSP is the price the manufacturer 

charges its direct customer (e.g., a 

wholesaler). The MPC is the cost for the 

manufacturer to produce a single unit of 

product, accounting for material, labor, 

depreciation and overhead costs 

associated with the manufacturing 

facility. The manufacturer markup is a 

multiplier that accounts for 

manufacturers’ production costs and 

revenue attributable to the product. 

DOE initially developed an average 

manufacturer mark-up by examining the 

annual Securities and Exchange 

Commission (‘‘SEC’’) 10–K reports filed 

by publicly-traded manufacturers 

primarily engaged in consumer furnace 

manufacturing and whose product range 

includes NWGFs and MHGFs. DOE 

refined its understanding of 

manufacturer mark-ups by using 

information obtained during 

manufacturer interviews. For additional 

detail on DOE’s methodology to 

determine the no-new-standards case 

manufacturer markup, see chapter 5 and 

chapter 12 of the final rule TSD. 

f. Manufacturer Interviews 

Throughout the rulemaking process, 

DOE sought feedback and insight from 

interested parties that would improve 

the information used in its analyses. 

DOE first interviewed NWGF and 

MHGF manufacturers as a part of the 

manufacturer impact analysis for the 

since-withdrawn March 2015 NOPR. 

During these interviews, DOE sought 

feedback on all aspects of its analyses 

for residential furnaces. DOE discussed 

the analytical assumptions and 

estimates, cost estimation method, and 

cost-efficiency curves with consumer 

furnace manufacturers. Subsequently, in 


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62Modular blower units with electric heat kits are 

also referred to as ‘‘electric furnaces.’’ 

63 DOE estimates that five percent of NWGFs are 

installed in commercial buildings. See section IV.G 

of this document for further discussion. 

64New owners are new furnace installations in 

buildings that did not previously have a NWGF or 

MHGF or existing NWGF or MHGF owners that are 

adding an additional consumer furnace. They 

primarily consist of households that add or switch 

to NWGFs or MHGFs during a major remodel. 

65BRG Building Solutions, The North American 

Heating & Cooling Product Markets (2023 Edition). 

(Available at www.brgbuildingsolutions.com/ 

reports-insights) (Last accessed August 1, 2023). 

66Clear Seas Research, 2019 Unitary Trends. 

(Available at clearseasresearch.com/?attachment_

id=2311) (Last accessed August 1, 2023). 

67 Decision Analyst, 2022 American Home 

Comfort Studies. (Available at 

www.decisionanalyst.com/syndicated/ 

homecomfort/) (Last accessed August 1, 2023). 

68The Do-It-Yourself (DIY) market is very small 

(only represents about 1–2 percent of the whole gas 

furnace market) and is not analyzed by DOE in this 

analysis. 

69The national accounts channel where the buyer 

is the same as the consumer is mostly applicable 

to NWGFs installed in small to mid-size 

commercial buildings, where on-site contractors 

purchase equipment directly from wholesalers at 

lower prices due to the large volume of equipment 

purchased, and perform the installation themselves. 

Overall, DOE’s analysis assumes that approximately 

7 percent of NWGFs installed in the residential and 

commercial sector use national accounts, based on 

the fraction of small to mid-sized commercial 

buildings with NWGFs relative to residential 

buildings with NWGFs in the 2023 BRG report. 

2021, DOE conducted a second series of 

interviews to obtain feedback on the 

updates to the cost analyses from the 

additional teardowns performed for the 

July 2022 NOPR. DOE considered all the 

information manufacturers provided 

while refining its cost estimates (and 

underlying data) and analytical 

assumptions. In order to avoid 

disclosing sensitive information about 

individual manufacturers’ products or 

manufacturing processes, DOE 

incorporated equipment and 

manufacturing process figures into the 

analyses as averages. Additional 

information on manufacturer interviews 

can be found in chapter 12 of the final 

rule TSD. 

g. Electric Furnaces 

In addition to NWGFs and MHGFs, 

DOE also estimated the MPCs of electric 

furnaces. This analysis was performed 

to develop accurate electric furnace cost 

data as an input to the product 

switching analysis (see section IV.F.10 

of this document for additional 

information). To estimate the MPCs of 

electric furnaces, DOE used information 

obtained from the teardowns of three 

modular blower units, as well as a 

teardown of an electric heat kit 

assembly, which were all originally 

used as inputs to the engineering 

analysis performed for the 2014 furnace 

fans rulemaking.62

The MPCs of electric furnaces were 

developed by calculating a market 

share-weighted MPC of the three 

modular blower units that were torn 

down, and then adding the MPC of the 

electric heat kit to the market shareweighted modular blower MPC. The 

MPC of the electric heat kit was scaled 

appropriately in order to approximate 

the MPCs of different input capacity 

electric furnaces. Similar to the 

engineering analysis performed for 

NWGFs, DOE estimated the MPCs of 

electric furnaces at input capacities of 

40, 60, 80, 100, and 120 kBtu/h. All 

material prices have been updated since 

the July 2022 NOPR to reflect recent 

changes in the market. These MPCs are 

presented in Table IV.6. 

TABLE IV.6—ELECTRIC FURNACE

MPCS

Input capacity 

(kBtu/h) 

MPC 

(2022$) 

40 .......................................... 324 

60 .......................................... 358 

80 .......................................... 391 

100 ........................................ 405 

TABLE IV.6—ELECTRIC FURNACE

MPCS—Continued 

Input capacity 

(kBtu/h) 

MPC 

(2022$) 

120 ........................................ 439 

Further details regarding the 

methodology used to estimate electric 

furnace MPCs are provided in chapter 5 

of the final rule TSD. 

D. Markups Analysis 

The markups analysis develops 

appropriate markups (e.g., manufacturer 

markups, retailer markups, distributor 

markups, contractor markups) in the 

distribution chain and sales taxes to 

convert the MPC/MSP estimates derived 

in the engineering analysis to consumer 

prices, which are then used in the LCC 

and PBP analysis. The markups are 

multiplicative factors applied to MPCs 

and MSPs. At each step in the 

distribution channel, companies mark 

up the price of the product to cover 

business costs and generate a profit 

margin. Before developing markups, 

DOE defines key market participants 

and identifies distribution channels. 

For consumer furnaces, the main 

parties in the distribution chain are: (1) 

manufacturers; (2) wholesalers or 

distributors; (3) retailers; (4) mechanical 

contractors; (5) builders; (6) 

manufactured home manufacturers, and 

(7) manufactured home dealers/retailers. 

See chapter 6 and appendix 6A of the 

final rule TSD for a more detailed 

discussion about parties in the 

distribution chain. 

For the final rule, DOE maintained the 

same approach as in the NOPR. DOE 

characterized two distribution channel 

market segments to describe how NWGF 

and MHGF products pass from the 

manufacturer to residential and 

commercial consumers: 63 (1) 

replacements and new owners 64 and (2) 

new construction. 

The NWGF and MHGF replacement/ 

new owners market distribution channel 

is primarily characterized as follows: 

Manufacturer → Wholesaler → 

Mechanical Contractor → Consumer 

Based on a 2023 BRG report,65 2019 

Clear Seas Research HVAC contractor 

survey,66 and Decision Analyst’s 2022 

American Home Comfort Study,67 DOE 

determined that the retail distribution 

channel (including internet sales) has 

been growing significantly in the last 

five years (previously it was negligible). 

Based on these sources, DOE estimated 

that 15 percent of the replacement 

market distribution channel for NWGF 

and 20 percent for MHGF (including 

mobile home specialty retailer/dealer) 

will be going through this market 

channel as follows (including some 

consumers that purchase directly and 

then have contractors install it): 68

Manufacturer → Retailer → Mechanical 

Contractor → Consumer 

Manufacturer → Mobile Home Specialty 

Retailer/Dealer → Consumer 

The NWGF new construction 

distribution channel is characterized as 

follows, where DOE assumes that for 50 

percent of installations, a larger builder 

has an in-house mechanical contractor: 

Manufacturer → Wholesaler → 

Mechanical Contractor → Builder 

→ Consumer 

Manufacturer → Wholesaler → Builder 

→ Consumer 

The MHGF new construction 

distribution channel is characterized as 

follows: 

Manufacturer → Mobile Home 

Manufacturer → Mobile Home 

Dealer → Consumer 

For replacements, new owners, and 

new construction, DOE also considered 

the national accounts or direct-frommanufacturer distribution channel, 

where the manufacturer, through a 

wholesaler, sells directly to a 

consumer.69

Manufacturer → Wholesaler (National 

Account) → Consumer 


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70Because the projected price of standardscompliant products is typically higher than the 

price of baseline products, using the same mark-up 

for the incremental cost and the baseline cost would 

result in higher per-unit operating profit. While 

such an outcome is possible, DOE maintains that in 

markets that are reasonably competitive, it is 

unlikely that standards would lead to a sustainable 

increase in profitability in the long run. 

71U.S. Census Bureau, 2017 Annual Wholesale 

Trade Survey. (Available at www.census.gov/data/ 

tables/2017/econ/awts/) (Last accessed August 1, 

2023). 

72U.S. Census Bureau, 2017 Economic Census 

Data. (Available at www.census.gov/econ/) (Last 

accessed August 1, 2023). 

73U.S. Securities and Exchange Commission, SEC 

10–K Reports (available at www.sec.gov/) (last 

accessed August 1, 2023). 

74U.S. Census Bureau, 2017 Annual Retail Trade 

Survey Data (available at www.census.gov/ 

programs-surveys/arts.html) (last accessed August 

1, 2023). 

75Air Conditioning Contractors of America 

(ACCA), Financial Analysis for the HVACR 

Contracting Industry (2005). (Available at 

www.acca.org/store) (Last accessed August 1, 2023). 

76Heating, Air Conditioning & Refrigeration 

Distributors International (HARDI), 2013 HARDI 

Profit Report. (Available at www.hardinet.org/) (Last 

accessed August 1, 2023). 

77U.S. Census Bureau, 2017 Economic Census 

Data. (Available at www.census.gov/econ/) (Last 

accessed August 1, 2023). 

78RS Means Company Inc., 2023 RS Means 

Mechanical Cost Data. Kingston, MA (2023). 

(Available at www.rsmeans.com/products/books/) 

(Last accessed August 1, 2022). 

79Craftsman Book Company, 2023 National 

Construction Estimator, CA (2023). (Available at 

craftsman-book.com/books-and-software/shop-bytype/shop-estimating-books) (Last accessed August 

1, 2023). 

80Sales Tax Clearinghouse Inc., State Sales Tax 

Rates Along with Combined Average City and 

County Rates (June 14, 2023). (Available at 

www.thestc.com/STrates.stm) (Last accessed August 

1, 2023). 

At each step in the distribution 

channel, companies mark up the price 

of the product to cover costs. DOE 

developed baseline and incremental 

mark-ups for each participant in the 

distribution chain to ultimately 

determine the consumer purchase cost. 

Baseline mark-ups are applied to the 

price of products with baseline 

efficiency, while incremental mark-ups 

are applied to the difference in price 

between baseline and higher-efficiency 

models (the incremental cost increase). 

The incremental mark-up is typically 

less than the baseline mark-up and is 

designed to maintain similar per-unit 

operating profit before and after new or 

amended standards.70

To estimate average baseline and 

incremental mark-ups, DOE relied on 

several sources, including: (1) the 2017 

Annual Wholesale Trade Survey 71 (for 

wholesalers and distributors); (2) U.S. 

Census Bureau 2017 Economic Census 

data 72 on the residential and 

commercial building construction 

industry (for builders, mechanical 

contractors, and mobile home 

manufacturers); (3) SEC 10–K reports 73

from Home Depot and Lowe’s and 2017 

Annual Retail Trade Survey 74 (for 

retailers); (4) 2017 Economic Census 

and other sources (for mobile home 

dealers and retailers). In addition, DOE 

used the 2005 Air Conditioning 

Contractors of America’s (‘‘ACCA’’) 

Financial Analysis on the Heating, 

Ventilation, Air-Conditioning, and 

Refrigeration (‘‘HVACR’’) contracting 

industry 75 to disaggregate the 

mechanical contractor mark-ups into 

replacement and new construction 

markets and the HARDI 2013 Profit 

Report 76 to derive regional-to-national 

wholesaler markup ratio. DOE also used 

various sources for the derivation of the 

mobile home dealer mark-ups (see 

chapter 6 of the final rule TSD). 

Typically, contractors will mark up 

equipment and labor differently, with 

the labor mark-up being greater than the 

equipment mark-up. For the purposes of 

the analysis, DOE is treating the furnace 

installation work, including the 

equipment and labor components, as 

one job, and assumes that the 

mechanical contractors use the same 

mark-up to account for overhead and 

profit of the entire job. However, the 

determination of that overall markup 

accounts for the different components of 

the job. After reviewing the available 

2017 economic census data,77 DOE 

adjusted the mechanical contractor 

mark-up to take into account that a 

fraction of the fringe costs related to the 

direct construction labor are part of the 

labor cost. This better matches the 

approach used in RS Means 78 and other 

cost books 79 on how the overall 

contractor mark-up is determined. 

Based on this methodology, the average 

baseline mark-up for mechanical 

contractors is 1.47 for replacements and 

1.39 for new construction, while the 

incremental mark-up for mechanical 

contractors is 1.27 for replacements and 

1.20 for new construction. The overall 

baseline mark-up is 2.85 for NWGFs and 

2.49 for MHGFs, while the incremental 

mark-up is 2.09 for NWGFs and 1.91 for 

MHGFs. See chapter 6 and appendix 6A 

of the final rule TSD for more details. 

In addition to the mark-ups, DOE 

obtained State and local taxes from data 

provided by the Sales Tax 

Clearinghouse.80 These data represent 

weighted average taxes that include 

county and city rates. DOE derived 

shipment-weighted average tax values 

for each region considered in the 

analysis. 

DOE acknowledges that there is 

uncertainty regarding the appropriate 

mark-ups to use, so the Department 

conducted a sensitivity analysis in 

which the same average mark-up is 

applied to baseline and higherefficiency products. Appendix 8N of the 

final rule TSD describes this analysis 

and how the associated LCC results 

differ from the results using the 

incremental mark-up approach. The 

relative comparison of the different 

efficiency levels remains similar, 

however, and the proposed energy 

conservation standard level remains 

economically justified regardless of 

which mark-up scenario is utilized. 

Lennox commented that the 

assumption that the incremental 

markup would be lower for condensing 

than for non-condensing furnace 

standard levels is incorrect, as the 

installed cost difference between EL 2 

and EL 3 is less than the difference 

between the MPC and MSP for these 

two levels. (Lennox, No. 389 at p. 2) 

Lennox further asserted that the 

incremental markup should be 

consistent for condensing and noncondensing levels. (Id.) 

DOE clarifies that the incremental 

mark-up is used for efficiency levels 

above the baseline, applied to those 

costs above the baseline cost. In the case 

of consumer furnaces, all condensing 

furnaces have an efficiency above the 

baseline, and, therefore, they all share 

the same incremental mark-up factor 

(absolute mark-up will vary based on 

the incremental cost). Baseline, noncondensing furnaces are characterized 

with a baseline mark-up only. Chapter 

6 of the final rule TSD provides details 

on DOE’s development of markups for 

NWGFs and MHGFs. 

E. Energy Use Analysis 

The purpose of the energy use 

analysis is to determine the annual 

energy consumption of NWGFs and 

MHGFs at different efficiencies in 

representative U.S. single-family homes, 

multi-family residences, mobile homes, 

and commercial buildings, and to assess 

the energy savings potential of increased 

furnace efficiency. The energy use 

analysis estimates the range of energy 

use of NWGFs and MHGFs in the field 

(i.e., as they are actually used by 

consumers). The energy use analysis 

provides the basis for other analyses 

DOE performed, particularly 

assessments of the energy savings and 

the savings in consumer operating costs 

that could result from adoption of 

amended or new standards. 

DOE estimated the annual energy 

consumption of NWGFs and MHGFs at 

specific energy efficiency levels across a 

range of climate zones, building 

characteristics, and heating 

applications. The annual energy 

consumption includes the natural gas, 


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81Energy Information Administration (EIA), 2020 

Residential Energy Consumption Survey (RECS). 

(Available at: www.eia.gov/consumption/ 

residential/) (Last accessed August 1, 2023). 

82U.S. Department of Energy: Energy Information 

Administration, Commercial Buildings Energy 

Consumption Survey (2018). (Available at: 

www.eia.gov/consumption/commercial/) (Last 

accessed August 1, 2023). 

83Air Conditioning Contractors of America 

Association (ACCA). Manual J—Residential Load 

Calculation (available at: www.acca.org/standards/ 

technical-manuals/manual-j) (last accessed August 

1, 2023). 84Air Conditioning Contractors of America 

Association (ACCA). Manual N—Commercial Load 

Calculation (available at: www.acca.org/standards/ 

technical-manuals/manual-n) (last accessed August 

1, 2023). 85This is the dry-bulb design temperature that is 

expected to be exceeded ninety-nine percent of the 

time. 86AHRI, Attachment A: Percentage of Residential 

Gas Furnace Shipments by Input Ranges, 20 Year 

Average (1995–2014) (October 14, 2015) (available 

at: www.regulations.gov/comment/EERE-2014-BTSTD-0031-0181) (last accessed August 1, 2023). 87Heating, Air-conditioning and Refrigeration 

Distributors International (HARDI), DRIVE portal 

(HARDI Visualization Tool managed by D+R 

International until 2022), proprietary Gas Furnace 

Shipments Data from 2013–2022 provided to 

Lawrence Berkeley National Laboratory (LBNL). 

88BRG Building Solutions, The North American 

Heating & Cooling Product Markets (2023 Edition) 

Continued 

liquid petroleum gas (LPG), and 

electricity used by the furnace. 

Chapter 7 of the final rule TSD 

provides details on DOE’s energy use 

analysis for NWGFs and MHGFs. 

1. Building Sample 

To determine the field energy use of 

NWGFs and MHGFs used in residential 

housing units and commercial 

buildings, DOE established a sample of 

households using EIA’s 2020 

Residential Energy Consumption Survey 

(RECS 2020) 81 and sample of 

commercial buildings using EIA’s 2018 

Commercial Building Energy 

Consumption Survey (CBECS 2018), 

which were the most recent such 

surveys that were available at that 

time.82 The RECS and CBECS data 

provide information on the vintage of 

the home or building, as well as heating 

energy use in each housing unit or 

building. DOE used the housing and 

building samples not only to determine 

existing furnace’s annual energy 

consumption, but also as the basis for 

conducting the LCC and PBP analyses. 

RECS and CBECS includes weights for 

each housing unit or commercial 

building in order to produce housing 

and commercial building population 

estimates to represent all housing units 

and commercial buildings, including 

those not in the survey sample. DOE 

used these RECS and CBECS weights 

along with furnace shipments data and 

furnace sample criteria to develop the 

projected furnace sample shipment 

weights in 2029, the first year of 

compliance with any amended or new 

energy conservation standards for 

NWGFs and MHGFs, used in the 

analysis. To characterize future new 

homes and buildings, DOE used a subset 

of housing units and commercial 

buildings in RECS and CBECS that were 

built after 2000. 

APGA argued that with DOE’s usage 

of EIA’s RECS 2015, DOE is imputing to 

over 120 million households 

characteristics based upon a survey of a 

few hundred. APGA further argued that 

RECS surveys are suspect because they 

rely on respondents knowing precisely 

the appliance that heats their house and 

for how long that has been. (APGA, No. 

387 at p.11) DOE notes that this 

characterization is incorrect. RECS 2015 

is based on a nationally representative 

sample of 5,686 households, not a few 

hundred. RECS 2020 had 18,496 

respondents complete the survey. 

Furthermore, EIA employs a number of 

different data collection modes, 

including in-person interviews with 

detailed measurements of the housing 

unit, as well as collecting fuel billing 

and delivery data from energy suppliers. 

There are a number of cross-checks and 

quality control steps to ensure the 

robustness of the survey, as detailed in 

the RECS technical documentation. 

APGA claimed that DOE relied on 

stale data from EIA’s RECS 2015 in the 

NOPR. APGA argued that DOE should 

incorporate RECS 2020 data and run its 

analysis again, allowing public 

comment in a supplemental NOPR. 

(APGA, No. 387 at p. 61) 

In response, DOE notes that the 

energy use analysis relies on the energy 

consumption and expenditures 

microdata from RECS, which at the time 

of the NOPR analysis were not yet 

published for RECS 2020. Only the 

preliminary housing characteristics 

statistics tables from RECS 2020 were 

available at the time of the NOPR 

analysis. However, it is common 

practice for DOE to include updated 

data in its analyses when they become 

available. The RECS 2020 final version 

of the microdata (including energy 

consumption and expenditures data) 

have since been published, and DOE has 

updated its analysis for the final rule to 

include the latest RECS 2020 data. DOE 

has also updated its analysis for the 

final rule to include the latest CBECS 

2018 data. See appendix 7A of the final 

rule TSD for details regarding the 

sample. 

JCI commented that manufactured 

home applications are not specifically 

addressed in RECS data after 1974. The 

commenter asserted that manufactured 

home applications are instead 

categorized in single-family homes. JCI 

argued that replacements in 

manufactured homes are, therefore, not 

accurately represented in DOE’s 

analysis, and that manufactured homes 

would be disproportionately negatively 

impacted by a 95-percent AFUE 

standard. (JCI, No. 411 at p. 2) 

In response, DOE clarifies that RECS 

does include survey responses from 

households in manufactured homes. 

They are labeled as ‘‘mobile homes’’ and 

are included in DOE’s analysis. These 

are the households that would be 

representative of MHGF installations 

and energy consumption. 

The CA IOUs cited the U.S. Energy 

Information Administration’s 2015 

Residential Energy Consumption Survey 

to report that only 26 percent of mobile 

homes use natural gas and propane 

MHGFs for space heating, while 55 

percent of mobile homes use electricity 

for space heating. (The CA IOUs, No. 

400 at p. 2) In response, DOE notes that 

in the NOPR, it used 2015 RECS data 

directly, and, therefore, this breakdown 

of energy usage was reflected in DOE’s 

NOPR analysis, and the current 

breakdown of energy use from 2020 

RECS data is reflected in DOE’s final 

rule analysis. 

2. Furnace Sizing 

DOE assigned an input capacity for 

the existing NWGF or MHGF of each 

housing unit or building based on an 

algorithm that correlates the calculated 

design heating load served by the 

furnace with furnace shipments data by 

input capacity. DOE used ACCA’s 

Manual J 83 and Manual N 84 calculation 

methods to more accurately determine 

the design heating load requirements for 

each sampled housing unit or building 

based primarily on RECS 2020 and 

CBECS 2018 building characteristics 

(including heated square footage, the 

outdoor design temperature for 

heating,85 wall type, insulation type, 

year built, roof type, number of floors, 

availability of an attic, basement, or 

crawlspace, etc.). The ACCA Manual J 

and Manual N process is the most 

widely accepted method to calculate 

heating and cooling requirements for a 

house by using well-documented values 

and building codes, based on 

experimental data and extreme 

conditions (worst-case assumptions). 

DOE distributed the input capacities 

based on shipments data by input 

capacity bins provided by AHRI from 

1995–2014,86 HARDI shipments data by 

capacity and region from 2013–2022,87

BRG report shipments data by capacity 

from 2014–2022,88 and manufacturer 


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(available at: www.brgbuildingsolutions.com/ 

reports-insights) (last accessed August 3, 2023). 

89U.S. Department of Energy, Compliance 

Certification Management System (available at: 

www.regulations.doe.gov/certification-data/) (last 

accessed August 1, 2023). 

90AHRI, Directory of Certified Product 

Performance: Residential Furnaces (available at: 

www.ahridirectory.org/Search/ 

QuickSearch?category=8&

searchTypeId=3&producttype=32) (last accessed 

August 1, 2023). 

91AHRI, Attachment A: Percentage of Residential 

Gas Furnace Shipments by Input Ranges, 20 Year 

Average (1995–2014) (Oct. 14, 2015) (available at: 

www.regulations.gov/comment/EERE-2014-BT-STD0031-0181) (last accessed August 1, 2023). 

92Heating, Air-conditioning and Refrigeration 

Distributors International (HARDI), DRIVE portal 

(HARDI Visualization Tool managed by D+R 

International until 2022), proprietary Gas Furnace 

Shipments Data from 2013–2022 provided to 

Lawrence Berkeley National Laboratory (LBNL). 

93EIA estimated the equipment’s annual energy 

consumption from the household’s or buildings 

utility bills using conditional demand analysis. To 

learn more, see www.eia.gov/consumption/ 

residential/data/2020/pdf/ 

2020%20RECS%20CE%20Methodology_Final.pdf. 

(Last accessed August 1, 2023). 

94National Oceanic and Atmospheric 

Administration (NOAA), NNDC Climate Data 

Online (available at: www.ncdc.noaa.gov/cdo-web/ 

search) (last accessed August 1, 2023). 

95U.S. Department of Energy, Energy Information 

Administration, Annual Energy Outlook 2023 

(available at: www.eia.gov/outlooks/aeo/) (last 

accessed August 1, 2023). 

input from manufacturer interviews. 

The shipments data by input capacity 

were further disaggregated into 5-kBtu/ 

h bins based on a set of non-repetitive 

or unique models from DOE’s 2023 

Compliance Certification Management 

System database for furnaces 89 and 

from AHRI’s 2023 residential furnace 

certification directory.90 The 

households’ calculated design heating 

load values are then rank ordered to 

match actual shipments distributions to 

determine the assigned furnace input 

capacity. DOE assumed that for the new 

furnace installation, the output capacity 

would remain similar to the output 

capacity for the existing furnace. 

This sizing methodology takes into 

account the actual field conditions 

where some households have a greater 

oversizing factor than recommended by 

ACCA, which could occur due to old 

furnaces being replaced by a much more 

efficient furnace and/or improvements 

to the building shell since the last 

furnace installation. For example, this 

methodology, applied to both NWGFs 

and MHGFs, allows for older, lessinsulated homes to be assigned larger 

furnaces compared to similar newlybuilt homes. This methodology also 

accounts for regional differences in 

building shells, which show that, on 

average, southern homes are not as well 

insulated as northern homes. Regional 

differences in design heating load are 

also captured in the sizing methodology 

by using the outdoor design temperature 

that best matches the household 

location and climate characteristics. 

DOE also accounted for the air 

conditioning sizing when determining 

the input capacity size of the furnace. 

DOE acknowledges that currently, there 

are few low-input-capacity furnace 

models with large furnace fans. For 

some installations, particularly in the 

South, a large furnace fan is required to 

meet the cooling requirements. DOE 

accounted for the fact that some furnace 

installations in the South have a larger 

input capacity than determined by the 

design heating load calculations by 

calculating the size of the furnace fan 

required to meet the cooling 

requirements of the household by using 

the AHRI shipments data by input 

capacity 91 and the HARDI furnace 

shipments by input capacity and 

region.92 DOE notes that this will 

primarily affect furnaces located in 

warmer areas of the country (with 

higher cooling loads), which potentially 

leads to a higher amount of oversizing 

than is assumed in the analysis for these 

households. DOE notes that the Federal 

furnace fan standards that took effect in 

July 2019 require fan motor designs that 

can more efficiently adjust the amount 

of air depending on both heating and 

cooling requirements. Thus, the size of 

the furnace fan (and the furnace 

capacity) will be able to better match 

both the heating and cooling 

requirements of the house. DOE 

acknowledges that, in the future, there 

might be greater availability of small 

furnaces with larger furnace fans, but for 

this final rule, DOE made a conservative 

assumption that larger furnace input 

capacities will be necessary to satisfy 

these cooling requirements because 

smaller capacity furnaces with larger 

fans are not commonly available in the 

market. If smaller capacity furnaces 

with larger fans become more common, 

the costs to replace these furnaces 

would be lower, increasing the net 

consumer benefits. See chapter 7 and 

appendix 7B of the final rule TSD for 

further detail. 

3. Furnace Active Mode Energy Use 

To estimate the annual energy 

consumption in active mode of furnaces 

meeting the considered efficiency 

levels, DOE first calculated the annual 

housing unit or building heating load 

using the RECS 2020 and CBECS 2018 

estimates of housing unit or building 

furnace annual energy consumption,93

the existing furnace’s estimated capacity 

and efficiency (AFUE), and the heat 

generated from the electrical 

components. The analysis assumes that 

some homes have two or more furnaces, 

with the heating load split evenly 

between them. DOE also took into 

account any secondary heating that 

might be present, utilizing the same fuel 

as the NWGF or MHGF, by reducing the 

heating load covered by the NWGF or 

MHGF. The estimation of furnace 

capacity is discussed in the previous 

section. The AFUE of the existing 

furnaces was estimated using the 

furnace vintage (the year of installation) 

provided by RECS or CBECS and 

historical data on the market share of 

furnaces by AFUE by region (see 

appendix 7B of the final rule TSD). DOE 

then used the housing unit or building 

heating load to calculate the burner 

operating hours at each considered 

efficiency level, which were then used 

to calculate the fuel and electricity 

consumption based on the DOE 

consumer furnace test procedure. 

a. Adjustments to Energy Use Estimates 

DOE adjusted the energy use 

estimates in RECS 2020 (for the year 

2020) and in CBECS 2018 (for the year 

2018) to ‘‘normal’’ weather using longterm heating degree-day (HDD) data for 

each geographical region.94 For this 

final rule, DOE then applied an HDD 

correction factor from AEO2023 95 that 

accounts for projected population 

migrations across the Nation and 

continues any realized historical 

changes in HDD at the State level. 

DOE also accounted for changes in 

building shell efficiency between 2020 

(for RECS 2020) or 2018 (for CBECS 

2018) and the compliance year by 

applying the shell integrity indexes 

associated with AEO2023. The indexes 

consider projected improvements in 

building shell efficiency due to 

improvements in home insulation and 

other thermal efficiency practices. EIA 

provides separate indexes for new 

buildings and existing buildings for a 

given year, for both residential homes 

and commercial buildings. For the year 

2029, the factor applied for homes is 

0.91 for residential replacements and 

0.77 for residential new construction 

relative to the 2022 building shell 

efficiency. The factor applied for 

commercial building replacements 

depend on building type and Census 

Division, ranging from 0.82 to 0.97 

relative to the 2018 building shell 

efficiency. For new construction 

commercial buildings, the factor used 

ranged from 0.31 to 0.86, depending on 

building type and Census Division 

relative to the 2020 building shell 


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96 DOE Building Energy Codes Program, Status of 

State Energy Code Adoption (available at: 

www.energycodes.gov/status) (last accessed August 

1, 2023). 

97See 10 CFR 430.32(y). 

98Found in 10 CFR part 430, subpart B, appendix 

N, section 10. 

efficiency. See chapter 7 of the final rule 

TSD for more details. 

Building codes and building practices 

vary widely across the U.S. For 

example, as of August 2023, more than 

half of the States were still under the 

2009 International Energy Conservation 

Code (‘‘IECC’’) or older codes instead of 

the 2015 IECC, 2018 IECC, or 2021 

IECC.96 EIA’s building shell index for 

new construction takes into account 

regional differences in building codes 

and building practices by including 

both homes that meet IECC 

requirements and homes that are built 

with the most efficient shell 

components, as well as non-compliant 

homes that fail to meet IECC 

requirements. The building shell index 

also accounts for the impact of incentive 

programs in improving building shell 

efficiency. It is uncertain how these 

building codes and building practices 

will change over time, so EIA uses 

technical and economic factors to 

project change in the building shell 

integrity indexes. For new home 

construction, EIA determined the 

building shell efficiency by using the 

relative costs and energy bill savings in 

conjunction with the building shell 

attributes. For commercial buildings, 

the shell efficiency factors vary by 

building type and region, and they take 

into account significant improvements 

to the commercial building shell, 

particularly in new commercial 

buildings. 

AHRI stated that DOE did not 

consider changes to Manufactured 

Housing Efficiency Standards in its 

analysis of proposed efficiency 

standards for MHGFs, adding that the 

new standards were promulgated by 

DOE in May 2022 and will take effect on 

May 31, 2023. AHRI commented that 

the new requirements will enhance the 

thermal efficiency of the building 

envelope of new manufactured homes, 

which will in turn reduce the heating 

demand for furnaces. AHRI added that 

the reduced heating demand for 

furnaces will then reduce the cost 

justification (in particular, LCC savings) 

for the proposed standards. 

Additionally, AHRI stated that DOE 

cannot double-count energy savings 

produced by a more-efficient building 

envelope and from improved furnace 

efficiency. (AHRI, No. 414–2 at pp. 1– 

3) Along these same lines, MHI 

commented that it does not think DOE 

considered the increased energy 

efficiency caused by the May 2022 ECS 

Final Rule for manufactured housing in 

its technical models. (MHI, No. 365 at 

p. 3) 

Mortex similarly commented that the 

standards for manufactured homes will 

lead to less usage and average input of 

furnaces, which weakens the cost 

justification for amending the furnaces 

standard. The commenter stated that 

these standards will reduce heating 

season gas demand and energy usage by 

approximately 15 percent, which means 

that there will be fewer energy savings 

to offset the increased up-front costs if 

a 95-percent AFUE furnace. (Mortex, 

No. 410 at p. 3) 

Mortex further commented that this 

rulemaking double-counts energy 

savings between this rulemaking and 

the manufactured housing rulemaking. 

The company also pointed to the 

manufactured housing rulemaking and 

the tiered approach such that 

requirements for single-section 

manufactured homes imposed less of a 

cost than requirements for multi-section 

manufactured homes in consideration of 

affordability of housing for mobile home 

residents. Mortex commented that such 

considerations should also be taken into 

account by DOE in the rulemaking for 

MHGFs. (Mortex, No. 410 at p. 3) 

In response, DOE notes that the NOPR 

analysis was performed using AEO2022, 

which was developed before 

promulgation of the May 2022 final rule 

for manufactured housing (87 FR 

32728). AEO projections only include 

the impacts of finalized regulations and, 

thus, do not include DOE’s May 2022 

manufactured housing rule. However, it 

is common practice for DOE to include 

updated data in its analyses when they 

become available. For the final rule, 

DOE used the latest AEO2023 building 

shell efficiency projections, which take 

into account all finalized rules in 2022, 

including the May 2022 final rule for 

manufactured housing, as well as other 

incentives to improve building shell 

efficiency. These projections result in a 

decrease in the estimated space heating 

energy use in the final rule. The 

updated analysis eliminates any 

potential double-counting. DOE’s 

conclusion of economic justification for 

MHGFs from the NOPR remains 

unchanged. With respect to 

affordability, DOE notes that smallercapacity furnaces, which would be used 

in smaller mobile homes, have lower 

incremental costs. 

Sierra Club et al. mentioned that the 

rule for energy efficiency standards for 

new manufactured homes was based in 

part on the requirements of the 2021 

IECC, though DOE declined to consider 

IECC requirements in setting minimum 

efficiency levels for heating appliances 

installed in such homes due to the 

coverage of these products under 

EPCA’s appliance efficiency standards 

program. 87 FR 32728, 32774 (May 31, 

2022). Sierra Club et al. stated that 

another stakeholder’s comments on the 

NOPR—claiming that DOE is extending 

the IECC’s requirements to mobile home 

gas furnaces—have an unclear basis. 

(Sierra Club et al., No. 401 at pp. 2–3) 

In response, DOE acknowledges that 

coverage under EPCA for MHGFs is 

under consumer furnaces provisions of 

EPCA and not under the manufactured 

housing rulemaking. DOE agrees with 

Sierra Club et al. that it is not extending 

IECC requirements. Instead, DOE is 

independently evaluating the 

technological feasibility and economic 

justification of amended energy 

conservation standards for MHGFs by 

conducting its own analysis. 

4. Furnace Electricity Use 

DOE’s analysis of furnace electricity 

consumption takes into account the 

electricity used by the furnace’s 

electrical components (e.g., blower, 

draft inducer, and ignitor). DOE 

determined furnace fan electricity 

consumption using field data on static 

pressures of duct systems and furnace 

fan performance data from manufacturer 

literature. As noted in section IV.C of 

this document, the furnace designs used 

in DOE’s analysis incorporate furnace 

fans that meet the energy conservation 

standards for those covered products 

that took effect in 2019.97 DOE 

accounted for furnace fan energy use 

during heating mode, as well as for the 

difference in furnace fan electricity use 

between a baseline furnace (80-percent 

AFUE) and a more-efficient furnace 

during cooling and continuous fan 

circulation. DOE also accounted for 

increased furnace fan energy use in 

condensing furnaces to produce the 

equivalent airflow output compared to a 

similar non-condensing furnace, since 

condensing furnaces tend to have a 

more restricted airflow path than noncondensing furnaces due to the presence 

of a secondary heat exchanger. To 

calculate electricity consumption for the 

inducer fan, ignition device, gas valve, 

and controls, DOE used the calculation 

described in DOE’s furnaces test 

procedure,98 as well as in DOE’s 2023 

unique furnace model dataset and 

manufacturer product literature. The 

electricity consumption of condensing 

furnaces also reflects the use of 

condensate pumps and heat tape. 


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99The furnace fan energy conservation standards 

relevant to condensing and non-condensing MHGFs 

can be met using improved PSC motors and, 

therefore, these considerations do not apply. 

100U.S. Department of Energy—Office of Energy 

Efficiency and Renewable Energy, Energy 

Conservation Program for Consumer Products: 

Technical Support Document: Energy Efficiency 

Standards for Consumer Products: Consumer 

Furnace Fans (October 2022) (available at: 

www.regulations.gov/document/EERE-2021-BTSTD-0029-0014) (last accessed August 1, 2023). 

DOE accounts for the increased 

electricity use of condensing furnaces in 

heating, cooling, and continuous fan 

circulation due to larger internal static 

pressure (a more restricted airflow path 

due to the presence of a secondary heat 

exchanger). DOE notes that the furnace 

fan energy conservation standards that 

took effect in 2019 (for both noncondensing and condensing NWGFs 99) 

can be met using constant-torque BPM 

motors, which do not require increasing 

the size of an undersized duct since the 

speed of the motor is kept constant with 

increased static pressure. DOE also 

accounts for higher energy use for a 

fraction of installations that include a 

constant airflow BPM (variable speed 

motor) that can increase the speed of the 

motor to compensate for high static 

pressures. See appendix 7C of the final 

rule TSD for more details. 

As stated previously, a condensing 

furnace uses more electricity than an 

equivalent non-condensing furnace but 

uses significantly less natural gas or 

LPG. DOE accounted for the additional 

heat released by the furnace fan motor, 

which must be compensated by the 

central air conditioner during the 

cooling season, based on analysis in the 

October 2022 Preliminary Analysis for 

consumer furnace fans.100 DOE also 

accounted for additional electricity use 

by the furnace fan during continuous 

fan operation. 

F. Life-Cycle Cost and Payback Period 

Analysis 

DOE conducted LCC and PBP 

analyses to evaluate the economic 

impacts on individual consumers of 

potential energy conservation standards 

for NWGFs and MHGFs. The effect of 

new or amended energy conservation 

standards on individual consumers 

usually involves a reduction in 

operating cost and an increase in 

purchase cost. DOE used the following 

two metrics to measure consumer 

impacts: 

• Life-Cycle Cost (LCC) is the total 

consumer expense of an appliance or 

product over the life of that product, 

consisting of total installed cost 

(manufacturer selling price, distribution 

chain markups, sales tax, and 

installation costs) plus operating costs 

(expenses for energy use, maintenance, 

and repair). To compute the operating 

costs, DOE discounts future operating 

costs to the time of purchase and sums 

them over the lifetime of the product. 

• Payback Period (PBP) is the 

estimated amount of time (in years) it 

takes consumers to recover the 

increased purchase cost (including 

installation) of a more-efficient product 

through lower operating costs. DOE 

calculates the PBP by dividing the 

change in purchase cost at higher 

efficiency levels by the change in 

annual operating cost for the year that 

amended or new standards are assumed 

to take effect. 

For any given efficiency level, DOE 

measures the change in LCC relative to 

the LCC in the no-new-standards case, 

which reflects the estimated efficiency 

distribution of NWGFs and MHGFs in 

the absence of new or amended energy 

conservation standards. In contrast, the 

PBP for a given efficiency level is 

measured relative to the baseline 

product. 

For each considered efficiency level 

in each product class, DOE calculated 

the LCC and PBP for a nationally 

representative set of housing units and, 

for NWGFs, also commercial buildings. 

As stated previously, DOE developed 

household samples from 2020 RECS and 

CBECS 2018. For each sample 

household, DOE determined the energy 

consumption of the furnace and the 

appropriate natural gas, LPG, and 

electricity price. By developing a 

representative sample of households, 

the analysis captured the variability in 

energy consumption and energy prices 

associated with the use of NWGFs and 

MHGFs. 

Inputs to the LCC calculation include 

the installed cost to the consumer, 

operating expenses, the lifetime of the 

product, and a discount rate. Inputs to 

the calculation of total installed cost 

include the cost of the product—which 

includes MPCs, manufacturer markups, 

product price projections, wholesaler 

and contractor markups, and sales taxes 

(where appropriate)—and installation 

costs. Inputs to the calculation of 

operating expenses include annual 

energy consumption, energy prices and 

price projections, repair and 

maintenance costs, product lifetimes, 

and discount rates. Inputs to the 

payback period calculation include the 

installed cost to the consumer and first 

year operating expenses. DOE created 

distributions of values for installation 

cost, repair and maintenance, product 

lifetime, and discount rates with 

probabilities attached to each value, to 

account for their uncertainty and 

variability. In addition, DOE established 

the efficiency in the no-new-standards 

case using a distribution of furnace 

efficiencies. 

In regard to DOE’s cost calculations, 

GAS commented that DOE is defying its 

own intent to use ‘‘transparent and 

robust analytical methods.’’ Instead, 

GAS commented, DOE games its 

analytical methods through undue 

complexity to declare some level of 

(usually minimal) positive LCC savings 

necessary to clear the low hurdle rate 

established by EPCA. GAS commented 

that DOE ‘‘grossly inflates’’ its LCC 

savings estimates by opaque 

methodologies that defy independent 

validation. (GAS, No. 385 at pp. 4–5) 

Trampe commented that a long-term 

study is needed where total costs (initial 

and maintenance) of furnaces with 

different efficiencies are compared. The 

commenter added that this study should 

cover different States and temperatures. 

Trampe stated that HVAC installers, 

repairers, distributors, and 

manufacturers can provide their input 

on what these total costs would be. 

(Trampe, No. 361 at p. 1) 

In response, DOE conducts all 

appliance standards rulemakings 

through the public notice-and-comment 

process, in which all members of the 

public are given the opportunity to 

comment on the rulemaking, and all 

documents are made publicly available 

at www.regulations.gov. Additionally, 

all benefits and burdens of the 

rulemaking are carefully considered by 

DOE. Section IV.F of this document 

explains DOE’s rationale regarding cost 

impacts and LCC models. As part of this 

rulemaking, DOE also hosted a number 

of public meetings, including one 

focused on its analytical models, in 

order to increase the transparency of its 

process. DOE currently works with 

manufacturers to determine appropriate 

costs, as Trampe suggested. Although 

predicted future and long-term costs are 

calculated and considered, a long-term 

study regarding total costs of furnaces at 

various efficiencies will not be 

conducted as part of this rulemaking 

because DOE has determined that its 

current methodology captures the 

elements which the commenter 

suggests. However, because DOE 

consistently strives to improve its 

analytical processes, the Department 

may consider Trampe’s comment as a 

topic for possible continued future 

research. 

The computer model DOE uses to 

calculate the LCC relies on a Monte 

Carlo simulation to incorporate 

uncertainty and variability into the 

analysis. The Monte Carlo simulations 

randomly sample input values from the 

probability distributions and NGWF and 


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101Crystal BallTM is a commercially-available 

software tool to facilitate the creation of these types 

of models by generating probability distributions 

and summarizing results within Excel (available at: 

https://www.oracle.com/middleware/technologies/ 

crystalball.html) (last accessed Aug. 3, 2023). 

MHGF user samples. For this 

rulemaking, the Monte Carlo approach 

is implemented in MS Excel together 

with the Crystal BallTM add-on.101

Details regarding the various inputs to 

the model are discussed in the 

subsections below. The model 

calculated the LCC and PBP for 

products at each efficiency level for 

10,000 furnace installations per 

simulation run. The analytical results 

include a distribution of 10,000 data 

points showing the range of LCC savings 

for a given efficiency level relative to 

the no-new-standards case efficiency 

distribution. In performing an iteration 

of the Monte Carlo simulation for a 

given consumer, product efficiency is 

chosen based on its probability. If the 

chosen product efficiency is greater than 

or equal to the efficiency of the standard 

level under consideration, the LCC 

calculation reveals that a consumer is 

not impacted by the standard level. By 

accounting for consumers who are 

projected to purchase more-efficient 

furnaces than the baseline furnace in the 

no-new-standards case, DOE avoids 

overstating the potential benefits from 

increasing product efficiency. DOE 

calculated the LCC and PBP for 

consumers of NWGFs and MHGFs as if 

each were to purchase a new product in 

the first year of required compliance 

with new or amended standards. Any 

amended standards apply to NWGFs 

and MHGFs manufactured five years 

after the date on which any new or 

amended standard is published in the 

Federal Register. (42 U.S.C. 

6295(f)(4)(C)) Therefore, DOE used 2029 

as the first year of compliance with any 

amended standards for NWGFs and 

MHGFs. 

DOE recognizes the uncertainties 

associated with some of the parameters 

used in the analysis. To assess these 

uncertainties, DOE has performed 

sensitivity analyses for key parameters 

such as energy prices, condensing 

furnace market penetration, consumer 

discount rates, lifetime, installation 

costs, downsizing criteria, and product 

switching criteria. DOE notes that the 

analysis is based on a Monte Carlo 

simulation approach, which uses the 

Crystal BallTM add-on as a tool to more 

easily apply probability distributions to 

various parameters in the analysis. See 

appendix 8B of the final rule TSD and 

relevant analytical sections of this 

document for further details about 

uncertainty, variability, and sensitivity 

analyses in the LCC analysis. 

DOE’s LCC analysis results at a given 

efficiency level account for the 

households that will not install 

condensing NWGFs unless the standard 

is changed, based on the no-newstandards case efficiency distribution 

described in section IV.F.8 of this 

document. This approach reflects the 

fact that some consumers may purchase 

products with efficiencies greater than 

the baseline levels. 

DOE’s analysis models the expected 

product lifetime, not the expected 

period of homeownership. DOE 

recognizes that the lifetime of a gas 

furnace and the residence time of the 

purchaser may not always overlap. 

However, EPCA requires DOE to 

consider the savings in operating costs 

throughout the estimated average life of 

the covered product compared to any 

increase in the price of, or in the initial 

charges for, or maintenance expenses of, 

the covered product that are likely to 

result from a standard. (42 U.S.C. 

6295(o)(2)(B)(i)(II)) In the context of this 

requirement, the expected product 

lifetime, not the expected period of 

homeownership, is the appropriate 

modeling period for the LCC, as energy 

cost savings will continue to accrue to 

the new owner/occupant of a home after 

its sale. If some of the price premium for 

a more-efficient furnace is passed on in 

the price of the home, there would be 

a reasonable matching of costs and 

benefits between the original purchaser 

and the home buyer. To the extent this 

does not occur, the home buyer would 

gain at the expense of the original 

purchaser. 

As discussed in section IV.F.10 of this 

document, in its LCC analysis, DOE 

considered the possibility that some 

consumers may switch to alternative 

heating systems under a standard that 

requires condensing technology in its 

LCC analysis. The LCC analysis showed 

that some consumers who switch end 

up with a reduction in the LCC relative 

to their projected purchase in the nonew-standards case. 

As part of the determination of 

whether a potential standard is 

economically justified, EPCA directs 

DOE to consider, to the greatest extent 

practicable, the savings in operating 

costs throughout the estimated average 

life of the covered product in the type 

(or class) compared to any increase in 

the price of, or in the initial charges for, 

or maintenance expenses of, the covered 

products which are likely to result from 

imposition of the standard. (42 U.S.C. 

6295(o)(2)(B)(i)(II)) EPCA does not 

expressly limit consideration of the 

covered product or covered products 

likely to result under an amended 

standard to the covered product type (or 

class) (i.e., no prohibition on 

consideration of the potential for 

product switching due to new or 

amended standards). EPCA indicates 

that the timeframe of the LCC analysis 

is based on the estimated average life of 

the covered product subject to the 

standard under consideration for 

amendment. (Id.) However, the use of 

‘‘covered products’’ in the plural for 

what is to be considered as resulting 

from an amended standard suggests that 

DOE could consider covered products 

other than that subject to the standard. 

In the present case, DOE has found it 

unnecessary to decide whether EPCA 

allows DOE to consider the benefits 

from this standard rule on consumers of 

other covered products (e.g., electric 

heat pumps). However, in this analysis, 

DOE has accounted for the expected 

effect that these standards will have on 

consumers’ decisions to switch from 

home heating via a gas-fired furnace to 

home heating via electric alternatives. 

As explained in detail below, were DOE 

not to consider the potential for 

consumers switching products in 

response to an amended standard, the 

analysis would not capture what could 

be expected to occur in actual practice. 

Given that understanding, DOE 

performed a sensitivity analysis with 

and without product switching for the 

LCC analysis (presented in section 

V.B.1.a of this document and in 

appendix 8J of the final rule TSD) and 

for the NIA as well (presented in 

sections V.B.3.a and V.B.3.b of this 

document and in appendix 10E of the 

final rule TSD). The economic 

justifications for the considered energy 

conservation standards for NWGFs and 

MHGFs are similar with either no 

product switching or with product 

switching, and the relative comparison 

between the TSLs remains similar. 

EPCA also establishes, as noted in 

section III.F.2 of this document, a 

rebuttable presumption that a standard 

is economically justified if the Secretary 

finds that the additional cost to the 

consumer of purchasing a product 

complying with an energy conservation 

standard level will be less than three 

times the value of the energy (and, as 

applicable, water) savings during the 

first year that the consumer will receive 

as a result of the standard. (42 U.S.C. 

6295(o)(2)(B)(iii)) As with the LCC 

analysis, accounting for the potential for 

switching in the PBP analysis provides 

a payback that is representative across 

consumers. 

Table IV.7 summarizes the approach 

and data DOE used to derive inputs to 

the LCC and PBP calculations. The 


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subsections that follow provide further 

discussion. Details of the spreadsheet 

model, and of all the inputs to the LCC 

and PBP analyses, are contained in 

chapter 8 of the final rule TSD and its 

appendices. 

TABLE IV.7—SUMMARY OF INPUTS AND METHODS FOR THE LCC AND PBP ANALYSIS * 

Inputs Source/method 

Product Cost ........................ Derived by multiplying MPCs by manufacturer, wholesaler, and contractor mark-ups and sales tax, as appropriate. Used historical data to derive a price scaling index to forecast product costs. 

Installation Costs .................. Baseline installation cost determined with data from 2022 RS Means. Assumed variation in cost with efficiency 

level. 

Annual Energy Use .............. Total annual energy use based on the annual heating load, derived from the building samples. Electricity consumption based on field energy use data. 

Variability: Based on the RECS 2020 and CBECS 2018. 

Energy Prices ....................... Natural Gas: Based on EIA’s Natural Gas Navigator data for 2022 and RECS 2020 and CBECS 2018 billing data. 

Propane: Based on EIA’s State Energy Data System (‘‘SEDS’’) for 2021. 

Electricity: Based on EIA’s Form 861 data for 2022 and RECS 2020 and CBECS 2018 billing data. 

Variability: State energy prices determined for residential and commercial applications. 

Marginal prices used for natural gas, propane, and electricity prices. 

Energy Price Trends ............ Based on AEO2023 price projections. 

Repair and Maintenance 

Costs.

Based on 2023 RS Means data and other sources. Assumed variation in cost by efficiency. 

Product Lifetime ................... Based on shipments data, multi-year RECS, American Housing Survey, American Home Comfort Survey data. 

Mean lifetime of 21.5 years. 

Discount Rates ..................... Residential: approach involves identifying all possible debt or asset classes that might be used to purchase the 

considered appliances, or might be affected indirectly. Primary data source was the Federal Reserve Board’s 

Survey of Consumer Finances. 

Commercial: Calculated as the weighted average cost of capital for businesses purchasing NWGFs. Primary data 

source was Damodaran Online. 

Compliance Date .................. 2029. 

* Note: References for the data sources mentioned in this table are provided in the sections following the table or in chapter 8 of the final rule 

TSD. 

A number of commenters expressed 

opposition to the proposed rule based 

on the LCC and PBP results. AGA et al. 

stated that under DOE’s proposal in the 

July 2022 NOPR, approximately 40 

percent of NWGFs would be eliminated 

from the market, and consumers would 

have to either upgrade existing venting 

systems or switch to an electric furnace, 

which the commenters say will have 

higher operating costs and require 

upgrades to home or business electrical 

systems. (AGA et al., No. 391 at p. 1) 

AGA et al. also stated that consumers, 

where it is economically appropriate for 

new homes or renovations, are already 

installing condensing furnaces and 

other high-efficiency units throughout 

the United States, and these 

commenters suggested that this high 

level of voluntary adoption 

demonstrates that DOE’s proposal is 

‘‘redundant.’’ (AGA et al., No. 391 at p. 

2) 

LANGD and Georgia Gas Authority 

commented that in its current form, the 

proposed standard will negatively 

impact nearly 1 in 6 customers of nonweatherized gas furnaces, including 1 in 

5 senior-only households, 1 in 7 lowincome households, and 1 in 5 small 

business consumers. (LANGD, No. 355 

at p. 1; Georgia Gas Authority, No. 367 

at p. 2) LANGD further stated that there 

are other ways to achieve lower 

emissions, improved energy efficiency, 

and reduced bills than those proposed 

in the NOPR. (LANGD, No. 355 at pp. 

1–2) 

The Coalition commented that the 

added costs associated with a 95- 

percent AFUE unit would be more than 

three times the value of their first-year 

energy savings, adding that some 

homeowners may never recoup the 

added upfront costs. The Coalition 

further commented that these 

calculations can be even more 

complicated in the rental housing 

environment where there can be a 

disconnect between who pays the 

upfront equipment cost and who pays 

the expenses for utilities. (The 

Coalition, No. 378 at pp. 5–6) 

Atmos Energy commented that DOE 

should improve the accuracy of its 

analysis by tailoring its consideration of 

consumer behavior, life-cycle 

evaluations, and costs. Atmos Energy 

further commented that the proposed 

rule uses unsupported and broad 

assumptions that are not reflective of 

actual consumer behavior and 

information. (Atmos Energy, No. 415 at 

p. 5) Atmos Energy also commented that 

the consequences of this proposed rule 

would hit especially hard in their 

service territory. The commenter stated 

that in Louisiana, Mississippi, and 

Texas alone, more than 1.5 million 

households live below 150 percent of 

the Federal poverty line. In addition, 

Atmos Energy stated that Texas 

households that fall between 100 and 

150 percent of the Federal poverty level 

experience an average energy burden 

(i.e., cost of energy as a percentage of 

income) of 8 percent, while Texans 

living below the Federal poverty level 

experience an average energy burden of 

16 percent. In Louisiana and 

Mississippi, Atmos Energy stated that it 

serves 361,000 households that fall 

below the Federal poverty line, 

commenting that these households 

spend approximately $350 more on 

energy each year than the national 

average with an estimated average 

energy burden of 22 percent. (Atmos 

Energy, No. 415 at p. 4) 

Black Hills Energy stated that 

approximately 40 percent of nonweatherized natural gas furnaces 

shipped to customers annually are noncondensing furnaces. The commenter 

stated that the proposed rule would 

eliminate non-condensing furnaces and 

that neither updates to venting for a 

condensing furnaces nor updates to 

electrical systems for an electric 

furnaces are pro-consumer. 

Additionally, Black Hills Energy stated, 

that electric furnaces may have a higher 

operating cost. (Black Hills Energy, No. 

397 at pp. 1–2) Black Hills Energy stated 

that the proposed rule is unnecessary 

because those for whom a condensing 

furnace is beneficial are choosing those 

furnaces, but the option for a noncondensing furnace should not be taken 

away from those for whom a conversion 


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is difficult due to issues of affordability. 

(Black Hills Energy, No. 397 at p. 2) 

Plastics Pipe Institute similarly 

commented that consumers are already 

installing higher-efficiency condensing 

furnaces throughout the country, and, 

therefore, the proposed rule is 

unnecessary. (Plastics Pipe Institute, No. 

404 at p. 2) A. Kessler opposed the 

proposed rule, arguing that a 

condensing furnace is not economically 

justified for some households, such as a 

townhome with a commonly vented 

water heater or a two-story home with 

a poured concrete foundation with brick 

exterior walls. (A. Kessler, No. 331 at 

pp. 2–4) 

In response, DOE acknowledges that 

for certain installations, there are 

significant costs. This is accounted for 

in the full distribution of LCC results, 

including consumers that experience 

net costs, and is part of the evaluation 

of economic justification as discussed in 

section V.C of this document. DOE also 

considered the impacts to low-income 

consumers, as described in sections 

IV.I.1 and V.B.1.b of this document. 

Additionally, DOE acknowledges that 

some consumers are already purchasing 

higher-efficiency condensing furnaces, 

and this market share is accounted for 

in the analysis, resulting in a percentage 

of consumers who are not impacted by 

the amended standard. The 

development of the distribution of 

efficiency in the no-new-standards case 

is discussed in further detail in section 

IV.F.8 of this document. 

AGA stated that DOE should revise its 

analysis to ensure that impacts are not 

inappropriately affected by the 

inclusion of buildings that are designed 

for condensing equipment and for 

which consumers already have 

condensing furnaces. (AGA, No. 405, 

pp. 86–87) 

In response, DOE clarifies that 

consumers who are not impacted by a 

standard in the LCC analysis, because 

they are already purchasing a higherefficiency furnace, do not factor into the 

average LCC savings. The average LCC 

savings only reflect impacted 

consumers. The percentage of 

consumers not impacted by a standard 

is shown separately from the 

percentages of consumers negatively 

impacted and positively impacted under 

the new-standards case in the LCC 

spreadsheet. 

AGA stated that even with some 

sensitivity analysis, establishing 

averages in terms of furnace costs, 

installation costs, annual maintenance 

costs, energy consumption, etc., is not 

appropriate for this type of DOE 

consumer covered product. (AGA, No. 

405 at p. 88) In response, DOE notes the 

commenter is mischaracterizing the 

analysis. DOE uses a distribution of 

installation costs, equipment capacity, 

maintenance cost, and energy 

consumption as part of the LCC analysis 

and does not really on average values 

for these inputs. 

AGA commented that DOE’s 

modeling approach is fundamentally 

flawed, being shaped by random 

numbers producing inconsistent results 

and, in some cases, profoundly different 

economic analyses. (AGA, No. 405 at 

pp. 73–74) In response, DOE notes that 

it has conducted a number of sensitivity 

scenario analyses, all of which vary key 

input parameters, and the results of the 

analyses do not alter DOE’s conclusion 

of economic justification. 

In contrast, other commenters agreed 

with DOE’s analysis that the proposed 

standard level for NWGFs and MHGFs 

is economically justified, based on the 

LCC and PBP results. 

NYSERDA offered that based on their 

analysis of the active models of the six 

major furnace manufacturers identified 

in chapter 3 of the NOPR TSD, a wide 

variety of models would continue to be 

available across a range of input 

capacities if the AFUE level were to be 

set at 96 percent. NYSERDA added that 

at this AFUE level, a broad range of 

residential applications would continue 

to be served, and consumers would not 

suffer from a deficit of market options. 

(NYSERDA, No. 379 at p. 2) NYSERDA 

stated that 30 percent of NWGF models 

would not be compliant if an AFUE 

level were to be set at 96 percent instead 

of 95 percent, but the commenter 

opined that manufacturers would have 

enough time over the five years 

following the initial rule to redesign and 

preserve many of those models. (Id.) 

NYSERDA commented that DOE’s 

update to the standards for the subject 

consumer furnaces would result in 

significant consumer benefits. 

NYSERDA further commented that the 

current LLC analysis, while robust, may 

overstate costs and underestimate 

benefits. (NYSERDA, No. 379 at p. 3) 

More specifically, NYSERDA 

commented that the composite effect of 

low heating energy use, low burner 

operating hours, and short equipment 

lifetime could affect LCC savings 

significantly. (NYSERDA, No. 379 at p. 

5) 

NYSERDA commented that there are 

real-world mitigating factors that are not 

factored into LCC analysis but are 

nonetheless likely to arise. As examples 

of some of these potential factors, the 

commenters pointed to limited 

warranties that do not completely cover 

an early failure, renters being 

responsible for equipment operation 

and building owners being responsible 

for the upfront purchase, future natural 

gas costs that may differ from EIA gas 

forecasts, and consumers opting for an 

alternative heating source to avoid highcost gas furnaces. (NYSERDA, No. 379 

at p. 5) 

Daikin commented that DOE’s 

proposed 95-percent AFUE standard has 

the shortest rebuttable payback period 

of the ELs considered, regardless of the 

standard type considered. (Daikin, No. 

416 at p. 2) On this point, DOE clarifies 

that the 95-percent AFUE level has the 

shortest simple payback period, relative 

to the baseline model and assuming a 

national standard, of the condensing 

ELs considered. 

NPGA commented that no deliberate 

attempts appear to have been made by 

DOE to address consumer choice and 

tradeoffs as recommended in the NAS 

report. (NPGA, No. 395 at p. 13) 

DOE notes that discussion of the 

recommendations of the NAS report 

will be addressed as part of a separate 

notice-and-comment process, and not 

on an individual rulemaking-byrulemaking basis. 

NPGA commented that the Monte 

Carlo analysis as implemented in the 

LCC and PBP analyses do not meet the 

requirements of the Office of 

Management and Budget Circular A–4 

for Regulatory Analysis. (NPGA, No. 395 

at p. 14) The commenter argued that 

DOE does not evaluate variables in the 

simulation for independence and fails to 

use the functionality of the Crystal Ball 

Microsoft Excel add-in to quantify 

relationships among correlated 

variables. (NPGA, No. 395 at p. 15) 

NPGA commented that DOE does not 

implement correlation of any 

distributional inputs, therefore 

presuming that all such inputs are 

independent random variables. NPGA 

asserted that DOE’s approach is not 

reasonable to represent actual 

consumers. NPGA further stated that the 

TSD does not suggest that DOE 

conducted a systematic analysis of 

correlated variables, as would be 

implied by the Circular A–4 guidance. 

(NPGA, No. 395 at p. 15) NPGA listed 

the following input variable pairs as 

likely correlated distributional input 

variables affecting LCC savings: furnace 

maintenance failure year and repair 

cost, furnace lifetime and EL design 

complexity, and EL design complexity 

and repair cost. (NPGA, No. 395 at pp. 

15–16) 

In response, DOE notes that multiple 

variables are correlated in the analysis. 

For example, installation costs depend 

on installation location and other 

housing characteristics. There is also a 

relationship between design options, 


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lifetime, and maintenance and repair 

costs. As discussed in chapter 8 and 

appendix 8F of the final rule TSD, 

repair costs do vary by failure year, and 

this is captured in the analysis. 

Annualized maintenance and repair 

costs also differ between noncondensing and condensing furnace. For 

other variables, DOE does not have 

enough information regarding any 

correlation. See appendix 8B for a 

description of the correlated variables. 

Thus, NPGA’s assertion that DOE does 

not implement correlation of variables is 

incorrect. 

NPGA commented that the NOPR 

does not provide evidence to suggest the 

use of the techniques in Circular A–4 for 

developing expert judgment estimates. 

(NPGA, No. 395 at p. 16) 

NPGA commented that DOE 

frequently mixes the objectives of 

modeling input diversity and 

uncertainty within a single distribution. 

(NPGA, No. 395 at p. 16) In response, 

DOE notes that this mischaracterizes the 

analysis. DOE uses probability 

distributions for a number of input 

variables that are reasonably expected to 

exhibit natural variation and diversity 

in practice (e.g., lifetime, repair cost, 

installation costs). These probability 

distributions are modeling diversity. In 

contrast, DOE addresses input 

uncertainty primarily with the use of 

sensitivity scenarios. To determine 

whether the conclusions of the analysis 

are robust, DOE performed several 

sensitivity scenarios with more extreme 

versions of these input variables 

(including high/low economic growth 

and energy price scenarios, alternative 

price trend scenarios, alternative mean 

lifetime scenarios, alternative product 

switching scenarios, an alternative 

venting technology scenario, and 

scenarios with different Monte Carlo 

sampling). The relative comparison of 

potential standard levels in the analysis 

remains the same throughout these 

sensitivity scenarios, confirming that 

the conclusion of economic justification 

is robust despite some input 

uncertainty. 

NPGA stated that DOE does not 

employ Oracle guidance in 

implementing the Crystal Ball software 

in the analysis. (NPGA, No. 395 at p. 16) 

According to NPGA, DOE only provides 

rudimentary flow diagrams of its Crystal 

Ball LCC savings and payback 

spreadsheet. (NPGA, No. 395 at p. 17) 

NPGA stated that DOE also does not 

provide a record on how it arrived at 

model design or how alternative model 

designs were considered. (NPGA, No. 

395 at p. 17) In response, DOE clarifies 

that the use of Crystal Ball is to generate 

the sequence of random numbers 

necessary to build the 10,000 samples 

utilized in the LCC analysis. All other 

calculations are contained in the LCC 

spreadsheet, which has been extensively 

documented and discussed at length 

with interested parties through various 

iterations of notice-and-comment, as 

well as informal workshops. Every 

calculation dependent on a random 

value is outlined in the LCC 

spreadsheet, including all the 

probability distributions relevant to the 

calculation. The LCC spreadsheet 

includes flow diagrams of all 

worksheets and outlines the 

dependencies of all calculations. 

NPGA stated that DOE does not assess 

validity in terms of reasonableness or 

validity of ‘‘outlier’’ consumer cases. 

(NPGA, No. 395 at p. 18) NPGA further 

commented that DOE does not apply 

manufacturer and consumer outcome 

data or implement methods or proxy 

calculations for validating its LCC and 

PBP calculations. (NPGA, No. 395 at p. 

18) NPGA stated that DOE failed to 

analyze key options for modeling and 

data inputs. (NPGA, No. 395 at p. 18) 

NPGA stated that DOE’s current process 

for supporting its LCC savings and 

payback analysis discounts the potential 

value of subject matter experts 

participating in the design, 

implementation, testing, and validation 

of its LCC savings and payback 

calculations. (NPGA, No. 395 at p. 18) 

DOE has requested, repeatedly, data 

and input from interested parties and 

has incorporated many such pieces of 

information and data into its analysis. 

When such data are provided, they are 

incorporated into the analysis to the 

maximum extent possible. DOE does not 

discount the value of commenters’ 

expert judgement, but DOE also relies 

on concrete data whenever possible to 

inform the analysis. With respect to 

outlier results, DOE notes that the full 

distribution of results, including median 

results, are available in the LCC 

spreadsheet. 

NPGA recommended that DOE should 

test extreme conditions and compare the 

model to any similar models. (NPGA, 

No. 395 at pp. 18–19) NPGA added that 

stakeholders have offered to provide 

calculations based on simpler 

approaches. (NPGA, No. 395 at p. 19) In 

response, DOE’s development of the 

LCC model is based on many prior 

comments over the years recommending 

the inclusion of various effects and 

other considerations. The increasing 

complexity of the model is due, in part, 

to DOE’s responsiveness to these prior 

comments from previous notices. 

Additionally, DOE considers the 

distribution of potential impacts across 

a range of conditions, which is why 

many input variables are characterized 

by probability distributions (whenever 

possible) and the LCC analyzes a sample 

of 10,000 households. 

AGPA asserted that DOE fails to deal 

with outlier data points in a reasonable 

manner. According to the commenter, 

extreme values should be eliminated 

from an analysis, but DOE has failed to 

make such an adjustment. (APGA, No. 

387 at p. 17) 

AHRI stated that DOE should utilize 

median values (as opposed to mean 

values) for future LCC analyses, stating 

that this method will remove the 

impacts of outlier buildings. However, 

AHRI acknowledged that switching 

from mean to median leaves DOE’s 

conclusions for this rulemaking 

essentially unchanged. (AHRI, No. 414– 

2 at pp. 3–4) 

In response, DOE provides a full range 

of statistics in the LCC spreadsheet, 

including median values and results at 

various percentiles. DOE also provides a 

distribution of impacts, including 

consumers with a net benefit, net cost, 

and not impacted by the rule. DOE 

further notes that the evaluation of 

economic justification would be the 

same using either average or median 

LCC savings. Therefore, individual LCC 

results at the ends of the distribution are 

not distorting DOE’s evaluation. 

The Marley Companies claimed that 

DOE recognizes there is uncertainty in 

the model, but only accounts for 

uncertainty in some parts of the model, 

thereby discrediting the variation in the 

information used to perform 

calculations. The commenter further 

claimed that DOE fails to use 

documented variation in both the RECS 

and CBECS data sets and uses 

‘‘representative capacities’’ in product 

categories instead of the welldocumented range of input capacities in 

each product category. (The Marley 

Companies, No. 386 at p. 2) 

The Marley Companies further 

asserted that any life-cycle cost 

modeling must, at a minimum, include 

the variation in the CBECS and RECS 

data sets, consistently relate all 

references to the specific geographic 

information of the home or building 

modeled, and utilize both the variation 

and average of the energy usage 

identified in the national energy surveys 

noted in the 2015 RECS comparison 

with other studies. The commenter 

asserted that DOE must provide the 

impact to the results using different 

sources of information than RECS and 

CBECS, as well as provide realistic 

modeling by accounting for documented 

uncertainties and variation in the inputs 

to the analysis. (The Marley Companies, 

No. 386 at pp. 3–5) 


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APGA claimed that DOE’s analysis 

does not merely fail to address 

uncertainty in many cases in which 

uncertainty is known to exist; there are 

key cases in which DOE’s model uses a 

single parameter input (as opposed to a 

distribution of inputs) and, thus, fails to 

address both the known variability of 

that input and any uncertainty as to 

what the range and distribution of that 

input should be. (APGA. No. 387 at p. 

12) 

In response, DOE acknowledges that 

the summary statistics published by 

RECS and CBECS include documented 

statistical uncertainties; however, DOE’s 

analysis uses the individual household 

microdata directly. These are survey 

responses from individual households. 

Accordingly, the standard errors 

published for RECS and CBECS do not 

directly apply. The average LCC savings, 

based on these microdata, include a full 

distribution of results, as presented in 

chapter 8 of the final rule TSD and the 

LCC spreadsheet. These results are 

based on a similar averaging and 

sampling weights as in the RECS and 

CBECS summary statistics. The LCC 

results at several different percentiles 

are available. 

DOE further notes that there will 

always be natural variation in RECS and 

CBECS editions because they are 

snapshots in time, and many aspects of 

energy consumption change with time. 

It is normal and expected for RECS and 

CBECS results to change with each 

edition, and DOE utilizes the most 

recent data set whenever possible so as 

to be as representative as possible. RECS 

and CBECS remain, by far, the most 

comprehensive and statistically 

representative surveys of energy 

consumption in residential and 

commercial buildings available for the 

U.S., and the commenters have failed to 

provide any alternative data sources that 

are of comparable quality. RECS and 

CBECS are the highest quality data 

sources available to DOE. DOE does 

correlate a number of inputs to 

individual building characteristics from 

RECS and CBECS as part of its energy 

use analysis, including heating load, 

building shell indices, installation costs, 

and no-new-standards case efficiency 

probability. 

DOE develops probabilities for as 

many inputs to the LCC analysis as 

possible, to reflect the distribution of 

impacts as comprehensively as possible. 

For example, DOE develops 

probabilities for building sampling, 

installation costs, lifetime, discount 

rate, and efficiency distribution, among 

other inputs. If there are insufficient 

data with respect to a specific input 

parameter to create a robust probability 

distribution, DOE will utilize a single 

input parameter. Such approach is 

neither arbitrary nor capricious; it is 

informed by the available data. 

Finally, DOE developed a number of 

sensitivity scenarios for the NOPR and 

this final rule to specifically address the 

potential uncertainty in some key input 

parameters, as raised in prior comments. 

DOE has been responsive to these 

comments and has provided a wealth of 

additional sensitivity scenarios to 

demonstrate that its conclusions of 

economic justification are robust. 

NPGA commented that representation 

in variability and uncertainty is not 

fully considered by DOE around 

installation costs of propane furnaces in 

replacement applications that require 

venting changes. (NPGA, No. 395 at p. 

14) 

Atmos Energy commented that DOE 

should more accurately and justifiably 

consider the variability and uncertainty 

around installation costs of natural gas 

furnaces, adding that this is particularly 

important in furnace replacement 

applications requiring a shift in venting 

systems from atmospheric to power 

venting. The commenter added that the 

consequences of required venting 

changes to other appliances should also 

be more accurately and justifiably 

considered. Atmos Energy also stated 

that this suggestion would be consistent 

with National Academy of Science peer 

review report’s recommendation. 

(Atmos Energy, No. 415 at p. 6) 

In response, DOE notes that its 

installation cost estimates do include a 

number of input parameters 

characterized by probability 

distributions, including for propane 

furnaces. DOE further emphasizes that a 

significant number of factors are 

considered in replacement applications, 

as discussed in section IV.F.2 of this 

document. DOE has been responsive to 

prior comments and has enhanced the 

installation cost estimates, including the 

installation of new venting, a number of 

times based on these comments. 

Southwest Gas Corporation 

commented that for the vast majority of 

Southwest customers who reside in a 

hot/dry climate, where the forced air 

system is used primarily for cooling, the 

payback period is estimated to range 20 

to 23 years, beyond the useful life of the 

furnace of 18 years. (Southwest, No. 353 

at p. 1) 

MHI commented that consumers in 

southern climates will be 

disproportionately impacted by the 

proposed standards for MHGFs. MHI 

argued that, in places where heating 

requirements are minimal, highefficiency furnaces make little economic 

sense, with longer payback periods. The 

commenter further asserted that 

southern consumers would likely move 

away from the gas furnace market, 

thereby shrinking the market and 

creating more challenges for 

manufactured homeowners who often 

rely on gas heating. (MHI, No. 365 at p. 

4) 

Georgia Gas Authority argued that 

consumers in Southern States, like 

Georgia, Florida, Alabama, and Texas, 

require much less home heating, making 

higher efficiency gas furnaces 

uneconomical. (Georgia Gas Authority, 

No. 367 at p. 3) 

NGA argued that DOE’s model 

understates the number of customers 

negatively impacted by the standard. 

(NGA of Georgia, No. 380 at p. 2) NGA 

stated that with the majority of 

Georgians receiving negative or neutral 

payback from this standard, it believes 

that DOE has violated factor (ii) of 42 

U.S.C. 6295(o)(2)(B). (Id.) 

HARDI commented that the payback 

period determined by DOE does not 

hold true for Southern States, such that 

the standards should not be updated 

nationwide. However, HARDI also 

commented that it opposes the 

development of regional standards for 

consumer furnaces, as Northern States 

are already trending towards highefficiency products. (HARDI, No. 384 at 

p. 3) 

The Coalition commented that in 

some areas (particularly the South), it 

will take years if not decades for owners 

to recoup the added costs of 95-percent 

AFUE furnaces through long-term 

energy savings, adding that furnaces run 

a maximum of three months a year in 

many southern climates. (The Coalition, 

No. 378 at p. 5) 

ACCA stated that DOE’s analysis 

overlooked regional burdens, especially 

in the Southern U.S. (ACCA, No. 398 at 

p. 3) 

Daikin commented that DOE’s 

payback analysis does not specify the 

impacts on particular regions, 

specifically the South, which has a 

lower heating load and longer payback 

periods. Daikin noted that the analysis 

still shows a national average benefit, 

but that southern areas are likely better 

suited for heat pump applications. 

(Daikin, No. 416 at p. 3) 

AGA commented that the NOPR fails 

to address significant regional 

differences in costs and benefits that 

will disproportionately impact millions 

of Americans. Fuel switching has a 

disproportionate impact on projected 

LCC savings for consumers in the South. 

(AGA, No. 405 at pp. 81–82) 

In response, DOE notes that the 

analysis considers all households, 

including households in the Southern 


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102 DOE notes that NGA’s comment specifically 

referenced 42 U.S.C. 6295(o)(2)(B)(ii), which 

pertains to the U.S. Attorney General’s obligation to 

determine, in writing, whether a proposed energy 

conservation standard would result in a lessening 

of competition in the relevant market. Because 

NGA’s comment focuses on consumer impacts, DOE 

has concluded that the statutory provision in the 

comment was cited in error, but instead, DOE 

presumes that NGA intended to cite 42 U.S.C. 

6295(o)(2)(B)(i)(II), the provision related to 

consumer impacts. DOE has responded to that 

comment accordingly. DOE further notes that the 

U.S. Department of Justice did conduct the requisite 

anti-competitive review for this rulemaking 

pursuant to 42 U.S.C. 6295(o)(2)(B)(ii), as discussed 

in section III.F.1.e of this document. 

U.S. This analysis allows DOE to meet 

its statutory obligation under EPCA 

when determining the economic 

justification of a potential standard to 

assess the savings in operating costs 

throughout the estimated average life of 

the covered product in the type (or 

class) compared to any increase in the 

price of, or in the initial charges for, or 

maintenance expenses of, the covered 

product which are likely to result from 

a new or amended standard. (42 U.S.C. 

6295(o)(2)(B)(i)(II)) DOE acknowledges 

that the impact of amended energy 

conservation standards for the subject 

furnaces on consumers, including the 

payback period, can vary from 

household to household and in different 

regions of the country. Some consumers 

may experience a net benefit and some 

may experience a net cost. This 

distribution of impacts is accounted for 

in the analysis and is part of the LCC 

results. DOE further acknowledges that 

some percentage of consumers will 

experience a net cost in the newamended-standards case when weighing 

costs and benefits as part of its 

evaluation of economic justification, as 

discussed in further detail in section 

V.C of this document. The full range of 

statistics, including simple payback 

period, is available in the LCC 

spreadsheet (specifically in the 

‘‘Statistics’’ and ‘‘Forecast Cells’’ 

worksheets). The LCC results are also 

presented by region in chapter 8 of the 

final rule TSD. 

DOE finds without merit NGA’s 

argument that because some percentage 

of consumers at either a national or 

regional level would experience a net 

LCC cost or an extended payback 

period, the Department has violated its 

obligations under 42 U.S.C. 

6295(o)(2)(B)(i)(II).102 The statute directs 

DOE to consider economic justification 

of a potential standard by determining 

whether its benefits exceed its burdens, 

by, to the greatest extent practicable, 

considering seven enumerated factors 

(see 42 U.S.C. 6295(o)(2)(B)(i)(I)–(VII)). 

Consumer impacts are just one of the 

factors DOE must weigh when 

considering a potential standard. 

Furthermore, DOE assesses impacts of 

potential standards at a national level, 

so impacts at a State or regional level 

will not automatically trigger a 

determination that a potential standard 

lacks economic justification in the 

manner NGA suggests. 

Under EPCA, DOE may consider 

adopting an additional, regional 

standard for consumer furnaces that is 

more stringent than the national 

standard. (42 U.S.C. 6295(o)(6)(B)(ii)) In 

order to establish a regional standard, 

DOE would have to, among other things, 

determine that a regional standard 

would save significant additional energy 

as compared to a single, base national 

standard and be economically justified. 

(42 U.S.C. 6295(o)(6)(D)). DOE did 

consider a regional standard in one of 

its TSLs (TSL 4), but as explained in 

section V.C of this document, DOE has 

found that a national standard for both 

NWGFs and MHGFs corresponding to 

95-percent AFUE (i.e., TSL 8) represents 

the maximum improvement in energy 

efficiency that is technologically 

feasible and economically justified. (42 

U.S.C. 6295(o)(2)(A)). DOE did not 

consider adopting a more stringent, 

regional standard in addition to the base 

national standard of 95-percent AFUE. 

NPGA stated that DOE’s LCC analysis 

and proposed minimum efficiency rule 

failed to include a separate breakout of 

category I non-weatherized residential 

propane furnaces from the currently 

grouped analysis of efficiency levels 

(EL) for categories I, III, and IV. (NPGA, 

No. 395 at p. 21) NPGA stated that the 

proposal would deprive consumers of 

the utility of simple, lower-cost furnace 

replacements. NPGA added that 

replacement may not always be easily 

accomplished due to housing structural 

design and may compromise consumer 

safety. (Id.) 

As discussed in sections II.B.2 and 

IV.A.1.c of this document, DOE 

published a final interpretive rule in the 

Federal Register on December 29, 2021, 

returning to DOE’s long-standing 

interpretation (from which the January 

2021 Final Interpretive Rule departed). 

86 FR 73947. Accordingly, for purposes 

of the analyses conducted for this final 

rule, DOE did not analyze separate 

equipment classes for non-condensing 

and condensing furnaces nor for 

separate categories of venting. However, 

the costs and requirements associated 

with different venting categories are 

included in DOE’s analysis, and any 

changes in venting in the new-amendedstandards case are included in the LCC 

impacts. 

PHCC commented that Tables V.5 and 

V.6 of the NOPR should consider 

consumers who have existing highefficiency products and replace them 

with new high-efficiency products. 

(PHCC, No. 403 at p. 6) 

In response, DOE clarifies that the 

average LCC savings and percentage of 

consumers with a net cost, as presented 

in Table V.6 of the NOPR, does include 

consumers who replace an existing 

high-efficiency product with a new 

high-efficiency product. Those 

consumers are not impacted by the 

standard. Table V.5 presents results for 

each TSL assuming that all consumers 

use products at that efficiency level. The 

approach in Table V.5 is done for the 

purposes of presenting typical average 

costs at each efficiency level for an 

average household, whereas Table V.6 

incorporates distributional impacts and 

the existing market share of consumers 

already utilizing higher-efficiency 

equipment. 

AGA argued that the LCC model’s cost 

savings relies on unreasonable and 

unsupported assumptions about what 

share of the market non-condensing 

furnaces would hold without the 

proposed rule’s requirements. (AGA, 

No. 405 at p. 91) 

In response, DOE’s estimated market 

share of condensing and noncondensing furnaces in the LCC is based 

on historical shipment data provided by 

industry stakeholders or market 

research firms. DOE includes an 

increasing penetration of condensing 

furnaces in the no-new-standards case, 

based on recent trends. DOE disagrees 

with AGA’s assertion that utilizing such 

industry data in the LCC analysis is 

unreasonable or unsupported. 

NPGA stated that DOE’s economic 

analysis fails to take into account 

additional costs and circumstances 

specifically related to propane. (NPGA, 

No. 395 at p. 2) More specifically, NPGA 

argued that DOE did not directly 

calculate the specific costs and benefits 

to propane consumers from its proposed 

minimum efficiency standards. (NPGA, 

No. 395 at p. 23) NPGA commented that 

by aggregating consumer costs and 

benefits of all gas furnaces, the analysis 

is biased by the natural gas consumer 

market share. NPGA stated that the 

analysis does not account for the large 

presence of consumer propane market 

households in rural areas. (Id.) NPGA 

added that DOE did not account for the 

unique costs related to fuel switching 

from propane to electric space heating. 

(Id.) NPGA stated that the lack of 

representation of propane customers in 

the simulation results is a fundamental 

problem, noting that eleven States and 

the District of Columbia had no propane 

customers in the LCC. (Id. at p. 24) 


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103U.S. Department of Labor, Bureau of Labor 

Statistics, Produce Price Indices Series ID 

PCU333415333415C (available at: www.bls.gov/ppi/) 

(last accessed August 1, 2023). 

In response, DOE notes that the 

analysis takes into account the energy 

price for propane and uses a 

representative building sample of homes 

using a NWGF with propane based on 

RECS 2020 for the residential sample 

and CBECS 2018 for the commercial 

sample. RECS and CBECS, while 

representative, have an upper limit on 

the number of households and buildings 

that were surveyed. The eleven States 

identified by the commenter and DC 

comprise a very small fraction of the 

national population, and natural survey 

sampling can produce the results seen 

in the LCC. DOE notes that the national 

fraction of propane customers for 

NWGFs and MHGFs is appropriately 

accounted for in the analysis, even if 

some low-population States are undersampled by RECS and CBECS. This does 

not invalidate the conclusions of the 

analysis. For installation costs, DOE 

used the latest information available in 

terms of piping and propane tank 

requirements. For this final rule, 

updated the energy prices using the 

latest EIA data and AEO2023 energy 

price trends. In addition, DOE used the 

latest RECS 2020 and CBECS 2018 

samples. In terms of installation costs, 

DOE updated its propane-related 

installation costs as highlighted in 

chapter 8 and appendices 8D and 8J of 

the final rule TSD. 

