Tuesday

May 14, 1991

EEJ

E=A

e

P.

Part III

Department of

Energy

Office of Conservation and Renewable

Energy

10 CFR Part 430

Energy Conservation Program for

Consumer Products: Energy Conservation

Standards for Three Types of Consumer

Products; Final Rule

CE-RM-88-101 COMMENT 04
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DEPARTMENT OF ENERGY

Office of Conservation and

Renewable Energy

10 CFR Part 430

[Docket No. CE-RM-88-101}

Energy Conservation Program for

Consumer Products: Final Rule

Regarding Energy Conservation

Standards for Three Types of

Consumer Products

AGENCY: Office of Conservation and

Renewable Energy, DOE.

ACTION: Final rule.

SUMMARY: The Energy Policy and

Conservation Act (EPCA), as amended

by the National Energy Conservation

Policy Act (NECPA), the National

Appliance Energy Conservation Act

(NAECA), and the National Appliance

Energy Conservation Amendments of

1988 (NAECA 1988), prescribes energy

conservation standards for certain

major household appliances, and

requires the Department of Energy (DOE

or Department) to administer an energy

conservation program for these

products. Among other things, the

NAECA amendments to EPCA require

DOE to consider amending the energy

conservation standards for dishwashers,

clothes washers, and clothes dryers.

DOE has determined that revised

energy conservation standards for

clothes washers, clothes dryers and

dishwashers would result in a

significant conservation of energy and

would be economically justified.

Therefore, the Department is today

amending Title 10, part 430 of the Code

of Federal Regulations to add new

standards for these products. More

stringent standards, including the

maximum technologically feasible

levels, were considered by the

Department, but rejected based upon

consideration of the economic analyses.

These standard levels are to take effect

May 14, 1994.

EFFECTIVE DATE: May 14, 1994.

ADDRESSES: A copy of the Technical

Support Document may be read at the

DOE Freedom of Information Reading

Room, U.S. Department of Energy,

Forrestal Building, room 1E-190, 1000

Independence Avenue, SW.,

Washington, DC, 20585, (202) 586-6020,

between the hours of 9 a.m. and 4 p.m.,

Monday through Friday, except Federal

holidays. Copies of the Technical

Support Document may be obtained

from: U.S. Department of Energy, Office

of Conservation and Renewable Energy,

Forrestal Building, Mail Station CE-43,

1000 Independence Avenue, SW.,

Washington, DC 20585, (202) 586-9127.

FOR FURTHER INFORMATION CONTACT:

Michael J. McCabe, U.S. Department of

Energy, Office of Conservation and

Renewable Energy, Forrestal Building,

Mail Station CE-43, 1000

Independence Avenue, SW.,

Washington, DC 20585, (202) 586-9127.

Eugene Margolis, Esq., U.S. Department

of Energy, Office of General Counsel,

Forrestal Building, Mail Station GC41, 1000 Independence Avenue, SW.,

Washington, DC 20585, (202) 586-9507-

U.S. Department of Energy, CE-43.1,

Docket No. CE-RM-88-101, Forrestal

Building, room 6B-025, 1000

Independence Avenue, SW.,

Washington, DC 20585, (202) 586-9320.

SUPPLEMENTARY INFORMATION:

1. Introduction

a. Authority

b. Background

II. General Discussion

- a. Maximum Technologically Feasible

Levels

b. Energy Savings

1. Determination of Savings

2. Significance of Savings

c. Rebuttable Presumption

d. Economic justification

1. Economic Impact on Manufacturers and

Consumers

2. Life-cycle Costs

3. Energy Savings

4. Lessening of Utility of Performance of

Products

5. Impact of Lessening of Competition

6. Need of the Nation to Conserve Energy

7. Other Factors

III. Discussion of Comments

a. General Analytical Comments

b. Product Specific Comments

1. Clothes Washers

2. Clothes Dryers

3. Dishwashers

IV. Product-Specific Discussion

a. Clothes Washers

1. Efficiency Levels Analyzed

2. Payback Periods

3. Significance of Energy Savings

4. Economic Justification

A. Economic Impact on Manufacturers and

Consumers

B. Life-cycle Cost and Net Present Value

C. Energy SavingsD. Lessening of Utility or Performance of

Products

E. Impact of Lessening of Competition

F. Need of the Nation to Save Energy

G. Other Factors

5. Conclusion

b. Clothes Dryers

1. Efficiency Levels Analyzed

2. Payback Periods

3. Significance of Energy Savings

4. Economic Justification

A. Economic Impact on Manufacturers and

Consumers

B. Life-cycle Cost and Net Present Value

C. Energy Savings

D. Lessening of Utility or Performance of

Products

E. Impact of Lessening of Competition

F. Need of the Nation to Save Energy

G. Other Factors

5. Conclusion

c. Dishwashers

1. Efficiency Levels Analyzed

2. Payback Periods

3. Significance of Energy Savings

4. Economic justification

A. Economic Impact on Manufacturers and

Consumers

B. Life-cycle Cost and Net Present Value

C. Energy Savings

D. Lessening of Utility or Performance of

Products

E. Impact of Lessening of Competition

F. Need of the Nation to Save Energy

G. Other Factors

5. Conclusion

V. Environmental, Regulatory Impact,

Federalism and Regulatory Flexibility

Reviews

a. Environmental Review

b. Regulatory Impact Review

c. Federalism Review

d. Regulatory Flexibility Review

L Introduction

a. Authority

Part B of Title III of the EPCA, Public

Law 94-163, as amended by NECPA,

Public Law 95-619, by NAECA, Public

Law 100-12, and by NAECA 1988, Public

'Law 100-357,' created the Energy

Conservation Program for Consumer

Products other than Automobiles. The

consumer products subject to this

program (often referred to hereafter as

"covered products") are: Refrigerators,

refrigerator-freezers and freezers;

dishwashers; clothes dryers; water

heaters; central air conditioners and

central air conditioning heat pumps;

furnaces; direct heating equipment;

'elevision sets; kitchen ranges and

evens; clothes washers; room air

conditioners; fluorescent lamp ballasts;

and pool heaters; as well as any other

:;onsumer product classified by the

Secretary of Energy. Section 322. To

date, the Secretary has not so classified

any additional products.

Under the Act, the program consists

essentially of three parts: Testing,

labeling, and Federal energy

conservation standards. DOE, in

consultation with the National Institute

of Standards and Technology (NIST), is

required to amend or establish new test

procedures as appropriate for each of

the covered products. Section 323. The

purpose of the test procedures is to

produce test results that measure the

energy efficiency, energy use, or

'Part B of Title III of SPCA, as amended by

NECPA. NAECA, and NAECA 1988, is referred to in

this notice as the Act. Part B of Title III is codified

at 42 U.S.C. 6291 et seq. Part B of Title III of EPCA.

as amended by NTECPA only, is referred to in this

notice as NECPA.

CE-RM-88-101 COMMENT 04
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estimated annual operating cost of a

covered product during a representative

average use cycle or period of use and

shall not be unduly burdensome to

conduct. Section 323(b)(3). A test

procedure is not required if DOE

determines by rule that one cannot be

developed. Section 323(d)(1). Test

procedures appear at 10 CFR part 430,

subpart B.

The Federal Trade Commission (FTC)

is required by the Act to prescribe rules

governing the labeling of covered

products for which test procedures have

been prescribed by DOE. Section 324(a).

These rules are to require that each

particular model of a covered product

bears a label that indicates its annual

operating cost and the range of

estimated annual operating costs for

other models of that product. Section

324(c)(1). Disclosure of estimated

operating cost is not required under

section 324 if the FTC determines that

such disclosure is not likely to assist

consumers in making purchasing

decisions, or is not economically

feasible. In such a case , FTC must

require a different useful measure of

energy consumption. Section 324(c). At

the present time there are FTC rules

requiring labels for the following

products: Room air conditioners,

furnaces, clothes washers, dishwashers,

water heaters, freezers, refrigerators and

refrigerator-freezers, central air

conditioners and central air conditioning

heat pumps, and fluorescent lamp

ballasts. 44 FR 66475, November 19,

1979, 52 FR 46888, December 10, 1987,

and 54 FR 28031, July-5, 1989.

For each of 12 of the covered

products, the Act prescribes an initial

Federal energy conservation standard.

Section 325(b)-(h). The Act establishes

dates of applicability for the standards

in 1988, 1990, 1992 or 1993, depending on

the product, and specifies that the

standards are to be reviewed by the

Department within 3 to 10 years, also

depending on the product. Section

325(b)-(h). After the specified period,

DOE may promulgate new standards for

each product; however, the Secretary

may not prescribe any amended

standard which increases the maximum

allowable energy use, or decreases the

minimum required energy efficiency of a

covered product. Section 325(1)(1). The

Department's current review of

standards is for dishwashers, clothes

washers, and clothes dryers. Section

325(g)(4)(A)•

Any new or amended standard is

required to be designed so as to achieve

the maximum improvement in energy

efficiency that is technologically

feasible and economically justified.

Section 325(I)(2)(A).

Section 325(1)(2)(B)(i) provides that

before DOE determines whether a

standard is economically justified, it

must first solicit comments on a

proposed standard. After reviewing

comments on the proposal, DOE must

then determine that the benefits of the

standard exceed its burdens, based to

the greatest extent practicable, on a

weighing of the following seven factors:

(1) The economic impact of the

standard on the manufacturers and on

the consumers of the products subject to

such standard;

(2) 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

directly from the imposition of the

standard;

(3) The total projected amount of

energy 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, determined in writing by

the Attorney General, that is likely to

result from the imposition of the

standard;

(6) The need for national. energy

conservation; and

(7) Other factors the Secretary

considers relevant.

In addition, section 325(1)(2)(B)(iii)

establishes a rebuttable presumption of

economic justification in instances

where the Secretary determines 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 * * ". "

Section 327 of the Act addresses the

effect of Federal rules concerning

testing, labeling, and standards on State

laws or regulations concerning such

matters. Generally, all such State laws

or regulations are superseded by the

Act. Section 327(a)-(c). Exemptions to

this general rule include: (1) State

standards prescribed or enacted before

January 8, 1987, and applicable to

appliances produced before January 3,

1988 (section 327(b)(1)); (2) State

procurement standards which are more

stringent than the applicable Federal

standard (section 327(b)(3) and (0(1)-

(4)); (3) State regulations banning

constant burning pilot lights in pool

heaters (section 327(b)(4)); and (4) State

standards for television sets effective on

or after January 1, 1992, may remain in

effect in the absence of a Federal

standard for such product (section

327(b)(6) and 327(c)).

b. Background

The purpose of this rulemaking is -to

review the energy conservation

standards for clothes washers, clothes

dryers and dishwashers.

As directed by the Act, DOE

published an advance notice of

proposed rulemaking, with a 60-day

comment period that ended July 18, 1988.

53 FR 17712, May 18, 198a. (Hereafter

referred to as the advance notice). The

advance notice presented the product

classes that DOE planned to analyze

and provided a detailed discussion of

the analytical methodology and

analytical models that the Department

expected to use in performing the

analysis to support this rulemaking. The

Department invited comments and data

on the accuracy and feasibility of the

planned methodology and encouraged

interested persons to recommend

improvements or alternatives to DOE's

approach.

On August 9, 1989, DOE published a

notice of proposed rulemaking

concerning clothes washers, clothes

dryers, and dishwashers. (Hereafter

referred to as the proposed rule.) 54 FR

32744, August 9, 1989. For clothes

washers, the Department did not

propose a specific standard level; rather.

DOE solicited comments and

information within a range of standard

levels. This range of standard levels

considered is shown in Table 1-1,

below. For clothes dryers, the

Department proposed a prescriptive

standard that would require clothes

dryers to be equipped with an automatic

termination device, either a moisture

termination or temperature termination

device. For dishwashers, the

Department proposed a minimum energy

efficiency standard. These proposed

standards are shown in Table 1-1

below.

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TABLE 1-1.-PROPOSED STANDARD LEVELS FOR CLOTHES WASHERS, CLOTHES DRYERS, AND DISHWASHERS

[Clothes washers]

Product class

1. Top Loading, Compact (1.6 ft.3 capacity or less) .........................................................................................

2. Top Loading, Standard 1.61 to 2.74 ft.3 capacity or greater) ............................................. _......................

3. Top Loading, Large (2.75 ft.3 capacity or greater) _ .....................................................................................

4. Top Loading, Semi-Automatic ..........................................................................................................................

5. Front Leading .......................................................................................................................................... _........

6. Suds Saver .................................... _...................................

Product Class

[Clothes dryers]

Energy factor (cu. ft./kWh/cycle)-January 1, 1993

Must have an unheated rinse option to 1.02 cu. ft./kWh/cycle.

Must have an unheated rinse option to 1.32 cu. ft./kWh/cycle.

Must have an unheated rinse option to 1.21 cu. ft./kWh/cycle.

Must have an unheated rinse option.

Must have an unheated rinse option.

Must have an unheated rinse option.

1. Electric, Standard ........................................................................................................................................................................

2. Electric, Compact (120V) ......................................................................

3. Electric, Compact (240V) ............................................................................................................................................................

4. Electric Heat Pump . ............................. . ............................................................... ................................ .................................. ... 5. Gas, Standard ........................................................................................................................................................_....................

6. Gas Compact ..............................................................................................................................................................................

[Dishwashers]

. Product Class

1. Compact Dishwasher (115V) ..................................................................................................................................................

2. Standard Dishwasher (115V) ................ _......................................................................... .............................................. .........

3. Water Heating Dishwasher, Compact (115V) .......................................................................................................................

4. Water Heating Dishwasher, Standard (115V) .......................................................................................................................

5. Water Heating Dishwasher, Compact (220V) .......................................................................................................................

6. Water Heating Dishwasher, Standard (220V) .......................................................................................................................

