.-. 

~GAO __ Accountability· IntegrIty' Reliability 

United States Government Accountability Office 

Washington, DC 20548 

B-319741 

May 26,2010 

The Honorable Jeff Bingaman 

Chairman 

The Honorable Lisa Murkowski 

Ranking Member 

Committee on Energy and Natural Resources 

United States Senate 

The Honorable Henry A. Waxman 

Chairman 

The Honorable Joe Barton 

Ranking Member 

. Committee on Energy and Commerce 

House of Representatives 

Subject: Department of Energy: Energy Conservation Program: Energy Conservation 

Standards for Residential Water Heaters, Direct Heating Equipment, and 

Pool Heaters 

Pursuant to section 801(a)(2)(A) of title 5, United States Code, this is our report on a 

major rule promulgated by the Department of Energy (DOE), entitled "Energy 

Conservation Program: Energy Conservation Standards for Residential Water 

Heaters, Direct Heating Equipment, and Pool Heaters" (RIN: 1904-AA90). It was 

published in the Federal Register as a final rule on April 16, 2010. 75 Fed. Reg. 

20,112. We received the rule on May 11, 2010. The final rule has an effective date of 

June 15,2010, although compliance with the amended standards for residential 

water heaters is not required until April 16, 2015, and compliance with the amended 

standards for direct heating equipment and pool heaters is not required until 

April 16, 2013. 

The final rule amends the existing energy conservation standards for residential 

water heaters (other than tabletop, and electric instantaneous models), gas-fired 

direct heating equipment, and gas-fired pool heaters. DOE determined that the 

amended standards for these products would result in significant conservation of 

energy and are technologically feasible and economically justified. 

The final rule, a major rule under the Congressional Review Act (CRA), has an 

announced effective date of June 15, 2010. CRA requires a 60-day delay in the 

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effective date of a major rule from the date of publication in the Federal Register or 

receipt of the rule by Congress, whichever is later. 5 U.S.C. 801(a)(3)(A). The rule 

was published in the Federal Register on April 16, 2010, but we did not receive the 

rule until May 11, 2010. Therefore, the final rule does not have the required 60-day 

delay in its effective date. 

Enclosed is our assessment of DOE's compliance with the procedural steps required 

by section 801(a)(1)(B)(i) through (iv) of title 5 with respect to the rule. Our review 

of the procedural steps taken indicates that, with the exception of the effective date, 

DOE complied with the applicable requirements. 

If you have any questions about this report or wish to contact GAO officials 

responsible for the evaluation work relating to the subject matter of the rule, please 

contact Shirley A. Jones, Assistant General Counsel, at (202) 512-8156. 

Robert J. Cramer 

Managing Associate General Counsel 

Enclosure 

cc: Daniel Cohen 

Assistant General Counsel for Legislation, 

Regulation, and Energy Efficiency 

Department of Energy 

Page 2 GAO-IO-750R 

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ENCLOSURE 

REPORT UNDER 5 U.S.C. § 801(a)(2)(A) ON A MAJOR RULE 

ISSUED BY THE 

DEPARTMENT OF ENERGY 

ENTITLED 

"ENERGY CONSERVATION PROGRAM: 

ENERGY CONSERVATION STANDARDS FOR 

RESIDENTIAL WATER HEATERS, 

DIRECT HEATING EQUIPMENT, AND POOL HEATERS" 

(RIN: 1904-AA90) 

0) Cost-benefit analysis 

DOE prepared a cost-benefit analysis in conjunction with the final rule. DOE 

determined that the standards adopted in the final rule will save approximately 

2.81 quads Btu of energy over a 30-year period, and eliminate the need for 

approximately three new 250 MW power plants. The energy savings will result in 

cumulative greenhouse gas emission reductions of approximately 164 million tons of 

carbon dioxide, and alleviate air pollution by resulting in cumulative emissions 

reductions of approximately 124 kilotons of nitrogen oxides and 0.54 tons of power 

plant mercury. DOE determined that the annualized monetized benefits of the rule 

would be $1,676 million per year, using a 7-percent discount rate, and $2,020.5 

million per year using a 3-percent discount rate. The costs are estimated to be 

$1,284.9 per year using a 7-percent discount rate, and $1,249.3 per year using a 

3-percent discount rate. 