Lennox commented that they found 

that DOE has taken the necessary steps 

to improve the analysis of amended 

AFUE standards for consumer furnaces 

under EPCA but recommended that 

DOE should further assess the economic 

justification of these standards while 

minimizing negative consumer impacts. 

(Lennox, No. 389 at p. 2) In response, 

DOE has continued to refine its analysis 

and updated using the latest data, as 

described in this document and in the 

final rule TSD. 

Atmos Energy commented that DOE 

should account for the savings among 

the choices of a baseline natural gas 

furnace against the proposed TSLs or 

the savings that could accrue from 

continuing to own a baseline product 

versus purchasing TSL efficiency 

products. Atmos Energy added that 

these savings are crucial for estimating 

the benefits of appliance replacement 

programs, adding that such savings 

analyses will better illuminate potential 

consumer impacts. (Atmos Energy, No. 

415 at p. 6) In response, DOE notes that 

it does estimate the impacts of 

purchasing higher-efficiency furnaces 

against the impacts of replacing existing 

furnace efficiencies that would have 

been purchased in the absence of a new 

energy conservation standard. This is 

already captured in the LCC analysis, 

and indeed, some percentage of 

consumers would accrue economic 

savings from continuing to own, or from 

buying as a replacement, a lowerefficiency furnace, as compared to a 

furnace at the adopted standard level. 

This is reflected in the percentage of 

consumers experiencing a net cost, as 

presented in section V.B of this 

document, and it is considered as part 

of DOE’s evaluation of economic 

justification. 

Atmos Energy commented that DOE 

should separately assess natural gas and 

propane when calculating LCC, adding 

that the LCC of the proposed rule would 

be more accurate if natural gas and 

propane products were evaluated 

separately. (Atmos Energy, No. 415 at p. 

7) Atmos Energy further commented 

that propane is more costly than natural 

gas, stating that aggregating these two 

products introduces an unsupported 

bias against natural gas into the 

consumer LCC savings and payback 

analysis and skews the outcome of the 

comparative cost of fuel-switching. 

(Atmos Energy, No. 415 at p. 7) In 

response, DOE accounts for both 

propane and natural gas consumers of 

furnaces in its analysis. However, since 

a potential standard is established at the 

product class level, the LCC results are 

aggregated up to this level. 

PHCC commented that that the 

calculations regarding the annual 

benefit for DOE’s proposed standby 

mode and off mode standards for 

NWGFs and MHGFs are unclear, as 

estimates show a $26 annual benefit 

(with a two-year payback period) in 

some places and a $2.60 annual benefit 

(with a two-year payback period) in 

others. PHCC claimed that their 

calculations related to the annual 

benefit of the proposed standby mode 

and off mode standards yielded $3.29 

(assuming 2.5 kw, 24 hours a day, 365 

days a year, and 15 cents per kWh). 

(PHCC, No. 403 at p. 3) 

Similarly, Daikin commented that the 

anticipated energy savings associated 

with standby mode and off mode are 

very small, adding that the incremental 

annual savings between TSL 1 ($1.44/ 

yr.) and TSL 3 ($2.40/yr.) would equate 

to only $0.96. Daikin further stated that 

DOE’s analysis overstates the annual 

electricity consumption of auxiliary 

components by using 6680 hours for 

standby mode operation and 73.48 kWh 

of energy per year, which does not 

include weighting for two-stage 

products with fewer operating hours. 

(Daikin, No. 416 at p. 5) 

As discussed previously in section 

III.A.8 of this document, DOE is not 

finalizing its previous proposal to set 

new standby mode and off mode power 

standards for NWGFs and MHGFs in 

this final rule. However, DOE will 

continue to monitor the standby mode 

and off mode power consumption of 

consumer furnaces and may address 

such standards in a future rulemaking. 

The Department may consider these 

comments at that time, as appropriate. 

1. Product Cost 

To calculate consumer product costs, 

DOE multiplied the MPCs developed in 

the engineering analysis by the markups 

described previously (along with sales 

taxes). DOE used different markups for 

baseline products and higher-efficiency 

products because DOE applies an 

incremental markup to the increase in 

MSP associated with higher-efficiency 

products. 

For the default price trend for 

residential furnaces, DOE derived an 

experience rate based on an analysis of 

long-term historical data. As a proxy for 

manufacturer price, DOE used Producer 

Price Index (PPI) data for warm-air 

furnace equipment from the Bureau of 

Labor Statistics from 1990 through 

2022.103 An inflation-adjusted PPI was 

calculated using the implicit price 

deflators for gross domestic product 

(GDP) for the same years. To calculate 

an experience rate, DOE performed a 

least-squares power-law fit on the 

inflation-adjusted PPI versus cumulative 

shipments of residential furnaces, based 

on a corresponding series for total 

shipments of residential furnaces (see 

section IV.G of this document for 

discussion of shipments data). Using the 

most recent data available, DOE fitted a 

power-law function to the deflated 

warm air furnace PPI and cumulative 

furnace shipments time series data 

between 1990 and 2018. The resulting 

power-law model has an R-square of 84 

percent, indicating that the model 

explains 84 percent of the variability of 

the observations around the mean. DOE 

then derived a price factor index, with 

the price in 2022 equal to 1, to forecast 

prices in 2029 for the LCC and PBP 

analyses, and, for the NIA, for each 

subsequent year through 2058. The 

index value in each year is a function 

of the experience rate and the 

cumulative production through that 

year. To derive the latter, DOE 

combined the historical shipments data 

with projected shipments in the nonew-standards case determined for the 

NIA (see section IV.H of this document). 

DOE’s learning curve methodology 

was developed by examining the 


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87558 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

104Taylor, M. and K.S. Fujita, Accounting for 

Technological Change in Regulatory Impact 

Analyses: The Learning Curve Technique, Lawrence 

Berkeley National Laboratory, Report No. LBNL– 

6195E (2013). (Available at: etapublications.lbl.gov/sites/default/files/lbnl-6195e_

.pdf) (Last accessed August 1, 2023). 

literature on accounting for 

technological change and empirical 

studies of energy technology learning 

rates.104 DOE utilized the most 

extensive time series data available 

specific to residential furnaces. 

Furnace prices can be affected by a 

variety of factors, and the cost of 

commodity materials is one of them. 

The nominal commodity PPI data for 

copper wire and cable, iron and steel, 

and aluminum wire and cable indicate 

that the nominal indices rose 

substantially between the early 2000s 

and 2011, which is primarily attributed 

to an increasing demand for such 

commodities from rapid 

industrialization in China, India, and 

other emerging economies. During the 

same period, the nominal warm air 

furnace PPI increased by 16 percent. 

However, these commodity indices have 

trended downward from 2011–2020, 

and the nominal warm air furnace PPI 

has steadily trended upward during this 

period. Based on these observations, 

DOE contends that even though the 

warm air furnace PPI, to a certain 

extent, is influenced by commodity 

indices, other factors impact furnace 

prices. In addition, due to the long-term 

nature of DOE’s analysis, it would be 

inappropriate to make assumptions 

based on recent, short-term trends only. 

The learning curve methodology 

implemented in this rule is based on 

sound economic theory, empirical 

evidence, and historical data. Based on 

the historical PPI data, the cost of 

commodity materials can only partially 

explain the furnace price trend, 

particularly when considering the 

recent trend observed in commodity and 

furnace price indices. The experience 

curve model that DOE developed, using 

the most recent data available, shows 

strong explanatory power and high 

statistical significance. 

DOE acknowledges that the prices of 

non-condensing and condensing 

furnaces may not change at the same 

rate and that using a trend for all 

NWGFs and MHGFs to represent the 

price trend of condensing furnaces may 

underestimate the future changes in the 

cost of condensing furnaces. DOE also 

acknowledges that an increase in 

production and innovation due to a 

condensing standard could result in a 

decline in the cost of condensing 

furnaces. However, DOE could not find 

detailed data that would allow for a 

price trend projection for condensing 

NWGFs and MHGFs that may differ 

from non-condensing NWGFs and 

MHGFs. Thus, for this final rule, DOE 

used the same price trend projection for 

condensing and non-condensing 

NWGFs and MHGFs. 

NYSERDA recommended that DOE 

also should consider furnace shipments 

to Canada when estimating learning 

rates for condensing furnaces, since the 

vast majority of condensing furnaces 

sold in Canada are the same models sold 

in the U.S. NYSERDA further urged 

DOE to consider how the recent 

Canadian furnace standard may impact 

the North American furnace market so 

as to result in additional price learning 

and less costly condensing equipment 

for consumers in U.S. and Canada. 

(NYSERDA, No. 379 at p. 9) However, 

NYSERDA expect that DOE’s 4.3 

percent and 7.1 percent price learning 

rates are more conservative than what 

would take place in the real world once 

an amended standard were to take 

effect. (Id.) 

NYSERDA also commented that the 

Heating, Refrigeration and Air 

Conditioning Institute (HRAI) of Canada 

reported that over 845,000 residential 

furnaces were shipped to Canada 

between 2020 and the first quarter of 

2022. The commenter added that nearly 

400,000 condensing furnaces are now 

being shipped into Canada annually, 

stating that the value is approximately 

12 percent of annual U.S. furnace 

shipments. NYSERDA further 

commented that the Canadian 

condensing furnace market is 

increasing, with approximately 8.5 

million Canadian homes currently 

relying on furnaces for heating. 

Furthermore, the commenter stated that 

it has found that the vast majority of 

furnaces sold in Canada are the same 

models sold in the U.S., and, as such, 

NYSERDA concluded that a higher 

learning rate factor should be 

considered in appendix 8C of the TSD. 

(NYSERDA, No. 379 at pp. 9–10) 

In response, DOE notes that if DOE 

included historical furnace shipments to 

Canada when developing learning rates, 

it would also need to include projected 

furnace shipments to Canada during the 

analysis period to project future prices, 

resulting in approximately the same 

price trend as a function of time. 

Furthermore, DOE analyzes sensitivity 

scenarios using alternative price trends, 

including a higher learning rate and a 

constant price trend, in appendix 8C of 

the final rule TSD. Consequently, in 

light of these considerations, DOE has 

decided to retain the same evaluation of 

economic justification for all sensitivity 

scenarios, as was done in the July 2022 

NOPR. 

Joint Efficiency Commenters stated 

that DOE may be overestimating the 

future cost of condensing furnaces by 

not applying a learning rate associated 

with condensing technology. These 

commenters further stated that price 

trends associated with condensing 

technology will likely be different than 

the overall furnace price trends. (Joint 

Efficiency Commenters, No. 381 at p. 4) 

In contrast, Lennox commented that 

price trends are indeed similar for both 

condensing and non-condensing 

consumer furnaces, as Lennox offers 

both technologies with premium 

features. Lennox commented that the 

trends increase the most for premium 

products, and the trends are similar for 

base and mid-level products. (Lennox, 

No. 389 at p. 6) 

As noted previously, DOE was not 

able to disaggregate non-condensing and 

condensing furnaces in developing 

future price trends based on the 

available data. DOE acknowledges the 

input from Lennox supporting the use of 

the same trend for all furnaces. 

Lennox further stated that costs and 

prices for all furnaces have increased 

significantly as a result of the pandemic, 

supply chain issues, and inflationary 

pressures. (Lennox, No. 389 at p. 6) 

Similarly, HARDI commented that 

supply chain and workforce issues since 

the beginning of the pandemic have 

dramatically changed the pricing of 

products, as would change the results of 

DOE’s analysis, which the commenter 

faulted as based on pre-pandemic data. 

(HARDI, No. 384 at p. 3) PHCC 

commented that DOE’s estimated 

equipment costs for gas furnaces are too 

low due to material cost and supply 

chain issues. (PHCC, No. 403 at p. 5) In 

response, DOE notes that its analysis 

adjusts costs and prices using updated 

price indices to reflect the changing 

dollar value, including the broader 

impact of inflation. DOE assumes that 

current supply chain issues will not 

persist out to 2029 and beyond, given 

that such issues are already in the 

process of resolving and current supply 

chains are not as constrained as they 

were during the pandemic. 

JCI pointed to several regulatory and 

market-related cost increases that 

impact mobile homes and mobile home 

HVAC products. As examples, the 

commenter noted the July 2014 furnace 

fan ECS rulemaking that eliminated PSC 

motors, recent inflation as a result of the 

COVID–19 pandemic that 

disproportionately impacted the MHGF 

industry, the January 2017 ECS 

rulemaking for CACs and heat pumps, 

and the IECC Construction Code 


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105RS Means Company Inc., RS Means 

Mechanical Cost Data. Kingston, MA (2023) 

(available at: www.rsmeans.com/products/books/ 

2023-cost-data-books) (last accessed August 1, 

2023). 

106RS Means Company Inc., RS Means 

Residential Repair & Remodeling Cost Data. 

Kingston, MA (2023) (available at: 

www.rsmeans.com/products/books/2023-cost-databooks) (last accessed August 1, 2023). 

107RS Means Company Inc., RS Means Plumbing 

Cost Data. Kingston, MA (2023) (available at: 

www.rsmeans.com/products/books/2023-cost-databooks) (last accessed August 1, 2023). 

108RS Means Company Inc., RS Means Electrical 

Cost Data. Kingston, MA (2023) (available at: 

www.rsmeans.com/products/books/2023-cost-databooks) (last accessed August 1, 2023). 

mandate for manufactured homes. (JCI, 

No. 411 at pp. 1–2) JCI commented that 

the 2021 IECC Construction Code and 

the CAC/HP ECS rulemaking mandate 

will contribute additional cost 

increases, which JCI asserted will have 

the further effect of reducing mobile 

home ownership. (JCI, No. 411 at p. 2) 

MHI also commented that, in May 

2022, DOE finalized an energy rule that 

required manufactured homes to 

comply with the 2021 IECC but not the 

product standards within the 2021 

IECC. (MHI, Public Meeting Webinar 

Transcript, No. 363 at pp. 25–26) MHI 

commented that DOE’s proposed 

furnace standards align with the 2021 

IECC, which the commenter argued did 

not consider homes that are built in a 

factory and transported to the site. (Id.) 

MHI stated that enforcing the IECC 

would require manufacturers to have to 

redesign current manufactured housing 

floor plans. (Id.) 

In response, DOE notes that the 

purported mobile home cost increases, 

unrelated to the furnaces rulemaking, 

will not impact the LCC results. Because 

these costs are already present in the nonew-standards case, there is no 

incremental cost to include in the 

amended standards case. The impact of 

cost increases for rules on manufactured 

homes or other equipment are captured 

as part of the analyses for those separate 

rulemakings. DOE further notes that the 

July 2014 final rule for furnace fans did 

not eliminate PSC motors for furnace 

fans in MHGFs. Finally, DOE reiterates 

that it adjusts costs and prices using 

price indices to reflect the changing 

dollar value, including the broader 

impact of inflation. DOE has also 

evaluated the cost of installing furnaces 

in new manufactured housing 

construction as part of the LCC analysis, 

which in many cases is less expensive 

(as summarized in section IV.F.2.e of 

this document) due to the materials 

required. Given this context, DOE’s 

expectation is that redesign costs are 

likely to be minimal. 

Lennox commented that condensing 

furnace products are mature products 

that constitute the majority of the 

current market. Therefore, Lennox 

recommended that DOE should reassess 

the ‘‘learning curve’’ for these products, 

as the commenter opined that the 

Department is overstating the degree to 

which a ‘‘learning curve’’ could lead to 

significant reduction in MPCs. (Lennox, 

No. 389 at p. 3) NYSERDA commented 

that it expects that the final furnaces 

standard will provide market certainty 

to streamline the manufacturing process 

to only condensing equipment and 

added that this is expected to decrease 

the marginal production costs in the 

medium- to long-run due to economies 

of scale and technological 

improvements. (NYSERDA, No. 379 at 

p. 11) 

Regarding the points involving 

learning curve-related prices declines 

raised by Lennox and NYSERDA, DOE 

notes that it has evaluated several price 

trend scenarios, including a constant 

price scenario, as part of its analysis (see 

appendix 8C of the final rule TSD for 

further details). The conclusions of the 

analysis remain the same regardless of 

the price trend scenario. 

A detailed discussion of DOE’s 

derivation of the experience rate is 

provided in appendix 8C of the final 

rule TSD. 

2. Installation Cost 

The installation cost is the cost to the 

consumer of installing the furnace, in 

addition to the cost of the furnace itself. 

Installation cost includes all labor, 

overhead, and any materials costs 

associated with the replacement of an 

existing furnace or the installation of a 

furnace in a new home, as well as 

delivery of the new furnace, removal of 

the existing furnace, and any applicable 

permit fees. Higher-efficiency furnaces 

may require a consumer to incur 

additional installation costs. DOE’s 

analysis of installation costs estimated 

specific installation costs for each 

sample household based on building 

characteristics given in RECS 2020 

(updated from RECS 2015 in the NOPR). 

For this final rule, DOE used 2023 RS 

Means data for the installation cost 

estimates, including labor 

costs.105 106 107 108 DOE’s analysis of 

installation costs accounted for regional 

differences in labor costs by aggregating 

city-level labor rates from RS Means 

into the 50 distinct States plus 

Washington, DC to match RECS 2020 

and CBECS 2018 data. 

DOE conducted a detailed analysis of 

installation costs for all potential 

installation cases, including when a 

non-condensing gas furnace is replaced 

with a non-condensing gas furnace, and 

when a non-condensing gas furnace is 

replaced with a condensing gas furnace. 

For the latter, particular attention was 

paid to venting issues in replacement 

applications, including adding a new 

flue venting (PVC), combustion air 

venting (PVC), concealing vent pipes, 

addressing an orphaned water heater (by 

updating flue vent connectors, vent 

resizing, or chimney relining), as well as 

condensate removal. DOE also included 

additional installation costs (‘‘adders’’) 

for new construction installations. 

These are described below. 

HARDI commented that increased 

installation costs should be considered 

in this analysis despite DOE’s statement 

that installation and retrofit 

requirements are not to be used in 

determining product utility for a class. 

(HARDI, No. 384 at p. 5) 

In response, DOE notes that a variety 

of installation factors are included in 

the analysis, as described extensively in 

the paragraphs that follow, which 

generally increase the installation cost 

of higher-efficiency furnaces. Even 

though installation costs do not form a 

basis for the development of product 

classes, DOE does include all relevant 

installation costs to estimate the total 

economic impacts on consumers. 

ACCA stated that data from a 2016 

survey of over 700 of ACCA’s members 

showed that installing a condensing 

furnace costs $569 more than installing 

a non-condensing furnace, so the 

commenter concluded that DOE’s cost 

assumptions inadequately reflect the 

true cost to consumers. (ACCA, No. 398 

at p. 2) 

DOE clarifies that in the final rule 

analysis, on average for replacement 

installations, the incremental 

installation cost is $490 for condensing 

NWGFs relative to non-condensing 

NWGFs, while the total installed costs 

for ranges between $654 and $914, 

which is consistent with ACCA’s survey 

results. 

APGA commented that DOE 

understates the cost difference between 

condensing and non-condensing 

furnaces because DOE is not reporting 

real consumer prices. (APGA, No. 387 at 

pp. 50–53) APGA explained that a 

website sponsored by a team of industry 

experts in the HVAC industry report 

that the installed cost of a condensing 

NWGF is three times more than a noncondensing NWGF at the current 

standard: an ‘‘80AFUE, Variable Speed 

Furnace’’ is $1,320 less than a ‘‘95AFUE 

2-Stage, Variable Speed Furnace.’’ (Id.) 

APGA noted that DOE’s LCC model, 

however, provides that the difference in 

the average installed cost of a 

condensing furnace and a noncondensing furnace is only $417. (Id.) 


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109Newer variable-speed motors are designed 

with lower cut-off static pressures to deal with this 

issue. In addition, the installer can easily decrease 

the airflow to address the issue by changing the 

airflow speed control setting (tap) on the furnace 

motor. 

110For further details, see the TSD for the July 

2014 final rule for furnace fans. (Available at: 

www.regulations.gov/document/EERE-2010-BTSTD-0011-0111) (Last accessed August 1, 2023). 

Thus, APGA stated that DOE’s view of 

the additional cost of an installed 

furnace complying with the proposed 

standard is inconsistent with reality. 

(Id.) 

In response, DOE emphasizes that it 

has conducted an extensive engineering 

tear-down cost analysis, as well as a 

manufacturer and distribution channel 

mark-up analysis, to estimate final 

consumer prices. These prices reflect an 

amended-standards scenario in which a 

given efficiency level is the new 

minimally compliant, baseline level. 

These products may not fully 

correspond to products in the market 

today sold and marketed as a 

‘‘premium’’ product, and therefore the 

prices are not necessarily comparable. 

DOE further notes that the vast majority 

of consumer furnaces are sold through 

a distribution channel involving a 

contractor, not via a retail outlet. 

Therefore prices seen on a website are 

unlikely to be representative of typical 

prices ultimately paid for by consumers. 

NPGA commented that merging 

product installed costs with changes in 

building structural elements required 

for a change in venting systems goes 

beyond the scope of minimum 

efficiency standards for a covered 

product as outlined in EPCA. (NPGA, 

No.395 at p. 21) In response, DOE notes 

that the installation cost analysis 

considers all relevant costs associated 

with the installation of furnaces, as 

required by EPCA, in order to estimate 

representative impacts to consumers. 

a. Basic Installation Costs 

DOE’s analysis estimated basic 

installation costs for replacement, new 

owner, and new home applications. 

These costs, which apply to both 

condensing and non-condensing gas 

furnaces, include furnace set-up and 

transportation, gas piping, ductwork, 

electrical hook-up, permit and removal/ 

disposal fees, and, where applicable, 

additional labor hours for an attic 

installation. 

DOE’s installation costs account for 

cases where significant ductwork 

redesign is required, including when 

furnaces with variable-speed motors are 

utilizing undersized ducts. DOE notes 

that this cost is applicable to variablespeed motors installed in either 

condensing or non-condensing furnaces. 

Variable-speed furnace blowers will try 

to maintain the same air flow at high 

static pressure (especially if the 

variable-speed blower is designed with 

a high cut-off or no cut-off static 

pressure),109 which could lead to noise 

issues in smaller ducts due to the 

increased speed of moving the air. 

However, the Federal furnace fan 

standard that took effect in 2019 

requires constant-torque furnace fans 

(with X13 motors) for NWGFs, which 

have similar performance curves as PSC 

motors.110

DOE notes that asbestos presents a 

safety hazard that must be properly 

abated for all retrofit installations where 

it is present. As explained previously, 

DOE recognizes that potential ductwork 

modifications typically occur due to the 

furnace fan requirements and not 

necessarily due to the installation of a 

condensing furnace. DOE included the 

cost of asbestos abatement for a fraction 

of both non-condensing and condensing 

NWGF installations. See appendix 8D of 

the final rule TSD for more details. 

b. Additional Installation Costs for NonWeatherized Gas Furnaces 

For replacement applications, DOE 

included a number of adders for a 

fraction of the sample households. For 

non-condensing gas furnaces, these 

additional costs included updating flue 

vent connectors, vent resizing, and 

chimney relining. For condensing gas 

furnaces, DOE included adders for flue 

venting (PVC), combustion air venting 

(PVC), concealing vent pipes, 

addressing an orphaned water heater (by 

updating flue vent connectors, vent 

resizing, or chimney relining), and 

condensate removal. 

Replacement Installations: NonCondensing to Non-Condensing NonWeatherized Gas Furnace 

For non-condensing non-weatherized 

gas furnace replacements, DOE added 

additional costs to a small fraction of 

installations that involve updating flue 

vent connectors, vent resizing, and 

chimney relining. These costs are most 

commonly applied to older furnace 

installations, such as natural draft 

furnace installations, furnaces not 

installed according to the current codes, 

and furnace installations that do not 

meet manufacturers’ installation 

requirements. In total, these costs for 

vent resizing or chimney relining are 

applied to less than eight percent of 

non-condensing to non-condensing 

furnace replacement installations in 

2029, with an average cost of $990. In 

addition, DOE estimated that 23 percent 

of installations of non-condensing to 

non-condensing furnace replacement 

installations in 2029 would require 

updating flue vent connectors, with an 

average cost of $328. 

Replacement Installations: NonCondensing to Condensing NonWeatherized Gas Furnace 

DOE assumed that condensing 

furnaces that replace non-condensing 

furnaces do not utilize the existing 

venting system, but instead require new, 

dedicated plastic venting that meets all 

applicable building codes and 

manufacturer instructions. In 

determining these installation costs, 

DOE takes into account vent length, 

vent diameter, vent termination, the 

potential need to create openings in 

walls or floors for the vent system, 

additional vent costs for housing units 

with shared walls, vent resizing in the 

case of an orphaned water heater, and 

concealment work cost increases in 

some installations. 

Appendix 8D in the TSD for this final 

rule describes the methodology used to 

determine the installation costs for all of 

the issues described in the paragraphs 

that follow. 

NGA of Georgia stated that because 

furnace replacements will have to 

undergo structural modifications and 

contractors will have to devise custom 

installation plans and procure materials 

after surveying the home, installations 

will take a few days rather than simply 

changing out the unit. Furthermore, the 

commenter stated that the longer 

installations will force homeowners to 

endure cold conditions longer, and to 

risk home damage in the form of 

freezing pipes, and they may be forced 

to endure the expense of a hotel room 

during the installation. NGA of Georgia 

stated that DOE’s analysis did not 

adequately consider these additional 

costs or the environmental impact of 

attempting to heat homes with electric 

room heaters during construction. (NGA 

of Georgia, No. 380 at p. 2) In response, 

DOE notes that its analysis thoroughly 

accounts for any potential vent or ductwork redesign. However, for most 

homes, installation is unlikely to take 

several days, even in the case of 

replacing a non-condensing furnace 

with a condensing furnace. DOE 

acknowledges that some fraction of 

replacements are emergency 

replacements, as described previously, 

with increased labor costs due to the 

emergency nature of the work during 

possibly challenging winter conditions. 

Accordingly, DOE also accounts for the 

cost of temporary space heating during 

the replacement of the furnace. 


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ACCA stated that DOE’s analysis 

overlooked the increased costs and 

extent of venting modifications and 

electrical upgrades necessary for 

condensing furnaces. (ACCA, No. 398 at 

p. 3) 

In response, DOE emphasizes that its 

analysis includes an extensive list of 

factors impacting the installation cost of 

venting, as discussed in this section and 

in chapter 8 of the final rule TSD. 

Several of these factors were previously 

suggested by commenters and 

incorporated into the analysis. ACCA 

did not provide any further details on 

additional venting modifications that 

should have been considered. With 

respect to electrical upgrades, those are 

accounted for in the analysis, including 

the potential requirement to upgrade the 

electrical panel. 

AGA asserted that the imposition of 

standards that non-condensing products 

cannot achieve would raise significant 

practical, economic, and legal issues. 

Furthermore, AGA claimed that the 

economic analysis in the NOPR fails to 

properly account for the necessary 

engineering relative to venting 

consumer furnaces or common venting 

of multiple appliances, including 

consumer water heaters. According to 

the commenter, the modifications 

required to alter existing buildings to 

accommodate the use of condensing 

products are far more complicated, 

extensive, and burdensome than the 

NOPR assumes. (AGA, No. 405 at p. 39) 

In response, DOE has already 

included a variety of factors in its 

installation cost estimates, including 

costs related to updating flue venting, 

accommodating the venting of multiple 

appliances such as water heaters, and 

any necessary building modifications to 

accommodate new venting outlets. The 

commenter has not provided any 

additional, specific factors for DOE to 

consider, other than to assert that DOE’s 

estimates are incorrect. Furthermore, the 

experience of replacing non-condensing 

furnaces with condensing furnaces in 

several jurisdictions (e.g., Canada) has 

shown that such installations can be 

achieved without excessively 

burdensome or costly modifications. 

AGA argued that DOE has potentially 

overestimated the cost of venting for 

non-condensing furnaces. The 

commenter claimed that DOE’s method 

for calculating labor overestimates time 

spent on tasks because it includes an 

average unit of type for each individual 

part instead of acknowledging that tasks 

can be completed concurrently. (AGA, 

No. 405 at pp. 88–89) 

On this topic, DOE clarifies that for 

non-condensing furnaces, there are 

several potential scenarios. In a 

replacement scenario, if the existing 

venting is in good condition, no 

additional installation costs are 

required, and the venting system can be 

used as-is. Costs for installing venting 

for non-condensing furnaces are only 

applicable if the existing venting has 

reached the end of its lifetime (in older 

homes), based on the estimated 

equipment age derived from RECS data 

and historical shipments, or in new 

construction. Therefore, DOE’s 

estimated costs for installing venting for 

non-condensing furnaces are not 

necessarily applicable in all situations. 

Regarding labor cost estimates, these are 

based on data from industry reference 

manuals and input from HVAC 

consultants and apply to both noncondensing and condensing 

installations. DOE estimates the time 

spent for typical tasks and multiplies 

this time by a labor rate. The overall 

labor time for a given installation will 

vary based on the specifics of the 

installation, as described in further 

detail in chapter 8 and appendix 8D of 

the final rule TSD. 

AGA recommended that DOE 

undertake additional evaluation of 

installation costs and annual 

maintenance costs of non-weatherized 

residential and manufactured home gas 

furnaces to ensure a complete LCC and 

payback period analysis. Specifically, 

AGA recommended a comprehensive 

analysis of the average installed 

replacement cost of an 80 kBtu/hour, 

80-percent AFUE non-condensing 

residential non-weatherized natural gas 

furnace. (AGA, No. 405 at p. 87) 

In response, DOE notes that it already 

conducts such an analysis. There are a 

range of input capacities considered as 

part of the LCC analysis, including 80 

kBtu/hour furnaces. 

AGA commented that DOE may have 

overestimated the length of pipe, which 

makes up half the cost of a new 4’’ vent. 

AGA stated that for buildings where the 

furnace was installed in the basement, 

the DOE calculations appear to fit a 

typical 2-story home where the average 

vent length is 26 feet. However, for 

buildings where the furnace is in the 

attic, the average length is 10 feet, so 

DOE’s analysis would result in venting 

extending up to 15 feet beyond the roof 

surface. (AGA, No. 405 at p. 89) 

In response, DOE clarifies that its 

installation cost methodology does not 

assume a fixed vent length for each 

home or building in the LCC. The length 

of the vent varies and is dependent on 

the characteristics of that specific 

building. For example, the vent length 

depends on the furnace location in the 

house, the ceiling height, and the 

number of floors above the furnace, 

among other factors. The analysis 

accounts for attic installations and does 

not assume excessively long vent 

lengths beyond the roof. 

In contrast, the Joint Efficiency 

Commenters stated that DOE may be 

overestimating the installation costs of 

condensing NWGFs in certain scenarios. 

(Joint Efficiency Commenters, No. 381 at 

p. 4) 

In response, DOE has included a 

number of factors that may impact the 

installation costs of condensing NWGFs, 

partly based on prior comments. There 

is no indication that these costs are 

systematically overestimated, and the 

commenter has not provided any data 

with which to update the analysis. 

Joint Efficiency Commenters stated 

that they are not aware of any issues 

regarding the size or installation of 

condensing MHGFs in new or 

replacement applications. These 

commenters further stated that these 

issues have been thoroughly evaluated 

and adequately addressed. (Joint 

Efficiency Commenters, No. 381 at p. 5) 

Similarly, NCLC stated that installing 

condensing MHGFs in manufactured 

homes will not present unique, 

significant, or insurmountable 

challenges. (NCLC, No. 383 at p. 7) DOE 

agrees. 

Joint Efficiency Commenters stated 

that DOE extensively evaluated 

installation scenarios and costs for 

consumer furnaces in the NOPR 

analysis and expressed their belief that 

these thorough evaluations are 

comprehensive and reasonable for 

condensing furnace installations. (Joint 

Efficiency Commenters, No. 381 at pp. 

5–6) DOE agrees. 

OPAE commented that a Clevelandbased heating and weatherization 

contractor for one of their member 

agencies who has been working in the 

low-income weatherization program for 

over 30 years, stated that he has not 

found a home where he could not install 

a condensing furnace. Additionally, 

OPAE stated that for most cases where 

venting changes may be difficult, 

manufacturers are developing solutions 

to use an existing chimney as a chaseway for the condensing furnace’s intake 

and exhaust pipes and other category I 

appliance ventilation. Furthermore, 

OPAE stated that these methods usually 

remove any impediment to installing a 

condensing furnace in situations that 

currently provide challenges. (OPAE, 

No. 347 at p. 1) DOE agrees that 

solutions exist for such situations, as 

described by the commentator and as 

evidenced in other jurisdictions (e.g., 

Canada). Moreover, DOE accounts for 

increased installation costs in these 

situations. 


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NYSERDA recommended that DOE 

should investigate the economics of 

newer venting technologies. The 

commenter added that newer venting 

technologies enable reuse of existing 

vents or masonry chimneys, thereby 

allowing condensing furnaces and water 

heaters with atmospheric combustion to 

share the same vent. NYSERDA further 

remarked that this technology could 

reduce total installation costs for 

consumers and improve LCC savings. 

(NYSERDA, No. 379 at p. 6) 

NCLC et al. commented that DOE has 

not fully considered venting 

technologies that could bring down the 

assumed installation costs in settings 

where installing a condensing furnace 

may present challenges and added costs. 

(NCLC et al., No. 383 at p. 7) 

In response, DOE notes that it did 

investigate new venting technologies in 

a sensitivity scenario for the July 2022 

NOPR, and does so again for the final 

rule (see appendix 8L of the final rule 

TSD). The LCC impacts are very similar 

to the reference case, and DOE’s 

evaluation of economic justification 

remains the same. 

NGA of Georgia stated that the 

proposed rule would eliminate the 

ability to common vent multiple gas 

appliances. The commenter also stated 

that this would prevent the use of gas 

appliances in older homes, multi-family 

developments, row homes, and 

townhomes. Furthermore, NGA of 

Georgia stated that because of this, 

water heaters may need to be changed 

out when the furnace is replaced, even 

if the water heater is still working. (NGA 

of Georgia, No. 380 at p. 2) 

APGA claimed that DOE does not 

account correctly for ‘‘orphaned’’ noncondensing gas water heaters. In those 

situations, APGA asserted that 

additional costs should be considered 

for updating flue vent connectors, vent 

resizing, or chimney relining. Where 

costs are relatively higher to address an 

orphaned water heater, the costs of 

venting should be higher there as well. 

APGA argued that DOE understates 

additional venting installation costs in 

multi-family buildings, townhomes, and 

row houses. AGA also argued that other 

homeowner obstacles are unaccounted 

for entirely, including: zoning variances 

required when venting is too close to a 

property line; building code restrictions; 

historic building limitations; and 

concerns about venting near places of 

congregation such as decks. (APGA, No. 

387 at pp. 54–55) 

In response, DOE acknowledges that 

common vents may need to be replaced 

and includes those costs in its analysis 

where applicable, including updating 

flue connectors, vent resizing, or 

chimney relining. However, DOE finds 

that these obstacles can be overcome, 

given that these buildings already have 

an existing furnace exhaust vent. Full 

details of the installation cost 

methodology are provided in appendix 

8D of the final rule TSD. DOE 

additionally includes situations in 

which the water heater is replaced as 

well, instead of updating the venting to 

permit continued use of the existing gas 

appliance. These costs are all included 

as part of the LCC analysis. 

ACCA stated that DOE’s analysis 

overlooked potential building code 

restrictions for apartments, 

condominiums, and/or row houses/ 

townhomes. (ACCA, No. 398 at p. 3) 

DOE is not aware of any physical 

limitations or building code issues that 

would preclude the installation of a 

condensing NWGF in multi-family 

buildings, townhomes, and row houses. 

Condensing NWGFs have been 

successfully installed in multi-family 

buildings, townhomes and row houses 

in jurisdictions requiring condensing 

furnaces (e.g., Canada, which has very 

similar building codes as the U.S.) and 

in regions with active efficiency and 

weatherization programs. The analysis 

includes additional costs, where 

necessary, to capture the increased 

complexity of such installations. 

PHCC commented that installation 

labor costs in DOE’s NOPR are not near 

today’s contractor rates, and that DOE’s 

residential and commercial rates are 

low, which will impact the economic 

model calculations. (PHCC, No. 403 at 

p. 5) In response, DOE notes that its 

analysis uses the latest RSMeans data to 

estimate labor rates, which are the best 

data available to the Department. No 

other sources of contractor rate data 

were submitted to DOE. 

Similarly, Daikin commented that 

there are existing applications (such as 

placement of furnaces in cold spaces 

such as attics and crawl spaces) that 

will incur additional burden as a result 

of a condensing standard. (Daikin, No. 

416 at p. 2) In response, DOE accounts 

for such applications as described 

subsequently in this document and in 

chapter 8 of the final rule TSD. 

Plastics Pipe Institute commented that 

if DOE eliminates non-condensing 

furnaces as a viable option, consumers 

will have to update their existing 

venting systems to accommodate a new 

natural gas furnace. (Plastics Pipe 

Institute, No. 404 at p. 2) Plastics Pipe 

Institute added that this conversion will 

lead to higher operating costs and will 

require electrical upgrades, inevitably 

increasing the cost of heating. (Id.) 

In response, DOE acknowledges that 

the installation of a condensing furnace 

may require an update to the venting 

system and includes these additional 

costs in the analysis. DOE also accounts 

for households that may require a new 

electrical connection. 

(a) Flue Venting 

DOE assumed that condensing 

furnaces do not utilize the existing 

venting system but instead require new, 

dedicated plastic venting that meets all 

applicable building codes and 

manufacturer instructions. Accordingly, 

DOE determined whether a condensing 

furnace is horizontally or vertically 

vented based on the shortest vent 

length. DOE’s analysis estimated that 70 

percent of condensing furnaces will be 

installed with a horizontal vent. 

DOE assumed that vent length varies 

depending on where a suitable wall is 

located relative to the furnace. In 

addition, when applicable, DOE 

accounts for use of a snorkel 

termination to meet minimum 

clearances to sidewalks, average snow 

accumulation level, overhangs, and air 

intake sources, including operable doors 

and windows, building corners, and gas 

meter vents. In DOE’s analysis, snorkel 

termination is more frequently needed 

in situations where the furnace is below 

the snow line (such as in basements or 

crawl spaces). DOE assumed that the 

replacement furnace would remain in 

the same location as the existing furnace 

and accounted for the new vent length 

and other changes, such as wall 

knockouts, to install new venting. In 

some installations, it might be easier 

and cheaper to change the furnace 

location, but this would require both gas 

line extensions and ductwork 

modifications, which were not modeled 

in DOE’s installation cost analysis. DOE 

accounted for additional vent length for 

housing units with shared walls. DOE 

also accounted for the cost of vent 

resizing in the case of an orphaned 

water heater and the cost of 

concealment work in some installations. 

The vent pipe length limitations 

depend on a number of factors, 

including number of elbows, vent 

diameter, horizontal vs. vertical length, 

as well as combustion fan size. A review 

of several manufacturer installation 

manuals shows that the maximum vent 

lengths range from 30 to 130 ft., 

depending primarily on the vent 

diameter. For a fraction of installations, 

DOE increased the vent diameter in 

order to be able to extend the vent 

length according to manufacturer 

specifications. 


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111The ANSI Z223.1/NFPA 54 Natural Fuel Gas 

Code (NFGC) venting requirements refer to category 

I, II, III, and IV gas appliances. Category I gas 

appliances, such as natural draft gas water heaters, 

exhaust high-temperature flue gases and are vented 

using negative static pressure vents designed to 

avoid excessive condensate production in the vent. 

Category IV gas appliances, such as condensing 

furnaces, exhaust low temperature flue gases and 

are vented using positive static pressure corrosionresistant vents. Due to the different venting 

requirements, the NFGC does not allow common 

venting of condensing and non-condensing 

appliances. The 2021 Edition is available at 

www.nfpa.org/codes-and-standards/all-codes-andstandards/list-of-codes-and-standards/ 

detail?code=54 (last accessed August 1, 2023). 

112 Data from the consumer water heater NOPR 

were used in this analysis. 88 FR 49058 (July 28, 

2023). 

113This fraction accounts for buildings without 

common venting; buildings where all/most furnaces 

are replaced at the same time (many rentals/ 

homeowners association (HOA) situations); smaller 

multi-family units/smaller number of floors; and 

situations where disconnecting one furnace from 

the common vent does not impact the common 

venting for remaining furnaces. This fraction is also 

based on 2020 RECS data regarding the number of 

apartments/units and the number of stories per 

multi-family building. 

114Oak Ridge National Laboratory, Condensing 

Furnace Venting Part 1: The Issue, Prospective 

Solutions, and Facility for Experimental Evaluation 

(October 2014) (available at: web.ornl.gov/sci/ 

buildings/docs/Condensing-Furnace-Venting-Part1- 

Report.pdf) (last accessed August 1, 2023). 

115Oak Ridge National Laboratory, Condensing 

Furnace Venting Part 2: Evaluation of SameChimney Vent Systems for Condensing Furnaces 

and Natural Draft Water Heaters (February 2015) 

(available at: web.ornl.gov/sci/buildings/docs/ 

Condensing-Furnace-Venting-Part2-Report.pdf) (last 

accessed August 1, 2023). 

116M&G DuraVent’s FasNSeal 80/90 Combination 

Cat I and Cat IV gas vent system is UL listed to 

applicable portions of ULC S636/UL1738, UL1777, 

and UL441 (available at: www.duravent.com/ 

fasnseal-80-90/) (last accessed August 1, 2023). 

117Oak Ridge National Laboratory, Condensing 

Furnace Venting Part 2: Evaluation of SameChimney Vent Systems for Condensing Furnaces 

and Natural Draft Water Heaters (February 2015) 

(available at: web.ornl.gov/sci/buildings/docs/ 

Condensing-Furnace-Venting-Part2-Report.pdf) (last 

accessed August 1, 2023). 

118Oak Ridge National Laboratory, Furnace and 

Water Heater Venting Field Demonstration (May, 

2019) (available at: www.ornl.gov/publication/ 

furnace-and-water-heater-venting-fielddemonstration) (last accessed August 1, 2023). 

(b) Common Venting Issues (Including 

Orphaned Water Heaters) 

Common venting provides a single 

exhaust flue for multiple gas appliances. 

In some cases, a non-condensing NWGF 

is commonly vented with a gas-fired 

water heater. When the non-condensing 

NWGF is replaced with a condensing 

NWGF, the new condensing furnace and 

the existing water heater can no longer 

be commonly vented due to different 

venting requirements,111 and the water 

heater becomes ‘‘orphaned.’’ The 

existing vent may need to be modified 

to safely vent the orphaned water 

heater, while a new vent is installed for 

the condensing NWGF. DOE accounted 

for a fraction of installations that would 

require chimney relining or vent 

resizing for the orphaned water heater, 

including updating flue vent 

connectors, resizing vents, or relining 

chimneys when applicable based upon 

the age of the furnace and the home. 

DOE accounted for the probability 

that in some cases, replacing a noncondensing furnace with a condensing 

furnace may require significant 

modifications to the existing vent 

system for the commonly-vented gas 

water heater. DOE accounted for costs 

related to updating the vent connector, 

relining the chimney, and resizing the 

vent, which would satisfy the 

installation requirements of the Natural 

Fuel Gas Code. DOE has determined 

that a potential option would be to 

install either a storage or tankless 

power-vented water heater to avoid the 

cost of a chimney or metal flue vent 

modification just for the gas water 

heater, or to switch to an electric storage 

water heater. DOE recognizes that the 

frequency of chimney relining and vent 

resizing may decrease slightly due to the 

increase in adoption of high-efficiency 

gas water heaters. However, DOE did 

not find any additional information or 

data 112 to project the market share of 

high-efficiency water heaters in 2029 or 

the decrease in the fraction of 

installations with common vents. 

Therefore, DOE did not consider the 

power-vented gas storage or other 

higher-efficiency water heater options. 

Instead, DOE either added additional 

installation costs associated with 

venting a category I water heater, such 

that the orphaned water heater could be 

vented through the chimney, or 

accounted for the installation of an 

electric storage water heater as an 

alternative. For new owners and new 

construction installations, DOE applied 

a venting cost differential if the owner/ 

builder was planning to install a 

commonly-vented non-condensing 

furnace and water heater. 

DOE acknowledges that multi-family 

buildings may require additional 

measures to replace non-condensing 

furnaces with condensing furnaces. 

Such measures include the vent length, 

existing common vents, and horizontal 

venting. For this final rule, DOE 

assigned additional venting installation 

costs (on average $241) for a quarter of 

replacement installations 113 in multifamily buildings to account for 

modifying the existing vent systems to 

accommodate a condensing furnace 

installation. 

(c) New Venting Technologies 

To address certain difficult 

installation situations, new venting 

technologies are being developed to 

vent a condensing residential furnace 

and an atmospheric combustion water 

heater through the same vent by reusing 

the existing metal vent or masonry 

chimney with a new vent cap and 

appropriate liner(s).114 115 In 2015, the 

FasNSeal 80/90 venting system was 

introduced commercially by M&G 

DuraVent, a new venting system that 

uses a unique, pipe-within-a-pipe 

design to vent a condensing furnace and 

a natural draft water heater.116 FasNSeal 

80/90 is UL-approved. An additional 

venting solution known as EntrainVent 

is available as a pre-commercial 

prototype by Oak Ridge National 

Laboratory.117 DOE conducted a 

sensitivity analysis to estimate the 

impact of such technologies on the 

installation cost of a condensing NWGF, 

but did not include the technologies in 

the primary analysis. 

DOE recognizes that there are 

currently limitations to DuraVent’s new 

FasNSeal 80/90 venting technology 

related to venting in masonry chimneys 

and that currently there are limited field 

performance data.118 Because of the 

uncertainty regarding applicability of 

FasNSeal 80/90 and other new venting 

technologies, DOE only considered 

using this option in a sensitivity 

analysis. DOE conducted two additional 

sensitivity analyses: (1) the FasNSeal 

80/90 option is applied to installations 

that can currently meet the FasNSeal 

80/90 installation requirements (metal 

vents only); and (2) all new venting 

technology options are applied to 

installations that could meet the 

respective installation requirements 

(metal vents and masonry chimney 

installations, including installations 

with more horizontal sections). 

(d) Combustion Air Venting 

DOE’s analysis accounts for the 

additional cost associated with direct 

vent installations that use combustion 

air intake. Direct vent or sealed 

combustion is not required for 

condensing installations, but it is 

recommended for any condensing 

furnace to utilize ‘‘sealed combustion.’’ 

All condensing furnaces come with this 

feature (which requires an opening for 

the intake combustion air pipe/vent). 

Condensing furnaces will often be 

installed as direct vent furnaces since it 


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119A non-direct vent furnace increases the air 

infiltration that the house experiences since for 

every cubic foot of air that leaves the house, another 

cubic foot of air comes in. Thus, a direct vent 

furnace avoids using heated indoor air for 

combustion. 

120By separating the combustion air from indoor 

household air, the furnace is not affected by other 

home appliances in a tight home. A direct vent 

furnace reduces the danger of any potential 

backdrafts (pulling exhaust gases down the 

chimney), as well as reducing the danger of foreign 

gases in the combustion air. For example, a furnace 

could be damaged by vapors from laundry products, 

as these vapors can mix with indoor combustion air 

to corrode furnace components. 

121 DOE, Technology Fact Sheet. Combustion 

Equipment Safety: Provide Safe Installation for 

Combustion Appliances (October 2000) (DOE/GO– 

102000–0784) (available at: www1.eere.energy.gov/ 

buildings/publications/pdfs/building_america/ 

26464.pdf) (last accessed August 1, 2023). 

122 DOE, Furnace and Boilers (available at: 

www.energy.gov/energysaver/home-heatingsystems/furnaces-and-boilers) (last accessed August 

1, 2023). 

123Heat tape is also referred to as heating cable 

and provides electric heating. 

124 ICP, Installation Instructions for Condensate 

Freeze Protection Kit (2012) (available at: 

www.icptempstarparts.com/mdocs-posts/ 

naha00201hh-condensate-freeze-protection-kitinstallation-instructions/) (last accessed August 1, 

2023). 

125Bryant, Installation Instructions: Condensate 

Drain Protection (2008) (available at: 

www.questargas.com/ForEmployees/ 

qgcOperationsTraining/Furnaces/Bryant_

355AAV.pdf) (last accessed August 1, 2023). 

126Brand, L. and W. Rose, Strategy Guideline: 

Accurate Heating and Cooling Load Calculations. 

Partnership for Advanced Residential Retrofits 

(October 2012) (available at: www.nrel.gov/docs/ 

fy13osti/55493.pdf) (last accessed August 1, 2023). 

127 DOE considered an installation to be 

‘‘difficult’’ if there is an orphaned water heater, a 

long PVC vent connection though multiple walls, or 

in households with condensate issues (e.g., ones 

requiring heat tape or a condensate pump). 

128 Decision Analyst, Homeowner ‘‘Spotlight’’ 

Report: Equipment Switching, Repair Profile and 

Energy Efficiency (August 2011) (available at: 

www.decisionanalyst.com/) (last accessed August 1, 

2023). 

129 Decision Analyst, Contractor ‘‘Spotlight’’ 

Report: Energy Efficiency and Installation Profile 

(August 2011) (available at: 

www.decisionanalyst.com/) (last accessed August 1, 

2023). 

130This finding is supported by an expert 

consultant (EER Consulting). 

offers significant energy savings 119 and 

safety 120 advantages.121 122

DOE’s analysis assumes that twothirds of condensing furnaces will be 

installed with the direct vent feature, 

based on a consultant report (see 

appendix 8D of the final rule TSD for 

further details). Typically, the 

combustion air intake pipe will go in 

the same direction of the flue vent or 

can be in a concentric vent. 

(e) Condensate Withdrawal 

DOE accounted for the cost of 

condensate removal for condensing 

NWGF installations, including, when 

applicable, a condensate drain, 

condensate pump, freeze protection 

(heat tape),123 drain pan, condensate 

neutralizer, and an additional electric 

outlet for the condensate pump. 

DOE acknowledges that condensate 

management can be costly for some 

installations (e.g., multi-family units) 

and very difficult in rare cases. DOE’s 

current installation cost approach 

accounts for these costs. However, DOE 

added a sensitivity analysis with 

additional condensate costs. 

The use of heat tape to prevent 

condensate pipes from freezing is 

standard installation practice 124 125

DOE’s analysis accounts for the use of 

heat tape typical in unconditioned attic 

installations, which are more likely to 

face freezing conditions. DOE 

acknowledges that other unconditioned 

locations could also face freezing, but it 

is far less common.126 DOE also 

included heat tape to installations in 

additional non-conditioned spaces such 

as crawl spaces, non-conditioned 

basements, and garages that are in 

regions that could be exposed to 

freezing conditions. DOE accounted for 

the additional installation cost and 

energy use of the heat tape. 

Additionally, because it is 

recommended practice that heat tape be 

plugged into a ground fault circuit 

interrupter (GFCI) circuit, DOE included 

the cost of adding a GFCI circuit for the 

fraction of households that do not have 

one available. DOE also conducted a 

sensitivity analysis with an additional 

fraction of installations necessitating the 

use of heat tape. 

To address situations where 

condensate must be treated before 

disposal (e.g., due to a local regulation), 

DOE assumed that a fraction of 

installations require condensate 

neutralizer for condensate withdrawal. 

As discussed in appendix 8D of the TSD 

for this final rule, the fraction of 

installations that require condensate 

neutralizer used in the analysis is 

representative of the current use. DOE 

includes the cost of using non-corrosive 

drains for an additional fraction of 

installations. Additionally, DOE 

conducted a sensitivity analysis 

assuming a high fraction of installations 

use condensate neutralizer or are 

installed with a non-corrosive drain. 

Napoleon stated that the proposals in 

the July 2022 NOPR will have negative 

economic and safety impacts on 

consumers in replacement scenarios. 

The commenter stated that increasing 

the minimum efficiency will require the 

furnaces to be condensing, and it is not 

practical to use the condensate removal 

system for an air conditioner (typically 

located in unconditioned space outside 

the building structure) to remove 

condensate from a condensing furnace 

when it could be subject to freezing 

temperatures. Napoleon also stated that 

installing a plumbed drain will be a 

significant cost for the consumer and 

may not even be feasible, and the 

commenter further added that installing 

such plumbing could be cost-prohibitive 

and force property owners to attempt to 

perpetually repair their existing 

products, thereby leading to a safety 

hazard. Therefore, Napoleon 

recommended that 80-percent AFUE 

furnaces must remain available for the 

replacement market because, according 

to the commenter, they are the only 

cost-effective and safe option for 

consumers. (Napoleon, No. 374 at p. 1– 

2) 

In response, DOE notes that the 

analysis does consider appropriate 

additional costs to remove condensate 

for condensing furnaces, as described 

above, in accordance with all 

manufacturer instructions and local 

requirements. The analysis accounts for 

situations in which additional freeze 

protection is required, imposing 

additional costs on the installation. DOE 

acknowledges that in some cases the 

costs to address condensate withdrawal 

may be significant, but these are already 

captured by the analysis and included 

in the distribution of impacts. 

(f) Difficult Installations 

DOE considered the potential need for 

additional vent length to reach a 

suitable location on an outside wall 

where the vent termination could be 

located, as well as the potential need for 

wall penetrations and/or concealing of 

flue vents in conditioned spaces. 

DOE used the best available 

information and data to characterize the 

likely nature and cost of installations of 

a condensing furnace as a replacement 

for a non-condensing furnace in its 

consumer sample. DOE estimates that 

39 percent of replacements in 

residential applications could be labeled 

as ‘‘difficult’’ installations,127 with an 

average incremental installation cost of 

$867 relative to the baseline 80-percent 

AFUE NWGF (compared to an 

incremental cost of $247 for all other 

replacement installations). 

DOE sought any information or data 

regarding potential physical limitations 

when installing a new condensing 

furnace. In consumer 128 and 

contractor 129 surveys, relocation was 

not mentioned as an issue for furnace 

installation.130 DOE recognizes that in 

some cases, homeowners could elect to 

relocate their furnace when replacing a 

non-condensing NWGF with a 

condensing NWGF, especially if the 


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131 Decision Analysts, 2022 American Home 

Comfort Studies (available at: 

www.decisionanalyst.com/syndicated/ 

homecomfort/) (last accessed August 1, 2023). 

132 DOE calculated that, on average, condensing 

NWGF installation costs are lower in the new 

construction market compared to non-condensing 

NWGFs, since high-efficiency NWGFs can be 

vented either horizontally or vertically (whichever 

is most cost-effective), and, therefore, a vertical 

buildout with roof penetration is not required. See 

appendix 8D of the TSD for this final rule for more 

details regarding new construction installation 

costs. 

133Lekov A., V. Franco, G. Wong-Parodi, J. 

McMahon, P. Chan, Economics of residential gas 

furnaces and water heaters in U.S. new construction 

market, Energy Efficiency (September 2010) Volume 

3, Issue 3, pp. 203–222 (available at: 

link.springer.com/article/10.1007/s12053-009-9061- 

y) (last accessed August 1, 2023). 

relocation is part of a planned remodel 

of the home. In such cases, the cost of 

relocation is likely to be comparable to 

the costs that DOE estimated for 

difficult installations. 

GAS commented that by not drawing 

a regulatory distinction between 

condensing and non-condensing 

appliances, DOE ignores the welldocumented ‘‘problematic designs’’ 

faced by consumers forced into 

replacing non-condensing appliances 

into structures that were not designed 

for condensing appliances. (GAS, No. 

385 at p. 3) 

The Coalition also commented as to 

the construction and configuration 

challenges that come with converting to 

a condensing furnace. The Coalition 

stated that insufficient exterior wall 

clearance for venting would be an 

obstacle, and that altering the venting 

might also necessitate replacement of 

the gas hot water heater. (The Coalition, 

No. 378 at p. 5) Also, the Coalition 

argued that plumbing issues would lead 

to considerable expense, and the cost 

impact of changing out flues and adding 

combustion air ducts would impact firerated floor assemblies. Finally, the 

Coalition commented that these issues 

of converting to a condensing furnace 

would potentially result in the 

displacement of residents, interruption 

of resident quality of life, disruption to 

property operation, and significant 

costs. (Id.) 

As DOE has discussed here and in 

further detail in chapter 8 and appendix 

8D of the final rule TSD, the analysis 

accounts for some situations in which 

there are high costs associated with the 

replacement of a non-condensing 

furnace with a condensing furnace, 

including interior wall displacement, 

vent or equipment relocation, and 

condensate withdrawal management. 

Those impacts are included in the 

distribution of LCC results. 

Furthermore, DOE has concluded that 

any disruptions associated with 

installation of a more-efficient furnace 

are likely to be temporary and of limited 

duration. Because such disruptions are 

temporary, they would not have a 

significant effect on the results of the 

analyses or DOE’s conclusions. 

(g) Emergency Replacements 

DOE acknowledges that installation 

costs could increase for condensing 

furnaces in an unplanned emergency 

situation for the reasons that follow. 

Decision Analyst’s 2022 American 

Home Comfort Study (AHCS) 131

reported that unplanned replacements 

accounted for one-third of gas furnace 

installations. For this final rule, DOE 

included labor costs for unplanned 

replacements to account for additional 

contractor labor needed to finish the 

installation, factoring in the difficulty of 

accessing the roof during periods of 

snow or ice accumulation. In addition, 

to address periods without heat during 

the replacement, DOE considered the 

costs of the temporary use of small 

electric resistance space heaters or 

secondary/back-up heaters. 

(h) Incremental Installation Cost for 

Condensing Furnaces 

DOE estimated that the incremental 

retrofit installation cost for condensing 

furnaces was $539. For new 

construction and new owners, the 

incremental installation cost was 

estimated to be, on average, ¥$708.132

Since 26 percent of shipments were 

estimated to be in the new construction 

and new owners market, based on the 

projected growth in new housing units 

and historical shipments (see chapter 9 

of the final rule TSD), the resulting 

average incremental installation cost 

was $218. The incremental installation 

cost estimates reflect labor cost and 

installation material cost data from 2023 

RS Means. 

In response to the July 2022 NOPR, 

the DCA commented that DOE does not 

need to force the installation of 

condensing furnaces by terminating the 

types of furnaces that can be easily 

installed without retrofitting. The DCA 

further commented that this proposed 

rulemaking would eliminate the 40 

percent of non-weatherized natural gas 

furnaces that are non-condensing. (DCA, 

No. 372 at p. 2) Daikin commented that 

in 2019, the standard in Canada was set 

to condensing standard of 95-percent 

AFUE, so presumably, that country 

must have found ways to overcome 

these installation challenges. (Daikin, 

No. 416 at p. 2) Similarly, the 

Watertown Municipal Utilities stated 

that close to 75 percent of the homes 

and businesses in its service area 

currently use non-condensing furnaces, 

and the commenter argued that 

retrofitting existing homes will increase 

monthly expenses for the average 

consumer. (WMU, No. 351 at p. 1) 

The Coalition commented that 

replacing non-condensing units with 

condensing units might require 

substantial retrofitting and/or property 

modifications. (The Coalition, No. 378 

at p. 4) The Coalition commented that 

the cost of retrofitting could be 

prohibitive or even impossible. (Id.) The 

Coalition added that this would result 

in some owners switching to lessefficient forms of heating that defeat the 

purpose of the proposed standards. (Id.) 

In response, DOE has conducted an 

extensive analysis of potential retrofit 

costs as detailed in this section, 

including replacement situations 

involving significant additional 

installation costs. These ‘‘difficult’’ 

installations are accounted for in the 

distribution of results (see section 

IV.F.2.b.f of this document). DOE has 

further evaluated the potential for some 

consumers to switch to alternative forms 

of space-heating as described in more 

detail in section IV.F.10 of this 

document. 

(i) New Construction or New Owner 

Installations 

It is common practice in new 

construction, when possible, to avoid 

vertical venting in order to limit roof 

penetrations and reduce potential 

liability issues (e.g., water leakage 

through new roof penetrations).133

Condensing furnaces have the flexibility 

of being vented either horizontally or 

vertically. When presented with this 

option in new construction, it is 

reasonable to conclude that most 

designers, architects, builders, 

contractors, and/or homeowners would 

opt for the most cost-effective 

installation. Current building practices 

are likely to evolve as the market 

changes in response to any amended 

energy conservation standards for the 

subject furnaces. 

For new owner and new construction 

installations, DOE applied an 

incremental venting cost if the owner/ 

builder had been planning to install a 

commonly-vented non-condensing 

furnace and water heater. 

c. Additional Installation Costs for 

Mobile Home Gas Furnaces 

DOE included the same basic 

installation costs for MHGFs as 

described previously for NWGFs. DOE 

also included costs for venting and 

condensate removal. Protection from 


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134On average, DOE’s analysis indicates that the 

incremental totaled installed cost of an AFUE 95 

percent MHGF, compared to an AFUE 80 percent 

MHGF, is only $188 (averaged over replacement 

installations and new construction and including 

both equipment and installation costs). Further 

details can be found in chapter 8 and appendix 8D 

of the final rule TSD. 

freezing (heat tape), a condensate pipe, 

condensate neutralizer, and an 

additional electrical connection are 

accounted for in the cost of condensate 

removal, where applicable. 

DOE notes that MHGFs are usually 

installed in tight spaces and often 

require space modifications if the 

replacement furnace dimensions are 

different from those of the existing 

furnace. DOE notes that most of the 

MHGF models at the adopted standard 

level of 95-percent AFUE are similar in 

size to the existing non-condensing 

MHGFs. However, some condensing 

furnaces in the manufacturer literature 

are wider and shorter than existing noncondensing furnaces. Accordingly, DOE 

increased the installation costs for a 

fraction of installations to address the 

impacts related to space constraints or 

condensate withdrawal that may be 

encountered when a condensing MHGF 

replaces an older manufactured-homespecific furnace. DOE also adjusted the 

installation cost for the dedicated vent 

system for condensing MHGFs by 

including an additional cost to remove 

the old venting system. Manufactured 

home designs must be approved by an 

accepted third-party inspection agency, 

as required by the U.S. Department of 

Housing and Urban Development, to 

ensure compliance with the HUD Code 

(24 CFR 3282.203), which requires 

sealed combustion system appliances. 

MHGFs cannot be commonly vented 

with other gas-fired equipment (such as 

a gas-fired water heater) (24 CFR 

328.709). Further, manufacturers are 

required to have an inspection agent, 

and each home must be inspected by the 

inspection agent in at least one phase of 

production, and the manufacturer must 

self-certify each section of the home as 

in compliance with the HUD code (24 

CFR 3282.204 and 3282.205). DOE also 

adjusted the condensate withdrawal 

installation costs to account for a 

fraction of installations that encounter 

difficulty installing the condensate 

drain. 

In regard to space constraints and 

installation, DOE received several 

comments in response to the July 2022 

NOPR. HARDI commented that EPCA 

prevents DOE from finalizing a rule that 

would outlaw equipment with certain 

size requirements. HARDI commented 

that size is not limited to the equipment 

itself, but any encroachment on the 

consumer’s living space. (HARDI, No. 

384 at p. 5) PHCC commented that 

venting poses a major challenge to 

installation, which will affect the 

installation costs. PHCC further stated 

that potential venting issues include 

excessive vent lengths, significant 

building modifications, drainage issues, 

or nuisance condensing vent plumes. 

(PHCC, No. 403 at p. 3) CEC commented 

that although some owners of 

manufactured homes may be concerned 

about potential space and cost 

constraints related to the proposed 

standards for MHGFs, updating their 

heating system with an efficient 

furnaces or electric heat pumps is 

feasible, both technically and 

economically. (CEC, No. 382 at p. 2) 

In response, DOE notes that the LCC 

includes costs related to additional 

venting requirements, condensate 

removal, and any modifications to 

address any space constraints for 

replacement installations of MHGFs. 

There is no technical limitation 

preventing the installation of a 

condensing MHGF, and all relevant 

costs are included in the analysis. 

Alternatively, consumers could switch 

to an appliance which utilizes a 

different technology (e.g., a heat pump). 

For these reasons, DOE has concluded 

that the approach adopted in this final 

rule is consistent with the requirements 

of EPCA. 

MHI commented that condensing 

furnaces require different venting and 

combustion air intake designs as 

compared to non-condensing furnaces, 

as well as the addition of condensate 

drain systems. (MHI, No. 365 at p. 2) 

Also, MHI noted that condensing 

furnaces would require manufactured 

home designers to change the typical 

floor plans of their designs, adding costs 

to this process that will be passed down 

to the consumer. (Id.) MHI commented 

that the impacts of changing the typical 

floor plan of a manufactured home in 

order to accommodate a condensing 

furnace are not fully captured in the 

July 2022 NOPR, and these impacts are 

particularly harmful for manufactured 

housing consumers, especially in 

southern climates. (Id.) 

MHI commented that the proposed 

standards for MHGF would increase 

construction costs for new 

manufactured homes by approximately 

$1300. (Id.) Nortek commented that 

condensing furnaces cost approximately 

$1300 more than non-condensing 

furnaces, and that they require 

significantly different venting/ 

combustion air in-take/condensate 

drainage systems. According to the 

commenter, these changes would lead to 

additional cost and floorplan design 

changes for manufactured homes. 

(Nortek, No. 406 at p. 4) In response, 

DOE’s analysis includes all costs 

necessary to install a condensing MHGF 

in new construction, including venting 

costs and condensate removal. However, 

DOE’s analysis, based on the best 

available evidence, does not indicate 

that incremental costs for installation of 

a condensing MHGF are as high as 

$1300.134

MHI commented that owners of 

manufactured homes typically have 

more budgetary restrictions than other 

consumers, as their median annual 

household income is well below the 

national average. MHI argued that 

manufactured homeowners, who would 

be unlikely to see cost savings from 

condensing furnaces for many years, 

would face significant budgetary 

burdens. (MHI, No. 365 at p. 3) In 

response, DOE notes that its analysis 

captures the discount rate that is 

applicable to owners of manufactured 

homes, based on their household 

income, and which reflects their access 

to capital and budgetary constraints. 

MHI estimated that certain floorplans 

of manufactured housing would incur 

up to $7000 to comply with the 

requirements of the May 2022 final rule 

for manufactured housing. (MHI, No. 

365 at p. 3) Similarly, Nortek 

commented that DOE’s final rule to 

establish energy conservation standards 

for manufactured housing will also 

impose costs on manufactured 

homeowners, and that DOE’s analytical 

models do for the furnaces rule not 

consider these costs.(Nortek, No. 406 at 

pp. 2–3) 

In response, DOE notes that the 

impacts of the May 2022 final rule for 

manufactured housing were considered 

as part of that rule and are not relevant 

in this rulemaking. 

MHI commented that the proposed 

standards for MHGFs will negatively 

impact the manufactured home resale 

and replacement market. The 

commenter argued that about one-third 

of manufactured homes use natural gas 

for heating, and that the cost to replace 

a non-condensing gas furnace with a 

condensing one could be burdensome to 

the consumer due to increased cost, the 

need to increase the cabinet size, and 

changes to venting. (MHI, No. 365 at pp. 

3–4) MHI also noted that there are a 

limited number of furnace 

manufacturers that manufacture 

condensing furnaces for use in 

manufactured homes. (Id. at 3) MHI 

commented that furnace replacements 

that would typically cost around $3,000 

now would cost $10,000 or more under 

DOE’s proposal, which the commenters 

asserted that many manufactured 


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Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 87567 

homeowners would not be able to 

afford. (MHI, Public Meeting Webinar 

Transcript, No. 363 at p. 28) MHI also 

stated that these impacts would be 

disproportionately felt by homeowners 

in Southern States. (Id.) MHI also 

asserted that this rulemaking would 

require redesigns of manufactured 

homes subject to the National Home 

Construction and Safety Standards Act, 

as any changes to a home’s design, 

manufacture, or installation must be 

reviewed and approved by HUD. (MHI, 

No. 365 at p. 2) 

Mortex commented that DOE’s 

incremental cost from non-condensing 

to condensing furnaces is much lower 

than MHI’s estimate, which is 

conservative. (Mortex, No. 410 at p. 2) 

Mortex estimated that the incremental 

cost to consumers to move from a noncondensing to a condensing MHGF is 

between $1700 and $2100. (Id.) Mortex 

further commented that the average 

savings estimated by DOE would be 

eliminated if the incremental cost was 

adjusted, meaning that there would be 

no payback for manufactured 

homeowners. Mortex further 

commented that southern consumers 

would be even less likely to experience 

life cycle cost savings. (Mortex, No. 410 

at pp. 2–3) 

AHRI expressed its concern regarding 

DOE’s results for TSL 8. AHRI stated 

that MHI has estimated that the 

incremental cost of a condensing 

furnace is $1,300, as opposed to the 

$315 estimated by DOE, adding that the 

LCC savings from a condensing furnace 

disappear when any cost approaching 

MHI’s estimated value is used. (AHRI, 

No. 414–2 at p. 3) 

JCI commented that it disagrees with 

the costs and benefits assumed for 

MHGFs in DOE’s analysis, arguing in 

particular that the replacement market 

is not accurately reflected. (JCI, No. 411 

at p. 3) 

In response to these comments, DOE 

disagrees with these cost estimates and 

notes that no persuasive evidence was 

submitted to substantiate these 

estimates. DOE has performed a detailed 

cost analysis and has determined that 

the potential benefits outweigh the 

costs, including the costs to replace a 

non-condensing MHGF with a 

condensing MHGF (including adjusting 

cabinet size and venting). DOE disagrees 

that a more-efficient MHGF will 

negatively impact the resale value of a 

manufactured home, as a more efficient 

MHGF will have lower operating costs, 

which is more attractive to potential 

buyers. Furthermore, DOE notes that 

potential investments made by 

manufactured housing OEMs are 

outside the scope of this rulemaking. 

DOE must follow specific statutory 

criteria for prescribing new or amended 

energy conservation standards for 

covered products, such as the subject 

consumer furnaces. Pursuant to EPCA, 

DOE’s analysis considers the economic 

impact of the standard on consumers 

and manufacturers of the products 

subject to the standard (i.e., 

manufacturers of NWGFs and MHGFs). 

(42 U.S.C. 6295(o)(2)(B)(i)(I)) The LCC 

analysis is focused on consumers of 

MHGFs and the costs to purchase the 

covered product (see 42 U.S.C. 

6295(o)(2)(B)(i)(II)), not the costs to 

purchase a manufactured home. With 

respect to manufacturers, since 

manufactured housing OEMs are not 

manufacturers of the products subject to 

the standard, DOE does not explicitly 

analyze those investments in its MIA. 

Furthermore, DOE did not include the 

manufactured housing rulemaking in its 

cumulative regulatory burden analysis 

for this rulemaking as none of the 

MHGF OEMs identified produce 

manufactured homes subject to the May 

2022 final rule for manufactured 

housing. 

JCI also commented that 

manufactured homeowners often have 

electrical limitations due to remote 

locations and limited electrical capacity, 

meaning that it would be more 

challenging for these consumers to 

switch to other methods of heating such 

as electric furnaces and heat pumps. 

(JCI, No. 411 at p. 2) JCI stated this 

means that manufactured homeowners 

would be more likely to incur the higher 

costs for condensing furnaces. (Id.) JCI 

stated that this is because electric 

mobile home furnaces and heat pumps 

require electric resistance backup 

heating which have additional power/ 

kW requirements which can greatly 

exceed those of a gas furnace especially 

in colder, northern climates (i.e., 

approximately 15 amps for the gas 

furnace vs 90 amps for the electric 

furnace). (Id.) JCI further noted that 

electric furnaces require 240 V, while 

gas furnaces require 120 V, which is 

more common. (Id.) Finally, JCI stated 

that southern areas are better suited for 

heat pump loads, with backup heat 

required for anomaly events. JCI 

commented that these requirements add 

cost for manufactured homeowners, 

increasing with colder temperatures. 

(Id.) 

In response, DOE acknowledges that 

there may be additional electrical 

connection costs when replacing a noncondensing furnace with a condensing 

furnace and has included such costs in 

the analysis. 

In contrast, NCLC et al. stated that 

installing condensing furnaces in 

manufactured homes will not present 

unique, significant, or insurmountable 

challenges, adding that the Low-income 

Energy Affordability Network has 

always been able to find condensing 

furnaces that fit into the available space 

when upgrading from non-condensing 

furnaces. (NCLC et al., No. 383 at p. 7) 

DOE agrees with this comment. 

The CA IOUs agreed with DOE that 

the average cost of a condensing MHGF 

in a new mobile home is comparable to 

a non-condensing MHGF because the 

price increase of the product is offset by 

lower installation costs for a condensing 

MHGF for most installations. (The CA 

IOUs, No. 400 at p. 2) Additionally, the 

CA IOUs noted that the National 

Consumer Law Center contacted two 

programs that retrofit mobile homes to 

improve efficiency (Action for Boston 

Community Development and Action 

Inc., Gloucester, Massachusetts) which 

indicated that the proposal would not 

be burdensome for MHGF replacements. 

(Id.) 

d. Contractor Survey and DOE’s Sources 

DOE notes that its focus for 

installation costs is to estimate the 

incremental cost between different 

efficiency levels. DOE used the results 

of a contractor survey previously 

submitted to DOE in order to validate its 

estimates of the average total installed 

cost for condensing furnaces in 

replacement applications, as well as the 

average incremental installation cost. 

DOE examined the ACCA/AHRI/PHCC 

survey of contractors but was unable to 

use the data directly in the LCC analysis 

because only aggregate values were 

reported. The ACCA/AHRI/PHCC 

survey results are binned in wide bins 

of $250, and the sample is heavily 

weighted towards the North (339 

responses in the North and 181 in the 

South). As noted previously, installation 

costs vary widely for different 

contractors and areas of the country. 

The installation costs in the Northern 

region will tend to be much higher than 

those reported in the rest of the country 

(as defined in the LCC analysis). For this 

final rule, DOE revised its installation 

cost methodology to account for various 

factors affecting both non-condensing 

and condensing NWGFs, such as: the 

cost of ductwork upgrades; baseline 

electrical installation costs; additional 

labor required for baseline installations; 

the cost of relining, resizing, and/or 

other adjustments of metal venting for 

baseline installations; premium 

installation costs for emergency 

replacements; and other premium 

installation costs for comfort-related 

features (e.g., advanced thermostats, 

zoning, hypoallergenic filters, humidity 


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87568 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

135Home Advisor, How Much Does a New Gas 

Furnace Cost? (available at: www.homeadvisor.com/ 

cost/heating-and-cooling/gas-furnace-prices/) (last 

accessed August 1, 2023). 136See www.improvenet.com/ (last accessed 

August 1, 2023). 

137Angie’s List, How Much Does it Cost to Install 

a New Furnace (available at: www.angieslist.com/ 

articles/how-much-does-it-cost-install-newfurnace.htm) (last accessed August 1, 2023). 

138HomeWyse, Cost to Install a Furnace 

(available at: www.homewyse.com/services/cost_to_

install_furnace.html) (last accessed August 1, 2023). 

139Cost Helper, How Much Does a Furnace Cost? 

(available at: home.costhelper.com/furnace.html) 

(last accessed August 1, 2023). 

140FIXr, Gas Central Heating Installation Cost 

(available at: www.fixr.com/costs/gas-centralheating-installation) (last accessed August 1, 2023). 

141CostOwl.com, How much Does a New Furnace 

Cost? (available at: www.costowl.com/homeimprovement/hvac-furnace-replacement-cost.html) 

(last accessed August 1, 2023). 

142 Gas Furnace Guide, Gas Furnace Prices and 

Installation Cost Comparison (available at: 

www.gasfurnaceguide.com/compare/) (last accessed 

August 1, 2023). 

controls). For this final rule, DOE also 

compared its average estimates to the 

AHRI/ACCA/PHCC contractor survey 

report and other sources such as Home 

Advisor,135 ImproveNet,136 Angie’s 

List,137 HomeWyse,138 Cost Helper,139

Fixr,140 CostOwl,141 and Gas Furnace 

Guide,142 and also consulted with RS 

Means staff. In addition, DOE was able 

to obtain installation costs disaggregated 

for households installing only a furnace 

versus installing both a furnace and air 

conditioner from the 2016 AHCS. For 

this final rule, the average incremental 

installation cost for a condensing NWGF 

in a retrofit installation was $539 (in 

2022$), which is consistent with the 

AHRI/ACCA/PHCC contractor survey 

and data provided by SoCalGas, as well 

as the other sources previously listed. 

Therefore, DOE concludes that the 

industry-supplied data support its 

installation cost methodology. 

e. Summary of Installation Costs 

Table IV.8 shows the fraction of 

installations impacted and the average 

cost for each of the installation cost 

adders in replacement applications (not 

including new owners). The estimates of 

the fraction of installations impacted 

were based on the furnace location 

(primarily derived from information in 

RECS 2020) and a number of other 

sources that are described in chapter 8 

of the final rule TSD. 

TABLE IV.8—ADDITIONAL INSTALLATION COSTS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS

FURNACES IN REPLACEMENT APPLICATIONS

Installation cost adder 

NWGFs MHGFs 

Replacement 

installations 

impacted 

(percent) 

Average cost 

(2022$) 

Replacement 

installations 

impacted 

(percent) 

Average cost 

(2022$) 

Non-Condensing Furnaces 

Updating Vent Connector ................................................................................ 23 $328 ........................ ........................

Updating Flue Vent * ........................................................................................ 8 990 100 $233 

Condensing Furnaces 

New Flue Venting (PVC) ................................................................................. 100 308 100 58 

Combustion Air Venting (PVC) ........................................................................ 62 324 100 58 

Concealing Vent Pipes .................................................................................... 5 603 ........................ ........................

Orphaned Water Heater .................................................................................. 7 806 ........................ ........................

Condensate Removal ...................................................................................... 100 92 100 163 

Multi-Family Adder ........................................................................................... 2 241 ........................ ........................

Mobile Home Adder ......................................................................................... ........................ ........................ 25 127 

* For a fraction of installations, this cost includes the commonly-vented water heater vent connector, chimney relining, and vent resizing. For 

mobile home gas furnaces, DOE assumed that flue venting has to be upgraded for all replacement installations. 

Table IV.9 shows the estimated 

fraction of new home installations 

impacted and the average cost for each 

of the adders. 

TABLE IV.9—ADDITIONAL INSTALLATION COSTS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS

FURNACES IN NEW CONSTRUCTION AND NEW OWNER APPLICATIONS

Installation cost adder 

NWGFs MHGFs 

New 

installations 

impacted 

(percent) 

Average cost 

(2022$) 

New 

installations 

impacted 

(percent) 

Average cost 

(2022$) 

Non-Condensing Furnaces 

New Flue Vent (Metal) * ................................................................................... 100 $1,835 100 $263 

Condensing Furnaces 

New Flue Venting (PVC) ................................................................................. 100 190 100 52 

Combustion Air Venting (PVC) ........................................................................ 66 358 100 52 

Concealing Vent Pipes * .................................................................................. 1 206 ........................ ........................

Orphaned Water Heater .................................................................................. 46 1,380 ........................ ........................


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143Steven Sorrell, et al., Empirical Estimates of 

the Direct Rebound Effect: A Review, 37 Energy 

Policy 1356–71 (2009) (available at: 

www.sciencedirect.com/science/article/pii/ 

S0301421508007131) (last accessed August 1, 

2023). 144Steven Nadel, ‘‘The Rebound Effect: Large or 

Small?’’ ACEEE White Paper (August 2012) 

(available at: www.aceee.org/files/pdf/white-paper/ 

rebound-large-and-small.pdf) (last accessed August 

1, 2023). 145Brinda Thomas and Ines Azevedo, Estimating 

Direct and Indirect Rebound Effects for U.S. 

Households with Input-Output Analysis, Part 1: 

Theoretical Framework, 86 Ecological Econ. 199– 

201 (2013) (available at: www.sciencedirect.com/ 

science/article/pii/S0921800912004764) (last 

accessed August 1, 2023). 146Lorna A. Greening, et al., Energy Efficiency 

and Consumption—The Rebound Effect—A Survey, 

28 Energy Policy 389–401 (2002) (available at: 

www.sciencedirect.com/science/article/pii/ 

S0301421500000215) (last accessed August 1, 

2023). 

147See: www.eia.gov/outlooks/aeo/nems/ 

documentation/residential/pdf/m067(2020).pdf 

(last accessed August 1, 2023). 148 DOE. Energy Conservation Program for Certain 

Industrial Equipment: Energy Conservation 

Standards for Small, Large, and Very Large AirCooled Commercial Package Air Conditioning and 

Heating Equipment and Commercial Warm Air 

Furnaces; Direct final rule. 81 FR 2419 (Jan. 15, 

2016) (available at: www.regulations.gov/document/ 

EERE–2013–BT–STD–0021–0055) (last accessed 

August 1, 2023). 

149 DOE. Energy Conservation Program: Energy 

Conservation Standards for Residential Boilers; 

Final rule. 81 FR 2319 (Jan. 15, 2016) (available at: 

www.regulations.gov/document/EERE–2012–BT– 

STD–0047–0078) (last accessed August 1, 2023). 

150 DOE. Energy Conservation Program: Energy 

Conservation Standards for Commercial Packaged 

Boilers; Final Rule. 85 FR 1592 (Jan. 10, 2020) 

(available at: www.regulations.gov/document/EERE2013-BT-STD-0030-0099) (last accessed August 1, 

2023). 

TABLE IV.9—ADDITIONAL INSTALLATION COSTS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS

FURNACES IN NEW CONSTRUCTION AND NEW OWNER APPLICATIONS—Continued 

Installation cost adder 

NWGFs MHGFs 

New 

installations 

impacted 

(percent) 

Average cost 

(2022$) 

New 

installations 

impacted 

(percent) 

Average cost 

(2022$) 

Condensate Removal ...................................................................................... 100 56 100 53 

* Applied to new owner installations only. 

3. Annual Energy Consumption 

For each sampled residential furnace 

installation, DOE determined the energy 

consumption for a NWGF or MHGF at 

different efficiency levels using the 

approach described previously in 

section IV.E of this document. 

Higher-efficiency furnaces reduce the 

operating costs for a consumer, which 

can lead to greater use of the furnace. A 

direct rebound effect occurs when a 

product that is made more efficient is 

used more intensively, such that the 

expected energy savings from the 

efficiency improvement may not fully 

materialize. At the same time, 

consumers benefit from increased 

utilization of products due to rebound. 

Overall consumer surplus (taking into 

account additional costs and benefits) is 

generally understood to increase from 

rebound. DOE examined a 2009 review 

of empirical estimates of the rebound 

effect for various energy-using 

products.143 This review concluded that 

the econometric and quasi-experimental 

studies suggest a mean value for the 

direct rebound effect for household 

heating of around 20 percent. DOE also 

examined a 2012 ACEEE paper 144 and 

a 2013 paper by Thomas and 

Azevedo.145 Both of these publications 

examined the same studies that were 

reviewed by Sorrell, as well as Greening 

et al.,146 and identified methodological 

problems with some of the studies. The 

studies believed to be most reliable by 

Thomas and Azevedo show a direct 

rebound effect for heating products in 

the 1-percent to 15-percent range, while 

Nadel concludes that a more likely 

range is 1 to 12 percent, with rebound 

effects sometimes higher for low-income 

households who could not afford to 

adequately heat their homes prior to 

weatherization. Based on DOE’s review 

of these recent assessments, DOE used 

a 15-percent rebound effect for NWGFs 

and MHGFs. This rebound is the same 

as assumed in EIA’s National Energy 

Modeling System (NEMS) for residential 

space heating.147 However, for 

commercial applications DOE applied 

no rebound effect, consistent with other 

recent energy conservation standards 

rulemakings.148 149 150

The LCC analysis considers increases 

in product and installation costs as well 

as decreases in operating costs, as 

directed by EPCA. In this analysis, DOE 

did not include the rebound effect in the 

LCC for the reasons that follow. Some 

households may increase their furnace 

use in response to increased efficiency, 

and as a result, not all households will 

realize the LCC savings represented in 

section V.B of this document. At the 

same time, those consumers will also 

experience a welfare gain from the 

increased utilization of the equipment, 

which has economic value. DOE 

includes rebound in the NIA for a 

conservative estimate of national energy 

savings and the corresponding impact to 

consumer NPV. See section IV.H of this 

document for further details. 