During the 60-day comment period

ending October 10, 1989, DOE received

40 written comments, and testimony

from 12 participants at the public

hearing held in Washington, DC, on

September 20, 1989. The issues raised

are addressed in Section III of this

notice.

On September 28, 1990, DOE

published an Advance Notice of

Proposed Rulemaking in the Federal

Register regarding energy conservation

standards for nine types of consumer

products, including clothes washers. (55

FR 39624). Clothes washers were

included in this advance notice because

subsequent to the close of the comment

period in this rulemaking, DOE became

aware of a clothes washer design option

currently in use in Europe which was

not included in the proposed rule and

upon which no comment was received.

This design option (horizontal wash tub

axis in top-loading washers) appears to

have the potential for saving significant

amounts of energy. Due to the absence

of any comment, the horizontal axis

design option was not considered for

inclusion in this Final Rule as discussed

below.

II. General Discussion

a. Maximum Technologically Feasible

Levels

The Act requires that in considering

any new or amended standards, the

Department must consider those that

"shall be designed to achieve the

maximum improvement in energy

efficiency which the Secretary

determines is technologically feasible

and economically justified." (Section 325

(1)(2)(A)). Accordingly, for each class of

product under consideration in this

rulemaking, a maximum technologically

feasible (max tech) design option was

identified. The max tech level is one that

can be carried out by the addition of

design options, both commercially

feasible and prototypes, to the baseline

units. DOE believes that the max tech

feasible level must be capable of being

assembled, but not necessarily

manufactured, by the effective date of

the amended standards.

The max tech levels were derived by

adding energy-conserving engineering

design options to the respective classes

in order of decreasing consumer

paybacks. For example, the max tech

level for clothes dryers includes heat

pumps, an expensive design that pays

back the slowest of all designs. A

complete discussion of each max tech

Requirement-January 1, 1993

Shall have moisture or temperature termination.

Shall have moisture or temperature termination.

Shall have moisture or temperature termination.

[Reserved].

Shall have moisture or temperature termination.

Shall have moisture or temperature termination.

Energy Factor (loads/kWh)-January 1, 1993

0.58.

0.41.

Must be equipped with option to dry without heat.

0.44.

Must be equipped with option to dry without heat

Must be equipped with option to dry without heat.

level, and the design options included in

each, is found in the Engineering

Analysis. See Technical Support

Document,. chapter 3.

Table 2-1 presents the Department's

max tech levels for clothes washer,

clothes dryer, and dishwasher classes:

TABLE 2-1.-MAXIMUM

TECHNOLOGICALLY FEASIBLE LEVELS

Products & product classes

Clothes Washers:

Top Loading, Compact r ................

Top Loading, Standard Capacity 2•

Clothes Dryers:

Compact, Electric, 120V 3.........

Compact, Electric, 240V a .............

Standard, Electric . .........................

Standard Gas 4 ...............................

Dishwashers:

Compact. 115V ........................... ...

Standard, 115V ...............................

Unit energy

consumption

189 kWh/yr.

339 kWh/yr.

140 kWh/yr.

151 kWh/yr.

238 kWh/yr.

3.5/MBtu/yr.

510 kWh/yr.

688 kWh/yr.

kWh/yr. = kilowatt hours per year

MBtu/yr. = thousand British thermal units per

year.

' Capacity equals 1.45 ft .3

2 Capacity equals 2.4 ft.3

0 Capacity equals 3.45 ft.3

* Capacity equals 5.9 tts

The Department believes that these

are the max tech levels from an

engineering analysis standpoint. Each of

the levels was evaluated in accordance

CE-RM-88-101 COMMENT 04
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with the economic justification factors

specified in the Act to determine

economic justification.

The Department evaluated each max

tech level to determine if it would be

economically. justified at the time the

standards would become effective. DOE

rejected energy conservation standards

that had unacceptable impacts on

consumers or manufacturers, e.g.,

unusually long payback periods and

substantially adverse impacts on -

manufacturers' returns on equity (ROE),

or that could result in a lessening of the

utility of the product.

b. Energy Savings

1. Determination of Savings. The

Department forecasted energy

consumption through the use of the

Lawrence Berkeley Laboratory

Residential Energy Model (LBL-REM),

which forecasted energy consumption

over the period of analysis for candidate

standards and the base case.2 The

Department quantified the energy

savings that would be attributable to a

standard as the difference in energy

consumption between the candidate

standard's case and the base case.

The LBL-REM is an improvement of

the Oak Ridge National Laboratory

Residential Energy End Use Model

(ORNL Model), which was used by DOE

in previous standards rulemakings. The

LBL-REM is explained in the TSD.

Appendix B to that document addresses

the LBL-REM in detail. The LBL-REM

contains algorithms to project average

efficiencies, usage behavior, and market

shares for each product.

The market share calculations for the

dishwasher, clothes washer, and clothes

dryer analyses contain the following

steps: Potential purchasers may

purchase any competing technology

within an end-use, or none. For

dishwashers, the decision to purchase or

not is modeled, and the fraction of the

total that chooses each class, e.g.,

standard 115V, is specified exogenously.

Lon ;-term market share elasticities have

been assumed with respect to equipment

price, operating expense, and income.

The effects of standards are expected to

be lower operating expense and

increased equipment price. The

percentage changes in these quantities

are used, together with the elasticities,

to determine changes in sales volumes

resulting from standards. Higher

equipment prices will decrease sales

volumes, while lower operating

expenses will increase them. The net

result depends on the standard level

The base case for these three products

represents NAECA's 1988 standards. wnich are

design standards only.

selected, and associated equipment

prices and operating expenses.

The LBL-REM is used to project

residential energy use over the relevant

time periods for these three products

with and without amended standards.

By comparing the energy consumption

projection at alternative standard levels

with NAECA's 1988 standards, the

Department estimated the amount of

energy projected to be saved during the

period 1993-2015.$ The energy saved is

expressed in Quads, i.e., quadrillions of

Btu's. With respect to electricity the

savings are quads of source or primary

energy, which is the energy necessary to

generate and transmit electricity. The

Act defines "energy use" as the quantity

of energy directly consumed by a

consumer product at point of use. This is

generally called "site" energy, as

opposed to "source" energy. There are

major differences between these types

of energy. in 1987, the amount of

electrical energy consumed at the site

was less than one-third of the amount of

source energy that was required to

generate and transmit the site electrical

energy.4 Therefore, it is important to

identify whether the electricity involved

is site or source energy.

The LBL-REM projections are

dependent on many assumptions.

Among the most important are

responsiveness of household appliance

purchases to changes in energy prices

and consumer income, future energy

prices, future levels of housing

construction, and options that exist for

improving the energy efficiency of

appliances. As is the case with any

complicated computer model simulation,

the validity of the outputs is critically

dependent on the inputs.

2. Significance of Savings. Under

section 325(1){3)(B) of the Act, the

Department is prohibited from adopting

a standard for a product if that standard

would not result in "significant" energy

savings. While the term "signifi cant"

has never been defined in the Act, the

U.S. Court of Appeals, in NRDC v.

Herrington, 768 F.2d 1355 (DC Cir.1985),

concluded that Congressional intent in

using the word "significant" was to

LBL-REM was programmed to analyze a single

standard level or alternate standard levels over the

entire period. That is, the fact that a standard might

be revised during subsequent ruiemakings was not

considered by the model. The Department believes

that it is not possible to predict what result such

reviews may have, and therefore it would be

speculative to model any particular result.

Therefore , for purposes of this rulemaking. each

standard level that was analyzed was projected to

have been in place from the time of implementation

to the year 2015.

+ Energy Information Administration, Electric

Power Annual 1987. Tables 25 and 84 DOE/EtA0348t87),1987

.22253

mean "non-trivial." Id. at 1373. Thus, for

the rulemaking, DOE believes that each

standard level considered results in

significant energy savings.

c. Rebuttable Presumption

NAECA established new criteria for

determining whether a standard level is

economically justified. Section

325(l)(2)(B)(iii) states:

"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, there shall be a

rebuttable presumption that such standard

level is economically justified. A

determination by the Secretary that such

criterion is not met shall not be taken into

consideration in the Secretary's

determination of whether a standard is

economically justified."

If the increase in initial price of an

appliance due to a conservation

standard would repay itself to the

consumer of energy savings in less than

three years, then it is presumed that

such standard is economically justified.5

This presumption of economic

justification can be rebutted upon a

proper showing.

d Economic justification

As noted earlier, section 325(l)(2)(B)(i)

of the Act provides seven factors to be

evaluated in determining whether a

conservation standard is economically

justified.

1. Economic Impact on Alanufacturers

and Consumers. The engineering

analysis identified improvements in

efficiency along with the associated

costs to manufacturers for each class of

product. For each design option, these

costs constitute the increased per unit

cost to manufacturers to achieve the

indicated energy efficiency levels.

Manufacturer, wholesaler, and retailer

markups will result in a consumer

purchase price higher than the

manufacturer cost.

To assess the likely impacts of

standards on manufacturers, and to

determine the effects of standards on

different-sized firms, the Department

used a computer model that simulated

hypothetical firms in the three industries

under consideration. This model, the

6 For this calculation, the Department calculated

cost-of-operation based on the DOE test procedures.

Therefore, the consumer is assumed to be an

"average" consumer as defined by the DOE test

procedures. Consumers that use the products less

than the test procedure assumes will experience a

longer payback while those that use them more than

the test procedure assumes will have a shorter

payback.

CE-RM-88-101 COMMENT 04
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Lawrence Berkeley Laboratory

Manufacturer Impact Model (LBL-MIM),

is explained in the TSD. See Technical

support Document, appendix C. LBLMIM provides a broad array of outputs,

including shipments, price, revenue, net

income, and ROE. An "Output Table"

lists values for all these outputs in the

base case and in each of the standards

cases under consideration. It also gives

a range for each of these estimates. A

"Sensitivity Chart" shows how ROE

would be affected by a change in any

one of the model's nine control

variables.

For consumers, measures of economic

impact are the charges in purchase price

and annual energy expense. The

purchase price and annual energy

expense, i.e., life-cycle cost (LCC), of

each standard level are presented in

chapter 6 of the TSD. Under section 325

of the Act, LCC analysis is a separate

factor to be considered in determining

economic justification.

2. Life-cycle Costs. One measure of

the effect of proposed standards on

consumers is the change in operating

expense as compared to the change in

purchase price, both resulting from

standards. This is quantified by the

difference in LCC between the base and

standards cases for the appliance

classes analyzed. The LCC is the sum of

the purchase price and the operating

expense, including maintenance

expenditures, discounted over the

lifetime of the appliance.

The LCC was calculated for the range

of efficiencies in the Engineering

Analysis for each class in the year

standards are imposed using consumer

discount rates of 2, 7, and 15 percent.

The purchase price is based on the

factory costs in the Engineering

Analysis and includes a factory markup

plus a distributor and retailer markup.

Energy price forecasts are inputs that

are taken from the 1989 Annual Energy

Outlook of the Energy Information

Administration (DOE/EIA--0383(89)).

Appliance usage inputs are taken from

the relevant test procedures and recent

Procter and Gamble data. (Procter and

Gamble (P&G) No. 27, at 2-3.8

The differences in LCC between the

base case and various levels of

standards for dishwashers, clothes

washers, and clothes dryers are

presented in chapter 6 of the TSD. These

LCC's are calculated at a 7 percent

discount rate; a higher rate, e.g., 15

percent, gives a smaller difference,

6 Comments on the proposed rule have been

assigned docket numbers and have been numbered

consecutively. Statements that were presented at

the September 20,1989, public hearing are identified

as Testimony.

while a lower rate, e.g., 2 percent;

produces a greater difference. This

results because the consumer benefits,"

i.e., reduced operating expenses, accrue

over the life of the appliance, and are

discounted back to some base year.

Therefore, the lower the discount rate,

the greater the resulting consumer

benefits after discounting. In addition,

as can be seen in the various LCC

curves, the use of a higher discount rate

results in a flatter curve.

When the LCC numbers are plotted

graphically (on the Y axis) against unit

energy consumption (on the X axis), the

data generally produce a curve that is

concave from above in shape. This

means that at first the LCC curve will

decline as efficiency improvements are

made, will reach a minimum (which may

or may not be discrete), and then rise.

This indicates that the first efficiency

improvements will produce energy

savings, the value of which will more

than pay for the design change. As

additional efficiency improvements are

made, it becomes increasingly costly to

save more energy, and, eventually, the

value of the energy savings will not

cover the expenditures for the design

improvements.

The minimum of the LCC curve was of

particular interest in the analysis. The

minimum of the curve represents that

level of efficiency improvements that

maximizes the difference between the

value of energy saved and the additional

consumer expenditures for the relevant

efficiency improvements. Therefore,

design options that corresponded to the

minimum point were considered as

standard levels for each class.

The Department conducted a net

present value (NPV) analysis to assess

the differential economic impacts on

consumers that would occur from the

adoption of amended standards for

these three products compared to a base

case with no change in the NAECAimposed 1988 standards. See Technical

Support Document, chapter 5. The LBLREM calculates the total expenditure for

each product (discounted total value of

energy consumption from 1993 through

the last year of use for those products

purchased through the year 2015), plus

the total discounted expenses for

equipment purchased from 1993 through

2015, with more stringent standards and

with NAECA 1988 standards. The NPV

analysis is similar to the LCC analysis,

in that the greatest NPV should occur at

the standard level that corresponds to

the LCC minimum for the_product.7 The

The NPV of a standard, per appliance, is

calculated for all affected appliances that are

purchased in the projection period, while the LCC is

calculated only for the lifetime of an appliance that

NPV for each product at the different

standard levels is identified in section

IV of this notice.

3. Energy Savings. While the

significant conservation of energy is a

separate statutory requirement for

imposing an energy conservation

standard, the Act requires DOE, in

determining the economic justification

of a standard, to consider the total

projected savings that are expected to

result directly from revised standards.