(ii) Agency actions relevant to the Regulatory Flexibility Act, 5 U.S.C. §§ 603-605, 

607, and 609 

DOE determined that the final rule may have a significant economic impact on a 

substantial number of small entities, and therefore prepared a final regulatory 

flexibility analysis. DOE determined that two of the three major manufacturers that 

control nearly 100 percent of the traditional direct heating equipment (DHE) market 

are small business manufacturers. There are ten small business manufacturers of 

gas hearth DHE, but none of the three major manufacturers is considered a small 

business. 

DOE determined that a /typical small business manufacturer of traditional DHE will 

have 6.5 product lines requiring conversion with an estimated total conversion cost 

of $1.92 million, while a typical large business manufacturer of traditional DHE will 

have 4 product lines requiring conversion with an estimated total conversion cost of 

$790,000. DOE also notes that regardless of the standard adopted, small business 

manufacturers are more likely to be disproportionately harmed because they have a 

much smaller volume across which to spread similar costs. DOE concluded that gas 

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hearth DHE manufacturers, including small business manufacturers, will be able to 

maintain a viable number of product offerings following the compliance date of the 

amended energy conservation standard. 

(iii) Agency actions relevant to sections 202-205 of the Unfunded Mandates Reform 

Act of 1995,2 US.C. §§ 1532-1535 

DOE determined that the final rule does not contain a federal intergovernmental 

mandate, but that it may impose expenditures of $100 million or more on the private 

sector. 

(iv) Other relevant information or reauirements under acts and executive orders 

Administrative Procedure Act, 5 US.C. §§ 551 et sea. 

DOE commenced the rulemaking on September 27,2006, by publishing on its Web 

site a "Rulemaking Framework for Residential Water Heaters, Direct Heating 

Equipment, and Pool Heaters." On November 24,2006, DOE published a notice 

announcing the availability of the framework document and a public meeting and 

requesting comments on the matters raised in the document. 71 Fed. Reg. 67,825. 

DOE held the framework document public meeting on January 16, 2007. On 

January 5, 2009, DOE announced an informal public meeting and the availability on 

its Web site of a preliminary technical support document, which was published in the 

Federal Regjsteron January 13, 2009. 74 Fed. Reg. 1,643. DOE held a public meeting 

on February 9,2009. On December 11, 2009, DOE published a notice of proposed 

rulemaking to consider amending the existing residential water heater, direct heating 

equipment, and pool heater energy conservation standards. 74 Fed. Reg. 65,852. 

DOE held a public meeting on January 7,2010, to hear oral comments and solicit 

information related to the proposed rule. DOE responded to those comments and 

written comments in the final rule. 75 Fed. Reg. 20,112. 

Paperwork Reduction Act, 44 US.C. §§ 3501-3520 

The final rule contains an information collection requirement subject to the 

Paperwork Reduction Act, which has been approved by the Office of Management 

and Budget COMB) under control number 1910-1400. DOE estimated that the public 

reporting burden for compliance reporting for energy and water conservation is to 

average 30 hours per response, including the time for reviewing instructions, 

searching existing data sources, gathering and maintaining the data needed, and 

completing and reviewing the collection of information. 

Statutory authorization for the rule 

The final rule is authorized by Part A of Title III of the Energy Policy and 

Conservation Act, as amended, codified at 42 US.C. § 6295. 

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Executive Order No. 12,866 (Regulatory Planning and Review) 

The final rule was determined by DOE to be a significant regulatory action under 

Executive Order 12,866 and was reviewed by the Office of Management and Budget. 

Executive Order No. 13,132 (Federalism) 

The final rule does not address Executive Order No. 13,132. 

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