EPCA requires that in its evaluation of 

proposed energy conservation 

standards, DOE must consider the 

savings in operating costs throughout 

the estimated average life of the covered 

product in the type (or class) compared 

to any increase in the price of, or in the 

initial charges for, or maintenance 

expenses of, the covered products 

which are likely to result from the 

imposition of the standard. (42 U.S.C. 

6295(o)(2)(B)(i)(II)) That is, DOE must 

consider the savings resulting from 

operating a covered product that the 

consumer would purchase under the 

proposed standard and the costs that the 

consumer would realize from operating 

such a product, as compared to the costs 

that the consumer would realize from 

operating a product under the current 

standard. This consideration is to 

inform the determination of whether an 

amended standard would be 

economically justified. 

EPCA directs DOE to consider 

‘‘savings in operating costs’’ with no 

reference as to how DOE is to consider 

any potential increase in value provided 

to the consumer under a proposed 

standard. (See 42 U.S.C. 

6295(o)(2)(B)(i)(II)) In evaluating 

potential changes in the operating costs, 

DOE has considered the useful output of 

a furnace provided to the consumer. The 

rebound effect reflects a benefit directly 

realized by the consumer in the form of 

increased comfort. Were DOE to adopt 

an approach that did not include a value 

for the additional comfort provided by 

a more-efficient furnace, the economic 

benefits from the proposed standard 

would have been underestimated. DOE’s 

evaluation of the economic impact of a 

proposed standard would include the 

cost of additional fuel consumption 

resulting from the rebound effect, but 

would fail to recognize the additional 

welfare provided directly to the 

consumer from a NWGF or MHGF that 


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87570 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

151U.S. Department of Energy-Energy Information 

Administration, Form EIA–861M (formerly EIA– 

826) detailed data (2022) (available at: www.eia.gov/ 

electricity/data/eia861m/) (last accessed August 1, 

2023). 

152U.S. Department of Energy-Energy Information 

Administration, Natural Gas Navigator (2022) 

(available at: www.eia.gov/naturalgas/data.php) 

(last accessed August 1, 2023). 

153U.S. Department of Energy-Energy Information 

Administration, 2021 State Energy Data System 

(SEDS) (2021) (available at: www.eia.gov/state/seds/) 

(last accessed August 1, 2023). 

154 Gas Technology Institute (GTI) provided a 

reference located in the docket of DOE’s 2016 

rulemaking to develop energy conservation 

standards for residential boilers. (Docket No. EERE– 

2012–BT–STD–0047–0068) (available at: 

www.regulations.gov/document/EERE-2012-BTSTD-0047-0068) (last accessed August 1, 2023). 

155U.S. Department of Energy-Energy Information 

Administration, Annual Energy Outlook 2023 

(available at: www.eia.gov/outlooks/aeo/) (last 

accessed August 1, 2023). 

complies at the proposed efficiency 

level. 

In addition to the consideration 

required by 42 U.S.C. 

6295(o)(2)(B)(i)(II), EPCA directs DOE to 

consider the economic impact of the 

standard on manufacturers and on the 

consumers of the products subject to 

such standard. (42 U.S.C. 

6295(o)(2)(B)(i)(I)) The economic impact 

is not narrowly defined to include only 

costs related to energy consumption. 

The occurrence of a rebound effect 

demonstrates that consumers value the 

additional output (i.e., heat) as they are 

paying for the additional heat, and 

resulting increase in comfort, reflected 

in their energy bills. To quantify the 

effects of rebound, DOE estimates the 

economic and energy savings impact in 

the NIA. See chapter 10 of the final rule 

TSD for more details. 

4. Energy Prices 

A marginal energy price reflects the 

cost or benefit of adding or subtracting 

one additional unit of energy 

consumption. Because marginal 

electricity price more accurately 

captures the incremental savings 

associated with a change in energy use 

from higher efficiency, it provides a 

better representation of incremental 

change in consumer costs than average 

electricity prices. Therefore, DOE 

applied average electricity prices for the 

energy use of the product purchased in 

the no-new-standards case, and 

marginal electricity prices for the 

incremental change in energy use 

associated with the other efficiency 

levels considered. 

DOE derived average monthly 

marginal residential and commercial 

electricity, natural gas, and LPG prices 

for each State using data from 

EIA.151 152 153 DOE calculated marginal 

monthly regional energy prices by: (1) 

first estimating an average annual price 

for each region; (2) multiplying by 

monthly energy price factors, and (3) 

multiplying by seasonal marginal price 

factors for electricity, natural gas, and 

LPG. The analysis used historical data 

up to 2022 for residential and 

commercial natural gas and electricity 

prices and historical data up to 2021 for 

LPG prices. Further details may be 

found in chapter 8 of the final rule TSD. 

DOE compared marginal price factors 

developed by DOE from the EIA data to 

develop seasonal marginal price factors 

for 23 gas tariffs provided by the Gas 

Technology Institute for the 2016 

residential boilers energy conservation 

standards rulemaking.154 DOE found 

that the winter price factors used by 

DOE are generally comparable to those 

computed from the tariff data, 

indicating that DOE’s marginal price 

estimates are reasonable at average 

usage levels. The summer price factors 

are also generally comparable. Of the 23 

tariffs analyzed, eight have multiple 

tiers, and of these eight, six have 

ascending rates and two have 

descending rates. The tariff-based 

marginal factors use an average of the 

two tiers as the commodity price. A full 

tariff-based analysis would require 

information about the household’s total 

baseline gas usage (to establish which 

tier the consumer is in), and a weight 

factor for each tariff that determines 

how many customers are served by that 

utility on that tariff. These data are 

generally not available in the public 

domain. DOE’s use of EIA State-level 

data effectively averages overall 

consumer sales in each State, and so 

incorporates information from all 

utilities. DOE’s approach is, therefore, 

more representative of a large group of 

consumers with diverse baseline gas 

usage levels than an approach that uses 

only tariffs. 

DOE notes that within a State, there 

could be significant variation in the 

marginal price factors, including 

differences between rural and urban 

rates. In order to take this into account, 

DOE developed price factors for each 

individual household and building 

using the annual RECS 2020 and CBECS 

2018 energy cost and energy use data. 

These data are then normalized to 

match the average State price factors, 

which are equivalent to a consumptionweighted average price across all 

households in the State. For more 

details on the comparative analysis and 

energy price analysis, see appendix 8E 

of the final rule TSD. 

To estimate energy prices in future 

years, DOE multiplied the 2022 energy 

prices by the projection of annual 

average price changes for each of the 

nine Census Divisions from the 

Reference case in AEO2023, which has 

an end year of 2050.155 To estimate 

price trends after 2050, DOE used the 

average annual rate of change in prices 

from 2045 through 2050. DOE also 

conducted sensitivity analyses using 

lower and higher energy price 

projections. The impact of these 

alternative scenarios is shown in 

appendix 8K of the final rule TSD. 

NCLC and Joint Efficiency 

Commenters stated that DOE may be 

underestimating future costs of natural 

gas and, therefore, the energy savings 

from installing a more efficient furnace. 

(NCLC, No. 383 at pp. 6–7; Joint 

Efficiency Commenters, No. 381 at p. 3) 

In contrast, AGA claimed that DOE 

continues to utilize energy price 

projections with an upward bias, 

consistently overestimates future 

natural gas costs, and should utilize 

price distributions instead of a mean. 

(AGA, No. 405 at pp. 90–91) In 

response, DOE notes that projected 

energy price trends from AEO are the 

best available to DOE at the time of the 

analysis, and DOE does not have any 

persuasive evidence to suggest these 

projected energy prices are 

underestimated. There is no other data 

set on energy prices of which DOE is 

aware that is as comprehensive or 

nationally representative as that from 

EIA. Furthermore, AEO provides a 

projection of future energy prices based 

on comprehensive macroeconomic 

modeling. Near-term projections of 

energy prices (as used in the LCC) tend 

to be similar to today’s prices. The 

analysis does not use a single mean 

value, but rather the energy prices vary 

by State according to the input data. 

Finally, DOE conducts sensitivity 

analyses using high/low economic 

growth scenarios from AEO, which have 

higher/lower energy price trends. 

NYSERDA agreed that actual prices 

deviating from forecasted prices in a 

given year would not significantly 

change the analysis, especially over a 

30-year time frame, but recommended 

that DOE develop and publish forecast 

accuracy estimates for energy price 

projections. (NYSERDA, No. 379 at p. 

10) In response, DOE acknowledges the 

uncertainty in energy price projections, 

but calculating formal uncertainty 

parameters based on historical editions 

of AEO is not necessarily informative, 

due to the constantly evolving models 

and input data sets. Prior forecast 

accuracy is not necessarily reflective of 

current models. Instead, DOE addresses 

energy price projection uncertainty with 


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Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 87571 

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Fischer, D.B. Philips, R.L. Osbone, J.C. Cross, G.R. 

Whitacre, J.G. Murray, W.J. Sheppard, D.W. 

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II—Appendices (September 1994) Gas Research 

Institute, Report No. GRI–94/0175 (available at: 

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160U.S. Department of Energy: Energy 

Information Administration, Residential Energy 

Consumption Survey (‘‘RECS’’), Multiple Years 

(1990, 1993, 1997, 2001, 2005, 2009, 2015, and 

2020). (Available at www.eia.gov/consumption/ 

residential/) (last accessed August 1, 2023). 

161U.S. Census Bureau: Housing and Household 

Economic Statistics Division, American Housing 

Survey, Multiple Years (1974, 1975, 1976, 1977, 

1978, 1979, 1980, 1981, 1983, 1985, 1987, 1989, 

1991, 1993, 1995, 1997, 1999, 2001, 2003, 2005, 

2007, 2009, 2011, 2013, 2015, 2017, 2019, and 

2021). (Available at www.census.gov/programssurveys/ahs/) (last accessed August 1, 2023). 

162Air-Conditioning, Heating, and Refrigeration 

Institute, Non-Condensing and Condensing 

Regional Gas Furnace Shipments for 2010–2015, 

Confidential Data Provided to Navigant Consulting 

(Nov. 26, 2016). 

163U.S. Department of Energy: Energy 

Information Administration, Residential Energy 

Consumption Survey (‘‘RECS’’) (2020). (Available at 

www.eia.gov/consumption/residential/) (last 

accessed August 1, 2023). 

164U.S. Census Bureau: Housing and Household 

Economic Statistics Division, American Housing 

Survey, Multiple Years (2015–2021). (Available at 

www.census.gov/programs-surveys/ahs/) (last 

accessed August 1, 2023). 

165 Decision Analysts, 2006, 2008, 2010, 2013, 

2016, 2019, and 2022 American Home Comfort 

Studies. (Available at www.decisionanalyst.com/ 

Syndicated/HomeComfort/) (last accessed August 1, 

2023). 

the use of sensitivity scenarios, in 

particular the high- and low-economicgrowth sensitivity scenarios. These 

utilize alternative economic growth 

cases in AEO, as well as alternative 

energy price projections. The 

conclusions of the analysis remain the 

same regardless of the scenario. 

APGA commented that, given the 

need to greatly expand electricity 

infrastructure to meet electrification and 

clean electricity goals, it is dubious that 

AEO2021 relied on in the NOPR 

predicts residential electricity prices 

declining over the next 30 years. 

(APGA, No. 387 at p. 60) In response, 

DOE notes that the analysis has been 

updated with AEO2023, which projects 

increasing electricity prices in years 

beyond 2030. 

5. Maintenance and Repair Costs 

Repair costs are associated with 

repairing or replacing product 

components that have failed in an 

appliance; maintenance costs are 

associated with maintaining the 

operation of the product. 

DOE estimated maintenance costs for 

residential furnaces at each considered 

efficiency level using a variety of 

sources, including 2023 RS Means,156

manufacturer literature, and information 

from expert consultants. DOE estimated 

the frequency of annual maintenance 

using data from RECS 2020 and the 

2022 American Home Comfort Study.157

DOE accounted for the likelihood that 

condensing furnaces require more 

maintenance and repair than noncondensing furnaces by adding costs to 

check the secondary heat exchanger and 

condensate system (including regular 

replacement of the condensate 

neutralizer fill material). For repair 

costs, DOE included repair of the 

ignition, gas valve, controls, and 

inducer fan, as well as the furnace fan 

blower. For condensing repair costs, 

DOE assumed higher material repair 

costs for the ignition, gas valve, 

controls, inducer fan, and furnace fan 

blower, as well as replacing or repairing 

the condensate pump, if applicable. To 

determine the service lifetime of various 

components, DOE used a Gas Research 

Institute (‘‘GRI’’) study.158 For the 

considered standby mode and off mode 

standards, DOE assumed that no 

additional maintenance or repair is 

required. 

In order to validate DOE’s approach, 

DOE did a review of maintenance and 

repair costs available from a variety of 

sources, including online resources. 

Overall, DOE found that the 

maintenance and repair cost estimates 

applied in its analysis fall within the 

typical range of published maintenance 

and repair charges. 

For more details on DOE’s 

methodology for calculating 

maintenance and repair costs, including 

all online resources reviewed, see 

appendix 8F of the TSD for this final 

rule. 

6. Product Lifetime 

Product lifetime is the age at which an 

appliance is retired from service. DOE 

conducted an analysis of furnace 

lifetimes based on the methodology 

described in a recent journal paper.159

For this analysis, DOE relied on RECS 

1990, 1993, 2001, 2005, 2009, 2015, and 

2020.160 DOE also used the U.S. 

Census’s biennial American Housing 

Survey (‘‘AHS’’), from 1974–2021, 

which surveys all housing, noting the 

presence of a range of appliances.161

DOE used the appliance age data from 

these surveys, as well as the historical 

furnace shipments, to generate an 

estimate of the survival function. The 

survival function provides a lifetime 

range from minimum to maximum, as 

well as an average lifetime. DOE 

estimates the average product lifetime to 

be 21.5 years for NWGFs and MHGFs. 

This estimate is consistent with the 

range of values identified in a literature 

review, which included values from 16 

years to 23.6 years. 

To better account for differences in 

lifetime due to furnace utilization, DOE 

determined separate lifetimes for the 

North and rest of country (as identified 

in the shipments analysis) but only 

based on the difference in operating 

hours in the two regions. DOE assumed 

that equipment operated for fewer hours 

will have a longer service lifetime. DOE 

developed regional lifetime estimates by 

using regional shipments, RECS survey 

data, and AHS survey data and applying 

the methodology described above. More 

specifically, these data include AHRI 

shipments in the North and rest of 

country regions from 2010–2015,162

2020 RECS data,163 and 2015–2021 AHS 

data survey data.164 DOE also 

incorporated lifetime data from Decision 

Analysts AHCS from 2006, 2008, 2010, 

2013, 2016, 2019, and 2022.165 The 

average lifetime used in this final rule 

is 22.5 years in the North and 20.2 years 

in the rest of country for both NWGFs 

and MHGFs (national average is 21.5 

years). Consumer furnaces located in the 

North are generally higher capacity to 

meet the higher heating load, and, thus, 

can have lower operating hours. 

Additionally, furnace replacements in 

the rest of country are more likely to be 

linked to a paired central air 

conditioner. For these reasons, the 

consumer furnace lifetimes in the two 

regions differ slightly. DOE also 

conducted sensitivity analyses using a 

median lifetime of 16 years (low lifetime 

scenario) and 27 years (high lifetime 

scenario) for NWGFs and MHGFs (see 

appendix 8G in the TSD for this final 

rule). 

There is significant variation in the 

distribution of furnace lifetime, and 

DOE uses a Weibull distribution to 

account for this distribution of product 

failure. DOE accounts for this variation 

by projecting energy cost savings and 

health benefits through the final year of 

furnace lifetime for all products shipped 

in 2058 (i.e., through 2113). 


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Chapter 8 of the TSD for this final rule 

provides further details on the 

methodology and sources DOE used to 

develop furnace lifetimes. 

AGPA claimed that a more complex 

condensing furnace with more parts that 

could break down will have a shorter 

life. APGA asserted that appliance 

manufacturers have explained to DOE 

that condensing natural gas appliances 

are more complex than their baseline 

counterparts, so the likelihood that the 

condensing appliance will fail is greater 

than with a non-condensing appliance. 

(APGA, No. 387 at pp. 49–50) 

As described in more detail in 

appendix 8G of the final rule TSD, the 

historical lifetime data do not show any 

indication that condensing furnace 

lifetimes are significantly different from 

non-condensing furnaces. The historical 

data cover a time period during which 

condensing furnaces gained more 

significant market share. As described 

in section IV.F.5 of this document, DOE 

included additional repair and 

maintenance costs for condensing 

furnaces to account for the increased 

complexity of these products, which 

would cover minor component failures 

that do not necessitate replacing the 

furnace. 

APGA asserted that DOE made an 

absurd conclusion that the average 

lifetime used in this NOPR is 22.5 years 

in the North and 20.2 years in the rest 

of country for both NWGFs and MHGFs. 

APGA claims that where furnaces run 

longer and harder in the North, product 

lifetime should be shorter rather than 

longer. (APGA, No. 387 at p. 50) 

In response, DOE notes that although 

the heating load is higher in the North 

compared to the rest of country, furnace 

sizing is also typically much higher. As 

a result, burner operating hours are not 

necessarily higher in the North than the 

rest of country, due to the increased 

capacity, and, thus, the furnace is not 

necessarily ‘‘working harder’’ in the 

North as the commenter claims. 

Furthermore, furnaces in the rest of 

country are more likely to be paired 

with an air conditioner, and, thus, the 

air handler can have significantly higher 

operating hours than in the North. 

Therefore, the fact that the lifetime is 

slightly lower in the rest of country is 

a reasonable result. DOE also notes that, 

with a slightly shorter lifetime in the 

rest of country, which typically has 

lower furnace operating costs compared 

to the North, DOE’s estimates of LCC 

savings are, therefore, more conservative 

than if DOE had assumed a higher 

lifetime for the rest of country. 

AGA argued that DOE’s economic 

analysis is highly sensitive to 

equipment lifetime assumptions, but the 

assumed consumer furnace lifetime 

used in that analysis is neither 

reasonable nor justified. More 

specifically, AGA asserted that the LCC 

spreadsheet incorrectly assumes that all 

consumer gas furnaces have the same 

lifetime regardless of energy efficiency. 

According to the commenter, since 

condensing furnaces are subject to 

condensing, acidic water vapor, contain 

more parts, and are generally more 

complex, it is unreasonable to assume 

condensing furnaces would not have a 

shorter lifetime than non-condensing 

furnaces. Indeed, AGA argued that the 

shorter lifespan of condensing products 

is well documented by actual data and 

studies that the NOPR fails to confront. 

AGA presented an analysis using DOE’s 

LCC model spreadsheet that seeks to 

demonstrate that even modest changes 

in assumed equipment lifetime produce 

significant changes in the life-cycle cost 

savings. (AGA, No. 405 at pp. 67–70) 

In response, DOE conducted an 

analysis of the available data on furnace 

lifetime, including both condensing and 

non-condensing furnaces. As discussed 

in further detail in appendix 8G of the 

final rule TSD, DOE found no data to 

support a shorter lifetime for 

condensing furnaces, despite their 

generally more complex nature. DOE 

further notes that it presented 

sensitivity scenarios with alternative 

lifetime estimates in the NOPR TSD and 

does so again for the final rule TSD (see 

appendix 8G). With a shorter lifetime 

assumption, the average LCC savings are 

obviously not as large as DOE’s 

reference case. However, LCC savings at 

the adopted standard level remain 

positive, with a similar percentage of 

consumers experiencing net cost, and 

the relative comparison between the 

potential standard levels remain the 

same. Therefore, DOE’s conclusions 

regarding the economic justification for 

the rule remain unchanged, even under 

these scenarios with alternative 

lifetimes. 

APGA argued that including distant 

benefits beyond 2058 is contrary to the 

statute and that DOE should limit its 

evaluation of savings in operating costs 

to the period of the estimated average 

life of the covered product. (APGA, No. 

387 at p. 15) In response, DOE clarifies 

that the LCC analysis only considers the 

costs and operating savings throughout 

the estimated average life of the covered 

product. This is explicitly in line with 

the direction of the statute. (42 U.S.C. 

6295(o)(2)(B)(i)(II)) The commenter 

appears to be conflating the LCC with 

national impact analysis (NIA), which 

additionally considers the aggregated 

national impact of products shipped 

over a 30 year period (2029–2058), in 

order to evaluate the total projected 

energy savings and net present value of 

the rule. (42 U.S.C. 6295(o)(2)(B)(i)(III)) 

Products shipped in that final year will 

accrue costs and savings beyond 2058. 

Both the LCC and NIA are considered as 

part of the evaluation of economic 

justification of potential standards. 

MHI asserted that DOE’s assumption 

that the lifetime of a MHGF is the same 

as the lifetime of a manufactured home 

is incorrect, as the useful life of 

manufactured homes is increasing and 

is now equivalent to site-built housing 

for properly maintained homes. 

Therefore, MHI argued that 

manufactured homeowners will incur 

substantial costs when replacing their 

furnace that may be prohibitively 

expensive. MHI further argued that this 

could lead consumers to continue 

servicing old equipment rather than 

making improvements, which would 

negate any energy savings the potential 

standards under consideration might 

bring, as well as potentially increasing 

the risk of air quality concerns such as 

carbon monoxide exposure. (MHI, No. 

365 at p. 4) 

In response, DOE notes that its 

estimate of MHGF lifetime is 

approximately 21 years on average, 

which is the same as for NWGFs. It is 

not directly tied to the future life 

expectancy of a manufactured home. 

Additionally, DOE accounts for 

increased installation costs when 

replacing an existing MHGF in a 

manufactured home with a higherefficiency MHGF. This accounts for the 

situation described by the commenter in 

which the useful life of the 

manufactured home is longer and the 

MHGF is replaced. DOE also 

acknowledges that some consumers may 

choose to continue servicing an existing 

MHGF rather than replace it, and 

includes this effect in its repair vs. 

replace methodology. This will reduce 

energy savings to some degree, although 

eventually, the MHGF will ultimately 

need to be replaced. Finally, DOE 

assumes that any licensed professional 

servicing an existing MHGF will correct 

any leaks or potential safety issues and 

will not allow any unsafe operation of 

a MHGF to persist. 

7. Discount Rates 

In the calculation of LCC, DOE 

applies discount rates appropriate to 

households and commercial buildings 

to estimate the present value of future 

operating cost savings. The discount 

rate used in the LCC analysis represents 

the rate from an individual consumer’s 

perspective. DOE estimated a 

distribution of discount rates for 

NWGFs and MHGFs based on consumer 


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166The implicit discount rate is inferred from a 

consumer purchase decision between two otherwise 

identical goods with different first cost and 

operating cost. It is the interest rate that equates the 

increment of first cost to the difference in net 

present value of lifetime operating cost, 

incorporating the influence of several factors: 

transaction costs; risk premiums and response to 

uncertainty; time preferences; interest rates at 

which a consumer is able to borrow or lend. The 

implicit discount rate is not appropriate for the LCC 

analysis because it reflects a range of factors that 

influence consumer purchase decisions, rather than 

the opportunity cost of the funds that are used in 

purchases. 

167The Federal Reserve Board, Survey of 

Consumer Finances (1995, 1998, 2001, 2004, 2007, 

2010, 2013, 2016, and 2019) (available at: 

www.federalreserve.gov/econres/ scfindex.htm) (last 

accessed August 1, 2023). 

168 Damodaran Online, Data Page: Costs of Capital 

by Industry Sector (2022) (available at: 

pages.stern.nyu.edu/∼adamodar/) (last accessed 

August 1, 2023). 

financing costs and the opportunity cost 

of consumer funds for residential 

applications and cost of capital for 

commercial applications. 

DOE applies weighted average 

discount rates calculated from consumer 

debt and asset data, rather than marginal 

or implicit discount rates.166 DOE notes 

that the LCC does not analyze the 

appliance purchase decision, so the 

implicit discount rate is not relevant in 

this model. The LCC analysis estimates 

net present value over the lifetime of the 

product, so the appropriate discount 

rate will reflect the general opportunity 

cost of household funds, taking this 

time scale into account. Given the long 

time horizon modeled in the LCC, the 

application of a marginal interest rate 

associated with an initial source of 

funds is inaccurate. Regardless of the 

method of purchase, consumers are 

expected to continue to rebalance their 

debt and asset holdings over the LCC 

analysis period, based on the 

restrictions consumers face in their debt 

payment requirements and the relative 

size of the interest rates available on 

debts and assets. DOE estimates the 

aggregate impact of this rebalancing 

using the historical distribution of debts 

and assets. For commercial applications, 

DOE’s method views the purchase of a 

higher-efficiency appliance as an 

investment that yields a stream of 

energy cost savings. DOE derived the 

discount rates for the LCC analysis by 

estimating the cost of capital for 

companies or public entities that 

purchase consumer boilers. For private 

firms, the weighted-average cost of 

capital (WACC) is commonly used to 

estimate the present value of cash flows 

to be derived from a typical company 

project or investment. Most companies 

use both debt and equity capital to fund 

investments, so their cost of capital is 

the weighted average of the cost to the 

firm of equity and debt financing, as 

estimated from financial data for 

publicly-traded firms in the sectors that 

purchase consumer boilers. As discount 

rates can differ across industries, DOE 

estimates separate discount rate 

distributions for a number of aggregate 

sectors with which elements of the LCC 

building sample can be associated. 

To establish residential discount rates 

for the LCC analysis, DOE identified all 

relevant household debt or asset classes 

in order to approximate a consumer’s 

opportunity cost of funds related to 

appliance energy cost savings. DOE 

estimated the average percentage shares 

of the various types of debt and equity 

by household income group using data 

from the Federal Reserve Board’s 

triennial Survey of Consumer 

Finances 167 (SCF) for 1995, 1998, 2001, 

2004, 2007, 2010, 2013, 2016, and 2019. 

Using the SCF and other sources, DOE 

developed a distribution of rates for 

each type of debt and asset by income 

group to represent the rates that may 

apply in the year in which amended or 

new standards would take effect. DOE 

assigned each sample household a 

specific discount rate drawn from one of 

the distributions. DOE assigned each 

sample household a specific discount 

rate drawn from one of the distributions. 

DOE notes that the interest rate 

associated with the specific source of 

funds used to purchase a furnace (i.e., 

the marginal rate) is not the appropriate 

metric to measure the discount rate as 

defined for the LCC analysis. The 

marginal interest rate alone would only 

be the relevant discount rate if the 

consumer were restricted from rebalancing their debt and asset holdings 

(by redistributing debts and assets based 

on the relative interest rates available) 

over the entire time period modeled in 

the LCC analysis. The LCC is not 

analyzing a marginal decision; rather, it 

estimates net present value over the 

lifetime of the product, so, therefore, the 

discount rate needs to reflect the 

opportunity cost of both the money 

flowing in (through operating cost 

savings) and out (through upfront cost 

expenditures) of the net present value 

calculation. In the context of the LCC 

analysis, the consumer is not only 

discounting based on their opportunity 

cost of money spent today, but instead, 

they are additionally discounting the 

stream of future benefits. A consumer 

might pay for an appliance with cash, 

thereby forgoing investment of those 

funds into one of the interest earning 

assets to which they might have access. 

Alternatively, a consumer might pay for 

the initial purchase by going into debt, 

subject to the cost of capital at the 

interest rate relevant for that purchase. 

However, a consumer will also receive 

a stream of future benefits in terms of 

annual operating cost savings that they 

could either put towards paying off that 

or other debts, or towards assets, 

depending on the restrictions they face 

in their debt payment requirements and 

the relative size of the interest rates on 

their debts and assets. All of these 

interest rates are relevant in the context 

of the LCC analysis, as they all reflect 

direct costs of borrowing, or opportunity 

costs of money either now or in the 

future. Additionally, while a furnace 

itself is not a readily tradable 

commodity, the money used to purchase 

it and the annual operating cost savings 

accruing to it over time flow from and 

to a household’s pool of debt and assets, 

including mortgages, mutual funds, 

money market accounts, etc. Therefore, 

the weighted-average interest rate on 

debts and assets provides a reasonable 

estimate for a household’s opportunity 

cost (and discount rate) relevant to 

future costs and savings. The best proxy 

for this re-optimization of debt and asset 

holdings over the lifetime of the LCC 

analysis is to assume that the 

distribution of debts and assets in the 

future will be proportional to the 

distribution of debts and assets 

historically. Given the long time horizon 

modeled in the LCC, the application of 

a marginal rate alone would be 

inaccurate. DOE’s methodology for 

deriving residential discount rates is in 

line with the weighted-average cost of 

capital used to estimate commercial 

discount rates. The average rate in this 

final rule analysis across all types of 

household debt and equity and across 

all income groups, weighted by the 

shares of each type, is 4.0 percent for 

NWGFs and 4.5 percent for MHGFs. 

To establish commercial discount 

rates for the small fraction of NWGFs 

installed in commercial buildings, DOE 

estimated the weighted-average cost of 

capital using data from Damodaran 

Online.168 The weighted-average cost of 

capital is commonly used to estimate 

the present value of cash flows to be 

derived from a typical company project 

or investment. Most companies use both 

debt and equity capital to fund 

investments, so their cost of capital is 

the weighted average of the cost to the 

firm of equity and debt financing. DOE 

estimated the cost of equity using the 

capital asset pricing model, which 

assumes that the cost of equity for a 

particular company is proportional to 

the systematic risk faced by that 

company. DOE’s commercial discount 

rate approach is based on the 


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169Fujita, K. Sydny. Commercial, Industrial, and 

Institutional Discount Rate Estimation for Efficiency 

Standards Analysis: Sector-Level Data 1998–2022. 

2023. (Available at: eta-publications.lbl.gov/ 

publications/commercial-industrial-and-2) (last 

accessed August 1, 2023). 

170The market share of furnaces with AFUE 

between 80 and 90 percent is well below 1 percent 

due to the very high installed cost of 81-percent 

AFUE furnaces, compared with condensing designs, 

and concerns about safety of operation. AHRI also 

provided national shipments data (not 

disaggregated by region) by efficiency for 1975, 

1978, 1980, 1983–1991, and 1993. 

171Air-Conditioning, Heating, and Refrigeration 

Institute (formerly Gas Appliance Manufacturers 

Association), Updated Shipments Data for 

Residential Furnaces and Boilers (April 25, 2005) 

(available at www.regulations.gov/document/EERE2006-STD-0102-0138) (last accessed August 1, 

2023). 

172Air-Conditioning, Heating, and Refrigeration 

Institute, Non-Condensing and Condensing 

Regional Gas Furnace Shipments for 2004–2009 

Data Provided to DOE (July 20, 2010). 

173Air-Conditioning, Heating, and Refrigeration 

Institute, Non-Condensing and Condensing Gas 

Furnace Shipments for 2010–2014. (Available at 

www.regulations.gov/document/EERE-2014-BTSTD-0031-0052) (last accessed August 1, 2023). 

174Air-Conditioning, Heating, and Refrigeration 

Institute, Non-Condensing and Condensing 

Regional Gas Furnace Shipments for 2010–2015, 

Confidential Data Provided to Navigant Consulting 

(Nov. 26, 2016). 

175Heating, Air-conditioning and Refrigeration 

Distributors International (HARDI), DRIVE portal 

(HARDI Visualization Tool managed by D+R 

International until 2022), proprietary Gas Furnace 

Shipments Data from 2013–2022 provided to 

Lawrence Berkeley National Laboratory (LBNL). 

176 DOE did not use the data for 2008–2011 

because these data appear to be influenced by 

incentives. AHRI also stated the period from 2008 

through 2011 was an outlier. (AHRI, No. 303 at pp. 

23–25). 

177The Energy Policy Act of 2005 established the 

tax credit for energy improvements to existing 

homes. The credit was originally limited to 

purchases made in 2006 and 2007, with an 

aggregate cap of $500 for all qualifying purchases 

made in these two years combined. For 

improvements made in 2009 and 2010, the cap was 

increased to $1,500. This coincides with a sharp 

increase in condensing furnace shipments. This 

credit has since been renewed several times, but the 

credit was reduced to its original form and original 

cap of $500 starting in 2011. More information is 

available at www.energy.gov/savings/dsire-page 

(last accessed August 1, 2023). 

methodology described in a LBNL 

report, and the distribution varies by 

business activity.169 The average rate for 

NWGFs used in commercial 

applications in this final rule analysis, 

across all business activity, is 6.7 

percent. 

See chapter 8 and appendix 8H of the 

final rule TSD for further details on the 

development of consumer and 

commercial discount rates. 

8. Energy Efficiency Distribution in the 

No-New-Standards Case 

To accurately estimate the share of 

consumers that would be affected by a 

potential energy conservation standard 

at a particular efficiency level, DOE’s 

LCC analysis considered the projected 

distribution (i.e., market shares) of 

product efficiencies under the no-newstandards case (i.e., the case without 

amended or new energy conservation 

standards) in the compliance year 

(2029). This approach reflects the fact 

that some consumers may purchase 

products with efficiencies greater than 

the baseline levels, such that even in a 

no-new-standards case, consumers will 

be purchasing higher-efficiency 

furnaces. 

To estimate the effect of a potential 

standard, DOE must estimate not only 

the expected market share of products at 

varying efficiencies, but also estimate 

how such products will be used—that 

is, in what buildings. The base case 

reflects three analytical steps: (1) an 

estimate of the buildings likely to use 

furnaces, (2) an estimate of the 

efficiency of the furnaces that would be 

sold absent the rule; and (3) the 

matching of particular furnace 

efficiencies with particular building 

types. 

Each building in the sample was 

assigned a furnace efficiency sampled 

from the no-new-standards-case 

efficiency distribution for the 

appropriate product class, either 

NWGFs or MHGFs. In assigning furnace 

efficiencies, DOE determined that, based 

on the presence of well-understood 

market failures (discussed at the end of 

this section), a random assignment of 

efficiencies, with some modifications 

discussed below, best accounts for 

consumer behavior in the consumer 

furnaces market. Random assignment of 

efficiencies reflects the full range of 

consumer behaviors in this market, 

including consumers who make 

economically beneficial decisions and 

consumers that, due to market failures, 

do not make such economically 

beneficial decisions. 

The LCC Monte Carlo simulations 

draw from the efficiency distributions 

and randomly assign an efficiency to the 

consumer furnaces purchased by each 

sample household and commercial 

building in the no-new-standards case. 

The resulting percentage shares within 

the sample match the market shares in 

the efficiency distributions. But, as 

mentioned previously, DOE considered 

available data in determining whether 

any modifications should be made to 

the random assignment methodology, as 

discussed in the following sections. 

a. Condensing Furnace Market Share in 

Compliance Year 

To estimate the efficiency distribution 

of NWGFs and MHGFs in 2029, DOE 

considered the market trends regarding 

increased sales of high-efficiency 

furnaces (including any available 

incentives). DOE relied on data 

provided by AHRI on historical 

shipments for each product class. DOE 

reviewed AHRI data from 1992 and 

1994–2003 (which includes both NWGF 

and MHGF shipments data), detailing 

the market shares of non-condensing 170

and condensing (90-percent AFUE and 

greater) furnaces by State.171 AHRI also 

provided data for non-condensing and 

condensing furnace shipments by region 

for 2004–2009 172 and nationally for 

2010–2014.173 AHRI additionally 

submitted proprietary data including 

shipments of condensing and noncondensing furnaces in the North and 

rest of country regions from 2010 to 

2015.174 DOE also obtained 2013–2022 

HARDI shipments data by efficiency for 

most States.175 AHRI and HARDI data 

capture different fractions of the market. 

Using the shipments data from AHRI 

and HARDI, DOE derived historical 

trends for each State. DOE used the 

HARDI State-level data (2013–2022) to 

project the trends and to estimate the 

condensing furnace market share in 

2029. This excludes years with a 

Federal tax incentive 176 177 in order to 

better reflect the trends of the current 

market. The maximum share of 

condensing furnace shipments for each 

region was assumed to be 95 percent, in 

order to reflect a small fraction of the 

market that would continue to install 

non-condensing furnaces. See chapter 8 

and appendix 8I of the TSD for this final 

rule for further information on the 

derivation of the efficiency distribution 

projections. 

APGA argued that DOE used 

insufficient shipments data to estimate 

the share of condensing furnaces in the 

country, relying only on data from 

2010–2014, and as a result, there is 

considerable reason to doubt the results 

of the analysis. (APGA, No. 387 at p. 13) 

In response, DOE notes that the 

commenter misunderstands the 

analysis. As detailed above, DOE 

utilizes significantly more historical 

shipment data than only 2010–2014, 

data which are disaggregated by 

efficiency in order to estimate the 

current and projected market share of 

condensing furnaces in the no-newstandards case. In particular, DOE 

includes shipment data by efficiency up 

to 2022 in its analysis. 

b. Market Shares of Different 

Condensing Furnace Efficiency Levels 

DOE used data on the shipments by 

efficiency from the 2013–2022 HARDI 

shipments to disaggregate the 

condensing furnace shipments among 


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the different condensing efficiency 

levels. Based on stakeholder input, DOE 

assumed that the fraction of furnace 

shipments of 95-percent or higher AFUE 

would be double in the new 

construction market. DOE also assumed 

that the fraction of furnace shipments of 

95-percent or higher AFUE would be 

higher in the North compared to the 

South, because the threshold for 

ENERGY STAR designation in the North 

is 95-percent AFUE compared to 90- 

percent AFUE in the South. The 

resulting distributions were then used to 

assign the new furnace AFUE for each 

sampled household or building in the 

no-new-standards case, both in the 

replacement and new construction 

markets, and in each of the 50 States 

and Washington, DC. 

The estimated market shares by region 

(North and rest of country) and market 

segment (replacement and new 

construction) for the no-new-standards 

case for NWGFs and MHGFs in 2029 are 

shown in Tables IV.11 and IV.12 of this 

document, respectively. DOE estimated 

that the national market share of 

condensing products would be 61 

percent in 2029 for NWGFs, and 34 

percent for MHGFs. See chapter 8 and 

appendix 8I of the final rule TSD for 

further information on the derivation of 

the efficiency distributions. 

TABLE IV—10 AFUE EFFICIENCY DISTRIBUTION IN THE NO-NEW-STANDARDS CASE FOR NON-WEATHERIZED GAS

FURNACES

Efficiency, AFUE 

(percent) 

2029 Market share 

(percent) 

North, repl North, new South, repl South, new 

Residential Market 

80 ..................................................................................................................... 25.0 15.9 67.8 33.9 

90 ..................................................................................................................... 0.4 0.2 0.1 0.1 

92 ..................................................................................................................... 17.9 19.9 10.6 23.5 

95 ..................................................................................................................... 55.3 62.4 20.2 39.4 

98 ..................................................................................................................... 1.4 1.5 1.3 3.2 

Commercial Market 

80 ..................................................................................................................... 22.3 11.8 67.5 34.0 

90 ..................................................................................................................... 1.7 0.0 0.0 0.0 

92 ..................................................................................................................... 17.8 17.6 11.9 17.0 

95 ..................................................................................................................... 58.3 70.6 20.6 44.7 

98 ..................................................................................................................... 0.0 0.0 0.0 4.3 

All 

80 ..................................................................................................................... 24.8 15.6 67.8 33.9 

90 ..................................................................................................................... 0.5 0.2 0.1 0.1 

92 ..................................................................................................................... 17.8 19.7 10.7 23.2 

95 ..................................................................................................................... 55.5 63.1 20.2 39.6 

98 ..................................................................................................................... 1.4 1.4 1.2 3.2 

Note: ‘‘Repl’’ means ‘‘replacement,’’ and ‘‘New’’ means ‘‘new construction.’’ 

TABLE IV—11 AFUE EFFICIENCY DISTRIBUTION IN THE NO-NEW-STANDARDS CASE FOR MOBILE HOME GAS FURNACES

Efficiency, AFUE 

(percent) 

2029 Market share 

(percent) 

North, repl North, new South, repl South, new 

80 ..................................................................................................................... 58.2 57.2 83.7 85.2 

90 ..................................................................................................................... 0.0 0.0 0.0 0.0 

92 ..................................................................................................................... 9.4 9.1 5.5 4.8 

95 ..................................................................................................................... 31.3 32.2 8.7 8.7 

96 ..................................................................................................................... 1.1 1.5 2.0 1.3 

Note: ‘‘Repl’’ means ‘‘replacement,’’ and ‘‘New’’ means ‘‘new construction.’’ 

MHI argued that manufactured homes 

already offer high-efficiency options, 

and that over 30 percent of 

manufactured homes meet or exceed 

EnergyStar Standards (MHI, No. 365 at 

p. 2) 

The DCA commented that consumers 

are already installing higher-efficiency 

furnaces across the country. (DCA, No. 

372 at p. 1) NYSERDA similarly stated 

that the proposed standard’s efficiency 

levels are already being met by a 

significant share of the New York 

market. (NYSERDA, No. 379 at p. 1) 

CEC commented that furnaces capable 

of meeting the proposed standards are 

already commercially available on the 

market, and that condensing furnaces 

have been required in Canada for over 

a decade. (CEC, No. 382 at p. 2) 

In response, DOE acknowledges that 

some consumers are already purchasing 

furnaces at an efficiency level equal to 

or greater than the standard level 

proposed in the NOPR and accounts for 

these consumers in the analysis. Such 

consumers are not impacted by the rule 

and are not included in the estimate of 

average LCC savings. As the 

commenters suggest, the availability of 

these high-efficiency furnaces on the 

market demonstrates their technological 

feasibility in the context of DOE’s 


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178 Gas Technology Institute (GTI), Empirical 

Analysis of Natural Gas Furnace Sizing and 

Operation, GTI–16/0003 (November 2016) 

(available at: www.regulations.gov/document/EERE2014-BT-STD-0031-0309) (last accessed August 1, 

2023). 

179 Decision Analysts, 2019 American Home 

Comfort Studies (available at: 

www.decisionanalyst.com/Syndicated/ 

HomeComfort/) (last accessed August 1, 2023). 

180Ward, D.O., Clark, C.D., Jensen, K.L., Yen, 

S.T., & Russell, C.S. (2011): ‘‘Factors influencing 

willingness-to pay for the ENERGY STAR® label,’’ 

Energy Policy, 39 (3), 1450–1458 (available at: 

www.sciencedirect.com/science/article/abs/pii/ 

S0301421510009171) (last accessed August 1, 

2023). 

consideration of amended energy 

conservation standards for NWGFs and 

MHGFs pursuant to EPCA at a national 

level. 

c. Assignment of Furnace Efficiency to 

Sampled Households 

For this final rule, DOE continued to 

assign furnace efficiency to households 

in the no-new-standards case in two 

steps, first at the State level, then at the 

building-specific level. However, DOE’s 

approach was modified to include other 

household characteristics. The market 

share of each efficiency level at the State 

level is based on historical shipments 

data (from the 2013–2022 HARDI data) 

and an estimated projection of trends 

between 2022 and the compliance year. 

The furnace efficiency distribution is 

then allocated to specific RECS 

households or CBECS, according to the 

market shares generated for each State. 

In some States, the market share of 

condensing furnaces is very high, and, 

therefore, most households in that State 

in the LCC analysis will be assigned a 

condensing furnace in the no-newstandards case. If a household is 

assigned a condensing furnace in the 

no-new-standards case, the replacement 

furnace is assumed to be condensing as 

well. 

To assign the efficiency at the 

building-specific level, DOE carefully 

considered any available data that might 

improve assignment of furnace 

efficiency in the LCC analysis. First, 

DOE examined the 2013–2022 HARDI 

data of gas furnace input capacity by 

efficiency level and region. DOE did not 

find a significant correlation between 

input capacity and condensing furnace 

market share in a given region, a 

correlation that might be expected a 

priori since buildings with larger 

furnace input capacity are more likely to 

be larger and have greater energy 

consumption. DOE next considered the 

GTI data submitted to DOE for 21 

Illinois households, which included the 

efficiency of the furnace (AFUE), size of 

the furnace (input capacity), square 

footage of the house, and annual energy 

use.178 Recognizing the relatively small 

sample size, DOE notes that these data 

exhibit no significant correlations 

between furnace efficiency and other 

household characteristics (with most 

furnace installations in this sample 

being non-condensing furnaces with 

high energy use). DOE also considered 

other data of furnace efficiency 

compared to household characteristics 

for other parts of the country, including 

the NEEA Database and permit data (see 

appendix 8I of the TSD for this final 

rule for more details). These data also 

suggest little to no correlation between 

furnace efficiency and household 

characteristics or economic factors. 

Finally, DOE considered the 2019 AHCS 

survey data.179 This survey includes 

questions to recent purchasers of HVAC 

equipment regarding the perceived 

efficiency of their equipment (Standard, 

High, and Super-High Efficiency), as 

well as questions related to various 

household and demographic 

characteristics. From these data, DOE 

did find a statistically significant, albeit 

weak, correlation: Households with 

larger square footage exhibited a slightly 

higher fraction of High or Super-High 

efficiency equipment installed. 

Specifically, the lower third of the 

square footage bins was five percent less 

likely to install higher efficiency units 

as compared to the middle third of the 

square footage bins, while the upper 

third of square footage bins was five 

percent more likely to do so than the 

middle square footage bin. Therefore, 

DOE used the AHCS data to adjust its 

furnace efficiency distributions as 

follows: (1) the market share of 

condensing equipment for households 

under 1,500 sq. ft. was decreased by five 

percentage points; and (2) the market 

share of condensing equipment for 

households above 2,500 sq. ft. was 

increased by five percentage points; 

however, DOE continued to maintain 

the same aggregate State-level efficiency 

distribution. For example, if a given 

State has a condensing market share of 

50 percent based on the shipments data, 

the probability of any one household in 

that State being assigned a condensing 

furnace in the no-new-standards case is 

50 percent. However, if the household is 

larger than 2,500 sq. ft., that probability 

increases to 55 percent instead. This 

adjustment preferentially assigns 

condensing furnaces within a given 

State to larger households (with 

presumably larger energy consumption) 

in the no-new-standards case, and 

preferentially assigns non-condensing 

furnaces to smaller households. This 

adjustment results in a more 

conservative estimate of potential 

energy savings. 

Beyond this adjustment of the 

probability distribution, which is 

bounded by the shipments data, the 

assignment of furnace efficiency to a 

given household is performed according 

to the random-assignment method 

described in this section. 

While DOE acknowledges that 

economic factors may play a role when 

consumers, commercial building 

owners, or builders decide on what type 

of furnace to install, assignment of 

furnace efficiency for a given 

installation, based solely on economic 

measures such as life-cycle cost or 

simple payback period most likely 

would not fully and accurately reflect 

actual real-world installations. There are 

a number of market failures discussed in 

the economics literature, as discussed in 

the July 2022 NOPR and summarized 

below, that illustrate how purchasing 

decisions with respect to energy 

efficiency are unlikely to be perfectly 

correlated with energy use, as described 

subsequently. DOE maintains that the 

method of assignment, which is in part 

random, is a reasonable approach. It 

simulates behavior in the furnace 

market, where market failures result in 

purchasing decisions not being perfectly 

aligned with economic interests, and it 

does so more realistically than relying 

only on apparent cost-effectiveness 

criteria derived from the limited 

information in CBECS or RECS. DOE 

further emphasizes that its approach 

does not assume that all purchasers of 

furnaces make economically irrational 

decisions (i.e., the lack of a correlation 

is not the same as a negative 

correlation). As part of the random 

assignment, some homes or buildings 

with large heating loads will be assigned 

higher-efficiency furnaces, and some 

homes or buildings with particularly 

low heating loads will be assigned 

baseline furnaces, which aligns with the 

available data. By using this approach, 

DOE acknowledges the uncertainty 

inherent in the data and minimizes any 

bias in the analysis by using random 

assignment, as opposed to assuming 

certain market conditions that are 

unsupported by the available evidence. 

The following discussion provides 

more detail about the various market 

failures that affect consumer furnace 

purchases. First, consumers are 

motivated by more than simple financial 

trade-offs. There are consumers who are 

willing to pay a premium for more 

energy-efficient products because they 

are environmentally conscious.180 There 

are also several behavioral factors that 

can influence the purchasing decisions 


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181Thaler, R.H., Sunstein, C.R., and Balz, J.P. 

(2014). ‘‘Choice Architecture’’ in The Behavioral 

Foundations of Public Policy, Eldar Shafir (ed). 

182Thaler, R.H., and Bernartzi, S. (2004). ‘‘Save 

More Tomorrow: Using Behavioral Economics in 

Increase Employee Savings,’’ Journal of Political 

Economy 112(1), S164–S187. See also Klemick, H., 

et al. (2015) ‘‘Heavy-Duty Trucking and the Energy 

Efficiency Paradox: Evidence from Focus Groups 

and Interviews,’’ Transportation Research Part A: 

Policy & Practice, 77, 154–166 (providing evidence 

that loss aversion and other market failures can 

affect otherwise profit-maximizing firms). 

183Thaler, R.H., and Sunstein, C.R. (2008). 

Nudge: Improving Decisions on Health, Wealth, and 

Happiness. New Haven, CT: Yale University Press. 

184 Davis, L.W., and G.E. Metcalf (2016): ‘‘Does 

better information lead to better choices? Evidence 

from energy-efficiency labels,’’ Journal of the 

Association of Environmental and Resource 

Economists, 3(3), 589–625 (available at: 

www.journals.uchicago.edu/doi/full/10.1086/ 

686252) (last accessed August 1, 2023). 

185Attari, S.Z., M.L. DeKay, C.I. Davidson, and W. 

Bruine de Bruin (2010): ‘‘Public perceptions of 

energy consumption and savings.’’ Proceedings of 

the National Academy of Sciences 107(37), 16054– 

16059 (available at: www.pnas.org/content/107/37/ 

16054) (last accessed August 1, 2023). 

186Houde, S. (2018): ‘‘How Consumers Respond 

to Environmental Certification and the Value of 

Energy Information,’’ The RAND Journal of 

Economics, 49 (2), 453–477 (available at: 

onlinelibrary.wiley.com/doi/full/10.1111/1756– 

2171.12231) (last accessed August 1, 2023). 

of complicated multi-attribute products, 

such as furnaces. For example, 

consumers (or decision makers in an 

organization) are highly influenced by 

choice architecture, defined as the 

framing of the decision, the surrounding 

circumstances of the purchase, the 

alternatives available, and how they are 

presented for any given choice 

scenario.181 The same consumer or 

decision maker may make different 

choices depending on the characteristics 

of the decision context (e.g., the timing 

of the purchase, competing demands for 

funds), which have nothing to do with 

the characteristics of the alternatives 

themselves or their prices. Consumers 

or decision makers also face a variety of 

other behavioral phenomena including 

loss aversion, sensitivity to information 

salience, and other forms of bounded 

rationality.182 Thaler, who won the 

Nobel Prize in Economics in 2017 for 

his contributions to behavioral 

economics, and Sunstein point out that 

these behavioral factors are strongest 

when the decisions are complex and 

infrequent, when feedback on the 

decision is muted and slow, and when 

there is a high degree of information 

asymmetry.183 These characteristics 

describe almost all purchasing 

situations of appliances and equipment, 

including furnaces. The installation of a 

new or replacement furnace is done 

very infrequently, as evidenced by the 

mean lifetime of 21.5 years for NWGFs 

and MHGFs. Additionally, it would take 

at least one full heating season for any 

impacts on operating costs to be fully 

apparent. Further, if the purchaser of 

the furnace is not the entity paying the 

energy costs (e.g., a building owner and 

tenant), there may be little to no 

feedback on the purchase. Additionally, 

there are systematic market failures that 

are likely to contribute further 

complexity to how products are chosen 

by consumers, as explained in the 

following paragraphs. The first of these 

market failures—the split-incentive or 

principal-agent problem—is likely to 

affect furnaces more than many other 

types of appliances. The principal-agent 

problem is a market failure that results 

when the consumer that purchases the 

equipment does not internalize all of the 

costs associated with operating the 

equipment. Instead, the user of the 

product, who has no control over the 

purchase decision, pays the operating 

costs. There is a high likelihood of splitincentive problems in the case of rental 

properties where the landlord makes the 

choice of what furnace to install, 

whereas the renter is responsible for 

paying energy bills. In the LCC sample, 

18.1 percent of households with a 

NWGF and 19.8 percent of households 

with a MHGF are renters. These 

fractions are significantly higher for 

low-income households (see section 

IV.I.1 of this document). In new 

construction, builders influence the 

type of furnace used in many homes but 

do not pay operating costs. Finally, 

contractors install a large share of 

furnaces in replacement situations, and 

they can exert a high degree of influence 

over the type of furnace purchased. 

In addition to the split-incentive 

problem, there are other market failures 

that are likely to affect the choice of 

furnace efficiency made by consumers. 

For example, emergency replacements 

of essential equipment such as a furnace 

in the heating season are strongly biased 

toward like-for-like replacement (i.e., 

replacing the non-functioning 

equipment with a similar or identical 

product). Time is a constraining factor 

during emergency replacements, and 

consumers may not consider the full 

range of available options on the market, 

despite their availability. The 

consideration of alternative product 

options is far more likely for planned 

replacements and installations in new 

construction. 

Additionally, Davis and Metcalf 184

conducted an experiment demonstrating 

that the nature of the information 

available to consumers from 

EnergyGuide labels posted on air 

conditioning equipment results in an 

inefficient allocation of energy 

efficiency across households with 

different usage levels. Their findings 

indicate that households are likely to 

make decisions regarding the efficiency 

of the climate-control equipment of 

their homes that do not result in the 

highest net present value for their 

specific usage pattern (i.e., their 

decision is based on imperfect 

information and, therefore, is not 

necessarily optimal). Also, most 

consumers did not properly understand 

the labels (specifically whether energy 

consumption and cost estimates were 

national averages or specific to their 

State). As such, consumers did not make 

the most informed decisions. 

In part because of the way 

information is presented, and in part 

because of the way consumers process 

information, there is also a market 

failure consisting of a systematic bias in 

the perception of equipment energy 

usage, which can affect consumer 

choices. Attari et al.185 show that 

consumers tend to underestimate the 

energy use of large energy-intensive 

appliances (such as central air 

conditioners), but overestimate the 

energy use of small appliances. 

Therefore, it is possible that consumers 

systematically underestimate the energy 

use associated with furnaces, resulting 

in less cost-effective furnace purchases. 

These market failures affect a sizeable 

share of the consumer population. A 

study by Houde 186 indicates that there 

is a significant subset of consumers that 

appear to purchase appliances without 

taking into account their energy 

efficiency and operating costs at all. 

There are market failures relevant to 

furnaces installed in commercial 

applications as well. It is often assumed 

that because commercial and industrial 

customers are businesses that have 

trained or experienced individuals 

making decisions regarding investments 

in cost-saving measures, some of the 

commonly observed market failures 

present in the general population of 

residential customers should not be as 

prevalent in a commercial setting. 

However, there are many characteristics 

of organizational structure and historic 

circumstance in commercial settings 

that can lead to underinvestment in 

energy efficiency. 

First, a recognized problem in 

commercial settings is the principalagent problem, where the building 

owner (or building developer) selects 

the equipment and the tenant (or 

subsequent building owner) pays for 


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energy costs.187 188 Indeed, more than a 

quarter of commercial buildings in the 

CBECS 2018 sample are occupied at 

least in part by a tenant, not the 

building owner (indicating that, in 

DOE’s experience, the building owner 

likely is not responsible for paying 

energy costs). Additionally, some 

commercial buildings have multiple 

tenants. There are other similarly 

misaligned incentives embedded in the 

organizational structure within a given 

firm or business that can impact the 

choice of a furnace. For example, if one 

department or individual within an 

organization is responsible for capital 

expenditures (and therefore equipment 

selection) while a separate department 

or individual is responsible for paying 

the energy bills, a market failure similar 

to the principal-agent problem can 

result.189 Additionally, managers may 

have other responsibilities and often 

have other incentives besides operating 

cost minimization, such as satisfying 

shareholder expectations, which can 

sometimes be focused on short-term 

returns.190 Decision-making related to 

commercial buildings is highly complex 

and involves gathering information from 

and for a variety of different market 

actors. It is common to see conflicting 

goals across various actors within the 

same organization, as well as 

information asymmetries between 

market actors in the energy efficiency 

context in commercial building 

construction.191

Second, the nature of the 

organizational structure and design can 

influence priorities for capital 

budgeting, resulting in choices that do 

not necessarily maximize 

profitability.192 Even factors as simple 

as unmotivated staff or lack of prioritysetting and/or a lack of a long-term 

energy strategy can have a sizable effect 

on the likelihood that an energyefficient investment will be 

undertaken.193 U.S. tax rules for 

commercial buildings may incentivize 

lower capital expenditures, since capital 

costs must be depreciated over many 

years, whereas operating costs can be 

fully deducted from taxable income or 

passed through directly to building 

tenants.194

Third, there are asymmetric 

information and other potential market 

failures in financial markets in general, 

which can affect decisions by firms with 

regard to their choice among alternative 

investment options, with energy 

efficiency being one such option.195

Asymmetric information in financial 

markets is particularly pronounced with 

regard to energy efficiency 

investments.196 There is a dearth of 

information about risk and volatility 

related to energy-efficiency investments, 

and energy efficiency investment 

metrics may not be as visible to 

investment managers,197 which can bias 

firms towards more certain or familiar 

options. This market failure results not 

because the returns from energy 

efficiency as an investment are 

inherently riskier, but because 

information about the risk itself tends 

not to be available in the same way it 

is for other types of investment, like 

stocks or bonds. In some cases, energy 

efficiency is not a formal investment 

category used by financial managers, 

and if there is a formal category for 

energy efficiency within the investment 

portfolio options assessed by financial 

managers, they are seen as weakly 

strategic and not seen as likely to 

increase competitive advantage.198 This 

information asymmetry extends to 

commercial investors, lenders, and realestate financing, which is biased against 

new and perhaps unfamiliar technology 

(even though it may be economically 

beneficial).199 Another market failure 

known as the first-mover disadvantage 

can exacerbate this bias against adopting 

new technologies, as the successful 

integration of new technology in a 

particular context by one actor generates 


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200Blumstein, C. and Taylor, M. (2013). 

Rethinking the Energy-Efficiency Gap: Producers, 

Intermediaries, and Innovation. Energy Institute at 

Haas Working Paper 243 (available at: 

haas.berkeley.edu/wp-content/uploads/WP243.pdf) 

(last accessed August 1, 2023). 

201A hurdle rate is the minimum rate of return 

on a project or investment required by an 

organization or investor. It is determined by 

assessing capital costs, operating costs, and an 

estimate of risks and opportunities. 

202 DeCanio 1994, op. cit. 

203 DeCanio, S.J. (1998). ‘‘The Efficiency Paradox: 

Bureaucratic and Organizational Barriers to 

Profitable Energy-Saving Investments,’’ Energy 

Policy, 26(5), 441–454. 

204Andersen, S.T., and Newell, R.G. (2004). 

‘‘Information programs for technology adoption: the 

case of energy-efficiency audits,’’ Resource and 

Energy Economics, 26, 27–50. 

205Prindle 2007, op. cit.; Howarth, R.B., Haddad, 

B.M., and Paton, B. (2000). ‘‘The economics of 

energy efficiency: insights from voluntary 

participation programs,’’ Energy Policy, 28, 477– 

486. 

206 Klemick, H., Kopits, E., Wolverton, A. (2017). 

‘‘Potential Barriers to Improving Energy Efficiency 

in Commercial Buildings: The Case of Supermarket 

Refrigeration,’’ Journal of Benefit-Cost Analysis, 

8(1), 115–145. 207de Almeida, E.L.F. (1998). ‘‘Energy efficiency 

and the limits of market forces: The example of the 

electric motor market in France’’, Energy Policy, 

26(8), 643–653; Xenergy, Inc. (1998). United States 

Industrial Electric Motor Systems Market 

Opportunity Assessment. (Available at: 

www.energy.gov/sites/default/files/2014/04/f15/ 

mtrmkt.pdf) (Last accessed August 1, 2023). 

information about cost-savings, and 

other actors in the market can then 

benefit from that information by 

following suit; yet because the first to 

adopt a new technology bears the risk 

but cannot keep to themselves all the 

informational benefits, firms may 

inefficiently underinvest in new 

technologies.200

In sum, the commercial and industrial 

sectors face many market failures that 

can result in an under-investment in 

energy efficiency. This means that 

discount rates implied by hurdle 

rates 201 and required payback periods 

of many firms are higher than the 

appropriate cost of capital for the 

investment.202 The preceding arguments 

for the existence of market failures in 

the commercial and industrial sectors 

are corroborated by empirical evidence. 

One study in particular showed 

evidence of substantial gains in energy 

efficiency that could have been 

achieved without negative 

repercussions on profitability, but the 

investments had not been undertaken by 

firms.203 The study found that multiple 

organizational and institutional factors 

caused firms to require shorter payback 

periods and higher returns than the cost 

of capital for alternative investments of 

similar risk. Another study 

demonstrated similar results with firms 

requiring very short payback periods of 

1–2 years in order to adopt energysaving projects, implying hurdle rates of 

50 to 100 percent, despite the potential 

economic benefits.204 A number of other 

case studies similarly demonstrate the 

existence of market failures preventing 

the adoption of energy-efficient 

technologies in a variety of commercial 

sectors around the world, including 

office buildings,205 supermarkets,206

and the electric motor market.207 The 

existence of market failures in the 

residential and commercial sectors is 

well supported by the economics 

literature and by a number of case 

studies. If DOE developed an efficiency 

distribution that assigned furnace 

efficiency in the no-new-standards case 

solely according to energy use or 

economic considerations such as lifecycle cost or payback period, the 

resulting distribution of efficiencies 

within the building sample would not 

reflect any of the market failures or 

behavioral factors above. Thus, DOE 

concludes such a distribution would not 

be representative of the consumer 

furnace market. Further, even if a 

specific household/building/ 

organization is not subject to the market 

failures above, the purchasing decision 

of furnace efficiency can be highly 

complex and influenced by a number of 

factors not captured by the building 

characteristics available in the RECS or 

CBECS samples. These factors can lead 

to households or building owners 

choosing a furnace efficiency that 

deviates from the efficiency predicted 

using only energy use or economic 

considerations such as life-cycle cost or 

payback period (as calculated using the 

information from RECS 2020 or CBECS 

2018). 

DOE further notes that, in certain 

States, the current market is heavily 

weighted toward either baseline furnace 

efficiency or a condensing furnace 

efficiency. Therefore, most consumers 

in these States are either similarly 

impacted (for States with predominantly 

non-condensing furnaces) or minimally 

impacted (for States with predominantly 

condensing furnaces). This result is 

merely a reflection of the available 

market data. Therefore, any variation to 

DOE’s efficiency assignment 

methodology would not produce 

substantially differing results than 

presented in this rule for these States, as 

most consumers would continue to be 

assigned the same efficiency regardless 

of the details of the methodology. 

APGA commented that in the NOPR, 

despite intense criticisms and detailed 

evidentiary showings, DOE has 

continued to justify its approach on the 

theory that consumers do not act 

rationally, such that random assignment 

is as valid as using actual consumer 

choice data. APGA argued that although 

DOE acknowledges ‘‘that economic 

factors may play a role’’ when 

consumers decide on what type of 

furnace to install, DOE persists in 

maintaining that market failures render 

random assignment just as valid an 

approach. APGA argued that much of 

DOE’s recitation on market failure 

misses the mark and lacks reference to 

current studies of how residential 

furnaces are purchased. APGA further 

argued that DOE relies upon ‘‘inexplicit 

consumer patterns on all sorts of 

purchases.’’ Although APGA noted that 

DOE’s statement that it ‘‘intends to 

investigate this issue further . . . [to] 

improve its assignment of furnace 

efficiency in its analyses,’’ the 

commenter urged DOE to do so before 

acting on the subject NOPR because it 

argued that the agency’s methodology 

does not produce results that accurately 

reflect the market. (APGA, No. 387 at 

pp. 25–27) Similarly, AGA argued that 

DOE’s economic analysis suffers from a 

critical defect in the economic criteria of 

how gas furnace efficiencies are 

assigned to consumers in the no-newstandards case or ‘‘base case.’’ The 

commenter took issue with DOE’s use of 

so-called ‘‘random assignment’’ to 

determine which consumers in the base 

case would be assigned specific furnace 

efficiencies and whether they install 

condensing or non-condensing furnaces. 

AGA claimed that DOE is assuming that 

consumers completely disregard 

economics when selecting a gas furnace, 

arguing that random assignment leads to 

an overstatement of benefits associated 

with the proposed rulemaking and an 

underestimation of the total costs. 

According to AGA, this defect in the 

development of the base case renders all 

of DOE’s subsequent analyses of any 

proposed standard levels void and 

unusable. (AGA, No. 405 at pp. 54–57) 

Spire argued that DOE’s analysis of 

10,000 trial cases does not represent the 

real world, where—as regional market 

share data for residential furnaces 

demonstrates—consumers generally 

purchase condensing gas furnaces when 

it is economically beneficial to do so 

and generally decline to purchase 

condensing gas furnaces where there are 

installation problems, insufficient 

economic returns, or insufficient 

resources for the initial investment 

required. Spire asserted that DOE’s trial 

cases represent an alternative universe 

in which consumers choose their gas 

furnaces with no consideration of the 

economic consequences of those 

decisions. (Spire, No. 413 at p. 7) Spire 

asserted that DOE’s use of random 


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assignment implies that consumer 

purchasing decisions are never 

influenced by the economics of 

potential efficiency investments. (Spire, 

No. 413 at p. 39) 

NPGA commented that a key error in 

the economic analysis is the use of a 

‘‘random assignment’’ process. NPGA 

stated that the examples of exceptions to 

the general rule of rational economic 

behavior relied upon in the rule are 

misplaced and do not justify ignoring 

that consumers do indeed act rationally 

in their own economic interest. (NPGA, 

No. 395 at pp. 11–12) Atmos Energy 

argued that DOE’s economic analysis 

approach of using a random assignment 

of consumers across design options 

considered in the life-cycle analysis has 

no technical basis or justification. The 

company further commented that this 

results in an inaccurate overstatement of 

efficiency standards’ potential to 

produce economic benefits for 

consumers. Atmos Energy argued that 

the use of random assignment results in 

consumers selecting furnaces that are 

suboptimal among available furnace 

options and artificially inflates the 

potential savings of the rule. (Atmos 

Energy, No. 415 at pp. 5–6) 

Spire further argued that base-case 

investments should disproportionately 

include investments with attractive 

economic outcomes; that rule-outcome 

investments should disproportionately 

include investments with unattractive 

economic outcomes, and, therefore, the 

average economic outcome for base-case 

investments would be better (and the 

average for rule-outcome investments 

would be worse) than the average of all 

potential investments in standardscompliant products. Spire further 

argued that purchasers of gas furnaces 

have a significant preference for 

economically beneficial investments, as 

evident from the fact that the market 

share for furnaces compliant with the 

proposed standard level is dramatically 

higher than average in colder regions 

where the economic benefits of moreefficient gas furnaces tend to be greatest 

and is dramatically lower than average 

in warmer regions where those benefits 

tend to be lowest. Spire went on to 

claim that DOE’s LCC analysis is based 

on a ‘‘random assignment’’ methodology 

that ‘‘assigns’’ particular efficiency 

investments to the ‘‘base’’ or 

‘‘standards’’ case randomly, an 

approach that effectively assumes that 

purchasers of residential furnaces have 

no preference for economically 

beneficial efficiency investments—and 

no aversion to economically unfavorable 

investments. (Spire, No. 413 at pp. 22– 

23) 

These commenters significantly 

mischaracterize the Department’s 

analysis in this area. Most 

fundamentally, DOE does not assume 

that consumers act irrationally. As 

stated above, the use of a random 

assignment of furnace efficiency is a 

methodological approach that reflects 

the full range of consumer behaviors in 

this market, including consumers who 

make economically beneficial decisions 

and consumers who, due to market 

failures, do not or cannot make such 

economically beneficial decisions, both 

of which occur in reality. As explained 

in the proposed rule and previously, 

DOE begins its assignment of furnaces 

in the no-new standards case based on 

two empirical constraints: (1) historical 

shipment data, by State demonstrating 

regional variation, with some regions 

(e.g., the North) having a higher market 

share of condensing furnaces; and (2) 

survey data demonstrating a correlation 

(albeit small) between home size and 

installed furnace efficiency. Within 

those constraints, DOE then models 

consumer behavior, consistent with the 

economics literature discussed 

previously, to reflect neither purely 

rational nor purely irrational decisionmaking. This approach presents a close 

approximation of the current market 

reality. 

The alternative approach advanced by 

these commenters assumes consumer 

behavior that is not evidenced by the 

scientific literature surveyed above or 

by any data submitted in the course of 

this rulemaking. The commenters’ 

approach depends on the assumption, 

for example, that homeowners know— 

as a rule—the efficiency of their homes’ 

insulation and windows, such that they 

always make heating investments 

accordingly. Similarly, the commenters’ 

approach assumes that, faced with a 

furnace failure, homeowners will 

always select as a replacement the most 

efficient available model. DOE’s 

approach, by contrast, recognizes that 

assumptions like these hold for some 

consumers some of the time—but not all 

consumers and not at all times. 

As part of the random assignment, 

some households or buildings with large 

heating loads will be assigned higherefficiency furnaces, and some 

households or buildings with 

particularly low heating loads will be 

assigned baseline furnaces—i.e., the 

economically rational investments. For 

example, at the adopted standard level, 

approximately 19 percent of NWGF 

consumers experience a net cost. These 

are consumers who would not 

financially gain from a more-efficient 

furnace and have a non-condensing 

furnace in the no-new-standards case, 

reflecting an economically optimal 

investment. Similarly, at the adopted 

standard level, approximately 45 

percent of NWGF consumers are not 

impacted by the rule, as they already 

purchase higher-efficiency furnaces. 

Many of these consumers experience 

lifetime savings compared to a baseline 

furnace, and the adoption of higher 

efficiency furnaces in the no-newstandards case again reflects an 

economically optimal investment. 

However, as DOE has noted, there is 

a complex set of behavioral factors, with 

sometimes opposing effects, affecting 

the furnace market. It is impractical to 

model every consumer decision 

incorporating all of these effects at this 

extreme level of granularity given the 

limited available data. Given these 

myriad factors, DOE estimates the 

resulting distribution of such a model, 

if it were possible, would be very 

scattered with high variability. It is for 

this reason DOE utilizes a random 

distribution (after accounting for market 

share constraints) to approximate these 

effects. The methodology is not an 

assertion of economic irrationality, but 

instead, it is a methodological 

approximation of complex consumer 

behavior. The analysis is neither biased 

toward high or low energy savings. The 

methodology does not preferentially 

assign lower-efficiency furnaces to 

households in the no-new-standards 

case where savings from the rule would 

be greatest, nor does it preferentially 

assign lower-efficiency furnaces to 

households in the no-new-standards 

case where savings from the rule would 

be smallest. Some consumers were 

assigned the furnaces that they would 

have chosen if they had engaged in the 

kind of perfect economic thinking upon 

which the commenters have focused. 

Others were assigned less-efficient 

furnaces even where a more-efficient 

furnace would eventually result in lifecycle savings, simulating scenarios 

where, for example, various market 

failures prevent consumers from 

realizing those savings. Still others were 

assigned furnaces that were more 

efficient than one would expect simply 

from life-cycle costs analysis, reflecting, 

say, ‘‘green’’ behavior, whereby 

consumers ascribe independent value to 

minimizing harm to the environment. 

DOE cites the available economic 

literature of which it is aware on this 

subject, supporting the existence of the 

various market failures which would 

give rise to such a distribution, and has 

repeatedly requested more data or 

studies on this topic. There are no 

studies DOE is aware of specific to how 

consumer furnaces are purchased. 

Commenters have failed to provide any 


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specific external data, information, or 

studies that could be incorporated into 

the analysis, but instead, they claim that 

DOE is assuming consumers are all 

making irrational decisions, which is 

incorrect and a mischaracterization of 

the analysis. DOE continues to evaluate 

the literature on this subject and is not 

aware of any new data or studies that 

contradict DOE’s analysis. DOE also 

notes that in a separate comment 

regarding the usage of RECS, APGA 

acknowledges that households may not 

have perfect information regarding their 

own furnace. (APGA, No. 387 at p. 11) 

Finally, DOE’s analysis does 

incorporate and reflect regional market 

share data and reflects this larger 

correlation. For States with a large 

majority of consumers already 

purchasing more-efficient furnaces per 

the available market data (e.g., in colder 

regions), the analysis assigns a 

correspondingly large majority of 

households with an efficient furnace at 

or above the adopted efficiency level in 

the no-new-standards case. The analysis 

also includes a greater probability that 

new construction is assigned higherefficiency furnaces in the no-newstandards case, given the typically lower 

installation costs in new construction; 

however, this probability is constrained 

by actual market share data. 

In response to Spire’s assertion that 

most investments in the no-newstandards case should include those 

with attractive economic outcomes and 

most outcomes as a result of the 

standard should be biased toward 

unattractive outcomes, DOE firmly 

disagrees. This assertion presupposes 

that any energy conservation standard 

would primarily result in unattractive 

outcomes by definition. The logical 

extension of this assertion is that the 

current furnace market already allocates 

furnace efficiencies in a nearly optimum 

manner, and, therefore, there is little to 

no benefit from an energy conservation 

standard. As DOE has presented, there 

is a wealth of academic literature clearly 

demonstrating that this view of the 

market is incorrect, as there are a 

number of identified market failures and 

other behaviors that prevent some 

consumers from maximizing their 

economic outcome in the absence of 

new energy conservation standards, 

and, therefore, the allocation of furnace 

efficiency among households is not 

economically optimal in the real world. 

Systematically biasing the analysis to 

preferentially produce unfavorable 

results due to an energy conservation 

standard, as the commenter suggests, 

has no basis in any of the available data 

or literature. DOE also notes that the 

acknowledgement of market failures and 

the resulting distribution of energy 

efficiency in the no-new-standards case 

is commonplace in DOE’s analyses for 

other energy conservation standards 

rulemakings. 

DOE has further confirmed its 

determination that the proposed TSL is 

economically justified through 

additional analysis of the anticipated 

life-cycle costs. First, DOE presents total 

life-cycle costs at each efficiency level, 

averaged over all households, in section 

V.B of this document. This effectively 

compares costs for an average 

household in the sample, not an 

extreme outlier household. DOE also 

makes available total life-cycle costs for 

households at the 25th, 50th, 75th, and 

95th percentile of the total life-cycle 

cost distribution in the LCC 

spreadsheet. Regardless of which value 

is considered, the total life-cycle cost of 

a furnace at the adopted standard level 

is lower than the total life-cycle cost of 

a baseline furnace or any lowerefficiency furnace. The claim that 

outlier results distort DOE’s conclusions 

can also be refuted by considering the 

median LCC savings instead of the mean 

LCC savings, which are robust against 

outlier results. The median LCC savings 

at the adopted standard level across the 

entire NWGF sample, which accounts 

for the existing distribution of furnace 

efficiency in the market, remain 

positive. If DOE were to exclude outlier 

results from the average LCC savings 

(e.g., both the top and bottom 10 percent 

of results), the average LCC savings 

would remain positive. If DOE were to 

adopt an even more conservative 

estimate and bias the results by 

excluding only the most favorable 

outcomes (e.g., the top 10 percent) but 

maintain the least favorable outcomes, 

the average LCC would still remain 

positive, and DOE’s conclusions would 

remain the same. Finally, none of these 

results include the estimated climate 

and health benefits, which as discussed 

in section V.C of this document are 

significant and only further reinforce 

the benefits of the rule. 

Spire stated that the results of the LCC 

analysis are disproportionately 

impacted by a relatively small 

percentage of individual trial cases, due 

to the efficiency assignment 

methodology, thereby producing 

unreasonable impacts that bias the 

conclusions of the analysis. (Spire, No. 

413 at pp. 25–34) 

In response, DOE acknowledges that 

there are some LCC trials with very high 

LCC savings as part of the distribution 

of impacts. There are similarly some 

LCC trials with very high net LCC costs. 

However, when evaluating the median 

LCC impacts instead of the average LCC 

impacts, the effects of outlier results are 

minimized. The median LCC savings 

remain positive at the adopted standard 

level. The median LCC savings are 

available in the LCC spreadsheet and 

presented in chapter 8 of the final rule 

TSD. Although the absolute magnitude 

of total savings would decrease if such 

extreme trial cases were excluded, the 

conclusions of the analysis would 

remain the same. 

APGA claimed that DOE’s method of 

randomly assigning furnace efficiencies 

eliminates from the no-new-standards 

case those instances where consumers 

would elect the most efficient product 

that costs the least, which inflates LCC 

benefits when compared to the 

standards case. Without random 

assignment, APGA claims that the 

estimated LCC benefits decline 

significantly because the consumer will 

rationally take the lower cost furnace 

that also brings higher energy efficiency 

regardless of a new standard. APGA 

further argued that outlier cases control 

LCC outcomes, even though those 

outlier cases are the most likely to be 

avoided by rational consumer behavior. 

APGA claimed that the analysis fails to 

reflect the market share of natural gas 

customers by State or Census Division. 

(APGA, No. 387 at pp. 22–33) Spire 

argued that DOE’s analysis 

inappropriately credits standards with 

the benefits of efficiency investments in 

which a higher-efficiency product 

selected as a result of a standard is the 

low-cost option in terms of initial costs 

and would provide additional economic 

benefits (in the form of operating cost 

savings) from day one. Because 

consumers would naturally select this 

result, Spire argued that DOE’s 

modeling approach produces spurious 

regulatory benefits. (Spire, No. 413 at p. 

27) 

In response, DOE notes that the 

commenters are once again 

mischaracterizing the Department’s 

analysis. First, the costs estimated in the 

analysis for higher-efficiency products 

reflect DOE’s projection that such 

products are at the new baseline 

efficiency, produced in volume, and no 

longer offered as a ‘‘premium’’ product. 

As such, costs may deviate from those 

seen in the market today or in the nonew-standards case. In some regions, 

the market share of higher-efficiency 

products remains low, and they are 

generally perceived as a more premium 

product, with higher total installed 

costs. This will impact the existing 

market share by efficiency. If these 

higher-efficiency products become the 

new baseline, as DOE analyzes in the 

standards cases, their costs generally 

will be lower than seen in the market 


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today. The costs developed in section 

IV.C of this document account for 

higher-efficiency products becoming the 

new baseline, produced at greater 

volume. The comparison made by the 

commenters does not account for this 

subtlety. Second, DOE notes that the 

assignment methodology is bounded by 

the available shipment data by 

efficiency, and, therefore, the market 

share of non-condensing/condensing 

furnaces reflects market data. Total 

installed costs for higher-efficiency 

products are generally lower in new 

construction, as discussed in section 

IV.F.2 of this document. However, in 

some States, the market share and 

estimated total shipments of condensing 

furnaces are lower than the estimated 

new construction; therefore, according 

to the data, some non-condensing 

furnaces must be installed in new 

construction. Thus, this market share 

constraint requires that some 

installations in new construction be 

assigned a baseline furnace even though 

a higher-efficiency furnace would cost 

less. Because such market shares are 

based upon real world data, this is not 

a spurious assumption on DOE’s part, 

and such approach does not produce 

spurious regulatory benefits. This is a 

factual result based on the available data 

and representative of the market as it is, 

which is indicative of some of the 

market failures DOE has identified. 

Nevertheless, if DOE were to exclude all 

these trial results from the average LCC 

savings, the result would remain 

positive, and DOE’s conclusions from 

the analysis would remain the same. 

Thus, the claim that outlier results 

control LCC outcomes—and, therefore, 

the justification for the rule—is 

incorrect. Finally, regarding the share of 

natural gas customers, DOE samples 

households and commercial buildings 

in RECS and CBECS that utilize natural 

gas furnaces. RECS and CBECS are large, 

nationally representative surveys with a 

representative sample of natural gas 

customers. DOE is not aware of any 

evidence to suggest these national 

surveys are systematically biased with 

respect to natural gas customers. 

APGA argued that DOE has not 

addressed prior stakeholder analyses 

(e.g., the GTI analysis) directly but only 

cataloged the stakeholder criticisms in 

defending its ‘‘random assignment’’ 

methodology. (APGA, No. 387 at p. 25) 

Those analyses, however, were based on 

LCC results presented as part of the 

2015 NOPR and 2016 SNOPR, both of 

which were withdrawn and replaced by 

the 2022 NOPR. DOE is responding to 

all relevant comments, but comments 

related to the detailed results of the 

withdrawn analyses are no longer 

applicable. 

Spire further argued that, for example, 

in a region in which 90 percent of 

consumers are already utilizing a 

furnace with an efficiency at or above 

the adopted standard level, the 

remaining 10 percent of consumers 

should disproportionately include the 

worst economic outcomes in the region 

as a result of the standard. (Spire, No. 

413 at pp. 35–36) Again, DOE firmly 

disagrees with this assertion. Spire’s 

assertion ignores the wealth of welldocumented market failures and other 

behaviors that can explain why some of 

the remaining 10 percent of consumers 

may have favorable outcomes as a result 

of the energy conservation standard. 

There is no compelling evidence or data 

of which DOE is aware that would 

necessitate proactively biasing results 

toward unfavorable outcomes, as 

suggested by the commenter. 

Furthermore, DOE’s assignment 

methodology already includes 

adjustments based on household square 

footage and based on new construction 

vs. replacement installations. 

Spire argued that economic theory 

provides no basis to disregard fact. On 

this point, Spire asserted that if random 

assignment came close to representing 

the market as it is, the regional market 

share for condensing furnaces would 

not range from 5 percent to 95 percent 

in the replacement market (and 6 

percent to 97 percent in the new 

construction market), with an obvious 

correlation to regional length and depth 

of the heating season. Spire further 

argued that if random assignment 

provided a reasonable simulation of 

base case purchasing behavior, there 

would not be a statistically significant 

correlation between the average regional 

LCC outcomes and regional market 

shares for condensing furnaces. (Spire, 

No. 413 at p. 42) 

In response, DOE agrees that 

economic factors may play a role in 

purchasing decisions, but the 

commenter is mischaracterizing both 

the Department’s analysis and its 

efficiency assignment methodology. 

DOE does not dispute that heatingdegree days likely play a role in 

consumers choosing furnace efficiency, 

and, as stated previously, the 

Department incorporates this effect into 

the analysis at the State/regional level 

based on current market share data (i.e., 

actual purchasing decisions). The 

efficiency assignment methodology is 

randomized as a last step, within a 

given State/region, to approximate a 

range of real-world effects and 

behaviors. Thus, the larger correlation 

based on region is taken into account. 

Consequently, at the next stage in the 

assignment methodology, the impact of 

large regional climate differences is no 

longer relevant, as most of those 

consumers experience a similar climate. 

Furthermore, the commenter did not 

acknowledge the role of historical 

incentive and rebate programs that have 

shaped consumer behavior and 

significantly increased the market share 

of higher-efficiency furnaces in some 

colder regions, beyond what consumers 

were adopting without those programs. 

Due to the bias toward like-for-like 

replacements, the estimated future 

market share in these regions is 

expected to remain dominated by 

higher-efficiency furnaces, but this 

market share is likely higher than what 

would have resulted had these past 

incentive and rebate programs not 

occurred. Therefore, the apparent 

correlation of efficiency with region 

would likely not be as evident without 

these programs. 

APGA argued that DOE’s inconsistent 

treatment of consumer behavior is 

arbitrary and capricious. On the one 

hand, APGA asserted that by using 

random assignment to predict consumer 

furnace selection, DOE assumes 

consumers to be ‘‘virtual zombies.’’ On 

the other hand, when it comes to fuel 

switching, APGA asserted that DOE 

assumes consumers to be rational and 

prescient by selecting the lowest cost 

option. (APGA, No. 387 at p. 24) Spire 

similarly commented that paradoxically, 

DOE employs a random assignment 

methodology that assumes that 

consumers never consider the economic 

consequences of choices between gas 

furnaces, but then included a fuel 

switching analysis that assumes 

consumers who do not (randomly) 

select a standards-compliant gas furnace 

on their own would always consider 

economics in deciding whether to 

switch from a gas appliance to an 

electric appliance. (Spire, No. 413 at pp. 