DOE used the LBL-REM results,

discussed earlier, in its consideration of

total projected savings. The savings for

the three products are provided in

section IV of this notice.

4. Lessening of Utility or Performance

of Products. This factor cannot be

quantified. In establishing classes of

products and design options, the

Department tried to eliminate any

degradation of utility or performance in

the three products under consideration

in this rulemaking. That is, to the extent

that comments, or DOE's own research,

indicated that a product included a

utility or performance-related feature

that affected energy efficiency, a

separate class with a different efficiency

standard was created for that product.

In this way, the Department attempted

to minimize the impact of this factor as a

result of the standards that were

analyzed.

5. Impact of Lessening of Competition.

The determination of this factor is to be

made by the Attorney General. This

determination is presented for each

product in section IV of today's notice.

In addition, a copy of the Attorney

General's letter containing the findings

is published below.

Dear Mr. Davis: By letter dated October 24,

1989, the Department of Energy ("DOE")

transmitted to the Attorney General a notice

of proposed rulemaking (54 FR 32744)

addressing energy standards for three classes

of household appliances. Section 325 of the

Energy Policy and Conservation Act, as

amended in 1987 (42 U.S.C. 6295), requires the

Attorney General to determine the impact, if

any, of any lessening of competition likely to

result from the proposed standards.

Competitive impact is one of seven criteria to

be considered by DOE in evaluating proposed

standards. This letter contains the

competitive impact determination of the

Department of justice ("Department").

Summary

The evidence available to the Department

does not indicate that any significant

lessening of competition is likely to result

from the imposition of the proposed

standards for dishwashers and clothes dryers

is purchased in the first year of the relevant'

standard. Therefore, NPV and LCC estimates, per

appliance, may not correlate exactly.

CE-RM-88-101 COMMENT 04
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contained in DOE's Notice of Proposed The possibility that concentration might

Rulemaking. For dishwashers, it is the increase depends primarily on whether

Department's judgment based on the compliance with the standards both (1)

available evidence, that no significant increases costs significantly and (2) results in

adverse competitive Impact is likely; but, such increased costs being felt more severely

under certain limited conditions described by some firms than others. Although

below, an unquantifiable adverse competitive increased costs may reduce demand, that

impact would be possible. For clothes dryers, alone would not necessarily affect market

the evidence affirmatively suggests that no structure. However, concentration could

adverse competitive impact is likely. The increase if the cost increases are both

evidence available to the Department significant and affect smaller firms more

indicates that a significant lessening of severely than large ones; costs that vary with

competition may result from the imposition of output (e.g., adding an automatic termination

the proposed standards for clothes washers device) should not disadvantage smaller

under certain conditions. firms while fixed costs or costs independent

The Notice of Proposed Rulemaking of output (e.g., redesign of a dishwasher)

discusses some standard levels higher than might disadvantage a smaller firm with a

the levels proposed but states that DOE lesser number of units across which to spread

concluded that these higher standards are not the same fixed costs.

economically justified. Accordingly, the Nevertheless, before such asymmetrical

Department's competitive impact cost increases could affect competition

determination considers only the standards adversely, the increases would have to be

actually proposed and does not cover higher sufficiently severe and asymmetrical that

standards discussed but not proposed in the they would force from the market one or

Notice of Proposed Rulemaking. more of the smaller significant competitors or

substantially decrease their market share. In

Discussion addition, levels of concentration would have

In appraising the competitive effect of the to rise substantially because of this effect.

proposed standards in the context of this Unlike a merger, where the acquiring firm is

statute, the Department has examined the likely to become substantially larger and the

relevant markets within which the standards other firms would remain the same size, the

will operate. The Department has then common result of a firm exiting the market

considered whether adoption of the would be that each of the remaining

standards would be likely to contribute to significant competitors is likely to increase its

increased concentration levels and other market share to a limited extent. Finally,

relevant market conditions that would other market conditions (e.g., entry barriers)

facilitate either oligopolistic pricing or actual would have to be conducive to oligopolistic

price fixing. The Department has also pricing or price fixing.

considered whether, independent of or in The available evidence in this instance

conjunction with any increase in does not demonstrate that such a lessening of

concentration, the standards would be likely competition would be likely to occur if DOE

to facilitate oligopolistic pricing or price adopts the proposed standards for

fixing by increasing product homogeneity. dishwashers. This evaluation is based on

In this instance, the Department has information concerning the identity and size

utilized the HI-II computations, commonly of the principal competitors and other market

employed in market analysis and described conditions. However, for this class of

in the Department's Merger Guidelines products, the evidence does not wholly

("Guidelines"), as an initial "screen." At foreclose the possibility of an anticompetitive

levels of concentration below 1,000, the impact. For example, some evidence

number of competitors ordinarily is sufficient indicates that increases In fixed costs may

to make competitive pricing likely and to

defeat oligopolistic pricing. Even if the

standards resulted in increased costs and

reduced the number of competitors, or

increased product homogeneity in some

measure, the Department generally would

expect that markets with that level of

concentration would continue to enjoy a

substantial measure of competition. however, indicates that the market share of

The analysis of dishwashers, clothes the largest competitor also may be

washers, and clothes dryers Is not completed significantly decreased, thus decreasing

by applying this screen because the risk of an market concentration. If DOE concludes that

adverse competitive impact is not diminished its standards for dishwashers will after

by the existing market structure as reflected significantly the structure of the market by

in the I-thil figures. Based on data contained substantially decreasing the relative size of

in the technical support document,

dishwashers, clothes washers, and clothes

dryers have HHI figures of about 3,000, 3,100,

and 3,300, respectively. These figures reflect

high levels of concentration (according to the

Guidelines, markets with HM levels above

1,800 are highly concentrated). It is thus

prudent to examine more closely the

possibility that the standards could increase

concentration within a market, increase

product homogeneity, or both.

occur and affect some smaller competitors

much more severely than some larger ones. If

the smaller firms thereby lose market share

to their larger rivals, then the HI-II for

dishwashers could increase significantly

(according to the Guidelines, a 50 point

increase in the HHI in a highly concentrated

market Is significant). Other evidence,

the smallest significant competitors without a

sufficiently large, compensating decrease in

the largest firm's size, then a further review

of the competitive impact would be

warranted.

For clothes dryers, the evidence

affirmatively suggests that no adverse

competitive impact is likely. The evidence

indicates that adding automatic termination

devices will achieve the desired result and

that the fixed costs associated with the

addition will be minimal and will not

disproportionately affect smaller competitors.

For clothes washers, the available

evidence indicates that a significant

lessening of competition may occur under

certain conditions. The Notice of Proposed

Rulemaking indicates that proposed standard

levels I and 2 can be met by eliminating the

warm rinse option and adding thermostatic

mixing valves. The available evidence

Indicates that some manufacturers may not

be able to comply with the proposed

standards by making just these design

changes and may need to undertake more

substantial redesign or retooling that would

impose substantial fixed costs. If all

competitors can meet the proposed standards

by making the suggested design changes, then

a significant lessening of competition is not

likely. If, however, as the available evidence

indicates, some competitors, such as Speed _

Queen. will have to engage in more

substantial redesign or retooling to meet the

proposed standards, then substantial

increases in fixed costs will occur. These

increased fixed costs are likely to affect

smaller competitors much more severely than

larger ones. If DOE concludes that its

standards for clothes washers will drive the

smallest significant competitor, Speed Queen,

out of the market or significantly decrease its

market share, then a further review of the

competitive impact would be warranted.

The available evidence does not indicate a

substantial threat that the standards for

dishwashers, clothes washers, and clothes

dryers would threaten competition by

increasing product homogeneity. The

dishwasher and clothes washer standards

are performance rather than design

standards, so that they can be met by

different combinations of features. The

clothes dryer standard is a prescriptive

standard requiring all dryers to have an

automatic termination device. The standard,

however, allows manufacturers to choose

between a moisture or temperature

termination device. In addition. the energyusing characteristics of dishwashers and

clothes washers, as well as the automatic

termination device required for clothes

dryers, represent only one aspect of these

products, and existing variation in many

other features would be expected to continue.

In making its determination, the

Department has relied on the facts set forth

in DOE's technical support document ; as well

as other information that could be collected

by the Department in the time allowed and

without the benefit of compulsory process.

Sincerely,

James F. Rill,

Assistant Attorney General.

6. Need of the Nation to Conserve

Energy. The results of the environmental

effects from each standard level for

each product will be reported under this

factor in the product specific discussion

(section IV) of this notice.

7. Other Factors. This provision

allows the Secretary of Energy, in

determining whether a standard is

economically justified, to consider any

CE-RM-88-101 COMMENT 04
222 Federal; Register /i;.Vol. 53,E N4. 93 / TuesdgY, Maya 14, 299 ^>l^ules; arld.Regulations

other factors that the Secretary deems to

be relevant. One such factor is the

estimated water savings from more

efficient dishwashers and clothes

washers.

IIL Discussion of Comments.

The Department received 40 written

comments in response to the August

1989, proposed rule, and received

testimony from 12 persons at the

September 20, 1989, public hearing.

These comments addressed all aspects

of the analysis. In this section, the

Department will present discussions of

the general analytical issues raised by

the comments, followed by discussions

of the product-specific issues.

a. General Analytical Comments

Markup

The Natural Resources Defense

Council (NRDC), the Ohio Office of

Consumers' Counsel (Ohio) and General

Electric Appliances (GEA) commented

on manufacturer markups used in the

analysis. (NRDC, No. 5 at 20 and No. 16

at 51; Ohio, No. 22 at 8; and GEA, No. 21

at 26).

NRDC commented that the record

does not support the markup assumption

between factory and retail of

approximately 1.5. (NRDC, No. 16 at 51).

The markups used in the analysis

have been derived from manufacturer

data over the history of this program,

including the earlier 1980 rulemaking.

Moreover, NRDC is mistaken regarding

the markup used in the analysis. The

total markup from manufacturer cost to

retail price used is approximately 2.00,

with the actual amount positively

related to the unit's efficiency. The

markup from manufacturer cost to

manufacturer selling price, and from

manufacturer selling price to retail price

were considered separately. The markup

to manufacturing selling price is

approximately 1.37, while that to retail

price is approximately 1.48. A complete

discussion of the markup is found in the

TSD. See Technical Support Document,

appendix C. DOE has reviewed NRDC's

comment and finds no basis for

changing the markup.

In the analysis for the proposed rule,

marginal variable costs to

manufacturers were assumed to be

passed on with a markup. The NRDC

took exception to this, claiming that

marginal variable costs cannot be

marked up, only passed on. (NRDC, No.

16 at 51).

In response, the Department notes

that the NRDC's contention is valid only

in instances of perfect competition.

Perfect competition is an economic

model of a market with the following

characteristics: Each economic agent,

i.e., buyer and seller, is so small relative

to the market that it cannot influence

price; the products of each seller are

homogeneous, i.e., perfect substitutes;

there is free mobility of all resources,

including free and easy business entry

into, and exit out of an industry; and all

economic agents in the market have

complete and perfect knowledge of the

future.

Obviously, with these restricting

requirements, no market has been or can

be perfectly competitive.

One identifying characteristic of a

perfectly competitive market is that

firms are all producing at their optimal

levels and thus no firm wishes to

increase sales. Clearly, perfect or pure

competition is not present here. Under

conditions of imperfect competition, i.e.,

all forms of market structure except for

perfect competition, marginal costs, i.e.,

the variable costs associated with the

last unit of output, are passed on with a

markup, and it is the ability to do so

which is evidence of market power.

Therefore, based on the consideration of

the above, the Department has included

a markup for all variable costs in the

final rule.

In commenting on the impact of design

options' costs and efficiencies on

manufacturers' ROE, the Association of

Home Appliance Manufacturers

(AHAM) stated that the DOE analysis

underestimated the negative impact of

standards on manufacturers'

profitabilities, or ROE's. In some cases,

the analysis even suggested that return

on equity would be increased by the

imposition of standards. AI-LAM stated

further that it appeared to be the

relatively high cost/low efficiency

design options that were the likely

prospects for increasing ROE for the

manufacturers. ARAM stated, "These

conclusions not only defy common

sense, but they contradict real world

experience documented in the TSD."

(AHAM, No. 29 at 2).

In response, the Department notes

that AHAM is incorrect in believing that

the TSD shows relatively high cost/low

(incremental) efficiency design options

are the likely prospects for higher ROE.

In fact, there is no such correlation. In

the case of standards, ROE may

increase because of the manufacturers'

ability to mark up marginal costs to

buyers. It depends little on the energy

efficiency nature of a design option.

Therefore, this unsupported assertion

that DOE's economic analysis selects

high cost and less appropriate energy

efficiency standards is wrong.

In the manufacturer analysis for the

proposed rule, the Department noted

that appliance prices had risen more

slowly than consumer and producer

price indexes, despite increased energy

and component prices during the last

two decades.

From its statements, AHAM

concluded that the Department

"recognized that even though appliance

manufacturers experienced increasing costs

for components, manufacturers were unable

to completely push these costs through to the

consumer in the form of higher prices."

(AHAM, No. 29 at 6).

The Department believes that

ARAM's conclusion is incorrectly

drawn. Saying that appliance prices

have risen more slowly than standard

inflation indices and that energy and

component prices for appliance

manufacturers have also risen implies

nothing about whether or not

manufacturers can completely pass

costs through to the consumer. If energy

and component prices have not risen as

fast as inflation indices, manufacturers

could pass through costs and the overall

rise in the level of appliance prices

would still be less than that of the

Consumer Price Index. What's relevant

is how appliance prices have risen

relative to the increased costs of

manufacturer inputs, not relative to

inflation indices.

ARAM and Whirlpool suggested that

the modeling of manufacturers' impacts

was simplistic in that it assumed

manufacturers' customers are individual

end-users of the product purchased and,

as such, have little power to control the

prices they pay. These comments

suggested that manufacturers face large

retailers and buying groups who have

monopsony power, i.e., who can put

pressure on the manufacturers' selling

prices. (ARAM, Testimony at 6 and No.

29 at 3-4; Whirlpool, No. 20 at 2).

On this point, both AHAM and

Whirlpool are mistaken; the LBL-MIM

does account for monopsony power, i.e.,

powerful purchasing groups, in the

market for these products. The model

does not simply assume that

manufacturers face "individual end

users." In fact, the LBL-IvI M projects

results of 32, 33, and 24 firms for the

dishwasher, clothes washer, and clothes

dryer industries, respectively. This is

clearly higher than observed industrial

concentration, since the four largest

firms in each industry control over 90

percent of market share. The number of

firms is estimated from data on

revenues, costs, and ROE. The

Department attributes this result of

"greater than observed" competition to

the monopsony power of these large

buyers in the market, and it is part of the

model. A "simplistic model" where

profitability was estimated from the

CE-RM-88-101 COMMENT 04
Fedbial Register' / VoL 5$,' Nd..93 ',/ Tuesdays Nkay' 14, 1991

observed number of firms would result

in a much higher degree of profitability.

In its comment, Whirlpool appears to

try to point out that the retailers are

gaining even more power. This may well

be true, but Whirlpool does not suggest

that appliance standards will in any

way contribute to this increase in

monopsony power. DOE's task is to

analyze how the position of

manufacturers will differ from what it

would have been without standards, not

from what it is today.

In the manufacturer impact analysis,

the Department concluded that there

would be real increases in the pricing of

appliances in the future. Whirlpool took

exception to this conclusion:

"As we look to the future, sales of

appliances will decline into 1990 and then

grow for the next several years, however, this

growth will be markedly slower than recent

years. In fact growth in sales of the core

products should average about 1.2 percent for

the 1989 to 1994 time frame versus 1.9 percent

for the previous ten years, which included a

deep recession. During the strong growth

years, prices of appliances have risen only 1.4

percent (since 1982) while inflation as

measured by the Consumer Price Index has

risen almost 29 percent. To remain profitable

in this scenario, the industry has continued to

improve costs and productivity, however,

costs have risen more rapidly than

productivity improvements in recent years.

Therefore, most manufacturers were forced to

raise prices in late 1988 and mid-1989. But, as

industry volumes are declining, many

manufacturers are searching for ways to

increase their own sales levels to support

plant fixed costs and capacity. The easy

answer has been price discounting. With this

approach, profit margins fall and smaller

companies are likely to be impacted more

significantly since they do not have the

economies of scale. The DOE assumes real

gains in pricing in future years which would

not seem appropriate based on these facts."

(Whirlpool, No. 20 at 1-2)

Whirlpool's assertion is that DOE

assumes "real gains in pricing in future

years which would not seem appropriate

based on these facts." Whirlpool,

however, provided only two comments

about industry price setting, and both

supported DOE's analysis.

Whirlpool's first point is that "costs

have risen more rapidly than

productivity improvements in recent

years. Therefore most manufacturers

were forced to raise prices * * *." This

is exactly the situation described by the

long run part of MIM; standards will

cause cost increases much greater than

productivity improvements, which will

force most manufacturers to raise prices.

Whirlpool's second point is that "as

industry volumes are declining, many

manufacturers are searching for ways to

increase their own sales levels. * * *

The easy answer has been price

discounting." Whirlpool is saying that

volumes are declining despite what wa4

just said about volumes increasing at

the rate of 1.9 percent over the last ten

years. Whirlpool must therefore be

referring to a short run phenomenon.

The Department recognizes this shortrun phenomenon which occurs regularly

during downturns in the business cycle.

DOE has run regressions to estimate the

amount of price decline that is caused

by the shortfall in sales during a slump,

and then assumed that a shortfall in

sales due to standards would cause the

same short-run response in price. This

analysis has been incorporated in the

LBL-MIM's short-run analysis and the

results are reported in chapter 7 of the

TSD.

ARAM and Whirlpool were critical of

the Department's conclusion that

standards-induced, higher-priced

appliances will lead to increased sales,

profits, ROE, and competitiveness for

the appliance industry. (Whirlpool, No.

20 at 3; ARAM, No. 29 at 6).

These comments are essentially

critical of the LBL-MIM's operating

expense elasticity. It is the operating

expense elasticity that results in greater

sales under standards. Whirlpool

commented that the analysis uses too

large an operating expense elasticity,

and ARAM argues that a smaller

operating expense elasticity would

prevent the estimated price increases.

AHAM stated that consumers' appliance

purchase decisions are not usually

influenced by energy efficiency factors,

but, rather, by quality, price, and brand.

The Department's estimates of

operating expense elasticity come from

econometric work done by Oak Ridge

National Laboratory (ORNL), which is

cited in the TSD. Unfortunately, the

comments do not provide an adequate

basis for improving or replacing those

estimates. DOE agrees that energy

efficiency is probably not as important

as the three factors cited by ARAM. It is

not clear, however, that the comments

contradict ORNL's estimated elasticities

of -0.125, -0.055, and -0.257 for

dishwashers, clothes washers, and

clothes dryers, respectively. The

Department agrees that operating

expense elasticities may warrant further

research. However, the commentators

supply no quantitative information to

justify any revisions.

The LBL-MIM is capable of predicting

either an increase or decrease in ROE in

the short run. While there may be a

positive increase in shipments at some

standard levels, an examination of the

other standard levels illustrates the case

of decreased shipments. In the short run,

the model often.predicts price will

decline, with a loss in profit. In the long

-Rules `arid 1 egulatioris 22257

run, however, (in the Department's

analysis, about eight years) the change

in shipments will be compensated for by

changes in the industry's capacity which

will eliminate the short-run decreases in

firms' ROE's.

Whirlpool stated that a long-run result

of energy conservation standards would

be to lower profit margins. As a

consequence, this could force remaining

smaller manufacturers out of business or

into consolidation with-larger firms,

thereby hurting competition. (Whirlpool,

No. 20 at 3).

In response, the Department notes

that because of the increasing industry

fixed costs from investments in

automation and productivity

improvements, there has been an

historic trend to increasing industrial

concentration in the industries involved.

Energy conservation standards have

played no role in this trend and, given

the size and direction of the predicted

changes in ROE, they are unlikely to

influence concentration to an

appreciable degree.

LBL Residential Energy Model

The Environmental Defense Fund

(EDF) commented that there is no basis

for the LBL-REM's assumption that

consumers respond to LCC when

purchasing appliances, and that the

opposite appears true. (EDF, No. 19, at

4).

The LBL-REM is used to project

residential energy use during the

relevant time periods. The model's

projections are dependent on many

assumptions; among the most important

are responsiveness of household

appliance purchases to changes in

energy prices and consumer income,

future energy prices, future levels of

housing construction, and options that

exist for improving the energy efficiency

of appliances. As is the case with any

complicated computer model simulation,

the validity of the outputs is dependent

on the inputs. While it may be argued

that there is or is not a direct link

between appliance purchase decisions

and LCC, the Department's appliance

standards analyses have shown that

appliance efficiency, in general, has

improved over the last 20 years. There

may be certain appliance types or

classes whose efficiencies have not

increased or increased very little, but

overall appliance efficiency has

increased. This is supported by

numerous filings to the Department on

the appliance standards rulemakings

and other information available to the

Department, including submittals to the

FTC for the appliance labeling program.

See Technical Support Document:

CE-RM-88-101 COMMENT 04
2,2258 Federal Register /* Vol. 56, No. 93 / Tuesday, May 14, 1991 /, Rules and Regulations

Energy Conservation Standards for

Consumer Products: Refrigerators, and

Furnaces, DOE/CE-0277, (November,

1989) and Supplement to March 1982

Consumer Products Efficiency

Standards Engineering Analysis and

Economic Analysis Documents, DOE/

CE-0045 (July, 1983). The Department

utilizes all available information on

appliance choice to calibrate the energy

use forecasts of the LBL-REM; and

while there may be questions

concerning a particular algorithm, the

Department believes that the LBL-REM

provides reasonable forecasts.

DOE does not believe that most

consumers actually calculate LCC;

rather, that purchase decisions can be

characterized as if an implicit tradeoff is

being made between equipment price

and operating expense. LBL-REM

characterizes that implicit tradeoff in an

LCC framework by using observed

purchase behavior in order to project

future efficiency choices that are a

function of both equipment price and

operating expense.

To calculate energy savings that can

result from standards, EDF proposed an

alternative methodology, which

consisted of freezing efficiencies at

current levels for the base case, and

calculating energy savings against the

fixed levels. DOE believes that if energy

prices became sufficiently different fromcurrent values, appliance consumers

would make a different choice of

efficiency from what they are doing

now. Thus, there is no basis for freezing

the efficiency. Therefore, DOE rejects

EDF's proposal.

Energy Prices

The Environmental Protection Agency

(EPA), State of Oregon Department of

Energy (ODOE) and the New York State

Energy Office (NYSEO) commented on

the appropriate values of energy prices

for use in the analysis. (EPA, No. 36 at 3;

ODOE, No. 15 at 3; and NYSEO, No. 32

at 11). EPA and ODOE argued that DOE

should use marginal costs of energy and

that by not using marginal costs, DOE

underestimated the savings to society.

NYSEO, on the other hand, agreed with

the Department that it is "most

appropriate for DOE to use national

average energy prices and usage rates."

DOE has reviewed EPA's and ODOE's

comments and disagrees. The purpose of

the analysis is to estimate the impacts of

standards on the Nation, including

consumers and manufacturers. In

analyzing the impacts of the standards

on consumers, DOE performs LCC

analysis as required by section 325(1) of

the Act. Furthermore, DOE analyzes the

payback of each standard level as

required by section 325(l)(2)(B)(iii) of the

Act. In each analysis, the Department is

required to consider the expense to the

consumer. The consumer, as EPA

recognized in its comment, pays the

average cost, not the marginal cost.

Similarly, in evaluating the effect of the

standard on the Nation, DOE uses the

LBI -REM to forecast energy savings

and NPV. DOE believes that this

calculation captures the effect of the

standard on the Nation, whereas the

marginal cost would overestimate the

impacts, since not all energy used is at

the marginal rate, and the marginal rate

is typically the highest cost energy to

produce. Therefore, after considering the

above, DOE rejects the proposal to use

marginal energy prices.

Payback

In accordance with section

325(i)(2)(B)(iii) of the Act, DOE is

required to calculate the payback of

each standard in the first year of the

standard. In order to calculate this

payback, DOE uses the forecast of

efficiency from the LBL-REM and

compares the increase in price of the

appliance at each standard level to this

level and the energy savings during the

first year. AHAM commented that DOE

should consider incremental payback,

i.e., the individual payback of each

design option, rather than the combined

payback as presented in the August 1989

proposal. (Gants. Testimony at 7;

AHAM, No. 29 at 4-6). The EDF,

however, urged DOE to use the

cumulative payback. (EDF, No. 3 at 3-4).

DOE has reviewed AI:AM's proposal

and disagrees; the Act clearly requires

the Department to consider the

cumulative impact of the standard in

calculating payback in accordance with

section 325(l)(2)(B)(iii). The Department,

however, does consider individual

paybacks when ordering the design

options in the engineering analysis, and

it considers incremental paybacks when

evaluating the economic impact of

standards. Therefore, in consideration of

the above, the Department continues to

calculate cumulative paybacks.

Whirlpool raised the issue of the

difference in savings that exists for

dishwashers and clothes washers,

depending on whether the unit is

connected to an electric or gas water

heater. (Whirlpool, No. 20, at 8).

In reporting the paybacks and LCC

results in the proposed rule, DOE

presented only those for units connected

to electric water heaters. DOE did not

report the values for products connected

to either gas or oil water heaters,

products which represent over 50

percent of the market. The energy use

analysis and NPV calculation in the

LBL-REM, however, did include a

consideration of electric, gas and oil

water heaters. After considering the

issue, the Department decided to present

payback and LCC results for

dishwashers and clothes washers

connected to either electric water

heaters or gas water heaters. DOE is not

presenting results for oil water heaters

because the annual cost-of-operation of

oil water heaters is nearly equal to that

of gas water heaters; therefore the

results for dishwashers and clothes

washers connected to gas water heaters

is representative of those connected to

oil water heaters.

Rebuttable Presumption

Congresswoman Claudine Schneider

(Schneider), ODOE, NTRDC, NYSEO,

EPA, Congressman John Dingell

(Dingell), and Public Citizen argued that

DOE has failed to prove why level 3 for

dishwashers and clothes dryers and

level 4 for clothes washers are not

economically justified. (Schneider, No.

10 at 2 and Schneider et al., No. 31 at 2;

ODOE, No. 15 at 2; NRDC, No. 16 at 22-

25; NYSEO, No. 32 at 4; EPA, No. 36 at 1;

Dingell, No. 35 at 1-3; and Public

Citizen, No. 34 at 1). ODOE argued that

DOE had not adequately rebutted

standards with paybacks less than three

years, and that DOE should accept all

measures with paybacks less than three

years.

DOE has reviewed these comments.

Today's Final Rule reflects the

Department's consideration of these

comments and includes more detailed

discussion of the basis of the final rule.

Life-cycle Cost

NRDC claimed that higher standard

levels were rejected in the proposed rule

because the Department had suggested

that "usage of an appliance, and

therefore savings, may be a function of

utility costs." NRDC stated that the

Department made this assertion despite

any empirical information to support it.