49–50) AGA also argued that the 

assignment of furnace efficiency in the 

no-new-standards case does not adhere 

to the model logic related to consumer 

fuel switching to electricity, which 

assumes consumers consider economics 

when choosing to switch. Furthermore, 

AGA stated that some of the critical 

inputs in that model are derived from 

survey data which indicates that 

consumers do consider economics when 

making purchasing decisions. (AGA, 

No. 405 at pp. 54–57) Along these same 

lines, NPGA commented that DOE 

contradicts itself by assuming 

consumers will not act in their own selfinterest when purchasing a gas furnace 

but will when switching from gas 


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furnaces to electric alternatives. (NPGA, 

No. 395 at p. 2) 

In response, DOE notes that the 

commenters are significantly 

misrepresenting the Department’s 

analysis. As discussed in this section, 

DOE’s approach for assigning efficiency 

in the no-new-standards case does not 

assume that purchasers of furnaces all 

make economically irrational decisions 

(i.e., the lack of a correlation is not the 

same as a negative correlation). The use 

of a random assignment of furnace 

efficiency is merely a methodological 

approach that reflects the full range of 

consumer behaviors in this market, 

including consumers who make 

economically beneficial decisions and 

consumers that, due to market failures, 

do not make such economically 

beneficial decisions, both of which 

occur in reality. The Department’s 

product switching analysis was 

incorporated into the analysis to address 

prior comments from stakeholders 

specifically regarding price-sensitive 

consumers opting to switch to 

alternative electric heating options in 

response to increased NWGF costs as 

discussed in section IV.F.10 of this 

document. DOE has conducted a fuelswitching analysis in this rule as a form 

of sensitivity analysis. That is, DOE has 

modeled the economic impacts of the 

rule assuming both no fuel switching 

and the maximum level of fuel 

switching reasonably foreseeable. To 

model that maximum level of fuel 

switching, DOE has assumed that 

consumers would act based solely on 

costs. DOE uses a simplified decision 

model based only on costs, in this very 

specific instance, to estimate the impact 

of product switching. The percentage of 

consumers who engage in product 

switching based on this simplified 

decision model is intended as an 

estimate of the maximum fuel switching 

reasonably likely to result from the rule. 

In any event, as discussed further 

below, the proportion of consumers 

expected to switch fuels is small, and 

any further refinements to DOE’s 

modeling would be expected to lead to 

similar conclusions. That is, a further 

refined model, which incorporated the 

market failures likely to prevail in the 

market for fuel switching, would be 

unlikely to produce meaningfully 

different results. Given the limited 

purpose for which DOE has considered 

product switching, DOE has not found 

it necessary to further refine its 

assumptions about product-switching 

consumer behavior. Furthermore, DOE 

presents results both with and without 

incorporating this effect, as an upper 

and lower bound, and DOE’s 

conclusions remain the same under both 

sets of results. The two approaches 

(assignment of efficiency in the no-newstandards case and estimating product 

switching) are not incompatible and are 

not inconsistent with each other. They 

simply reflect different levels of 

modeling approximation on different 

consumer samples. Further discussion 

of the product switching methodology is 

presented in section IV.F.10 of this 

document. 

NPGA stated that consumers will 

often voluntarily choose to install 

condensing furnaces, without 

mandatory standards, when it makes 

economic sense. (NPGA, No. 395 at p. 

11) The commenter further stated that 

this is evident in the fact that highefficiency gas furnaces have a much 

higher market share where the economic 

benefits of such furnaces are greatest. 

(NPGA, No. 395 at pp. 11–12) In 

response, DOE agrees and incorporates 

the existing market share of condensing 

furnaces by State in its analysis. In 

States with a very high fraction of 

consumers with condensing furnaces at 

the adopted efficiency level or above in 

the current market (typically States with 

colder winters where the benefits of 

such furnaces are higher), most 

consumers in those States are not 

impacted by the rule and do not factor 

into the standards-case analysis. 

However, as noted previously, incentive 

and rebate programs have increased the 

market share of condensing furnaces 

beyond what consumers had been 

previously adopting, even in colder 

regions. 

Spire commented that the issue of 

efficiency assignment in the no-newstandards case was raised in American 

Public Gas Ass’n v. U.S. Dept. of Energy, 

22 F.4th 1018 (D.C. Cir. 2022) (APGA v. 

DOE)—a challenge to DOE’s commercial 

packaged boiler standards—and the 

Court found that DOE had failed to 

respond to the ‘‘substantial concerns’’ 

about this ‘‘crucial part of its analysis’’ 

and that its ‘‘failure to engage the 

arguments raised before it . . . bespeaks 

a failure to consider an important aspect 

of the problem.’’ Id., 22 F.4th at 1027– 

28. Spire claimed that the furnaces 

NOPR exhibits the same failing. (Spire, 

No. 413 at pp. 34–35) 

In response, DOE disagrees with 

Spire’s assertion that it has failed to 

adequately explain the choices made in 

its LCC analysis or has failed to provide 

sufficient opportunity for comment on 

those matters. Instead, DOE has 

extensively discussed the rationale and 

evidentiary basis for its LCC analysis in 

this both the July 2022 NOPR, as well 

as this final rule. DOE’s detailed 

explanation has focused on the presence 

of numerous market failures that cause 

consumers to purchase commercial 

packaged boilers that do not maximize 

LCC savings. Furthermore, DOE 

provided and sought public comment 

on its thorough explanation in the July 

2022 Furnaces NOPR as to why the 

assignment of efficiencies in the nonew-standards case, which is in part 

random, is a reasonable approach that 

simulates behavior in the furnace 

market, where market failures 

frequently result in purchasing 

decisions not being perfectly aligned 

with economic interests. 87 FR 40590, 

40640–40643 (July 7, 2022). 

AGA presented an analysis using 

DOE’s LCC spreadsheet and claimed 

that it demonstrates that DOE’s method 

of randomly assigning furnace 

efficiencies in its base case is improper. 

AGA further argued that its analysis 

demonstrates that any market failure 

results in greater adoption of highefficiency equipment than would be 

expected by economics alone. AGA 

concluded that DOE, therefore, 

overstates the benefits of the proposed 

standards by assuming consumers do 

not consider economics at all when 

selecting furnaces. (AGA, No. 405 at pp. 

59–67) 

In response, as discussed above, DOE 

notes that this is a mischaracterization 

of the analysis. DOE does not assume 

consumers never consider the 

economics of the purchase. DOE 

acknowledges that there are several 

market failures in the furnace market 

affecting some consumers, while other 

consumers are making economically 

beneficial decisions. Indeed, the 

existence of consumers experiencing a 

net cost in the standards case is an 

illustration of this. Such consumers are 

assigned a baseline efficiency furnace in 

the no-new-standards case and do not 

benefit from a higher efficiency furnace, 

reflecting an economically beneficial 

decision in the no-new-standards case. 

Similarly, some consumers are already 

purchasing a higher-efficiency furnace 

because it is beneficial to them and as 

a result are not impacted in the 

standards case. The characterization of 

the analysis as assuming all consumers 

are irrational is incorrect. 

AGA’s analysis of the NOPR results is 

flawed in several respects. Their 

analysis identifies a relationship that is 

known and discussed in the TSD, 

namely that regions with a higher 

current market share of condensing 

furnaces are more likely to be colder 

and, thus, have higher space-heating 

energy consumption. Therefore, it is no 

surprise that LCC savings for 

households or buildings in those regions 

that have not yet adopted condensing 


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furnaces are likely to be higher. 

Similarly, regions with a lower current 

market share of condensing furnaces are 

more likely to be warmer, and 

consumers there may have negative LCC 

savings in the standards case. The 

analysis incorporates these regional 

market share trends as part of the 

efficiency assignment methodology. The 

commenter is attempting to highlight 

these relationships in the LCC, which is 

a reflection of the current market, as 

evidence that DOE cannot assume 

consumers never consider the 

economics of their purchasing 

decisions. However, this is a 

mischaracterization, and DOE is not 

making an assumption that consumers 

never consider the economics of their 

purchasing decision. The efficiency 

assignment is a methodological 

simplification that takes into account 

existing market trends, such as the 

regional trends identified by the 

commenter, and acknowledges a range 

of consumer behaviors and market 

failures. The LCC produces 

relationships in the results that AGA’s 

own analysis shows are reasonable and 

expected, given the current market 

shares of condensing and noncondensing furnaces. 

AGA noted that there are examples in 

the LCC where the total installed cost of 

a non-condensing furnace is higher than 

the total installed cost of a condensing 

furnace for an individual household or 

building, and yet DOE’s methodology 

assigns a non-condensing furnace in the 

no-new-standards case to this 

household or building. AGA argues this 

is an illogical scenario that ignores 

consumer rationality and biases the 

overall results to overly favorable 

outcomes. (AGA, No. 405 at pp. 57–58) 

APGA pointed to the inclusion of LCC 

trials where a higher efficiency furnace 

costs less than a baseline furnace, but 

for which the LCC assigns a baseline 

furnace in the no-new-standards case, as 

unreasonably inflating LCC benefits. 

(APGA, No. 387 at pp. 22–23) Spire also 

commented that the LCC includes LCC 

trials where the higher-efficiency 

furnace is the lower-cost option, but it 

argued that the LCC erroneously assigns 

benefits to such trial cases by assigning 

a baseline furnace in the no-newstandards case. (Spire, No. 413 at pp. 

27–28) 

In response, DOE acknowledges that 

there are scenarios in which the total 

installed cost is lower for higherefficiency condensing furnaces. This 

situation primarily occurs in new 

construction, where a new vent is 

required for all installations, and 

condensing furnaces can often take 

advantage of a shorter vent length that 

is incorporated into the construction 

design from the beginning. This 

scenario can also occur in replacement 

installations where the existing vent has 

reached the end of its life and requires 

replacement, even when replacing a 

non-condensing furnace with another 

non-condensing furnace. With respect to 

the LCC assigning a non-condensing 

furnace in some of these instances, DOE 

once again notes that the efficiency 

assignment methodology is constrained 

by the State-level shipments market 

share data. For example, in States with 

a low current market share of 

condensing furnaces, the methodology 

will be constrained to assign mostly 

non-condensing furnaces in the no-newstandards case, reflecting the current 

market, and, therefore, some new 

construction will be assigned noncondensing furnaces in the no-newstandards case. The commenters argue 

that this is an illogical outcome, but the 

methodology is simply reflecting the 

reality of the current market. This 

situation can also occur in replacement 

installations due to, for example, 

familiarity bias on the part of the 

consumer or contractor, biasing 

replacements to familiar technology 

options even if a lower cost option is 

available. However, the percentage of 

individual LCC trial outcomes where 

this situation occurs is limited to only 

a few percent in the final rule analysis, 

predominately in new construction. 

Even if DOE were to exclude these 

individual outcomes as extreme outlier 

results, the LCC analysis would 

demonstrate economic justification, as 

seen from the median LCC savings (as 

opposed to the average), available in the 

LCC spreadsheet and in chapter 8 of the 

final rule TSD. The median LCC savings 

are robust to outlier results, and they 

remain positive at the adopted standard 

level. Additionally, excluding these 

individual outcomes as extreme outlier 

results would not substantially change 

the percent of consumers with a net cost 

and would not alter the conclusion of 

economic justification. 

PHCC commented that DOE should 

reconsider its assumptions regarding 

consumer awareness of products, as the 

studies used for reference are 20–30 

years old, and trends for LED lighting 

that indicate that consumers choose 

higher levels of performance in cases of 

lower cost and lower maintenance. 

(PHCC, No. 403 at p. 3) In response, 

DOE notes that it cites the relevant 

available literature, which is still 

applicable to consumers of furnaces 

even if published 20–30 years ago. DOE 

also cites studies performed with 

respect to appliances and HVAC 

equipment, which are more relevant 

than studies related to lighting. The 

lighting market and associated 

technology are very different than the 

furnaces market. 

PHCC commented that DOE’s 

conclusion that commercial customers 

will not value higher efficiency because 

typically owners do not pay operating 

bills or consider operating costs as 

write-offs is inaccurate. Because their 

clients seek out best-case operating 

expenses, owners seek to offer highquality facilities in order to give 

themselves an advantage in the market. 

PHCC further commented that write-offs 

are not desirable, as owners benefit from 

keeping their income and paying taxes 

in full rather than overspending. The 

commenter stated that there are 

contractors who have successfully 

marketed high-efficiency equipment. 

(PHCC, No. 403 at pp. 3–4) In response, 

DOE clarifies that it does not assert that 

commercial customers will not value 

higher-efficiency equipment. DOE 

merely notes that there are market 

failures prevalent in the commercial 

sector, similar to the residential sector, 

that may cause some commercial 

customers to undervalue the benefits of 

higher-efficiency equipment. DOE 

agrees that some commercial customers 

will highly value the benefits of efficient 

furnaces, and the efficiency assignment 

methodology approximates this range in 

commercial customer behavior. 

Sierra Club and Earth Justice 

commented that the claims of internal 

inconsistency posed by some 

commenters ignores that the DOE’s 

method of modeling the base-case 

furnace efficiency distribution reflects 

available data showing only a modest 

correlation between high-efficiency 

furnace installations and applications 

where those high-efficiency products 

are more likely to be cost-effective. 

(Sierra Club and Earth Justice, No. 401 

at pp. 1–2) DOE agrees with the 

comment in support of the agency’s 

approach. 

NYSERDA expressed support for 

DOE’s methodology and approaches 

presented in the NOPR, particularly 

around random distribution. NYSERDA 

disagreed with commenters who argue 

that the random nature of DOE’s LCC 

distributions is problematic. NYSERDA 

further stated that using a random 

distribution in the no-new-standards 

case to model the assignment of furnace 

efficiency is a valid method, driven by 

the best available data. NYSERDA 

emphasized that DOE used AHRI and 

HARDI data to accurately capture the 

existing market distributions of furnaces 

at different efficiency levels, informing 

the efficiency distributions in the noVerDate Sep<11>2014 17:57 Dec 15, 2023 Jkt 262001 PO 00000 Frm 00084 Fmt 4701 Sfmt 4700 E:\FR\FM\18DER2.SGM 18DER2

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208By typical oversizing, DOE refers to a value of 

1.7, as specified in ASHRAE 103, ‘‘Method of 

Testing for Annual Fuel Utilization Efficiency of 

Residential Central Furnaces and Boilers,’’ which is 

incorporated by reference in the DOE residential 

furnace and boiler test procedure at 10 CFR part 

430, subpart B, appendix N. 

209 10 CFR part 430, subpart B, appendix N. 

210ACCA recommends oversizing by a maximum 

of 40 percent. ACCA. See Manual S—Residential 

Equipment Selection (2nd Edition). (Available at 

https://www.acca.org/standards/technicalmanuals/manual-s) (Last accessed August 1, 2023) 

211City of Fort Collins, Evaluation of New Home 

Energy Efficiency: Summary Report (June 2002) 

(available at: www.fcgov.com/utilities/img/site_

specific/uploads/newhome-eval.pdf) (last accessed 

August 1, 2023). 

Pigg, Scott, What you need to know about 

residential furnaces, air conditioners and heat 

pumps if you’re NOT an HVAC professional (Feb. 

2017) (available at: www.duluthenergydesign.com/ 

Content/Documents/GeneralInfo/ 

PresentationMaterials/2017/Day2/What-You-NeedPigg.pdf) (last accessed August 1, 2023). Energy 

Center of Wisconsin, Electricity Use by New 

Furnaces: A Wisconsin Field Study (2003) 

(available at: www.proctoreng.com/dnld/ 

WIDOE2013.pdf) (last accessed August 1, 2023). 

Burdick, Arlan, Strategy Guideline: Accurate 

Heating and Cooling Load Calculations. Ibacos, Inc. 

(June 2011) (available at: www.nrel.gov/docs/ 

fy11osti/51603.pdf) (last accessed August 1, 2023). 

Ecovent, When Bigger is not Better (August 2014) 

(available at: docplayer.net/13225631-When-biggerisn-t-better.html) (last accessed August 1, 2023). 

Energy Center of Wisconsin, Central Air 

Conditioning in Wisconsin (May 2008) (available at: 

www.focusonenergy.com/sites/default/files/ 

centralairconditioning_report.pdf) (last accessed 

August 1, 2023). Washington State University, 

Efficient Home Cooling (2003) (available at: 

www.energy.wsu.edu/documents/AHT_

Energy%20Efficient%20Home%20Cooling.pdf) (last 

accessed August 1, 2023). 

new-standards case. NYSERDA further 

noted that DOE includes a correlation of 

efficiency with household square 

footage, using available data to inform 

the structure of the probabilistic 

distribution. Consequently, NYSERDA 

concludes that the stochastic approach 

is valid and viable. (NYSERDA, No. 379 

at pp. 11–12) DOE agrees with this 

comment. 

Similarly, Joint Efficiency 

Commenters stated that DOE’s 

assignment of efficiency levels in the 

no-new-standards case reasonably 

reflects actual consumer behavior and is 

more representative than assigning 

efficiencies based solely on costeffectiveness. Joint Efficiency 

Commenters noted that there are various 

market failures, as well as aspects of 

consumer preference, that significantly 

impact how products are chosen by 

consumers, including misaligned 

incentives for rental properties, the 

influence of contractors during 

replacement installations, and the very 

infrequent nature of furnace 

replacements impacting information 

transparency with respect to costs. (Joint 

Efficiency Commenters, No. 381 at pp. 

6–7) DOE agrees. 

9. Alternative Size Thresholds for Small 

Consumer Gas Furnaces 

DOE analyzed potential separate 

energy conservation standards for small 

and large NWGFs and MHGFs, with 

varying capacity thresholds for a small 

NWGF or MHGF. The examined 

thresholds had a maximum input rate 

that ranged from less than or equal to 40 

kBtu/h to 100 kBtu/h, which were 

assessed in 5 kBtu/h increments. 

DOE assigned an input capacity to 

existing furnaces based on data from 

RECS 2020 and CBECS 2018. It is 

common industry practice to oversize 

furnaces to ensure that they can meet 

the house heating load in extreme 

temperature conditions. Under a 

scenario which envisions a separate 

energy conservation standard for small 

NWGFs and MHGFs set at a level which 

does not require condensing technology, 

DOE expects that some consumers who 

would otherwise install a typically 

oversized furnace 208 may choose to 

downsize in order to be able to purchase 

a less-expensive, non-condensing 

furnace. 

DOE identified households from the 

NWGF and MHGF sample that might 

downsize at each of the considered 

standard levels. In identifying these 

households, DOE first determined 

whether a household would install a 

non-condensing furnace with an input 

capacity greater than the small furnace 

size limit in the no-new-standards case, 

based on the assigned input capacity 

(which reflects historical oversizing) 

and efficiency. DOE relied on the 

ASHRAE 103–1993 test procedure, 

‘‘Method of Testing for Annual Fuel 

Utilization Efficiency of Residential 

Central Furnaces and Boilers,’’ 

(incorporated by referenced in the DOE 

residential furnace and boiler test 

procedure) 209 to estimate that the 

typical oversize factor used to size 

furnaces was 70 percent (i.e., the 

furnace capacity is 70-percent greater 

than required to heat the home under 

heating outdoor design temperature 

(‘‘ODT’’) conditions). If the input 

capacity of the furnace determined 

using a reduced oversize factor of 10 to 

40 percent is less than or equal to the 

input capacity limit for small furnaces, 

DOE assumed that the consumer would 

downsize his or her furnace. DOE 

believes that an oversize factor of 10–40 

percent is realistic because ACCA 

recommends a maximum oversize factor 

of 40 percent.210 Note that the 10 

percent is the maximum downsizing, 

but in many cases, the actual 

downsizing is less because the resulting 

input capacity is rounded up to the 

nearest input capacity bin in 5 kBtu/h 

increments, and the unit is downsized 

up to the maximum small furnace size 

limit criteria. 

DOE has found that the available data 

regarding oversizing of furnaces in the 

existing stock indicate that an average 

oversizing in past installations of 70 

percent is likewise reasonable.211 DOE 

acknowledges that the oversizing varies 

among furnace installations, and, thus, 

DOE assigned an oversizing factor to 

each household based on the furnace 

sizing methodology described in section 

IV.E.2 of this document (which rank 

ordered the estimated design heating 

load and matched to furnace shipments 

by input capacity). The actual 

oversizing factor in the analysis for a 

given existing household or building 

varies from 0 percent to 275 percent (85 

percent on average). 

DOE continues to expect that in the 

case of an energy conservation standard 

that allows small furnaces to use noncondensing technology, some 

consumers would have a financial 

incentive to downsize their furnace. 

Even without oversizing, a furnace 

installation should be designed to 

handle dry-bulb temperatures that will 

occur 99 percent of the time. Therefore, 

handling nearly all extreme conditions 

is already accounted for when selecting 

the unit, so a 10–40 percent oversizing 

should provide ample allowance for the 

most extreme conditions that might 

occur. Thus, DOE reasons that there 

would be no loss of utility or comfort 

under the Department’s approach. DOE 

acknowledges that there could be cases 

where downsizing might not be 

advantageous. Therefore, for this final 

rule, DOE assumed that not all 

consumers would downsize when the 

oversize factor of 10–40 percent is less 

than or equal to the assumed input 

capacity limit for small furnaces. In 

addition, DOE conducted several 

sensitivity analyses of its downsizing 

methodology, assuming no downsizing 

as well as higher and lower levels of 

downsizing. See appendix 8M of the 

final rule TSD for further details. 

PHCC commented that current 

furnace models (both condensing and 

non-condensing) will have problems 

with oversizing, as excessive 

temperature rise can be detrimental to 

the life of the furnace, and that selecting 

excessive fan speed to compensate for 

the excess temperature rise will produce 

very drafty conditions. The commenter 

further stated that professional 

contractors have been accurately sizing 

equipment, despite ACCA references to 

limit oversizing to 40 percent. Finally, 


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although PHCC acknowledged that the 

exact furnace size required for a space 

is not always available, the commenter 

stated that contractors will select the 

next incremental size and be reluctant 

to select equipment below the ‘‘design 

day capacity,’’ as weather and needs 

vary. (PHCC, No. 403 at p. 4) 

DOE acknowledges that complex 

factors are relevant when contractors 

size equipment. However, as discussed 

previously, DOE has found multiple 

sources of data to indicate an average 

oversizing factor in historical 

installations and has used those data in 

the analysis. 

PHCC commented that DOE’s 

assumption that consumers have 

financial incentive to downsize 

products indicates that costs are a 

concern for them and that consumers 

are aware of the economic impacts of 

furnace sizing. (PHCC, No. 403 at p. 4) 

In response, DOE acknowledges that 

the initial total installed cost of a 

consumer furnace may result in a 

consumer making an alternative choice 

instead of a like-for-like replacement. 

For potential standard levels that 

include a capacity cutoff, below which 

the standard is not amended, DOE 

estimates some fraction of consumers 

would instead opt to purchase a slightly 

lower capacity furnace at a lower 

efficiency instead of a higher capacity 

furnace at the new efficiency level. 

DOE’s analysis similarly accounts for 

consumers who may choose to extend 

the life of their existing furnace with 

additional repairs, or switch to an 

electric space heat alternative 

altogether. All of these potential options 

are accounted for in the analysis, as 

discussed in further detail in chapter 8 

of the final rule TSD. 

For this final rule, DOE analyzed the 

potential for similar separate energy 

conservation standards for small and 

large MHGFs as it did for NWGFs. 

a. Accounting for Impacts of Downsized 

Equipment 

The estimated degree of downsizing 

anticipated in the case of a noncondensing standard for small NWGFs 

and MHGFs is presented in Table IV.14 

under the criteria of various ‘‘small 

furnace’’ definitions. For further details 

regarding this downsizing methodology, 

see appendix 8M of the TSD for this 

final rule. This appendix also presents 

sensitivity analysis results. 

TABLE IV.11—SHARE OF LCC SAMPLE HOUSEHOLDS MEETING SMALL FURNACE DEFINITION IN 2029 

Small furnace definition 

NWGFs MHGFs 

Without 

amended 

standards 

(percent) 

With separate 

small furnace 

standard and 

downsizing 

(percent) 

Without 

amended 

standards 

(percent) 

With separate 

small furnace 

tandard and 

with 

downsizing 

(percent) 

≤40 kBtu/h ........................................................................................................... 3.0 13.6 5.6 14.6 

≤45 kBtu/h ........................................................................................................... 4.4 16.7 9.7 18.4 

≤50 kBtu/h ........................................................................................................... 6.2 19.7 12.7 21.9 

≤55 kBtu/h ........................................................................................................... 7.4 21.4 13.8 23.6 

≤60 kBtu/h ........................................................................................................... 18.8 29.5 29.0 35.2 

≤65 kBtu/h ........................................................................................................... 20.3 31.5 32.8 39.0 

≤70 kBtu/h ........................................................................................................... 30.4 38.7 43.6 48.5 

≤75 kBtu/h ........................................................................................................... 41.5 47.1 59.6 63.3 

≤80 kBtu/h ........................................................................................................... 54.6 57.5 82.9 84.4 

≤85 kBtu/h ........................................................................................................... 56.4 59.4 85.9 87.3 

≤90 kBtu/h ........................................................................................................... 63.7 65.8 92.0 92.4 

≤95 kBtu/h ........................................................................................................... 63.7 66.2 92.0 92.5 

≤100 kBtu/h ......................................................................................................... 81.7 82.2 98.7 98.7 

10. Accounting for Product Switching 

Under Potential Standards 

During the development of the 2006 

NOPR for consumer furnaces, 

manufacturers commented that when 

presented with potential standards for 

non-weatherized gas furnaces set at a 

level effectively requiring condensing 

technology, they expect consumers to 

switch to heat pumps or repair their 

existing equipment due to the increased 

cost of condensing non-weatherized gas 

furnaces. 71 FR 59204, 59230–59231 

(Oct. 6, 2006). During the development 

of the 2011 direct final rule for 

consumer furnaces, some commenters 

again stated that a furnace standard set 

at a level effectively requiring 

condensing furnaces would cause some 

consumers to switch from gas furnaces 

to electric resistance heating or heat 

pumps. 76 FR 37408, 37483 (June 27, 

2011). For the 2011 direct final rule, 

DOE did not explicitly quantify this 

potential for product switching, 

assuming that such switching was likely 

minimal in response to standards. Id. at 

76 37483–37484. As part of the 

development of the March 2015 NOPR 

during informal workshops, some 

commenters again stated that consumers 

might switch to alternative electric 

heating systems due to a standard set at 

a level effectively requiring condensing 

furnaces. 

As noted previously, DOE recognizes 

that consumers may elect to switch from 

one heating source to another. Those 

consumer choices are affected by many 

factors. As commenters to this proposed 

rule and prior rules have noted, one 

such factor is the furnace efficiency 

standard itself. Accordingly, in this 

rulemaking, DOE has considered the 

potential for a standard level to impact 

the choice between various types of 

heating products, for residential new 

construction, new owners, and the 

replacement of existing products. 

Because home builders are sensitive to 

the initial cost of heating equipment, a 

standard level that significantly 

increases purchase price may induce 

some builders to switch to a different 

heating product than they would have 

otherwise installed in the no-newstandards case. Such an amended 

standard level may also induce some 

homeowners to replace their existing 

furnace at the end of its useful life with 

a different type of heating product. The 

central assumption is that, for 

consumers to switch, the total installed 

cost of the alternative heating 

equipment would be less than the cost 

of a new consumer furnace at the 

amended standard level (operating costs 

may or may not be higher). 


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212Electric furnaces are estimated to have the 

same lifetime as NWGFs (21.5 years); however, heat 

pumps have an estimated average lifetime of 19 

years. To ensure comparable accounting, DOE 

annualized the installed cost of a second heat pump 

and multiplied the annualized cost by the 

difference in lifetime between the heat pump and 

a NWGF. 

213U.S. Department of Energy-Office of Energy 

Efficiency and Renewable Energy, Residential 

Central Air Conditioners and Heat Pumps Technical 

Support Document (available at: 

www.regulations.gov/document/EERE-2014-BTSTD-0048-0098) (last accessed August 1, 2023). 

214U.S. Department of Energy-Office of Energy 

Efficiency and Renewable Energy, Heating Products 

Final Rule (available at: www.regulations.gov/ 

document?D=EERE-2006-STD-0129-0005) (last 

accessed August 1, 2023). 

In conducting this analysis, DOE has 

remained focused on the covered 

products subject to this rulemaking— 

consumer furnaces. That is, this analysis 

is intended to inform DOE’s assessment 

of whether the standard level proposed 

is ‘‘economically justified’’ ‘‘for [the] 

type (or class) of covered product.’’ 42 

U.S.C. 6295(o)(2)(A). 

To assess the effect of fuel switching, 

DOE modeled the proposed standard 

under two scenarios. The first scenario 

assumed no switching at all; that is, it 

assumed that consumers faced with 

negative LCCs as a result of the standard 

would nevertheless make those 

investments (the zero-switching 

scenario). Under the second scenario, 

DOE assumed that every consumer for 

whom switching would be economically 

justified (according to simplified 

assumptions, detailed below), would do 

so (the maximum-switching scenario). 

These scenarios are intended to 

bookend the range of reasonably 

plausible switching results foreseeable 

as a result of this rule. 

The assumptions underlying the 

maximum-switching scenario are 

intentionally simplified. The purpose of 

this scenario is not to model consumers’ 

actual expected behavior, but rather to 

estimate an outer bound for the possible 

range of responses. Accordingly, DOE 

has not attempted to incorporate into 

this model the market inefficiencies and 

consumer biases known to shape 

consumers’ actual purchasing decisions. 

Instead, by assuming perfect economic 

rationality, this model produces an 

estimate of the most switching 

reasonably foreseeable as a result of this 

rule. 

The results of these two estimates 

confirm DOE’s conclusion that the 

proposed standard level is economically 

justified. That is, whether DOE assumes 

that no consumers will switch fuels as 

a result of the rule or assumes that the 

maximum reasonably foreseeable 

number of consumers will do so, the 

rule is economically justified. The 

analysis underlying that conclusion is 

explained further below. 

a. Product Switching Resulting From 

Amended Standards for NonWeatherized Gas Furnaces 

In order to estimate the impact of 

potential product switching resulting 

from amended standards, DOE 

developed a consumer choice model to 

estimate the switching response of 

builders and homeowners in residential 

installations to potential amended 

AFUE standards for NWGFs. (Potential 

product switching for MHGFs is 

discussed in the following subsection.) 

However, the potential consumer 

switching response is highly uncertain, 

as this represents a significant change in 

residential heating equipment. Given 

this uncertainty, DOE chose to bound 

the range of potential impacts by 

analyzing several scenarios, including a 

scenario with no product switching, 

scenarios with a moderate amount of 

product switching, and an additional 

scenario with a much higher percentage 

of consumers switching to heat pump 

systems due to the potential availability 

of tax credits. By analyzing this range of 

scenarios, DOE can determine whether 

the potential for product switching 

affects its evaluation of economic 

justification. 

For the purposes of the reference case 

analysis, DOE assumed a moderate level 

of product switching. DOE analyzed 

product switching scenarios that 

represent the most common 

combinations of space conditioning and 

water heating products. The model 

considers three options available for 

each sample home when installing a 

heating product: (1) a NWGF that meets 

a particular standard level, (2) a heat 

pump, or (3) an electric furnace. In 

addition, for situations in which 

installation of a condensing furnace 

would leave an ‘‘orphaned’’ gas water 

heater requiring costly re-venting, the 

model allows for the option to purchase 

an electric water heater as an 

alternative. For option 2, DOE took into 

consideration the age of the existing 

central air conditioner, if one exists, by 

including its residual value in the 

choice model. If an existing air 

conditioner is not very old, it is unlikely 

that the consumer would opt to install 

a heat pump, which can also provide 

cooling. 

The consumer choice model 

calculates the PBP between the higherefficiency NWGF in each standards case 

compared to the electric heating options 

using the total installed cost and firstyear operating cost for each sample 

household or building. The operating 

costs take into account the spaceheating load and the water heating load 

for each household, as well as the 

energy prices over the lifetime of the 

available product options.212 DOE 

accounted for any additional 

installation costs to accommodate a new 

product. DOE also accounted for the 

cooling load of each relevant household 

that might switch from a NWGF and 

central air conditioners (‘‘CAC’’) to a 

heat pump. For switching to occur, the 

total installed cost of the electric option 

must be less than the NWGF standards 

case option. 

DOE used updated CAC and heat 

pump prices from the 2016 CAC and 

heat pump direct final rule,213 assuming 

implementation of the CAC/HP 

minimum standards scheduled to take 

effect in 2023. 82 FR 1786 (Jan. 6, 2017). 

These heat pump prices include the 

manufacturer production costs, 

shipping costs, markups, and 

installation costs determined in the 

2016 final rule. These costs were 

updated to 2022$ and the installation 

costs were updated using the same labor 

costs as discussed in section IV.F.2 of 

this document. DOE additionally 

updated the decreasing price trend for 

heat pumps derived in the 2016 final 

rule with the latest price data available. 

This trend suppresses the cost of heat 

pumps over time for the analysis period 

in this rulemaking. The consumer 

choice model assumes that if a 

consumer switches to a heat pump, it is 

to a minimally compliant heat pump 

(SEER 14). If consumers were to instead 

install higher efficiency heat pumps, 

this would generally increase heat 

pump installation costs, lowering the 

rate of equipment switching. DOE 

estimated the price of electric furnaces 

in the engineering analysis (see section 

IV.C of this document). For water 

heaters, DOE used efficiency and 

consumer prices for models that meet 

the amended energy conservation 

standards that took effect on April 16, 

2015. 10 CFR 430.32(d). DOE estimated 

the price of gas and electric storage 

water heaters based on the 2010 heating 

products final rule. 75 FR 20112 (April 

16, 2010).214 For situations where a 

household with a NWGF might switch 

to an electric space-heating appliance, 

DOE determined the total installed cost 

of the electric heating options, including 

a separate circuit up to 100 amps that 

would need to be installed to power the 

electric resistance heater within an 

electric furnace or heat pump, as well as 

the cost of upgrading the electrical 

service panel for a fraction of 

households. 

For the purposes of the reference case 

analysis, the consumer choice model 


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215 Decision Analysts, 2006, 2008, 2010, 2013, 

2016, 2019, and 2022 American Home Comfort 

Studies (available at: www.decisionanalyst.com/ 

Syndicated/HomeComfort/) (last accessed August 1, 

2023). Non-proprietary data of a similar nature were 

not available. 

216The PBP is negative when the electric heating 

option has lower operating cost compared to the 

condensing NWGF option. 

217 DOE notes that any product switching that 

may occur in the absence of amended energy 

conservation standards due to tax credits is 

discussed in section IV.G of this document. Such 

switching would not be relevant in the LCC analysis 

as those consumers would switch in the no-newstandards case and thus not be part of the furnaces 

LCC sample anymore. 

needs to be calibrated to an available 

data point. The decision criterion in 

DOE’s model was based on proprietary 

survey data from Decision Analyst, 

collected from five separate surveys 

conducted between 2006 and 2022.215

Each survey involved approximately 

30,000 homeowners. For a 

representative sample of consumers, the 

surveys identified consumers’ 

willingness to purchase more-efficient 

space-conditioning systems. The 

surveys asked respondents the 

maximum price they would be willing 

to pay for a product that was 25 percent 

more efficient than their existing 

product, which DOE assumed is 

equivalent to a 25-percent decrease in 

annual energy costs. From these data, as 

well as RECS billing data to determine 

average annual space-heating energy 

costs, DOE determined that consumers 

considering replacing their gas furnace 

would require, on average, a payback 

period of 3.5 years or less in order to 

purchase a condensing furnace rather 

than switch to an electric space-heating 

option. This resulting payback period 

requirement is very short, consistent 

with other studies discussed in section 

IV.F.8.c of this document that found 

consumers and organizations often have 

very short payback period requirements, 

despite the longer-term economic 

benefits, thereby leading to suboptimal 

allocation of energy efficiency as a 

decisional factor. This relatively low 

payback period requirement means that 

consumers are quite sensitive to first 

costs, and as such, this will tend to 

dominate the switching criterion. 

The consumer choice model 

calculates the PBP between the 

condensing NWGF in each standards 

case compared to the electric heating 

options using the total installed cost and 

first-year operating cost as estimated for 

each sample household or building. For 

switching to occur, the total installed 

cost of the electric option must be less 

than the NWGF standards case option. 

The model assumes that a consumer 

will switch to an electric heating option 

if the PBP of the condensing NWGF 

relative to the electric heating option is 

greater than 3.5 years or the PBP relative 

to the electric heating option is 

negative.216 In the case of switching to 

an electric heating option, the model 

selects the most economically beneficial 

product. For the proposed energy 

conservation standard, the switching 

fraction of NWGF consumers is 8.9 

percent, and the switching fraction of 

MHGF consumers is 8.5 percent. 

This consumer model may 

overestimate the level of product 

switching that would occur, as not every 

consumer is likely to run through this 

PBP calculation to determine whether to 

switch or not. Familiarity bias and likefor-like replacement bias may reduce 

the impact of product switching. 

However, as previously mentioned, DOE 

developed several scenarios in order to 

place upper and lower limits on this 

effect, including a scenario in which no 

product switching occurs and a scenario 

with significantly more product 

switching. Analyzing all these scenarios 

allows DOE to account for the identified 

uncertainty in this consumer response. 

DOE acknowledges that the consumer 

survey data it used to determine the 

switching criterion do not directly 

address the consumer choice to switch 

heating fuels, but because the data 

reflect a trade-off between first cost and 

ongoing savings, it is reasonable to 

expect that the payback criterion is 

broadly reflective of the potential 

consumer behavior regarding switching. 

Furthermore, the fuel switching results 

from DOE’s analysis match the overall 

findings from the GTI Fuel Switching 

Study (see appendix 8J of the final rule 

TSD), which surveyed both contractors 

and home builders. 

In addition to the primary estimate, 

DOE conducted sensitivity analyses 

using higher and lower levels of 

switching, as well as a scenario with no 

switching. The sensitivity analyses use 

payback periods that are one year higher 

or lower than 3.5 years (i.e., 2.5 years 

and 4.5 years). DOE also analyzed a 

scenario in which potential tax credits 

(up to $2,000) significantly reduce the 

cost of installing a heat pump system, 

thereby incentivizing even more 

consumers to switch from nonweatherized gas furnaces to heat pumps. 

This scenario represents an upper 

bound on the fraction of consumers 

switching to alternative heating 

equipment in response to amended 

energy conservation standards for 

NWGFs.217

The relative comparison of the 

standard levels analyzed for NWGFs 

remains similar, regardless of the 

switching scenario (including the 

scenario with no switching), as shown 

in appendix 8J of the final rule TSD. 

The average LCC savings and percentage 

of consumers experiencing a net cost 

vary between the different switching 

scenarios; however, at the adopted 

standard level, the average LCC savings 

are positive, and the percentage of 

consumers experiencing a net cost is 

below 25 percent in all scenarios. 

Therefore, DOE’s evaluation of 

economic justification for NWGFs does 

not depend on the specific details or 

assumptions regarding product 

switching, and DOE would come to the 

same conclusions regarding economic 

justification even if the impacts of the 

fuel switching analysis were not 

included. 

In response to the NOPR, APGA 

commented that DOE’s statutory 

interpretation that the incorporation of 

the results of fuel switching into the 

LCC analysis is permissible is contrary 

to clear intent of Congress. (APGA, No. 

387 at pp. 19–20) APGA further 

commented that it is unlawful for DOE 

to compel fuel switching in a rule and 

that Congress intentionally designed 

EPCA to be fuel neutral—and 

specifically between gas furnaces and 

electric alternatives. APGA argued that 

EPCA requires DOE to consider the 

possibility of fuel switching and set a 

standard that ‘‘is not likely to result in 

a significant shift from gas heating to 

electric resistance heating with respect 

to either residential construction or 

furnace replacement.’’ APGA claimed 

that DOE allows fuel switching in some 

cases and not in others—for example 

depending on degree. APGA disagreed 

with DOE’s interpretation given a plain 

reading of the statute and upon the 

strength of the legislative history. 

(APGA, No. 387 at pp. 36–39) 

AGA similarly stated that it is 

improper for DOE to include LCC 

savings associated with fuel switching 

in the energy saving and economic 

justification of a consumer natural gas 

furnace standard. (AGA, No. 405 at pp. 

74–77) AGA further argued, similarly to 

APGA, that the proposed rule would 

unlawfully compel many consumers to 

switch from gas to electric appliances. 

AGA argued that when Congress gave 

the Department authority to establish 

new standards for furnaces, it specified 

that those standards must not be ‘‘likely 

to result in a significant shift from gas 

heating to electric resistance heating 

with respect to either residential 

construction or furnace replacement,’’ 

and, therefore, the legislative history 

demonstrates that Congress did not 

intend for energy conservation 

standards to allow DOE to favor one fuel 


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218For example, general service fluorescent 

lamps, motors, and clothes washers. 

over another or limit consumer choice. 

(AGA, No. 405 at pp. 102–103) AGA 

argued that Congress designed the 

energy conservation standard program 

to be fuel-neutral and prevent fuel 

switching. (AGA, No. 405 at p. 105) 

HARDI commented that the NOPR did 

not meet the requirements outlined by 

EPCA, stating that the statute prescribes 

that standards cannot ‘‘result in a 

significant shift from gas heating,’’ and 

that the fuel-switching analysis does not 

demonstrate this requirement has been 

met. (HARDI, No. 384 at pp. 3–4) 

NPGA stated that because the 

proposed minimum efficiency level can 

only be achieved using condensing 

technology that requires a condenser 

and venting configurations that differ 

from atmospherically drafted furnaces, 

the proposal exceeds authority under 

EPCA, unlawfully compels fuel 

switching from gas furnaces to electric 

alternatives, and imposes design 

requirements. (NPGA, No. 395 at p. 2) 

NPGA further stated that Congress gave 

DOE authority to promulgate standards, 

but such standards must not be ‘‘likely 

to result in a significant shift from gas 

heating to electric resistance heating 

with respect to either residential 

construction or furnace replacement.’’ 

NPGA commented that the proposed 

standard is contrary to this requirement 

because it is so uneconomical that it is 

predicted to force consumers from gas 

furnaces to electric alternatives, such as 

electric resistance heating or heat 

pumps. (NPGA, No. 395 at p. 4) NPGA 

cited Senate and Congressional reports 

from 1986 and 1987 discussing the 

standards to be set for small gas 

furnaces, in order to show that Congress 

did not want to set standards for small 

gas furnaces that would impact 

competition between fuel sources and 

cause a significant switch to electric 

resistance heating. (NPGA, No. 395 at 

pp. 4–8) NPGA commented that 

contrary to the intent of Congress, DOE’s 

proposal embraces fuel switching, 

biases against gas in favor of electricity, 

and harms an important industry vital 

to consumer wellbeing. (NPGA, No. 395 

at pp. 8–9) The Heartland Institute 

expressed concern that consumers will 

switch from natural gas to less-efficient 

electricity or heat their homes in a 

dangerous or more inefficient manner, 

stating that this is unlawful and that 

EPCA is designed to be fuel-neutral. 

(Heartland Institute, No. 376 at pp. 1– 

2) The Georgia Gas Authority 

commented that the lack of economic 

justification and the effect of driving 

consumers towards fuel-switching 

makes the proposed rule unlawful 

under EPCA. (Georgia Gas Authority, 

No. 367 at p. 2) Spire commented that 

DOE’s fuel switching analysis is 

inconsistent with EPCA’s statutory 

scheme because it fails to provide 

comparisons between the cost of 

furnaces with the required efficiency 

improvements and the value of the 

operating cost savings those efficiency 

improvements would provide as a result 

of the standard. (Spire, No. 413 at pp. 

45–46) Spire also commented that the 

proposed standards promote 

electrification rather than conserve 

energy through efficiency in gas 

products, thereby conflicting with EPCA 

and being inconsistent with the overall 

statutory scheme. (Spire, No. 413 at pp. 

2, 43–49) Finally, Spire commented that 

the fuel-switching analysis occurs in 

instances without new standards, and 

that the fuel-switching numbers 

provided include those instances. 

(Spire, Public Meeting Webinar 

Transcript, No. 4099 at p. 15) 

The following paragraphs explain 

DOE’s rationale as to why the 

Department’s amended standard and 

fuel switching analysis are appropriate 

and are consistent with EPCA. 

First, DOE has concluded that the 

amended standards it is adopting for 

NWGFs and MHGFs are performancebased energy conservation standards 

that meet all relevant statutory 

requirements. As explained in section 

II.B of this document, DOE has 

determined that non-condensing 

technology and associated venting do 

not constitute a performance-related 

‘‘feature’’ under 42 U.S.C. 6295(o)(4), 

consistent with the Department’s 

December 2021 Final Interpretive Rule. 

Consequently, DOE is not making any 

covered product with a performancerelated feature unavailable as a result of 

this rulemaking. These furnace 

standards are AFUE-based standards, 

which reflect efficiencies that are 

achieved by furnaces currently on the 

market. Although such levels are 

typically achieved by use of condensing 

technology, DOE does not mandate any 

specific technology or design to be used 

for meeting the standard, thereby 

allowing manufacturers maximum 

flexibility in terms of incorporating 

future technological advancements they 

deem appropriate. In the end, DOE has 

determined that the adopted furnace 

standards would result in the maximum 

energy savings that are technologically 

feasible and economically justified. 

Because these standards have been set 

in accordance with the applicable 

statutory criteria, DOE finds Spire’s and 

NPGA’s assertions that DOE has 

exceeded its statutory authority to be 

without merit. So, too, DOE finds 

without merit Spire’s comments that 

these standards seek to promote 

electrification rather than to improve 

the energy efficiency of gas furnaces or 

that DOE’s rule evidences a bias against 

gas. Consistent with EPCA’s mandate, 

DOE has established product classes for 

each fuel source—gas, oil, and 

electricity—and set standards for those 

classes based on the criteria EPCA 

requires, i.e., to achieve the maximum 

improvement in energy efficiency which 

the Secretary determines is 

technologically feasible and 

economically justified. (42 U.S.C. 

6295(o)(2)(A)) 

Second, DOE has concluded that an 

analysis of potential fuel switching 

effects is appropriate and consistent 

with EPCA. Initially, DOE notes that its 

analysis of fuel switching in the context 

of furnaces was initiated at the request 

of commenters who urged the 

Department to analyze such effects. As 

discussed previously, even in the 

absence of standards, consumers of 

HVAC appliances have a number of 

choices in terms of product selection in 

the current marketplace. For example, 

some number of consumers voluntarily 

switch their home heating system in any 

given year to a heat pump from a gas 

furnace, and some number of consumers 

switch from a gas furnace to an electric 

furnace. Understanding such routine 

changes is necessary for DOE to 

properly analyze the base case in any 

standards rulemaking, particularly as it 

relates to annual product shipments. 

DOE sees no reason why such realworld effects should be ignored in the 

standards cases. Instead, the failure to 

properly account for such effects would 

be inconsistent with EPCA’s direction to 

consider whether the standard is 

economically justified, accounting for, 

among other things, future product 

shipments. (See 42 U.S.C. 

6295(o)(2)(B)(i)(I) and (III)) Consistent 

with that recognition, DOE has analyzed 

potential changes in consumer behavior 

in a number of other rulemakings—and 

without controversy in terms of the 

permissibility under EPCA of 

considering such effects. DOE has 

analyzed the impacts of a potential 

standard on out-of-scope products as 

well as cross-elasticities between 

different product classes in other 

rulemakings.218 DOE cautions that any 

primary analysis that refuses to 

acknowledge the potential for fuel 

switching (product switching) ignores 

reality, so DOE has continued to include 

the fuel switching model as part of its 

analysis, in order to provide the most 

accurate assessment of the costs and 

benefits of this rulemaking. However, as 


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discussed in the paragraph that follows, 

DOE has performed sensitivity analyses 

which assessed the effects of DOE’s 

proposed standards if there were to be 

no fuel switching (see appendix 8J of 

the final rule TSD). 

DOE’s sensitivity analysis shows that 

the rule would be economically justified 

even if consumers were assumed to 

forgo economically beneficial 

opportunities to switch from gas 

furnaces to electric heat pumps. For 

example, with the reference case 

switching assumptions, DOE estimates 

that 18.7 percent of NWGF consumers 

would experience a net cost with 

average LCC savings of $350. Assuming 

no switching, DOE estimates that 21.6 

percent of consumers would experience 

a net cost with an overall average LCC 

savings of $164 across all consumers. In 

either case, DOE considers the amended 

standard level to be economically 

justified. Thus, even if EPCA required 

the Department to ignore the likely realworld effects of its standards, and 

instead compelled an analysis that 

assumed consumers would eschew all 

fuel-switching, the resulting analysis 

would produce the same results: the 

standards adopted for gas-fired furnaces 

by this rule would still be the standards 

that achieve the maximum improvement 

in energy efficiency and that are 

technologically feasible and 

economically justified. 

The amended standards plainly do 

not compel fuel switching. DOE’s rule 

does not ban gas furnaces, and the 

Department has concluded that there are 

technological solutions available to 

allow continued installation of gas-fired 

furnaces for virtually all installation 

scenarios, as discussed in section IV.F.2 

of this document. Consequently, DOE’s 

rule does not compel any consumer to 

convert to an electric space-heating 

product, and consumers continue to 

have a variety of choices to suit their 

needs. DOE does acknowledge (and 

accounts for in its analysis) that in 

certain difficult installation situations 

with higher costs, consumers may 

choose to change their HVAC 

equipment to a product using a different 

fuel type, but as previously discussed, 

DOE expects this percentage to be small. 

Furthermore, newer technology options 

such as DuraVent FasNSeal may further 

reduce the prevalence and cost of such 

problematic installations. Although gas 

industry commenters have made 

numerous qualitative arguments 

regarding such installations, they have 

provided no data to demonstrate the 

quantitative impacts or to show that 

DOE’s estimates are incorrect. DOE also 

finds no basis to support the Heartland 

Institute’s assertion that consumers who 

choose to change their home heating 

product would face safety challenges or 

encounter a lack of energy-efficient 

alternatives; DOE’s energy conservation 

standards for any of its covered spaceheating products set minimum energy 

efficiency requirements for those 

products, and there are typically a 

variety of even more efficient products 

available on the market. DOE further has 

found that there are trained and 

qualified personnel available to 

adequately install and service such 

products, thereby alleviating any 

potential safety or reliability concerns. 

Finally, DOE clarifies the concept of 

fuel neutrality. Contrary to commenters’ 

arguments, EPCA does not contain a 

general fuel-neutrality provision. In 

addition, in several specific provisions, 

EPCA requires particular consideration 

of fuel switching and the utility 

consumers derive from different fuels. 

DOE has adhered to these requirements 

of EPCA, as applicable. The Department 

has made clear in other rules that ‘‘DOE 

does not agree that EPCA, as amended, 

mandates fuel neutral energy 

conservation standards.’’ See Full-FuelCycle Final Statement of Policy, 76 FR 

51281, 51284 (August 18, 2011). In that 

document, DOE confirmed that it will 

continue to consider comparable 

products that use different fuels in 

separate classes as required by 42 U.S.C. 

6295(q)(1). Id. 

As explained in DOE’s August 2021 

proposed interpretive rule, fuel 

switching is a natural part of market 

operation for the subject appliances, and 

it may occur even in the absence of 

amended energy conservation 

standards. The Department has 

recognized that ‘‘fuel switching occurs 

frequently and most certainly in the 

context of new energy conservation 

standards.’’ 86 FR 48049, 40856 (August 

27, 2021). Installation costs may 

influence consumer decisions regarding 

fuel choice, and at any time, a segment 

of consumers may choose replacement 

products that rely on a different fuel 

source than that of the unit being 

replaced. Id. Because fuel switching 

may be impacted by the adoption of 

standards, when conducting an energy 

conservation standards rulemaking, the 

Department routinely accounts for 

potential fuel switching in its consumer 

choice model, which is one part of its 

full suite of analyses. Accordingly, 

‘‘[a]lthough DOE typically analyzes fuelswitching effects, the agency is 

generally free to set an appropriate level 

under the applicable statutory criteria 

regardless of any ancillary fuel 

switching effects.’’ Id. Consequently, to 

the extent EPCA imposes a general 

principle of fuel-neutrality, DOE has 

understood that principle to be 

‘‘violate[d]’’ only by ‘‘a degree of fuel 

switching that is much greater than 

typically found in DOE energy 

conservation standards rulemakings.’’ 

Id. 

The specific provision to which gas 

industry commenters cite in support of 

their fuel-neutrality argument is not 

applicable to this rulemaking. 

Specifically, commenters rely on a 

provision requiring DOE to determine 

that a particular energy conservation 

standard not ‘‘result in a significant shift 

from gas heating to electric resistance 

heating with respect to either residential 

construction or furnace replacements’’ 

(see 42 U.S.C. 6295(f)(1)(B)(iii)). 

However, commenters ignore the 

limited applicability of that provision. 

That limitation is one of three 

requirements applicable to DOE’s 

issuance of an energy conservation 

standard for small furnaces (i.e., less 

than 45,000 BTUs) (see 42 U.S.C. 

6295(f)(1)(B)(i)), for which DOE was 

required to establish standards no later 

than January 1, 1989 (see Id. at 42 U.S.C. 

6295(f)(1)(B)). DOE discharged that 

obligation by rulemaking in 1989. See 

Energy Conservation Program for 

Consumer Products: Energy 

Conservation Standards for Two Types 

of Consumer Products, 54 FR 47916 

(Nov. 17, 1989). The statutory provision 

to which commenters point 

demonstrates that Congress knew how 

to address concerns about fuel 

neutrality, doing so explicitly at the 

relevant place in the statute; Congress 

did not choose to adopt fuel neutrality 

provisions in other, broader provisions 

of EPCA’s rulemaking authority. 

The commenters seek to expand the 

reach of that provision to all subsequent 

furnace rulemakings. As explained 

subsequently, neither the language of 

the statute nor the legislative history 

support such a broad expansion of this 

fuel-neutrality limitation. 

Congress did not place this fuel 

neutrality requirement in a provision of 

EPCA applicable to all rulemakings or 

even in a separate provision applicable 

to all furnace rulemakings. Instead, this 

specific limitation was included in a 

grant of authority for a single 

rulemaking to be completed by January 

1, 1989, establishing an energy 

conservation standard for furnaces 

(other than furnaces designed solely for 

installation in mobile homes) having an 

input of less than 45,000 Btu per hour 

and manufactured on or after January 1, 

1992. (42 U.S.C. 6295(f)(1)(B)(i)) The 

statute further provided that DOE’s final 

rule must be set at an AFUE between 71 

percent and 78 percent. (42 U.S.C. 

6295(f)(1)(B)(ii)) Congress set specific 


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219 132 Cong. Rec. 31328 (Oct. 15, 1986) 

(emphasis added). 

220S. Rep. No. 99–497, at 5 (1986) (emphasis 

added). 

AFUE levels for most consumer 

furnaces by statute. (See Id. at 42 U.S.C. 

6295(f)(1) and (2)) For this specific 

small furnaces rulemaking, however, 

Congress granted DOE discretion, but 

nevertheless imposed unusually 

prescriptive guidelines. Those specific 

guidelines make sense against a 

backdrop of otherwise congressionally 

mandated standards. However, they are 

entirely inconsistent with the general 

rulemaking authority Congress 

conferred upon the Department to set 

new or amended standards for covered 

products. The previous subsection 

makes this plain. Subsection (f)(1)(B)(ii) 

mandates that a January 1, 1989, 

regulation for ‘‘such furnaces’’—i.e., 

small furnaces manufactured after 

January 1, 1992—must set an AFUE 

between 71 and 78 percent. (Id. at 42 

U.S.C. 6295(f)(1)(B)(ii)) But that 

provision is obviously inapplicable to 

all future furnace rulemakings. In its 

1989 regulation, DOE established a 

standard for the small furnaces to which 

these provisions apply with an AFUE of 

78 percent. In 2007, pursuant to EPCA’s 

requirement that DOE consider 

amended standards for consumer 

furnaces, DOE promulgated amended 

standards for furnaces—including both 

these small furnaces and furnaces of 

other sizes—which raised the AFUE 

standard to 80-percent AFUE for 

NWGFs, to 81-percent AFUE for 

weatherized gas furnaces, to 80-percent 

AFUE for MHGFs, and to 82-percent 

AFUE for non-weatherized oil-fired 

furnaces. Such a rule would have been 

impossible if the efficiency range 

specified by 42 U.S.C. 6295(f)(1)(B)(ii)— 

71–78 percent AFUE—applied to that 

rulemaking. Of course, it did not, 

because 42 U.S.C. 6295(f)(1)(B)(ii) 

applied only to the Department’s initial 

small-furnace rulemaking in 1989. 

Commenters never explain why 

subsection (f)(1)(B)(iii)—proscribing a 

significant shift to electric resistance 

heating—should apply to future 

rulemakings while subsection 

(f)(1)(B)(ii) should not. 

Further, even if applicable to this 

rulemaking, the specific prohibition of 

42 U.S.C. 6295(f)(1)(B)(iii) would have 

far less effect here than commenters 

assert. That section prevented DOE from 

setting a standard that would likely 

result in a significant shift from gas 

heating to ‘‘electric resistance heating.’’ 

Although that statutory requirement to 

avoid a shift to electric resistance 

heating was limited to the past 

rulemaking conducted under 42 U.S.C. 

6295(f)(1)(B)(iii), DOE has concluded 

that the current rulemaking is also 

unlikely to drive a shift to electric 

resistance heating. To the extent the 

standard at issue here may result in a 

shift, it is far more likely to result in a 

shift from gas heating to electric heat 

pumps, a different technology with very 

different characteristics. At the time 

these particular statutory provisions 

were adopted, electric heat pumps were 

not as common with low market share 

in regions traditionally heated by 

furnaces, but in the intervening years, 

the heat pump market has seen 

considerable development. Heat pumps 

are far more efficient than electric 

resistance heating and can be more 

energy efficient than gas-fired furnaces. 

It would pervert EPCA’s energy-savings 

purpose to infer from a prohibition on 

setting a standard likely to result in an 

inefficient shift an additional, a textual 

prohibition on setting a standard likely 

to result in an efficient one. 

Although the relevant statutory text is 

clear and controls, DOE nonetheless 

examined the legislative history to 

confirm its reading of the text, 

particularly since certain commenters 

advanced a contrary reading based at 

least in part on legislative history. This 

inquiry confirmed DOE’s understanding 

of the statutory text and likewise 

confirmed that the contrary reading 

espoused by those commenters is 

incorrect, for the reasons discussed 

subsequently. The legislative history 

that commenters cite supports the 

Department’s interpretation. In one set 

of remarks regarding amendments to 

EPCA, Senator Bennett Johnston, 

Chairman of the Senate Committee on 

Energy and Natural Resources, stated: 

We were concerned that if the Secretary 

establishes a standard for small gas furnaces 

at 78 percent, as originally proposed, the first 

cost differential between electric resistance 

heat and natural gas will increase to the point 

where builders will not even consider gas 

heat, particularly in southern areas where 

heating is a minor part of the overall 

residential energy requirement. With regard 

to the first cost, according to AGA, a 71- 

percent efficient gas furnace costs $475. 

Electric-resistance-heating equipment costs 

on an average $350, a difference of $125. By 

contrast, a 78-percent efficient gas furnace 

entails additional installation and duct work 

cost estimated conservatively at $150 to 

$200. Thus, the builder could save some 

$500 per living unit by choosing electric 

resistance heat over a 78-percent efficient gas 

furnace. 

One of the main goals of this legislation is 

to encourage energy conservation without 

unduly altering the economics of fuel 

choices. This goal will be impaired unless 

the standard for small gas furnaces is set so 

as to avoid raising the cost of these furnaces 

to the point where builders are forced to 

select electric resistance heat instead of a gas 

furnace purely on the basis of first cost. 

That is why I added language in our Energy 

and Natural Resources Committee report 

making it clear that the Secretary must pay 

due consideration to the need for utilities to 

continue to compete fairly when DOE 

considers setting the standard for small gas 

furnaces. I made it clear the committee was 

concerned that setting a standard for small 

gas furnaces at or near the 78-percent level 

mandated in the bill for larger gas furnaces 

would increase the first cost of the small gas 

furnace sufficiently to induce a significant 

switch to electric resistance heating. 

The report language goes on to say that the 

bill will, upon a sufficient showing, * * * 

forbid a standard for small gas furnaces being 

set at a level that would increase the price 

to the point that the product would be 

noncompetitive, resulting in minimal 

demand for the product.219

In Senate Report No. 99–497, the 

report states in relevant part: 

In addition, the Committee agreed to adopt 

specific report language clarifying its intent 

with respect to small furnaces; those having 

an input of less than 45,000 Btu’s per hour. 

The Committee did not establish an initial 

standard for small gas furnaces in the statute 

and instead directed the DOE to establish the 

standard by rule at an annual fuel utilization 

efficiency of not less than 71 percent and not 

more than 78 percent. The Committee was 

concerned that setting a standard for small 

gas furnaces, at or near 78 percent (the level 

for larger gas furnaces), would increase their 

initial price. Because of the competition 

between small gas furnaces and electric 

resistance heating in some areas of the 

Nation, such a price increase for small gas 

furnaces could induce builders or consumers 

to switch to electric resistance heating. No 

specific standard for electric resistance 

heating is included in this bill. 

Section 325(j) provides several safeguards 

against a standard for small gas furnaces 

being set at a level that results in a buying 

preference or significant switching from gas 

heating to electric resistance heating. The 

Secretary must consider the impact of any 

lessening of competition that is likely to 

result from the establishment of a standard 

for small furnaces. He must consider the 

economic impact of the standard on 

manufacturers and consumers. In addition, 

the Secretary must consider the total 

projected amount of energy savings likely to 

result from the establishment or revision of 

a standard for small furnaces. 

Finally, section 325(j)(4) forbids a standard 

being set so as to result in the unavailability 

in the United States in any covered product 

type (or class) of performance 

charact[e]ristics, such as size or capacity. 

This paragraph, upon a sufficient showing, 

would forbid a standard for small gas 

furnaces being set at a level that would 

increase the price to the point that the 

product would be noncompetitive and that 

would result in minimal demand for the 

product.’’ 220 Language from Senate Report 


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221S. Rep. No. 100–6, at 5–6 (emphasis added). 

222At 133 Cong. Rec. 545 (Jan. 6, 1987), Senator 

Johnston states, ‘‘One very sensitive aspect of this 

bill has been to minimize the effect it might have 

on the intense competition between the electric and 

gas industries. We don’t want the bill to have the 

effect of creating a significant bias against any 

fuel—be it oil, gas, or electricity—so as to favor one 

over the other.’’ 

No. 100–6 similarly reflects Congress’s 

specific focus on small gas furnaces: ‘‘On 

page 23, lines 13 through 18, the Committee 

modified the language of the bill amending 

section 325(f)(1)(B) of EPCA to include an 

additional clause (iii). The purpose of the 

new clause is to clarify that, in setting an 

energy conservation standard for small gas 

furnaces (those having an input of less than 

45,000 Btu’s per hour), the Secretary of 

Energy shall, in a manner which is otherwise 

consistent with this Act, establish the 

standard at a level between 71 percent and 

78 percent AFUE ‘which the Secretary 

determines is not likely to result in a 

significant shift from gas heating to electric 

resistance heating with respect to either 

residential construction or furnace 

replacement. 

The Committee did not establish an initial 

standard for small gas furnaces in the statute 

and instead directed the DOE to establish the 

standard by rule at an annual fuel utilization 

efficiency of not less than 71 percent and not 

more than 78 percent. The Committee was 

concerned that setting a standard for small 

gas furnaces, at or near 78 percent (the level 

for larger gas furnaces), would increase their 

initial price. Because of the competition 

between small gas furnaces and electric 

resistance heating in some areas of the 

Nation, such a price increase for small gas 

furnaces could induce builders or consumers 

to switch to electric resistance hearing. No 

specific standard for electric resistance 

heating is included in this bill. 

Section 325(j) provides additional 

safeguards against a standard for small gas 

furnaces being set at a level that results in 

a buying preference or significant switching 

from gas heating to electric resistance heating 

(see section-by-section analysis).221

Although the legislative history 

reveals a broader statement 222 by one 

individual member of Congress, once 

again Senator Bennett Johnston, its 

breadth is an outlier which contrasts 

with his own later statements and 

committee report language which 

demonstrates a focus on the small 

furnaces standard. The grants of 

rulemaking authority at 42 U.S.C. 

6295(f)(4) and 42 U.S.C. 6295(m)(1), on 

which this rulemaking relies, do not 

limit the Department’s discretion in the 

manner of 42 U.S.C. 6295(f)(1)(B)(iii). 

As relevant here, rather, the 

Department’s discretion under those 

provisions is constrained by the 

generally applicable limits found in 42 

U.S.C. 6295(m), (o), (p), and (q). Those 

provisions disallow establishment of a 

standard likely to result in the 

unavailability of a feature (see 42 U.S.C. 

6295(o)(4)), and require establishment of 

a separate standard for any covered 

products that ‘‘consume a different kind 

of energy from that consumed by other 

covered products within’’ the regulated 

type of products (42 U.S.C. 

6295(q)(1)(A)). The standards 

established by this final rule comport 

with these statutory requirements. 

AGA stated that it is improper for 

DOE to consider fuel switching as one 

of the benefits of the proposed 

standards. To be consistent with EPCA’s 

text, purpose, structure, and intent, 

AGA argued instead that the purported 

savings due to fuel switching must be 

subtracted from the analysis of whether 

the standards would be economically 

justified. (AGA, No. 405 at p. 105) In 

response, DOE notes that the impacts of 

fuel switching are not necessarily 

benefits. There are differences in costs 

and energy consumption compared to 

the no-new-standards case, and DOE is 

merely accounting for these differences 

in the sensitivity analysis described in 

this section. DOE has evaluated a 

variety of fuel-switching scenarios 

(including a scenario with no 

switching). The relative comparison of 

the standard levels analyzed for NWGFs 

remains similar, regardless of the 

switching scenario. The results for all 

scenarios are found in appendices 8J 

and 10E of the final rule TSD. Therefore, 

DOE’s evaluation of economic 

justification for NWGFs does not 

depend on the specific details or 

assumptions regarding product 

switching, and DOE comes to the same 

conclusions even if the impacts of fuel 

switching are not included. 

AGA argued that DOE also fails to 

acknowledge that with a condensing 

furnace, consumers will use more 

electricity, counteracting the fuel 

savings. AGA asserted that DOE should 

recognize that fuel switching, under the 

proposed rule, would increase overall 

energy consumption, which runs 

counter to the objectives of an energy 

conservation standard. (AGA, No. 405 at 

pp. 74–77) In response, DOE finds 

AGA’s claim to be incorrect and without 

merit. DOE’s analysis does account for 

the slight increase in electricity 

consumption for condensing furnaces 

compared to non-condensing furnaces, 

as presented in section IV.E.4 of this 

document, and the estimated energy 

savings of the rule incorporate this 

impact. DOE also accounts for the 

increase in electricity consumption if a 

consumer switches to a heat pump or 

electric furnace. These effects are 

incorporated in both the LCC analysis 

and national impact analysis. However, 

the energy savings from reduced natural 

gas consumption vastly outweigh the 

slight increase in electricity 

consumption. Furthermore, DOE fully 

accounts for these impacts in all fuelswitching scenarios. Even in scenarios 

where some fraction of consumers 

switch to an electric heating alternative, 

the energy savings from reduced natural 

gas consumption vastly outweigh the 

increase in electricity consumption. It 

would run counter to the purposes of 

EPCA to forgo such energy savings 

unnecessarily. 

Spire commented that forced 

transition to electric alternatives would 

increase energy consumption. (Spire, 

No. 413 at pp. 5–14) In response, DOE 

accounts for the increased electricity 

consumption as a result of product 

switching to electric alternatives in its 

analysis. 

APGA commented that DOE’s 

analysis fails to appropriately account 

for the increased emissions from the 

electricity sector that results from 

increased electrical energy consumption 

caused by fuel switching. (APGA, No. 

387 at p. 29) AGA commented that DOE 

should fully examine the impacts fuel 

switching would have on the entire 

energy system, including utilities and 

end-use residential consumers. 

According to the commenter, fuel 

switching can impact existing and 

future natural gas utility and electricity 

consumers, so, therefore, the 

Department should thoroughly examine 

how fuel switching would impact future 

electricity generation, transmission, or 

distribution infrastructure requirements. 

(AGA, No. 405 at pp. 105–106) In 

response, DOE emphasizes that the 

impacts of fuel switching are 

incorporated in all parts of its analysis 

(as part of the reference new-standards 

scenario). This includes the impacts on 

end-use residential consumers, electric 

utilities, natural gas utilities, and 

emissions reductions or increases. The 

results do account for increased 

emissions from the electricity sector. 

The utility impact analysis specifically 

accounts for the effects of fuel 

switching. 

APGA opined that the estimates of 

potential switching in the TSD remain 

low, especially given financial 

incentives just passed by Congress in 

the Inflation Reduction Act, various 

initiatives of DOE to support lowincome households, and numerous State 

initiatives. According to APGA, another 

reason that DOE’s estimate of fuel 

switching is low is that DOE continues 

to underestimate the cost of difficult 

retrofits. The commenter reasoned that 

additional fuel switching to electric 

appliances decreases energy savings 

under DOE’s analysis. (APGA, No. 387 

at pp. 33–34) As discussed more fully 


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subsequently, DOE has amended its 

shipments projection to account for 

existing policy initiatives with known 

impacts (see section IV.G.2 of this 

document), which has resulted in 

adjustments to the no-new-standards 

shipments projection. For the final rule, 

the shipments projected in 2050 are 

approximately 3 percent lower than was 

estimated in the NOPR. With respect to 

costs, DOE estimates its installation 

costs based on the best available data 

and information submitted by 

commenters, as discussed in section 

IV.F.2 of this document. DOE has 

evaluated all relevant information and 

data and has not identified any data that 

contradict its cost estimates. DOE 

concludes that its installation cost 

estimates are reasonable and 

representative and, therefore, that the 

resulting fuel-switching impacts are 

reasonable and representative. Finally, 

DOE accounts for all energy 

consumption differences compared to 

the no-new-standards case. In fuelswitching scenarios where some fraction 

of consumers switch to an electric 

heating alternative, the energy savings 

from reduced natural gas consumption 

vastly outweigh the increase in 

electricity consumption. 

Spire claimed that DOE employs a 

fuel-switching analysis that assumes 

that consumers facing higher initial 

costs will engage in fuel-switching and 

does not consider the economic 

outcome of an investment in a 

standards-compliant furnace. Spire 

further argued that this is statutorily 

prohibited, as it is not fuel-neutral and 

is not comparing directly within classes 

because the technology is changing 

(non-condensing to electric). Spire 

claimed that DOE’s fuel-switching 

analysis seeks to justify standards 

imposing economically unjustified 

efficiency by driving consumers to 

choose alternatives to gas furnaces. 

(Spire, No. 413 at pp. 43–44) In 

response, DOE finds that Spire is 

incorrect in its characterization of the 

analysis. The analysis considers the 

economic outcome of an investment in 

a standards-compliant furnace. Only a 

small fraction of consumers then opt for 

an electric alternative after this 

consideration. Even in the absence of 

amended standards, some portion of 

consumers with furnaces will choose to 

convert their home’s heating system to 

a heat pump, changes which reflect 

consumer choice and the availability of 

alternative space-heating appliances in 

the marketplace. As commenters 

acknowledge, amended standards are 

likely to have some effect on such 

consumer purchasing decisions, so it 

would be inappropriate for DOE to fail 

to analyze these effects in both the nonew-standards case and standards cases. 

Furthermore, DOE evaluates a range of 

sensitivity scenarios with respect to 

fuel-switching assumptions, including a 

scenario with no fuel switching. The 

relative comparison of the standard 

levels analyzed for NWGFs remains 

similar, regardless of the switching 

scenario. The results for all scenarios 

are found in appendices 8J and 10E of 

the final rule TSD. Therefore, DOE’s 

evaluation of economic justification for 

NWGFs does not depend on the specific 

details or assumptions regarding 

product switching, and DOE would 

reach the same conclusions even if the 

impacts of fuel switching are not 

included. To be clear, contrary to the 

assertions of Spire and others, 

justification for the amended standards 

set by DOE in this final rule does not 

hinge on fuel-switching results. 

Spire commented that DOE’s analysis 

does not appear to account for base case 

fuel switching (i.e., fuel switching that 

would occur in the absence of new 

standards). (Spire, No. 413 at p. 50) In 

response, DOE notes that this assertion 

is incorrect. As previously mentioned, 

DOE incorporates existing market 

trends, including a shift to heat pumps 

and other heating alternatives in the 

absence of new standards, in its 

shipments projection and national 

impact analysis (see section IV.G of this 

document for further discussion). The 

LCC analysis specifically analyzes 

existing furnace consumers and the 

impacts on them due to a standard. 

Consumers that have already switched 

in the absence of a standard are not part 

of the LCC analysis, as they are not 

directly impacted by the rule; however, 

the reduction of future furnace 

shipments due to product switching 

will reduce overall energy savings in the 

national impact analysis, and that is 

accounted for in the analysis. 

Spire further argued that DOE’s 

assumptions appear to be designed to 

maximize LCC savings rather than to 

simulate actual consumer purchasing 

behavior. (Spire, No. 413 at p. 51) In 

response, DOE notes that this is a 

significant mischaracterization of the 

analysis. The incorporation of product 

switching is intended to capture a 

potential effect raised in previous 

comments. DOE evaluated a variety of 

fuel-switching scenarios (including a 

scenario with no switching). The 

relative comparison of the standard 

levels analyzed for NWGFs remains 

similar, regardless of the switching 

scenario. The results for all scenarios 

are found in appendices 8J and 10E of 

the final rule TSD. Therefore, DOE’s 

evaluation of economic justification for 

NWGFs does not depend on the specific 

details or assumptions regarding 

product switching, and DOE reaches the 

same conclusions even if the impacts of 

fuel switching are not included. 

Spire argued that DOE’s fuelswitching analysis understates the 

adverse impacts of fuel switching 

resulting from the standards by 

significantly understating the costs 

associated with switching to heat 

pumps and ignoring the extent to which 

high initial costs and installation 

constraints can be expected to drive 

fuel-switching consumers to the worst 

option from an energy conservation 

perspective: electric resistance heating. 

(Spire, No. 413 at p. 15) Spire further 

argued that DOE arbitrarily limits the 

fuel-switching options to heat pumps 

and electric furnaces, ignoring the fact 

that baseboard heating is readily 

available, easy to install, and has 

extremely low initial costs. (Spire, No. 

413 at p. 52) 

In response, DOE notes that its 

estimates of heat pump costs are based 

on the 2016 final rule technical support 

document for central air conditioners 

and heat pumps and adjusted to 2022$. 

These are the most recently published 

estimates by DOE. Heat pump costs are 

unlikely to have changed significantly 

in the intervening years, other than due 

to the dollar value (which was 

accounted for). DOE’s current analysis is 

consistent with the prior analysis 

specific to heat pumps. DOE further 

notes that the product-switching 

analysis considers alternative heating 

options that work with the existing 

ducted HVAC system. For a stand-alone 

gas furnace, the only other option is an 

electric furnace (i.e., electric resistance 

heating). For a system that includes both 

an air conditioner and a furnace, a heat 

pump becomes another comparable 

option. DOE also considers switching 

options related to a water heater that 

formerly shared an exhaust vent with a 

NWGF. Switching from a NWGF to 

electric baseboard heating requires 

extensive electrical work in all rooms of 

a home and a likely upgrade of the 

electrical panel, which likely costs 

several thousands of dollars. DOE 

disagrees that this is a low-cost option 

and estimates that very few consumers, 

if any, would switch to this option as a 

result of amended energy conservation 

standards, given the availability of other 

lower-cost alternatives. Additionally, 

DOE does not consider electric 

resistance space heaters as a viable 

space-heating alternative to a NWGF, 

because such heaters provide only 

localized heating utility as opposed to 

whole-home heating. 


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Spire argued that fuel switching 

substantially increases overall carbon 

emissions and claimed that DOE is 

understating the adverse energy 

consumption and emissions impacts 

due to product switching. (Spire, No. 

413 at pp. 5–6) In response, DOE notes 

that these assertions are incorrect and a 

mischaracterization of the analysis. 

Product switching does not 

substantially increase carbon emissions, 

and DOE evaluates a full range of energy 

savings and emissions impacts for all 

the switching sensitivity scenarios 

(including a scenario with no 

switching). The national impact analysis 

results for all scenarios are presented in 

appendix 10E of the final rule TSD. 

Although incorporating product 

switching decreases national energy 

savings (due to increased electricity 

consumption), in all scenarios, the rule 

will result in significant energy savings 

and emissions reductions compared to 

the no-new-standards case. The energy 

savings from reduced natural gas 

consumption vastly outweigh the 

increase in electricity consumption, 

when addressed on a comparable FFC 

basis. 

APGA stated that a 95-percent AFUE 

furnace costs nearly three times as much 

as an 80-percent AFUE natural gas 

furnace and that an average air-source 

heat-pump system could cost $5,000 to 

$10,000 to install, which the commenter 

claimed is several times more than a gas 

furnace. (APGA, No. 387 at p. 65) APGA 

further commented that the heat pumps 

and central air conditioners test 

procedure final rule that the July 2022 

NOPR cited for its product prices did 

not clearly explain how the prices were 

developed. APGA questioned whether 

DOE used a different methodology to 

predict the future prices of heat pumps, 

and the commenter stated that these 

matters should be clearly explained in 

the final rule. (APGA, No. 387 at p. 53) 

DOE has described how it estimated 

furnace costs previously in significant 

detail. With respect heat pumps, as 

noted, DOE utilized the estimated costs 

published in the January 2017 direct 

final rule for central air conditioners 

and heat pumps. 82 FR 1786 (Jan. 6, 

2017). The heat pump product 

switching analysis is only relevant for 

households with an existing air 

conditioning system, because adding an 

air conditioner or heat pump requires 

significant additional installation costs, 

as well as space requirements (including 

adding a concrete pad). Households 

without an existing air conditioning 

system are unlikely to switch to a heat 

pump in response to an amended 

standard for consumer furnaces, 

whereas households with an existing 

(and aging) air conditioning system 

might opt to switch to a heat pump for 

both their heating and cooling needs. 

PHCC commented that DOE’s 

assumption that heat pump equipment 

costs will go down is incorrect, as 

material prices have increased due to 

the COVID–19 pandemic and resulting 

supply chain issues. PHCC further 

stated that heat pump costs are too low 

as estimated in the NOPR, and that the 

costs for adding power capacity and 

estimates of the number of homes that 

require additional power capacity are 

also too low. (PHCC, No. 403 at p. 5) In 

response, DOE acknowledges the supply 

chain issues that were prevalent during 

the COVID–19 pandemic; however, DOE 

estimates that by the first year of 

compliance (i.e., 2029) these constraints 

will no longer be relevant. DOE has also 

adjusted all cost estimates to $2022 to 

reflect recent inflation trends. Lastly, no 

additional data were submitted to 

support further adjustment of the 

number of homes that require additional 

power capacity. 

PHCC expressed uncertainty as to 

whether DOE’s updates related to heat 

pumps and to its fuel-switching analysis 

are sufficient, including whether the 

Department considered the impacts on 

the recent proposal to require a new 

refrigerant. (PHCC, No. 403 at pp. 4–5) 

In response, DOE notes that it 

incorporates the latest refrigerant 

requirements for heat pumps in its fuelswitching estimates. 

PHCC commented that the fuelswitching and repair information in 

Tables V.3 and V.4 of the NOPR are 

understated. (PHCC, No. 403 at p. 6) In 

response, DOE notes that the commenter 

did not provide any meaningful 

information or data to update or 

improve the analysis. DOE’s analysis is 

based on the best available data and 

information, including that submitted 

by commenters. DOE has evaluated all 

relevant information and data and has 

not identified any data that contradicts 

its estimates. Therefore, DOE concludes 

that its estimate of the percentage of 

consumers switching to an electric 

heating alternative or opting for 

extended repair are reasonable and 

representative. 

NGA of Georgia commented that the 

proposed rule will create a competitive 

disadvantage because the high initial 

cost of the installation requirements for 

condensing furnaces will cause 

consumers to switch from natural gas to 

less-efficient home heating alternatives 

such as oil, kerosene, and electric 

resistance furnaces. (NGA of Georgia, 

No. 380 at p. 3) In response, DOE 

disagrees that consumers will likely 

switch to oil or kerosene alternatives, as 

there are significantly higher operating 

and installation costs for those fuels. For 

example, as projected in AEO2023, the 

cost of fuel oil per MMBtu is more than 

double that of natural gas. Therefore, 

DOE does not include these fuels in its 

fuel-switching estimates. With respect 

to electric furnaces, DOE already 

accounts for a fraction of consumers that 

opt to switch to an electric furnace and 

includes these impacts in its analysis. 

The Georgia Gas Authority stated that 

the residential customers served by its 

members continue to choose the noncondensing furnace as the most 

economical and energy-efficient option. 

The commenter stated that this is 

evidenced by the number of noncondensing furnaces financed through 

the Georgia Gas Authority’s on-bill 

financing program and the responses of 

HVAC contractors interviewed 

throughout the various regions their 

members serve. According to the 

commenter, the interviewed HVAC 

contractors indicated that the 

unavailability of non-condensing 

furnaces would cause widespread fuel 

switching to electric heating. 

Furthermore, the Georgia Gas Authority 

stated that many natural gas customers 

would face higher monthly energy costs 

without any improved energy 

efficiencies by switching to electric 

appliances. (The Georgia Gas Authority, 

No. 367 at p. 2) In response, DOE 

estimates the total costs and benefits 

associated with existing non-condensing 

furnace consumers moving to a 

condensing furnace. DOE’s analysis is 

national in scope but captures regional 

variability. DOE’s analyses show that a 

majority of consumers, nationally, are 

expected to receive a net LCC benefit 

under this rulemaking, and DOE 

disagrees with the commenter that most 

consumers would switch to an electric 

alternative. In particular, the availability 

of condensing furnaces will change in 

the new-standards case, and, therefore, 

it is highly unlikely that consumers will 

switch to electric alternatives due to the 

unavailability of products. Furthermore, 

DOE’s analysis estimates that only a 

modest fraction of consumers would 

switch to an electric alternative. The full 

impacts of this switch, including all 

operating costs and energy consumption 

impacts, are accounted for in DOE’s 

analysis and evaluation of economic 

justification. 

The DCA also commented that this 

proposed rulemaking would lead to 

customers switching to electric 

furnaces. The commenter further added 

that this switch would lead to higher 

operating costs and necessitate upgrades 

to electrical systems. (DCA, No. 372 at 


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p. 2) In response, DOE has evaluated 

this possibility of consumers switching 

to electric furnaces as part of the fuelswitching analysis, including the 

impacts of potentially higher operating 

costs and the need for upgrades to 

electrical systems. 

Edison Electric Institute commented 

that the fuel-switching analysis should 

account for the other standards that 

have been implemented for related 

products such as heat pumps. (Edison 

Electric Institute, Public Meeting 

Webinar Transcript, No. 363 at p. 85) 

Edison Electric Institute similarly 

commented that the fuel-switching 

model should include technologies such 

as oil furnaces or other technologies 

besides electric heating systems. (Edison 

Electric Institute, Public Meeting 

Webinar Transcript, No. 4099 at p. 18) 

In response, DOE notes that the fuelswitching analysis does account for 

relevant and up-to-date standards for 

heat pumps. DOE further estimates that 

switching from gas-fired to oil-fired 

furnaces is highly unlikely, given the 

installation costs necessary to do so and 

significantly higher fuel oil prices. As a 

general matter, there has been an overall 

market shift away from oil-fired 

furnaces. 

HARDI commented that DOE’s 

analysis fails to adequately measure the 

impact of the NOPR. Specifically, 

HARDI commented that the LCC model 

and its fuel-switching analysis contain 

incorrect assumptions that will make it 

more difficult for distributors to predict 

the market changes and warehouse the 

appropriate inventory. (HARDI, No. 384 

at p. 2) In response, DOE notes that in 

the standards case, the market for 

furnaces will be more predictable in 

terms of furnace efficiency options. DOE 

acknowledges the uncertainty in how 

consumers may respond in terms of 

product switching, which is why there 

are several product switching sensitivity 

scenarios, but in all cases, DOE 

concludes that the rule is economically 

justified. 

Sierra Club and Earthjustice 

commented that the modeling of 

consumers’ decisions to switch to 

electric space-heating appliances in 

response to amended consumer furnace 

standards is solidly grounded in the 

available data. (Sierra Club and 

Earthjustice, No. 401 at p. 2) Sierra Club 

and Earthjustice further commented that 

industry stakeholders misapprehend 

DOE’s objective in modeling consumer 

decisions about fuel switching. These 

commenters stated, as long-term 

industry trends suggest, some portion of 

consumers will switch to heat pumps no 

matter what standard DOE selects. 

Further, Sierra Club and Earthjustice 

stated that the amended standard would 

not be driving the broader shift to 

electric heating appliances, but it may 

encourage customers to invest in costeffective electric alternatives to 

consumer furnaces. These organizations 

commented that the base-case efficiency 

and consumer fuel-switching analysis 

serve different roles in the analysis of 

impact. (Sierra Club and Earthjustice, 

No. 401 at p. 2) In response, DOE 

clarifies that there are indeed separate 

aspects to fuel switching addressed in 

the analysis. To the extent that the 

existing NWGF market is shifting to 

electric heating alternatives, such as 

heat pumps, in the absence of any 

amended energy conservation standard 

for NWGFs, that is reflected in the nonew-standards case shipments 

projection, as discussed in more detail 

in section IV.G of this final rule. The 

second aspect of fuel switching is in 

response to an amended energy 

conservation standard for NWGFs. DOE 

agrees with Sierra Club and Earth 

Justice that an amended energy 

conservation standard will not drive a 

significantly broader shift to electric 

heating alternatives. As explained 

previously, the estimated fraction of 

consumers that switch to an electric 

heating alternative in response to an 

amended energy conservation standard 

for NWGFs is expected to be modest. 

Joint Efficiency Commenters stated 

that DOE’s sensitivity analyses 

demonstrate that the proposed 

standards are cost-effective even with 

alternative assumptions for key 

parameters. These groups further 

commented that, while higher product 

switching was found to result in greater 

LCC savings and a lower simple 

payback period, assuming no product 

switching still resulted in positive LCC 

savings for the proposed standard level. 

(Joint Efficiency Commenters, No. 381 at 

pp. 4–5) DOE agrees. 

b. Product Switching Resulting From 

Amended Standards for Mobile Home 

Gas Furnaces 

As in the NOPR analysis, DOE has 

included product switching in its 

analysis for MHGFs for this final rule, 

including a variety of sensitivity 

scenarios. The MHGF product-switching 

methodology is similar to the productswitching methodology for NWGFs, 

except that the model does not assume 

any switching from gas storage water 

heaters to electric storage water heaters, 

since MHGFs and gas storage water 

heaters do not share common vents. See 

appendix 8J of the TSD for this final 

rule for more details regarding the 

product-switching model for MHGFs. 

The relative comparison of the 

standard levels analyzed for MHGFs in 

this final rule remains similar, 

regardless of the switching scenario 

(including the scenario with no 

switching), as presented in appendix 8J 

of the final rule TSD. The average LCC 

savings and percentage of consumers 

experiencing a net cost vary between the 

different switching scenarios. However, 

at the adopted standard level, the 

average LCC savings are positive, and 

the percentage of consumers 

experiencing a net cost is below 25 

percent in all scenarios. Therefore, 

DOE’s evaluation of economic 

justification demonstrates that MHGFs 

are not significantly impacted by the 

specific details or assumptions 

regarding product switching. 

MHI suggested that the standards 

proposed in the July 2022 NOPR could 

lead consumers to adopt less-efficient, 

and sometimes dangerous, heating 

methods. (MHI, No. 344 at p. 1) JCI 

similarly commented that DOE should 

evaluate whether the proposed MHGF 

standards would drive homeowners to 

unsafe heating alternatives such as 

portable space heaters. (JCI, No. 411 at 

p. 2) In response, DOE has not found 

data to suggest that MHGF standards 

would drive homeowners to unsafe 

heating alternatives such as portable 

space heaters. In addition, DOE notes 

that the commenters did not provide, 

and that DOE was unable to identify, 

data to support the claim that 

consumers would switch to dangerous 

heating methods in response to an 

amended efficiency standard for the 

subject furnaces. While homeowners of 

manufactured homes could purchase 

multiple portable space heaters to fulfill 

their heating needs throughout the 

winter in various rooms, switching to 

portable electric resistance heating 

would substantially increase operating 

costs for most consumers to maintain 

the same level of comfort and increase 

monthly utility bills for most owners of 

manufactured homes. DOE believes this 

occurrence will be rare because 

homeowners are unlikely to forgo the 

use of heat throughout the winter, are 

unlikely to choose unsafe heating 

alternatives where warnings regarding 

their constant use are readily available 

and apparent, and are sensitive to 

monthly expenses on utility bills. Thus, 

DOE believes any occurrences of the 

type posited by MHA and JCI would be 

rare in practice. DOE has identified and 

evaluated the likely heating alternatives 

for consumers of MHGFs, based on 

existing and safe products on the 

market, in its switching analysis. 


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223Fujita, S., Estimating Price Elasticity Using 

Market-Level Appliance Data. LBNL–188289 

(August 2015) (available at: eta-publications.lbl.gov/ 

sites/default/files/lbnl-188289.pdf) (last accessed 

August 1, 2023). 

11. Accounting for Furnace Repair as an 

Alternative to Replacement Under 

Potential Standards 

For this final rule, DOE added a repair 

option into its consumer choice model. 

Because repair is likely to be considered 

first by consumers facing furnace 

replacement, DOE evaluated this option 

before the product switching options. 

To estimate the fraction of consumers 

in a standards case that would choose 

to repair their existing furnace rather 

than replace it or switch to an 

alternative product, DOE used a price 

elasticity parameter, which relates the 

incremental total installed cost to total 

gas furnace shipments, and an efficiency 

elasticity parameter, which relates the 

change in the operating cost to gas 

furnace shipments. Both types of 

elasticity relate changes in demand to 

changes in the corresponding 

characteristic (price or efficiency). A 

regression analysis estimated these 

terms separately from each other and 

found that the price elasticity of 

demand for several appliances is on 

average ¥0.45.223 Thus, for example, a 

price increase of 10 percent would 

result in a shipment decrease of 4.5 

percent, all other factors held constant. 

The same regression analysis found that 

the efficiency elasticity is estimated to 

be on average 0.2 (i.e., a 10-percent 

efficiency improvement, equivalent to a 

10-percent decrease in operating costs, 

would result in a shipments increase of 

2 percent, all else being equal). From 

these two parameters, DOE derived a 

probability that a given household will 

not purchase a furnace, which is 

interpreted as the household repairing 

rather than replacing the furnace. The 

regression analysis included a range for 

the elasticity parameters. The price 

elasticity parameter was adjusted by 

income such that the higher elasticity 

was assigned to lower-income 

households and the lower elasticity was 

assigned to higher-income households, 

resulting in a greater probability of 

repairing existing equipment for lowerincome households. Households that are 

designated as doing a repair rather than 

replacement are not considered in the 

subsequent switching analysis. DOE 

also conducted sensitivity analyses 

using higher and lower rates of repair. 

See appendix 8J of the TSD for this final 

rule for more details on the repair vs. 

replace consumer choice model for 

NWGFs and MHGFs. 

HARDI commented that the proposed 

standards would increase repairs of 

older equipment, which would make it 

more challenging to stock repair parts, 

make these repairs more expensive, and 

take longer due to more product 

shipments. Finally, HARDI argued that 

many consumers would still opt for 

these higher repair costs rather than 

replace their furnace due to the 

increased cost of a new, standardscompliant unit. (HARDI, No. 384 at pp. 

2–3) ACCA also stated its expectation 

that the proposals in the July 2022 

NOPR would result in a significant 

increase in homeowners opting to repair 

their existing equipment rather than 

working with a licensed professional to 

replace it. (ACCA, No. 398 at p. 3) 

In response, DOE acknowledges that 

some consumers may opt to extend the 

lifetime of an existing lower-efficiency 

furnace rather than replace it, and the 

Department includes this effect in its 

analysis as part of its repair vs. replace 

methodology. Incorporating this effect 

into DOE’s analysis reduces the total 

energy savings expected as a result of 

the standards. However, DOE estimates 

that only a few percent of consumers 

will opt for an extended repair, which 

will only delay the replacement by a 

few years given that the furnace will 

ultimately need to be replaced (see 

results presented in section V.B of this 

document). DOE’s shipments projection 

accounts for these extended repair 

situations. With respect to the 

availability of non-condensing furnace 

replacement parts, DOE acknowledges 

that as the share of non-condensing 

furnaces in the building stock decreases 

over time, the availability of 

replacement parts will decrease as well, 

but the Department expects that 

manufacturers will have both an 

economic incentive to continue to make 

such parts available, as well as a desire 

to maintain good relations with their 

customer base. 

PHCC expressed disagreement with 

DOE’s conclusion that new standards 

will not cause consumers to repair 

products or use alternate heating 

methods. The commenter surmised that 

DOE’s rationale relates to contractors 

not doing much of this type of repair 

work in the market now, but PHCC 

argued that the relatively low rate of 

repair is likely tied to consumers 

currently having other non-condensing 

furnace options. PHCC pointed to the 

air-conditioning industry, where repairs 

increased when refrigerant requirements 

changed. Finally, the commenter argued 

that low- and fixed-income consumers 

would be impacted by these increased 

costs, and that these costs should be 

considered as a part of the LCC and PBP 

analysis. (PHCC, No. 403 at p. 5) 

In response, DOE clarifies that it does 

include repair and maintenance costs as 

part of the analysis, differentiated by 

efficiency level. DOE also considers that 

a fraction of consumers may choose to 

repair a furnace, rather than replace it, 

at the end of its lifetime, in response to 

an amended energy conservation 

standard, as described previously. DOE 

also clarifies that it considered the 

possibility that consumers may adopt 

alternative heating methods in response 

to an amended energy conservation 

standard for consumer furnaces, as 

described in section IV.F.10 of this 

document. 

12. Payback Period Analysis 

The payback period is the amount of 

time (expressed in years) it takes the 

consumer to recover the additional 

installed cost of more-efficient products, 

compared to baseline products, through 

energy cost savings. Payback periods 

that exceed the life of the product mean 

that the increased total installed cost is 

not recovered in reduced operating 

expenses. 

The inputs to the PBP calculation for 

each efficiency level are the change in 

total installed cost of the product and 

the change in the first-year annual 

operating expenditures relative to the 

baseline. The PBP calculation uses the 

same inputs as the LCC analysis when 

deriving first-year operating costs, 

except that discount rates are not 

needed. 

As noted previously in section III.F.2 

of this document, EPCA establishes a 

rebuttable presumption that a standard 

is economically justified if the Secretary 

finds that the additional cost to the 

consumer of purchasing a product 

complying with an energy conservation 

standard level will be less than three 

times the value of the first year’s energy 

savings resulting from the standard, as 

calculated under the applicable test 

procedure. (42 U.S.C. 6295(o)(2)(B)(iii)) 

For each considered efficiency level, 

DOE determined the value of the first 

year’s energy savings by calculating the 

energy savings in accordance with the 

applicable DOE test procedure, and 

multiplying those savings by the average 

energy price projection for the year in 

which compliance with the amended 

standards would be required. 

APGA argued that since the product 

switching decision criterion is based on 

a simple payback period calculation, the 

inclusion of product switching biases 

the average PBPs to be more attractive 

than they should be. (APGA, No. 387 at 

pp. 57–58) In response, DOE notes that 

it has performed a sensitivity scenario 


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224 DOE uses data on manufacturer shipments as 

a proxy for national sales, as aggregate data on sales 

are lacking. In general, one would expect a close 

correspondence between shipments and sales. 

225The new owners primarily consist of 

households that add or switch to NWGFs or MHGFs 

during a major remodel. Because DOE calculates 

new owners as the residual between its shipments 

model compared to historical shipments, new 

owners also include shipments that switch away 

from NWGFs or MHGFs. 

with no product switching, including 

calculating the resulting PBPs, and the 

conclusions of economic justification 

remain the same regardless of whether 

product switching is included or not. 

G. Shipments Analysis 

1. Shipments Model and Inputs 

DOE uses projections of annual 

product shipments to calculate the 

national impacts of potential amended 

or new energy conservation standards 

on energy use, NPV, and future 

manufacturer cash flows.224 The 

shipments model takes an accounting 

approach, tracking market shares of 

each product class and the vintage of 

units in the stock. Stock accounting uses 

product shipments as inputs to estimate 

the age distribution of in-service 

product stocks for all years. The age 

distribution of in-service product stocks 

is a key input to calculations of both the 

NES and NPV, because operating costs 

for any year depend on the age 

distribution of the stock. 

DOE developed shipment projections 

based on historical data and an analysis 

of key market drivers for each product. 

DOE estimated NWGF and MHGF 

shipments by projecting shipments in 

three market segments: (1) replacement 

of existing consumer furnaces; (2) new 

housing; and (3) new owners in 

buildings that did not previously have 

a NWGF or MHGF or existing NWGF or 

MHGF owners that are adding an 

additional consumer furnace.225 DOE 

also considered whether standards that 

require more efficient consumer 

furnaces would have an impact on 

consumer furnace shipments, as 

discussed in section IV.G.2 of this final 

rule. 

An anonymous commenter stated that 

with recent shortages, it has been hard 

to find air-conditioner or furnace units 

that meet the ultra-low NOX

requirement in areas that require them. 

(Anonymous 2, No. 346 at p. 1) The 

anonymous commenter further 

recommended that more resources 

should be made available to 

manufacturers so that availability is no 

longer an issue. (Id.) The same 

anonymous commenter also stated that 

heat pumps alleviate the issue of not 

having available resources to meet ultralow NOX requirements. (Id.) The same 

anonymous commenter referenced a 

blog from Lee’s Air, Plumbing, and 

Heating that may serve as a resource for 

helping residential homeowners 

upgrade old furnaces to ultra-low NOX

systems. (Id.) In response, DOE 

acknowledges recent supply chain 

constraints but assumes that all such 

constraints will be resolved by the first 

year of compliance (2029), as such 

constraints were heavily tied to the 

COVID–19 pandemic. DOE assumes that 

current supply chain issues will not 

persist out to 2029 and beyond, given 

that such issues are already in the 

process of resolving and current supply 

chains are not as constrained as they 

were during the pandemic. 

The Georgia Gas Authority stated that 

over the past 15 years, the average 

residential natural gas consumption per 

customer has dropped from 72 MMBtu 

per year to 65 MMBtu per year. The 

Georgia Gas Authority commented that 

condensing units are currently 50 

percent of the market and 60 percent of 

shipped NWGFs. (Georgia Gas 

Authority, No. 367 at p. 2) 

Citing a report from the Bonneville 

Power Administration, NEEA stated that 

65 percent of gas furnace sales in the 

Northwest in 2020 were at an efficiency 

of 95 percent AFUE or higher. Similarly, 

NEEA added that less than one-third of 

gas furnaces sales in the Northwest are 

non-condensing, and that this figure has 

been stable and declining from 2016 to 

2020. (NEEA, No. 368 at p. 3) 

The Heartland Institute commented 

that condensing furnaces capture more 

than half the market, with six in ten 

NWGFs shipped being condensing 

models. Accordingly, the commenter 

argued that the proposed standards for 

NWGFs and MHGFs are not needed. 

(Heartland Institute, No. 376 at p. 2) 

APGA asserted that growth in the 

market share for condensing furnaces is 

likely to be higher than DOE’s estimate 

and undermines DOE’s economic 

justification for further market 

intervention in the form of new 

standards. (APGA, No. 387 at pp. 7–8) 

In contrast, NYSERDA further 

commented that DOE’s condensing 

furnace national projections are lower 

than as described in the 2021 HARDI 

data for the Northeast and New York, 

which shows 76 percent and 64 percent 

of natural gas furnace shipments as 

being condensing systems, respectively. 

(Id.) NYSERDA also commented that 

HARDI sales data for New York show 

that over 50 percent of furnaces sold in 

the Northeast and over 45 percent of 

those sold in New York are at 96- 

percent AFUE. (NYSERDA, No. 379 at 

p. 2) 

DOE acknowledges the increasing 

market saturation of condensing 

furnaces and has included this trend as 

part of the shipments analysis based on 

historical shipments data. These data do 

indicate a high fraction of condensing 

furnaces in the Northeast. 

Evergreen Action commented that 

condensing furnaces represent about 

half of the new purchases on the current 

market; the other half of purchases are 

made by landlords or builders who are 

not responsible for the utility bills, or by 

homeowners who are making a quick 

decision when replacing a broken 

furnace. (Evergreen Action, No. 364 at p. 

1) In response, although DOE 

acknowledges that a mix of landlords or 

homeowners purchase consumer 

furnaces, the Department bases its 

shipments projection on historical 

shipment and saturation data. DOE 

further notes that these observations 

regarding landlords and builders, as 

well as homeowners making quick 

replacement decisions, are consistent 

with DOE’s discussion of market 

failures in section IV.F.8 of this 

document. 

Nortek commented that the proposed 

furnace standards could lead the already 

relatively small retail market for MHGFs 

to shrink, which could cause companies 

to stop making them. The commenter 

further stated that this could reduce 

competition and, in turn, cause 

problems for manufactured homeowners 

who would have to turn to more 

expensive alternatives. (Nortek, No. 406 

at p. 6) 

Mortex commented that DOE’s 

shipments estimates for MHGFs are too 

high, and estimating that these values 

should be closer to 36,000 (consistent 

with 2021 shipments). In contrast to 

DOE’s projection of increasing 

shipments, Mortex forecasted that 

shipments of MHGFs will decline, 

reaching 19,000 by 2040. (Mortex, No. 

410 at p. 2) 

As discussed in the subsections that 

fellow, DOE’s shipments projections for 

MHGFs are based on historical 

shipment data submitted to DOE by 

manufacturers and trade associations 

and historical and projected 

manufactured housing data (existing 

and new construction), as described in 

chapter 9 and appendix 9A of the final 

rule TSD. Projected housing trends are 

based on AEO2023. These data indicate 

that MHGF shipments are unlikely to 

decrease to the level suggested by 

Mortex, primarily due to replacements 

needed for existing manufactured 

homes. 

AGA inquired about how the modeled 

market correlates to the 2020 RECS data, 

pointing out that the modeled market 


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87598 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

226Appliance Magazine. Appliance Historical 

Statistical Review: 1954–2012 (2014). 

227Air-Conditioning, Heating, & Refrigeration 

Institute, Furnace Historical Shipments Data. 

(1996–2022) (Available at: www.ahrinet.org/ 

resources/statistics/historical-data/furnaceshistorical-data) (last accessed August 1, 2023). 

228Heating, Air-conditioning and Refrigeration 

Distributors International (HARDI). DRIVE portal 

(HARDI Visualization Tool managed by D+R 

International until 2022), proprietary Gas Furnace 

Shipments Data from 2013–2022 proprietary Gas 

Furnace Shipments Data from 2013–2022 provided 

to Lawrence Berkeley National Laboratory (LBNL). 

229BRG Building Solutions. The North American 

Heating & Cooling Product Markets (2023 Edition) 

(available at: www.brgbuildingsolutions.com/ 

reports-insights) (last accessed August 1, 2023). 

230Air-Conditioning, Heating, and Refrigeration 

Institute (formerly Gas Appliance Manufacturers 

Association). Updated Shipments Data for 

Residential Furnaces and Boilers, April 25, 2005 

(available at: www.regulations.gov/document/EERE2006-STD-0102-0138) (last accessed August 1, 

2023). 

231Air-Conditioning, Heating, and Refrigeration 

Institute. Non-Condensing and Condensing 

Regional Gas Furnace Shipments for 2004–2009 and 

2010–2015 Data Provided to DOE contractors, July 

20, 2010, and November 26, 2016. 

232U.S. Census Bureau, Manufactured Homes 

Survey: Annual Shipments to States from 1994– 

2022 (available at: www.census.gov/data/tables/ 

time-series/econ/mhs/shipments.html) (last 

accessed Aug. 1, 2023). 233U.S. Census Bureau, Manufactured Homes 

Survey: Historical Annual Placements by State from 

1980–2013 (available at: www.census.gov/data/ 

tables/time-series/econ/mhs/historical-annualplacements.html) (last accessed August 1, 2023). 234U.S. Census Bureau—Housing and Household 

Economic Statistics Division, American Housing 

Survey, multiple years from 1973–2021 (available 

at: www.census.gov/programs-surveys/ahs/ 

data.html) (last accessed August 1, 2023). 235Energy Information Administration (EIA). 

Residential Energy Consumption Survey (RECS), 

multiple years from 1979–2020 (available at: 

www.eia.gov/consumption/residential/) (last 

accessed August 1, 2023). 236U.S. Census. Characteristics of New Housing 

from 1999–2022 (available at: www.census.gov/ 

construction/chars/) (last accessed August 1, 2023). 237U.S. Census. Characteristics of New Housing 

(Multi-Family Units) from 1973–2022 (available at: 

www.census.gov/construction/chars/mfu.html) (last 

accessed August 1, 2023). 238Home Innovation Research Labs (independent 

subsidiary of the National Association of Home 

Builders (NAHB). Annual Builder Practices Survey 

(2015–2019) (available at: 

www.homeinnovation.com/trends_and_reports/ 

data/new_construction) (last accessed August 1, 

2023). 

239U.S. Census Bureau, Characteristics of New 

Housing (available at: www.census.gov/ 

construction/chars/) (last accessed August 1, 2023). 

240 Decision Analysts, 2002, 2004, 2006, 2008, 

2010, 2013, 2016, 2019, and 2022 American Home 

Comfort Study (available at: 

www.decisionanalyst.com/Syndicated/ 

HomeComfort/) (last accessed August 1, 2023). 

241BRG Building Solutions. The North American 

Heating & Cooling Product Markets (2023 Edition) 

(available at: www.brgbuildingsolutions.com/ 

reports-insights) (last accessed August 1, 2023). 

242AHRI (formerly GAMA), Furnace and Boiler 

Shipments data provided to DOE for Furnace and 

Boiler ANOPR (Jan. 23, 2002). 

share of the Pacific Region in 2029 

differs from the 2020 RECS data. (AGA, 

Public Meeting Transcript, No. 363 at p. 

55) In response, DOE clarifies that it 

includes market share trends into its 

analysis, such that the market shares 

projected for 2029 will not exactly 

match 2020 market shares. Furthermore, 

RECS data represent the market share of 

the existing stock, whereas the market 

share for 2029 represents new 

shipments of consumer furnaces. 

a. Historical Shipments Data 

DOE assembled historical shipments 

data for NWGFs and MHGFs from 

Appliance Magazine for 1954–2012,226

AHRI from 1996–2022,227 HARDI from 

2013–2022,228 and BRG from 2000– 

2022.229 DOE also used the 1992 and 

1994–2003 shipments data by State 

provided by AHRI 230 and 2004–2009 

and 2010–2015 shipments data by North 

and rest of country regions provided by 

AHRI,231 as well as HARDI shipments 

data that is disaggregated by region and 

most States to disaggregate shipments 

by region. DOE also used CBECS 2018 

data and BRG shipments data to 

estimate the commercial fraction of 

shipments. Disaggregated shipments for 

MHGFs are not available, so DOE 

disaggregated MHGF shipments from 

the total by using a combination of data 

from the U.S. Census 232 233 American 

Housing Survey (AHS),234 and RECS.235

b. Shipment Projections in No-NewStandards Case 

As stated previously, DOE estimated 

NWGF and MHGF shipments by 

projecting shipments in three market 

segments: (1) replacement of existing 

furnaces; (2) new housing; and (3) new 

owners in buildings that did not 

previously have a NWGF or MHGF or 

existing NWGF or MHGF owners that 

are adding an additional consumer 

furnace. These projections reflect 

equipment switching that is occurring 

without standards and additions to 

homes without central heating. 

To project furnace replacement 

shipments, DOE developed retirement 

functions from furnace lifetime 

estimates and applied them to the 

existing products in the housing stock, 

which are tracked by vintage. DOE 

calculated replacement shipments using 

historical shipments and the lifetime 

estimates (average 21.5 years). In 

addition, DOE adjusted replacement 

shipments by taking into account 

demolitions, using the estimated 

changes to the housing stock from 

AEO2023. 

To project shipments to the new 

housing market, DOE utilized a forecast 

of new housing construction and 

historic saturation rates of furnaces in 

new housing. DOE used the AEO2023 

housing starts and commercial building 

floor space projections and data from 

U.S. Census Characteristics of New 

Housing,236 237 Home Innovation 

Research Labs Annual Builder Practices 

Survey,238 RECS 2020, AHS 2021, and 

CBECS 2018 to estimate new 

construction saturations. DOE also 

estimated future furnace saturation rates 

in new single-family housing based on 

a weighted average of values from the 

U.S. Census Bureau’s Characteristics of 

New Housing from 1990 through 

2022.239

To project shipments to the newowner market, DOE estimated the new 

owners based on the residual shipments 

from the calculated replacement and 

new construction shipments compared 

to historical shipments over five years 

(2016–2020 for this final rule). DOE 

compared this with data from Decision 

Analysts’ 2002 to 2019 American Home 

Comfort Study,240 2023 BRG data,241

and AHRI’s estimated shipments in 

2000,242 which showed similar 

historical fractions of new owners. DOE 

assumed that the new-owner fraction 

would be the 10-year average in 2029 

and then decrease to zero by the end of 

the analysis period (2058). If the 

resulting fraction of new owners is 

negative, DOE assumed that it was 

primarily due to equipment switching 

or non-replacement and added this 

number to replacements (thus reducing 

the replacements value). 

Table IV.12 shows the fraction of 

shipments for the replacement, new 

construction, and new owner markets in 

2029. For NWGFs in residential 

applications, 59 percent of shipments 

are projected to be in the North and 41 

percent in the rest of the country. For 

NWGFs in commercial applications, 51 

percent of shipments are projected to be 

in the North and 49 percent in the rest 

of the country. For MHGFs, 70 percent 

of shipments are projected to be in the 

North and 30 percent in the rest of the 

country. See chapter 9 of the final rule 

TSD for more details on the shipments 

analysis. 


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243South Coast Air Quality Management District. 

2016 Air Quality Management Plan (AQMP) 

(available at: www.aqmd.gov/home/air-quality/ 

clean-air-plans/air-quality-mgt-plan/final-2016- 

aqmp) (last accessed Feb. 15, 2022). 

244See www.aqmd.gov/docs/default-source/rulebook/reg-xi/rule-1111.pdf (last accessed May 31, 

2023). 

245The 2022 update includes heat pumps as a 

performance standard baseline for water heating or 

space heating in single-family homes, as well as 

space heating in multi-family homes. Under the 

California Code, builders will need to either include 

one high-efficiency heat pump in new constructions 

or subject those buildings to more-stringent energy 

efficiency standards. 

246See https://ww2.arb.ca.gov/resources/ 

documents/2022-state-strategy-stateimplementation-plan-2022-state-sip-strategy#:∼:

text=The%202022%20State%20SIP%20Strategy,

all%20nonattainment%20areas%20across%20

California (last accessed August 1, 2023). 

TABLE IV—12 TOTAL AND FRACTION OF NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

SHIPMENTS BY MARKET SEGMENT (REPLACEMENTS, NEW CONSTRUCTION, AND NEW OWNERS) IN 2029 

Product class Market segment 

North Rest of country Total 

Million % Million % Million % 

NWGF (Residential) ..................... Replacements * ............................ 1.412 82 0.948 79 2.360 81 

New Construction ......................... 0.316 18 0.255 21 0.571 19 

Total ...................................... 1.728 100 1.202 100 2.930 100 

NWGF (Commercial) .................... Replacements * ............................ 0.057 74 0.052 72 0.109 73 

New Construction ......................... 0.020 26 0.020 28 0.040 27 

Total ...................................... 0.077 100 0.072 100 0.149 100 

MHGF ........................................... Replacements * ............................ 0.050 70 0.020 64 0.070 68 

New Construction ......................... 0.021 30 0.011 36 0.032 32 

Total ...................................... 0.071 100 0.031 100 0.102 100 

* Includes new owners. 

Note: percentages may not add up to 100 percent due to rounding 

Regarding the proposed California 

2016 Air Quality Management Plan 

(AQMP),243 which targets ozonedepleting NOX emissions, DOE notes 

that the proposed control measure has 

two components: (1) implementing the 

existing Rule 1111 244 emission limit of 

NOX for residential space heaters; and 

(2) incentivizing the replacement of 

older space heaters with more efficient 

low-NOX products, and/or ‘‘green 

technologies’’ such as solar heating or 

heat pumps. Incentivizing heat pumps 

is only one of the proposed approaches 

to reduce NOX emissions that were 

offered in the plan, but it is unclear how 

this would trigger actual market and/or 

policy changes in the future. Current 

requirements in many parts of California 

for low-NOX and ultra-low-NOX

furnaces could also increase the cost of 

these furnaces, but it is currently 

unclear if it will be enough to drive 

shipments towards other heating 

options (including heat pumps). Thus, it 

is very uncertain to what extent 

installations of heat pumps would 

increase. 

For the NOPR, assumptions regarding 

future policies encouraging 

electrification of households were 

speculative at that time, so such policies 

were not incorporated into the 

shipments projection. For the final rule, 

DOE accounted for the 2022 update to 

Title 24 in California 245 and also the 

decision of the California Public 

Utilities Commission to eliminate 

ratepayer subsidies for the extension of 

new gas lines beginning in July 2023. 

Together, these policies are expected to 

lead to the eventual phase-out of 

NWGFs and MHGFs in new singlefamily homes in California. The 

California Air Resources Board has 

adopted a 2022 State Strategy for the 

State Implementation Plan that would 

effectively ban sales of new gas furnaces 

beginning in 2030.246 However, because 

a final decision on a rule would not 

happen until 2025, DOE did not include 

this latter policy in its analysis for the 

final rule. 

DOE understands that ongoing 

electrification policies at the Federal, 

State, and local levels are likely to 

encourage installation of heat pumps in 

some new homes and adoption of heat 

pumps in some homes that currently 

use NWGFs and MHGFs. However, 

there are many uncertainties about the 

timing and effects of these policies that 

make it difficult to fully account for 

their likely impact on NWGF and MHGF 

market shares in the time frame for this 

analysis (i.e., 2029 through 2058). 

Nonetheless, DOE has modified some of 

its projections to attempt to account for 

impacts that are most likely in the 

relevant time frame. The assumptions 

are described in chapter 9 and appendix 

9A of the final rule TSD. The changes 

result in a decrease of NWGF and 

MHGF shipments in the no-newstandards case in 2029 compared to the 

NOPR analysis, with a corresponding 

decrease in estimated energy savings 

resulting from the standards. DOE 

acknowledges that electrification 

policies may result in a larger decrease 

in shipments of NWGFs and MHGFs 

than projected in this final rule, 

especially if stronger policies are 

adopted in coming years. However, this 

would occur in the no-new-amendedstandards case and, thus, would only 

reduce the energy savings estimated in 

this rule. For example, if incentives and 

rebates shifted five percent of shipments 

in the no-new-amended-standards case 

from NWGFs to heat pumps, then the 

energy savings estimated and associated 

monetized benefits for NWGFs in this 

rule would decline by approximately 

five percent. The estimated consumer 

impacts are likely to be similar, 

however, except that the percentage of 

consumers with no impact at a given 

efficiency level would increase. Nor 

does DOE expect that a modest shift in 

shipments would have a significant 

effect on manufacturers. DOE notes that 

the economic justification for the rule 

would be unlikely to significantly 

change even if DOE were to include 

these larger impacts of incentives and 

rebates in the no-new-standards case, 

although the absolute magnitude of the 

savings might decline. 

Regarding this aspect of the July 2022 

NOPR, Lennox commented that 

Resolution 22–14 (i.e., the 2022 State 

SIP Strategy in California), the New 

York State scoping plan, and the 

incentives and tax credits for electric 

HVAC in the Inflation Reduction Act 


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247 DOE also accounted for situations when 

installing a condensing furnace could leave an 

‘‘orphaned’’ gas storage water heater that would 

require expensive re-sizing of the vent system. 

Rather than incurring this cost, the consumer could 

choose to purchase an electric storage water heater 

along with a new furnace. 

248The NIA accounts for impacts in the 50 States 

and U.S. territories. 

249For the NIA, DOE adjusts the installed cost 

data from the LCC analysis to exclude sales tax, 

which is a transfer. 

will contribute to additional shifting 

towards electrification for heating and 

cooling. The commenter asserted that 

DOE should consider these factors in 

the shipment estimates and related 

analysis for consumer furnaces. 

(Lennox, No. 389 at p. 3) 

In response, as noted in the previous 

discussion, DOE has accounted for some 

policies encouraging the electrification 

of homes, such as the 2022 update to 

Title 24 in California. The shipments 

analysis reflects these initiatives. With 

respect to the California 2022 State 

Strategy for the State Implementation 

Plan, a rule specific to NWGFs and 

MHGFs is not yet final and remains 

uncertain at this time. Similarly, the 

specific implementation of any 

incentives or rebates as part of the New 

York State Scoping Plan and Inflation 

Reduction Act remain speculative at 

this time. Therefore, DOE did not 

incorporate either of these initiatives in 

the shipments projections for this 

rulemaking. As DOE has noted, 

however, the economic justification for 

the rule would be unlikely to change 

significantly, even if DOE were to 

include these larger impacts of 

incentives and rebates in the no-newstandards case, although the absolute 

magnitude of the savings might decline. 

Rheem commented that it does not 

agree with DOE’s shipment projections 

that predict a 30-percent increase in 

furnace sales between 2035 and 2050, 

arguing that they are inaccurate because 

of the Federal and State-level policy 

trends toward electric appliances which 

is largely buoyed by manufacturers. 

(Rheem, No. 394 at p. 2) In response, 

DOE clarifies that at the proposed 

standard levels in the NOPR, total 

furnace shipments (NWGFs and 

MHGFs) only increased by 

approximately 15 percent between 2035 

and 2050, not 30 percent. DOE notes, 

however, that it has revised its 

shipments projection to reflect Federal, 

State, and local-level initiatives 

currently in effect, as described 

previously, which results in a smaller 

increase in furnace sales. Accordingly, 

for the final rule shipments projection, 

total furnace shipments (NWGFs and 

MHGFs) are expected to increase by 

approximately 5 percent between 2035 

and 2050. 

Atmos Energy commented that the 

proposed rule would likely reduce the 

effectiveness of existing rebate 

programs, arguing that it would 

undermine the overall goals of the 

energy efficiency program. The 

commenter added that the proposed 

rule would reduce the pool of customers 

able to take advantage of available 

incentive programs. (Atmos Energy, No. 

415 at p. 4) Atmos Energy further stated 

that it currently offers conservation and 

energy efficiency programs in its 

Louisiana, Mississippi, Colorado, and 

Mid-Tex divisions, adding that it 

provides financial incentives to 

purchase high-efficiency natural gas 

equipment, smart thermostats, and 

home weatherization upgrades. Atmos 

Energy stated that in 2020, 1.39 million 

therms of natural gas were conserved 

and 8,117 tons of CO2 emissions were 

avoided annually as a result of energy 

efficiency programs. (Atmos Energy, No. 

415 at p. 5) In response, DOE 

acknowledges that rebate programs 

incentivizing the purchase of higher 

efficiency condensing furnaces will no 

longer be needed after energy 

conservation standards for consumer 

furnaces come into effect. 

2. Impact of Potential Standards on 

Shipments 

a. Impact of Equipment Switching 

DOE applied the consumer choice 

model described in section IV.F.10 of 

this document to estimate the impact on 

NWGF and MHGF shipments of product 

switching that may be incentivized by 

potential standards. The options 

available to each sample household or 

building are to purchase and install: (1) 

the NWGF or MHGF that meets a 

particular standard level, (2) a heat 

pump, or (3) an electric furnace.247

As applied in the LCC and PBP 

analyses, the consumer choice model 

considers product prices in the 

compliance year and energy prices over 

the lifetime of products installed in that 

year. The shipments model considers 

the switching that might occur in each 

year of the analysis period (2029–2058). 

To do so, DOE estimated the switching 

in the first year of the analysis period 

(2029) and derived trends from 2029 to 

2058. First, DOE applied the NWGF and 

MHGF product price trend described in 

section IV.F.1 of this document to 

project prices in 2058. DOE used the 

appropriate energy prices over the 

lifetime of products installed in each 

year. Although the inputs vary, the 

decision criteria were the same in each 

year. For each considered standard 

level, the number of NWGFs or MHGFs 

shipped in each year is equal to the base 

shipments in the no-new-standards case 

minus the number of NWGF or MHGF 

buyers who switch to either a heat 

pump or an electric furnace. The 

shipments model also tracks the number 

of additional heat pumps and electric 

furnaces shipped in each year. 

b. Impact of Repair vs. Replace 

As discussed in section IV.F.11 of this 

document, for this final rule, DOE 

estimated a fraction of both NWGF and 

MHGF replacement installations that 

choose to repair their equipment, rather 

than replace their equipment or switch 

to a heat pump or electric furnace, in 

the new standards case. The approach 

captures not only a decrease in NWGF 

and MHGF replacement shipments, but 

also the energy use from continuing to 

use the existing furnace and the cost of 

the repair. For purposes of this analysis, 

DOE assumes that the demand for space 

heating is inelastic and, therefore, that 

no modeled household or commercial 

building will forgo either repairing or 

replacing their equipment (either with a 

new NWGF of MHGF or a suitable 

space-heating alternative). While DOE 

recognizes that edge cases exist, DOE 

believes that its analytical assumption 

of inelasticity is representative of the 

vast majority of households. 

For details on DOE’s shipments 

analysis, product and fuel switching, 

and the repair option, see chapter 9 of 

the final rule TSD. 

H. National Impact Analysis 

The NIA assesses the national energy 

savings (NES) and the NPV from a 

national perspective of total consumer 

costs and savings that would be 

expected to result from new or amended 

energy conservation standards at 

specific efficiency levels.248

(‘‘Consumer’’ in this context refers to 

consumers of the product being 

regulated.) DOE calculates the NES and 

NPV for the potential standard levels 

considered based on projections of 

annual product shipments, along with 

the annual energy consumption and 

total installed cost data from the energy 

use and LCC analyses.249 For the 

present analysis, DOE projected the 

energy savings, operating cost savings, 

product costs, and NPV of consumer 

benefits over the lifetime of NWGFs and 

MHGFs sold from 2029 through 2058. 

DOE evaluates the impacts of new or 

amended standards by comparing a case 

without such standards with standardscase projections. The no-new-standards 

case characterizes energy use and 

consumer costs for each product class in 

the absence of new or amended energy 

conservation standards. For this 


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projection, DOE considers historical 

trends in efficiency and various forces 

that are likely to affect the mix of 

efficiencies over time. DOE compares 

the no-new-standards case with 

projections characterizing the market for 

each product class if DOE adopted new 

or amended standards at specific energy 

efficiency levels (i.e., the TSLs or 

standards cases) for that class. For the 

standards cases, DOE considers how a 

given standard would likely affect the 

market shares of products with 

efficiencies greater than the standard. In 

the standards cases, a small fraction of 

households will replace the furnace a 

second time within the 30-year 

analytical period of the NIA. For these 

households, the installation cost adders 

for going from a non-condensing furnace 

to a condensing furnace are not applied 

in the standards cases for the second 

replacement, as the household will 

already have a condensing furnace. 

DOE uses a spreadsheet model to 

calculate the energy savings and the 

national consumer costs and savings 

from each TSL. AEO2023 is the source 

of the energy price trends as well as 

other inputs to the NIA such as 

projected housing starts and new 

commercial building floor space, 

heating and cooling degree day 

projections, and building shell 

efficiency projections. Interested parties 

can review DOE’s analyses by changing 

various input quantities within the 

spreadsheet. The NIA spreadsheet 

model uses typical values (as opposed 

to probability distributions) as inputs. 

Table IV.13 summarizes the inputs 

and methods DOE used for the NIA 

analysis for the final rule. Discussion of 

these inputs and methods follows the 

table. See chapter 10 of the final rule 

TSD for further details. 

TABLE IV.13—SUMMARY OF INPUTS AND METHODS FOR THE NATIONAL IMPACT ANALYSIS

Inputs Method 

Shipments ........................................... Annual shipments from shipments model. 

Compliance Date of Standard ............ 2029. 

Efficiency Trends ................................ No-new-standards case: Based on historical data. 

Standard cases: Roll-up in the compliance year (except for EL 1, 90-percent AFUE for NWGFs as described below) and then DOE estimated growth in shipment-weighted efficiency in all the standards 

cases, except max-tech. 

Annual Energy Consumption per Unit Annual weighted-average values are a function of energy use at each TSL. Incorporates projection of future energy use based on AEO2023 projections for HDD/cooling degree days (CDD) and building shell 

efficiency index. 

Total Installed Cost per Unit ............... Annual weighted-average values are a function of cost at each TSL. Incorporates projection of future 

product prices based on historical data. 

Repair and Maintenance Cost per 

Unit.

Annual weighted-average values vary by efficiency level. 

Energy Price Trends ........................... AEO2023 projections (to 2050) and extrapolation thereafter. Natural gas and electricity marginal prices 

based on EIA and RECS 2020 and CBECS 2018 billing data. 

Energy Site-to-Primary and FFC Conversion.A time-series conversion factor based on AEO2023. 

Discount Rate ..................................... Three and seven percent. 

Present Year ....................................... 2023. 

1. Product Efficiency Trends 

A key component of the NIA is the 

trend in energy efficiency projected for 

the no-new-standards case and each of 

the standards cases. Section IV.F.8 of 

this document describes how DOE 

developed an energy efficiency 

distribution for the no-new-standards 

case (which yields a shipment-weighted 

average efficiency) for each of the 

considered product classes for the year 

of anticipated compliance with an 

amended or new standard (2029). To 

project the trend in efficiency absent 

amended standards for NWGFs and 

MHGFs over the entire shipments 

projection period, DOE extrapolated the 

historical trends in efficiency that were 

described in section III.F.8 of this 

document. These trends are based on 

industry shipment data from AHRI and 

HARDI and include a near 100-percent 

saturation of condensing furnaces in the 

North region. For this final rule, DOE 

estimated that the national market share 

of condensing products would grow 

from 61 percent in 2029 to 71 percent 

by 2058 for NWGFs, and from 34 

percent to 48 percent for MHGFs during 

those same years. The market shares of 

the different condensing efficiency 

levels (i.e., 90-, 92-, 95-, and 98-percent 

AFUE for NWGFs and 92-, 95-, and 96- 

percent AFUE for MHGFs) are 

maintained in the same proportional 

relationship as in 2029. The approach is 

further described in appendix 8I and 

chapter 10 of the final rule TSD. 

For the standards cases, DOE used a 

‘‘roll-up’’ scenario to establish the 

shipment-weighted efficiency for the 

year that standards are assumed to 

become effective (2029). In this 

scenario, the market shares of products 

in the no-new-standards case that do not 

meet the standard under consideration 

would ‘‘roll up’’ to meet the new 

standard level, and the market share of 

products above the standard would 

remain unchanged. In the standards 

case with a 90-percent AFUE national 

standard, DOE estimated that many 

consumers will purchase a 92-percent 

AFUE NWGF rather than a 90-percent 

AFUE furnace because the extra 

installed cost is minimal, and the 

market has already moved significantly 

toward the 92-percent AFUE level. To 

develop standards-case efficiency trends 

after 2029, DOE estimated growth in 

shipment-weighted efficiency in the 

standards cases, except in the max-tech 

standards case. 

2. National Energy Savings 

The national energy savings analysis 

involves a comparison of national 

energy consumption of the considered 

products between each potential 

standards level (TSL) case and the case 

with no new or amended energy 

conservation standards. DOE calculated 

the national energy consumption by 

multiplying the number of units (stock) 

of each product (by vintage or age) by 

the unit energy consumption (also by 

vintage). DOE calculated annual NES 

based on the difference in national 

energy consumption for the no-newstandards case and for each higherefficiency standards case. DOE 

estimated energy consumption and 

savings based on site energy and 

converted the electricity consumption 


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250For example, see www.journals.uchicago.edu/ 

doi/abs/10.1093/reep/rev017?journalCode=reep 

(last accessed August 1, 2023). 

251For more information on NEMS, refer to The 

National Energy Modeling System: An Overview 

2023, DOE/EIA–0581(2023) (available at: 

www.eia.gov/forecasts/aeo/index.cfm) (last 

accessed August 1, 2023). 

and savings to primary energy (i.e., the 

energy consumed by power plants to 

generate site electricity) using annual 

conversion factors derived from 

AEO2023. For natural gas and LPG, DOE 

assumed that site energy consumption is 

the same as primary energy 

consumption. Cumulative energy 

savings are the sum of the NES for each 

year over the timeframe of the analysis. 

The per-unit annual energy use is 

adjusted with the building shell 

improvement index, which results in a 

decline of three percent in the heating 

load from 2029 to 2058, and the climate 

index, which results in a decline of nine 

percent in the heating load. 

DOE incorporated a rebound effect for 

NWGFs and MHGFs by reducing the site 

energy savings (and the associated FFC 

energy savings) in each year by 15 

percent. However, for commercial 

applications, DOE applied no rebound 

effect in order to be consistent with 

other recent standards rulemakings (see 

section IV.F.3 of this document). 

In the standards cases, there are fewer 

shipments of NWGFs or MHGFs 

compared to the no-new-standards case 

because of product switching and repair 

vs. replaced, but there are additional 

shipments of heat pumps, electric 

furnaces, and electric water heaters. 

DOE incorporated the per-unit annual 

energy use of the heat pumps and 

electric furnaces that was calculated in 

the LCC and PBP analyses (based on the 

specific sample households that switch 

to these products) into the NIA model. 

NYSERDA expressed support for 

DOE’s methodology and approaches 

used for this NOPR, particularly around 

the rebound effect, stating that it is 

consistent with documented behaviors. 

The commenter further stated agreement 

with DOE’s use of the 15-percent 

estimate for rebound effect. (NYSERDA, 

No. 379 at pp. 11–12) DOE agrees and 

maintains a 15-percent rebound effect 

estimate for the final rule. 

NYSERDA recommended that DOE 

should qualitatively discuss the indirect 

rebound effect in the rebound section of 

the TSD. (NYSERDA, No. 379 at p. 13) 

In response, DOE acknowledges that 

indirect rebound (increased energy 

consumption by consumers in other 

areas due to the monetary savings from 

efficiency standards) may be a factor 

warranting consideration in the context 

of amended energy conservation 

standards for the subject furnaces, but 

quantifying such a macroeconomic 

effect is particularly challenging and 

subject to inherently large uncertainties. 

However, regardless of the specific 

magnitude of this effect, DOE notes that 

it is very likely to be welfare-increasing 

even if energy savings are reduced.250

In the standards cases, there are fewer 

shipments of NWGFs or MHGFs 

compared to the no-new-standards case 

because of product switching and 

product repairs, but there are also 

additional shipments of heat pumps, 

electric furnaces, and electric water 

heaters. DOE incorporated the per-unit 

annual energy use of the heat pumps 

and electric furnaces that was calculated 

in the LCC and PBP analyses (based on 

the specific sample households that 

switch to these products) into the NIA 

model. 

In 2011, in response to the 

recommendations of a committee on 

‘‘Point-of-Use and Full-Fuel-Cycle 

Measurement Approaches to Energy 

Efficiency Standards’’ appointed by the 

National Academy of Sciences, DOE 

announced its intention to use FFC 

measures of energy use and greenhouse 

gas and other emissions in the national 

impact analyses and emissions analyses 

included in future energy conservation 

standards rulemakings. 76 FR 51281 

(August 18, 2011). After evaluating the 

approaches discussed in the August 18, 

2011 announcement, DOE published a 

statement of amended policy in which 

DOE explained its determination that 

EIA’s National Energy Modeling System 

(NEMS) is the most appropriate tool for 

its FFC analysis and its intention to use 

NEMS for that purpose. 77 FR 49701 

(August 17, 2012). NEMS is a public 

domain, multi-sector, partial 

equilibrium model of the U.S. energy 

sector 251 that EIA uses to prepare its 

Annual Energy Outlook. The FFC factors 

incorporate losses in production and 

delivery in the case of natural gas 

(including fugitive emissions) and 

additional energy used to produce and 

deliver the various fuels used by power 

plants. The approach used for deriving 

FFC measures of energy use and 

emissions is described in appendix 10A 

of the final rule TSD. 

3. Net Present Value Analysis 

The inputs for determining the NPV 

of the total costs and benefits 

experienced by consumers are: (1) total 

annual installed cost; (2) total annual 

operating costs (energy costs and repair 

and maintenance costs), and (3) a 

discount factor to calculate the present 

value of costs and savings. DOE 

calculates net savings each year as the 

difference between the no-newstandards case and each standards case 

in terms of total savings in operating 

costs versus total increases in installed 

costs. DOE calculates operating cost 

savings over the lifetime of each product 

shipped during the projection period. 

As discussed in section IV.F.1 of this 

document, DOE developed NWGF and 

MHGF price trends based on historical 

PPI data. DOE applied the same trends 

to project prices for each product class 

at each considered efficiency level. 

DOE’s projection of product prices is 

described in appendix 10C of the final 

rule TSD. 

To evaluate the effect of uncertainty 

regarding the price trend estimates, DOE 

investigated the impact of different 

product price projections on the 

consumer NPV for the considered TSLs 

for NWGFs and MHGFs. In addition to 

the default price trend, DOE considered 

two product price sensitivity cases: (1) 

a high-price-decline case based on PPI 

data from 1990–2006 and (2) a constantprice-trend case. The derivation of these 

price trends and the results of these 

sensitivity cases are described in 

appendix 10C of the final rule TSD. 

As described in section IV.H.2 of this 

document, DOE assumed a 15-percent 

rebound from an increase in utilization 

of the product arising from the increase 

in efficiency (i.e., the direct rebound 

effect). In considering the economic 

impact on consumers due to the direct 

rebound effect, DOE accounted for 

change in consumer surplus attributed 

to additional heating/comfort from the 

purchase of a more-efficient unit. 

Overall consumer surplus is generally 

understood to be enhanced from 

rebound. The net consumer impact of 

the rebound effect is included in the 

calculation of operating cost savings in 

the consumer NPV results. See 

appendix 10G of the final rule TSD for 

details on DOE’s treatment of the 

monetary valuation of the rebound 

effect. 

The operating cost savings are energy 

cost savings, which are calculated using 

the estimated energy savings in each 

year and the projected price of the 

appropriate form of energy. To estimate 

energy prices in future years, DOE 

multiplied the average regional energy 

prices by the projection of annual 

national-average residential energy price 

changes in the Reference case from 

AEO2023, which has an end year of 

2050. To estimate price trends after 

2050, DOE used the average annual rate 

of change in prices from 2045 through 

2050. As part of the NIA, DOE also 

analyzed scenarios that used inputs 

from variants of the AEO2023 Reference 


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252United States Office of Management and 

Budget, Circular A–4: Regulatory Analysis (Sept. 17, 

2003) Section E (available at: 

obamawhitehouse.archives.gov/omb/circulars_

a004_a-4/) (last accessed August 1, 2023). 

253RECS 2020 includes a category for households 

that pay only some of the gas bill. For the lowincome consumer subgroup analysis, DOE assumes 

that these households pay 50 percent of the gas bill, 

and, therefore, would receive 50 percent of 

operating cost benefits of an amended energy 

conservation standard. 

case that have lower and higher 

economic growth. Those cases have 

lower and higher energy price trends 

compared to the Reference case. NIA 

results based on these cases are 

presented in appendix 10D of the final 

rule TSD. 

In considering the consumer welfare 

gained due to the direct rebound effect, 

DOE accounted for change in consumer 

surplus attributed to additional heating 

from the purchase of a more efficient 

unit. Overall consumer welfare is 

generally understood to be enhanced 

from rebound. The net consumer impact 

of the rebound effect is included in the 

calculation of operating cost savings in 

the consumer NPV results. See 

appendix 10G of the final rule TSD for 

details on DOE’s treatment of the 

monetary valuation of the rebound 

effect. 

In calculating the NPV, DOE 

multiplies the net savings in future 

years by a discount factor to determine 

their present value. For this final rule, 

DOE estimated the NPV of consumer 

benefits using both a 3-percent and a 7- 

percent real discount rate. DOE uses 

these discount rates in accordance with 

guidance provided by the Office of 

Management and Budget (‘‘OMB’’) to 

Federal agencies on the development of 

regulatory analysis.252 The discount 

rates for the determination of NPV are 

in contrast to the discount rates used in 

the LCC analysis, which are designed to 

reflect a consumer’s perspective. The 7- 

percent real value is an estimate of the 

average before-tax rate of return to 

private capital in the U.S. economy. The 

3-percent real value represents the 

‘‘social rate of time preference,’’ which 

is the rate at which society discounts 

future consumption flows to their 

present value. 

I. Consumer Subgroup Analysis 

In analyzing the potential impact of 

new or amended energy conservation 

standards on consumers, DOE evaluates 

the impact on identifiable subgroups of 

consumers that may be 

disproportionately affected by a new or 

amended national standard. The 

purpose of a subgroup analysis is to 

determine the extent of any such 

disproportional impacts. DOE evaluates 

impacts on particular subgroups of 

consumers by analyzing the LCC 

impacts and PBP for those particular 

consumers from alternative standard 

levels. For this final rule, DOE analyzed 

the impacts of the considered standard 

levels on three subgroups: (1) lowincome households, (2) senior-only 

households, and (3) small businesses. 

The analysis used subsets of the RECS 

2020 sample composed of households 

that meet the criteria for the considered 

subgroups. DOE used the LCC and PBP 

spreadsheet model to estimate the 

impacts of the considered efficiency 

levels on these subgroups. Chapter 11 in 

the final rule TSD describes the 

consumer subgroup analysis. 

1. Low-Income Households 

Low-income households are 

significantly more likely to be renters 

and/or live in subsidized housing units, 

compared to homeowners. DOE notes 

that in these cases, the landlord 

purchases the equipment and may pay 

the gas bill as well. RECS 2020 includes 

data on whether a household pays for 

the gas bill, allowing DOE to categorize 

households appropriately in the 

analysis.253 For this consumer subgroup 

analysis, DOE considers the impact on 

the low-income household narrowly, 

excluding any costs or benefits that are 

accrued by either a landlord or 

subsidized housing agency. This allows 

DOE to determine whether low-income 

households are disproportionately 

affected by an amended energy 

conservation standard in a more 

representative manner. DOE takes into 

account a fraction of renters that face 

costly product switching, that is, when 

landlords switch to products that have 

lower upfront costs but higher operating 

costs, which will be incurred by tenants. 

Table IV.19 summarizes the low-income 

statistics and potential impacts. For the 

low-income subgroup, renters account 

for more than half of the NWGF 

installations and close to thirty percent 

of the MHGF installations. 

TABLE IV.19—LOW-INCOME SUBGROUP CHARACTERISTICS AND POTENTIAL NET BENEFITS

Type of household * 

(pay for gas?) ** 

Percentage of low-income 

sample * Benefits from 

energy cost 

savings 

Responsibility for 

incremental cost 

NWGF MHGF 

Renters (Pay for Gas Bill) ............................................................... 43.0 27.8 Full ......................... None. 

Renters (Pay for Part of Gas Bill) ................................................... 1.5 0.0 Partial savings ....... None. 

Renters (Do Not Pay for Gas Bill) .................................................. 8.6 2.0 None ...................... None. 

Owners (Pay for Gas Bill) ............................................................... 45.9 64.3 Full ......................... Full. 

Owners (Pay for Part of Gas Bill) ................................................... 0.1 0.0 Partial savings ....... Full. 

Owners (Do Not Pay for Gas Bill) .................................................. 0.9 5.9 None ...................... Full. 

* RECS 2020 lists three categories: (1) Owned or being bought by someone in your household (classified as ‘‘Owners’’ in this table); (2) 

Rented (classified as ‘‘Renters’’ in this table); (3) Occupied without payment of rent (also classified as ‘‘Renters’’ in this table). Therefore, renters 

include occupants in subsidized housing including public housing, subsidized housing in private properties, and other households that do not pay 

rent. RECS 2020 does not distinguish homes in subsidized or public housing. 

** RECS 2020 lists four categories: (1) Household is responsible for paying for all used in this home; (2) All used in this home is included in the 

rent or condo fee; (3) Some is paid by the household, some is included in the rent or condo fee; and (4) Paid for some other way. ‘‘Pay for Gas 

Bill’’ includes only category (1); all other categories are included in ‘‘Don’t Pay for Gas Bill.’’ Note that DOE also takes into account if the occupant pays for electricity, as for some higher-efficiency options, electricity use can vary compared to baseline equipment. 

Atmos Energy commented that in 

fulfilling its statutory obligations, DOE 

cannot rely on potential external 

measures to mitigate the negative 

impacts of its standards, including 

rebate programs so as to improve its 

analytical outcomes and reduce the 

burden on low-income households. 

(Atmos Energy, No. 415 at p. 3) 

In response, DOE clarifies that it does 

not rely on potential measures, such as 

rebate programs, to justify a standard. 

These measures are not part of the lowincome subgroup analysis. DOE merely 


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notes their possible existence, which 

would improve the assessed impacts to 

low-income households as presented in 

section V.B of this document. 

MHI commented that it stands ready 

to work with DOE to ensure that 

standards for consumer furnaces do not 

negatively impact potential 

manufactured homeowners. (MHI, No. 

365 at p. 5) 

In response, DOE analyzed the impact 

of the considered amended energy 

conservation standards on 

manufactured-home households, 

including low-income manufacturedhome households, and the Department 

has concluded that these standards are 

economically justified, as discussed in 

section V.C of this document. 

Measures of energy insecurity provide 

another accounting of the number of 

households that are affected by cost 

changes due to rules for heating 

equipment energy efficiency in addition 

to the senior-only and low-income 

categories used by DOE in this analysis. 

Energy insecurity in the 2020 RECS 

quantifies the households reporting one 

or more of the metrics for energy 

insecurity, including that they that are 

forgoing basic necessities to pay for 

energy, and that they leave their home 

at an unhealthy temperature due to 

energy cost. The energy insecurity data 

are disaggregated by heating equipment 

type, income category, race, ethnicity, 

presence of children, presence of 

seniors, regional distribution, and 

ownership/rental status. DOE has 

determined that the energy-insecure 

designation captures more households 

than the low-income and seniors-only 

categories used for distributional 

analysis. Similar PBP and net savings/ 

net cost analysis applied to energy 

insecure households could result in 

larger impacts than for the categories 

DOE chose to analyze and may be more 

directly interpreted in terms of welfare 

changes that can be disaggregated by the 

factors already listed. 

Commenting on the NOPR, a number 

of commenters opposed the proposed 

rule based on, in part, the potential 

impacts to low-income households. 

Southwest Gas Corporation 

commented that for low-income and 

vulnerable populations, the appliance 

replacement and retrofit costs would be 

a financial burden. Southwest estimated 

that the NOPR would not be 

economically justifiable for a majority of 

its customers. (Southwest, No. 353 at p. 

2) 

The Georgia Gas Authority recognized 

the importance of appliance efficiency 

but argued that energy conservation 

standards should not sacrifice the wellbeing of low-income families to achieve 

such goals. (The Georgia Gas Authority, 

No. 367 at p. 2) 

NGA of Georgia stated that DOE’s 

proposed rule would place an undue 

burden on those who can afford it the 

least, including seniors and low-income 

consumers. (NGA of Georgia, No. 380 at 

p. 1) The commenter more specifically 

argued that the rule would unfairly 

impact low- and fixed-income 

homeowners and renters, seniors, and 

small businesses. NGA of Georgia added 

that low- and fixed-income homeowners 

are less likely to purchase a new home 

and, thus, would be forced to endure 

costly retrofit installations. 

Additionally, the commenter stated, that 

low- and fixed-income homeowners 

typically live in smaller spaces 

requiring less energy to heat, which 

diminishes the value of a highefficiency product in such applications. 

Further, NGA of Georgia stated that lowincome renters would be forced to deal 

with increased rent when landlords try 

to recoup the high cost of retrofitting 

apartments with condensing furnaces. 

(NGA of Georgia, No. 380 at p. 2) 

APGA claimed that DOE’s analysis 

shows that low-income households fare 

much worse than average consumers 

under the proposed rule. APGA further 

claimed that DOE has not fully 

accounted for the impacts on lowincome residents. The commenter 

asserted that regional differences in the 

impact of the proposed rule would 

create even more unfavorable results for 

low-income households in certain 

negatively affected regions; for example, 

the South, where APGA has many 

members, would be expected to be more 

adversely affected than average. APGA 

further argued that the impact of fuel 

switching on low-income households is 

not clear in the NOPR. (APGA, No. 387 

at pp. 45–47) 

Spencer and Dayaratna stated that the 

amended standards proposed in the July 

2022 NOPR will unjustifiably reduce 

consumer choice. The commenters 

added that the economic value of energy 

efficiency is best determined by 

individual consumers and businesses. 

The commenters also added that the 

flexibility to assess individual economic 

tradeoffs is even more important to lowincome Americans, citing statements 

from OMB and research studies. 

Spencer and Dayaratna argued that a 

nine-year payback period may not make 

sense for many Americans who would 

be better served by having additional 

resources available for food or housing. 

The commenters opined that DOE 

should not compel Americans to take on 

these extra costs or degrade the 

livability of their homes. (Spencer and 

Dayaratna, No. 390 at pp. 8–9) 

Black Hills Energy commented that, if 

adopted, the proposed rule would 

negatively impact individual 

homeowners, including senior and lowincome households, small business, and 

the overall furnace market. The 

commenter stated that DOE should not 

issue a rule with such negative impacts 

as those described in the proposal that 

would affect low-income households, 

seniors, and energy insecure consumers. 

(Black Hills Energy, No. 397 at pp. 1– 

2) 

PHCC commented that energy 

insecurity is a significant concern and 

that access to gas products and noncondensing products remains an 

important solution to this issue. (PHCC, 

No. 403 at p. 5) 

AHRI stated that the impacts of a full 

condensing furnace standards would 

fall disproportionately on lower-income 

and senior households. AHRI referenced 

a statement from MHI that the median 

income for mobile home purchasers is 

$35,000 and that manufactured 

homeowners comprise a 

disproportionate amount of the Nation’s 

fixed-income citizens and first-time 

homebuyers. (AHRI, No. 414–2 at p. 3) 

Atmos Energy commented that DOE 

should amend the proposed furnace 

standards to address the significant 

adverse impacts on low-income 

households, adding that DOE’s 

assessment on this matter is insufficient. 

(Atmos Energy, No. 415 at p. 2) Atmos 

Energy further commented that the 

proposed rule burdens low-income 

households because it would cause an 

increase in furnace costs. Atmos Energy 

stated that condensing furnaces cost 

consumers around $1,300 more than 

non-condensing furnaces, adding that 

this increase in cost would burden 

homeowners and place upward pressure 

on rents by adding to maintenance 

costs. (Atmos Energy, No. 415 at p. 3) 

Several commenters expressed 

concern regarding the July 2022 NOPR’s 

potential impacts on housing 

affordability and consumers. AGA et al., 

The Coalition, The Heartland Institute, 

Plastics Pipe Institute, ACCA, and DCA 

all commented that the proposed rule 

would have significant adverse impacts, 

especially on low-income or fixedincome households, seniors, energy 

insecure consumers, small businesses, 

and/or the overall furnace market. (AGA 

et al., No. 391 at p. 1; The Coalition, No. 

378 at p. 2; The Heartland Institute, No. 

376 at pp. 1–2; Plastics Pipe Institute, 

No. 404 at p. 1; ACCA, No. 398 at pp. 

1–2; DCA, No. 372 at pp. 1–2) Strauch 

objected to the life-cycle methodology of 

DOE’s proposed rulemaking due to 

concerns about consumer impacts. 

(Strauch, No. 366 at p. 1) Strauch stated 


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that poorer individuals or those with 

fixed incomes may not be able to afford 

the up-front investment that would 

allow them access to the future dollar 

savings of a more-efficient product. (Id.) 

Strauch also noted that the elderly 

population similarly may not live long 

enough to recover these additional costs 

through energy savings. (Id.) Strauch 

also argued that the July 2022 NOPR 

will reduce consumer choice. (Id.) 

MTNGUD, WMU, Consumer Energy 

Alliance, LANGD, Georgia Gas 

Authority, and the Heartland Institute 

stated that the potential negative 

impacts of the proposals in the July 

2022 NOPR on consumers, including 

senior-only households, low-income 

households, and small business 

consumers, are inconsistent with the 

Biden-Harris Administration’s priority 

of achieving environmental justice in 

Federal programs. (MTNGUD, No. 350 

at p. 1; WMU, No. 350 at p. 1; Consumer 

Energy Alliance, No. 354 at p. 1; 

LANGD, No. 355, at p. 1; Georgia Gas 

Authority, No 367 at p. 2; The Heartland 

Institute, No. 376 at p. 1) Also, several 

commenters noted that manufactured 

housing provides a source of affordable 

homeownership, which is impacted by 

this rulemaking. (Nortek, No. 406 at p. 

5; MHI, No. 344 at p. 1; MHI, Public 

Meeting Webinar Transcript, No. 363 at 

p. 25–29; MHI, No. 365 at p. 1) Nortek 

commented that the median annual 

income of manufactured homeowners is 

below the national average, and that 

these individuals and families make up 

a larger group of America’s fixedincome citizens and first-time 

homebuyers. Nortek stated that this 

makes the demographic more vulnerable 

to changes that could price them out of 

the homebuying market. (Nortek, No. 

406 at p. 5) MHI similarly argued that 

the July 2022 NOPR could reduce the 

affordability of manufactured homes 

without providing substantial energyefficiency or cost-saving benefits. (MHI, 

No. 344 at p. 1; MHI, Public Meeting 

Webinar Transcript, No. 363 at pp. 25– 

27) Also, MHI asserted that should 

furnaces become less affordable, some 

manufactured housing owners may 

switch to less efficient and less safe 

heating methods. (MHI, No. 365 at p. 1) 

Nortek further stated that additional 

regulation that increases the cost to 

purchase or maintain a home could 

prevent some financially vulnerable 

consumers from achieving 

homeownership. (Nortek, No. 406 at p. 

2) The Coalition commented that, given 

current housing prices, many potential 

homebuyers have been priced out of the 

market. (The Coalition, No. 378 at p. 3) 

The Coalition also stated that these 

proposed standards place added 

pressure on households that are 

simultaneously struggling with rapidly 

rising prices for food, utilities, 

transportation, and other basic needs. 

(Id.) 

In contrast, a number of other 

commenters supported the proposed 

rule based on, in part, the potential 

benefits to low-income households. 

NCEL stated that outdated and 

inefficient gas furnaces generate high 

energy bills that particularly burden 

lower-income households. The State 

legislators commented that heating bills 

are one of the biggest energy expenses 

for most households, and those with 

inefficient gas furnaces face annual 

average heating bills of about $700. 

Furthermore, NCEL stated that 

increasing gas furnace efficiency will go 

a long way towards easing the burden of 

energy costs. (NCEL, No. 359 at p. 1) 

GHHI stated that due to historic 

underinvestment in low-income 

communities of color, residents often 

lack the resources to fix their aging and 

deteriorating homes, leading to poor 

insulation, drafts, and outdated HVAC 

systems. Consequently, GHHI stated that 

low-income communities, 

disproportionately of Black, Hispanic, 

and Native backgrounds, end up paying 

three times as much of their income on 

energy bills compared to those with 

higher income. (GHHI, No. 371 at p. 2) 

While GHHI acknowledged that newer 

appliances have greater upfront costs, 

GGHI argued that the savings from 

reduced utility costs mean the payback 

period from low-income families 

averages just over two years. (GHHI, 

Public Meeting Webinar Transcript, No. 

363 at p. 18) The State Agencies 

commented that a 95-percent AFUE 

would help to decrease the energy 

burden for low-income households that 

spend a large portion of their income on 

energy bills. (State Agencies, No. 375 at 

p. 2) 

NYSERDA commented that, based on 

their review of DOE’s LCC analysis, the 

commenter has concluded that for New 

York and the rest of the U.S., 

establishing a standard at TSL 8 would 

yield significant consumer benefits that 

outweigh potential costs, especially for 

low-income consumers and those living 

in disadvantaged communities. 

(NYSERDA, No. 379 at p. 3) The 

commenter stated that DOE’s LCC 

analysis demonstrates the importance of 

this standard for low-income 

households. NYSERDA further 

commented that it found that adopting 

TSL 8 would not unfairly burden lowincome or disadvantaged communities 

in the Northeast but instead would 

provide significant benefits, especially 

to renters who pay for utility bills. 

(NYSERDA, No. 379 at pp. 6–7) 

NYSERDA commented that in 

September 2022, Con Edison reported 

that, for that winter, electricity bills in 

their territory are expected to increase 

by 22 percent (to an average of $116 per 

month), and natural gas bills are 

expected to increase by 32 percent (to 

an average of $460 per month). 

NYSERDA emphasized the importance 

of transitioning to more efficient 

appliances for the general New York 

population, especially low-income 

households. (NYSERDA, No. 379 at p. 6) 

NCLC et al. commented on a 2021 

analysis by the Pew Research Center, 

stating that 60 percent of those in the 

lowest income quartile are renters and 

that only 10 percent of households in 

the highest income quartile rent. NCLC 

et al. added that since tenants cannot 

dictate the efficiency of furnaces that 

owners purchase, strong standards are 

often the only way to ensure that 

tenants will benefit from having 

efficient furnaces. (NCLC et al., No. 383 

at pp. 4–5) 

The Pennsylvania Groups commented 

in support of improved efficiency 

standards because they expect that such 

standards would help reduce energy 

burden disparities for systematically 

marginalized communities across the 

Commonwealth. These commenters 

stated that communities of color and 

low-income families face high energy 

burdens and often struggle to afford and 

maintain energy services to their homes. 

(The Pennsylvania Groups, No. 396 at p. 

2) 

The Pennsylvania Groups stated that 

to achieve baseline affordability 

standards, a family’s total housing 

costs—including utility costs—should 

account for no more than 30 percent of 

the household’s total income. These 

commenters further stated that 

throughout Pennsylvania, families 

living at or below 150 percent of the 

Federal Poverty Line spend as much as 

29 percent of their income on utility 

costs alone. (The Pennsylvania Groups, 

No. 396 at p. 2) 

The Pennsylvania Groups stated that 

these households often forgo other basic 

necessities in order to pay their heating 

bills, and when they cannot keep up 

with payments, their heat is shut off. 

These commenters further stated that 

this shut-off creates serious risks to the 

health and well-being of family 

members and threatens stable 

employment and education. (The 

Pennsylvania Groups, No. 396 at p. 3) 

The Pennsylvania Groups commented 

that low-income and BIPOC (Black, 

Indigenous, and People of Color) 

residents disproportionately occupy 


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older, lower-quality housing, and these 

homes are more likely to use lessefficient, natural gas-fueled appliances. 

These commenters stated that 

Pennsylvania has some of the oldest 

housing stock in the country and that 55 

percent of homes are heated with gas or 

propane. The Pennsylvania Groups 

pointed out that renters may bear even 

more of the negative impacts of wasteful 

furnaces than homeowners. (The 

Pennsylvania Groups, No. 396 at p. 3) 

They stated that the increased demand 

for rental housing and escalating rental 

costs have resulted in a market with 

limited access to safe, healthy, and 

quality housing, with significant cost 

burdens to low-income households. 

(The Pennsylvania Groups, No. 396 at 

pp. 3–4) 

The Pennsylvania Groups stated that 

their Commonwealth has over 435,000 

low-income renters whose home heating 

is up to their landlords. Additionally, 

these commenters stated that the 

estimated savings under DOE’s 

proposed standard would be a 

significant amount to low-income 

families. (The Pennsylvania Groups, No. 

396 at p. 4) 

Climate and Health Coalition stated 

that high heating bills can force a 

terrible choice upon consumers between 

paying for heat and other necessities, 

particularly for low-income households 

which pay three times as much of their 

incomes on energy costs than non-lowincome households and are 

disproportionately Black, Hispanic, and 

Native American. (Climate and Health 

Coalition, No. 399 at p. 4) 

The NCLC commented that lowincome rental properties are more likely 

to have less-efficient furnaces and pass 

the associated larger energy bill on to 

tenants. (NCLC, Public Meeting Webinar 

Transcript, No. 363 at pp. 8–10) 

NEEA stated that the proposals in the 

July 2022 NOPR will improve equitable 

outcomes by ensuring that rental units 

have efficient heating, thereby 

benefiting the larger portion of lowerincome rental units, and better 

insulating lower-income households 

from variable energy prices. (NEEA, No. 

368 at pp. 3–4) The Joint Efficiency 

Commenters stated that DOE’s analysis 

shows that the majority of consumers, 

and especially low-income consumers, 

will benefit from the proposed standard 

level for MHGFs. (Joint Efficiency 

Commenters, No. 381 at p. 5) Climate 

Smart Missoula et al. stated that DOE’s 

proposal would lead to health benefits 

through the emissions reductions and 

by lowering utility bills for low-tomoderate income households, thereby 

freeing up resources that can be spent 

on food and medicine. (Climate Smart 

Missoula et al., No. 393 at pp. 1–2) 

NCLC commented that increased 

efficiency standards will benefit lowincome families by lowering utility bills 

and mitigating harms caused by global 

warming, which provides both 

pocketbook savings and health benefits. 

(NCLC et al., No. 383 at p. 2) 

CFA stated that all of the conclusions 

about consumer benefits in the aggregate 

(i.e., payback period less than half the 

appliance lifetime, many more 

consumers with net benefits than with 

net costs, and individual who benefit 

having larger gains than the losses of 

individuals who do not) apply to lowincome consumers as well. (CFA, Public 

Meeting Webinar Transcript, No. 363 at 

p. 20) 

PSEA stated that high-efficiency 

condensing furnaces dramatically 

reduced the energy costs of low-income 

Philadelphians while also reducing 

indoor air pollution, and stated that the 

proposed standards would bring 

tremendous financial benefits and 

health benefits to low-income people 

nationwide. (PSEA, Public Meeting 

Webinar Transcript, No. 363 at p. 37) 

In response, DOE acknowledges the 

importance of considering the potential 

impacts on low-income households 

from energy conservation standards for 

consumer furnaces. As discussed in 

further detail in section V.C of this 

document, DOE concludes that lowincome households are not 

disproportionately negatively impacted 

compared to the national average. DOE’s 

analysis takes into account a variety of 

factors, as described in detail in section 

IV.F of this document, that are 

important to consider for low-income 

households, including typical 

equipment price, installation costs, 

furnace sizing, heating load, discount 

rate. DOE also considers the possibility 

of equipment switching to alternative 

options that meet all safety 

requirements. DOE finds no evidence 

that consumers are likely to switch to 

less-safe heating methods, and even if 

some consumers do so, such switching 

is likely to be very rare. 

A significantly higher fraction of lowincome households are renters 

compared to the national average. 

Renters are unlikely to be responsible 

for the selection and purchase of a 

consumer furnace but are often 

responsible for energy costs. The main 

LCC results assume all equipment costs 

are ultimately paid for by the 

household, as an upper-bound estimate 

of costs paid for by each household, and 

the low-income subgroup analysis 

represent a lower-bound estimate by 

assuming no passthrough. DOE did not 

make this upper-bound assumption in 

the low-income subgroup analysis in 

order to better understand the likely 

impacts on this specific subgroup, 

excluding the impact to landlords, who 

are not part of the low-income 

subgroup. There is no evidence DOE is 

aware of that suggests a price increase 

on the installation of a consumer 

furnace, paid for by a landlord, would 

be passed down to any significant extent 

to low-income renters. Rental markets 

are a separate market determined by 

their own supply and demand, and lowincome rents can be further restricted by 

local requirements or subsidies. There 

are some indications that premium, 

efficient appliances can result in higher 

rents, but this correlation mostly applies 

to premium rental properties, not lowincome households. Therefore, DOE 

assumes that landlords are very likely to 

bear the increased installation costs, not 

the low-income renter households. 

The main LCC results and the lowincome subgroup results provide an 

upper and lower bound on the likely 

impacts to low-income renter 

households, either assuming 100 

percent of equipment and installation 

costs are passed through to renters or 0 

percent of costs are passed through. 

Even if costs are passed through to 

renters to some extent in practice, DOE 

concludes that low-income renters are 

very likely to disproportionately benefit 

from an energy conservation standard 

for consumer furnaces as a result of 

significant operating cost savings. DOE 

acknowledges that for low-income 

owner households, there are some 

consumers with a net LCC cost and 

some households with a net LCC 

savings. Those are included as part of 

the overall low-income subgroup 

results. In addition, these results are all 

considered as part of DOE’s evaluation 

of economic justification, balancing the 

various burdens and benefits of a 

potential standard. 

ACCA recommended that DOE should 

focus on educating and incentivizing 

homeowners to demand that HVAC 

systems are installed according to the 

industry’s recommended minimum 

standards (including proper equipment 

sizing, duct redesign and sealing, and 

appropriate refrigerant charge levels). 

(ACCA, No. 398 at p. 2) ACCA 

commented that implementing such 

changes would result in a 25 to 30 

percent efficiency improvement and 

would result in fewer negative 

consumer impacts. (Id.) 

APGA asserted that to the extent that 

a landlord incurs net costs under the 

proposed rule, landlords will flow those 

cost increases through to their lowincome tenants, but DOE’s methodology 

intentionally excludes that negative 


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impact in its analysis. APGA argued that 

DOE’s failure even to try to consider 

how much of the cost will be passed 

down to low-income renters is 

unreasonable. (APGA, No. 387 at pp. 

47–48) 

As discussed previously, DOE does 

not agree with comments asserting that 

furnace cost increases will pass through 

to low-income tenants. DOE is not 

aware of any evidence to suggest this is 

the case. Rental markets are a separate 

market and not dictated by the cost of 

furnace (especially low-income rental 

properties), particularly when all rental 

properties are subject to the same energy 

conservation standards for furnaces, 

and, thus, there is no differentiation 

between rental properties based on the 

installed furnace. Furthermore, even if 

some fraction of total installed costs 

were passed through to tenants through 

rent increases, the benefits of a higherefficiency furnace would still vastly 

outweigh the costs. Any increase in rent 

would be averaged over many months 

and years, such that increases in first 

cost for lower income households 

would be constrained with higher than 

average discount rates. 

DOE also notes that a program based 

on educating and incentivizing 

homeowners is highly unlikely to 

achieve the level of energy savings in 

this rule, as evaluated in the discussion 

of alternative programs to energy 

conservation standards, presented in 

chapter 17 of the final rule TSD. 

AGA claimed that the reported 

percentage impacts for low-income 

consumers only include the results of 

low-income renters that pay their gas 

bills. According to the commenter, the 

remainder of low-income households is 

substantial and includes owneroccupied units and renters that do not 

pay their bills. AGA stated that the 

inclusion of fuel switching in the 

overall LCC savings significantly 

impacts the total and average LCC 

savings for low-income and senior 

households. AGA also pointed out that 

low-income consumers in four separate 

regions have negative LCC savings 

under a no-switching scenario. (AGA, 

No. 405 at pp. 98–102) 

In response, DOE notes that the 

commenter’s assertions are incorrect. 

The low-income subgroup results 

include all low-income households that 

meet the definition, including renters 

(both renters who pay and who do not 

pay their energy bills) and owneroccupied households. A significant 

fraction of low-income households are 

renters, as shown in section IV.I of this 

document. For owner-occupied lowincome households, DOE acknowledges 

that some households will experience a 

net savings and that some will 

experience a net cost, but the 

Department considers this distribution 

of impacts, including regional 

variability, in its evaluation of economic 

justification. DOE has also considered 

all of the product switching sensitivity 

scenarios as part of its evaluation. DOE 

acknowledges there is a range of 

potential impacts across these scenarios, 

but as discussed in section V.C of this 

document, they do not alter DOE’s 

conclusions. 

NCP pointed out that in DOE’s LCC 

analysis, savings were negative for 

housing types with more than five units, 

which are frequently occupied by 

consumers with lower incomes. (NCP, 

No. 370 at p. 2) 

In response and as noted previously, 

DOE has conducted its main LCC 

analysis to assume 100 percent of total 

installed costs of a standards-compliant 

furnace are passed through to renters. 

Again, this is likely to provide a very 

conservative estimate of the impacts to 

renters, including those who live in 

housing types with more than five units. 

However, when assuming that the 

landlord is likely to bear most if not all 

of these costs, those households 

disproportionately benefit from an 

energy conservation standard for 

consumer furnaces. 

Atmos Energy commented that the 

proposed rule burdens low-income 

households because of the physical 

differences that become more 

problematic in multifamily dwelling 

units and smaller or older homes. The 

commenter elaborated that when 

switching to a condensing furnace, there 

are physical design changes required in 

the house, such as larger cabinets, 

different venting/combustion air intake 

systems, and the addition of condensate 

drain systems. (Atmos Energy, No. 415 

at p. 3) 

As discussed in more detail in section 

IV.F of this document, DOE accounts for 

a variety of factors in its analysis, 

including the need for different venting/ 

combustion air intake systems and 

possible alterations such as larger 

cabinets, and installation of condensate 

drain systems. These factors are 

considered for all households, including 

low-income households. 

Atmos Energy commented that the 

proposed rule burdens low-income 

households because eliminating more 

affordable classes of furnaces that can be 

accommodated without renovations 

would make furnace replacements out 

of reach for many households with 

modest incomes. The commenter added 

that this would advantage wealthier 

households that can afford to replace 

less-efficient furnaces with newer 

models and reap the accompanying 

energy savings benefits. (Atmos Energy, 

No. 415 at p. 3) 

As discussed previously, DOE 

acknowledges that total installed costs 

for a standards-compliant furnace is 

expected to increase, but the commenter 

fails to acknowledge that operating costs 

will decrease. DOE evaluates the full 

impact on households, including both 

the initial total installed costs and 

operating costs, when evaluating 

economic justification. DOE 

acknowledges that some low-income 

households may have a particularly 

high discount rate, and this is reflected 

in the discount rate distribution for the 

lowest income bin (see section IV.F.7 of 

this document). DOE also has no 

evidence that the majority of lowincome households who are renters who 

will to be burdened with an increase in 

total installed costs, and, thus, DOE 

disagrees with the assertion that the rule 

is primarily advantageous to wealthier 

households. 

The Coalition commented that 

regulatory requirements, including the 

amended standards proposed in the July 

2022 NOPR, collectively create a 

substantial financial burden for the 

development and rehabilitation of 

housing. The commenter pointed to 

studies suggesting that regulatory 

requirements account for almost 25 

percent of the average cost of a new 

single-family home and account for an 

average of 40.6 percent of the total 

development costs of new multi-family 

communities. The Coalition argued that 

these proposed furnace standards would 

add to these regulatory burdens. (The 

Coalition, No. 378 at pp. 3–4) 

The Coalition further commented that 

the proposed furnace standards would 

have adverse impacts on housing 

providers, renters, and manufacturers by 

effectively eliminating non-condensing 

furnaces as an option for home heating. 

The Coalition added that these 

standards would increase the cost of a 

furnace, stating that condensing 

furnaces cost consumers approximately 

$1,300 more than non-condensing 

furnaces. The commenter predicted that 

this additional cost would need to be 

absorbed by new home buyers and 

would increase maintenance costs, 

arguing that these added costs would be 

significant for households with modest 

incomes and providers of affordable 

housing. (The Coalition, No. 378 at p. 4) 

In response, DOE notes that 

installation cost of a 95-percent AFUE 

furnace in new construction can be less 

expensive than the installation cost of 

an 80-percent AFUE furnace, as 

discussed in section IV.F.2 of this 

document. This is primarily due to 


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87608 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

254A copy of the GRIM spreadsheet tool is 

available on the DOE website for this rulemaking: 

www1.eere.energy.gov/buildings/appliance_

standards/standards.aspx?productid= 

59&action=viewlive. 

lower costs to install venting systems in 

new construction, with shorter vent 

lengths and without the need to remove 

an existing venting system. Despite this, 

market data show that 80-percent AFUE 

furnaces continue to be installed in new 

construction. Therefore, DOE does not 

agree that an energy conservation 

standard will have an adverse impact on 

builders or housing providers, nor will 

it negatively impact the development of 

more affordable housing options. To the 

extent that an amended energy 

conservation standard for consumer 

furnaces adds to total construction 

costs, which are then absorbed by new 

home buyers, that is included in DOE’s 

analysis. Those new home buyers would 

then also benefit from reduced operating 

costs as part of the LCC analysis. 

Finally, other regulatory requirements 

on builders and developers would apply 

in both the no-new-standards case as 

well as the new-standards case, and, 

therefore, such requirements do not 

factor in DOE’s analysis. 