Furthermore, NRDC charged that the

proposed rule then stated, again without

any empirical information to support the

assertion, that consumers in areas with

higher utility rates may already be

purchasing the higher levels of

efficiency in existing products. NRDC

noted that the Department claimed that,

if this were true, average savings could

be lower than those that had been

reported in the TSD (DOE/CE-0267, July

1389) that had been prepared for the

proposed rule.

NRDC then stated that the

Department's assertion is not only

unsupported, "it is actually contradicted

by the only regional data that has ever

been submitted to DOE records

CE-RM-88-101 COMMENT 04
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concerning appliance efficiency as a

function of utility costs." NRDC cited

the 1963 appliance proceedings, wherein

the Carrier Corporation had submitted

data showing that the areas of the

country with the highest air conditioning

expenses, i.e., New York (high rates)

and Florida (high usage), had air

conditioner efficiencies that were the

same as the national average air

conditioner efficiencies. Therefore,

NRDC concluded: "Unless the

assumptions of regional price- or usageinduced variation in appliance

efficiency for these products are valid,

DOE's whole rationale for reducing the

level of proposed standards vanishes."

(NRDC, No. 16 at 16-17).

NRDC is correct in stating that the

Department did not present any

empirical information to support its

assertion that consumers in areas that

have high energy expenses would tend

to purchase appliances with efficiencies

higher than the national, average; NRDC

is not correct, however, in concluding

that if the assertion is invalid, the

rationale for reducing the level of

proposed standards vanishes. That is

because there are seven factors of

economic justification that the

Department considered in arriving at its

conclusions.

NYSEO charged that the Department

was incorrect in raising. the issue of

regional impacts solely from the

viewpoint of consumers who live in high

energy price areas buying more efficient

appliances than the national average,

thereby leading to an overestimation of

energy savings from standards. There is

just as much reason to assert, according

to NYSEO, that consumers who live in

low energy price areas buy less efficient

appliances than the national average,

thereby leading to an underestimation of

energy savings from standards. Without

empirical information on the foregoing

and to the extent to which either of

these effects might be greater, the

Department's use of national average

energy prices and usage rates is no more

likely to overstate the energy savings

from standards than it is likely to

understate the energy savings. (NYSEO,

No. 32 at 10-11).

The Department is unaware of any

data source that provides regional

variation in usage, e.g., cycles per year

by region, for dishwashers, clothes

washers, and clothes dryers. However,

because differences in regional energy

prices are available, the Department

conducted a sensitivity analysis of the

life-cycle cost by design option for each

class, utilizing regional residential

energy prices for the lowest and highest

priced census regions. The results of

these sensitivities are reported in

chapter 6 of the TSD accompanying this

rulemaking.

The Northwest Power Planning

Council (NPPC), ODOE, NRDC, EDF,

and NYSEO argued that DOE should

adopt standards beyond the LCC

minima and suggested that DOE should

not place undue weight on the LCC

component of the analysis. (NPPC, No.

13 at 2; ODOE, No. 15 at 1; NRDC, No. 16

at 9-14; EDF, No. 19 at 9; and NYSEO,

No. 32 at 17 and 21). NRDC maintained

further that DOE is violating the

requirement of the Act by comparing

one standard level with another

standard level of lower efficiency.

NRDC argued that "if Congress had

intended DOE to set standards at the

level that maximizes economic benefits,

or at a conservatively low level that

minimizes risk considering economic

benefits, it would have said so." (NRDC,

No. 16 at 11). Additionally, NRDC stated

that "coincidence with minimum life

cycle cost point is not a criterion set

forth in the statute. If [a trial standards

level] is 'technologically feasible' * • *

and had economic benefits * * * it must

at least be considered for the final rule

as being the level achieving the

maximum improvement in energy

efficiency that is technologically

feasible and economically justified."

(NRDC, No. 16 at 12). Additionally,

NYSEO stated that DOE cannot,

consistent with the Act, reject a

standard level as not economically

justified just because it is not the

optimum standard from an LCC

perspective.

DOE agrees. No standard is rejected

because it is not the optimum standard

from an LCC perspective. However,

DOE disagrees with the contention that

the Department cannot consider that a

standard level beyond the minimum

LCC point is a burden, since it could

preclude consumers from being able to

buy the most cost-units. The Department

believes that factor is consistent with

the Act and can be considered under

either section 325(i)(2)(B)(i) (I) or (ii).

Need of the Nation To Save Energy

Several comments took issue with the

Department's failure to consider a

number of societal benefits in the

proposed rule, including environmental

impacts and reduced dependence on

foreign oil. (Schneider, Nos. 10 and 31, at

2; ODOE, No. 15 at 3; NRDC, No. 16 at 3-

8; Ohio, No. 22 at 3; Washington State

Energy Office (Washington), No. 33 at 2;

and Public Citizen, No. 34 at 2). Public

Citizen pointed out that in the proposed

rule the Department limited

consideration of "the need for national

energy conservation" to the need for the

U.S. to reduce consumption of imported

oil. Public Citizen argued that the

Department failed to consider global

warming; acid rain, and radioactive

waste, In addition, Public Citizen

pointed. out that imports, of oil. reached

7.712 million barrels per day in 1988, the

highest level since 1979, and that this

poses an increased risk to national

security and worsens the U.S. trade

imbalance. Also, NRDC argued that

standards improve electric utilities`

demand projections and reduce the

uncertainty over the need to construct

electrical generating plants.

The Department agrees with these

comments, and to the extent DOE had

data, included these factors in the

consideration of the Need of the Nation

To Conserve Energy. Currently, the

Department is not able to project the

impact standards will have on

radioactive waste; therefore, this

concern was not, considered.

Michael Shepard of the Rocky

Mountain Institute (RVII) suggested that.

the Department should attempt to

estimate the effects of standards on lowincome people, who, it was stated,

would be most affected by the price

increases caused by standards. In

particular, RMI urged the Department to

consider the impacts of standards on the

prices of used appliances. (RMI, No. 12

at 2).

The Department notes that insufficient

data were provided in comments to

analyze this issue. LBL-REM does not

presently distinguish among income

levels. Nevertheless, because the

Department is sensitive to this issue;. it

is a valid area for future research.

Citing several. studies, Paul Centolelia

of the Ohio Office of the Consumers'

Counsel (OOCC) stated that energy

conservation can create social benefits:

"By redirecting consumer purchases

from energy to appliances and personnel

(sic) consumption, aggressive

conservation can significantly increase

employment and economic growth,"

(OOCC, No. 2 at 5).

The Department agrees that appliance

standards can produce social benefits

beyond the benefits that accrue to the

purchasers of the more energyconserving appliances. In fact, the

environmental effects that are expected

from each standard are examples of

such social benefits; these have not only

been quantified, but have also been

considered in the development of the

selected standard levels.

Utility Analysis

The NRDC raised several issues

regarding the Department's analysis of

the impact of standards on utilities.

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First, NRDC pointed to a risk factor not

considered by the Department that

argues in favor of more stringent

standards. Specifically, NRDC suggested

that more stringent standards reduce the

risk of utilities' overbuilding or

underbuilding capacity. NRDC charged

that in the utility analysis, the

Department assumed that utilities will

not consider the impact of appliance

conservation standards in their energy

demand forecasts. NRDC commented

that this premise formed a basis for the

analysis that showed reduced utility

revenue from standards, and it is

unfounded. (NRDC No. 16 at 16 and 58).

The Department agrees that standards

reduce the uncertainty in forecasting

electricity or gas sales faced by utilities,

and that this is a benefit. However, the

Department believes that quantifying

this effect is not feasible. Uncertainty in

utilities' forecasts for residential

electricity or gas sales is caused by

several factors, including projections of

population, household formations and

locations, and the ages and efficiencies

of the household appliances. By

establishing minimum efficiency

standards on new appliances, the range

of efficiencies in the marketplace is

narrowed, and this should enable

utilities to reduce somewhat the

uncertainty in their forecasts. Given the

number of variables on which such

forecasts depend, the extent to which -

the forecast uncertainty is reduced by

minimum appliance efficiency standards

would likely be quite small. In addition,

it would be extraordinarily difficult to

estimate. This effect is discussed in the

TSD, but not quantified.

NRDC also commented that the

Department's model of utility

ratemaking seems flawed. The

Department performed calculations of

the economic impacts of standards in

terms of real dollars; in addition, DOE

evaluated future power costs for

electrical supply in real dollars. Public

utility commissions, however, compute

electric utility rates in terms of nominal

dollars. As a result, NRDC suggested

that there would be no revenue loss as a

result of appliance standards; instead,

there would be rate decreases. (NRDC,

No. 16 at 60-61).

In response, the Department does not

believe that the use of real dollars to

evaluate utility impacts is misleading.

The reader can convert to nominal

dollars by assuming an inflation rate,

and applying it to the annual impacts

reported in the TSD.

Secondly, there is no easy translation

of the impacts of standards into rate

changes. Rates are determined as a

function of the specific financial

circumstances of each utility. The

Department believes that the effects on

utility rates of the energy savings in this

rulemaking are so small as not to justify

the enormous effort required to quantify

them. As a result, the Department is not

changing its utility analysis.

Environmental Analysis

Environmental Impact Statement. A

large number of comments discussed the

environmental effects of appliance

standards. Virtually all of the comments

on this subject stated that the proposed

rule would have a significant

environmental impact on air pollution,

including significant effects on acid rain

and global warming. As a result, the

comments concluded that the

Department's Environmental

Assessment was insufficient, and that

the Department should have prepared a

complete Environmental Impact

Statement (EIS). (Schneider, Testimony

at 2; Goldstein, Testimony at 23; Miller,

Testimony at 6-7; Osann, Testimony at

2; Schneider, No. 10 at 2; Alexander, No.

14 at 3; NRDC, No. 16 at 62; EDF, No. 19

at 9; OOCC, No. 22 at 6; Schneider et al,

No. 31 at 2; and Public Citizen, No. 34 at

3).

In addition, the EDF argued that DOE

underestimated the economic benefit of

the potential reductions in SO2

emissions due to standards. (EDF, No. 19

at 3-4). EDF argued that the correct

approach to estimating potential

benefits is to multiply the average cost

of emission reductions by the total

emissions reductions over the entire

period, rather than the marginal cost by

the annual savings in a particular year.

DOE agrees with EDF and added that

calculation to the Final Rule. The results

of this calculation are shown under the

Need of the Nation To Conserve Energy

and in the environmental analysis as

presented in section V of today's final

rule.

The National Wildlife Federation

(NWF), NRDC, and Public Citizen

argued that if DOE had performed a

complete EIS, the Department would

have been able to calculate more of the

impacts of the standards, including the

impacts of more stringent standards

such as those requiring heat pump

clothes dryers and the impact of

standards on the water consumption of

clothes washers and dishwashers.

(Osann, Testimony at 2; NRDC, No. 16 at

67-68; Public Citizen, No. 34 at 3-4).

Alexander argued that by failing to

recognize the full potential that strong

appliance efficiency standards can

achieve, the rule will allow more

pollution of the environment.

(Alexander, No. 14 at 3).

DOE disagrees with the comments

that a full EIS should have been

/' Rule§ arid' Regu atibns

performed. None of the comments took

issue with the Department's calculation

of SO2, CO2, or NO2 reductions; rather,

they argued that more stringent

standards would have saved more

energy and resulted in fewer emissions.

DOE agrees with this claim and notes

that the proposed rule's EA presented

the reductions in emissions at each

standard level; these reductions were

found not to be significant. With respect

to comments that more stringent

standards, e.g., requiring heat pump

clothes dryers, would have beneficial

environmental impacts, the Department

has added this design option to the

analysis, and the results are presented

below.

Furthermore, the Department has

added to the consideration of the Need

of the Nation to Conserve Energy the

environmental impacts of the standards,

both for the total period analyzed and

for a representative year. By so doing,

the Department is ensuring that those

environmental effects resulting from the

different standard levels were

considered in the economic justification

criteria.

The Department continues to present

the results for the year 2015 because by

that time nearly the full impact of the

standards would have occurred. In

earlier years, e.g., 1995, which is two

years after the standards go into effect,

the standards would have had only

limited effect on the marketplace. In

later years, when more of the products

in the marketplace have been subject to

standards, the standards will have a

greater impact on energy consumption

and the environment.

Finally, NRDC argued that the courts

require the Agency to consider:

"(I) whether the agency took a hard look at

the problem; (2) whether the agency

identified the relevant areas of environmental

concern; (3) as to the problems studied and

identified, whether the agency made a

convincing case that the impact was

insignificant; and (4) if there was an impact

of true significance, whether the agency

convincingly established that changes in the

project sufficiently reduced it to a minimum."

(NRDC, No. 16 at 63). -

The Department has analyzed the

environmental impacts of the standards

as shown in the EA accompanying

today's final rule. The EA considers the

impacts of all the candidate standards,

including the maximum technologically

feasible levels and other levels rejected

for economic considerations. In

addition, as noted above, the

environmental impacts were considered

as part of the Department's economic

analysis for each candidate stam..ard

CE-RM-88-101 COMMENT 04
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level as shown in section IV of today's

final rule.

In analyzing the. environmental impact

of standards, the Department considers

the impacts to be in three areas: Energy

consumption, power plarrt emissions

and water consumption. These

considerations are discussed elsewhere

in this rule . Additional areas of potential

impact are power plant construction and

nuclear waste disposal. The Department

is unable to measure if standards will

have any effect on nuclear- waste.

However, the Department generally

believes that the standards will not have

any effect on nuclear waste because no

new nuclear power plants that are not

currently under construction or already

scheduled for construction will come on

line during the period of analysis. The

Department believes that today's final

rule will not affect utilities' decisions

with respect to nuclear power plant

construction. While it is possible to

estimate the number of potential power

plant savings, as if there were one

national electric utility determining U.B.

power plant construction, each

individual utility makes its own

decisions as to the. number, size and

type of generating units, subject to

governmental review- Such decisions

are usually made at a "local" level. The

standards, however, are national

standards and thus it is impossible to

estimate to what extent, if any,

standards would affect power plant

construction.