NGA of Georgia stated that the 

proposed rule would negatively impact 

Georgians and reduce competition. The 

commenter stated that the proposal 

disproportionately prioritizes uncertain 

CO2 emissions reductions over the 

broader negative impacts to consumers. 

NGA of Georgia argued that 

affordability, end-user utility, and 

resiliency cannot be deprioritized in 

favor of increased emissions reductions. 

(NGA of Georgia, No. 380 at p. 1) 

In response, DOE acknowledges that 

some fraction of consumers will 

experience net savings, whereas others 

will experience net costs. DOE’s 

analyses account for regional variation, 

and consumers in different States (as 

represented in the RECS and CBECS 

surveys) are represented in the LCC. 

Thus, DOE’s evaluation of economic 

justification considers a distribution 

showing the full range of consumer 

impacts. DOE further notes that its 

conclusions would be the same even 

without considering the monetized 

benefits of emissions reductions. 

Accordingly, DOE concludes that 

affordability, end-user utility, and 

resiliency will not be negatively 

impacted by the standards being 

adopted in this final rule. 

ACCA expressed concern that a 

landlord will not see a return on their 

cost for a more expensive but higher 

efficiency furnace. ACCA argued that 

landlords will likely turn to alternative 

heating options resulting in increased 

monthly utility bills for their tenants 

and additional safety concerns. (ACCA, 

No. 398 at p. 3) DOE notes that this 

comment is not specific to the lowincome subgroup. In the main LCC 

results, the product switching analysis 

includes examples of households 

experiencing higher operating costs after 

switching to lower cost electric 

alternatives. The product switching 

analysis only considers alternative 

options that meet all safety 

requirements. 

Joint Efficiency Commenters stated 

that there are other energy efficiency 

programs that can help offset the costs 

of switching to a higher-efficiency gas 

furnace or electric heating system, 

adding that there are particular 

programs for low- and moderate-income 

households. These commenters further 

stated that these types of programs 

would reduce the number of lowincome consumers that may be 

disproportionately impacted by the 

proposed standard. (Joint Efficiency 

Commenters, No. 381 at p. 3) 

NCLC et al. commented that with 

passage of the Inflation Reduction Act, 

Public Law 117–169, there will be 

funding to help consumers install 

efficient heating products, as well as 

assistance from rebate and subsidy 

programs offered by many State 

agencies and utility companies. 

Furthermore, NCLC et al. agreed that 

there will often be programs available 

for mitigating the cost impact of 

purchasing and installing efficient 

furnaces, particularly for low-income 

households. (NCLC et al., No. 383 at p. 

7) 

In response, DOE acknowledges that 

rebate and incentive programs may 

assist low-income owner households 

with the purchase of more-efficient 

consumer furnaces. However, as 

discussed in section IV.G of this 

document, the implementation details 

of such future programs remain 

unknown at the time of the analysis, 

and DOE did not include them in its 

analysis. However, DOE notes that if 

such programs were to be deployed after 

the compliance date of an amended 

standard, the consumer benefits of the 

amended standards would be even 

higher. If such programs were 

implemented prior to the compliance 

date of an amended standard, 

incentivizing low-income households to 

adopt more efficient furnaces, such 

households would no longer be 

impacted by the amended standard. 

NCLC et al. commented that the 

proposed TSL 8 standard will 

significantly reduce greenhouse gas and 

other emissions, adding that this 

reduction will benefit low-income 

households and racial minorities. 

(NCLC et al., No. 383 at p. 7) DOE agrees 

with this comment. 

J. Manufacturer Impact Analysis 

1. Overview 

DOE performed an MIA to estimate 

the financial impacts of amended energy 

conservation standards on 

manufacturers of NWGFs and MHGFs 

and to estimate the potential impacts of 

such standards on domestic 

employment, manufacturing capacity, 

and cumulative regulatory burden for 

those manufacturers. The MIA has both 

quantitative and qualitative aspects. The 

quantitative part of the MIA includes 

analyses of projected industry cash 

flows, the INPV, additional investments 

in research and development (R&D) and 

manufacturing capital necessary to 

comply with amended standards, and 

the potential impact on domestic 

manufacturing employment. 

Additionally, the MIA seeks to 

qualitatively determine how amended 

energy conservation standards might 

affect manufacturing capacity and 

competition, as well as how standards 

contribute to manufacturers’ overall 

regulatory burden. Finally, the MIA 

serves to identify any disproportionate 

impacts on manufacturer subgroups, 

including small business manufacturers. 

The quantitative part of the MIA 

primarily relies on the Government 

Regulatory Impact Model (GRIM),254 an 

industry cash-flow model with inputs 

specific to this rulemaking. The key 

GRIM inputs include data on the 

industry cost structure, unit production 

costs, product shipments, manufacturer 

markups, and investments in R&D and 

manufacturing capital required to 

produce compliant products. The key 

GRIM outputs are the INPV, which is 

the sum of industry annual cash flows 

over the analysis period, discounted 

using the industry-weighted average 

cost of capital, and the impact on 

domestic manufacturing employment. 

The model uses standard accounting 

principles to estimate the impacts of 

amended energy conservation standards 

on the NWGF and MHGF manufacturing 

industry by comparing changes in INPV 

and domestic manufacturing 

employment between the no-newstandards case and the various 

standards cases (i.e., TSLs). To capture 

the uncertainty relating to manufacturer 

pricing strategies following amended 

standards, the GRIM estimates a range of 

possible impacts under different 

markup scenarios. 

The qualitative part of the MIA 

addresses manufacturer characteristics 


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Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 87609 

255U.S. Securities and Exchange Commission’s 

Electronic Data Gathering, Analysis, and Retrieval 

system (EDGAR) database (available at: 

www.sec.gov/edgar/search/) (last accessed August 

1, 2023). 

256U.S. Census Bureau’s Annual Survey of 

Manufactures: 2018–2021 (available at: 

www.census.gov/programs-surveys/asm/data/ 

tables.html) (last accessed August 1, 2023). 

257The Dun & Bradstreet Hoovers subscription 

login is accessible online at: app.dnbhoovers.com/ 

login (last accessed August 1, 2023). 

and market trends. Specifically, the MIA 

considers such factors as a potential 

standard’s impact on manufacturing 

capacity, competition within the 

industry, the cumulative regulatory 

burden impact of other DOE and nonDOE regulations, and impacts on 

manufacturer subgroups. The complete 

MIA is outlined in chapter 12 of the 

final rule TSD. 

DOE conducted the MIA for this 

rulemaking in three phases. In Phase 1 

of the MIA, DOE prepared a profile of 

the NWGF and MHGF manufacturing 

industry based on the market and 

technology assessment, preliminary 

manufacturer interviews, and publiclyavailable information. This included a 

top-down cost analysis of NWGF and 

MHGF manufacturers that DOE used to 

derive preliminary financial inputs for 

the GRIM (e.g., revenues; materials, 

labor, overhead, and depreciation 

expenses; selling, general, and 

administrative expenses (SG&A); R&D 

expenses; and tax rates). DOE also used 

public sources of information to further 

calibrate its initial characterization of 

the NWGF and MHGF manufacturing 

industry, including company filings of 

form 10–K from the SEC,255 corporate 

annual reports, the U.S. Census 

Bureau’s Annual Survey of 

Manufactures (ASM),256 and prior 

NWGF and MHGF rulemakings, as well 

as subscription-based market research 

tools (i.e., reports from Dun & 

Bradstreet 257). 

In Phase 2 of the MIA, DOE prepared 

a framework industry cash-flow analysis 

to quantify the potential impacts of new 

or amended energy conservation 

standards. The GRIM uses several 

factors to determine a series of annual 

cash flows starting with the 

announcement of the standard and 

extending over a 30-year period 

following the compliance date of the 

standard. These factors include annual 

expected revenues, costs of sales, SG&A 

and R&D expenses, taxes, and capital 

expenditures. In general, energy 

conservation standards can affect 

manufacturer cash flow in three distinct 

ways: (1) creating a need for increased 

investment; (2) raising production costs 

per unit, and (3) altering revenue due to 

higher per-unit prices and changes in 

sales volumes. 

In addition, during Phase 2, DOE 

developed interview guides to distribute 

to manufacturers of NWGF and MHGF 

in order to develop other key GRIM 

inputs, including product and capital 

conversion costs, and to gather 

additional information on the 

anticipated effects of amended energy 

conservation standards on revenues, 

direct employment, capital assets, 

industry competitiveness, and 

manufacturer subgroup impacts. 

In Phase 3 of the MIA, DOE’s 

contractor conducted structured, 

detailed interviews with representative 

NWGF and MHGF manufacturers. These 

interviews discussed engineering, 

manufacturing, procurement, and 

financial topics to validate assumptions 

used in the GRIM. The interviews also 

solicited information about 

manufacturers’ views of the industry as 

a whole and their key concerns 

regarding this rulemaking. DOE’s 

contractor conducted manufacturer 

interviews for the withdrawn March 

2015 NOPR. DOE’s contractor 

conducted additional abridged 

interviews in October 2021 for the 

purposes of updating analyses. As part 

of Phase 3, DOE also evaluated 

subgroups of manufacturers that may be 

disproportionately impacted by 

amended standards or that may not be 

accurately represented by the average 

cost assumptions used to develop the 

industry cash-flow analysis. Such 

manufacturer subgroups may include 

small business manufacturers, lowvolume manufacturers, niche players, 

and/or manufacturers exhibiting a cost 

structure that largely differs from the 

industry average, all of whom could be 

more negatively affected by amended 

energy conservation standards. DOE 

identified one subgroup for a separate 

impact analysis: small business 

manufacturers. The small business 

subgroup is discussed in section VI.B, 

‘‘Review Under the Regulatory 

Flexibility Act,’’ of this document and 

in chapter 12 of the final rule TSD. 

2. Government Regulatory Impact Model 

and Key Inputs 

DOE uses the GRIM to quantify the 

changes in cash flows over time due to 

amended energy conservation standards 

that result in a higher or lower INPV for 

the standards cases as compared to the 

no-new-standards case. The GRIM uses 

a standard, annual discounted cash-flow 

analysis that incorporates manufacturer 

costs, manufacturer markups, 

shipments, and industry financial 

information as inputs. The GRIM 

models changes in costs, distribution of 

shipments, investments, and 

manufacturer margins that could result 

from an amended energy conservation 

standard. The GRIM spreadsheet uses 

the inputs to arrive at a series of annual 

cash flows, beginning in 2023 (the base 

year of the analysis) and continuing to 

2058 (the terminal year of the analysis). 

DOE calculated INPVs by summing the 

stream of annual discounted cash flows 

during this period. For manufacturers of 

NWGFs and MHGFs, DOE used a real 

discount rate of 6.4 percent, which was 

derived from industry corporate annual 

reports and public filings to the 

Securities and Exchange Commission 

(SEC 10–Ks) and then modified 

according to feedback received during 

manufacturer interviews. 

Many GRIM inputs came from the 

engineering analysis, the NIA, 

manufacturer interviews, and other 

research conducted during the MIA. The 

major GRIM inputs are described in 

detail in the following sections. 

The GRIM results are presented in 

section V.B.2 of this document. 

Additional details about the GRIM, the 

discount rate, and other financial 

parameters can be found in chapter 12 

of the final rule TSD. 

a. Manufacturer Production Costs 

Manufacturing more efficient 

products is typically more expensive 

than manufacturing baseline products 

due to the use of more complex 

components, which are typically more 

costly than baseline components. The 

changes in the MPCs of covered 

products can affect the shipments, 

revenue, gross margins, and cash flow of 

the industry. To calculate the MPCs for 

NWGFs and MHGFs at and above the 

baseline, DOE performed teardowns for 

representative units. The data generated 

from these analyses were then used to 

estimate the incremental materials, 

labor, depreciation, and overhead costs 

for products at each efficiency level. For 

a complete description of the MPCs, see 

section IV.C of this document or chapter 

5 of the final rule TSD. 

b. Shipments Projections 

The GRIM estimates industry 

revenues based on total unit shipment 

projections and the distribution of those 

shipments by efficiency level and 

product class. Changes in sales volumes 

and efficiency mix over time can 

significantly affect manufacturer 

finances. For this analysis, the GRIM 

uses the NIA’s annual shipment 

projections derived from the shipments 

analysis from 2023 (the base year) to 

2058 (the end year of the analysis 

period). In the shipments analysis, DOE 

estimates the distribution of efficiencies 


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87610 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

258 DOE analyzed the preservation of per-unit 

operating profit scenario for the proposed standby 

mode and off mode standards in the July 2022 

NOPR. DOE is not analyzing the preservation of 

per-unit operating profit scenario for this final rule, 

as DOE is not adopting the standby mode/off mode 

power standards for NWGFs/MHGFs proposed in 

the July 2022 NOPR at this time. 

259The gross margin percentages correspond to 

manufacturer markups of 1.34 for NWGFs and 1.27 

for MHGFs. 

in the no-new-standards case and 

standards cases for all product classes. 

To account for a regional standard at 

TSL 4, shipment values in the GRIM are 

broken down by region, North and rest 

of country, for the NWGF and MHGF 

product classes. 

The NIA assumes that product 

efficiencies in the no-new-standards 

case that do not meet the energy 

conservation standard in the standards 

case either ‘‘roll up’’ to meet the 

amended standard or switch to another 

product, such as a heat pump or electric 

furnace. In other words, the market 

share of products that are below the 

energy conservation standard is added 

to the market share of products at the 

minimum energy efficiency level 

allowed under each standard case. The 

market share of products above the 

amended energy conservation standard 

is assumed to be unaffected by that 

standard in the compliance year. For a 

complete description of the shipments 

analysis, see section IV.G of this 

document and chapter 9 of the final rule 

TSD. 

c. Capital and Product Conversion Costs 

Amended energy conservation 

standards could cause manufacturers to 

incur one-time conversion costs to bring 

their production facilities and product 

designs into compliance. DOE evaluated 

the level of conversion-related 

expenditures that would be needed to 

comply with each considered efficiency 

level in each product class. For the MIA, 

DOE classified these conversion costs 

into two major groups: (1) capital 

conversion costs; and (2) product 

conversion costs. Capital conversion 

costs are one-time investments in 

property, plant, and equipment 

necessary to adapt or change existing 

production facilities such that new, 

compliant product designs can be 

fabricated and assembled. Product 

conversion costs are one-time 

investments in research, development, 

testing, marketing, and other noncapitalized costs necessary to make 

product designs comply with amended 

energy conservation standards. 

To evaluate the level of capital 

conversion costs manufacturers would 

likely incur to comply with amended 

energy conservation standards, DOE 

used manufacturer interviews to gather 

data on the anticipated level of capital 

investment that would be required at 

each efficiency level. Manufacturer data 

were aggregated to better reflect the 

industry as a whole and to protect 

confidential information. DOE then 

scaled up the capital conversion cost 

feedback from interviews to estimate 

total industry capital conversion costs. 

DOE assessed the product conversion 

costs at each considered AFUE 

efficiency level by integrating data from 

quantitative and qualitative sources. 

DOE considered market-share weighted 

feedback regarding the potential costs at 

each efficiency level from multiple 

manufacturers to estimate product 

conversion costs. Once again, 

manufacturer data were aggregated to 

better reflect the industry as a whole 

and to protect confidential information. 

DOE adjusted the conversion cost 

estimates developed in support of the 

July 2022 NOPR to 2022$ for this 

analysis. Industry conversion costs for 

the adopted standard total $162.0 

million. It consists of $117.3 million in 

capital conversion costs and $44.8 

million in product conversion costs. 

In general, DOE assumes all 

conversion-related investments occur 

between the year of publication of the 

final rule and the year by which 

manufacturers must comply with the 

new standard. The conversion cost 

figures used in the GRIM can be found 

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

additional information on the estimated 

capital and product conversion costs, 

see chapter 12 of the final rule TSD. 

d. Manufacturer Markup Scenarios 

MSPs include direct manufacturing 

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

and overhead estimated in DOE’s MPCs) 

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

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

profit. To calculate the MSPs in the 

GRIM, DOE applied manufacturer 

markups to the MPCs estimated in the 

engineering analysis for each product 

class and efficiency level. Modifying 

these manufacturer markups in the 

standards case yields different sets of 

impacts on manufacturers. For the MIA, 

DOE modeled two standards-case 

scenarios to represent uncertainty 

regarding the potential impacts on 

prices and profitability for 

manufacturers following the 

implementation of amended energy 

conservation standards: (1) a 

preservation of gross margin percentage 

scenario; and (2) a tiered scenario.258

These scenarios lead to different 

manufacturer markup values that, when 

applied to the MPCs, result in varying 

revenue and cash flow impacts. The 

industry cash-flow analysis results in 

section V.B.2 of this document present 

the impacts of the upper and lower 

bound manufacturer markup scenarios 

on INPV. For the proposed AFUE 

standards, the preservation of gross 

margin percentage scenario represents 

the upper bound scenario, and the 

tiered scenario represents the lower 

bound scenario for INPV impacts. 

Under the preservation of gross 

margin percentage scenario, DOE 

applied a single uniform ‘‘gross margin 

percentage’’ markup across all efficiency 

levels, which assumes that following 

amended standards, manufacturers 

would be able to maintain the same 

amount of profit as a percentage of 

revenues at all efficiency levels within 

a product class. As production costs 

increase with efficiency, this scenario 

implies that the per-unit dollar profit 

will increase. Based on publicly 

available financial information for 

NWGF and MHGF manufacturers, as 

well as comments from manufacturer 

interviews, DOE assumed average gross 

margin percentages of 25.3 percent for 

NWGFs and 21.3 percent for MHGF.259

Manufacturers noted that this scenario 

represents the upper bound of the 

NWGF and MHGF industry’s 

profitability in the standards case 

because manufacturers can fully pass on 

additional costs due to standards to 

consumers. 

DOE also modeled a tiered scenario, 

which reflects the industry’s ‘‘good, 

better, best’’ pricing structure. DOE 

implemented the tiered markup 

scenario because several manufacturers 

stated in interviews that they offer 

multiple tiers of product lines that are 

differentiated, in part, by efficiency 

level. Manufacturers further noted that 

tiered pricing encompasses additional 

differentiators such as comfort features, 

brand, and warranty. To account for this 

nuance in the GRIM, DOE’s tiered markup structure incorporates both AFUE 

and combustion systems (e.g., singlestage, two-stage, and modulating 

combustion systems) into its ‘‘good, 

better, best’’ markup analysis. 

Multiple manufacturers suggested that 

amended standards could lead to a 

compression of overall mark-ups and 

reduce the profitability of higherefficiency products. During interviews, 

manufacturers provided information on 

the range of typical manufacturer markups in the ‘‘good, better, best’’ tiers. 

DOE used this information to estimate 

manufacturer mark-ups for NWGFs and 

MHGFs under a tiered pricing strategy 

in the no-new-standards case. In the 

standards cases, DOE modeled the 


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260Available at: www.epa.gov/sites/production/ 

files/2021-04/documents/emission-factors_

apr2021.pdf (last accessed August 1, 2023). 

261U.S. Environmental Protection Agency. 

External Combustion Sources. In Compilation of Air 

Pollutant Emission Factors. AP–42. Fifth Edition. 

Volume I: Stationary Point and Area Sources. 

Chapter 1 (available at: www.epa.gov/air-emissionsfactors-and-quantification/ap-42-compilation-airemissions-factors#Proposed/) (last accessed August 

1, 2023). 

situation in which amended standards 

result in a reduction of product 

differentiation, compression of the 

markup tiers, and an overall reduction 

in profitability. 

A comparison of industry financial 

impacts under the two scenarios is 

presented in section V.B.2.a of this 

document. 

K. Emissions Analysis 

The emissions analysis consists of 

two components. The first component 

estimates the effect of potential energy 

conservation standards on power sector 

and site (where applicable) combustion 

emissions of CO2, NOX, SO2, and Hg. 

The second component estimates the 

impacts of potential standards on 

emissions of two additional greenhouse 

gases, CH4 and N2O, as well as the 

reductions in emissions of other gases 

due to ‘‘upstream’’ activities in the fuel 

production chain. These upstream 

activities comprise extraction, 

processing, and transporting fuels to the 

site of combustion. 

The analysis of electric power sector 

emissions of CO2, NOX, SO2, and Hg 

uses emissions intended to represent the 

marginal impacts of the change in 

electricity consumption associated with 

amended or new standards. The 

methodology is based on results 

published for the AEO, including a set 

of side cases that implement a variety of 

efficiency-related policies. The 

methodology is described in appendix 

13A in the final rule TSD. The analysis 

presented in this document uses 

projections from AEO2023. Power sector 

emissions of CH4 and N2O from fuel 

combustion are estimated using 

Emission Factors for Greenhouse Gas 

Inventories published by the 

Environmental Protection Agency 

(EPA).260

The on-site operation of the subject 

consumer furnaces requires combustion 

of fossil fuels and results in emissions 

of CO2, NOX, SO2, CH4, and N2O where 

these products are used. Site emissions 

of these gases were estimated using 

Emission Factors for Greenhouse Gas 

Inventories and, for NOX and SO2,

emissions intensity factors from an EPA 

publication.261

FFC upstream emissions, which 

include emissions from fuel combustion 

during extraction, processing, and 

transportation of fuels, and ‘‘fugitive’’ 

emissions (direct leakage to the 

atmosphere) of CH4 and CO2, are 

estimated based on the methodology 

described in chapter 15 of the final rule 

TSD. 

The emissions intensity factors are 

expressed in terms of physical units per 

MWh or MMBtu of site energy savings. 

For power sector emissions, specific 

emissions intensity factors are 

calculated by sector and end use. Total 

emissions reductions are estimated 

using the energy savings calculated in 

the national impact analysis. 

GHHI stated that the reductions in 

nitrous oxide emissions will create more 

than $21 billion in health benefits from 

reduced medical spending on treatment 

and improved economic productivity. 

(GHHI, No. 371 at p. 2) 

NCLC et al. commented that reducing 

the combustion of natural gas in 

furnaces would reduce emissions of 

CO2, nitrogen oxides, and methane, 

which in turn would yield health 

benefits. NCLC et al. further commented 

that these benefits are important for 

low-income communities and racial 

minorities, stating that these groups 

already experience higher rates of 

negative health outcomes, have limited 

healthcare access, and struggle with 

higher amounts of medical debt. These 

commenters added that the reduction of 

heating-energy bills would further 

benefit low-income households who are 

forced to cut back on other necessities 

to pay energy bills. (NCLC et al., No. 383 

at p. 8) 

Climate and Health Coalition 

expressed support for the eventual 

elimination of gas use within the home, 

and during the transition, Climate and 

Health Coalition stated that DOE’s 

proposed rule would reduce pollutants 

that harm human health, reduce climate 

change emissions, and save all 

customers (including disadvantaged and 

low-income communities) money. 

(Climate and Health Coalition, No. 399 

at p. 1) Climate and Health Coalition 

further commented that exposure to air 

pollutants caused by burning natural gas 

contributes to premature mortality and 

increased risk for illness, including 

ischemic heart disease, stroke, chronic 

obstructive pulmonary disease (COPD), 

lung cancer, heart attack, type-2 

diabetes, headache, fatigue, 

unconsciousness, lower-respiratory 

infections, and even death. (Climate and 

Health Coalition, No. 399 at pp. 1–3) 

Additionally, these commenters stated 

that there is a growing body of evidence 

showing an association between longterm exposure to air pollution and 

adverse birth outcomes. (Climate and 

Health Coalition, No. 399 at pp. 1–2) 

Furthermore, Climate and Health 

Coalition stated that air pollution can 

exacerbate asthma and cardiopulmonary 

symptoms, are associated with upper 

respiratory infections and cough, 

increase lower respiratory tract 

illnesses, and reduce lung function in 

children. (Climate and Health Coalition, 

No. 399 at pp. 2–3) 

In response, DOE acknowledges the 

potential health and climate benefits of 

reducing emissions and continues to 

estimate site and power plant emissions 

reductions for CO2, CH4, N2O, NOX, 

SO2, and Hg in this final rule. 

APGA expressed concerned that 

DOE’s assumed fuel sulfur content leads 

to overstatements of SO2 emissions from 

on-site operation of furnaces, especially 

as utilities across the country can have 

much less total sulfur in their gas and 

still meet odorant requirements. (APGA, 

No. 387 at pp. 29–30) 

DOE acknowledges that there is some 

uncertainty in the sulfur content of fuel. 

However, the resulting site emission 

reductions of SO2 are over an order of 

magnitude smaller than the 

corresponding increases in SO2

emissions due to increased electricity 

consumption in the amended standards 

case, and, therefore, any changes to the 

sulfur content assumptions would have 

very little impact on overall results and 

would not alter DOE’s evaluation of 

economic justification. 

APGA noted that EPA is in the 

process of promulgating regulations to 

impose a methane fee (i.e., a charge on 

methane emissions from the petroleum 

and natural gas sector, where methane 

emissions from an applicable facility 

(upstream of gas distribution) exceed a 

pre-determined waste emissions 

threshold). APGA argued that given that 

such a fee would reduce methane 

emissions, DOE’s estimates are likely 

overstated and must be recalculated to 

account for the impact of EPA’s new 

methane fee. (APGA, No. 387 at p. 30) 

In response, DOE notes that its 

estimates of emissions reductions, 

including methane, are based on various 

projections from the latest AEO. AEO’s 

methodology incorporates all 

regulations affecting the energy sector, if 

they are finalized. If a rule is proposed 

but not yet finalized, it will not be 

incorporated into the reference case of 

AEO, as it may ultimately differ from its 

proposed rule (or not be finalized). 

Should EPA finalize a regulation 

regarding a methane fee, it will be 

incorporated into future publications of 

AEO. AEO2023 does not incorporate 

this regulation. DOE notes that, even if 

methane emissions were lower than 

estimated in this final rule, the 


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262For further information, see the Assumptions 

to AEO2023 report that sets forth the major 

assumptions used to generate the projections in the 

Annual Energy Outlook (available at: www.eia.gov/ 

outlooks/aeo/assumptions/) (last accessed August 1, 

2023). 

263CSAPR requires States to address annual 

emissions of SO2 and NOX, precursors to the 

formation of fine particulate matter (PM2.5) 

pollution, in order to address the interstate 

transport of pollution with respect to the 1997 and 

2006 PM2.5 National Ambient Air Quality Standards 

(NAAQS). CSAPR also requires certain States to 

address the ozone season (May–September) 

emissions of NOX, a precursor to the formation of 

ozone pollution, in order to address the interstate 

transport of ozone pollution with respect to the 

1997 ozone NAAQS. 76 FR 48208 (August 8, 2011). 

EPA subsequently published a supplemental rule in 

the Federal Register that included an additional 

five States in the CSAPR ozone season program, 76 

FR 80760 (Dec. 27, 2011). 264See footnote 246. 

Department’s conclusions regarding 

economic justification and technological 

feasibility of the rule would be the 

same. 

Spencer and Dayaratna cited a report 

from the U.S. Environmental Protection 

Agency indicating that U.S. air quality 

has been improving for decades, 

suggesting that this weakens DOE’s 

finding that the air quality benefits 

associated with DOE’s proposal would 

outweigh the costs. (Spencer and 

Dayaratna, No. 390 at pp. 5–6) 

In response, DOE notes that this 

assertion is incorrect. DOE 

acknowledges that air quality is 

generally improving, but this would 

occur in the no-new-standards case as 

well as the new-standards-case. DOE’s 

analysis specifically considers the 

difference between the two cases (i.e., 

emissions reductions from an energy 

conservation standard on consumer 

furnaces only). This difference between 

the no-new-standards and newstandards cases is the same regardless of 

the background air quality. 

Furthermore, DOE incorporates 

projections from AEO with respect to 

the fuel mix of future electricity 

generation, which includes a greater 

fraction of renewable sources with no 

emissions. Therefore, improving 

emissions from the power sector are 

included in DOE’s analysis. 

Atmos Energy commented that DOE’s 

analysis should differentiate between 

the carbon dioxide emissions from 

natural gas-fueled and propane-fueled 

furnaces and evaluate them separately. 

(Atmos Energy, No. 415 at p. 7) 

DOE acknowledges that propane and 

natural gas have different carbon 

dioxide emissions. However, this 

difference is orders of magnitude 

smaller than the total emissions 

reductions estimated in the analysis. 

Furthermore, as discussed in section 

V.C of this document, DOE comes to the 

same conclusions with or without 

taking into consideration the impact of 

emissions reductions, and, therefore, 

any adjustments to the emissions 

analysis for propane would not change 

DOE’s conclusions. 

1. Air Quality Regulations Incorporated 

in DOE’s Analysis 

DOE’s no-new-standards case for the 

electric power sector reflects the AEO, 

which incorporates the projected 

impacts of existing air quality 

regulations on emissions. AEO2023 

generally represents current legislation 

and environmental regulations, 

including recent government actions, 

that were in place at the time of 

preparation of AEO2023, including the 

emissions control programs discussed in 

the following paragraphs.262

SO2 emissions from affected electric 

generating units (‘‘EGUs’’) are subject to 

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

Clean Air Act sets an annual emissions 

cap on SO2 for affected EGUs in the 48 

contiguous States and the District of 

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

SO2 emissions from numerous States in 

the eastern half of the United States are 

also limited under the Cross-State Air 

Pollution Rule (CSAPR). 76 FR 48208 

(August 8, 2011). CSAPR requires these 

States to reduce certain emissions, 

including annual SO2 emissions, and 

went into effect as of January 1, 

2015.263 AEO2023 incorporates 

implementation of CSAPR, including 

the update to the CSAPR ozone season 

program emission budgets and target 

dates issued in 2016. 81 FR 74504 (Oct. 

26, 2016). Compliance with CSAPR is 

flexible among EGUs and is enforced 

through the use of tradable emissions 

allowances. Under existing EPA 

regulations, for States subject to SO2

emissions limits under CSAPR, any 

excess SO2 emissions allowances 

resulting from the lower electricity 

demand caused by the adoption of an 

efficiency standard could be used to 

permit offsetting increases in SO2

emissions by another regulated EGU. 

However, beginning in 2016, SO2

emissions began to fall as a result of the 

Mercury and Air Toxics Standards 

(MATS) for power plants. 77 FR 9304 

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

EPA established a standard for hydrogen 

chloride as a surrogate for acid gas 

hazardous air pollutants (HAP), and also 

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

equivalent surrogate standard for acid 

gas HAP. The same controls are used to 

reduce HAP and non-HAP acid gas; 

thus, SO2 emissions are being reduced 

as a result of the control technologies 

installed on coal-fired power plants to 

comply with the MATS requirements 

for acid gas. In order to continue 

operating, coal plants must have either 

flue gas desulfurization or dry sorbent 

injection systems installed. Both 

technologies, which are used to reduce 

acid gas emissions, also reduce SO2

emissions. Because of the emissions 

reductions under the MATS, it is 

unlikely that excess SO2 emissions 

allowances resulting from the lower 

electricity demand would be needed or 

used to permit offsetting increases in 

SO2 emissions by another regulated 

EGU. Therefore, energy conservation 

standards that decrease electricity 

generation will generally reduce SO2

emissions. DOE estimated SO2

emissions reduction using emissions 

factors based on AEO2023. 

CSAPR also established limits on NOX

emissions for numerous States in the 

eastern half of the United States. Energy 

conservation standards would have 

little effect on NOX emissions in those 

States covered by CSAPR emissions 

limits if excess NOX emissions 

allowances resulting from the lower 

electricity demand could be used to 

permit offsetting increases in NOX

emissions from other EGUs. In such 

case, NOX emissions would remain near 

the limit even if electricity generation 

goes down. Depending on the 

configuration of the power sector in the 

different regions and the need for 

allowances, however, NOX emissions 

might not remain at the limit in the case 

of lower electricity demand. That would 

mean that standards might reduce NOX

emissions in covered States. Despite this 

possibility, DOE has chosen to be 

conservative in its analysis and has 

maintained the assumption that 

standards will not reduce NOX

emissions in States covered by CSAPR. 

Energy conservation standards would be 

expected to reduce NOX emissions in 

the States not covered by CSAPR.264

DOE used AEO2023 data to derive NOX

emissions factors for the group of States 

not covered by CSAPR. 

The MATS limit mercury emissions 

from power plants, but they do not 

include emissions caps and, as such, 

DOE’s energy conservation standards 

would be expected to slightly reduce Hg 

emissions. DOE estimated mercury 

emissions reduction using emissions 

factors based on AEO2023, which 

incorporates the MATS. 

L. Monetizing Emissions Impacts 

As part of the development of this 

final rule, for the purpose of complying 

with the requirements of Executive 


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265See www.whitehouse.gov/wp-content/ 

uploads/2021/02/TechnicalSupportDocument_

SocialCostofCarbonMethaneNitrousOxide.pdf (last 

accessed August 1, 2023). 

266Marten, A.L., E.A. Kopits, C.W. Griffiths, S.C. 

Newbold, and A. Wolverton. Incremental CH4 and 

N2O mitigation benefits consistent with the U.S. 

Government’s SC–CO2 estimates. Climate Policy 

(2015) 15(2): pp. 272–298. 

267National Academies of Sciences, Engineering, 

and Medicine. Valuing Climate Damages: Updating 

Estimation of the Social Cost of Carbon Dioxide. 

2017. The National Academies Press: Washington, 

DC. 

Order 12866, DOE considered the 

estimated net monetary benefits from 

changes in emissions of CO2, CH4, N2O, 

NOX, and SO2 that are expected to result 

from each of the TSLs considered. In 

order to make this calculation analogous 

to the calculation of the NPV of 

consumer benefit, DOE considered the 

reduced emissions expected to result 

over the lifetime of products shipped in 

the projection period for each TSL. This 

section summarizes the basis for the 

values used for monetizing the 

emissions benefits and presents the 

values considered in this final rule. 

1. Monetization of Greenhouse Gas 

Emissions 

To monetize the benefits of reducing 

GHG emissions, this analysis uses the 

interim estimates presented in the 

Technical Support Document: Social 

Cost of Carbon, Methane, and Nitrous 

Oxide Interim Estimates Under 

Executive Order 13990 published in 

February 2021 by the IWG.265

DOE estimates the monetized benefits 

of the reductions in emissions of CO2, 

CH4, and N2O by using a measure of the 

social cost (SC) of each pollutant (e.g., 

SC–CO2). These estimates represent the 

monetary value of the net harm to 

society associated with a marginal 

increase in emissions of these pollutants 

in a given year, or the benefit of 

avoiding that increase. These estimates 

are intended to include (but are not 

limited to) climate-change-related 

changes in net agricultural productivity, 

human health, property damages from 

increased flood risk, disruption of 

energy systems, risk of conflict, 

environmental migration, and the value 

of ecosystem services. 

DOE exercises its own judgment in 

presenting monetized climate benefits 

as recommended by applicable 

Executive orders, and DOE would reach 

the same conclusion presented in this 

final rule in the absence of the social 

cost of greenhouse gases. That is, the 

social costs of greenhouse gases, 

whether measured using the February 

2021 interim estimates presented by the 

Interagency Working Group on the 

Social Cost of Greenhouse Gases or by 

another means, did not affect the rule 

ultimately being adopted by DOE. 

DOE estimated the global social 

benefits of CO2, CH4, and N2O 

reductions (i.e., SC–GHGs) using SC– 

GHG values that were based on the 

interim values presented in the 

Technical Support Document: Social 

Cost of Carbon, Methane, and Nitrous 

Oxide Interim Estimates under 

Executive Order 13990, published in 

February 2021 by the IWG. The SC– 

GHGs is the monetary value of the net 

harm to society associated with a 

marginal increase in emissions in a 

given year, or the benefit of avoiding 

that increase. In principle, SC–GHGs 

includes the value of all climate change 

impacts, including (but not limited to) 

changes in net agricultural productivity, 

human health effects, property damage 

from increased flood risk and natural 

disasters, disruption of energy systems, 

risk of conflict, environmental 

migration, and the value of ecosystem 

services. The SC–GHGs, therefore, 

reflects the societal value of reducing 

emissions of the gas in question by one 

metric ton. The SC–GHGs is the 

theoretically appropriate value to use in 

conducting benefit-cost analyses of 

policies that affect CO2, N2O, and CH4

emissions. As a member of the IWG 

involved in the development of the 

February 2021 SC–GHG TSD, DOE 

agrees that the interim SC–GHG 

estimates represent the most appropriate 

estimate of the SC–GHG until revised 

estimates have been developed 

reflecting the latest, peer-reviewed 

science. 

The SC–GHGs estimates presented 

here were developed over many years, 

using a transparent process, peerreviewed methodologies, the best 

science available at the time of that 

process, and with input from the public. 

Specifically, in 2009, the IWG, which 

included DOE and other Executive 

Branch agencies and offices, was 

established to ensure that agencies were 

using the best available science and to 

promote consistency in the social cost of 

carbon (SC–CO2) values used across 

agencies. The IWG published SC–CO2

estimates in 2010 that were developed 

from an ensemble of three widely cited 

integrated assessment models (IAMs) 

that estimate global climate damages 

using highly aggregated representations 

of climate processes and the global 

economy combined into a single 

modeling framework. The three IAMs 

were run using a common set of input 

assumptions in each model for future 

population, economic, and CO2

emissions growth, as well as 

equilibrium climate sensitivity—a 

measure of the globally averaged 

temperature response to increased 

atmospheric CO2 concentrations. These 

estimates were updated in 2013 based 

on new versions of each IAM. In August 

2016, the IWG published estimates of 

the social cost of methane (SC–CH4) and 

nitrous oxide (SC–N2O) using 

methodologies that are consistent with 

the methodology underlying the SC– 

CO2 estimates. The modeling approach 

that extends the IWG SC–CO2

methodology to non-CO2 GHGs has 

undergone multiple stages of peer 

review. The SC–CH4 and SC–N2O 

estimates were developed by Marten et 

al.266 and underwent a standard doubleblind peer review process prior to 

journal publication. In 2015, as part of 

the response to public comments 

received to a 2013 solicitation for 

comments on the SC–CO2 estimates, the 

IWG announced a National Academies 

of Sciences, Engineering, and Medicine 

review of the SC–CO2 estimates to offer 

advice on how to approach future 

updates to ensure that the estimates 

continue to reflect the best available 

science and methodologies. In January 

2017, the National Academies released 

their final report, ‘‘Valuing Climate 

Damages: Updating Estimation of the 

Social Cost of Carbon Dioxide,’’ and 

recommended specific criteria for future 

updates to the SC–CO2 estimates, a 

modeling framework to satisfy the 

specified criteria, and both near-term 

updates and longer-term research needs 

pertaining to various components of the 

estimation process (National 

Academies, 2017).267 Shortly thereafter, 

in March 2017, President Trump issued 

Executive Order 13783, which 

disbanded the IWG, withdrew the 

previous TSDs, and directed agencies to 

ensure SC–CO2 estimates used in 

regulatory analyses are consistent with 

the guidance contained in OMB’s 

Circular A–4, ‘‘including with respect to 

the consideration of domestic versus 

international impacts and the 

consideration of appropriate discount 

rates’’ (E.O. 13783, section 5(c)). Benefitcost analyses following E.O. 13783 used 

SC–GHG estimates that attempted to 

focus on the U.S.-specific share of 

climate change damages as estimated by 

the models and were calculated using 

two discount rates recommended by 

Circular A–4, 3 percent and 7 percent. 

All other methodological decisions and 

model versions used in SC–GHG 

calculations remained the same as those 

used by the IWG in 2010 and 2013, 

respectively. 

On January 20, 2021, President Biden 

issued Executive Order 13990, which reVerDate Sep<11>2014 17:57 Dec 15, 2023 Jkt 262001 PO 00000 Frm 00113 Fmt 4701 Sfmt 4700 E:\FR\FM\18DER2.SGM 18DER2

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268 Interagency Working Group on Social Cost of 

Carbon. Social Cost of Carbon for Regulatory Impact 

Analysis under Executive Order 12866 (2010) 

United States Government (last accessed August 1, 

2023) (available at: www.epa.gov/sites/default/files/ 

2016-12/documents/scc_tsd_2010.pdf); Interagency 

Working Group on Social Cost of Carbon. Technical 

Update of the Social Cost of Carbon for Regulatory 

Impact Analysis Under Executive Order 12866 

(2013) (78 FR 70586) (last accessed August 1, 2023) 

(available at: www.federalregister.gov/documents/ 

2013/11/26/2013-28242/technical-supportdocument-technical-update-of-the-social-cost-ofcarbon-for-regulatory-impact); Interagency Working 

Group on Social Cost of Greenhouse Gases, United 

States Government. Technical Support Document: 

Technical Update on the Social Cost of Carbon for 

Regulatory Impact Analysis-Under Executive Order 

12866 (August 2016) (last accessed August 1, 2023) 

(available at: www.epa.gov/sites/default/files/2016- 

12/documents/sc_co2_tsd_august_2016.pdf); 

Interagency Working Group on Social Cost of 

Greenhouse Gases, United States Government. 

Addendum to Technical Support Document on 

Social Cost of Carbon for Regulatory Impact 

Analysis under Executive Order 12866: Application 

of the Methodology to Estimate the Social Cost of 

Methane and the Social Cost of Nitrous Oxide. 

August 2016 (last accessed August 1, 2023) 

(available at: www.epa.gov/sites/default/files/2016- 

12/documents/addendum_to_sc-ghg_tsd_august_

2016.pdf). 

established the IWG and directed it to 

ensure that the U.S. Government’s 

estimates of the social cost of carbon 

and other greenhouse gases reflect the 

best available science and the 

recommendations of the National 

Academies (2017). The IWG was tasked 

with first reviewing the SC–GHG 

estimates currently used in Federal 

analyses and publishing interim 

estimates within 30 days of the E.O. that 

reflect the full impact of GHG 

emissions, including by taking global 

damages into account. The interim SC– 

GHG estimates published in February 

2021 are used here to estimate the 

climate benefits for this rulemaking. The 

February 2021 SC–GHG TSD provides a 

complete discussion of the IWG’s initial 

review conducted under E.O. 13990. In 

particular, the IWG found that the SC– 

GHG estimates used under E.O. 13783 

fail to reflect the full impact of GHG 

emissions in multiple ways. 

First, the IWG found that the SC–GHG 

estimates used under E.O. 13783 fail to 

fully capture many climate impacts that 

affect the welfare of U.S. citizens and 

residents, and those impacts are better 

reflected by global measures of the SC– 

GHG. Examples of omitted effects from 

the E.O. 13783 estimates include direct 

effects on U.S. citizens, assets, and 

investments located abroad, supply 

chains, U.S. military assets and interests 

abroad, and tourism, as well as spillover 

pathways such as economic and 

political destabilization and global 

migration that can lead to adverse 

impacts on U.S. national security, 

public health, and humanitarian 

concerns. In addition, assessing the 

benefits of U.S. GHG mitigation 

activities requires consideration of how 

those actions may affect mitigation 

activities by other countries, as those 

international mitigation actions will 

provide a benefit to U.S. citizens and 

residents by mitigating climate impacts 

that affect U.S. citizens and residents. A 

wide range of scientific and economic 

experts have emphasized the issue of 

reciprocity as support for considering 

global damages of GHG emissions. If the 

United States does not consider impacts 

on other countries, it is difficult to 

convince other countries to consider the 

impacts of their emissions on the United 

States. The only way to achieve an 

efficient allocation of resources for 

emissions reduction on a global basis— 

and so benefit the U.S. and its citizens— 

is for all countries to base their policies 

on global estimates of damages. As a 

member of the IWG involved in the 

development of the February 2021 SC– 

GHG TSD, DOE agrees with this 

assessment, and, therefore, in this final 

rule DOE centers attention on a global 

measure of the SC–GHG. This approach 

is the same as that taken in DOE 

regulatory analyses from 2012 through 

2016. A robust estimate of climate 

damages that accrue only to U.S. 

citizens and residents does not currently 

exist in the literature. As explained in 

the February 2021 TSD, existing 

estimates are both incomplete and an 

underestimate of total damages that 

accrue to the citizens and residents of 

the U.S. because they do not fully 

capture the regional interactions and 

spillovers discussed above, nor do they 

include all of the important physical, 

ecological, and economic impacts of 

climate change recognized in the 

climate change literature. As noted in 

the February 2021 SC–GHG TSD, the 

IWG will continue to review 

developments in the literature, 

including more robust methodologies 

for estimating a U.S.-specific SC–GHG 

value, and explore ways to better inform 

the public of the full range of carbon 

impacts. As a member of the IWG, DOE 

will continue to follow developments in 

the literature pertaining to this issue. 

Second, the IWG found that the use of 

the social rate of return on capital (7 

percent under current OMB Circular A– 

4 guidance) to discount the future 

benefits of reducing GHG emissions 

inappropriately underestimates the 

impacts of climate change for the 

purposes of estimating the SC–GHG. 

Consistent with the findings of the 

National Academies (2017) and the 

economic literature, the IWG continued 

to conclude that the consumption rate of 

interest is the theoretically appropriate 

discount rate in an intergenerational 

context,268 and recommended that 

discount rate uncertainty and relevant 

aspects of intergenerational ethical 

considerations be accounted for in 

selecting future discount rates. 

Furthermore, the damage estimates 

developed for use in the SC–GHG are 

estimated in consumption-equivalent 

terms, and so an application of OMB 

Circular A–4’s guidance for regulatory 

analysis would then use the 

consumption discount rate to calculate 

the SC–GHG. DOE agrees with this 

assessment and will continue to follow 

developments in the literature 

pertaining to this issue. DOE also notes 

that while OMB Circular A–4, as 

published in 2003, recommends using 3 

percent and 7 percent discount rates as 

‘‘default’’ values, Circular A–4 also 

reminds agencies that ‘‘different 

regulations may call for different 

emphases in the analysis, depending on 

the nature and complexity of the 

regulatory issues and the sensitivity of 

the benefit and cost estimates to the key 

assumptions.’’ On discounting, Circular 

A–4 recognizes that ‘‘special ethical 

considerations arise when comparing 

benefits and costs across generations,’’ 

and Circular A–4 acknowledges that 

analyses may appropriately ‘‘discount 

future costs and consumption benefits 

. . . at a lower rate than for 

intragenerational analysis.’’ In the 2015 

‘‘Response to Comments on the Social 

Cost of Carbon for Regulatory Impact 

Analysis,’’ OMB, DOE, and the other 

IWG members recognized that ‘‘Circular 

A–4 is a living document’’ and ‘‘the use 

of 7 percent is not considered 

appropriate for intergenerational 

discounting. There is wide support for 

this view in the academic literature, and 

it is recognized in Circular A–4 itself.’’ 

Thus, DOE concludes that a 7 percent 

discount rate is not appropriate to apply 

to value the social cost of greenhouse 

gases in the analysis presented in this 

analysis. 

To calculate the present and 

annualized values of climate benefits, 

DOE uses the same discount rate as the 

rate used to discount the value of 

damages from future GHG emissions, for 

internal consistency. That approach to 

discounting follows the same approach 

that the February 2021 TSD 

recommends ‘‘to ensure internal 

consistency—i.e., future damages from 

climate change using the SC–GHG at 2.5 

percent should be discounted to the 

base year of the analysis using the same 

2.5 percent rate.’’ DOE has also 

consulted the National Academies’ 2017 

recommendations on how SC–GHG 


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269 Interagency Working Group on Social Cost of 

Greenhouse Gases (IWG) (2021) Technical Support 

Document: Social Cost of Carbon, Methane, and 

Nitrous Oxide Interim Estimates under Executive 

Order 13990. February. United States Government 

(available at: www.whitehouse.gov/briefing-room/ 

blog/2021/02/26/a-return-to-science-evidencebased-estimates-of-the-benefits-of-reducing-climatepollution/) (last accessed August 1, 2023). 

estimates can ‘‘be combined in RIAs 

with other cost and benefits estimates 

that may use different discount rates.’’ 

The National Academies reviewed 

several options, including ‘‘presenting 

all discount rate combinations of other 

costs and benefits with [SC–GHG] 

estimates.’’ 

As a member of the IWG involved in 

the development of the February 2021 

SC–GHG TSD, DOE agrees with the 

above assessment and will continue to 

follow developments in the literature 

pertaining to this issue. While the IWG 

works to assess how best to incorporate 

the latest, peer-reviewed science to 

develop an updated set of SC–GHG 

estimates, it set the interim estimates to 

be the most recent estimates developed 

by the IWG prior to the group being 

disbanded in 2017. The estimates rely 

on the same models and harmonized 

inputs and are calculated using a range 

of discount rates. As explained in the 

February 2021 SC–GHG TSD, the IWG 

has recommended that agencies revert 

to the same set of four values drawn 

from the SC–GHG distributions based 

on three discount rates as were used in 

regulatory analyses between 2010 and 

2016 and were subject to public 

comment. For each discount rate, the 

IWG combined the distributions across 

models and socioeconomic emissions 

scenarios (applying equal weight to 

each) and then selected a set of four 

values recommended for use in benefitcost analyses: an average value resulting 

from the model runs for each of three 

discount rates (2.5 percent, 3 percent, 

and 5 percent), plus a fourth value, 

selected as the 95th percentile of 

estimates based on a 3-percent discount 

rate. The fourth value was included to 

provide information on potentially 

higher-than-expected economic impacts 

from climate change. As explained in 

the February 2021 SC–GHG TSD, and 

DOE agrees, this update reflects the 

immediate need to have an operational 

SC–GHG for use in regulatory benefitcost analyses and other applications that 

was developed using a transparent 

process, peer-reviewed methodologies, 

and the science available at the time of 

that process. Those estimates were 

subject to public comment in the 

context of dozens of proposed 

rulemakings as well as in a dedicated 

public comment period in 2013. 

There are a number of limitations and 

uncertainties associated with the SC– 

GHG estimates. First, the current 

scientific and economic understanding 

of discounting approaches suggests 

discount rates appropriate for 

intergenerational analysis in the context 

of climate change are likely to be less 

than 3 percent, near 2 percent or 

lower.269 Second, the IAMs used to 

produce these interim estimates do not 

include all of the important physical, 

ecological, and economic impacts of 

climate change recognized in the 

climate change literature and the 

science underlying their ‘‘damage 

functions’’ (i.e., the core parts of the 

IAMs that map global mean temperature 

changes and other physical impacts of 

climate change into economic—both 

market and nonmarket—damages) lags 

behind the most recent research. For 

example, limitations include the 

incomplete treatment of catastrophic 

and non-catastrophic impacts in the 

integrated assessment models, their 

incomplete treatment of adaptation and 

technological change, the incomplete 

way in which inter-regional and 

intersectoral linkages are modeled, 

uncertainty in the extrapolation of 

damages to high temperatures, and 

inadequate representation of the 

relationship between the discount rate 

and uncertainty in economic growth 

over long time horizons. Likewise, the 

socioeconomic and emissions scenarios 

used as inputs to the models do not 

reflect new information from the last 

decade of scenario generation or the full 

range of projections. The modeling 

limitations do not all work in the same 

direction in terms of their influence on 

the SC–CO2 estimates. However, as 

discussed in the February 2021 TSD, the 

IWG has recommended that, taken 

together, the limitations suggest that the 

interim SC–GHG estimates used in this 

final rule likely underestimate the 

damages from GHG emissions. DOE 

concurs with this assessment. 

DOE’s derivations of the SC–GHG 

(i.e., SC–CO2, SC–N2O, and SC–CH4) 

values used for this final rule are 

discussed in the following sections, and 

the results of DOE’s analyses estimating 

the benefits of the reductions in 

emissions of these GHGs are presented 

in section V.B of this document. 

A number of commenters expressed 

concern over DOE’s estimates of the SC– 

GHG, as discussed in the paragraphs 

that follow. 

The Joint Market and Consumer 

Organizations argued that climate 

change considerations do not play a role 

under EPCA and that DOE should not 

use the IWG SC–GHGs analysis to 

calculate net regulatory benefits. The 

commenters claimed that climate 

change is mentioned nowhere in EPCA’s 

detailed instructions to DOE on how to 

set and amend appliance efficiency 

standards. They suggest that DOE acted 

extra-statutorily by relying on Executive 

Order 13990 to account for greenhouse 

gas emissions in their net benefit 

analysis. (Joint Market and Consumer 

Organizations, No. 373 at p. 6) The 

commenters also question how DOE 

attempted to calculate the net benefits, 

claiming the SC–GHG is too speculative 

and subjective, and that it is too easily 

manipulated to be weighed in the same 

scales with the near-term consumer 

costs of the proposed standards. They 

claimed the IWG estimates are biased 

due to reliance on overheated climate 

models, inflated emission scenarios, and 

pessimistic adaptation assumptions. 

These commenters concluded that using 

biased SC–GHG estimates to estimate 

net benefits is arbitrary and capricious. 

(Id. at pp. 3, 7–10) They also claimed, 

even if the IWG’s methodology were not 

biased in multiple ways, that DOE’s 

finding that the furnace efficiency 

standards will deliver the estimated 

climate benefits would be unlikely. (Id. 

at p. 11) 

APGA asserted that flaws in the 

interim SC–GHG values could lead to 

miscalculations in monetary benefits 

from the proposed rule for NWGFs and 

MHGFs. APGA claimed that the process 

used by the IWG to develop the 

estimates was inconsistent with the 

Administrative Procedure Act, failed to 

fully consider recommendations from a 

related National Academies of Sciences, 

Engineering, and Medicine review, and 

did not follow current Office of 

Management and Budget bulletins and 

circulars, each of which is intended to 

ensure the underlying data used to 

develop the SC–GHGs are based on the 

best available science and economics. 

Accordingly, APGA asserted that failure 

to ensure that these procedural 

shortcomings are fully addressed before 

applying any SC–GHG estimates in a 

final rule will result in inappropriately 

calculated and, thus, misapplied values. 

APGA argued that DOE’s speculative 

projections regarding emission 

reductions benefits should not be part of 

any final rule. (APGA, No. 387 at pp. 

31–32) 

Spencer and Dayaratna stated that the 

SC–GHGs obscures regulatory costs. 

These commenters referenced studies 

exploring the sensitivity of assessment 

models to changes in assumptions, 

which they said could make such 

models prone to user manipulation. 

Additionally, Spencer and Dayaratna 

stated that accurately accounting for 

costs and benefits, even those that do 


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not impact DOE’s final decision (such as 

the SC–GHGs), is important for 

providing transparency. The 

commenters also suggested that DOE’s 

use of the SC–GHGs creates bias and is 

misleading. (Spencer and Dayaratna, 

No. 390 at pp. 6–8) 

The Associations urged DOE to 

reconsider the use of the SC–GHGs 

estimates in this rulemaking based on 

three core concerns. First, these 

commenters argued that before DOE 

considers applying the SC–GHG 

estimates to the proposed rule (and, 

likewise, to any final rule resulting from 

this rulemaking), the SC–GHG estimates 

should be subject to a proper 

administrative process, including a full 

and fair public comment process, as 

well as a robust independent peer 

review. Second, these commenters 

argued that there are statutory 

limitations on using the SC–GHG 

estimates, and the Associations urged 

DOE to fully consider the applicable 

limits before applying those estimates. 

Third, the Associations urged DOE to 

carefully consider whether the ‘‘major 

questions’’ doctrine precludes the 

application of the SC–GHG estimates in 

the proposed rule, given the political 

and economic significance of the 

estimates. (The Associations, No. 392 at 

p. 2) 

In response, DOE first notes that it 

would reach the same conclusion 

presented in this final rule in the 

absence of the social cost of greenhouse 

gases. DOE notes that, as stated in 

section III.F.1.f of this document, DOE 

maintains that environmental and 

public health benefits associated with 

the more efficient use of energy, 

including those connected to global 

climate change, are important to take 

into account when considering the 

‘‘need for national energy . . . 

conservation,’’ which is one of the 

factors that EPCA requires DOE to 

evaluate in determining whether a 

potential energy conservation standard 

is economically justified. (42 U.S.C. 

6295(o)(2)(B)(i)(VI)); Zero Zone, Inc. v. 

United States DOE, 832 F.3d 654, 677 

(7th Cir. 2016) (pointing to 42 U.S.C. 

6295(o)(2)(B)(i)(VI) in concluding that 

‘‘[w]e have no doubt that Congress 

intended that DOE have the authority 

under the EPCA to consider the 

reduction in SCC.’’) DOE has been 

analyzing the monetized emissions 

impacts from its rules, for over 10 years. 

In addition, Executive Order 13563, 

‘‘Improving Regulation and Regulatory 

Review,’’ which was re-affirmed on 

January 20, 2021, states that each 

agency, among other things, must, to the 

extent permitted by law: ‘‘select, in 

choosing among alternative regulatory 

approaches, those approaches that 

maximize net benefits (including 

potential economic, environmental, 

public health and safety, and other 

advantages; distributive impacts; and 

equity).’’ E.O. 13563, section 1(b). 

Furthermore, as noted previously, E.O. 

13990, ‘‘Protecting Public Health and 

the Environment and Restoring Science 

to Tackle the Climate Crisis,’’ reestablished the IWG and directed it to 

ensure that the U.S. Government’s 

estimates of the social cost of carbon 

and other greenhouse gases reflect the 

best available science and the 

recommendations of the National 

Academies. As a member of the IWG 

involved in the development of the 

February 2021 SC–GHG TSD, DOE 

agrees that the interim SC–GHG 

estimates represent the most appropriate 

estimate of the SC–GHG until revised 

estimates have been developed 

reflecting the latest, peer-reviewed 

science. For these reasons, DOE 

includes monetized emissions 

reductions in its evaluation of potential 

standard levels. Finally, DOE notes that 

the ‘‘major questions’’ doctrine raised by 

the Associations applies only in 

‘‘extraordinary cases’’ concerning 

Federal agencies claiming highly 

consequential regulatory authority 

beyond what Congress could reasonably 

be understood to have granted. West 

Virginia v. EPA, 142 S. Ct. 2587, 2609 

(2022); N.C. Coastal Fisheries Reform 

Grp. v. Capt. Gaston LLC, 2023 U.S. 

App. LEXIS 20325, *6–8 (4th Cir., Aug. 

7, 2023) (listing the hallmarks courts 

have recognized to invoke the major 

questions doctrine, such as a hesitancy 

‘‘to recognize new-found powers in old 

statutes against a backdrop of an agency 

failing to invoke them previously,’’ 

‘‘when the asserted power raises 

federalism concerns,’’ or ‘‘when the 

asserted authority falls outside the 

agency’s traditional expertise, . . . or is 

found in an ‘ancillary provision.’ ’’). 

DOE has clear authorization under 

EPCA to regulate the energy efficiency 

or energy use of a variety of consumer 

products, including the subject 

furnaces. Although DOE routinely 

conducts an analysis of the anticipated 

emissions impacts of potential energy 

conservation standards under 

consideration, see, e.g., Zero Zone, 832 

F.3d at 677, DOE does not purport to 

regulate such emissions, and as stated 

elsewhere in this document, DOE’s 

selection of standards would be the 

same without consideration of 

emissions. Where DOE applied the 

factors it was tasked to consider under 

EPCA and the rule is justified even 

absent use of the SC–GHG analysis, the 

major questions doctrine has no bearing. 

In contrast to the commenters on this 

topic discussed previously, The Climate 

Commenters stated that DOE 

appropriately applies the social cost 

estimates developed by the IWG on the 

SC–GHGs to its analysis of emissions 

reduction benefits generated by the 

proposed rule for NWGFs and MHGFs. 

These commenters stated that DOE 

should expand upon its rationale for 

adopting a global damages valuation 

and for the range of discount rates it 

applies to climate effects, as there are 

additional legal, economic, and policy 

reasons for such methodological 

decisions that can further bolster and 

support DOE’s rationale for these 

choices. These commenters added that 

DOE should consider conducting 

sensitivity analysis using a sound 

domestic-only social cost estimate as a 

backstop, and the Department should 

explicitly conclude that the rule is costbenefit justified even using a domesticonly valuation that may still undercount 

climate benefits. These commenters also 

urged DOE to consider providing 

additional sensitivity analysis using 

discount rates lower than two percent 

for climate impacts. (The Climate 

Commenters, No. 388 at pp. 1–3) 

In response, DOE maintains that the 

reasons for using global measures of the 

SC–GHG previously discussed are 

sufficient for the purposes of this 

rulemaking. DOE notes that further 

discussion of this topic is contained in 

the February 2021 SC–GHG TSD, and 

DOE agrees with the assessment therein. 

Regarding conducting sensitivity 

analysis using a domestic-only social 

cost estimate, climate change harms 

U.S. interests both domestically and 

abroad through (1) impacts within U.S. 

borders; (2) impacts outside U.S. 

borders that affect the welfare of U.S. 

citizens and residents; and (3) spillover 

impacts of climate actions elsewhere on 

U.S. interests. Focusing on climate 

impacts occurring solely within U.S. 

borders, as commenters suggest, would 

‘‘underestimate’’ benefits of greenhousegas mitigation for U.S. citizens and 

residents and ignore the reality that a 

Nation’s interests extend beyond its 

borders. See Zero Zone, Inc. v. U.S. 

Dep’t of Energy, 832 F.3d 654, 678–79 

(7th Cir. 2016) (upholding consideration 

of global impacts in climate analysis). 

DOE also agrees with the assessment in 

the February 2021 SC–GHG TSD that 

the only currently available quantitative 

characterization of domestic damages 

from GHG emissions is both incomplete 

and an underestimate of the share of 

total damages that accrue to the citizens 

and residents of the United States. 


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270National Academies of Sciences, Engineering, 

and Medicine. Valuing Climate Damages: Updating 

Estimation of the Social Cost of Carbon Dioxide. 

2017. The National Academies Press: Washington, 

DC. (Available at: https://

nap.nationalacademies.org/catalog/24651/valuingclimate-damages-updating-estimation-of-the-socialcost-of) (last accessed August 1, 2023). 

271See EPA, Revised 2023 and Later Model Year 

Light-Duty Vehicle GHG Emissions Standards: 

Regulatory Impact Analysis, Washington, DC, 

December 2021. Available at nepis.epa.gov/Exe/ 

ZyPDF.cgi?Dockey=P1013ORN.pdf (last accessed 

August 1, 2023). 

Therefore, it would be of questionable 

value to conduct the suggested 

sensitivity analysis at this time. DOE 

considered performing sensitivity 

analysis using discount rates lower than 

two percent for climate impacts, as 

suggested by the IWG, but it concluded 

that such analysis would not add 

meaningful information or impact the 

rationale in the context of this 

rulemaking. 

The Climate Commenters further 

stated that DOE should provide 

additional justification for combining 

climate effects discounted at an 

appropriate consumption-based 

discount rate, with other costs and 

benefits discounted at a capital-based 

rate (i.e., 7 percent). (The Climate 

Commenters, No. 388 at p. 2) 

In response, DOE notes that the 

reasons for using consumption-based 

discount rates for future climate effects 

were discussed previously and are 

further elaborated in the February 2021 

SC–GHG TSD. Combining climate 

benefits with health benefits and 

consumer economic benefits is in 

keeping with the guidance of OMB 

Circular A–4 to count all significant 

costs and benefits. DOE is aware that 

there are different approaches to 

combining climate benefits with other 

cost and benefits estimates that may use 

different discount rates, and the 

approach applied in this document (as 

well as in numerous other past DOE 

rulemaking notices) is among those 

discussed in the National Academies 

2017 report (p. 182).270

Finally, The Climate Commenters 

recommend that DOE should clearly 

state that any criticisms of the social 

cost of greenhouse gases are moot in this 

rulemaking, because the proposed rule 

is easily cost-justified without any 

climate benefits. (The Climate 

Commenters, No. 388 at p. 3) 

In response, DOE acknowledges that 

its conclusions regarding economic 

justification and technological 

feasibility would be the same without 

including climate benefits. When those 

benefits are accounted for, the 

justification becomes stronger still. 

PHCC commented that it is a mistake 

to include the estimated social and 

health cost in the rulemaking because 

they are currently under litigation, 

which could affect the rule’s viability. 

(PHCC, No. 403 at p. 5) 

In response, DOE notes that on April 

5, 2023, the Fifth Circuit Court of 

Appeals (No. 22–30087) ruled that the 

plaintiffs lacked standing, dismissed the 

case for lack of jurisdiction, and vacated 

the February 11, 2022, preliminary 

injunction issued by the District Court 

in Louisiana v. Biden, No. 21–cv–1074– 

JDC–KK (W.D. La.). As reflected in this 

rule, DOE has reverted to its approach 

prior to the injunction and presents 

monetized greenhouse gas abatement 

benefits where appropriate and 

permissible under law. 

Furthermore, DOE bases its factors on 

the best available estimates for both 

climate and health benefits. The 

commenter did not provide any 

alternative data sources for DOE’s 

consideration, and, therefore, DOE has 

maintained its current approach from 

the NOPR for this final rule. 

a. Social Cost of Carbon 

The SC–CO2 values used for this final 

rule were based on the values developed 

for the IWG’s February 2021 TSD, which 

are shown in Table IV.14 in five-year 

increments from 2020 to 2050. DOE 

notes that it has exercised its discretion 

in adopting the IWG’s estimates, and as 

previously stated, DOE finds that the 

interim SC–GHG estimates represent the 

most appropriate estimate of the SC– 

GHG until revised estimates have been 

developed reflecting the latest, peerreviewed science. 

The set of annual values that DOE 

used, which was adapted from estimates 

published by EPA,271 is presented in 

appendix 14A of the final rule TSD. 

These estimates are based on methods, 

assumptions, and parameters identical 

to the estimates published by the IWG 

(which were based on EPA modeling), 

and include values for 2051 to 2070. 

DOE expects additional climate benefits 

to accrue for products still operating 

after 2070, but a lack of available SC– 

CO2 estimates for emissions years 

beyond 2070 prevents DOE from 

monetizing these potential benefits in 

this analysis. 

TABLE IV.14—ANNUAL SC–CO2 VALUES FROM 2021 INTERAGENCY UPDATE, 2020–2050 

[2020$ per metric ton CO2] 

Year 

Discount rate and statistic 

5% 

Average 

3% 

Average 

2.5% 

Average 

3% 

95th 

percentile 

2020 ................................................................................................................. 14 51 76 152 

2025 ................................................................................................................. 17 56 83 169 

2030 ................................................................................................................. 19 62 89 187 

2035 ................................................................................................................. 22 67 96 206 

2040 ................................................................................................................. 25 73 103 225 

2045 ................................................................................................................. 28 79 110 242 

2050 ................................................................................................................. 32 85 116 260 

DOE multiplied the CO2 emissions 

reduction estimated for each year by the 

SC–CO2 value for that year in each of 

the four cases. DOE adjusted the values 

to 2022$ using the implicit price 

deflator for gross domestic product 

(GDP) from the Bureau of Economic 

Analysis. To calculate a present value of 

the stream of monetary values, DOE 

discounted the values in each of the 

four cases using the specific discount 

rate that had been used to obtain the 

SC–CO2 values in each case. See chapter 

13 of the final rule TSD for the annual 

emissions reduction and see also 

appendix 14A of the final rule TSD for 

the annual SC–CO2 values. 


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272Estimating the Benefit per Ton of Reducing 

PM2.5 Precursors from 21 Sectors (available at: 

www.epa.gov/benmap/estimating-benefit-tonreducing-pm25-precursors-21-sectors) (last accessed 

August 1, 2023). 

273 ‘‘Area sources’’ represents all emission sources 

for which States do not have exact (point) locations 

in their emissions inventories. Because exact 

locations would tend to be associated with larger 

sources, ‘‘area sources’’ would be fairly 

representative of small, dispersed sources like 

homes and businesses. 

274 ‘‘Area sources’’ are a category in the 2018 

document from EPA, but are not used in the 2021 

document cited previously. See: www.epa.gov/sites/ 

default/files/2018-02/documents/ 

sourceapportionmentbpttsd_2018.pdf (last accessed 

August 1, 2023). 

b. Social Cost of Methane and Nitrous 

Oxide 

The SC–CH4 and SC–N2O values used 

for this final rule were based on the 

values developed for the February 2021 

TSD. DOE notes that it has exercised its 

discretion in adopting the IWG’s 

estimates, and as previously stated, DOE 

finds that the interim SC–GHG estimates 

represent the most appropriate estimate 

of the SC–GHG until revised estimates 

have been developed reflecting the 

latest, peer-reviewed science. Table 

IV.16 shows the updated sets of SC–CH4

and SC–N2O estimates from the latest 

interagency update in five-year 

increments from 2020 to 2050. The full 

set of annual values used is presented 

in appendix 14A of the final rule TSD. 

To capture the uncertainties involved in 

regulatory impact analysis, DOE has 

determined it is appropriate to include 

all four sets of SC–CH4 and SC–N2O 

values, as recommended by the IWG. 

DOE derived values after 2050 using the 

approach described previously for the 

SC–CO2. 

TABLE IV.16—ANNUAL SC–CH4 AND SC–N2O VALUES FROM 2021 INTERAGENCY UPDATE, 2020–2050 

[2020$ per metric ton] 

Year 

SC–CH4 SC–N2O 

Discount rate and statistic Discount rate and statistic 

5% 

Average 

3% 

Average 

2.5% 

Average 

3% 

95th 

percentile 

5% 

Average 

3% 

Average 

2.5% 

Average 

3% 

95th 

percentile 

2020 ......................................................... 670 1,500 2,000 3,900 5,800 18,000 27,000 48,000 

2025 ......................................................... 800 1,700 2,200 4,500 6,800 21,000 30,000 54,000 

2030 ......................................................... 940 2,000 2,500 5,200 7,800 23,000 33,000 60,000 

2035 ......................................................... 1,100 2,200 2,800 6,000 9,000 25,000 36,000 67,000 

2040 ......................................................... 1,300 2,500 3,100 6,700 10,000 28,000 39,000 74,000 

2045 ......................................................... 1,500 2,800 3,500 7,500 12,000 30,000 42,000 81,000 

2050 ......................................................... 1,700 3,100 3,800 8,200 13,000 33,000 45,000 88,000 

DOE multiplied the CH4 and N2O 

emissions reduction estimated for each 

year by the SC–CH4 and SC–N2O 

estimates for that year in each of the 

cases. DOE adjusted the values to 2022$ 

using the implicit price deflator for 

gross domestic product (GDP) from the 

Bureau of Economic Analysis. To 

calculate a present value of the stream 

of monetary values, DOE discounted the 

values in each of the cases using the 

specific discount rate that had been 

used to obtain the SC–CH4 and SC–N2O 

estimates in each case. See chapter 13 

of the final rule TSD for the annual 

emissions reduction, and see also 

appendix 14A of the final rule TSD for 

the annual SC–CH4 and SC–N2O values. 

2. Monetization of Other Emissions 

Impacts 

For the final rule, DOE estimated the 

monetized value of NOX and SO2

emissions reductions from electricity 

generation using benefit-per-ton 

estimates for that sector from the EPA’s 

Benefits Mapping and Analysis 

Program.272 DOE used EPA’s values for 

PM2.5-related benefits associated with 

NOX and SO2 and for ozone-related 

benefits associated with NOX for 2025, 

2030, and 2040, calculated with 

discount rates of 3 percent and 7 

percent. DOE used linear interpolation 

to define values for the years not given 

in the 2025 to 2040 range; for years 

beyond 2040, the values are held 

constant. DOE combined the EPA 

regional benefit-per-ton estimates with 

regional information on electricity 

consumption and emissions from 

AEO2023 to define weighted-average 

national values for NOX and SO2 (see 

appendix 14B of the final rule TSD). 

DOE also estimated the monetized 

value of NOX and SO2 emissions 

reductions from site use of natural gas 

in NWGFs and MHGFs using benefitper-ton estimates from the EPA’s 

Benefits Mapping and Analysis 

Program. Although none of the sectors 

covered by EPA refers specifically to 

residential and commercial buildings, 

the sector called ‘‘area sources’’ would 

be a reasonable proxy for residential and 

commercial buildings.273 The EPA 

document provides high and low 

estimates for 2025 and 2030 at 3- and 7- 

percent discount rates.274 DOE used the 

same linear interpolation and 

extrapolation as it did with the values 

for electricity generation. 

DOE multiplied the site emissions 

reduction (in tons) in each year by the 

associated $/ton values, and then 

discounted each series using discount 

rates of 3 percent and 7 percent as 

appropriate. 

GHHI stated that increasing furnace 

efficiency will have direct health 

benefits for American families, 

particularly in low-income and 

vulnerable communities. GHHI 

explained that fossil fuel burning 

furnaces release pollutants that can 

affect indoor air quality, including 

nitrogen oxides, carbon monoxide, 

PM2.5, and formaldehyde, all of which 

are associated with asthma, 

cardiovascular disease, birth defects, 

and even death. (GHHI, No. 371 at p. 1) 

In addition, GHHI stated that hazardous 

air conditions in dense cities have led 

to disproportionately higher rates of 

chronic conditions such as heart disease 

and respiratory disease in low-income 

and Black and Brown communities. (Id.) 

GHHI also commented that older 

unsafe systems can lead to carbon 

monoxide leaks. GHHI stated that 450 

Americans are killed annually from 

these leaks, disproportionately effecting 

Hispanic and black populations. (GHHI, 

Public Meeting Webinar Transcript, No. 

363 at pp. 15–16) GHHI commented that 

low-income homes are twice as likely to 

use a gas stove or oven for heating, 

which results in higher indoor pollution 

and increased rick of fire-related death 

and injury. (Id.) According to GHHI, 

access to more-efficient furnaces may 

help to prevent these hazards, and that 


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increasing furnace standards will 

directly benefit low-income 

communities and people of color. (Id.) 

The Pennsylvania Groups stated that 

inefficient and faulty furnaces expose 

household members to unsafe levels of 

indoor air pollution. These commenters 

further stated that families living in 

homes with polluted air frequently 

experience more hospital visits, with 

causes ranging from cardiovascular 

disease, heart attacks, asthma attacks, 

and premature death, among others. 

Moreover, the Pennsylvania Groups 

stated, that individuals exposed to 

indoor air pollution have increased 

COVID–19 infection incidences, 

hospitalizations, and deaths. (The 

Pennsylvania Groups, No. 396 at p. 3) 

Climate and Health Coalition 

commented that although gas furnaces 

are vented outside, that does not 

prevent back drafting of these pollutants 

back into the home when indoor air 

pressure is reduced due to kitchen 

exhaust hoods or bathroom ventilation 

fans. Additionally, Climate and Health 

Coalition stated that venting pollutants 

outdoors can cause community-wide 

harm, particularly among low-income 

communities and communities of color 

who are already saddled with increased 

levels of ambient air pollution. (Climate 

and Health Coalition, No. 399 at p. 1) 

Climate and Health Coalition stated 

that gas heating appliances account for 

about two-thirds of household gas use 

and related emissions. The commenter 

added that nearly half of U.S. homes are 

heated with gas or propane furnaces. 

Additionally, Climate and Health 

Coalition commented that many homes 

use inefficient furnaces, which cause 

excess methane, carbon dioxide, and 

nitrogen dioxide emissions into the 

indoor and outdoor environment. 

(Climate and Health Coalition, No. 399 

at p. 1) Climate and Health Coalition 

further mentioned that uncombusted 

methane gas, which can leak into 

homes, was found to contain varying 

levels of at least 21 different hazardous 

pollutants that are undetectable by 

smell. Additionally, Climate and Health 

Coalition stated that methane is a potent 

greenhouse gas that drives health harms 

related to climate change. (Climate and 

Health Coalition, No. 399 at p. 2) 

In response, DOE has not 

quantitatively assessed the health 

benefits of reducing in-home exposure 

to particulate matter, nitrogen dioxide, 

and other hazardous air pollutants. DOE 

acknowledges that in-home emissions 

may carry different health risks than the 

risks assumed in the monetized health 

benefits calculations. Such in-home 

emissions may be associated with a 

variety of serious respiratory and 

cardiovascular conditions and other 

health risks. Not all the public health 

and environmental benefits from the 

reduction of greenhouse gases, NOX, 

and SO2 are captured in the values 

reflected in DOE’s analysis, and there 

may be additional unquantified benefits 

from the reductions of those pollutants, 

as well as from the reduction of Hg, 

direct PM, and other co-pollutants. 

However, DOE assumes in its analysis 

that furnaces will be installed by 

licensed professionals and that all 

appropriate safety standards will be 

met, including indoor air pollutant 

exposure. DOE further assumes that a 

properly ventilated furnace will not 

result in any significant in-home 

emissions and, therefore, does not 

estimate any additional health benefits 

from reducing in-home emissions. 

Furnaces are not simple appliances that 

are purchased in stores and installed by 

average consumers. They require 

licensed gas plumbers and experienced 

contractors to properly size and install 

a system, especially in new 

construction. It is highly unlikely that 

an unlicensed individual, with little 

knowledge of gas plumbing, would 

install a furnace. However, DOE does 

account for site emissions that are 

vented outdoors and includes those 

emissions in its analysis. 

GHHI stated that the improved 

furnace efficiency standards would 

reduce use of dangerous heating 

methods. The commenter stated that 

low-income, energy insecure homes are 

twice as likely to use a gas stove or oven 

as a supplemental method to generate 

heat when money is short. Furthermore, 

GHHI stated that these practices often 

lead to levels of indoor pollution that 

are above what is recommended by 

public health guidelines, and 

accordingly, are a main risk factor for 

pediatric asthma. The commenter 

continued that children under age 6 in 

homes that use a gas stove or oven for 

heat are 80 percent more likely to have 

asthma than children in other homes. 

Additionally, GHHI commented that 

families that use a gas stove or oven as 

supplementary heat are also at an 

increased risk of fire-related death and 

injury. (GHHI, No. 371 at p. 2) 

In response, DOE is not aware of any 

data supporting the claim that the 

amended standards would increase the 

use of gas stoves being used to 

supplement heating from a furnace, and 

accordingly, the Department has not 

included any emissions impact of 

supplemental heating in the analysis for 

this rule. 

M. Utility Impact Analysis 

The utility impact analysis estimates 

the changes in installed electrical 

capacity and generation projected to 

result for each considered TSL. The 

analysis is based on published output 

from the NEMS associated with 

AEO2023. NEMS produces the AEO 

Reference case, as well as a number of 

side cases that estimate the economywide impacts of changes to energy 

supply and demand. For the current 

analysis, impacts are quantified by 

comparing the levels of electricity sector 

generation, installed capacity, fuel 

consumption, and emissions in the 

AEO2023 Reference case and various 

side cases. Details of the methodology 

are provided in the appendices to 

chapters 13 and 15 of the final rule TSD. 

The output of this analysis is a set of 

time-dependent coefficients that capture 

the change in electricity generation, 

primary fuel consumption, installed 

capacity, and power sector emissions 

due to a unit reduction in demand for 

a given end use. These coefficients are 

multiplied by the stream of electricity 

savings calculated in the NIA to provide 

estimates of selected utility impacts of 

potential new or amended energy 

conservation standards. 

The utility analysis also estimates the 

impact on gas utilities in terms of 

projected changes in natural gas 

deliveries to consumers for each TSL. 

APGA commented that DOE’s 

procedures state: ‘‘The analysis of utility 

impacts will include estimated marginal 

impacts on electric and gas utility costs 

and revenues.’’ According to APGA, 

DOE contends that ‘‘rate decoupling’’ 

insulates gas utilities’ revenues from 

change resulting from the actions by the 

Department in this proceeding. APGA 

pointed out that rate decoupling is not 

a factor in most States and that few of 

its over 730 members employ rate 

decoupling. Furthermore, APGA argued 

that rate decoupling does not insulate 

retail customers from higher rates, as 

fixed costs are spread across reduced 

volumes due to fuel switching that 

would be caused by the elimination of 

non-condensing furnaces. The 

commenter recommended that DOE 

should conduct better sensitivity 

analyses based on the fuel switching 

that its own analysis shows will occur, 

as well as the fuel switching that will 

occur if the DOE analysis is corrected as 

APGA has suggested. (APGA, No. 387 at 

p. 58) 

AGA similarly asserted that DOE’s 

Process Rule requires the Department’s 

utility impact analysis to ‘‘include 

estimated marginal impacts on electric 

and gas utility costs and revenues.’’ 


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275See U.S. Department of Commerce–Bureau of 

Economic Analysis. Regional Multipliers: A User 

Handbook for the Regional Input-Output Modeling 

System (RIMS II) (1997) U.S. Government Printing 

Office: Washington, DC. (Available at: https://

www.bea.gov/resources/methodologies/RIMSII-userguide) (last accessed August 1, 2023). 

276Livingston, O.V., S.R. Bender, M.J. Scott, and 

R.W. Schultz. ImSET 4.0: Impact of Sector Energy 

Technologies Model Description and User’s Guide 

(2015), Pacific Northwest National Laboratory: 

Richland, WA. PNNL–24563. 

According to AGA, the analysis 

presented in the NOPR is insufficient. 

Consequently, AGA argued that DOE 

should conduct a complete impact 

analysis that quantifies and evaluates 

the marginal impacts to gas utility costs 

and revenues of a reduction in gas 

deliveries due to fuel switching driven 

by the proposed rule. In addition, AGA 

stated that DOE should evaluate 

whether the loss of demand for natural 

gas local distribution companies could 

lead to higher rates on remaining 

consumers in order to cover fixed 

distribution costs. (AGA, No. 405 at pp. 

107–108) 

In response, DOE acknowledges that 

rate decoupling does not apply to all 

utilities, but for those utilities that are 

subject to rate decoupling, changes in 

natural gas deliveries will not impact 

revenues. Analysis of the impact of 

standards on rates is very difficult, 

given the diversity of regulatory 

structures in the U.S. and the many 

factors that go into setting utility rates. 

DOE notes that the Process Rule is nonbinding and is intended to guide DOE 

in the consideration and promulgation 

of new or revised appliance energy 

conservation standards and test 

procedures. The analyses it describes 

are not necessarily those that are needed 

to meet EPCA’s requirements for 

evaluating the economic justification of 

potential new or amended standards. 

(42 U.S.C. 6295(o)(2)(B)(i)(I)–(VII)) 

Nevertheless, DOE includes an estimate 

of impacts on gas utility deliveries as 

part of the utility impact analysis in 

chapter 15 of the final rule TSD, in 

addition to estimates of impacts to 

installed capacity and generation for 

electric utilities. DOE notes that the 

impacts on gas deliveries does include 

the effects of product switching. 

N. Employment Impact Analysis 

DOE considers employment impacts 

in the domestic economy as one factor 

in selecting a standard. Employment 

impacts from new or amended energy 

conservation standards include both 

direct and indirect impacts. Direct 

employment impacts are any changes in 

the number of employees of 

manufacturers of the products subject to 

standards. The MIA addresses those 

impacts. Indirect employment impacts 

are changes in national employment 

that occur due to the shift in 

expenditures and capital investment 

caused by the purchase and operation of 

more-efficient appliances. Indirect 

employment impacts from standards 

consist of the net jobs created or 

eliminated in the national economy, 

other than in the manufacturing sector 

being regulated, caused by: (1) reduced 

spending by consumers on energy, (2) 

reduced spending on new energy supply 

by the utility industry, (3) increased 

consumer spending on the products to 

which the new standards apply and 

other goods and services, and (4) the 

effects of those three factors throughout 

the economy. 

One method for assessing the possible 

effects on the demand for labor of such 

shifts in economic activity is to compare 

sector employment statistics developed 

by the Labor Department’s Bureau of 

Labor Statistics (BLS). BLS regularly 

publishes its estimates of the number of 

jobs per million dollars of economic 

activity in different sectors of the 

economy, as well as the jobs created 

elsewhere in the economy by this same 

economic activity. Data from BLS 

indicate that expenditures in the utility 

sector generally create fewer jobs (both 

directly and indirectly) than 

expenditures in other sectors of the 

economy.275 There are many reasons for 

these differences, including wage 

differences and the fact that the utility 

sector is more capital-intensive and less 

labor-intensive than other sectors. 

Energy conservation standards have the 

effect of reducing consumer utility bills. 

Because reduced consumer 

expenditures for energy likely lead to 

increased expenditures in other sectors 

of the economy, the general effect of 

efficiency standards is to shift economic 

activity from a less labor-intensive 

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

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

and service sectors). Thus, the BLS data 

suggest that net national employment 

may increase due to shifts in economic 

activity resulting from energy 

conservation standards. 

DOE estimated indirect national 

employment impacts for the standard 

levels considered in this final rule using 

an input/output model of the U.S. 

economy called Impact of Sector Energy 

Technologies version 4 (ImSET).276

ImSET is a special-purpose version of 

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

designed to estimate the national 

employment and income effects of 

energy-saving technologies. The ImSET 

software includes a computer- based I– 

O model having structural coefficients 

that characterize economic flows among 

187 sectors most relevant to industrial, 

commercial, and residential building 

energy use. 

DOE notes that ImSET is not a general 

equilibrium forecasting model, and that 

there are uncertainties involved in 

projecting employment impacts, 

especially changes in the later years of 

the analysis. Because ImSET does not 

incorporate price changes, the 

employment effects predicted by ImSET 

may over-estimate actual job impacts 

over the long run for this rule. 

Therefore, DOE used ImSET only to 

generate results for near-term 

timeframes (2029–2034), where these 

uncertainties are reduced. For more 

details on the employment impact 

analysis, see chapter 16 of the final rule 

TSD. 

V. Analytical Results and Conclusions 

The following section addresses the 

results from DOE’s analyses with 

respect to the considered energy 

conservation standards for NWGFs and 

MHGFs. It addresses the TSLs examined 

by DOE, the projected impacts of each 

of these levels if adopted as energy 

conservation standards for NWGFs and 

MHGFs, and the standards levels that 

DOE is adopting in this final rule. 

Additional details regarding DOE’s 

analyses are contained in the TSD 

supporting this final rule. 

A. Trial Standard Levels 

In general, DOE typically evaluates 

potential amended standards for 

products and equipment at the product 

class level and by grouping select 

individual efficiency levels for each 

class into TSLs. Use of TSLs allows DOE 

to identify and consider industry-level 

manufacturer cost interactions between 

the product classes, to the extent that 

there are such interactions, and 

national-level market cross-elasticity 

from consumer purchasing decisions 

that may change when different 

standard levels are set. For the subject 

consumer furnaces, it is particularly 

important to look at the aggregated 

impacts as characterized by TSLs due to 

the changes in consumer purchasing 

decisions as a result of the increased 

product and installation costs that 

impact the shipments model. The 

changes to the shipments model will 

drive differential national impacts both 

on the consumer and manufacturer side 

that are more realistic of how the market 

may change in response to amended 

DOE standards. 

For this final rule, DOE analyzed the 

consumer impacts of four efficiency 

levels for NWGFs, four efficiency levels 

for MHGFs, and the national impacts of 


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nine TSLs for NWGFs and MHGFs. 

Table V.1 presents the TSLs and the 

corresponding efficiency levels that 

DOE has identified for potential 

amended energy conservation standards 

for NWGFs and MHGFs. It is noted that 

because the impact of a potential 

standard on different consumers can 

depend on the input capacity of the 

NWGF or MHGF, DOE considered 

certain TSLs (six cases) with an input 

capacity threshold, below which the 

amended standard would remain at the 

current efficiency level of 80-percent 

AFUE. Because the impact of a potential 

standard on different consumers can 

depend on the region of the country, for 

one of these six cases, DOE considered 

a regional TSL such that the amended 

standard would remain at an efficiency 

level of 80-percent AFUE outside the 

Northern region. For other TSLs (three 

cases), DOE examined a national 

standard level for NWGFs and MHGFs 

not differentiated by input capacity. 

DOE presents the results for the TSLs in 

this document, while the results for all 

efficiency levels that DOE analyzed are 

in the final rule TSD. 

The following provides a brief 

overview of the TSLs considered. Each 

TSL consists of similar efficiency levels 

for both NWGFs and MHGFs. TSL 9 

represents the maximum 

technologically feasible (‘‘max-tech’’) 

energy efficiency for both NWGFs (98- 

percent AFUE) and MHGFs (96-percent 

AFUE) and represents the maximum 

energy savings possible among the 

specific efficiency levels analyzed by 

DOE (see section IV.C.1 of this final 

rule). TSL 8 consists of a national 

standard at an efficiency level of 95- 

percent AFUE for both NWGFs and 

MHGFs, which reflects a high degree of 

energy savings second only to the maxtech efficiency levels. TSL 7 consists of 

an efficiency level at 80-percent AFUE 

for small NWGFs and MHGFs at or 

below an input capacity of 55 kBtu/h 

and an efficiency level at 95-percent 

AFUE for large NWGFs and MHGFs. 

The threshold of 55 kBtu/h generally 

separates the market into larger capacity 

furnaces typically installed in larger 

single-family detached homes versus 

smaller capacity furnaces more likely to 

be installed in multi-family buildings 

and other households with higher 

potential installation costs. TSL 6 

consists of the next highest efficiency 

levels, which would set a national 

standard at 92-percent AFUE for both 

NWGFs and MHGFs, regardless of input 

capacity. Similar to TSL 7, TSL 5 is 

constructed with an input capacity 

threshold. TSL 5 consists of an 

efficiency level at 80-percent AFUE for 

small NWGFs and MHGFs at or below 

an input capacity of 55 kBtu/h and an 

efficiency level at 92-percent AFUE for 

large NWGFs and MHGFs. TSL 4 

consists of the efficiency levels that 

represent 95-percent AFUE for the 

Northern region for both NWGFs and 

MHGFs, but retains the baseline 

efficiency level (80-percent AFUE) for 

the rest of country. TSLs 3, 2, and 1 are 

similar to TSL 5, except with an 

increasingly higher input capacity 

threshold (and a correspondingly 

smaller fraction of the market subject to 

more-stringent standards). TSL 3 

consists of the efficiency level that 

represents 80-percent AFUE for small 

NWGFs and MHGFs at or below an 

input capacity of 60 kBtu/h and the 

efficiency level that represents 92- 

percent AFUE for large NWGFs and 

MHGFs. TSL 2 consists of the efficiency 

level that represents 80-percent AFUE 

for small NWGFs and MHGFs at or 

below an input capacity of 70 kBtu/h 

and the efficiency level that represents 

92-percent AFUE for large NWGFs and 

MHGFs. TSL 1 consists of the efficiency 

level that represents 80-percent AFUE 

for small NWGFs and MHGFs at or 

below an input capacity of 80 kBtu/h 

and the efficiency level that represents 

92-percent AFUE for large NWGFs and 

MHGFs. 

TABLE V.1—TRIAL STANDARD LEVELS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS FURNACES

TSL 

AFUE (percent) 

Non-weatherized gas furnace Mobile home gas furnace 

1 ............................................................................................................... 92% (>80 kBtu/h) ..........................

80% (≤80 kBtu/h) ..........................

92% (>80 kBtu/h). 

80% (≤80 kBtu/h). 

2 ............................................................................................................... 92% (>70 kBtu/h) ..........................

80% (≤70 kBtu/h) ..........................

92% (>70 kBtu/h). 

80% (≤70 kBtu/h). 

3 ............................................................................................................... 92% (>60 kBtu/h) ..........................

80% (≤60 kBtu/h) ..........................

92% (>60 kBtu/h). 

80% (≤60 kBtu/h). 

4 ............................................................................................................... 95% (North) ...................................

80% (Rest of Country) ..................

95% (North). 

80% (Rest of Country). 

5 ............................................................................................................... 92% (>55 kBtu/h) ..........................

80% (≤55 kBtu/h) ..........................

92% (>55 kBtu/h). 

80% (≤55 kBtu/h). 

6 ............................................................................................................... 92% ............................................... 92%. 

7 ............................................................................................................... 95% (>55 kBtu/h) ..........................

80% (≤55 kBtu/h) ..........................

95% (>55 kBtu/h). 

80% (≤55 kBtu/h). 

8 ............................................................................................................... 95% ............................................... 95%. 

9 ............................................................................................................... 98% ............................................... 96%. 

B. Economic Justification and Energy 

Savings 

1. Economic Impacts on Individual 

Consumers 

DOE analyzed the economic impacts 

on NWGF and MHGF consumers by 

looking at the effects that potential new 

and amended standards at each TSL 

would have on the LCC and PBP. DOE 

also examined the impacts of potential 

standards on selected consumer 

subgroups. These analyses are discussed 

in the following sections. 

a. Life-Cycle Cost and Payback Period 

In general, higher-efficiency products 

affect consumers in two ways: (1) 

purchase price increases and (2) annual 

operating costs decrease. In addition, for 

NWGFs, some consumers may choose to 

switch to an alternative heating system 

rather than purchase and install a 

NWGF if they judge the economics to be 

favorable. DOE estimated the extent of 

switching at each TSL using the 

consumer choice model discussed in 

section IV.F.10 of this document. 

Inputs used for calculating the LCC 

and PBP include total costs (i.e., product 

price plus installation costs), and 

operating costs (i.e., annual energy use, 

energy prices, energy price trends, 

repair costs, and maintenance costs). 

The LCC calculation also uses product 

lifetime and a discount rate. In cases 


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where consumers are predicted to 

switch, the inputs include the total 

installed costs, operating costs, and 

product lifetime for the chosen heating 

system. Chapter 8 of the final rule TSD 

provides detailed information on the 

LCC and PBP analyses. 

For NWGFs, the LCC and PBP results 

at each efficiency level include 

consumers that would purchase and 

install a NWGF at that level, and also 

consumers that would choose to switch 

to an alternative heating product rather 

than purchase and install a NWGF at 

that level. The impacts for consumers 

that switch depend on the product that 

they choose (heat pump or electric 

furnace) and the NWGF that they would 

purchase in the no-new-standards case. 

The extent of projected product/fuel 

switching (in 2029) is shown in Tables 

V.2 and V.3 for each TSL for NWGFs 

and MHGFs, respectively. The degree of 

switching increases at higher-efficiency 

TSLs where the installed cost of a 

NWGF is very high for some consumers, 

making the alternative option 

competitive. As discussed in section 

IV.F.10 of this document, DOE also 

conducted sensitivity analyses using noswitching, high, and low switching 

estimates. See appendix 8J of the final 

rule TSD for more details. For the 

adopted standards (TSL 8), the total 

switching and repair vs. replace is 6.8 

percent for NWGFs and 4.8 percent for 

MHGFs. 

TABLE V.2—RESULTS OF FUEL-SWITCHING ANALYSIS FOR NON-WEATHERIZED GAS FURNACES IN 2029 

Consumer option 

Trial standard level 

1 2 3 4 5 6 7 8 9 

% of consumers 

Purchase NWGF at Standard Level ................................ 99.4 99.2 98.5 98.4 98.1 93.2 98.1 93.2 89.2 

Switch to Heat Pump * ..................................................... 0.1 0.2 0.7 0.8 1.0 4.1 1.0 4.2 7.3 

Switch to Electric Furnace * ............................................. 0.1 0.1 0.2 0.1 0.2 0.8 0.2 0.8 1.2 

Repair vs. Replacing ........................................................ 0.4 0.5 0.6 0.8 0.7 1.9 0.7 1.8 2.3 

Total .......................................................................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 

* Includes switching from a gas water heater to an electric water heater. 

Note: Components may not sum due to rounding. 

TABLE V.3—RESULTS OF FUEL-SWITCHING ANALYSIS FOR MOBILE HOME GAS FURNACES IN 2029 

Consumer option 

Trial standard level 

1 2 3 4 5 6 7 8 9 

% of consumers 

Purchase MHGF at Standard Level ................................. 100.0 99.9 99.7 99.0 99.6 95.4 99.6 95.2 90.2 

Switch to Heat Pump ....................................................... 0.0 0.0 0.1 0.6 0.2 2.4 0.2 2.6 2.3 

Switch to Electric Furnace ............................................... 0.0 0.0 0.1 0.1 0.1 1.4 0.1 1.5 1.5 

Repair vs. Replacing ........................................................ 0.0 0.0 0.1 0.4 0.1 0.7 0.1 0.7 6.0 

Total .......................................................................... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 

Note: Components may not sum due to rounding. 

Tables V.4 through V.7 show the LCC 

and PBP results for the TSLs considered 

for each product class. In the first of 

each pair of tables, the simple payback 

is measured relative to the baseline 

product. In the second table, the 

impacts are measured relative to the 

efficiency distribution in the in the nonew-standards case in the compliance 

year (see section IV.F.8 of this 

document). The LCC and PBP results for 

NWGFs include both residential and 

commercial users. The LCC and PBP 

results are shipment-weighted and 

averaged over all capacities and regions. 

Results for all efficiency levels are 

reported in chapter 8 of the final rule 

TSD. LCC Results for the alternative 

product switching scenarios are 

reported in appendix 8J of the final rule 

TSD. 

Because some consumers purchase 

products with higher efficiency in the 

no-new-standards case, the average 

savings are less than the difference 

between the average LCC of the baseline 

product and the average LCC at each 

TSL. The savings refer only to 

consumers who are affected by a 

standard at a given TSL. Those who 

already purchase a product with 

efficiency at or above a given TSL are 

not affected. Consumers for whom the 

LCC increases at a given TSL experience 

a net cost. 

TABLE V.4—AVERAGE LCC AND PBP RESULTS FOR NON-WEATHERIZED GAS FURNACES

TSL AFUE 

(%) 

Average costs 

(2022$) Simple 

payback 

(years) 

Average 

lifetime 

Installed (years) 

cost 

First year’s 

operating 

cost 

Lifetime 

operating 

cost 

LCC 

1 .................. 92/80 * ................................................................ 3,733 578 9,300 13,033 6.4 21.5 

2 .................. 92/80 * ................................................................ 3,786 571 9,173 12,959 6.6 21.5 

3 .................. 92/80 * ................................................................ 3,810 568 9,114 12,924 6.7 21.5 


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TABLE V.4—AVERAGE LCC AND PBP RESULTS FOR NON-WEATHERIZED GAS FURNACES—Continued 

TSL AFUE 

(%) 

Average costs 

(2022$) Simple 

payback 

(years) 

Average 

lifetime 

Installed (years) 

cost 

First year’s 

operating 

cost 

Lifetime 

operating 

cost 

LCC 

4 .................. 95/80 ** ............................................................... 3,832 566 9,075 12,907 7.0 21.5 

5 .................. 92/80 * ................................................................ 3,835 566 9,077 12,912 7.0 21.5 

6 .................. 92 † ..................................................................... 3,947 563 8,958 12,905 9.4 21.5 

7 .................. 95/80 * ................................................................ 3,845 556 8,924 12,769 5.8 21.5 

8 .................. 95 † ..................................................................... 3,962 552 8,788 12,750 7.6 21.5 

9 .................. 98 (Max-Tech) † ................................................. 4,156 545 8,620 12,776 10.1 21.5 

* The first number refers to the standard for large NWGFs; the second refers to the standard for small NWGFs. The input capacity threshold 

definitions for small NWGFs are as follows: 

TSL 1: 80 kBtu/h 

TSL 2: 70 kBtu/h 

TSL 3: 60 kBtu/h 

TSL 5: 55 kBtu/h 

TSL 7: 55 kBtu/h. 

** The first number refers to the efficiency level for the North; the second number refers to the efficiency level for the rest of country. 

† Refers to national standards. 

Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative 

to the baseline product. 

TABLE V.5—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR NON-WEATHERIZED GAS

FURNACES

TSL AFUE 

(%) 

Life-cycle cost savings 

Average LCC savings 

(2022$) 

Percentage of consumers that 

experience net cost 

(%) 

1 .................. 92/80 * ............................................................................................ 577 3.2 

2 .................. 92/80 * ............................................................................................ 571 4.7 

3 .................. 92/80 * ............................................................................................ 580 5.8 

4 .................. 95/80 ** ........................................................................................... 390 5.6 

5 .................. 92/80 * ............................................................................................ 551 6.8 

6 .................. 92 † ................................................................................................. 320 19.2

7 .................. 95/80 * ............................................................................................ 479 6.8 

8 .................. 95 † ................................................................................................. 350 18.7

9 .................. 98 (Max-Tech) † ............................................................................. 169 62.3 

* The first number refers to the standard for large NWGFs; the second refers to the standard for small NWGFs. The input capacity threshold 

definitions for small NWGFs are as follows: 

TSL 1: 80 kBtu/h 

TSL 2: 70 kBtu/h 

TSL 3: 60 kBtu/h 

TSL 5: 55 kBtu/h 

TSL 7: 55 kBtu/h 

** The first number refers to the efficiency level for the North; the second number refers to the efficiency level for the rest of country. 

† Refers to national standards. 

Note: The savings represent the average LCC for affected consumers. 

TABLE V.6—AVERAGE LCC AND PBP RESULTS FOR MOBILE HOME GAS FURNACES

TSL AFUE 

(%) 

Average costs 

(2022$) Simple 

payback 

(years) 

Average 

lifetime 

Installed (years) 

cost 

First year’s 

operating 

cost 

Lifetime 

operating 

cost 

LCC 

1 .................. 92/80 * ................................................................ 2,429 545 9,126 11,556 2.2 21.5 

2 .................. 92/80 * ................................................................ 2,484 525 8,804 11,288 2.5 21.5 

3 .................. 92/80 * ................................................................ 2,499 518 8,709 11,209 2.5 21.5 

4 .................. 95/80 ** ............................................................... 2,510 513 8,577 11,087 2.4 21.5 

5 .................. 92/80 * ................................................................ 2,514 515 8,647 11,161 2.6 21.5 

6 .................. 92 † ..................................................................... 2,564 511 8,547 11,111 3.6 21.5 

7 .................. 95/80 * ................................................................ 2,528 505 8,492 11,020 2.4 21.5 

8 .................. 95 † ..................................................................... 2,583 500 8,374 10,956 3.2 21.5 

9 .................. 96 (Max-Tech) † ................................................. 2,592 517 8,312 10,904 4.8 21.5 

* The first number refers to the standard for large MHGFs; the second refers to the standard for small MHGFs. The input capacity threshold 

definitions for small MHGFs are as follows: 

TSL 1: 80 kBtu/h 


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87624 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

TSL 2: 70 kBtu/h 

TSL 3: 60 kBtu/h 

TSL 5: 55 kBtu/h 

TSL 7: 55 kBtu/h. 

** The first number refers to the efficiency level for the North; the second number refers to the efficiency level for the rest of country. 

† Refers to national standards. 

Note: The results for each TSL are calculated assuming that all consumers use products at that efficiency level. The PBP is measured relative 

to the baseline product. 

TABLE V.7—AVERAGE LCC SAVINGS RELATIVE TO THE NO-NEW-STANDARDS CASE FOR MOBILE HOME GAS FURNACES

TSL AFUE 

(%) 

Life-cycle cost savings 

Average LCC savings 

(2022$) 

Percentage of consumers that 

experience net cost 

(%) 

1 .................. 92/80 * ............................................................................................ 846 0.6 

2 .................. 92/80 * ............................................................................................ 805 2.5 

3 .................. 92/80 * ............................................................................................ 736 3.7 

4 .................. 95/80 ** ........................................................................................... 908 3.9 

5 .................. 92/80 * ............................................................................................ 675 5.0 

6 .................. 92 † ................................................................................................. 532 16.2

7 .................. 95/80 * ............................................................................................ 760 5.0 

8 .................. 95 † ................................................................................................. 616 15.3

9 .................. 96 (Max-Tech) † ............................................................................. 529 18.6 

* The first number refers to the standard for large MHGFs; the second refers to the standard for small MHGFs. The input capacity threshold 

definitions for small MHGFs are as follows: 

TSL 1: 80 kBtu/h 

TSL 2: 70 kBtu/h 

TSL 3: 60 kBtu/h 

TSL 5: 55 kBtu/h 

TSL 7: 55 kBtu/h 

** The first number refers to the efficiency level for the North; the second number refers to the efficiency level for the rest of country. 

† Refers to national standards. 

Note: The savings represent the average LCC for affected consumers. 

b. Consumer Subgroup Analysis 

In the consumer subgroup analysis, 

DOE estimated the impact of the 

considered TSLs on low-income 

households, senior-only households, 

and small businesses (for NWGF only). 

Tables V.8 and V.9 compare the average 

LCC savings and PBP at each efficiency 

level for the consumer subgroups, along 

with the average LCC savings for the 

entire consumer sample. Because the 

small NWGF and MHGF efficiency 

levels at TSLs 1, 2, 3, 5, and 7 and the 

rest of country efficiency level at TSL 4 

are at the baseline (i.e., the current 

standard), these tables only include 

results for large NWGFs and MHGFs or 

the Northern region for these TSLs. The 

percentage of low-income NWGF and 

MHGF consumers experiencing a net 

cost is smaller than the full LCC sample 

in all cases, largely due to the high 

proportion of renter households. The 

percentage of senior-only NWGF and 

MHGF households experiencing a net 

cost is either very similar to or smaller 

than the full LCC sample. Chapter 11 of 

the final rule TSD presents the complete 

LCC and PBP results for the subgroups. 

TABLE V.8—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND ALL HOUSEHOLDS FOR NONWEATHERIZED GAS FURNACES

TSL 

Average LCC savings 

(2022$) 

Simple payback period 

(years) 

% of consumers experiencing net cost 

(%) 

Lowincome Senioronly Small 

business All Lowincome 

Senioronly Small 

business All LowIncome 

Senioronly Small 

business All 

1 * ..................... 332 354 767 577 2.9 6.2 1.0 6.4 2.0 2.6 3.5 3.2 

2 * ..................... 384 394 457 571 2.6 5.8 2.2 6.6 2.6 3.6 8.2 4.7 

3 * ..................... 383 402 689 580 2.4 5.8 2.3 6.7 3.4 4.3 8.9 5.8 

4 ** .................... 277 160 298 390 1.7 6.2 1.5 7.0 4.0 4.7 2.5 5.6 

5 * ..................... 392 387 630 551 2.5 6.0 2.2 7.0 4.8 5.7 10.4 6.8 

6 † .................... 207 321 402 320 3.0 7.1 2.4 9.4 15.4 16.5 16.1 19.2 

7 * ..................... 372 250 626 479 2.0 5.0 1.9 5.8 5.7 5.5 8.7 6.8 

8 † .................... 254 254 460 350 2.5 6.0 2.1 7.6 15.9 15.5 13.7 18.7 

9 † .................... 153 412 269 169 3.4 7.6 3.1 10.1 39.7 54.0 58.0 62.3 

* Refers to TSLs with separate standards for small and large NWGFs. The input capacity threshold definitions for small NWGFs are as follows: 

TSL 1: 80 kBtu/h 

TSL 2: 70 kBtu/h 

TSL 3: 60 kBtu/h 

TSL 5: 55 kBtu/h 

TSL 7: 55 kBtu/h 

** Regional standards. 

† Refers to national standards. 

Note: The savings represent the average LCC for affected consumers. The PBP is measured relative to the baseline product. 


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Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 87625 

TABLE V.9—COMPARISON OF LCC SAVINGS AND PBP FOR CONSUMER SUBGROUPS AND ALL HOUSEHOLDS FOR MOBILE

HOME GAS FURNACES

TSL 

Average LCC savings 

(2022$) 

Simple payback period 

(years) 

% of consumers experiencing 

net cost 

(%) 

Lowincome Senioronly All Lowincome Senioronly All Lowincome 

Senioronly All 

1 * ................................................ 1,175 697 846 1.2 2.0 2.2 0.1 0.4 0.6 

2 * ................................................ 1055 865 805 1.4 2.0 2.5 1.0 3.2 2.5 

3 * ................................................ 888 820 736 1.4 2.0 2.5 2.2 3.9 3.7 

4 ** ............................................... 931 764 908 1.0 1.1 2.4 3.6 3.4 3.9 

5 * ................................................ 699 702 675 1.5 2.2 2.6 4.6 6.7 5.0 

6 † ............................................... 472 546 532 2.0 3.0 3.6 15.9 19.1 16.2 

7 * ................................................ 775 648 760 1.3 2.1 2.4 4.7 6.9 5.0 

8 † ............................................... 552 537 616 1.8 2.7 3.2 15.3 19.2 15.3 

9 † ............................................... 476 1,493 529 2.7 3.7 4.8 18.0 21.7 18.6 

* Refers to TSLs with separate standards for small and large MHGFs. The input capacity threshold definitions for small MHGFs are as follows: 

TSL 1: 80 kBtu/h 

TSL 2: 70 kBtu/h 

TSL 3: 60 kBtu/h 

TSL 5: 55 kBtu/h 

TSL 7: 55 kBtu/h 

** Regional standards. 

† Refers to national standards. 

Note: The savings represent the average LCC for affected consumers. The PBP is measured relative to the baseline product. 

c. Rebuttable Presumption Payback 

As discussed in section III.F.2 of this 

document, EPCA establishes a 

rebuttable presumption that an energy 

conservation standard is economically 

justified if the increased purchase cost 

for a product that meets the standard is 

less than three times the value of the 

first-year energy savings resulting from 

the standard. In calculating a rebuttable 

presumption payback period for each of 

the considered TSLs, DOE used discrete 

values, and, as required by EPCA, based 

the energy use calculation on the DOE 

test procedures for residential furnaces 

and boilers. In contrast, the PBPs 

presented in section V.B.1.a of this 

document were calculated using 

distributions that reflect the range of 

energy use in the field. 

Table V.10 present the rebuttablepresumption payback periods for the 

considered TSLs for NWGFs and 

MHGFs. The payback periods for most 

NWGF and MHGF TSLs do not meet the 

rebuttable-presumption criterion. While 

DOE examined the rebuttablepresumption criterion, it determined 

whether the standard levels considered 

for this rule are economically justified 

through a more detailed analysis of the 

economic impacts of those levels, 

pursuant to 42 U.S.C. 6295(o)(2)(B)(i), 

that considers the full range of impacts 

to the consumer, manufacturer, Nation, 

and environment. The results of that 

analysis serve as the basis for DOE to 

definitively evaluate the economic 

justification for a potential standard 

level, thereby supporting or rebutting 

the results of any preliminary 

determination of economic justification. 

TABLE V.10—REBUTTABLE-PRESUMPTION PAYBACK PERIODS (YEARS) FOR NON-WEATHERIZED GAS FURNACE AND

MOBILE HOME GAS FURNACES

TSL Non-weatherized 

gas furnaces 

Mobile home 

gas furnaces 

1 * ................................................................................................................................................................. 2.64 1.52 

2 * ................................................................................................................................................................. 2.86 1.62 

3 * ................................................................................................................................................................. 2.94 1.68 

4 ** ................................................................................................................................................................ 1.03 0.54 

5 * ................................................................................................................................................................. 3.06 1.69 

6 † ................................................................................................................................................................ 3.20 1.80 

7 * ................................................................................................................................................................. 2.92 1.56 

8 † ................................................................................................................................................................ 3.05 1.63 

9 † ................................................................................................................................................................ 3.67 1.67 

* Refers to TSLs with separate standards for small and large NWGFs and MHGFs. The input capacity threshold definitions for small NWGFs 

and MHGFs are as follows: 

TSL 1: 80 kBtu/h 

TSL 2: 70 kBtu/h 

TSL 3: 60 kBtu/h 

TSL 5: 55 kBtu/h 

TSL 7: 55 kBtu/h 

** Regional standards. 

† Refers to national standards. 


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87626 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

277The gross margin percentage values 

correspond to manufacturer markups of 1.34 for 

NWGFs and 1.27 for MHGFs. 

2. Economic Impacts on Manufacturers 

DOE performed an MIA to estimate 

the impact of amended energy 

conservation standards on 

manufacturers of NWGFs and MHGFs. 

The next section describes the expected 

impacts on manufacturers at each 

considered TSL. Chapter 12 of the final 

rule TSD explains the analysis in further 

detail. 

a. Industry Cash-Flow Analysis Results 

In this section, DOE provides GRIM 

results from the analysis, which 

examines changes in the industry that 

could result from a standard. Table V.11 

presents the financial impacts of 

analyzed standards on NWGF and 

MHGF manufacturers represented by 

changes in INPV and free cash flow in 

the year before the standard would take 

effect, as well by the conversion costs 

that DOE estimates NWGF and MHGF 

manufacturers would incur at each TSL. 

To evaluate the range of cash-flow 

impacts on the NWGF and MHGF 

industry, DOE modeled two 

manufacturer markup scenarios that 

correspond to the range of anticipated 

market responses to amended standards. 

DOE modeled a preservation of gross 

margin percentage markup scenario and 

a tiered markup scenario. Each scenario 

results in a unique set of cash flows and 

corresponding industry values at each 

TSL. 

In the following discussion, the INPV 

results refer to the difference in INPV 

between the no-new-standards case and 

the standards cases, calculated by 

summing discounted cash flows from 

the reference year (2023) through the 

end of the analysis period (2058). 

Changes in INPV reflect the potential 

impacts on the value of the industry 

over the course of the analysis period as 

a result of implementing a particular 

TSL. The results also discuss the 

difference in cash flows between the nonew-standards case and the standards 

cases in the year before the compliance 

date for analyzed standards (2028). This 

difference in cash flow represents the 

size of the required conversion costs 

relative to the cash flow generated by 

the NWGF and MHGF industry in the 

absence of amended energy 

conservation standards. 

To assess the upper (less severe) 

bound of the range of potential impacts 

on NWGF and MHGF manufacturers, 

DOE modeled a preservation of gross 

margin percentage scenario. This 

scenario assumes industry would be 

able to maintain its average no-newstandards case gross margin percentage 

in the standard case, even as MPCs 

increase and companies make upfront 

investments to bring products into 

compliance with amended standards. 

DOE assumed gross margin percentages 

of 25.3 percent for NWGFs and 21.3 

percent for MHGFs.277 Manufacturers 

noted in interviews that it is optimistic 

to assume that, as their production costs 

increase in response to an amended 

energy conservation standard, they will 

be able to maintain the same gross 

margin percentage. DOE has determined 

this scenario to be an upper bound to 

industry profitability under an energy 

conservation standard. 

To assess the lower (more severe) 

bound of the range of potential impacts 

of AFUE standards on NWGF and 

MHGF manufacturers, DOE modeled a 

tiered scenario. DOE implemented the 

tiered scenario because multiple 

manufacturers stated in interviews that 

they offer multiple tiers of product lines 

that are differentiated, in part, by 

efficiency level. Manufacturers further 

noted that pricing tiers encompass 

additional differentiators, such as the 

combustion system (e.g., single-stage, 

two-stage, and modulating combustion 

systems). To account for this nuance, 

the tiered markup in the GRIM 

incorporates both efficiency and 

combustion system technology into the 

‘‘good, better, best’’ manufacturer 

markup scenario. 

Several manufacturers suggested that 

amended standards would lead to a 

reduction in premium markups and 

would reduce the profitability of higherefficiency products. During the 

manufacturer interviews, manufacturers 

provided information on the range of 

typical efficiency levels in those tiers 

and the change in profitability at each 

level. DOE used this information to 

estimate manufacturer markups for 

NWGFs and MHGFs under a tiered 

pricing strategy in the no-new-standards 

case. In the standards cases, DOE 

modeled the situation in which 

standards result in less product 

differentiation, compression of the 

markup tiers, and an overall reduction 

in profitability. 

Table V.11 presents the financial 

impacts of the analyzed standards on 

NWGF and MHGF manufacturers. These 

impacts are represented by changes in 

INPV summed over the analysis period 

and free cash flow in the year before the 

standard (2028), as well as by the 

conversion costs that DOE estimates 

NWGF and MHGF manufacturers would 

incur at each TSL. The range of results 

reflect the two manufacturer markup 

scenarios that were modeled. 

TABLE V.11—MANUFACTURER IMPACT ANALYSIS RESULTS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME

GAS FURNACES

Units No-new-standards 

case TSL 1 TSL 2 TSL 3 TSL 4 

INPV ............................... 2022$ millions ... 1,371.8 ..................... 1,263.7 to 1,351.3 .... 1,226.3 to 1,345.3 .... 1,207.2 to 1,337.0 .... 1,088.7 to 1,342.5 

Change in INPV .............. 2022$ millions ... ................................... (107.8) to (20.5) ....... (145.3) to (26.5) ....... (164.3) to (34.9) ....... (282.8) to (29.4)

% ....................... ................................... (7.9) to (1.5) ............. (10.6) to (1.9) ........... (12.0) to (2.5) ........... (20.6) to (2.1) 

Free Cash Flow (2028) ... 2022$ millions ... 84.6 .......................... 60.3 .......................... 53.8 .......................... 50.7 .......................... 38.4 

Change in Free Cash 

Flow (2028).

% ....................... ................................... (28.8) ........................ (36.4) ........................ (40.1) ........................ (54.6) 

Product Conversion 

Costs.

2022$ millions ... ................................... 28.8 .......................... 28.8 .......................... 28.8 .......................... 44.8 

Capital Conversion Costs 2022$ millions ... ................................... 31.6 .......................... 46.0 .......................... 52.9 .......................... 67.7 

Total Investment Required.2022$ millions ... ................................... 60.4 .......................... 74.8 .......................... 81.7 .......................... 112.5 

Units TSL 5 TSL 6 TSL 7 TSL 8 TSL 9 

INPV ............................... 2022$ millions ... 1,199.6 to 1,341.4 .... 1,201.0 to 1,337.9 .... 1,014.8 to 1,339.1 .... 1,004.2 to 1,338.0 .... 702.8 to 1,352.7 

Change in INPV .............. 2022$ millions ... (172.0) to (30.4) ....... (170.5) to (34.0) ....... (356.8) to (32.7) ....... (367.3) to (33.8) ....... (668.7) to (19.1) 

% ....................... (12.5) to (2.2) ........... (12.4) to (2.5) ........... (26.0) to (2.4) ........... (26.8) to (2.5) ........... (48.7) to (1.4) 

Free Cash Flow (2028) ... 2022$ millions ... 47.9 .......................... 40.1 .......................... 28.0 .......................... 16.1 .......................... (54.4) 


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TABLE V.11—MANUFACTURER IMPACT ANALYSIS RESULTS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME

GAS FURNACES—Continued 

Units No-new-standards case TSL 1 TSL 2 TSL 3 TSL 4 

Units TSL 5 TSL 6 TSL 7 TSL 8 TSL 9 

Change in Free Cash 

Flow (2028).

% ....................... (43.4) ........................ (52.6) ........................ (66.9) ........................ (81.0) ........................ (164.3) 

Product Conversion 

Costs.

2022$ millions ... 28.8 .......................... 28.8 .......................... 44.8 .......................... 44.8 .......................... 86.8 

Capital Conversion Costs 2022$ millions ... 59.2 .......................... 76.4 .......................... 90.8 .......................... 117.3 ........................ 241.1 

Total Investment Required.2022$ millions ... 87.9 .......................... 105.2 ........................ 135.6 ........................ 162.0 ........................ 328.0 

Note: Parentheses indicate negative values. 

The following cash flow results 

discussion refers to the AFUE efficiency 

levels and capacity threshold cutoffs 

detailed in section V.A of this 

document. Tables V.12 and V.13 present 

the percentage of NWGF and MHGF 

shipments in 2028 that are considered 

to be large or small, based on the input 

capacity threshold for each TSL. See 

section IV.G of this document for 

additional details on the shipments 

analysis. 

TABLE V.12—SHIPMENTS BREAKDOWNS (2028) REPRESENTING LARGE AND SMALL NON-WEATHERIZED GAS FURNACES

AT EACH TRIAL STANDARD LEVEL

Size 

Trial standard level and capacity threshold 

TSL 1 

80 

kBtu/h 

(%) 

TSL 2 

70 

kBtu/h 

(%) 

TSL 3 

60 

kBtu/h 

(%) 

TSL 4 

No 

cutoff 

(%) 

TSL 5 

55 

kBtu/h 

(%) 

TSL 6 

No 

cutoff 

(%) 

TSL 7 

55 

kBtu/h 

(%) 

TSL 8 

No 

cutoff 

(%) 

TSL 9 

No 

cutoff 

(%) 

Large ................................................................................ 45.4 69.5 81.1 100.0 92.5 100.0 92.5 100.0 100.0 

Small ................................................................................ 54.6 30.5 18.9 0.0 7.5 0.0 7.5 0.0 0.0 

TABLE V.13—SHIPMENTS BREAKDOWNS (2028) REPRESENTING LARGE AND SMALL MOBILE HOME GAS FURNACES AT

EACH TRIAL STANDARD LEVEL

Size 

Trial standard level and capacity threshold 

TSL 1 

80 

kBtu/h 

(%) 

TSL 2 

70 

kBtu/h 

(%) 

TSL 3 

60 

kBtu/h 

(%) 

TSL 4 

No 

cutoff 

(%) 

TSL 5 

55 

kBtu/h 

(%) 

TSL 6 

No 

cutoff 

(%) 

TSL 7 

55 

kBtu/h 

(%) 

TSL 8 

No 

cutoff 

(%) 

TSL 9 

No 

cutoff 

(%) 

Large ................................................................................ 18.9 61.1 76.0 100.0 89.4 100.0 89.4 100.0 100.0 

Small ................................................................................ 81.1 38.9 24.0 0.0 10.6 0.0 10.6 0.0 0.0 

TSL 1, TSL 2, TSL 3, and TSL 5 all 

represent national standards set at 92- 

percent AFUE for large furnaces, while 

small furnaces remain at the current 

Federal minimum of 80-percent AFUE. 

However, the capacity threshold used to 

classify small furnaces is different at 

each TSL. Small NWGFs and MHGFs 

are defined as units having an input 

capacity of 80 kBtu/h or less at TSL 1, 

70 kBtu/h or less at TSL 2, 60 kBtu/h 

or less at TSL 3, and 55 kBtu/h or less 

at TSL 5. As the capacity threshold 

decreases from 80 kBtu/h at TSL 1 down 

to 55 kBtu/h at TSL 5, the number of 

furnace shipments classified as large 

gas-fired consumer furnaces—and 

subsequently the portion of shipments 

that must be condensing after the 

standard year—increases. Capital 

conversion costs increase as 

manufacturers add additional capacity 

to their secondary heat exchanger 

production lines. Manufacturers would 

also incur product conversion costs as 

they invest resources to develop costoptimized 92-percent AFUE models that 

are competitive at lower price points. 

Manufacturers are expected to incur 

$28.8 million in product conversion 

costs to develop such models at each of 

TSL 1, TSL 2, TSL 3, and TSL 5. 

In addition to conversion costs, a 

national standard of 92-percent AFUE 

for large NWGFs and MHGFs could lead 

to a slight compression of manufacturer 

markups. In its manufacturer markup 

scenarios, DOE includes a scenario 

which models the industry maintaining 

three tiers of markups, with efficiency 

as one differentiating attribute. In a 

market where the national standard is 

92-percent AFUE, DOE characterizes 

these markups as ‘‘good,’’ ‘‘better,’’ and 

‘‘best,’’ and they correspond to 92- 

percent AFUE, 95-percent AFUE, and 

max-tech levels (98-percent AFUE for 

NWGFs and 96-percent AFUE for 

MHGFs), respectively. 

TSL 1 represents a national standard 

set at 92-percent AFUE for large NWGFs 

and MHGFs, while small NWGFs and 

MHGFs remain at the current Federal 

minimum of 80-percent AFUE. At TSL 

1, small furnaces are defined as NWGFs 

and MHGFs with input capacities of 80 

kBtu/h or less. DOE estimates the 

change in INPV to range from ¥$107.8 

million to ¥$20.5 million, or a change 

of ¥7.9 percent to ¥1.5 percent. At this 

level, industry free cash flow in 2028 

(the year before the compliance date) is 

estimated to decrease to $60.3 million, 

or a decrease of 28.8 percent compared 

to the no-new-standards case value of 

$84.6 million. 


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Small furnaces with input capacities 

of 80 kBtu/h or less account for 

approximately 54.6 percent of NWGF 

shipments and 81.1 percent of MHGF 

shipments in 2028, a year before the 

standard goes into effect. In the no-newstandards case, approximately 60.6 

percent of NWGF shipments and 33.3 

percent of MHGF shipments are 

expected to be sold at condensing levels 

in the year before the standard goes into 

effect. At TSL 1, once the standard goes 

into effect, DOE expects 70.0 percent of 

NWGF shipments and 44.2 percent of 

MHGF shipments to be sold at 

condensing levels, requiring the 

industry to expand its production of 

secondary heat exchangers. 

Manufacturers will incur an estimated 

$31.6 million in capital conversion costs 

as manufacturers increase secondary 

heat exchanger production line 

capacity. Manufacturers would also 

incur product conversion costs driven 

by the development necessary to create 

compliant, cost-competitive products. 

Total industry conversion costs are 

expected to reach $60.4 million at TSL 

1. 

TSL 2 represents a national standard 

at 92-percent AFUE for large furnaces, 

while small furnaces remain at the 

current Federal minimum of 80-percent 

AFUE. Small furnaces are defined as 

NWGFs and MHGFS with input 

capacities of 70 kBtu/h or less. At TSL 

2, DOE estimates the change in INPV to 

range from ¥$145.3 million to ¥$26.5 

million, or a change in INPV of ¥10.6 

percent to ¥1.9 percent. At this level, 

free cash flow in 2028 is estimated to 

decrease to $53.8 million, or a decrease 

of 36.4 percent compared to the no-newstandards-case value of $84.6 million in 

the year 2028. 

Small furnaces with input capacities 

of 70 kBtu/h or less account for 

approximately 30.5 percent of NWGF 

shipments and 38.9 percent of MHGF 

shipments in the year before standards 

go into effect. At TSL 2, once the 

standard goes into effect, DOE expects 

75.2 percent of NWGF shipments and 

66.1 percent of MHGF shipments to be 

sold at condensing levels, requiring the 

industry to expand its production of 

secondary heat exchangers. Capital 

conversion costs increase from $31.6 

million at TSL 1 to $46.0 million at TSL 

2. Manufacturers would also incur 

product conversion costs driven by the 

development necessary to create 

compliant, cost-competitive products. 

Total industry conversion costs are 

expected to reach $74.8 million at TSL 

2. 

TSL 3 represents a national standard 

at 92-percent AFUE for large furnaces, 

while small furnaces remain at the 

current Federal minimum of 80-percent 

AFUE. Small furnaces are defined as 

NWGFs and MHGFs with input 

capacities of 60 kBtu/h or less. At TSL 

3, DOE estimates the change in INPV to 

range from ¥$164.3 million to ¥$34.9 

million, or a change in INPV of ¥12.0 

percent to ¥2.5 percent. At this level, 

free cash flow is estimated to decrease 

to $50.7 million, or a decrease of 40.1 

percent compared to the no-newstandards case value of $84.6 million in 

the year 2028. 

Small furnaces with input capacities 

of 60 kBtu/h or less account for 

approximately 18.9 percent of NWGF 

shipments and 24.0 percent of MHGF 

shipments in the year before standards 

take effect. At TSL 3, once standards go 

into effect, DOE expects 78.6 percent of 

NWGF shipments and 75.3 percent of 

MHGF shipments to be sold at 

condensing levels, requiring the 

industry to expand its production of 

secondary heat exchangers. Capital 

conversion costs would increase from 

$46.0 million at TSL 2 to $52.9 million 

at TSL 3 as manufacturers increase 

secondary heat exchanger production 

line capacity. Manufacturers would also 

incur product conversion costs driven 

by the development necessary to create 

compliant, cost-competitive products. 

Total industry conversion costs could 

reach $81.7 million at TSL 3. 

TSL 4 represents a regional standard 

set at 95-percent AFUE for products 

sold in the North and 80-percent AFUE 

for products sold in the rest of country. 

TSL 4 does not have a small furnace 

capacity threshold. At TSL 4, DOE 

estimates the change in INPV to range 

from ¥$282.8 million to ¥$29.4 

million, or a change in INPV of ¥20.6 

percent to ¥2.1 percent. At this level, 

free cash flow is estimated to decrease 

to $38.4 million, or a decrease of 54.6 

percent compared to the no-newstandards case value of $84.6 million in 

the year 2028. 

In the year before the standard goes 

into effect, DOE expects that the North 

region will account for approximately 

58.8 percent of consumer furnace 

shipments, with the remaining 

shipments attributable to the rest of 

country region. Once the standard goes 

into effect, consumer furnaces sold in 

the North must achieve 95-percent 

AFUE. At TSL 4, DOE expects 74.7 

percent of NWGFs and 74.5 percent of 

MHGFs would be sold at condensing 

levels in 2029. Capital conversion costs 

are expected to reach $67.7 million as 

manufacturers increase secondary heat 

exchanger production line capacity. 

Product conversion costs reach $44.8 

million, as manufacturers develop costoptimized 95-percent AFUE furnaces 

that are competitive at reduced 

markups. Total industry conversion 

costs would be expected to reach $112.5 

million at TSL 4. 

For products sold in the North that 

must achieve 95-percent AFUE, the 

industry faces a noticeable compression 

of markups. In the no-new-standards 

case, 95-percent AFUE products garner 

a higher markup than baseline products. 

At TSL 4, 95-percent AFUE products 

become the minimum AFUE efficiency 

offering and would no longer command 

the same premium manufacturer 

markup in the North. However, at this 

level, manufacturers can still 

differentiate products and offer multiple 

markup tiers based on ‘‘comfort’’ 

features, such as two-stage or 

modulating combustion technology. 

DOE models the industry maintaining 

three manufacturer markup tiers (‘‘good, 

better, best’’) but at a compressed range 

of manufacturer markup values. This 

approach accounts for manufacturers’ 

continued ability to differentiate 

products based on combustion system 

technology while recognizing that 

manufacturer markups (and 

profitability) for high-efficiency 

products in the North may be reduced 

due to the higher AFUE standard. 

TSL 5 represents a standard set at 92- 

percent AFUE for large furnaces, while 

small furnaces remain at the current 

Federal minimum of 80-percent AFUE. 

Small furnaces are defined as NWGFs 

and MHGFs with input capacities of 55 

kBtu/h or less. At TSL 5, DOE estimates 

the change in INPV to range from 

¥$172.0 million to ¥$30.4 million, or 

a change in INPV of ¥12.5 percent to 

¥2.2 percent. At this level, free cash 

flow is estimated to decrease to $47.9 

million, or a decrease of 43.4 percent 

compared to the no-new-standards case 

value of $84.6 million in the year 2028. 

Small furnaces with input capacities 

of 55 kBtu/h or less account for 

approximately 7.5 percent of NWGFs 

and 10.6 percent of MHGFs in the year 

before the standard goes into effect. At 

TSL 5, 81.5 percent of NWGF shipments 

and 82.4 percent of MHGF shipments 

would be sold at condensing levels 

when the standard goes into effect, 

requiring the industry to expand its 

production of secondary heat 

exchangers. Capital conversion costs 

would increase from $52.9 million at 

TSL 3, the previous TSL with a separate 

standard level for small furnaces, to 

$59.2 million at TSL 5. Manufacturers 

will also incur product conversion costs 

driven by the development necessary to 

create compliant, cost-competitive 

products. DOE estimates total industry 

conversion costs could reach $87.9 

million at TSL 5. 


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TSL 6, TSL 8, and TSL 9 represent 

national standards for all covered 

NWGFs and MHGFs. At these TSLs, 

there is no separate standard level based 

on furnace input capacity. As the TSL 

increases from TSL 6 to TSL 8 to TSL 

9, the national standard increases, and 

DOE models a compression of markups 

in the tiered markup scenario. 

Compressed markups are a significant 

driver of negative impacts to INPV in 

the tiered markup scenario, particularly 

at TSL 9 for NWGFs, when neither 

efficiency nor combustion system 

technology (e.g., single-stage, two-stage, 

or modulating combustion) is a means 

for product differentiation. 

TSL 6 represents a national 92- 

percent AFUE standard for all covered 

NWGFs and MHGFs. As previously 

noted, TSL 6 does not have a small 

furnace capacity threshold. At this level, 

DOE estimates the change in INPV to 

range from ¥$170.5 million to ¥$34.0 

million, or a change in INPV of ¥12.4 

percent to ¥2.5 percent. At this level, 

free cash flow is estimated to decrease 

to $40.1 million, or a decrease of 52.6 

percent compared to the no-newstandards case value of $84.6 million in 

the year 2028. 

At TSL 6, all shipments of the covered 

product would be at a condensing level 

once the standard goes into effect. 

Manufacturer markups at TSL 6 are 

slightly reduced, but the industry is still 

able to maintain three tiers of markups. 

Manufacturers would incur product 

conversion costs of $28.8 million at TSL 

6, as manufacturers develop 92-percent 

AFUE furnaces that are competitive at 

reduced markups. Capital conversion 

costs would total $76.4 million, as 

manufacturers add production capacity 

to have secondary heat exchangers for 

all NWGF and MHGF shipments sold 

into the domestic market. Total 

conversion costs could reach $105.2 

million for the industry. 

TSL 7 represents a 95-percent AFUE 

standard for large furnaces, while small 

furnaces remain at the current Federal 

minimum of 80-percent AFUE. At TSL 

7, small furnaces are defined as NWGFs 

and MHGFs with input capacities of 55 

kBtu/h or less. DOE estimates the 

change in INPV to range from ¥$356.8 

million to ¥$32.7 million, or a change 

in INPV of ¥26.0 percent to ¥2.4 

percent. At this level, free cash flow is 

estimated to decrease to $28.0 million, 

or a decrease of 66.9 percent compared 

to the no-new-standards case value of 

$84.6 million in the year 2028. 

Small furnaces with input capacities 

of 55 kBtu/h or less account for 

approximately 7.5 percent of NWGF 

shipments and 10.6 percent of MHGF 

shipments before the standard goes into 

effect. At this level, 81.5 percent of 

NWGF shipments and 82.4 percent of 

MHGF shipments would be sold at 

condensing levels when the standard 

goes into effect, requiring the industry 

to expand its production of secondary 

heat exchangers. Capital conversion 

costs would total $90.8 million, as 

manufacturers add production capacity 

to have secondary heat exchangers for 

the majority of NWGF and MHGF 

shipments sold into the domestic 

market. Manufacturers would also incur 

product conversion costs of an 

estimated $44.8 million, driven by the 

development necessary to create 

compliant, cost-competitive products. 

Total conversion costs could reach 

$135.6 million. 

For large NWGFs and MHGFs, 

industry faces a noticeable compression 

of markups due to their limited ability 

to differentiate products purely based 

on AFUE. However, as with TSL 4, 

manufacturers can still differentiate 

products subject to the 95-percent 

standard based on ‘‘comfort’’ features, 

such as two-stage or modulating 

combustion technology. DOE models 

the industry as maintaining three 

markup tiers (‘‘good, better, best’’) but at 

a compressed range of tiers where maxtech products do not command the same 

premium as they did in the no-newstandards case. This approach accounts 

for manufacturers’ continued ability to 

differentiate large NWGFs and MHGFs 

based on combustion systems while 

recognizing that markups (and 

profitability) for high-efficiency 

products may be reduced for large 

furnaces due to the 95-percent AFUE 

standard. While manufacturers would 

not experience a compression of 

markups for small capacity products, 

most shipments qualify as large furnaces 

at this capacity cutoff. The reduction in 

premium product offerings and 

deterioration of markups for the 

majority of furnace shipments, coupled 

with increased conversion costs, are 

expected to result in a negative change 

in INPV at TSL 7. 

TSL 8 represents a national 95- 

percent AFUE standard for all covered 

NWGFs and MHGFs. TSL 8 does not 

have a small capacity threshold. At TSL 

8, DOE estimates the change in INPV to 

range from ¥$367.3 million to ¥$33.8 

million, or a change in INPV of ¥26.8 

percent to ¥2.5 percent. At this level, 

free cash flow is estimated to decrease 

to $16.1 million, or a decrease of 81.0 

percent compared to the no-newstandards case value of $84.6 million in 

the year 2028. 

DOE estimates that approximately 

41.6 percent of the annual NWGF 

shipments and approximately 19.5 

percent of the annual MHGF shipments 

currently meet or exceed the efficiencies 

required at TSL 8. At TSL 8, all covered 

furnaces would be condensing after the 

standard goes into effect. DOE estimates 

capital conversion costs would increase 

to $117.3 million at TSL 8, as 

manufacturers add production capacity 

to have secondary heat exchangers for 

all NWGF and MHGF shipments sold 

into the domestic market. Product 

conversion costs would total $44.8 

million, as manufacturers develop a 

cost-optimized 95-percent AFUE for 

NWGF and MHGF models that are 

competitive at reduced markups. Total 

industry conversion costs could reach 

$162.0 million. 

With a national standard of 95- 

percent AFUE, industry faces a 

noticeable compression of markups due 

to their limited ability to differentiate 

products purely based on AFUE. As 

with TSL 4 and TSL 7, manufacturers 

can still differentiate products based on 

‘‘comfort’’ features such as the 

combustion systems. At TSL 8, DOE 

models the industry as maintaining 

three markup tiers (‘‘good, better, best’’) 

but at a compressed range of 

manufacturer markup values where 

max-tech products do not command the 

same premium as they did in the nonew-standards case. This approach 

accounts for manufacturers’ continued 

ability to differentiate NWGFs and 

MHGFs based on combustion systems 

while recognizing that markups (and 

profitability) for high-efficiency 

products may be reduced due to the 95- 

percent AFUE standard. The 

compression of markups and a 

reduction in product offerings, coupled 

with increased conversion costs are 

expected to result in INPV losses at TSL 

8. 

TSL 9 represents a national max-tech 

standard, where NWGF products must 

achieve 98-percent AFUE and MHGF 

products must achieve 96-percent 

AFUE. At TSL 9, DOE estimates the 

change in INPV to range from ¥$668.7 

million to ¥$19.1 million, or a change 

in INPV of ¥48.7 percent to ¥1.4 

percent. At this level, the large 

conversion costs result in a free cash 

flow dropping below zero in the years 

before the standard year. The negative 

free cash flow calculation indicates 

manufacturers may need to access cash 

reserves or outside capital to finance 

conversion efforts. 

At TSL 9, approximately 1.4 percent 

of NWGFs and 0.9 percent of MHGFs 

are sold at this level today. 

Manufacturers would incur $86.8 

million in product conversion costs as 

they develop cost-optimized, highefficiency NWGF models that can 


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278U.S. Census Bureau’s Annual Survey of 

Manufactures: 2018–2021 (available at 

www.census.gov/programs-surveys/asm/data/ 

tables.html) (last accessed March 21, 2023). 279U.S. Bureau of Labor Statistics, Employer 

Costs for Employee Compensation (March 17, 2023) 

(available at: www.bls.gov/news.release/pdf/ 

ecec.pdf) (last accessed March 21, 2023). 280The comprehensive description of production 

and non-production workers is available online at: 

www2.census.gov/programs-surveys/asm/technicaldocumentation/questionnaire/2021/instructions/ 

MA_10000_Instructions.pdf, ‘‘Definitions and 

Instructions for the Annual Survey of 

Manufacturers, MA–10000’’ (pp. 13–14). (Last 

accessed June 1, 2023). 

compete in a market where efficiency 

and combustion systems are no longer 

viable options for product 

differentiation and MHGF models that 

can compete in a market where 

efficiency is no longer a means for 

product differentiation. More than half 

of all NWGF and MHGF OEMs do not 

currently offer any models that meet the 

efficiency levels required by TSL 9. 

Manufacturers would also incur capital 

conversion costs of $241.1 million as 

manufacturers add the production 

capacity necessary to produce all 

NWGFs and MHGFs sold into the 

domestic market at 98-percent and 96- 

percent AFUE, respectively. Total 

conversion costs would be expected to 

reach $328.0 million for the industry. 

Some manufacturers expressed great 

concern about the state of technology at 

max-tech. Specifically, those 

manufacturers noted uncertainty about 

the ability to deliver cost-effective 

products for their customers. They also 

cited high conversion costs and large 

investments in R&D to produce all 

products at this level. Many OEMs do 

not currently manufacture any models 

that meet these efficiency levels. These 

OEMs would likely have more technical 

challenges in designing new models that 

meet max-tech levels. Furthermore, 

NWGF manufacturers would lose 

efficiency and combustion systems as 

differentiators between baseline and 

premium product offerings. The extent 

of conversion costs, the compression of 

markups, and the reduced ability to 

differentiate products would likely alter 

the consumer furnace competitive 

landscape. 

b. Direct Impacts on Employment 

To quantitatively assess the potential 

impacts of amended energy 

conservation standards on direct 

employment in the NWGF and MHGF 

industry, DOE used the GRIM to 

estimate the domestic labor 

expenditures and number of direct 

employees in the no-new-standards case 

and in each of the standards cases 

during the analysis period. DOE 

calculated these values using the most 

up-to-date statistical data from the U.S. 

Census Bureau’s 2021 ASM,278 the U.S. 

Bureau of Labor Statistics’ (‘‘BLS’’) 

employee compensation data,279 results 

of the engineering analysis, and 

manufacturer interviews. 

Labor expenditures related to product 

manufacturing depend on the labor 

intensity of the product, the sales 

volume, and an assumption that wages 

remain fixed in real terms over time. 

The total labor expenditures in each 

year are calculated by multiplying the 

total MPCs by the labor percentage of 

MPCs. The total labor expenditures in 

the GRIM were then converted to 

domestic production employment levels 

by dividing production labor 

expenditures by the average fully 

burdened wage multiplied by the 

average number of hours worked per 

year per production worker. To do this, 

DOE relied on the ASM inputs: 

Production Workers Annual Wages, 

Production Workers Annual Hours, 

Production Workers for Pay Period, and 

Number of Employees. DOE also relied 

on the BLS employee compensation 

data to determine the fully burdened 

wage ratio. The fully burdened wage 

ratio factors in paid leave, supplemental 

pay, insurance, retirement and savings, 

and legally required benefits. 

The number of production employees 

is then multiplied by the U.S. labor 

percentage to convert total production 

employment to total domestic 

production employment. The U.S. labor 

percentage represents the industry 

fraction of domestic manufacturing 

production capacity for the covered 

product. This value is derived from 

manufacturer interviews, product 

database analysis, and publiclyavailable information. Consistent with 

the July 2022 NOPR, DOE estimates that 

45 percent of gas-fired consumer 

furnaces are produced domestically. 

The domestic production employees 

estimate covers production line 

workers, including line supervisors, 

who are directly involved in fabricating, 

processing, or assembling products 

within the OEM facility. Workers 

performing services that are closely 

associated with production operations, 

such as handling materials using 

forklifts, are also included as production 

labor.280 DOE’s estimates only account 

for production workers who 

manufacture the specific products 

covered by this rulemaking. 

Non-production workers account for 

the remainder of the direct employment 

figure. The non-production employees 

cover domestic workers who are not 

directly involved in the production 

process, such as sales, engineering, 

human resources, management, etc. 

Using the amount of domestic 

production workers calculated above, 

non-production domestic employees are 

extrapolated by multiplying the ratio of 

non-production workers in the industry 

compared to production employees. 

DOE assumes that this employee 

distribution ratio remains constant 

between the no-new-standards case and 

standards cases. 

Using the GRIM, DOE estimates that 

in the absence of new energy 

conservation standards, there would be 

1,470 domestic production and nonproduction workers for NWGFs and 

MHGFs in 2029. Table V.14 shows the 

range of the impacts of potential 

amended energy conservation standards 

on U.S. manufacturing employment in 

the NWGF and MHGF industry. The 

discussion below provides a qualitative 

evaluation of the range of potential 

impacts presented in the table. 

TABLE V.14—POTENTIAL CHANGES IN THE TOTAL NUMBER OF NON-WEATHERIZED GAS FURNACE AND MOBILE HOME

GAS FURNACE PRODUCTION AND NON-PRODUCTION WORKERS IN 2029 

Trial standard level 

No-newstandards 

case 

TSL 1 TSL 2 TSL 3 TSL 4 

Direct Employment in 2029 (Production 

Workers + Non-Production Workers).

1,470 .................. 435 to 1,514 ....... 453 to 1,532 ....... 451 to 1,530 ....... 487 to 1,566. 

Potential Changes in Direct Employment 

Workers in 2029 *.

............................ (1,079) to 44 ...... (1,079) to 62 ...... (1,079) to 60 ...... (1,079) to 96. 


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TABLE V.14—POTENTIAL CHANGES IN THE TOTAL NUMBER OF NON-WEATHERIZED GAS FURNACE AND MOBILE HOME

GAS FURNACE PRODUCTION AND NON-PRODUCTION WORKERS IN 2029—Continued 

Trial standard level 

No-newstandards 

case 

TSL 1 TSL 2 TSL 3 TSL 4 

TSL 5 TSL 6 TSL 7 TSL 8 TSL 9 

Direct employment in 2029 (Production 

Workers + Non-Production Workers).

473 to 1,552 ....... 470 to 1,549 ....... 547 to 1,626 ....... 571 to 1,650 ....... 549 to 1,628. 

Potential Changes in Direct Employment 

Workers in 2029 *.

(1,079) to 82 ...... (1,079) to 79 ...... (1,079) to 156 ..... (1,079) to 180 .... (1,079) to 158. 

* DOE presents a range of potential employment impacts. Numbers in parentheses indicate negative values. 

The direct employment impacts 

shown in Table V.14 represent the 

potential domestic employment changes 

that could result following the 

compliance date of the amended 

standards for NWGFs and MHGFs. The 

upper end of the range estimates an 

increase in the number of domestic 

workers producing NWGFs and MHGFs 

after implementation of an amended 

energy conservation standard at each 

TSL. This upper bound assumes 

manufacturers would continue to 

produce the same scope of covered 

products within the United States and 

would require additional labor to 

produce more-efficient products. The 

lower bound of the range represents the 

estimated maximum decrease in the 

total number of U.S. domestic workers 

if all production moved to lower laborcost countries or if domestic 

manufacturers left the market. Some 

large manufacturers are currently 

producing covered products in 

countries with lower labor costs, and an 

amended standard that necessitates 

large increases in labor content or large 

expenditures to re-tool facilities could 

cause manufacturers to re-evaluate 

domestic production siting options. 

Additional detail on the analysis of 

direct employment can be found in 

chapter 12 of the final rule TSD. 

Additionally, the employment impacts 

discussed in this section are 

independent of the employment impacts 

from the broader U.S. economy, which 

are documented in chapter 15 of the 

final rule TSD. 

c. Impacts on Manufacturing Capacity 

According to manufacturer feedback, 

production facilities are not currently 

equipped to supply the entire NWGF 

and MHGF market with condensing 

products. However, most manufacturers 

would be able to add capacity and 

adjust product designs in the five-year 

period between the announcement year 

of the standard and the compliance year 

of the standard. DOE interviewed 

manufacturers representing over 65 

percent of industry shipments. None of 

the interviewed manufacturers 

expressed concern over the industry’s 

ability to increase the capacity of 

production lines that meet required 

efficiency levels at TSL 1 through TSL 

8 to meet consumer demand. At TSL 9, 

technical uncertainty was expressed by 

manufacturers that do not offer maxtech efficiency products today, as they 

were unsure of what production lines 

changes would be needed to meet an 

amended standard set at max-tech. 

However, because TSL 8 (the adopted 

level) would not require max-tech 

efficiencies, DOE does not expect 

manufacturers to face long-term 

capacity constraints due to the standard 

levels detailed in this final rule. 

d. Impacts on Subgroups of 

Manufacturers 

Using average cost assumptions to 

develop an industry cash-flow estimate 

is not adequate for assessing differential 

impacts among subgroups of 

manufacturers. Small manufacturers, 

niche players, or manufacturers 

exhibiting a cost structure that differs 

substantially from the industry average 

could be affected disproportionately. 

DOE used the results of the industry 

characterization to group manufacturers 

exhibiting similar characteristics. 

Specifically, DOE identified small 

businesses as a manufacturer subgroup 

that it believes could be 

disproportionally impacted by energy 

conservation standards and would 

require a separate analysis in the MIA. 

DOE did not identify any other 

adversely impacted manufacturer 

subgroups for this rulemaking based on 

the results of the industry 

characterization. 

DOE analyzes the impacts on small 

businesses in a separate analysis in 

section VI.B of this final rule as part of 

the Regulatory Flexibility Analysis. In 

summary, the Small Business 

Administration (SBA) defines a ‘‘small 

business’’ as having 1,250 employees or 

less for North American Industry 

Classification System (‘‘NAICS’’) code 

333415, ‘‘Air-Conditioning and Warm 

Air Heating Equipment and Commercial 

and Industrial Refrigeration Equipment 

Manufacturing.’’ Based on this 

classification, DOE identified four 

domestic OEMs that certify NWGFs 

and/or MHGFs that qualify as a small 

business. For a discussion of the 

impacts on the small business 

manufacturer subgroup, see the 

Regulatory Flexibility Analysis in 

section VI.B of this final rule and 

chapter 12 of the final rule TSD. 

e. Cumulative Regulatory Burden 

One aspect of assessing manufacturer 

burden involves examining the 

cumulative impact of multiple DOE 

standards and the product-specific 

regulatory actions of other Federal 

agencies that affect the manufacturers of 

a covered product or equipment. While 

any one regulation may not impose a 

significant burden on manufacturers, 

the combined effects of several recent or 

impending regulations may have serious 

consequences for some manufacturers, 

groups of manufacturers, or an entire 

industry. Assessing the impact of a 

single regulation may overlook this 

cumulative regulatory burden. In 

addition to energy conservation 

standards, other regulations can 

significantly affect manufacturers’ 

financial operations. For these reasons, 

DOE conducts an analysis of cumulative 

regulatory burden as part of its 

rulemakings pertaining to appliance 

efficiency. 

For the cumulative regulatory burden 

analysis, DOE examines Federal, 

product-specific regulations that could 

affect NWGF and MHGF manufacturers 

that take effect approximately three 

years before or after the 2029 

compliance date. Table V.15 presents 

the DOE energy conservation standards 

that would impact manufacturers of 


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87632 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

NWGF and MHGF products in the 2026 

to 2032 timeframe. 

TABLE V.15—COMPLIANCE DATES AND EXPECTED CONVERSION EXPENSES OF FEDERAL ENERGY CONSERVATION

STANDARDS AFFECTING GAS-FIRED CONSUMER FURNACE ORIGINAL EQUIPMENT MANUFACTURERS

Federal energy conservation standard Number of 

OEMs * 

Number of 

OEMs 

affected by 

this rule ** 

Approx. 

standards 

compliance 

year 

Industry 

conversion costs 

(millions) 

Industry 

conversion 

costs/product 

revenue *** 

(%) 

Consumer Clothes Dryers † 87 FR 51734 (August 23, 2022) ........ 15 1 2027 $149.7 (2020$) 1.8 

Residential Clothes Washers † 88 FR 13520 (March 3, 2023) ....... 19 1 2027 $690.8 (2021$) 5.2 

Refrigerators, Freezers, and Refrigerator-Freezers † 88 FR 12452 

(February 27, 2023) ..................................................................... 49 1 2027 $1,323.6 (2021$) 3.8 

Room Air Conditioners 88 FR 34298 (May 26, 2023) .................... 8 2 2026 $24.8 (2021$) 0.4 

Miscellaneous Refrigeration Products † 88 FR 19382 (March 31, 

2023) ............................................................................................ 38 1 2029 $126.9 (2021$) 3.1 

Dishwashers † 88 FR 32514 (May 19, 2023) .................................. 22 1 2027 $125.6 (2021$) 2.1 

Consumer Water Heaters † 88 FR 49058 (July 28, 2023) .............. 22 3 2030 $228.1 (2022$) 1.3 

Consumer Pool Heaters 88 FR 34624 (May 30, 2023) .................. 20 1 2028 $48.4 (2021$) 1.5 

Commercial Water Heating Equipment ‡ ......................................... 15 3 2026 $42.7 (2022$) 5.3 

Consumer Boilers † 88 FR 55128 (August 14, 2023) ..................... 24 4 2030 $98.0 (2022$) 3.6 

Walk-in Coolers and Freezers † 88 FR 60746 (September 5, 

2023) ............................................................................................ 79 4 2027 $89.0 (2022$) 0.8 

Microwave Ovens 88 FR 39912 (June 20, 2023) ........................... 18 1 2026 $46.1 (2021$) 0.7 

* This column presents the total number of OEMs identified in the energy conservation standard rule that is contributing to cumulative regulatory burden. 

** This column presents the number of OEMs producing consumer furnaces that are also listed as OEMs in the identified energy conservation 

standard that is contributing to cumulative regulatory burden. 

*** This column presents industry conversion costs as a percentage of product revenue during the conversion period. Industry conversion costs 

are the upfront investments manufacturers must make to sell compliant products/equipment. The revenue used for this calculation is the revenue 

from just the covered product/equipment associated with each row. The conversion period is the time frame over which conversion costs are 

made and lasts from the publication year of the final rule to the compliance year of the energy conservation standard. The conversion period 

typically ranges from three to five years, depending on the rulemaking. 

† These rulemakings are at the NOPR stage, and all values are subject to change until finalized through publication of a final rule. 

‡At the time of issuance of this consumer furnaces final rule, the commercial water heating equipment energy conservation standards final rule 

has been issued but not yet published in the Federal Register. Once published, the commercial water heating equipment final rule will be available at: www.regulations.gov/docket/EERE-2021-BT-STD-0027. 

3. National Impact Analysis 

This section presents DOE’s estimates 

of the national energy savings and the 

NPV of consumer benefits that would 

result from each of the TSLs considered 

as potential amended standards. 

a. Significance of Energy Savings 

To estimate the energy savings 

attributable to potential amended 

standards for NWGFs and MHGFs, DOE 

compared their energy consumption 

under the no-new-standards case to 

their anticipated energy consumption 

under each TSL. The savings are 

measured over the entire lifetime of 

products purchased in the 30-year 

period that begins in the year of 

anticipated compliance with amended 

standards (2029–2058). Table V.16 

presents DOE’s projections of the 

national energy savings for each TSL 

considered for NWGFs and MHGFs. The 

savings were calculated using the 

approach described in section IV.H.2 of 

this document. 

TABLE V.16—CUMULATIVE NATIONAL ENERGY SAVINGS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS

FURNACES; 30 YEARS OF SHIPMENTS (2029–2058) 

Energy savings Product 

class 

Trial standard level 

1 2 3 4 5 6 7 8 9 

(quads) 

Primary Energy ........................................ NWGF ........ 1.33 1.81 2.06 2.60 2.24 3.00 3.09 3.98 5.17 

MHGF ......... 0.02 0.07 0.08 0.11 0.09 0.10 0.12 0.13 0.15 

Total .... 1.35 1.88 2.14 2.72 2.34 3.10 3.21 4.11 5.32 

FFC Energy ............................................. NWGF ........ 1.49 2.04 2.33 2.97 2.54 3.51 3.50 4.62 6.10 

MHGF ......... 0.03 0.08 0.09 0.13 0.10 0.12 0.14 0.15 0.17 

Total .... 1.52 2.11 2.42 3.10 2.65 3.63 3.63 4.77 6.26 

For the adopted standards (TSL 8), the 

FFC energy savings of 4.77 quads are the 

FFC natural gas savings minus the 

increase in FFC energy use associated 

with higher electricity use due primarily 


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281U.S. Office of Management and Budget, 

Circular A–4: Regulatory Analysis (Sept. 17, 2003) 

(available at: obamawhitehouse.archives.gov/omb/ 

circulars_a004_a-4/) (last accessed August 1, 2023). 

282Section 325(m) of EPCA requires DOE to 

review its standards at least once every 6 years, and 

requires, for certain products, a 3-year period after 

any new standard is promulgated before 

compliance is required, except that in no case may 

any new standards be required within 6 years of the 

compliance date of the previous standards. While 

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

period adds up to 9 years, DOE notes that it may 

undertake reviews at any time within the 6 year 

period and that the 3-year compliance date may 

yield to the 6-year backstop. A 9-year analysis 

period may not be appropriate given the variability 

that occurs in the timing of standards reviews and 

the fact that for some products, the compliance 

period is 5 years rather than 3 years. 

283U.S. Office of Management and Budget, 

Circular A–4: Regulatory Analysis (Sept. 17, 2003) 

(available at: obamawhitehouse.archives.gov/omb/ 

circulars_a004_a-4/) (last accessed August 1, 2023). 

to some consumers switching to electric 

heating. 

The results reflect the use of the 

reference product switching scenario 

and repair vs. replace trend for NWGFs 

and MHGFs (as described in sections 

IV.F.10 and IV.F.11 of this document). 

DOE also conducted a sensitivity 

analysis that considered scenarios with 

lower and higher rates of product 

switching, as compared to the default 

case. The results of these alternative 

cases are presented in appendix 10E of 

the final rule TSD. 

OMB Circular A–4 281 requires 

agencies to present analytical results, 

including separate schedules of the 

monetized benefits and costs that show 

the type and timing of benefits and 

costs. Circular A–4 also directs agencies 

to consider the variability of key 

elements underlying the estimates of 

benefits and costs. For this rulemaking, 

DOE undertook a sensitivity analysis 

using 9 years, rather than 30 years, of 

product shipments. The choice of a 9- 

year period is a proxy for the timeline 

in EPCA for the review of certain energy 

conservation standards and potential 

revision of and compliance with such 

revised standards.282 The review 

timeframe established in EPCA is 

generally not synchronized with the 

product lifetime, product manufacturing 

cycles, or other factors specific to 

NWGFs and MHGFs. Thus, such results 

are presented for informational 

purposes only and are not indicative of 

any change in DOE’s analytical 

methodology. The NES sensitivity 

analysis results based on a 9-year 

analytical period are presented in for 

standards. The impacts are counted over 

the lifetime of NWGFs and MHGFs 

purchased in 2029–2037. 

TABLE V.17—CUMULATIVE NATIONAL ENERGY SAVINGS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS

FURNACES; 9 YEARS OF SHIPMENTS (2029–2037) 

Energy savings Product 

class 

Trial standard level 

1 2 3 4 5 6 7 8 9 

(quads) 

Primary Energy ........................................ NWGF ........ 0.35 0.50 0.57 0.69 0.62 0.85 0.87 1.14 1.56 

MHGF ......... 0.01 0.02 0.03 0.04 0.03 0.04 0.04 0.05 0.05 

Total .... 0.36 0.52 0.60 0.73 0.65 0.89 0.91 1.19 1.62 

FFC Energy ............................................. NWGF ........ 0.40 0.56 0.64 0.79 0.70 1.00 0.98 1.33 1.85 

MHGF ......... 0.01 0.03 0.03 0.05 0.04 0.04 0.05 0.05 0.06 

Total .... 0.41 0.58 0.68 0.84 0.74 1.04 1.03 1.38 1.91 

b. Net Present Value of Consumer Costs 

and Benefits 

DOE estimated the cumulative NPV of 

the total costs and savings for 

consumers that would result from the 

TSLs considered for NWGFs and 

MHGFs. In accordance with OMB’s 

guidelines on regulatory analysis,283

DOE calculated NPV using both a 7- 

percent and a 3-percent real discount 

rate. Table V.18 shows the consumer 

NPV results for standards with impacts 

counted over the lifetime of products 

purchased in 2029–2058. 

TABLE V.18—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR NON-WEATHERIZED GAS FURNACES AND

MOBILE HOME GAS FURNACES; 30 YEARS OF SHIPMENTS (2029–2058) 

Energy savings Product 

class 

Trial standard level 

1 2 3 4 5 6 7 8 9 

(billion 2022$) 

7 percent ................................................. NWGF ........ 1.25 1.85 2.14 2.76 2.43 2.90 3.70 4.41 3.60 

MHGF ......... 0.06 0.19 0.24 0.35 0.27 0.29 0.36 0.40 0.44 

Total .... 1.31 2.04 2.38 3.11 2.70 3.20 4.06 4.81 4.04 

3 percent ................................................. NWGF ........ 4.31 6.21 7.20 9.05 8.18 11.06 11.76 15.28 16.03 

MHGF ......... 0.17 0.50 0.63 0.92 0.71 0.78 0.94 1.06 1.17 

Total .... 4.48 6.71 7.83 9.97 8.88 11.84 12.70 16.34 17.21 

These results reflect the use of the 

default product switching trend for 

NWGFs (as described in section IV.F.10 

of this document). As previously 

discussed, DOE conducted a sensitivity 

analysis assuming higher and lower 

levels of product switching for NWGFs. 

The results of these alternative cases are 


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87634 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

presented in appendix 10 E of the final 

rule TSD. 

The NPV results for standards based 

on the aforementioned 9-year analytical 

period are presented in Table V.19. The 

impacts are counted over the lifetime of 

products purchased in 2029–2037. As 

mentioned previously, such results are 

presented for informational purposes 

only and are not indicative of any 

change in DOE’s analytical methodology 

or decision criteria. 

TABLE V.19—CUMULATIVE NET PRESENT VALUE OF CONSUMER BENEFITS FOR NON-WEATHERIZED GAS FURNACE AND

MOBILE HOME GAS FURNACE STANDARDS; 9 YEARS OF SHIPMENTS (2029–2037) 

Energy savings Product 

class 

Trial standard level 

1 2 3 4 5 6 7 8 9 

(billion 2022$) 

7 percent ................................................. NWGF ........ 0.57 0.90 1.06 1.48 1.19 1.43 1.99 2.41 2.01 

MHGF ......... 0.04 0.11 0.15 0.21 0.16 0.18 0.22 0.24 0.27 

Total .... 0.61 1.01 1.21 1.69 1.36 1.62 2.20 2.65 2.28 

3 percent ................................................. NWGF ........ 1.46 2.21 2.62 3.49 2.94 3.93 4.60 5.97 6.37 

MHGF ......... 0.08 0.24 0.30 0.44 0.34 0.38 0.45 0.50 0.56 

Total .... 1.53 2.45 2.92 3.92 3.28 4.31 5.05 6.47 6.92 

The previous results reflect the use of 

a default trend to estimate the change in 

price for NWGFs and MHGFs over the 

analysis period (see section IV.F.1 of 

this document). DOE also conducted a 

sensitivity analysis that considered one 

scenario with a lower rate of price 

decline than the reference case and one 

scenario with a higher rate of price 

decline than the reference case. The 

results of these alternative cases are 

presented in appendix 10C of the final 

rule TSD. In the high-price-decline case, 

the NPV of consumer benefits is higher 

than in the default case. In the lowprice-decline case, the NPV of consumer 

benefits is lower than in the default 

case. 

c. Indirect Impacts on Employment 

It is estimated that amended energy 

conservation standards for NWGFs and 

MHGFs will reduce energy expenditures 

for consumers of those products, with 

the resulting net savings being 

redirected to other forms of economic 

activity. These expected shifts in 

spending and economic activity could 

affect the demand for labor. As 

described in section IV.N of this 

document, DOE used an input/output 

model of the U.S. economy to estimate 

indirect employment impacts of the 

TSLs that DOE considered. There are 

uncertainties involved in projecting 

employment impacts, especially 

changes in the later years of the 

analysis. Therefore, DOE generated 

results for near-term timeframes (2029– 

2034), where these uncertainties are 

reduced. 

The results suggest that the adopted 

standards are likely to have a negligible 

impact on the net demand for labor in 

the economy. The net change in jobs is 

so small that it would be imperceptible 

in national labor statistics and might be 

offset by other, unanticipated effects on 

employment. Chapter 16 of the final 

rule TSD presents detailed results 

regarding anticipated indirect 

employment impacts. 

4. Impact on Utility or Performance of 

Products 

As discussed in section III.F.1.d of 

this document, DOE has concluded that 

the standards adopted in this final rule 

would not lessen the utility or 

performance of the NWGFs and MHGFs 

under consideration in this rulemaking. 

Manufacturers of these products 

currently offer units that meet or exceed 

the adopted standards. 

5. Impact of Any Lessening of 

Competition 

DOE considered any lessening of 

competition that would be likely to 

result from new or amended standards. 

As discussed in section III.F.1.e of this 

document, EPCA directs the Attorney 

General of the United States (Attorney 

General) to determine the impact, if any, 

of any lessening of competition likely to 

result from a proposed standard and to 

transmit such determination in writing 

to the Secretary within 60 days of the 

publication of a proposed rule, together 

with an analysis of the nature and 

extent of the impact. DOE has provided 

DOJ with copies of the proposed rule 

and the accompanying TSD for review. 

DOE considered DOJ’s comments on the 

proposed rule in determining whether 

to proceed to a final rule. DOE is 

publishing and responds to DOJ’s 

comments in this final rule. 

6. Need of the Nation To Conserve 

Energy 

Enhanced energy efficiency, where 

economically justified, improves the 

Nation’s energy security, strengthens the 

economy, and reduces the 

environmental impacts (costs) of energy 

production. Chapter 15 in the final rule 

TSD presents the estimated impacts on 

electricity generating capacity, relative 

to the no-new-standards case, for the 

TSLs that DOE considered in this 

rulemaking. 

Energy conservation resulting from 

potential energy conservation standards 

for NWGFs and MHGFs is expected to 

yield environmental benefits in the form 

of reduced emissions of certain air 

pollutants and greenhouse gases. Table 

V.20 provides DOE’s estimate of 

cumulative emissions reductions 

expected to result from the TSLs 

considered in this rulemaking. The 

increase in emissions of SO2 and Hg is 

due to a fraction of NWGF consumers 

that are projected to switch from gas 

furnaces to electric heat pumps and 

electric furnaces in response to the 

potential standards. The emissions were 

calculated using the multipliers 

discussed in section IV.K of this 

document. DOE reports annual 

emissions reductions for each TSL in 

chapter 13 of the final rule TSD. 


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TABLE V.20—CUMULATIVE EMISSIONS REDUCTION FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME GAS

FURNACES SHIPPED IN 2029–2058 

Trial standard level 

1 2 3 4 5 6 7 8 9 

Power Sector and Site Emissions 

CO2 (million metric tons) .................................................. 75 106 125 173 139 234 189 290 413 

CH4 (thousand tons) ........................................................ 1.5 2.0 2.3 2.9 2.5 3.1 3.4 4.2 5.2 

N2O (thousand tons) ........................................................ 0.1 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 

NOX (thousand tons) ........................................................ 67 95 112 157 124 218 169 268 385 

SO2 (thousand tons) ........................................................ (0) (1) (1) (4) (2) (10) (2) (10) (19) 

Hg (tons) .......................................................................... (0.00) (0.01) (0.01) (0.03) (0.02) (0.08) (0.02) (0.08) (0.15) 

Upstream Emissions 

CO2 (million metric tons) .................................................. 11 15 18 25 20 34 27 42 59 

CH4 (thousand tons) ........................................................ 1,080 1,528 1,801 2,519 2,005 3,473 2,725 4,282 6,139 

N2O (thousand tons) ........................................................ 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.1 0.1 

NOX (thousand tons) ........................................................ 167 237 279 389 310 534 422 660 944 

SO2 (thousand tons) ........................................................ 0.04 0.05 0.05 0.04 0.05 (0.01) 0.08 0.02 (0.04) 

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

Total FFC Emissions 

CO2 (million metric tons) .................................................. 86 121 142 197 158 268 215 332 472 

CH4 (thousand tons) ........................................................ 1,082 1,531 1,803 2,522 2,007 3,476 2,728 4,286 6,144 

N2O (thousand tons) ........................................................ 0.2 0.2 0.2 0.3 0.3 0.3 0.4 0.4 0.4 

NOX (thousand tons) ........................................................ 234 331 390 546 435 752 591 928 1329 

SO2 (thousand tons) ........................................................ (0) (1) (1) (4) (2) (10) (2) (10) (19) 

Hg (tons) .......................................................................... (0.00) (0.01) (0.01) (0.03) (0.02) (0.08) (0.02) (0.08) (0.15) 

Note: Negative values (shown in parentheses) refer to an increase in emissions. 

As part of the analysis for this 

rulemaking, DOE estimated monetary 

benefits likely to result from the 

reduced emissions of CO2 that DOE 

estimated for each of the considered 

TSLs for NWGFs and MHGFs. Section 

IV.L.1.a of this document discusses the 

SC–CO2 values used. 

Table V.21 presents the present value 

of the CO2 emissions reduction at each 

TSL. 

TABLE V.21—PRESENT VALUE OF CO2 EMISSIONS REDUCTION FOR NON-WEATHERIZED GAS FURNACES AND MOBILE

HOME GAS FURNACES SHIPPED IN 2029–2058 

TSL 

SC–CO2 case 

Discount rate and statistics 

5%, Average 3%, Average 2.5%, Average 3%, 95th-percentile 

(million 2022$) 

1 ............................................................................................... 676 3,059 4,860 9,253 

2 ............................................................................................... 965 4,357 6,917 13,181 

3 ............................................................................................... 1,137 5,130 8,142 15,522 

4 ............................................................................................... 1,543 6,989 11,104 21,139 

5 ............................................................................................... 1,266 5,709 9,060 17,274 

6 ............................................................................................... 2,165 9,735 15,433 29,464 

7 ............................................................................................... 1,721 7,767 12,327 23,500 

8 ............................................................................................... 2,684 12,076 19,149 36,550 

9 ............................................................................................... 3,857 17,311 27,429 52,406 

As discussed in section IV.L.1.b of 

this document, DOE estimated monetary 

benefits likely to result from the 

reduced emissions of methane (CH4) 

and N2O that DOE estimated for each of 

the considered TSLs for furnaces. Table 

V.22 presents the value of the CH4

emissions reduction at each TSL, and 

Table V.23 presents the value of the N2O 

emissions reduction at each TSL. 