The NINrF commented that the EA for

the proposed rule did not discuss the

effects of the various options on water

consumption. (NWF, No. 11 at 2).

In the analysis for the final rule, the

Department did make specific

calculations of the impacts on water

consumption of the different candidate

standard levels. See Technical Support

Document, sections 5.1.6. and 5.2.6. As

noted above, these water savings

estimates were considered in the

standards' selection decisions under

Other Factors.

Discount Rate

Eleven comments addressed the

discount rate used in the analysis.

(Schneider, No. 10, at 2 and No. 31 at 3:

RMI, No. 12 at 2; N-PPC, No. 13 at. 1;

NRDC, No. 16 at 44-51; Whirlpool, No.

20 at 3; Ohio, No. 22 at 8; AHAM,. No. 29

at 7; New York,. No. 32 at 7;. Washington,

No. 33 at 1; and Public Citizen, No. 34 at

2).

The proposed rule used a discount

rate of seven percent both for the

calculation of LCC and, in the LBL-REM,

for calculating.. energy use and NPV. The

use of the discount rate in the projection

of energy use is significant because the

LBL-REM projects marketplace demand

for more efficient appliances based on

the LC'. The LBL-REM assumes that as

the price of energy increases, the LCC

will increase. This results because the

value of the energy savings resulting

from more efficient equipment is greater,

which, in turn, causes the marketplace

to demand more efficient appliances.

Whirlpool, AHAM, and NYSEO

commented that the use of a seven

percent discount rate was reasonable.

NYSEO commented that the use of the

seven percent rate was the "most

reasonable," while Whirlpool stated

that the seven percent value is plausible

and provides a calculation, with market

assumptions, that results in 6.5 percent

as an "average" consumer discount rate.

(NTYSEO, No. 32 at 7; and Whirlpool, No.

20 at 3). The Whirlpool calculation

provided values for the fraction of

appliance purchases being financed. by

various means; however, Whirlp, of did

not provide any basis for the values, nor

did Whirlpool state frown. when or how

these values were derived.

The approach Whirlpool proposed is

similar to that put forward by the

Department in the November 1989 Final

Rule for refrigerators; refrigeratorfreezer, freezers, and small gas furnaces.

(54 FR 47916; November 17,19891. In that

Final Rule, DOE selected a seven

percent discount rate based on a

methodology derived from the Court

decision. NRDC v. Herrington, supra at

110. As DOE discussed in the November

.17, 1989,. Final Rule, the applicability of

the Court decision changed somewhat

with the passage of the Tax Reform Act

of 1986 (Pub. L. 99-514). The Tax Reform

Act will have phased out the tax

deductibility of interest paid on

consumer loans by the time amended

standards will be applicable. Based on

the revised methodology, DOE

calculated a range of real, after-tax,.

finance rates that consumers could

incur; this range is from less than 1

percent to slightly more than 15 percent.

As explained in the November 17,1989,

final rule, DOE selected seven percent

for the analysis because it was near the.

mid-point of the potential consumer

finance rates. in addition, DOE found

that this approach has another

advantage: It has a reasoned theoretical

basis in that it is related to the

opportunity cost of money for

purchasing consumer durables; as such,

it is justified in terms of the alternate

consumer investment opportunities that

are foregone in order to finance the

purchases of appliances.

Some comments urged a discount rate

of less the seven percent, based on the

rates associated with appliance

purchases. These included Schneider,..

The American Council for an EnergyEfficient Economy ACEEE).. and Public

Citizen. (Schneider,. No_ 10 at 2, and

Schneider,, et. aL,. No.. 31 at 3;. ACEEE.

Testimony at 4-5; and Public Citizen.

No. 34 at 2).

None of these comments urging a.

lower consumer rate,. based on. real,

after-tax rates associated with

consumer purchases of appliances

offered any empirical basis for the

recommendation of a. rate below seven

percent. Ideally, if DOE could obtain

empirical data. on the methods that.

consumers use to pay for their appliance

purchases, the Department could use a

weighted average, real, after-tax,

finance rate for a consumer discount

rate in the analysis.'Therefore, unless

and until any broad-based empirical.

data can be developed on the methods

consumers use to finance purchases of

appliances, the Department will -

continue to use seven percent, for the

reasons mentioned above.

Nevertheless, because therange of

real, after-tax rates of finance is so

broad, the Department has expanded its '

sensitivity runs from. using 5 and 10'

percent rates to using 2 and 15 percent

rates. It. is believed that this broader

range of sensitivities will . better reflect

the wide variation in actual consumer

financing rates, and, therefore, better

capture the significance of any

differences resulting from the range of

rates.

Water Savings

EPA commented that the'Department

should calculate the value of water

savings based on the marginal costs, not

the average cost, and that the savings

should be considered In. the decisionmaking. process. (EPA, No. 36 at 5).

The Department disagrees with EPA

regarding the cost of water used in the

analysis. As discussed above; the

analysis is intended to provide an

estimate of the impact of standards on

consumers and the Nation . Individual

consumers do not pay the marginal cost

of water, as they do not pay the

marginal cost of energy. Therefore, the

analysis continues to use the average

cost of water. However, the Department

agrees with EPA regarding the

consideration of water savings in the

decision-making process,. and, as noted

above, included water savings in the

economic analysis under Other Factors,

Test Procedures

NRDC commented that the existing

test procedures should be used to the

extent practical, and that the

Department should propose

modification wherever the analysis

CE-RM-88-101 COMMENT 04
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suggests that changes are warranted. In

those cases where the existing test

procedure does not evaluate the

performance of a design , DOE should

evaluate the energy savings using an

assumed test procedure. (NRDC, No. 16,

at 24-25).

DOE interprets NRDC's comment to

endorse setting standards based on a

prospective test procedure rulemaking.

This option, in DOE's opinion, is not an

alternative in setting standards. For

most products, moreover, the Act

requires only that the test procedure be

in place before a standard can be

prescribed. Section 321 (a)(6).

Furthermore, as DOE's test procedure

rulemaking history shows, most test

procedures that have been adopted,

including amendments to existing test

procedures, include numerous changes

from what was published in the

proposed rule. These changes often

affect the measure of a product's energy

use. Therefore, if a standard could be

adopted based on a prospective test

procedure, DOE would question such a

process because, in all likelihood the

final test procedure will be different

from that proposed. -

A number of other comments were

raised regarding this issue, particularly

with respect to automatic termination

for clothes dryers and higher spin

speeds for clothes washers. These

comments will be addressed in detail in

the product-specific discussion of

today's final rule. However, with respect

to the general issue of how the

Department is to analyze the impacts of

standards, section 325(l)(2)(13)(iii) of the

Act requires the Department to base the

payback calculation on the applicable

DOE test procedure. Therefore, for the

purpose of determining whether a

standard level meets the rebuttable

presumption test under section

325(l)(2)(B)(iii), the Department used the

existing test procedure, including the

test procedure's annual cycles of

operation.

Based on information provided in

comments on the proposed rile, and

discussed below, the Department

believes that the usage information in

the test procedure for certain

appliances, e.g. dishwashers, clothes

washers and clothes dryers, does not

reflect current usage practices.

Additionally, the Department believes

that use of the test procedure usage

information in the LBL-REM and the

LCC will result in incorrect estimates on

the impact of standards on the Nation

and consumers, since current usages are

generally lower than test procedure

assumptions. Therefore , for the purpose

of calculating LCC, energy savings and

NPV, DOE used usage values which it

considers to be reflective of current

consumer usage patterns of the

particular appliances. This approach is

similar to what was done in the

November 17,1989, Final Rule for

refrigerators, refrigerator-freezers, and

freezers and small gas furnaces. Also, in

the LCC analysis, the Department

performed a sensitivity analysis which

included the calculation of LCC using

the test procedure values . The results of

that analysis are shown in the TSD. See

Technical Support Document, chapter 6.

Baseline Unit

Whirlpool, GEA, Nyle Corporation

(Nyle), AHAM, and NRDC provided

comments about the baseline unit used

in the analysis for the proposed rule.

(Whirlpool, No. 20 at 12, 13, and 32;

GEA, No. 21 at 1, 10, and 20; Nyle, No. 24

at 4; AHAM, No. 29 at I and 2; and

NRDC, No.16 at 40-42). NRDC

commented that the baseline unit should

be the average efficiency, i.e., the

shipment weighted energy factor

(SWEF). Conversely, Whirlpool, GEA

and AHAM each commented that the

baseline unit was not representative of

typical clothes washers, clothes dryers,

and dishwashers.

The baseline unit is not the SWEF, but

is a construction of the engineering

analysis. It is used to estimate the cost

and efficiency of a range of energyconserving design options, including

those in the max tech level. This

information is used in the economic

analysis, both in the LBL-REM and LBLMth,4. The Department did use the

SWEF, however, for the purpose of

projecting energy consumption, NPV,

paybacks under the rebuttable

presumption test, and impacts on

manufacturers. In that way, the impacts

on manufacturers, consumers and the

Nation are calculated by comparing

what would happen under different

standard levels to what is expected to

occur without any changes to the extant

standards.

In the November 17,1989, final rule for

refrigerators, refrigerator-freezers, and

freezers, and small gas furnaces, the

Department used the maximum

allowable energy use set by the Act as

the baseline for refrigerators,

refrigerator-freezers, and freezers for

1990. However, for the purposes of this

analysis, the Department did not have

similar guidance from the Act: The Act

prescribes only design standards for

clothes washers, clothes dryers, and

dishwashers; products meeting this

standard have a range of efficiencies.

Therefore, for the Final Rule, the

Department reviewed available data,

including comments on the proposed

rule and manufacturers' submittals to

the FTC for the appliance labeling

program, to identify the range of

efficiencies available in each class for

each product type. A model with an

efficiency slightly higher than the least

efficient unit was then used as the

baseline unit for the engineering

analysis. Data and information from

comments submitted in response to the

August 9, 1989, proposed rule were then

used as input to the economic analysis

for the purpose of calculating impacts of

standards.

Finally, Nyle commented that the

baseline energy factor for clothes dryers

was unrealistic. (Nyle, No . 24 at 4). Nyle

went further to say that it had never

seen a residential clothes dryer near this

efficiency.

DOE does not understand this

comment, since the efficiency estimates

used in the engineering analysis

included the results of testing reported

to DOE. Furthermore, Nyle's comment is

the only one that takes issue with the

measure of efficiency. Therefore, DOE

believes that Nyle must have

misinterpreted the test procedure. The

Department has not made any changes

to the analysis in response to this

comment.

Appliance Usage Data

P&G and AHAM provided information

in their comments regarding clothes

washer and dishwasher annual cycles of

operation and clothes washer

temperature use factors. (P&G, No. 27 at

2, and ARAM. No. 29 at 10-12). The P&G

data show that the number of clothes

washer cycles per year is declining;

based on 1989-89 survey data, it is now

380 cycles per year, down from the test

procedure value of 416. Similarly, the.

P&G data show that the number of

dishwasher cycles per year is lower

than the test procedure value, 286 cycles

per year versus 322; however, the P&G

data show that 1988-89 usage was

higher than 1986-87, 286 versus 260.

These new data are used in the

economic analysis in the calculation of

LCC, energy savings and NPV, as

described above.

AHAM also argued that if the new

usage data are not used,'the energy

savings potential will be overestimated

and the payback period understated for

each standard level. (AHAM. No. 29 at

10).

Al-JAM is correct with respect to the

payback period, however, as explained

above in the discussion of payback

period, the Department is required by

section 325(l)(2)(B)(iii) of the Act to use

the "applicable test procedure," which

the Department interprets as the extant

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test procedure. Therefore, DOE rejects

AHAM's comment with respect to

payback period. With respect to energy

savings, as discussed above, DOE used

the new usage data in the LBL-REM to

calculate energy savings.

Maintenance Expenses

AHAM proposed that maintenance

expenditures should be included in the

analysis and that they should equal 5-

10% of the price of the appliance. (Gants,

Testimony at 7). This estimate was

based on what typically is charged to

consumers for extended warranties.

ACEEE and the EDF disagreed with an

arbitrary maintenance expense figure.

Maintenance expenditures should be

included to the extent that increases (or

decreases) in them can be documented;

to add an arbitrary "fudge-factor" Is not

appropriate.

DOE agrees with ACEEE and EDF and

has not adopted AHAM's

recommendation. The only maintenance

expenses to be used in the analysis are

the incremental changes, positive or

negative, from the baseline unit.

Maximum Technological Feasibility

DOE received six comments that it did

not consider all commercially available

technologies. (Schneider, No. 10 at 1;

Schneider et. aL, No. 31 at 1, NWF, No.

11 at 2, NRDC, No. 18 at 9, EDF, No. 19

at 1, and EPA, No. 36 at 4). Schneider

and EDF argued that DOE had not

evaluated all commercially feasible

options identified in the proposed rule's

TSD. NWF and EPA went beyond these

comments to identify specific

technologies for each product type for

the Department to consider in the final

rule. NRDC made the general argument

that the Department had failed to

propose standards that were at the max

tech level and economically justified.

The Department has considered these

design options and others, where data

are available, in the Final Rule. The

design options considered are discussed

in more detail in the product specific

discussion below and in the TSD. See

Technical Support Document, chapter 3

and appendix A.

b. Product-Specific Comments

1. Clothes Washers.

Classes

The Department had proposed six

classes of clothes washers; top loading

compact, standard, and large; top

loading semi-automatic; front loading;

and suds saving. Speed Queen

commented that it was opposed to the

creation of a large capacity, top-loading

clothes washer class. It recommended

.that the classes be compact and

standard sizes. (Speed Queen, No. 28 at

1, 2). The company further commented

that the standards as proposed, i.e.

having a lower standard for large

capacity machines than for standard

capacity ones, would encourage

manufacturers to build large units. Since

the DOE test procedure rates capacity

by measuring the total volume of the

tub, companies could be subject to the

lower energy factor by increasing the

volume of the washer that is above the

water fill and not need to incorporate

design options which affect energy use.

In response to Speed Queen's

comment, EDF and ACEEE stated that

DOE should evaluate the relationship

between energy use and volume. (EDF,

No. 19 at 8, and ACEEE, No. 18 at 2).

Whirlpool commented that the energy

factor for clothes washers could be

redefined to be equal to maximum

basket volume divided by energy

consumption. (Whirlpool, No. 20 at 22).

DOE has reviewed these comments

and agrees that separate classes for

standard and large size top loading

clothes washers may result in

manufacturers' redesigning products in

order to meet the lower standard, as

Speed Queen suggested, and that this

could result in reduced energy savings.

In addition, DOE investigated the

relationship between energy use and

capacity and found very poor statistical

correlation (of R 2=0.65) between

energy use and volume. This analysis

was based on 1989 manufacturers' data

supplied to the FTC as part of the

appliance labeling program. In

consideration of the above, DOE

established three classes of top loading

clothes washers for the final rule,

standard (greater than 1.6 It 8 capacity),

compact (1.6 ft 8 capacity or less), and

semi-automatic.

NWF commented that front-loading

clothes washers should not have been

placed into a separate class as DOE

proposed. (Osann, Testimony at 3).

NWF suggested, however, that if front

loaders are a separate product class,

then design options should be

considered to make them more efficient.

AHAM commented that front loaders

can use less water, but because of

configuration and size, they do not

represent a large consumer market, and

as a result, DOE had rightfully

designated them as a separate product

class. (AHAM, No. 29 at 21).

DOE reviewed the comments of NWF

and AHAM and found they both have

some merit. DOE agrees with ARAM

that each type of machine, top- and

front-loading, has a distinct consumer

utility, and that typically there is a

difference in energy efficiency between

the two. However, DOE has found that

22263

there are now horizontal-axis, toploading clothes washers manufactured

in Europe; this indicates that the

difference in efficiency is not dependent

on door placement, i.e., the utility

related feature does not necessarily

determine the product's performance.

DOE believes that the horizontal

rotation design of front loaders, which

uses less water and therefore energy,

can now be incorporated into top

loaders as well. The Department has

therefore added the horizontal axis

design option to the top loading clothes

washer engineering analysis, while

retaining front loading as a separate

class. See Technical Support Document,

chapter 3, and appendix A.

Elimination of Warm Water Rinses

AHAM, Whirlpool and Maytag

commented that the elimination of warm

water rinses should not be considered

as a design option because It would

reduce consumer utility. (Whirlpool, No.

20 at 14, AHAM, No. 29 at 18 and 19, and

Maytag, No. 17 at 2, and No. 40 at 6).

Each commented that warm rinse has

utility for arthritic people and those

living in cold regions of the U.S. Also,

Whirlpool testified that some woolen

articles call for warm wash and rinse to

prevent shrinkage. (Whirlpool,

Testimony at 5). Furthermore, AHAM

and Maytag commented that in order toavoid reaction to laundry chemicals,

some consumers find it necessary to use

a warm rinse. (AHAM,'No. 29 at 19, and

Maytag, No. 40 at 6). In addition, AHAMM

and Maytag commented that dryer

energy would be increased three percent

with a cold rinse.

NRDC, on the other hand, argued that

there is no evidence that warm rinse

provides significant utility to consumers.

(NRDC, No.16 at 42-44). NRDC further

stated that not having a warm rinse has

become acceptable to the market since

45 percent of Whirlpool's clothes

washers do not have this option. Also,

P&G commented that it "supports the

use of cold water rinsing in clothes

washers in general, and finds no

performance reasons negating this

move." (P&G, No. 27 at 4).

The Department notes that there are

presently clothes washer models being

sold that do not provide warm rinse

choices. The energy savings from

elimination of warm rinse are

substantial (26 percent with 1975 P&G

data used in the DOE test procedure and

19 percent with 1986-87 P&G data). It is

a low cost, high energy savings option.

The Department reviewed the comments

and determined there is no evidence

that a warm rinse is necessary in the

washing process, especially in light of

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the large number of clothes washers

sold without it. Therefore, DOE included

he elimination of warm rinse as a

lesign option in the engineering

analysis.

Whirlpool proposed that if the

Department were to adopt a standard

based on the elimination of warm rinse,

the standard should be a prescriptive

standard allowing the use of a warm

water rinse that would have to be

selected each time it was desired, i.e., a

cold rinse default setting. (Whirlpool,

No. 20 at 14,).

The standard considered was based

on the elimination of warm water rinse.

However, being a performance

standard, it could also be met by a

machine with a warm water rinse if

other design options to improve

efficiency were included. The

Department notes that there are already

models on the market with warm water

rinse that could meet this standard.

Higher Spin Speeds

RMI, Public Citizen, NRDC, and EDF

commented that the removal of water by

increased clothes washer drum spin

speeds could significantly reduce

clothes dryer energy consumption and

should be considered as a design option

in the clothes washer analysis. (RMI,

No. 12 at 6. Public Citizen, No. 34 at 1,

NRDC, No. 16 at 35-36, and EDF, No. 19

at I and 3). NRDC and EDF recognized

that the present DOE test procedure

cannot evaluate this option, but that the

TSD gives a feasible method of

evaluating such a change, and that DOE

should evaluate this option based on a

revised test procedure. (N13DC, No. 16 at

35, and EDF, No. 19 at 1).

DOE rejects this proposal. As

discussed above, the Act requires

standards to be based on the applicable

test procedure. Since the test procedure

does not provide for this design, it

cannot be included as a candidate for

standards.

Thermostatically Controlled Mixing

Valves

In the proposed rule, the Department

calculated energy savings for this design

option based on the assumption that the

valves would control the hot water

wash temperature to 120 'F.

In testimony at the public hearing,

Whirlpool and Speed Queen contended

that 120 'F is too low a wash

temperature for washing clothes stained

with grease and oil. (Schornhorst,

Testimony at 6-8; Coates, Testimony at

4-5). These views were supported in

comments offered by P&G and ARAM.

(P&G, No. 27 at 3; AHAM No. 29 at 19-

20). These companies believe that

clothes washers' performance would

decrease at the lower temperature of 120

F.

On the other hand, ACEEE stated that

only a small segment of the population

requires a hot wash temperature for

clothes washing; for them, ACEEE

argued that manufacturers could provide

washing machines that would use 130°

water for their hot water washes, while

achieving the necessary energy savings

elsewhere.

P&G, however, contended that

virtually all purchasers of washing

machines would have need of an

occasional 130 'F hot water wash.

Therefore, P&G strongly supported an

130 'F or better inlet water temperature

be considered for all clothes washers in

order to remove greasy soils.

Given P&G's extensive work in

researching the solubility and the

effectiveness of different laundering

agents, the Department puts great

credibility in its comments. As a result,

for the Final Rule, the Department

calculated energy savings for the

thermostatically controlled mixing

valves based on the assumption that the

valves would control the hot water

wash temperature to 130 °F. This

ie:t ed the estimated energy saving

pet tial '6f that design option from that

propsed.

Plastic Tub

Maytag, Whirlpool and AHA.M all

commented on the plastic tub design

option. (Maytag, No. 17 at 2, Whirlpool,

No. 20 at 19, and AHAM, No. 29 at 21).

AI -'1!I said that the design was

technically feasible, but that

incoVorating it would require a major

capifial investment since plastic is not a

direct substitute for steel. Whirlpool

agreed that the effect of reducing

thermal mass would be to improve

efficiency, but stated that the savings

are not achievable without sophisticated

and expensive temperature controls.

Maytag stated, however, that one of the

means it used to reach proposed level 1,

a 1.13 energy factor, was plastic tubs.

Maytag did support AHAM's comment

that the materials are not

interchangeable . Maytag stated that

when a plastic tub is used, greater

clearances must be allowed to prevent

any contact with the spinning wash

basket.

After reviewing these comments, DOE

believes that reduced thermal mass by

the use of a plastic tub has energyconserving potential and is, therefore, a

viable design option. Accordingly, the

Department included this design in the

analysis for this rulemaking.

Motor Efficiency

Maytag, Whirlpool, and ARAM

discussed the feasibility of increasing

motor efficiency. (Maytag, No. 17 at 13-

14., Whirlpool, No. 20 at 16 and 17, and

ARAM, No. 29 at 20). Maytag stated that

its motor suppliers were not capable of

manufacturing a permanent split

capacitor (P.S.C.) motor that would meet

its torque requirements. Similarly,

AHA3,4 commented that motor

efficiency can be increased , but that

such motors do not provide adequate

starting torque.

On the other hand, Whirlpool

commented that its motor efficiency

could be increased to the level

calculated in the TSD but that the

additional motor price would be $14.60

instead of $4.00, as estimated in the

TSD. Additionally, Whirlpool stated that

the improved motor would weigh more,

requiring a change to the washer

suspension system which would add an

additional $.50 to $1.00 to each machine

and cost 5 million dollars for retooling.

In Whirlpool's opinion, this would not

be economically justified.

In light of the comments received,

DOE re-evaluated the motor cost data

discussed in the TSD, including

Whirlpool's, and has revised the

estimated cost increase for the improved

motor from $4.00 to $7.50. DOE

recognizes that in some instances a

heavier motor could exceed the capacity

of the suspension system, requiring

redesign and retooling, but DOE did not

consider any retooling cost for this

design option. The entire $7.50

incremental cost for this design was

treated as a variable cost.

Other Design Options

Comments were received concerning

the possibility of including the

additional design options of manual fill

control, partial fill control and

adjustable speed drives. (NRDC, No. 16

at 17, EPA, No. 36 at 4, RMI, No. 12 at 3,

NWF, No. 11 at 3, and Public Citizen,

No. 34 at 1).

With respect to improved fill control,

AHAM commented that in 1987, 98.5

percent of clothes washers were

equipped with manual water level

switches. (AHAM, No. 29 at 22). Based

on the comments submitted by ARAM,

DOE concluded that the design options

of manual fill control and partial fill

control were adequately considered by

the proposed baseline which

incorporated manual water level

controls.

With respect to adjustable speed

motors, the Department notes they ha .,e

the potential to save energy in space

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heating and cooling equipment, as

mentioned in the RMI comment when

the load varies over time. (RMI, No. 12

at 3). However, in the case of clothes

washing where the load is more

constant, DOE does not believe that

adjustable speed motors are applicable

for energy saving purposes.

2. Clothes Dryers.

Heat Pumps

RMI, NPPC, NRDC, Maytag,

Whirlpool, Ohio, Nyle Corporation

(Nyle), AHAM, Washington State

Energy Office (WSEO), and Public

Citizen all discussed whether heat pump

clothes dryers were technologically

feasible, and/or whether they should be

a separate class or design option for

electric clothes dryers. (RMI, No. 12 at 7,

NPPC, No. 13 at 2, NRDC, No. 16 at 28-

33, Maytag, No. 17 at 9 and No . 40 at 3,

Whirlpool, No. 20 at 58, Ohio, No. 22, at

7, Nyle, No. 24, at I and 2, ARAM, No.

29 at 28, WSEO, No. 33 at 2, Public

Citizen, No. 34, at 1).

RMI, NPPC, NRDC, Ohio, Nyle,

WSEO, and Public Citizen all argued

that heat pump clothes dryers are

technologically feasible and should be

considered as a design option, not a

separate class.

Nyle reported its success in

manufacturing commercial heat pump

dryers or closed cycle dehumidification

dryers, Nyle has manufactured and

installed hundreds of systems in

commercial applications utilizing heat

pumps for drying leather, wood, food,

paper, and pharmaceuticals. (Nyle, No.

24 at 3). Nyle argued that this technology

can be applied to clothes drying, and

stated that the company is working with

a commercial dryer manufacturer to

offer a commercial line of heat pump

clothes dryers. Nyle believes that this

technology can also be extended to

residential clothes dryers.

Maytag and Whirlpool both

commented that two problem with heat

pump clothes dryers are lint and water

build-up, which would affect the

performance and, possibly , the safety of

the unit. (Maytag, No. 17 at 9 and No. 40

at 3, and Whirlpool, No. 20 at 58).

Maytag cited its experiences with closed

cycle condenser dryers and combination

washer/dryers in which lint

accumulation was a major problem,

which contributed to Maytag's

eliminating them from the marketplace.

Whirlpool also commented that a heat

pump clothes dryer would require at

least eight inches additional depth

compared to a conventional electric

dryer. (Whirlpool, No. 20 at 57). This

was based on its assumption that the

dryer would require a heat pump with a

capacity of 10,000 Btu/hour and would

have a volume of more than 8,000 cubic

inches. Whirlpool contended that in

order to add the heat pump system to a

dryer and maintain the same width (29")

and height (35"), the additional depth for

the system would be at least 8". Nyle, on

the other hand, argued that the system

fits into cabinets that are the same size

as, and similar in appearance to,

conventional dryers. (Nyle, No. 24 at 1).

Based primarily on Nyle's comments

and experience, DOE is convinced that

heat pump clothes dryers are technically

feasible. DOE recognizes that lint buildup may be a problem, but also notes.that

Whirlpool implies that lint is a

continuing problem in all clothes dryers,

While Nyle did not address lint per se,

DOE presumes that it is coping with the

lint problem in its commercial models.

DOE is not convinced that lint build-up

is such a large problem as to preclude

the technology. DOE is also convinced,

based on Nyle's experience, that heat

pump clothes dryers can be made to fit

the same size space as conventional

dryers by extending the back of the

cabinet as far as the vent pipe extends

in a conventional dryer and moving the

control panel forward. Based on the

comments, DOE has concluded that heat

pump clothes dryers do not provide

distinct utility to the consumer, and has

included heat pumps (or closed cycle

dehumidification systems) as a design

option in the analysis for today's final

rule.