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87636 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

TABLE V.22—PRESENT VALUE OF METHANE EMISSIONS REDUCTION FOR NON-WEATHERIZED GAS FURNACES AND

MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058 

TSL 

SC–CH4 case 

Discount rate and statistics 

5%, Average 3%, Average 2.5%, Average 3%, 95th-percentile 

(million 2022$) 

1 ............................................................................................... 403 1,284 1,817 3,395 

2 ............................................................................................... 576 1,829 2,588 4,838 

3 ............................................................................................... 681 2,160 3,054 5,712 

4 ............................................................................................... 935 2,976 4,213 7,872 

5 ............................................................................................... 760 2,408 3,405 6,370 

6 ............................................................................................... 1,333 4,199 5,930 11,108 

7 ............................................................................................... 1,032 3,271 4,626 8,652 

8 ............................................................................................... 1,641 5,177 7,314 13,695 

9 ............................................................................................... 2,378 7,473 10,549 19,771 

TABLE V.23—PRESENT VALUE OF NITROUS OXIDE EMISSIONS REDUCTION FOR NON-WEATHERIZED GAS FURNACES AND

MOBILE HOME GAS FURNACES SHIPPED IN 2029–2058 

TSL 

SC–N2O case 

Discount rate and statistics 

5%, Average 3%, Average 2.5%, Average 3%, 95th-percentile 

(million 2022$) 

1 ............................................................................................... 0.5 2.0 3.2 5.4 

2 ............................................................................................... 0.7 2.8 4.4 7.5 

3 ............................................................................................... 0.7 3.1 4.9 8.4 

4 ............................................................................................... 0.8 3.6 5.7 9.7 

5 ............................................................................................... 0.8 3.4 5.3 9.0 

6 ............................................................................................... 0.8 3.3 5.2 8.8 

7 ............................................................................................... 1.1 4.7 7.4 12.6 

8 ............................................................................................... 1.1 4.9 7.7 13.1 

9 ............................................................................................... 1.3 5.5 8.7 14.7 

DOE is well aware that scientific and 

economic knowledge about the 

contribution of CO2 and other GHG 

emissions to changes in the future 

global climate and the potential 

resulting damages to the world economy 

continues to evolve rapidly. Thus, any 

value placed on reduced GHG emissions 

in this rulemaking is subject to change. 

That said, because of omitted damages, 

DOE agrees with the IWG that these 

estimates most likely underestimate the 

climate benefits of greenhouse gas 

reductions. DOE, together with other 

Federal agencies, will continue to 

review various methodologies for 

estimating the monetary value of 

reductions in CO2 and other GHG 

emissions. This ongoing review will 

consider the comments on this subject 

that are part of the public record for this 

and other rulemakings, as well as other 

methodological assumptions and issues. 

DOE notes that the adopted standards 

are economically justified even without 

inclusion of monetized benefits of 

reduced GHG emissions. 

DOE also estimated the monetary 

value of the economic benefits 

associated with NOX emissions 

reductions anticipated to result from the 

considered TSLs for NWGFs and 

MHGFs. The dollar-per-ton values that 

DOE used are discussed in section IV.L 

of this document. Table V.24 shows the 

present value for NOX emissions 

reduction for each TSL calculated using 

7-percent and 3-percent discount rates. 

This table presents results that use the 

low benefit-per-ton values, which reflect 

DOE’s primary estimate. 

TABLE V.24—PRESENT VALUE OF NOX EMISSIONS REDUCTION FOR NON-WEATHERIZED GAS FURNACES AND MOBILE

HOME GAS FURNACES SHIPPED IN 2029–2058 

TSL 7% Discount rate 3% Discount rate 

(million 2022$) 

1 ............................................................................................................................................................... 2,195 6,868 

2 ............................................................................................................................................................... 3,157 9,777 

3 ............................................................................................................................................................... 3,735 11,520 

4 ............................................................................................................................................................... 5,031 15,773 

5 ............................................................................................................................................................... 4,164 12,822 

6 ............................................................................................................................................................... 7,251 21,994 

7 ............................................................................................................................................................... 5,651 17,432 

8 ............................................................................................................................................................... 8,950 27,227 


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TABLE V.24—PRESENT VALUE OF NOX EMISSIONS REDUCTION FOR NON-WEATHERIZED GAS FURNACES AND MOBILE

HOME GAS FURNACES SHIPPED IN 2029–2058—Continued 

TSL 7% Discount rate 3% Discount rate 

(million 2022$) 

9 ............................................................................................................................................................... 12,980 39,089 

Note: Results are based on the low benefit-per-ton values. 

DOE also estimated the monetary 

value of the economic impacts 

associated with changes in SO2

emissions anticipated to result from the 

considered TSLs for NWGFs and 

MHGFs. The dollar-per-ton values that 

DOE used are discussed in section 

IV.L.2 of this document. Table V.25 

presents the present value of SO2

emission changes for each TSL 

calculated using 7-percent and 3- 

percent discount rates. This table 

presents results that use the low benefitper-ton values, which reflect DOE’s 

primary estimate. 

TABLE V.25—PRESENT VALUE OF SO2 EMISSION CHANGES FOR NON-WEATHERIZED GAS FURNACES AND MOBILE HOME

GAS FURNACES SHIPPED IN 2029–2058 

TSL 7% Discount rate 3% Discount rate 

(million 2022$) 

1 ............................................................................................................................................................... (7) (20) 

2 ............................................................................................................................................................... (15) (44) 

3 ............................................................................................................................................................... (28) (81) 

4 ............................................................................................................................................................... (76) (226) 

5 ............................................................................................................................................................... (39) (112) 

6 ............................................................................................................................................................... (214) (608) 

7 ............................................................................................................................................................... (43) (131) 

8 ............................................................................................................................................................... (214) (616) 

9 ............................................................................................................................................................... (401) (1,142) 

Note: Parentheses indicate negative (¥) values. 

The benefits of reduced CO2, CH4, and 

N2O emissions are collectively referred 

to as ‘‘climate benefits.’’ The effects of 

SO2 and NOX emission changes are 

collectively referred to as ‘‘health 

benefits.’’ For the time series of 

estimated monetary values of reduced 

emissions, see chapter 14 of the final 

rule TSD. 

7. Other Factors 

The Secretary of Energy, in 

determining whether a standard is 

economically justified, may consider 

any other factors that the Secretary 

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

6295(o)(2)(B)(i)(VII)) No other factors 

were considered in this analysis. 

8. Summary of National Economic 

Impacts 

Table V.26 presents the NPV values 

that result from adding the monetized 

estimates of the potential economic, 

climate, and health net benefits 

resulting from GHG, NOX, and SO2

emission changes to the NPV of 

consumer savings calculated for each 

TSL considered in this rulemaking. The 

consumer benefits are domestic U.S. 

monetary savings that occur as a result 

of purchasing the covered NWGFs and 

MHGFs, and are measured for the 

lifetime of products shipped in 2029– 

2058. The climate benefits associated 

with reduced GHG emissions resulting 

from the adopted standards are global 

benefits and are also calculated based 

on the lifetime of consumer furnaces 

shipped in 2029–2058. The climate 

benefits associated with four SC–GHG 

estimates are shown. DOE does not have 

a single central SC–GHG point estimate, 

and it emphasizes the importance and 

value of considering the benefits 

calculated using all four SC–GHG 

estimates. 

TABLE V.26—NPV OF CONSUMER BENEFITS COMBINED WITH MONETIZED CLIMATE AND HEALTH BENEFITS FROM

EMISSIONS REDUCTIONS

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 TSL 8 TSL 9 

3% discount rate for NPV of Consumer and Health Benefits (billion 2022$) 

5% d.r., Average SC–GHG case ...................................................................... 12.4 18.0 21.1 28.0 23.6 36.7 32.8 47.3 61.4 

3% d.r., Average SC–GHG case ...................................................................... 15.7 22.6 26.6 35.5 29.7 47.2 41.0 60.2 79.9 

2.5% d.r., Average SC–GHG case ................................................................... 18.0 26.0 30.5 40.8 34.1 54.6 47.0 69.4 93.1 

3% d.r., 95th-percentile SC–GHG case ............................................................ 24.0 34.5 40.5 54.5 45.2 73.8 62.2 93.2 127.3 

7% discount rate for NPV of Consumer and Health Benefits (billion 2022$) 

5% d.r., Average SC–GHG case ...................................................................... 4.6 6.7 7.9 10.5 8.8 13.7 12.4 17.9 22.9 

3% d.r., Average SC–GHG case ...................................................................... 7.8 11.4 13.4 18.0 14.9 24.2 20.7 30.8 41.4 

2.5% d.r., Average SC–GHG case ................................................................... 10.2 14.7 17.3 23.4 19.3 31.6 26.6 40.0 54.6 

3% d.r., 95th-percentile SC–GHG case ............................................................ 16.2 23.2 27.3 37.1 30.5 50.8 41.8 63.8 88.8 

Note: ‘‘d.r.’’ means discount rate. 


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I 

I 

I I I I I I 

I I I I I I 
87638 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

284P.C. Reiss and M.W. White (2005), Household 

Electricity Demand, Revisited. The Review of 

Economic Studies, 72 (3), 853–883 (available at: academic.oup.com/restud/article/72/3/853/ 

1557538) (last accessed August 1, 2023). 

C. Conclusion 

When considering new or amended 

energy conservation standards, the 

standards that DOE adopts for any type 

(or class) of covered product must be 

designed to achieve the maximum 

improvement in energy efficiency that 

the Secretary determines is 

technologically feasible and 

economically justified. (42 U.S.C. 

6295(o)(2)(A)) In determining whether a 

standard is economically justified, the 

Secretary must determine whether the 

benefits of the standard exceed its 

burdens by, to the greatest extent 

practicable, considering the seven 

statutory factors discussed previously. 

(42 U.S.C. 6295(o)(2)(B)(i)) The new or 

amended standard must also result in 

significant conservation of energy. (42 

U.S.C. 6295(o)(3)(B)) 

In this final rule, DOE considered the 

impacts of amended standards for 

NWGFs and MHGFs at each TSL, 

beginning with the maximum 

technologically feasible level, to 

determine whether that level was 

economically justified. Where the maxtech level was not justified, DOE then 

considered the next most efficient level 

and undertook the same evaluation until 

it reached the highest efficiency level 

that is both technologically feasible and 

economically justified and saves a 

significant amount of energy. 

To aid the reader as DOE discusses 

the benefits and/or burdens of each TSL, 

tables in this section present a summary 

of the results of DOE’s quantitative 

analysis for each TSL. In addition to the 

quantitative results presented in the 

tables, DOE also considers other 

burdens and benefits that affect 

economic justification. These include 

the impacts on identifiable subgroups of 

consumers who may be 

disproportionately affected by a national 

standard and impacts on employment. 

DOE also notes that the economics 

literature provides a wide-ranging 

discussion of how consumers trade off 

upfront costs and energy savings in the 

absence of government intervention. 

Much of this literature attempts to 

explain why consumers appear to 

undervalue energy efficiency 

improvements. There is evidence that 

consumers undervalue future energy 

savings as a result of: (1) a lack of 

information; (2) a lack of sufficient 

salience of the long-term or aggregate 

benefits; (3) a lack of sufficient savings 

to warrant delaying or altering 

purchases; (4) excessive focus on the 

short term, in the form of inconsistent 

weighting of future energy cost savings 

relative to available returns on other 

investments; (5) computational or other 

difficulties associated with the 

evaluation of relevant tradeoffs; and (6) 

a divergence in incentives (for example, 

between renters and owners, or builders 

and purchasers). Having less than 

perfect foresight and a high degree of 

uncertainty about the future, consumers 

may trade off these types of investments 

at a higher than expected rate between 

current consumption and uncertain 

future energy cost savings. 

In DOE’s current regulatory analysis, 

potential changes in the benefits and 

costs of a regulation due to changes in 

consumer purchase decisions are 

included in two ways. First, if 

consumers forgo the purchase of a 

product in the standards case, this 

decreases sales for product 

manufacturers, and the impact on 

manufacturers attributed to lost revenue 

is included in the MIA. Second, DOE 

accounts for energy savings attributable 

only to products actually used by 

consumers in the standards case; if a 

standard decreases the number of 

products purchased by consumers or 

increases consumer use of energy, such 

as through a rebound rate, this decreases 

the potential energy savings from an 

energy conservation standard. DOE 

provides estimates of shipments and 

changes in the volume of product 

purchases in chapter 9 of the final rule 

TSD. However, DOE’s current analysis 

does not explicitly control for 

heterogeneity in consumer preferences, 

preferences across subcategories of 

products or specific features, or 

consumer price sensitivity variation 

according to household income.284

1. Benefits and Burdens of TSLs 

Considered for Non-Weatherized Gas 

Furnaces and Mobile Home Gas 

Furnaces 

Tables V.27 and V.28 summarize the 

quantitative impacts estimated for each 

TSL for NWGFs and MHGFs. The 

national impacts are measured over the 

lifetime of NWGFs and MHGFs 

purchased in the 30-year period that 

begins in the anticipated year of 

compliance with amended standards 

(2029–2058). The energy savings and 

emissions reductions refer to full-fuelcycle results. The efficiency levels 

contained in each TSL are described 

further in section V.A of this document. 

TABLE V.27—SUMMARY OF ANALYTICAL RESULTS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS

FURNACE TSLS: NATIONAL IMPACTS

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 TSL 8 TSL 9 

Cumulative FFC National Energy Savings (quads) 

Quads ................................................................................................................ 1.52 2.11 2.42 3.10 2.65 3.63 3.63 4.77 6.26 

Cumulative FFC Emissions Reduction (total FFC emission) 

CO2 (million metric tons) ................................................................................... 86 121 142 197 158 268 215 332 472 

CH4 (thousand tons) ......................................................................................... 1,082 1,531 1,803 2,522 2,007 3,476 2,728 4,286 6,144 

N2O (thousand tons) ......................................................................................... 0.16 0.22 0.24 0.28 0.26 0.26 0.36 0.38 0.43 

NOX (thousand tons) ......................................................................................... 234 331 390 546 435 752 591 928 1,329

SO2 (thousand tons) ......................................................................................... (0) (1) (1) (4) (2) (10) (2) (10) (19) 

Hg (tons) ........................................................................................................... (0.00) (0.01) (0.01) (0.03) (0.02) (0.08) (0.02) (0.08) (0.15) 

Present Value of Benefits and Costs (3% discount rate, billion 2022$) 

Consumer Operating Cost Savings .................................................................. 6.3 9.3 10.9 13.9 12.4 18.8 17.3 24.8 32.8 

Climate Benefits * .............................................................................................. 4.3 6.2 7.3 10.0 8.1 13.9 11.0 17.3 24.8 

Health Benefits ** .............................................................................................. 6.8 9.7 11.4 15.5 12.7 21.4 17.3 26.6 37.9 

Total Benefits † .................................................................................................. 17.4 25.2 29.7 39.4 33.2 54.1 45.6 68.7 95.5 

Consumer Incremental Product Costs ‡ ........................................................... 1.8 2.5 3.1 3.9 3.5 7.0 4.6 8.5 15.6 

Consumer Net Benefits ..................................................................................... 4.5 6.7 7.8 10.0 8.9 11.8 12.7 16.3 17.2 

Total Net Benefits ............................................................................................. 15.7 22.6 26.6 35.5 29.7 47.2 41.0 60.2 79.9 


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TABLE V.27—SUMMARY OF ANALYTICAL RESULTS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS

FURNACE TSLS: NATIONAL IMPACTS—Continued 

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 TSL 8 TSL 9 

Present Value of Benefits and Costs (7% discount rate, billions 2022$) 

Consumer Operating Cost Savings .................................................................. 2.3 3.4 4.1 5.1 4.6 7.0 6.4 9.3 12.5 

Climate Benefits * .............................................................................................. 4.3 6.2 7.3 10.0 8.1 13.9 11.0 17.3 24.8 

Health Benefits ** .............................................................................................. 2.2 3.1 3.7 5.0 4.1 7.0 5.6 8.7 12.6 

Total Benefits † .................................................................................................. 8.8 12.7 15.1 20.1 16.8 28.0 23.1 35.3 49.8 

Consumer Incremental Product Costs ‡ ........................................................... 1.0 1.4 1.7 2.0 1.9 3.8 2.4 4.5 8.4 

Consumer Net Benefits ..................................................................................... 1.3 2.0 2.4 3.1 2.7 3.2 4.1 4.8 4.0 

Total Net Benefits ............................................................................................. 7.8 11.4 13.4 18.0 14.9 24.2 20.7 30.8 41.4 

Note: This table presents the costs and benefits associated with consumer furnaces shipped in 2029–2058. These results include benefits to consumers which accrue after 2058 from the products shipped in 2029–2058. Parentheses indicate negative (¥) values. 

* Climate benefits are calculated using four different estimates of the social cost of carbon (SC–CO2), methane (SC–CH4), and nitrous oxide (SC–N2O) (model average at 2.5-percent, 3-percent, and 5-percent discount rates; 95th-percentile at 3-percent discount rate). Together these represent the global social cost of greenhouse 

gases (SC–GHG). For presentational purposes of this table, the climate benefits associated with the average SC–GHG at a 3-percent discount rate are shown, but 

the Department does not have a single, central SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated using all 

four sets of SC–GHG estimates. To monetize the benefits of reducing GHG emissions, this analysis uses the interim estimates presented in the Technical Support 

Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive Order 13990 published in February 2021 by the IWG. 

** Net health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health 

benefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. 

† Total and net benefits include those consumer, climate, and health benefits that can be monetized. For presentation purposes, total and net benefits for both the 

3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate. 

‡ Costs include incremental equipment costs as well as installation costs. 

TABLE V.28—SUMMARY OF ANALYTICAL RESULTS FOR NON-WEATHERIZED GAS FURNACE AND MOBILE HOME GAS

FURNACE TSLS: MANUFACTURER AND CONSUMER IMPACTS

Category TSL 1 TSL 2 TSL 3 TSL 4 TSL 5 TSL 6 TSL 7 TSL 8 TSL 9 

Manufacturer Impacts 

Industry NPV (million 

2022$) (No-new-standards case INPV = 

1,371.8).

1,264.0 to 

1,351.3.

1,226.7 to 

1,345.3.

1,207.5 to 

1,337.0.

1,089.0 to 

1,342.5.

1,199.9 to 

1,341.4.

1,201.3 to 

1,337.9.

1,015.1 to 

1,339.1.

1,004.6 to 

1,338.0.

703.1 to 

1,352.7 

Industry NPV (% change) (7.9) to (1.5) (10.6) to 

(1.9).

(12.0) to 

(2.5).

(20.6) to 

(2.1).

(12.5) to 

(2.2).

(12.4) to (2.5) (26.0) to 

(2.4).

(26.8) to 

(2.5).

(48.7) to 

(1.4) 

Consumer Average LCC Savings (2022$) 

NWGF .............................. 577 ............. 571 ............. 580 ............. 390 ............. 551 ............. 320 ................. 479 ............. 350 ............. 169 

MHGF ............................... 846 ............. 805 ............. 736 ............. 908 ............. 675 ............. 532 ................. 760 ............. 616 ............. 529 

Shipment-Weighted Average *

.

583 ............. 580 ............. 587 ............. 406 ............. 557 ............. 327 ................. 487 ............. 357 ............. 176 

Consumer Simple PBP (years) 

NWGF .............................. 6.4 .............. 6.6 .............. 6.7 .............. 7.0 .............. 7.0 .............. 9.4 .................. 5.8 .............. 7.6 .............. 10.1 

MHGF ............................... 2.2 .............. 2.5 .............. 2.5 .............. 2.4 .............. 2.6 .............. 3.6 .................. 2.4 .............. 3.2 .............. 4.8 

Shipment-Weighted Average *

.

6.4 .............. 6.5 .............. 6.6 .............. 6.9 .............. 7.0 .............. 9.2 .................. 5.7 .............. 7.5 .............. 10.0 

Percentage of Consumers That Experience a Net Cost 

NWGF .............................. 3.2 .............. 4.7 .............. 5.8 .............. 5.6 .............. 6.8 .............. 19.2 ................ 6.8 .............. 18.7 ............ 62.3 

MHGF ............................... 0.6 .............. 2.5 .............. 3.7 .............. 3.9 .............. 5.0 .............. 16.2 ................ 5.0 .............. 15.3 ............ 18.6 

Shipment-Weighted Average *

.

3.1 .............. 4.6 .............. 5.8 .............. 5.6 .............. 6.8 .............. 19.2 ................ 6.8 .............. 18.7 ............ 61.4 

Note: Parentheses indicate negative (¥) values. 

* Weighted by shares of each product class in total projected shipments in 2029. 

DOE first considered the standards at 

TSL 9, which represents the max-tech 

efficiency levels and which includes the 

highest efficiency commercially 

available for both non-weatherized gas 

furnaces and mobile furnaces (i.e., 98- 

percent AFUE for NWGFs and 96- 

percent AFUE for MHGFs). TSL 9 would 

save 6.26 quads of energy, an amount 

DOE considers significant. Under TSL 9, 

the NPV of consumer benefit would be 

$4.0 billion using a discount rate of 7 

percent, and $17.2 billion using a 

discount rate of 3 percent. 

The cumulative emissions reductions 

at TSL 9 are 472 Mt of CO2, 6.1 million 

tons of CH4, 0.4 thousand tons of N2O, 

and 1.3 million tons of NOX. Projected 

emissions show an increase of 19 

thousand tons of SO2 and 0.15 tons of 

Hg. The increase is due to projected 

switching from gas furnaces to electric 

heat pumps and electric furnaces by 

some consumers under standards at TSL 

9. The estimated monetary value of the 

climate benefits from reduced GHG 

emissions (associated with the average 

SC–GHG at a 3-percent discount rate) at 

TSL 9 is $24.8 billion. The estimated 

monetary value of the net health 

benefits from changes to NOX and SO2

emissions at TSL 9 is $12.6 billion using 

a 7-percent discount rate and $37.9 

billion using a 3-percent discount rate. 

Using a 7-percent discount rate for 

consumer benefits and costs, net health 

benefits from SO2 and NOX emission 

changes, and the 3-percent discount rate 

case for climate benefits from reduced 

GHG emissions, the estimated total NPV 

at TSL 9 is $41.4 billion. Using a 3- 

percent discount rate for all benefits and 


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costs, the estimated total NPV at TSL 9 

is $79.9 billion. 

At TSL 9, the average LCC impact on 

affected consumers is a savings of $169 

for NWGFs and $529 for MHGFs. The 

simple payback period is 10.1 years for 

NWGFs and 4.8 years for MHGFs. The 

fraction of consumers experiencing a net 

LCC cost is 62.3 percent for NWGFs and 

18.3 percent for MHGFs. The fraction of 

low-income consumers experiencing a 

net LCC cost is 39.7 percent for NWGFs 

and 18.0 percent for MHGFs. 

At TSL 9, the projected changes in 

INPV range from a decrease of $668.7 

million to a decrease of $19.1 million. 

If the more severe end of this range is 

realized, TSL 9 could result in a net loss 

of 48.7 percent in INPV. Industry 

conversion costs could reach $328.0 

million at this TSL. 

At TSL 9, manufacturers would need 

to significantly restructure their product 

offerings. Currently, less than half of 

consumer furnace manufacturers offer a 

product that meets the max-tech 

efficiencies. The models available at 

these efficiencies are not produced in 

high volumes. DOE estimates that 

approximately 1.4 percent of NWGF 

shipments and 0.9 percent of MHGF 

shipments are currently sold (2023) at 

the max-tech levels, 98-percent AFUE 

and 96-percent AFUE, respectively. The 

NWGF industry would incur significant 

product conversion costs to develop 

cost-optimized NWGF models for a 

marketplace where efficiency and 

combustion system technology are no 

longer viable options for product 

differentiation. Similarly, the MHGF 

industry would incur significant 

product conversion costs to develop 

cost-optimized models for a marketplace 

where efficiency is no longer a means 

for product differentiation. As noted in 

section IV.J.2.d of this document, 

manufacturers currently maintain 

multiple tiers of product lines, which 

have varying levels of profitability. DOE 

models the industry operating with 

three manufacturer markup tiers (‘‘good, 

better, best’’) that are primarily 

differentiated on AFUE and combustion 

system technology (e.g., single-stage, 

two-stage, and modulating combustion 

systems). Generally, higher-efficiency 

models and those with more advanced 

combustion system technology 

command a higher manufacturer 

markup than lower efficiency models. 

At max-tech, NWGF and MHGF 

manufacturers would lose the ability to 

charge a premium markup based on 

AFUE, which would lead to an overall 

reduction in profitability. At the NWGF 

max-tech level, manufacturers would 

also lose the ability to differentiate 

products based on combustion system 

technology, as all models would need to 

integrate modulating combustion. 

Without these differentiators, 

manufacturers would have a more 

difficult time maintaining premium 

product lines that command higher 

manufacturer markups. The reduction 

in product differentiation leads to a 

reduction in profitability, which is a key 

driver of loss in INPV. Even as 

profitability of products is expected to 

decline, NWGF and MHGF 

manufacturers would need to invest in 

significant capital conversion costs to 

update manufacturing lines to produce 

max-tech designs at high volume. The 

reduced profitability due to limited 

product differentiation, large upfront 

investments to remain in the market, 

and negative impacts on INPV could 

alter the consumer furnaces competitive 

landscape. Manufacturers that have 

lower cash reserves, more difficulty 

raising capital, a greater portion of 

products that require redesign, or fewer 

technical resources would experience 

more business risk than their 

competitors in the industry. 

Based upon the above considerations, 

the Secretary concludes that at TSL 9 for 

NWGFs and MHGFs, the benefits of 

energy savings, positive NPV of 

consumer benefits, emission reductions, 

and the estimated monetary value of the 

net health benefits of emissions 

reductions would be outweighed by the 

economic burden on many consumers, 

especially low-income consumers, as 

well as the impacts on manufacturers, 

including the large potential reduction 

in INPV. In reaching this decision, DOE 

notes that a large fraction of both NWGF 

and MHGF consumers (62.3 percent and 

18.6 percent, respectively), including 

low-income consumers, experience a 

net cost at TSL 9. This is due to the high 

incremental cost of NWGFs and MHGFs 

at the max-tech efficiency levels. This is 

particularly pronounced for NWGFs, 

where the incremental production cost 

above baseline is more than twice as 

large as the next highest efficiency level 

(see section IV.C.2 of this document). 

Consumers with existing furnaces above 

90-percent AFUE but below 98-percent 

AFUE are more likely to experience a 

net cost at TSL 9, given the relatively 

modest decrease in operating costs 

compared to the high incremental 

installed costs. DOE also notes the 

consumer impacts are similar across the 

range of sensitivity analyses performed, 

particularly with respect to the fraction 

of consumers who may switch to 

alternative space-heating products. A 

large fraction of NWGF and MHGF 

consumers in the sensitivity analyses 

experience a net cost at TSL 9 as well. 

Therefore, DOE’s conclusions would not 

change if based on any of the sensitivity 

scenarios. At max-tech, most 

manufacturers would need to make 

significant upfront investments to 

update product lines and manufacturing 

facilities. Additionally, the companies 

must make those investments to remain 

in a less-profitable market where there 

is less product differentiation to 

maintain premium pricing tiers and 

where consumers are more likely to 

repair their existing furnaces or switch 

to alternative heating technologies. As 

result, there is risk that some 

manufacturers would choose to leave 

the market and risk that the standard 

would drive industry consolidation that 

would not otherwise have occurred. 

Consequently, the Secretary has 

concluded that TSL 9 is not 

economically justified. 

DOE then considered the standards at 

TSL 8, which consists of intermediate 

condensing efficiency levels at 95- 

percent AFUE for both NWGFs and 

MHGFs across the Nation. TSL 8 would 

save 4.77 quads of energy, an amount 

DOE considers significant. Under TSL 8, 

the NPV of consumer benefit would be 

$4.8 billion using a discount rate of 7 

percent, and $16.3 billion using a 

discount rate of 3 percent. 

The cumulative emissions reductions 

at TSL 8 would be expected to be 332 

Mt of CO2, 4.3 million tons of CH4, 0.4 

thousand tons of N2O, and 0.9 million 

tons of NOX. Projected emissions show 

an increase of 10 thousand tons of SO2

and 0.08 tons of Hg. The increase is due 

to projected switching from gas furnaces 

to electric heat pumps and electric 

furnaces by some consumers under 

standards at TSL 8. The estimated 

monetary value of the climate benefits 

from reduced GHG emissions 

(associated with the average SC–GHG at 

a 3-percent discount rate) at TSL 8 is 

$17.3 billion. The estimated monetary 

value of the net health benefits from 

changes to NOX and SO2 emissions at 

TSL 8 is $8.7 billion using a 7-percent 

discount rate and $26.6 billion using a 

3-percent discount rate. 

Using a 7-percent discount rate for 

consumer benefits and costs, net health 

benefits from SO2 and NOX emission 

changes, and the 3-percent discount rate 

case for climate benefits from reduced 

GHG emissions, the estimated total NPV 

at TSL 8 is $30.8 billion. Using a 3- 

percent discount rate for all benefits and 

costs, the estimated total NPV at TSL 8 

is $60.2 billion. 

At TSL 8, the average LCC impact on 

affected consumers is a savings of $350 

for NWGFs and $616 for MHGFs. The 

simple payback period is 7.6 years for 

NWGFs and 3.2 years for MHGFs. The 


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fraction of consumers experiencing a net 

LCC cost is 18.7 percent for NWGFs and 

15.3 percent for MHGFs. The fraction of 

low-income consumers experiencing a 

net LCC cost is 15.9 percent for NWGFs 

and 15.3 percent for MHGFs. 

At TSL 8, the projected changes in 

INPV range from a decrease of $367.3 

million to a decrease of $33.8 million. 

If the more severe end of this range is 

realized, TSL 8 could result in a net loss 

of 26.8 percent in INPV. Industry 

conversion costs would reach $162.0 

million as manufacturers expand 

secondary heat exchanger capacity and 

redesign products to meet the standard. 

At TSL 8, manufacturers would incur 

conversion costs to develop costoptimized model offerings at the new 

minimum 95-percent AFUE and to 

expand secondary heat exchanger 

production capacity. However, the 

conversion costs at TSL 8 are 

substantially lower than those at TSL 9. 

Ninety percent of manufacturers 

currently have a range of compliant 

offerings at TSL 8. DOE estimates that 

approximately 41.6 percent of the 

annual NWGF shipments and 

approximately 19.5 percent of the 

annual MHGF shipments are already at 

this level. Furthermore, manufacturers 

would not be making the upfront 

investments with same level of 

profitability risk noted at TSL 9. With a 

national standard of 95-percent AFUE, 

both NWGF and MHGF manufacturers 

would maintain the ability to 

differentiate products based on 

efficiency and combustion system 

technology. With these options 

available, industry can continue to 

operate with three markup tiers (‘‘good, 

better, best’’) that enable greater 

industry profitability. However, the 

range of manufacturer markups are 

compressed, as max-tech products 

would not be expected to command the 

same premium as they did in the nonew-standards case. 

After considering the analysis and 

weighing the benefits and burdens, the 

Secretary has concluded that a standard 

set at TSL 8 for NWGFs and MHGFs 

would be economically justified. At this 

TSL, the average LCC savings for both 

NWGF and MHGF consumers are 

positive. An estimated 18.7 percent of 

NWGF consumers and 15.3 percent of 

MHGF consumers experience a net cost. 

The reduction in the percentage of 

consumers experiencing a net cost at 

TSL 8 compared to TSL 9 is largely due 

to the market share of consumers 

already with a furnace at 95-percent 

AFUE (see section IV.F.8 of this 

document). These consumers are not 

impacted by a standard set at TSL 8. For 

the remaining consumers that are 

impacted, the lower incremental cost 

above baseline for a 95-percent AFUE 

furnace compared to a max-tech furnace 

(see section IV.C.2 of this document), 

particularly for NWGFs, results in fewer 

consumers experiencing a net cost as 

compared to TSL 9. DOE also notes the 

consumer impacts are similar across the 

range of sensitivity analyses performed, 

particularly with respect to the fraction 

of consumers who may switch to 

alternative space-heating products. A 

much smaller fraction of NWGF and 

MHGF consumers in the sensitivity 

analyses experience a net cost at TSL 8 

as compared to TSL 9 as well. 

Therefore, DOE’s conclusions would not 

change if based on any of the sensitivity 

scenarios. The FFC national energy 

savings at TSL 8 are significant, and the 

NPV of consumer benefits is positive 

using both a 3-percent and 7-percent 

discount rate. Notably, the benefits to 

consumers vastly outweigh the cost to 

manufacturers. At TSL 8, the NPV of 

consumer benefits, even measured at the 

more conservative discount rate of 7 

percent, is 13 times higher than the 

maximum estimated manufacturers’ loss 

in INPV. The shipment-weighted 

average LCC savings are 2 times higher 

than at TSL 9. The standard levels at 

TSL 8 are economically justified even 

without weighing the estimated 

monetary value of the net health 

benefits of emissions reductions. When 

those emissions reductions are 

included—representing $17.3 billion in 

climate benefits (associated with the 

average SC–GHG at a 3-percent discount 

rate), and $26.6 billion (using a 3- 

percent discount rate) or $8.7 billion 

(using a 7-percent discount rate) in net 

health benefits—the rationale becomes 

stronger still. 

DOE further notes that there have 

been regulations in Canada requiring 

condensing furnaces with at least 90- 

percent AFUE for over ten years and 

requiring at least 95-precent AFUE since 

July 2019 (see section II.B.3 of this final 

rule). The adopted standard levels for 

NWGFs at TSL 8 align with the 

Canadian regulations. As discussed in 

the 2016 SNOPR (since withdrawn), 

some stakeholders noted that Canada 

has required condensing furnaces for 

years and stated that neither Natural 

Resources Canada nor its mortgage 

agency found any significant 

implementation issues. 81 FR 65720, 

65779 (Sept. 23, 2016). While DOE 

realizes that climate and fuel prices 

differ between the U.S. and Canada and 

will yield different results in terms of 

costs and benefits of the standard, there 

are similarities in the equipment and 

venting materials used in both the U.S. 

and Canada with respect to NWGFs. 

Because the stock of buildings using 

NWGFs in Canada has many similarities 

to the stock using NWGFs in northern 

parts of the U.S., the Canadian 

experience in terms of installation of 

condensing furnaces has relevance to 

the U.S. 

DOE acknowledges that an estimated 

15.9 percent of low-income NWGF and 

15.3 percent of low-income MHGF 

consumers experience a net cost at TSL 

8, whereas an estimated 5.7 percent of 

low-income NWGF and 4.7 percent of 

low-income MHGF consumers 

experience a net cost at TSL 7. (TSL 7 

is an AFUE standard at the same level 

as TSL 8 but for NWGFs and MHGFs 

greater than 55 kBtu/h only.) The 

majority of negatively impacted lowincome consumers at TSL 8 have 

smaller capacity NWGFs or MHGFs 

below 55 kBtu/h and, therefore, would 

not be impacted by a standard set at TSL 

7, since the standards for NWGFs and 

MHGFs below 55 kBtu/h would remain 

at 80-percent AFUE. However, 

compared to TSL 7, it is estimated that 

TSL 8 would result in additional FFC 

national energy savings of 1.14 quads 

and additional net health benefits of 

$9.3 billion (using a 3-percent discount 

rate) or $3.1 billion (using a 7-percent 

discount rate). The national consumer 

NPV similarly increases at TSL 8, 

compared to TSL 7, by $0.7 billion 

using a 7-percent discount rate and $3.6 

billion using a 3-percent discount rate. 

These additional savings and benefits at 

TSL 8 are significant. DOE considers 

these impacts to be, as a whole, 

economically justified at TSL 8. 

Accordingly, the Secretary has 

concluded that TSL 8 would offer the 

maximum improvement in efficiency 

that is technologically feasible and 

economically justified and would result 

in the significant conservation of 

energy. Although results are presented 

here in terms of TSLs, DOE analyzes 

and evaluates all possible ELs for each 

product class in its analysis. For both 

NWGFs and MHGFs, TSL 8 is 

comprised of the highest efficiency level 

below max-tech. For NWGFs and 

MHGFs, the max-tech efficiency level 

results in a large percentage of 

consumers that experience a net LCC 

cost, in addition to significant 

manufacturer impacts. The ELs one 

level below max-tech, representing the 

adopted standard levels, result in 

positive LCC savings for both classes, 

significantly reduce the number of 

consumers experiencing a net cost, and 

reduce the decrease in INPV and 

conversion costs to the point where 

DOE has concluded they are 


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economically justified, as discussed for 

TSL 8 in the preceding paragraphs. 

Therefore, based on the 

considerations discussed, DOE adopts 

the energy conservation standards for 

NWGFs and MHGFs at TSL 8. The 

adopted energy conservation standards 

for NWGFs and MHGFs, which are 

expressed as AFUE, are shown in Table 

V.29. 

TABLE V.29—ADOPTED ENERGY CONSERVATION STANDARDS FOR NON-WEATHERIZED GAS FURNACES AND MOBILE

HOME GAS FURNACES

[Compliance starting 2029] 

Product class AFUE 

(percent) 

Non-Weatherized Gas Furnaces ......................................................................................................................................................... 95 

Mobile Home Gas Furnaces ................................................................................................................................................................ 95 

2. Annualized Benefits and Costs of the 

Adopted Standards 

The benefits and costs of the adopted 

standards can also be expressed in terms 

of annualized values. The annualized 

net benefit is: (1) the annualized 

national economic value (expressed in 

2022$) of the benefits from operating 

products that meet the adopted 

standards (consisting primarily of 

operating cost savings from using less 

energy, minus increases in product 

purchase costs), and (2) the annualized 

monetary value of the climate and net 

health benefits from emission 

reductions. 

Table V.30 shows the annualized 

values under TSL 8, expressed in 2022$. 

The results under the primary estimate 

are as follows. 

Using a 7-percent discount rate for 

consumer benefits and costs and net 

health benefits from SO2 and NOX

emission changes, and the 3-percent 

discount rate case for climate benefits 

from reduced GHG emissions, the 

estimated cost of the adopted standards 

is $511 million per year in increased 

equipment costs, while the estimated 

annual benefits would be $1,054 million 

in reduced equipment operating costs, 

$1,021 million in climate benefits, and 

$987 million in net health benefits 

(accounting for reduced NOX emissions 

and increased SO2 emissions). In this 

case, the net benefit amounts to $2,551 

million per year. 

Using a 3-percent discount rate for all 

benefits and costs, the estimated cost of 

the adopted standards is $500 million 

per year in increased equipment costs, 

while the estimated annual benefits 

would be $1,467 million in reduced 

operating costs, $1,021 million in 

climate benefits, and $1,574 million in 

net health benefits (accounting for 

reduced NOX emissions and increased 

SO2 emissions). In this case, the net 

benefit amounts to $3,561 million per 

year. 

TABLE V.30—ANNUALIZED MONETIZED BENEFITS AND COSTS OF ADOPTED STANDARDS FOR NON-WEATHERIZED GAS

FURNACES AND MOBILE HOME GAS FURNACES

[TSL 8] 

Million 2022$/year 

Primary 

estimate 

Low-netbenefits 

estimate 

High-netbenefits 

estimate 

3% discount rate 

Consumer Operating Cost Savings ......................................................................................................... 1,467 1,528 1,440 

Climate Benefits * ..................................................................................................................................... 1,021 1,003 1,028 

Net Health Benefits ** .............................................................................................................................. 1,574 1,546 1,585 

Total Monetized Benefits † ...................................................................................................................... 4,061 4,077 4,053 

Consumer Incremental Product Costs ‡ .................................................................................................. 500 520 489 

Net Monetized Benefits ........................................................................................................................... 3,561 3,557 3,564 

Change in Producer Cashflow (INPV‡‡) ................................................................................................ (27)–(2) (27)–(2) (27)–(2) 

7% discount rate 

Consumer Operating Cost Savings ......................................................................................................... 1,054 1,094 1,051 

Climate Benefits * (3% discount rate) ...................................................................................................... 1,021 1,003 1,028 

Health Benefits ** ..................................................................................................................................... 987 972 994 

Total Monetized Benefits † ...................................................................................................................... 3,062 3,069 3,073 

Consumer Incremental Product Costs ‡ .................................................................................................. 511 528 501 

Net Monetized Benefits ........................................................................................................................... 2,551 2,541 2,572 

Change in Producer Cashflow (INPV‡‡) ................................................................................................ (27)–(2) (27)–(2) (27)–(2) 

Note: This table presents the costs and benefits associated with consumer furnaces shipped in 2029–2058. These results include benefits to 

consumers which accrue after 2058 from the products shipped in 2029–2058. 

* Climate benefits are calculated using four different estimates of the global SC–GHG (see section IV.L of this document). For presentational 

purposes of this table, the climate benefits associated with the average SC–GHG at a 3-percent discount rate are shown, but the Department 

does not have a single, central SC–GHG point estimate. DOE emphasizes the importance and value of considering the benefits calculated using 

all four sets of SC–GHG estimates. To monetize the benefits of reducing GHG emissions, this analysis uses the interim estimates presented in 

the Technical Support Document: Social Cost of Carbon, Methane, and Nitrous Oxide Interim Estimates Under Executive Order 13990 published 

in February 2021 by the IWG. 


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** Health benefits are calculated using benefit-per-ton values for NOX and SO2. DOE is currently only monetizing (for SO2 and NOX) PM2.5 precursor health benefits and disbenefits and (for NOX) ozone precursor health benefits, but will continue to assess the ability to monetize other effects such as health benefits from reductions in direct PM2.5 emissions. See section IV.L of this document for more details. 

† Total benefits for both the 3-percent and 7-percent cases are presented using the average SC–GHG with 3-percent discount rate.

‡ Costs include incremental equipment costs, as well as installation costs. 

‡‡ Operating Cost Savings are calculated based on the LCC analysis and national impact analysis as discussed in detail below. See sections 

IV.F and IV.H of this document. DOE’s national impact analysis includes all impacts (both costs and benefits) along the distribution chain beginning with the increased costs to the manufacturer to manufacture the product and ending with the increase in price experienced by the consumer. DOE also separately conducts a detailed analysis on the impacts on manufacturers (the MIA). See section IV.J of this document. In the 

detailed MIA, DOE models manufacturers’ pricing decisions based on assumptions regarding investments, conversion costs, cashflow, and margins. The MIA produces a range of impacts, which is the rule’s expected impact on the INPV. The change in INPV is the present value of all 

changes in industry cash flow, including changes in production costs, capital expenditures, and manufacturer profit margins. The annualized 

change in INPV is calculated using the industry weighted average cost of capital value of 6.4 percent that is estimated in the manufacturer impact analysis (see chapter 12 of the final rule TSD for a complete description of the industry weighted average cost of capital). For NWGFs and 

MHGFs, those values are ¥$27 million to ¥$2 million. DOE accounts for that range of likely impacts in analyzing whether a TSL is economically 

justified. See section V.C of this document. DOE is presenting the range of impacts to the INPV under two manufacturer markup scenarios: the 

Preservation of Gross Margin scenario, which is the manufacturer markup scenario used in the calculation of Consumer Operating Cost Savings 

in this table, and the Tiered scenario, where DOE assumed amended standards would result in a reduction of product differentiation and a compression of the markup tiers. DOE includes the range of estimated annualized change in INPV in the above table, drawing on the MIA explained 

further in section IV.J of this document, to provide additional context for assessing the estimated impacts of this final rule to society, including potential changes in production and consumption, which is consistent with OMB’s Circular A–4 and E.O. 12866. If DOE were to include the INPV 

into the annualized net benefit calculation for this final rule, the annualized net benefits would range from $3,534 million to $3,559 million at 3- 

percent discount rate and would range from $2,524 million to $2,549 million at 7-percent discount rate. Parentheses ( ) indicate negative values. 

VI. Procedural Issues and Regulatory 

Review 

A. Review Under Executive Orders 

12866, 13563, and 14094 

Executive Order (E.O.) 12866, 

‘‘Regulatory Planning and Review,’’ 58 

FR 51735 (Oct. 4, 1993), as 

supplemented and reaffirmed by E.O. 

13563, ‘‘Improving Regulation and 

Regulatory Review,’’ 76 FR 3821 (Jan. 

21, 2011), and E.O. 14094, 

‘‘Modernizing Regulatory Review,’’ 88 

FR 21879 (April 11, 2023), requires 

agencies, to the extent permitted by law, 

to: (1) propose or adopt a regulation 

only upon a reasoned determination 

that its benefits justify its costs 

(recognizing that some benefits and 

costs are difficult to quantify); (2) tailor 

regulations to impose the least burden 

on society, consistent with obtaining 

regulatory objectives, taking into 

account, among other things, and to the 

extent practicable, the costs of 

cumulative regulations; (3) select, in 

choosing among alternative regulatory 

approaches, those approaches that 

maximize net benefits (including 

potential economic, environmental, 

public health and safety, and other 

advantages; distributive impacts; and 

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

performance objectives, rather than 

specifying the behavior or manner of 

compliance that regulated entities must 

adopt; and (5) identify and assess 

available alternatives to direct 

regulation, including providing 

economic incentives to encourage the 

desired behavior, such as user fees or 

marketable permits, or providing 

information upon which choices can be 

made by the public. DOE emphasizes as 

well that E.O. 13563 requires agencies to 

use the best available techniques to 

quantify anticipated present and future 

benefits and costs as accurately as 

possible. In its guidance, the Office of 

Information and Regulatory Affairs 

(OIRA) in the Office of Management and 

Budget (OMB) has emphasized that such 

techniques may include identifying 

changing future compliance costs that 

might result from technological 

innovation or anticipated behavioral 

changes. For the reasons stated in this 

preamble, this final regulatory action is 

consistent with these principles. 

Section 6(a) of E.O. 12866 also 

requires agencies to submit ‘‘significant 

regulatory actions’’ to OIRA for review. 

OIRA has determined that this final 

regulatory action constitutes a 

‘‘significant regulatory action’’ under 

section 3(f)(1) of E.O. 12866, as 

amended by E.O. 14094. Accordingly, 

pursuant to section 6(a)(3)(C) of E.O. 

12866, DOE has provided to OIRA an 

assessment, including the underlying 

analysis, of benefits and costs 

anticipated from the final regulatory 

action, together with, to the extent 

feasible, a quantification of those costs; 

and an assessment, including the 

underlying analysis, of costs and 

benefits of potentially effective and 

reasonably feasible alternatives to the 

planned regulation, and an explanation 

why the planned regulatory action is 

preferable to the identified potential 

alternatives. These assessments are 

summarized in this preamble and 

further detail can be found in the 

technical support document for this 

rulemaking. 

B. Review Under the Regulatory 

Flexibility Act 

The Regulatory Flexibility Act (5 

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

of an initial regulatory flexibility 

analysis (IRFA) and a final regulatory 

flexibility analysis (FRFA) for any rule 

that by law must be proposed for public 

comment, unless the agency certifies 

that the rule, if promulgated, will not 

have a significant economic impact on 

a substantial number of small entities. 

As required by E.O. 13272, ‘‘Proper 

Consideration of Small Entities in 

Agency Rulemaking,’’ 67 FR 53461 

(August 16, 2002), DOE published 

procedures and policies on February 19, 

2003, to ensure that the potential 

impacts of its rules on small entities are 

properly considered during the 

rulemaking process. 68 FR 7990. DOE 

has made its procedures and policies 

available on the Office of the General 

Counsel’s website (www.energy.gov/gc/ 

office-general-counsel). DOE has 

prepared the following FRFA for the 

products that are the subject of this 

rulemaking. 

For manufacturers of NWGFs and 

MHGFs, the SBA has set a size 

threshold, which defines those entities 

classified as ‘‘small businesses’’ for the 

purposes of the statute. DOE used the 

SBA’s small business size standards to 

determine whether any small entities 

would be subject to the requirements of 

the rule. (See 13 CFR part 121.) The size 

standards are listed by North American 

Industry Classification System (NAICS) 

code and industry description and are 

available at www.sba.gov/document/ 

support-table-size-standards. 

Manufacturing of NWGFs and MHGFs is 

classified under NAICS 333415, ‘‘AirConditioning and Warm Air Heating 

Equipment and Commercial and 

Industrial Refrigeration Equipment 

Manufacturing.’’ The SBA sets a 

threshold of 1,250 employees or fewer 

for an entity to be considered as a small 

business for this category. 

1. Need for, and Objectives of the Rule 

DOE is amending the energy 

conservation standards for NWGFs and 

MHGFs. EPCA specifically provides that 

DOE must conduct two rounds of energy 


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285 DOE’s Compliance Certification Database is 

available at: www.regulations.doe.gov/certificationdata/ (last accessed March 8, 2023). 

286California Energy Commission’s MAEDbS 

(available at: cacertappliances.energy.ca.gov/Pages/ 

Search/AdvancedSearch.aspx) (last accessed July 

15, 2021). 287AHRI’s Directory of Certified Product 

Performance (available at: www.ahridirectory.org/ 

Search/SearchHome) (last accessed March 8, 2023). 288S&P Global. Panjiva Market Intelligence is 

available at: panjiva.com/import-export/UnitedStates (last accessed March 24, 2023). 289 D&B Hoovers subscription login is available at: 

app.dnbhoovers.com/ (last accessed March 24, 

2023). 

conservation standard rulemakings for 

NWGFs and MHGFs. (42 U.S.C. 

6295(f)(4)(B) and (C)) The statute also 

requires that not later than six years 

after issuance of any final rule 

establishing or amending a standard, 

DOE must publish either a notice of 

determination that standards for the 

product do not need to be amended, or 

a NOPR including new proposed energy 

conservation standards. (42 U.S.C. 

6295(m)(1)) This rulemaking is pursuant 

to the statutorily required second round 

of rulemaking for NWGFs and MHGFs 

and the statutorily required six-yearlookback review. 

2. Significant Issues Raised in Response 

to the IRFA 

In response to the July 2022 NOPR, 

NGA of Georgia stated that DOE’s 

proposal fails to capture the negative 

effects on small businesses that 

manufacture venting and accessories for 

non-condensing furnaces. (NGA of 

Georgia, No. 380 at p. 2) HARDI 

commented that the proposed standards 

also do not meet the requirements under 

the Regulatory Flexibility Act, as DOE 

only assessed the impact on four small 

manufacturers, but not on distributors, 

contractors, or manufacturers of furnace 

supplies. HARDI stated that there are a 

number of small businesses that serve as 

furnace suppliers. (HARDI, No. 384 at 

pp. 3–4) 

DOE conducted an IRFA in support of 

the July 2022 NOPR. The Regulatory 

Flexibility Act requires an agency to 

perform a regulatory flexibility analysis 

of small entity impacts only when a rule 

directly regulates the small entities. 

This final rule regulates manufacturers 

of consumer furnaces, and, as such, 

DOE’s analysis is scoped to the original 

equipment manufacturers (OEMs) of the 

covered products directly affected by 

this rulemaking. 

3. Description and Estimated Number of 

Small Entities Affected 

DOE reviewed this final rule under 

the provisions of the Regulatory 

Flexibility Act and the procedures and 

policies published on February 19, 

2003. 68 FR 7990. DOE conducted a 

market survey to identify potential 

small manufacturers of the covered 

products. DOE began its assessment by 

reviewing DOE’s Compliance 

Certification Database (CCD),285

California Energy Commission’s 

Modernized Appliance Efficiency 

Database System (MAEDbS),286 Air 

Conditioning, Heating, and Refrigeration 

Institute’s (AHRI) Directory of Certified 

Product Performance database,287

individual retailer websites, and the 

withdrawn September 2016 SNOPR to 

identify manufacturers of the covered 

products. 81 FR 65720. DOE then 

consulted publicly-available data, such 

as manufacturer websites, manufacturer 

specifications and product literature, 

import/export logs (e.g., bills of lading 

from Panjiva 288), and basic model 

numbers, to identify OEMs of the 

products covered by this rulemaking. 

DOE further relied on public data and 

subscription-based market research 

tools (e.g., Dun & Bradstreet reports) 289

to determine company location, 

headcount, and annual revenue. DOE 

also asked industry representatives if 

they were aware of any other small 

manufacturers during manufacturer 

interviews. DOE screened out 

companies that do not offer products 

covered by this rulemaking, do not meet 

the SBA’s definition of a ‘‘small 

business,’’ or are foreign-owned and 

operated. 

For the IRFA, DOE identified 15 

OEMs selling NWGFs and/or MHGFs in 

the United States. Of those 15 OEMs, 

DOE tentatively determined that four 

companies qualified as small businesses 

and were not foreign-owned or 

operated. For this FRFA, DOE refreshed 

its database of model listings to include 

the most up-to-date information on 

NWGF and MHGF models currently 

available on the market. Through its 

review of the updated product database 

and other public sources, DOE 

determined that one MHGF OEM and 

that one small domestic NWGF OEM no 

longer offer products covered by this 

rulemaking. Additionally, DOE 

identified a new entrant to the NWGF 

market that qualifies as a ‘‘small 

business.’’ Therefore, for this FRFA, 

DOE identified 14 OEMs that sell 

NWGFs and/or MHGFs in the United 

States. Of the 14 OEMs identified, DOE 

determined that four companies qualify 

as small businesses and are not foreignowned or operated. 

4. Description of Compliance 

Requirements 

Of the four small domestic OEMs 

identified, two manufacture NWGFs, 

one manufactures MHGFs, and one 

manufactures both NWGFs and MHGFs. 

DOE considered the impact of this rule 

on the four manufacturers. 

DOE adjusted the small business 

conversion cost estimates developed in 

the IRFA to 2022$ for this FRFA. As 

previously discussed, DOE also 

refreshed its database of model listings 

to include updated information on 

NWGF and MHGF models currently 

available on the market. 

One of the small NWGF 

manufacturers (‘‘Company A’’) sells a 

niche product in the NWGF market. The 

company offers three basic models of a 

through-the-wall furnace marketed for 

multi-family construction. The three 

models have identical dimensions and 

share many components. One model is 

rated at 80-percent AFUE, one model is 

rated at 93-percent AFUE, and the other 

model is rated at 95-percent AFUE. 

Given the product similarities and low 

volume of sales, DOE expects the 

manufacturer would likely discontinue 

the non-compliant models. DOE does 

not expect the small manufacturer 

would incur conversion costs due to the 

standard, as the company currently 

offers their niche product at 95-percent 

AFUE. 

The other small NWGF manufacturer 

(‘‘Company B’’) introduced new 

products into the CCD after DOE 

conducted its NOPR analysis. Since the 

July 2022 NOPR, this small NWGF 

manufacturer now offers approximately 

10 basic models of both non-condensing 

and condensing NWGFs. The noncondensing models are rated at 81- 

percent AFUE, and the condensing 

models are rated between 93-percent 

and 96-percent AFUE. The noncondensing models and condensing 

models have identical dimensions and 

share many components. Given the 

product similarities, DOE expects this 

manufacturer would likely ramp up 

production of its compliant models and 

discontinue models that do not meet the 

adopted level. However, to avoid 

underestimating the potential 

investments, DOE used model counts to 

scale industry product conversion costs 

and market share estimates to scale 

industry capital conversion costs for 

this FRFA. As discussed in this final 

rule, capital conversion costs are onetime investments in property, plant, and 

equipment necessary to adapt or change 

existing production facilities such that 

new, compliant product designs can be 

fabricated and assembled. Product 

conversion costs are one-time 

investments in research, development, 

testing, marketing, and other noncapitalized costs necessary to make 

product designs comply with amended 


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290According to D&B Hoovers, this small 

business has an estimated annual revenue of $119.8 

million. DOE calculated total conversion costs as a 

percent of revenue over the 5-year conversion 

period using the following calculation: ($0.4 

million + $1.1 million)/(5 years × $119.8 million). 

291According to D&B Hoovers, this small 

business has an estimated annual revenue of $60.4 

million. DOE calculated total conversion costs as a 

percent of revenue over the 5-year conversion 

period using the following calculation: ($1.4 

million + $5.3 million)/(5 years × $60.4 million). 

292Excluding the conversion costs attributable to 

Mortex, DOE estimates industry MHGF capital 

conversion costs of $2.6 million and industry 

MHGF product conversion costs of $0.5 million, for 

a total of $3.1 million, at the adopted level (TSL 8). 

293According to D&B Hoovers, this small 

business has an estimated annual revenue of $240.6 

million. DOE calculated total conversion costs as a 

percent of revenue over the 5-year conversion 

period using the following calculation: ($0.1 

million + $0.6 million)/(5 years × $240.6 million). 

energy conservation standards. The 

eight NWGF models that would require 

redesign or retirement is an estimated 

1.0 percent of the 825 NWGF models 

with an AFUE below 95-percent in the 

product database developed for this 

rulemaking. DOE estimates that this 

small business could incur 

approximately $0.4 million in product 

conversion costs and $1.1 million in 

capital conversion costs as they work to 

develop a condensing NWGF product 

line. The total conversion costs of $1.6 

million are approximately 0.3 percent of 

company revenues over the 5-year 

conversion period.290

The small MHGF manufacturer, 

Mortex (‘‘Company C’’), sells noncondensing furnaces into the 

manufactured housing replacement 

market. DOE identified this small 

business through its review of DOE’s 

CCD and the withdrawn September 

2016 SNOPR. Of the six MHGF OEMs 

identified, Mortex is the only MHGF 

company that does not currently offer 

any condensing products. DOE analyzed 

the conversion costs for Mortex 

separately from other MHGF 

manufacturers since Mortex would need 

to make a different set of investments 

than the rest of the MHGF industry. 

To offer condensing MHGFs, Mortex 

would need to either source secondary 

heat exchangers from a vendor or set up 

its own manufacturing line to produce 

secondary heat exchangers. Setting up 

in-house production is the significantly 

more capital-intensive option. For this 

FRFA, DOE estimated the investments 

required for the company to set up inhouse production. Based on DOE’s 

engineering analysis, the main driver of 

additional capital conversion costs 

would be the production of secondary 

heat exchangers. Including equipment, 

tooling, and conveyer, DOE estimates 

upfront capital investments of $5.3 

million to set up manufacturing of 

condensing MHGFs. Additionally, the 

design and product development (e.g., 

engineering resources, testing costs) of 

condensing products could run as high 

as $1.4 million. If the company has less 

than 15 percent market share in the 

MHGF market, as suggested by the 

percentage of industry model offerings, 

the cost recovery period for this 

investment would be in excess of 10 

years. Unlike other MHGF 

manufacturers, which can leverage their 

investments in secondary heat 

exchanger production across other 

heating products, DOE is not aware of 

any other heating product from Mortex 

that could make use of the secondary 

heat exchanger production capacity. 

The total conversion costs of $6.7 

million are approximately 2.2 percent of 

company revenues over the 5-year 

conversion period and are considered 

significant.291

Given the high upfront investment 

and long cost recovery period, the small 

manufacturer would likely seek options 

other than investing in secondary heat 

exchanger production capabilities. The 

company could source the secondary 

heat exchanger, which would reduce the 

need for capital conversion costs but 

would also increase the per-unit cost of 

the final product. DOE estimates that 

the secondary heat exchanger accounts 

for approximately 14 percent of the total 

manufacturer production cost, on 

average. Sourcing the heat exchanger 

could put the company at a pricing 

disadvantage relative to manufacturers 

that produce their heat exchangers inhouse. Depending on the business’ 

ability to compete on factors other than 

price, its willingness to invest technical 

resources toward designing a 

condensing product, and the role of 

MHGFs in the company’s business 

strategy, the small manufacturer could 

also choose to leave the MHGF business. 

The remaining small manufacturer of 

NWGFs and MHGFs (‘‘Company D’’) is 

one of the five MHGF companies that 

offer condensing products. Of these five 

companies with condensing MHGFs, 

one manufacturer only offers products 

at or above the adopted standard and 

would, therefore, likely incur no 

conversion costs. The remaining four 

manufacturers, which includes the 

small manufacturer of NWGFs and 

MHGFs, have some products that do not 

meet the standard. All MHGF 

conversion costs that are not directly 

attributed to Mortex would be borne by 

these four manufacturers. The small 

domestic business has six MHGF 

models that would require redesign or 

retirement, which is an estimated 14.6 

percent of the 41 MHGF models with an 

AFUE below 95 percent in the product 

database developed for this rulemaking. 

DOE estimated industry conversion 

costs of $3.1 million for the MHGF 

standard when excluding the 

conversion costs attributable to 

Mortex.292 For the purposes of this 

FRFA, DOE assumes the $3.1 million in 

conversion costs are evenly allocated 

across the four companies that may 

incur MHGF conversion costs. The 

MHGF-related conversion costs are 

approximately $0.8 million per 

company. DOE has determined this 

even allocation of capital and product 

conversion costs avoids underestimating the investment requirements 

on the small, domestic manufacturer, 

given that this manufacturer has a small 

market share. For the small 

manufacturer, total conversion costs are 

approximately 0.1 percent of company 

revenue over the 5-year conversion 

period.293

As noted earlier, this small domestic 

manufacturer also produces NWGFs. 

The company offers four NWGF models, 

out of over 1,300 NWGFs in the product 

database developed for this rulemaking. 

All four of their NWGF offerings are at 

or above the adopted standard and 

would not likely incur conversion costs 

due to the standard. Therefore, the small 

manufacturer that produces both 

MHGFs and NWGFs is expected to only 

incur conversion costs relating to their 

MHGF products at TSL 8, the adopted 

standard level. 


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TABLE VI.1—ESTIMATED SMALL BUSINESS IMPACTS

[TSL 8] 

Company 

Product 

conversion 

costs 

($ millions) 

Capital 

conversion 

costs 

($ millions) 

Annual 

revenue 

($ millions) 

Conversion 

period 

revenue 

($ millions) 

Conversion 

costs as a % 

of conversion 

period revenue 

Company A ...................................................................... 0.0 0.0 77.0 385.0 0.0 

Company B ...................................................................... 0.4 1.1 119.8 599.0 0.3 

Company C ...................................................................... 1.4 0.0 60.4 302.0 0.5 

Company D ...................................................................... 0.1 0.6 240.6 1,202.8 0.1 

5. Significant Alternatives Considered 

and Steps Taken To Minimize 

Significant Economic Impacts on Small 

Entities 

The discussion in the previous 

section analyzes impacts on small 

businesses that would result from the 

adopted standards, represented by TSL 

8. In reviewing alternatives to the 

adopted standards, DOE examined a 

range of different efficiency levels and 

their respective impacts to both 

manufacturers and consumers. At TSL 

9, the conversion costs were higher for 

small businesses and for industry 

overall. At TSLs 1, 2, 3, 4, 5, 6, and 7, 

the impacts on small manufacturers 

would have been potentially lower. 

However, those changes would have 

would come at the expense of reduced 

consumer benefits and a reduction in 

energy savings. In general, the consumer 

benefits were an order of magnitude 

greater than the cost to industry 

generally, and multiple orders of 

magnitude greater than the conversion 

costs to small manufacturers. DOE has 

determined that establishing standards 

at the adopted level, TSL 8, balances the 

benefits of energy savings with the 

potential burdens placed on 

manufacturers of covered products, 

including small business manufacturers. 

DOE has determined that establishing 

standards at TSL 8 would deliver the 

highest energy savings while mitigating 

the potential burdens placed on NWGF 

and MHGF manufacturers, including 

small business manufacturers. 

Accordingly, DOE is not adopting one of 

the other TSLs considered in the 

analysis, or the other policy alternatives 

examined as part of the regulatory 

impact analysis and included in chapter 

17 of the final rule TSD. 

Additional compliance flexibilities 

may be available through other means. 

EPCA provides that a manufacturer 

whose annual gross revenue from all of 

its operations does not exceed $8 

million may apply for an exemption 

from all or part of an energy 

conservation standard for a period not 

longer than 24 months after the effective 

date of a final rule establishing the 

standard. (42 U.S.C. 6295(t)) 

Additionally, manufacturers subject to 

DOE’s energy conservation standards 

may apply to DOE’s Office of Hearings 

and Appeals for exception relief under 

certain circumstances. Manufacturers 

should refer to 10 CFR part 430, subpart 

E, and 10 CFR part 1003 for additional 

details. 

C. Review Under the Paperwork 

Reduction Act 

Manufacturers of NWGFs and MHGFs 

must certify to DOE that their products 

comply with any applicable energy 

conservation standards in terms of 

AFUE. 

In certifying compliance, 

manufacturers must test their products 

according to the DOE test procedures for 

NWGFs and MHGFs, including any 

amendments adopted for those test 

procedures. DOE has established 

regulations for the certification and 

recordkeeping requirements for all 

covered consumer products and 

commercial equipment, including 

NWGFs and MHGFs. (See generally 10 

CFR part 429) These requirements were 

also discussed in some detail in the July 

2022 NOPR. 87 FR 40590, 40702 (July 

7, 2022). The collection-of-information 

requirement for the certification and 

recordkeeping is subject to review and 

approval by OMB under the Paperwork 

Reduction Act (PRA). This requirement 

has been approved by OMB under OMB 

control number 1910–1400. Public 

reporting burden for the certification is 

estimated to average 35 hours per 

response, including the time for 

reviewing instructions, searching 

existing data sources, gathering and 

maintaining the data needed, and 

completing and reviewing the collection 

of information. 

DOE is not amending the existing 

reporting requirements or establishing 

new DOE reporting requirements. If 

determined to be necessary, DOE may 

consider associated reporting and 

certification requirements in a future 

rulemaking. Therefore, DOE has 

concluded that the amended energy 

conservation standards for NWGFs and 

MHGFs will not impose additional costs 

for manufacturers related to reporting 

and certification. 

Notwithstanding any other provision 

of the law, no person is required to 

respond to, nor shall any person be 

subject to a penalty for failure to comply 

with, a collection of information subject 

to the requirements of the PRA, unless 

that collection of information displays a 

currently valid OMB control number. 

D. Review Under the National 

Environmental Policy Act of 1969 

Pursuant to the National 

Environmental Policy Act of 1969 

(NEPA), DOE has analyzed this action in 

accordance with NEPA and DOE’s 

NEPA implementing regulations (10 

CFR part 1021). DOE has determined 

that this rule qualifies for categorical 

exclusion under 10 CFR part 1021, 

subpart D, appendix B, categorical 

exclusion B5.1, because it is a 

rulemaking that establishes energy 

conservation standards for consumer 

products or industrial equipment, none 

of the exceptions identified in 

categorical exclusion B5.1(b) apply, no 

extraordinary circumstances exist that 

require further environmental analysis, 

and it otherwise meets the requirements 

for application of a categorical 

exclusion. See 10 CFR 1021.410. 

Therefore, DOE has determined that 

promulgation of this rule is not a major 

Federal action significantly affecting the 

quality of the human environment 

within the meaning of NEPA, and does 

not require an environmental 

assessment or an environmental impact 

statement. 

E. Review Under Executive Order 13132 

E.O. 13132, ‘‘Federalism,’’ 64 FR 

43255 (August 10, 1999), imposes 

certain requirements on Federal 

agencies formulating and implementing 

policies or regulations that preempt 

State law or that have federalism 

implications. The Executive order 

requires agencies to examine the 

constitutional and statutory authority 

supporting any action that would limit 

the policymaking discretion of the 


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States and to carefully assess the 

necessity for such actions. The 

Executive order also requires agencies to 

have an accountable process to ensure 

meaningful and timely input by State 

and local officials in the development of 

regulatory policies that have federalism 

implications. On March 14, 2000, DOE 

published a statement of policy 

describing the intergovernmental 

consultation process it will follow in the 

development of such regulations. 65 FR 

13735. DOE has examined this rule and 

has determined that it would not have 

a substantial direct effect on the States, 

on the relationship between the 

National Government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government. EPCA governs and 

prescribes Federal preemption of State 

regulations as to energy conservation for 

the products that are the subject of this 

final rule. States can petition DOE for 

exemption from such preemption to the 

extent, and based on criteria, set forth in 

EPCA. (42 U.S.C. 6297(d)) Therefore, no 

further action is required by Executive 

Order 13132. 

F. Review Under Executive Order 12988 

Regarding the review of existing 

regulations and the promulgation of 

new regulations, section 3(a) of E.O. 

12988, ‘‘Civil Justice Reform,’’ 61 FR 

4729 (Feb. 7, 1996), imposes on Federal 

agencies the general duty to adhere to 

the following requirements: (1) 

eliminate drafting errors and ambiguity; 

(2) write regulations to minimize 

litigation; (3) provide a clear legal 

standard for affected conduct rather 

than a general standard, and (4) promote 

simplification and burden reduction. 

Regarding the review required by 

section 3(a), section 3(b) of E.O. 12988 

specifically requires that Executive 

agencies make every reasonable effort to 

ensure that the regulation: (1) clearly 

specifies the preemptive effect, if any; 

(2) clearly specifies any effect on 

existing Federal law or regulation; (3) 

provides a clear legal standard for 

affected conduct while promoting 

simplification and burden reduction; (4) 

specifies the retroactive effect, if any; (5) 

adequately defines key terms, and (6) 

addresses other important issues 

affecting clarity and general 

draftsmanship under any guidelines 

issued by the Attorney General. Section 

3(c) of E.O. 12988 requires Executive 

agencies to review regulations in light of 

applicable standards in sections 3(a) 

and 3(b) to determine whether they are 

met or it is unreasonable to meet one or 

more of them. DOE has completed the 

required review and determined that, to 

the extent permitted by law, this final 

rule meets the relevant standards of E.O. 

12988. 

G. Review Under the Unfunded 

Mandates Reform Act of 1995 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA) requires 

each Federal agency to assess the effects 

of Federal regulatory actions on State, 

local, and Tribal governments and the 

private sector. Public Law 104–4, sec. 

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

regulatory action likely to result in a 

rule that may cause the expenditure by 

State, local, and Tribal governments, in 

the aggregate, or by the private sector of 

$100 million or more in any one year 

(adjusted annually for inflation), section 

202 of UMRA requires a Federal agency 

to publish a written statement that 

estimates the resulting costs, benefits, 

and other effects on the national 

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

UMRA also requires a Federal agency to 

develop an effective process to permit 

timely input by elected officers of State, 

local, and Tribal governments on a 

‘‘significant intergovernmental 

mandate,’’ and requires an agency plan 

for giving notice and opportunity for 

timely input to potentially affected 

small governments before establishing 

any requirements that might 

significantly or uniquely affect them. On 

March 18, 1997, DOE published a 

statement of policy on its process for 

intergovernmental consultation under 

UMRA. 62 FR 12820. DOE’s policy 

statement is also available at 

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

documents/umra_97.pdf. 

DOE has concluded that this final rule 

may require expenditures of $100 

million or more in any one year by the 

private sector. Such expenditures may 

include (1) investment in research and 

development and in capital 

expenditures by NWGF and MHGF 

manufacturers in the years between the 

final rule and the compliance date for 

the new standards and (2) incremental 

additional expenditures by consumers 

to purchase higher-efficiency NWGFs 

and MHGFs starting at the compliance 

date for the applicable standard. 

Section 202 of UMRA authorizes a 

Federal agency to respond to the content 

requirements of UMRA in any other 

statement or analysis that accompanies 

the final rule. (2 U.S.C. 1532(c)) The 

content requirements of section 202(b) 

of UMRA relevant to a private sector 

mandate substantially overlap the 

economic analysis requirements that 

apply under section 325(o) of EPCA and 

Executive Order 12866. The 

SUPPLEMENTARY INFORMATION section of 

this document and the TSD for this final 

rule respond to those requirements. 

Under section 205 of UMRA, DOE is 

obligated to identify and consider a 

reasonable number of regulatory 

alternatives before promulgating a rule 

for which a written statement under 

section 202 is required. (2 U.S.C. 

1535(a)) DOE is required to select from 

those alternatives the most cost-effective 

and least burdensome alternative that 

achieves the objectives of the rule, 

unless DOE publishes an explanation 

for doing otherwise, or the selection of 

such an alternative is inconsistent with 

law. As required by EPCA, this final 

rule establishes amended energy 

conservation standards for NWGFs and 

MHGFs that are designed to achieve the 

maximum improvement in energy 

efficiency that DOE has determined to 

be both technologically feasible and 

economically justified, as required by 42 

U.S.C. 6295(o)(2)(A) and 6295(o)(3)(B). 

A full discussion of the alternatives 

considered by DOE is presented in 

chapter 17 of the TSD for this final rule. 

H. Review Under the Treasury and 

General Government Appropriations 

Act, 1999 

Section 654 of the Treasury and 

General Government Appropriations 

Act, 1999 (Pub. L. 105–277) requires 

Federal agencies to issue a Family 

Policymaking Assessment for any rule 

that may affect family well-being. This 

rule would not have any impact on the 

autonomy or integrity of the family as 

an institution. Accordingly, DOE has 

concluded that it is not necessary to 

prepare a Family Policymaking 

Assessment. 

I. Review Under Executive Order 12630 

Pursuant to E.O. 12630, 

‘‘Governmental Actions and Interference 

with Constitutionally Protected Property 

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

DOE has determined that this rule 

would not result in any takings that 

might require compensation under the 

Fifth Amendment to the U.S. 

Constitution. 

J. Review Under the Treasury and 

General Government Appropriations 

Act, 2001 

Section 515 of the Treasury and 

General Government Appropriations 

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

provides for Federal agencies to review 

most disseminations of information to 

the public under information quality 

guidelines established by each agency 

pursuant to general guidelines issued by 

OMB. OMB’s guidelines were published 

at 67 FR 8452 (Feb. 22, 2002), and 

DOE’s guidelines were published at 67 

FR 62446 (Oct. 7, 2002). Pursuant to 

OMB Memorandum M–19–15, 


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87648 Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 

294The 2007 ‘‘Energy Conservation Standards 

Rulemaking Peer Review Report’’ is available at the 

following website: energy.gov/eere/buildings/ 

downloads/energy-conservation-standardsrulemaking-peer-review-report-0 (last accessed Feb. 

16, 2022). 

295The December 2021 NAS report is available at 

www.nationalacademies.org/our-work/review-ofmethods-for-setting-building-and-equipmentperformance-standards (last accessed August 14, 

2023). 

‘‘Improving Implementation of the 

Information Quality Act’’ (April 24, 

2019), DOE published updated 

guidelines which are available at: 

www.energy.gov/sites/prod/files/2019/ 

12/f70/DOE%20Final%20Updated

%20IQA%20Guidelines

%20Dec%202019.pdf. DOE has 

reviewed this final rule under the OMB 

and DOE guidelines and has concluded 

that it is consistent with applicable 

policies in those guidelines. 

K. Review Under Executive Order 13211 

E.O. 13211, ‘‘Actions Concerning 

Regulations That Significantly Affect 

Energy Supply, Distribution, or Use,’’ 66 

FR 28355 (May 22, 2001), requires 

Federal agencies to prepare and submit 

to OIRA at OMB, a Statement of Energy 

Effects for any significant energy action. 

A ‘‘significant energy action’’ is defined 

as any action by an agency that 

promulgates or is expected to lead to 

promulgation of a final rule, and that: 

(1) is a significant regulatory action 

under Executive Order 12866, or any 

successor order; and (2) is likely to have 

a significant adverse effect on the 

supply, distribution, or use of energy, or 

(3) is designated by the Administrator of 

OIRA as a significant energy action. For 

any significant energy action, the agency 

must give a detailed statement of any 

adverse effects on energy supply, 

distribution, or use should the proposal 

be implemented, and of reasonable 

alternatives to the action and their 

expected benefits on energy supply, 

distribution, and use. 

DOE has concluded that this 

regulatory action, which sets forth 

amended energy conservation standards 

for NWGFs and MHGFs, is not a 

significant energy action because the 

standards are not likely to have a 

significant adverse effect on the supply, 

distribution, or use of energy, nor has it 

been designated as such by the 

Administrator at OIRA. Accordingly, 

DOE has not prepared a Statement of 

Energy Effects on this final rule. 

L. Review Under the Information 

Quality Bulletin for Peer Review 

On December 16, 2004, OMB, in 

consultation with the Office of Science 

and Technology Policy (OSTP), issued 

its Final Information Quality Bulletin 

for Peer Review (‘‘the Bulletin’’). 70 FR 

2664 (Jan. 14, 2005). The Bulletin 

establishes that certain scientific 

information shall be peer reviewed by 

qualified specialists before it is 

disseminated by the Federal 

Government, including influential 

scientific information related to agency 

regulatory actions. The purpose of the 

Bulletin is to enhance the quality and 

credibility of the Government’s 

scientific information. Under the 

Bulletin, the energy conservation 

standards rulemaking analyses are 

‘‘influential scientific information,’’ 

which the Bulletin defines as ‘‘scientific 

information the agency reasonably can 

determine will have, or does have, a 

clear and substantial impact on 

important public policies or private 

sector decisions.’’ 70 FR 2664, 2667 

(Jan. 14, 2005). 

In response to OMB’s Bulletin, DOE 

conducted formal peer reviews of the 

energy conservation standards 

development process and the analyses 

that are typically used and prepared a 

report describing that peer review.294

Generation of this report involved a 

rigorous, formal, and documented 

evaluation using objective criteria and 

qualified and independent reviewers to 

make a judgment as to the technical/ 

scientific/business merit, the actual or 

anticipated results, and the productivity 

and management effectiveness of 

programs and/or projects. Because 

available data, models, and 

technological understanding have 

changed since 2007, DOE has engaged 

with the National Academy of Sciences 

to review DOE’s analytical 

methodologies to ascertain whether 

modifications are needed to improve 

DOE’s analyses. DOE is in the process 

of evaluating the resulting December 

2021 report.295

M. Congressional Notification 

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

report to Congress on the promulgation 

of this rule prior to its effective date. 

The report will state that it has been 

determined that the rule falls within the 

scope of 5 U.S.C. 804(2). 

VII. Approval of the Office of the 

Secretary 

The Secretary of Energy has approved 

publication of this final rule. 

List of Subjects in 10 CFR Part 430 

Administrative practice and 

procedure, Confidential business 

information, Energy conservation, 

Household appliances, Imports, 

Intergovernmental relations, Small 

businesses. 

Signing Authority 

This document of the Department of 

Energy was signed on September 28, 

2023, by Jeffrey Marootian, Principal 

Deputy Assistant Secretary for Energy 

Efficiency and Renewable Energy, 

pursuant to delegated authority from the 

Secretary of Energy. That document 

with the original signature and date is 

maintained by DOE. For administrative 

purposes only, and in compliance with 

requirements of the Office of the Federal 

Register, the undersigned DOE Federal 

Register Liaison Officer has been 

authorized to sign and submit the 

document in electronic format for 

publication, as an official document of 

the Department of Energy. This 

administrative process in no way alters 

the legal effect of this document upon 

publication in the Federal Register. 

Signed in Washington, DC, on November 

14, 2023. 

Treena V. Garrett, 

Federal Register Liaison Officer, U.S. 

Department of Energy. 

For the reasons stated in the 

preamble, DOE amends part 430 of 

chapter II, of title 10 of the Code of 

Federal Regulations, as set forth below: 

PART 430—ENERGY CONSERVATION 

PROGRAM FOR CONSUMER 

PRODUCTS 

■ 1. The authority citation for part 430 

continues to read as follows: 

Authority: 42 U.S.C. 6291–6309; 28 U.S.C. 

2461 note. 

■ 2. Amend § 430.32 by: 

■ a. Revising paragraph (e)(1)(ii); 

■ b. Redesignating paragraph (e)(1)(iii) 

as paragraph (e)(1)(iv); and 

■ c. Adding a new paragraph (e)(1)(iii). 

The revision and addition read as 

follows: 

§ 430.32 Energy and water conservation 

standards and their compliance dates. 

* * * * * 

(e) * * * 

(1) * * * 

(ii) The AFUE for non-weatherized 

gas furnaces (not including mobile 

home gas furnaces) manufactured on or 

after November 19, 2015, but before 

December 18, 2028; mobile home gas 

furnaces manufactured on or after 

November 19, 2015, but before 

December 18, 2028; non-weatherized 

oil-fired furnaces (not including mobile 

home furnaces) manufactured on or 

after May 1, 2013, mobile home oil-fired 

furnaces manufactured on or after 

September 1, 1990; weatherized gasfired furnaces manufactured on or after 

January 1, 2015; weatherized oil-fired 

furnaces manufactured on or after 


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Federal Register / Vol. 88, No. 241 / Monday, December 18, 2023 / Rules and Regulations 87649 

January 1, 1992; and electric furnaces 

manufactured on or after January 1, 

1992; shall not be less than the 

following: 

Product class AFUE 

(percent) 1

(A) Non-weatherized gas furnaces (not including mobile home furnaces) ......................................................................................... 80.0 

(B) Mobile home gas furnaces ............................................................................................................................................................ 80.0 

(C) Non-weatherized oil-fired furnaces (not including mobile home furnaces) ................................................................................... 83.0 

(D) Mobile home oil-fired furnaces ...................................................................................................................................................... 75.0 

(E) Weatherized gas furnaces ............................................................................................................................................................. 81.0 

(F) Weatherized oil-fired furnaces ....................................................................................................................................................... 78.0 

(G) Electric furnaces ............................................................................................................................................................................ 78.0 

1Annual Fuel Utilization Efficiency, as determined in § 430.23(n)(2). 

(iii) The AFUE for non-weatherized 

gas (not including mobile home gas 

furnaces) manufactured on and after 

December 18, 2028; and mobile home 

gas furnaces manufactured on and after 

December 18, 2028, shall not be less 

than the following: 

Product class AFUE 

(percent) 1

(A) Non-weatherized gas furnaces (not including mobile home gas furnaces) .................................................................................. 95.0 

(B) Mobile home gas furnaces ............................................................................................................................................................ 95.0 

1Annual Fuel Utilization Efficiency, as determined in § 430.23(n)(2). 

* * * * * 

Note: The following appendix will not 

appear in the Code of Federal Regulations. 

Appendix A—Letter From the 

Department of Justice to the 

Department of Energy 

U.S. Department of Justice 

Antitrust Division 

RFK Main Justice Building 

950 Pennsylvania Avenue NW 

Washington, DC 20530–0001 

September 6, 2022 

Ami Grace-Tardy 

Assistant General Counsel for Legislation, 

Regulation and Energy Efficiency 

U.S. Department of Energy 

Washington, DC 20585 

Ami.Grace-Tardy@hq.doe.gov 

Dear Assistant General Counsel Grace-Tardy: 

I am responding to your July 7, 2022, letter 

seeking the views of the Attorney General 

about the potential impact on competition of 

proposed energy conservation standards for 

consumer furnaces, specifically for nonweatherized gas furnaces (‘‘NWGFs’’) and 

mobile-home gas furnaces (‘‘MHGFs’’). 

Your request was submitted under Section 

325(o)(2)(B)(i)(V) of the Energy Policy and 

Conservation Act, as amended (EPCA), 42 

U.S.C. 6295(o)(2)(B)(i)(V) 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). 

The Assistant Attorney General for the 

Antitrust Division has authorized me, as the 

Policy Director for the Antitrust Division, to 

provide the Antitrust Division’s views 

regarding the potential impact on 

competition of proposed energy conservation 

standards on his behalf. 

In conducting its analysis, the Antitrust 

Division examines whether a proposed 

standard may lessen competition, for 

example, by substantially limiting consumer 

choice or increasing industry concentration. 

A lessening of competition could result in 

higher prices to manufacturers and 

consumers. We have reviewed the proposed 

standards contained in the Notice of 

Proposed Rulemaking (87 FR 40591, July 7, 

2022). We have also interviewed industry 

participants, reviewed public comments and 

information provided by industry 

participants, reviewed comments submitted 

to DOJ, have spoken with DOE staff, and have 

listened to the Webinar of the Public Meeting 

held on August 3, 2022. 

Based on our review of the information 

currently available, we do not believe that 

the proposed energy conservation standards 

for consumer furnaces are likely to 

substantially lessen competition in any 

particular product or geographic market. In 

the course of our review, we were told that 

the MHGF market may be more highly 

concentrated than DOE’s analysis suggests. 

Given the necessarily short time-frame for 

our review, we are not in a position to 

confirm the level of concentration increase 

that may be caused by the rule, but encourage 

DOE to closely examine and consider 

potential competitive issues that commenters 

may raise with respect to this rulemaking. 

Sincerely, 

/s/ 

David G.B. Lawrence, 

Director of Policy. 

[FR Doc. 2023–25514 Filed 12–15–23; 8:45 am] 

BILLING CODE 6450–01–P 


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