Microwave Clothes Dryers

RMI, Rudy Pesci (Pesci), and NRDC

supported the incorporation of

microwave drying in clothes dryers,

while Maytag and Whirlpool opposed

the adoption of this technology as a

design option in the analysis. (RMI, No.

12 at 7, Pesci, No. 30 at 1, NTRDC, No 37

at 2, Maytag, No. 40 at 3, and Whirlpool,

No. 39 at 3, 5, and 6). RMI suggested that

such a technology be considered in

future proceedings, while Pesci and

NRDC supported its consideration in

this rulemaking. Pesci provided copies

of patents issued for microwave clothes

dryers, and technical and cost

information concerning the technology,

including limited test data on an

operating prototype. NTRDC commented

that the only drawback is its inability to

dry fabrics with metal threads.

On the other hand, Maytag and

Whirlpool stated that safety problems

exist with the unit, with Whirlpool even

putting sample garments in a microwave

oven set to full power to demonstrate

some of the potential safety problems.

(Maytag, No. 40 at 3, and Whirlpool, No.

39 at 3, 5, and 6).

DOE reviewed Whirlpool's comments

and concluded that its experience of

putting clothing in a microwave oven Is

not applicable to the prototype

microwave dryer experience. DOE

believes, based on the Pesci and the

NRDC statements, that although some

limitations exist with microwave clothes

dryers, microwave clothes drying is a

technically feasible design option. The

Department, therefore , included it as a

design option in the analysis for today's

final rule.

Finally, NRDC provided information

with respect to the cost and efficiency of

microwave ovens and magnetrons.

(NRDC, No. 37 at 2).NTRDC stated that

the prototype microwave clothes dryer

made by Mahan Micro , Ltd., has a

magnetron (the microwave generator)

with an efficiency of 55 percent and that

more efficient magnetrons are available,

units with efficiencies as high as 75

percent. As part of an upcoming

rulemaking on kitchen ranges and

ovens, DOE has been gathering data

regarding microwave ovens and

magnetrons. Based on those data, DOE

is unaware of magnetrons with

efficiencies less than 75 percent.

Apparently, the industry standard is a

75 percent efficient magnetron; the

efficiency of the device is reduced when

installed. The installed efficiency is

generally in the 55 to 60 percent range.

Based on the information available to

the Department, DOE believes that the

microwave clothes dryer that Mahan

Micro, Ltd. manufactured actually has a

magnetron of 75 percent efficiency.

Therefore, the analysis is based on a 75

percent efficient magnetron , and DOE

knows of no higher magnetron

efficiencies at this time . With respect to

the retail price of microwave clothes

dryers, NRDC suggested a retail price of

$325 to $625, or a $25 to $325 increase

over thp baseline unit. DOE used a price

increase of $395 and believes that the

higher figure is more reasonable,

particularly in light of the added

features required , including humidity

sensing and the magnetron.

Exhaust Heat Recovery

Public Citizen commented that DOE

did not adequately examine the recycle

exhaust heat design option. (Public

Citizen, No. 34 at 1).

DOE disagrees; this design option was

included in the proposed rule as

standard level 4. In addition, it was

included in the analysis for today's Final

Rule. See Technical Support Document,

appendix A.

EDF commented that DOE did not

give a basis for not considering inlet air

preheat. (EDF, No. 19 at 3). DOE did

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consider inlet air preheat, as discussed

in the TSD, but did not explain why it

was not chosen as a standard level.

DOE identified three methods of

recovering heat that is generally lost

from clothes dryers; they are recycled

exhaust heat, non-condensing inlet air

preheat, and condensing inlet air

preheat. DOE believes the three

methods of exhaust beat recovery are

mutually exclusive. That is, only one

can be used on a dryer. After examining

the three different approaches, DOE

found that the methods are

approximately equal in their

contribution to clothes dryer energy

consumption, but that the option of

recycle exhaust heat had a lower

manufacturer cost and, therefore, was

chosen as the design option for exhaust

heat recovery.

In addition, Whirlpool and AHAM

commented that each design has

technical problems. (Whirlpool, No. 20

at 52; and AHAM, No. 29 at 25 and 26).

Recycle exhaust heat has safety

problems due to the potential of larger

pieces of lint breaking off and being

ignited by the electric resistance

element or by the flame in a gas clothes

dryer. Both inlet air preheat options

have performance problems caused by

the buildup of lint in the heat exchanger.

DOE agrees with AHAM's and

Whirlpool's comments concerning the

technical problems with each design;

however, as stated previously, the

Department believes that lint is a

problem in all dryers. These

technologies may exacerbate the

problem, but the Department is not

convinced that the problem is so large

as to render the technologies infeasible.

Therefore, the Department has included

exhaust heat recovery as a design

option based on recycle exhaust heat

because of its lower cost.

NRDC, EDF, Nyle, and Whirlpqol each

questioned the Department's estimate of

the energy savings potential of this

design option of this in clothes dryers.

(NRDC, No. 16 at 37-39; EDF, No. 19 at 3;

Whirlpool, No. 20 at 34; and Nyle, No. 24

at 4 and 5). NRDC, EDF, and Nyle

argued that DOE had underestimated

the savings. EDF estimated that 80

percent of the heat is exhausted, not 20

percent as estimated by DOE. NRDC

cited a report by D. Hekmat and W.J.

Fisk, Improving the Energy Efficiency of

Residential Clothes Dryers, to support

its argument that the energy savings

potential was underestimated.

Whirlpool, however, referred to an

analysis submitted to the Federal

Energy Administration in 1976 which

claimed that "about 92% of the

theoretical maximum energy utilization

in the dryer drum is already being

attained." (Whirlpool, No. 20 at 34)

DOE reviewed these conflicting

comments, but was not convinced that

any changes should be made to the

analysis regarding the heat loss, i.e.,

energy conservation potential, of clothes

dryers.

Automatic Termination

DOE received a number of comments

regarding the method of automatic

termination, moisture or temperature,

and the energy savings for each. ODOE

recommended that moisture sensors

should be the required option, while

Dingell urged that DOE resolve the

question of whether moisture sensing

devices really save more energy than

temperature sensing devices. (ODOE,

No. 15 at 5; and Dingell, No. 35 at 3).

.NYSEO and NRDC both argued that the

rationale used in the proposed rule (the

test procedure gives both forms of

automatic termination the same energy

savings credit) is not sufficient to

support a standard that would allow

either option since the standard is a

design standard, not an efficiency

standard. (NRDC, No. 16 at 33; and

NYSEO, No. 32 at 28). AHAM

commented that manufacturers have

found little difference between the two

technologies. (AHAM, No. 29 at 25).

Whirlpool provided results from a three

year field test that measured a 13.0

percent savings for temperature sensors

and a 13.6 percent savings for moisture

sensors. (Whirlpool, No. 20 at 33).

Based on the Whirlpool data, DOE

concluded that the credit given by the

test procedure is justified and therefore

based consideration of today's Final

Rule on the credit given by the test

procedure.

Timed Dry

Maytag, ACEEE, EDF, Whirlpool,

GEA, and Al-JA.M all commented that

timed dry was required in certain

instances. For example, Maytag

commented that automatic termination

is not effective when drying items on a

stationary rack inside the dryer. In

addition, Maytag commented that timed

dry is necessary for those occasional

loads that are not sensed properly by

automatic controls or for partial drying

prior to ironing. (Maytag, No. 17 at 7 and

8). Whirlpool agreed with Maytag and

provided an extensive discussion of the

situations where timed dry would be

necessary. (Whirlpool, No. 20, at 37-47).

ACEEE and EDF commented that the

elimination of timed dry would decrease

utility, and that it should be allowed, if

the maximum setting were no longer

than 30 minutes. (ACEEE, No. 18 at 2;

and EDF. No. 19 at 7).

Rules` and Regulations

Maytag, Whirlpool and GEA stated

that they would support a standard that

would allow timers in conjunction with,

but not overridden by, automatic

controls. (Maytag, No. 17 at 10;

Whirlpool, No. 20 at 47; and GEA; No. 21

at 22). GEA further stated that there

should not be a limit on the setting for

timed dry.

After reviewing the comments, DOE

concluded that this feature, timed dry, is

of benefit to consumers and should

remain as a manually selected option.

DOE is not able to determine if there is

a basis for a limit on the timed dry;

therefore, one is not specified.

Reduced Air Flow

RMl commented that reduced air flow

could save energy, but that it would

reduce consumer utility. (RMI, No. 12 at

7). DOE agrees, and therefore did not

include it in the Final Rule.

3. Dishwashers.

General

Whirlpool commented that the

proposed standard level 1 is technically

feasible and cost justified, while Maytag

commented that an energy factor of 0.37

for standard sized dishwashers is

achievable. (Whirlpool, No. 20 at 6; and

Maytag, No. 17 at 6).

DOE determined that standard levels

more stringent than these are technically

feasible and cost justified, as discussed

below.

Water Temperature

P&G stated that its studies show that

130 `F water is needed for satisfactory

fatty an d greasy soil removal in

dishwashers. (P&G, No. 27 at 3). P&G

states that the wash temperature may

not reach 130 'F until the third water fill.

P&G's data indicate that the average tap

temperature is 132.5 'F. P&G said that

the water heater temperature should

stay at 140 °F and that the dishwasher

inlet temperature should be left

unchanged. In addition, ARAM

referenced a P&G report that shows "the

need for 130-140 'F water in

dishwaters." (AHAM, No. 29 at 17).

Also, GEA stated that reduced inlet

water temperature can be accomplished

only through use of water heating

dishwashers. (GEA, No. 21 at 4).

On the other hand, ACEEE and NRDC

both commented that the Department

had not presented evidence that loads

containing animal fats would be

insufficiently cleaned by lower water

temperatures. (ACEEE, No. 10 at 6; and

NRDC, No. 18 at 34).

DOE reviewed the P&G study and

found that P&G studied four kinds of fat

at three temperatures (90 'F, 120 °F, and

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140 °F). 120 °F water appeared to remove

most of the fats after one use and wash.

However, on a seventh use and wash,

the removal of one of the fats (pork) was

inadequate.

The Department notes that there was

no discussion of what took place

between the first and seventh uses and

washes to cause the problem.

Additionally, there was no discussion of

the use of alternative detergents.

Furthermore, the comments do not

address dishwashers with booster

heaters such as water heating

dishwashers.

NRDC, Portland General Electric

(PGE), and ACEEE commented that

booster heaters should be considered as

a design option, not as a separate class.

(NRDC, No. 16 at 34-35; PGE, No. 23 at 2;

and ACEEE, No. 18 at 4).

After reviewing the comments, the

Department has concluded that a water

heating dishwasher, which is essentially

the same as a standard dishwasher with

a booster heater, does not offer a

distinct utility to the consumer.

Accordingly, the Department dropped

from consideration water heating

dishwashers, both 115 and 220 volts, as

separate classes, and added, as a design

option for standard dishwashers,

booster heaters, which allow a 120 °F

water heater set point while providing

for the use of higher wash water

temperature when necessary.

Improved Food Filter

GEA commented that reduced water

consumption with an improved food

filter would result in units with

unacceptable washing performance.

GEA further commented that its

experience indicates that the addition of

food filters saves 0.67 gallons of water

per cycle, not the 2.2-2.3 gallons used in

the proposed rule. (GEA, No. 21 at 3, 4,

and 8). Whirlpool stated that an

improved food filter allows the

reduction of water use by 20 percent (5

to 4 fills). (^Nhirlpool, No. 20 at 6).

After consideration of the above, DOE

has retained the improved food filter as

a possible design option to reduce hot

water usage, as was done in the

proposed rule. The intent of this design

option is to reduce water usage from the

12 gallons used by the baseline model to

9.5 gallons used by two of the top rated

dishwashers in the Consumer Report

test submitted by NWF. The magnitude

of this water reduction is compatible

with Whirlpool's experience of

improving the food filter. While there

are other ways to reduce water usage,

DOE used the improved food filter as

being representative of this concept.

Three Fill

NWF, NRDC and ACEEE commented

that a three-fill option for dishwashers

should be fully analyzed. (NWF, No. 11

at 3; NRDC, No. 16 at 34; and ACEEE,

No. 18 at 4). NRDC stated that DOE

must analyze whether these models

provide utility comparable to the fourfill models. AHAM commented that

three-fill units have been manufactured

but have shown poor performance.

(ARAM, No. 29 at 16). Whirlpool stated

that it is the manufacturer that produced

the three-fill model referred to in the

TSD, and that it no longer manufactures

the model because of consumer

complaints about performance.

(Whirlpool, No. 20 at 13). Maytag

commented that it had made a three-fill

dishwasher that Consumer Reports

criticized for poor washability; it could

clean "prerinsed" dishes but not those

that were not rinsed. Maytag

discontinued the model because it could

not provide comparable utility to fourfill models. (Maytag, No. 40 at 5 and 6).

DOE reviewed the comments and

concluded that three-fill models do not

provide the performance required of

dishwashers. The Department, therefore,

did not include this option in the

analysis for today's final rule.

Fill Control

NRDC commented that the

Department should have considered an

improved fill control as a design option.

(NRDC, No. 16 at 34). AI-IAM and

22267

Maytag commented that improved fill

controls do not work properly if the unit

is not level, and that tolerances are

manufactured into the unit to allow for

this. (Maytag, No. 17 at 5; and AHAM,

No. 29 at 15).

DOE agrees with Maytag and AHAM

that out-of-level installation can affect

dishwasher performance.

DOE finds, however, that an improved

fill control is technologically feasible in

that dishwashers can be installed level;

therefore, DOE included it as a design

option.

IV. Product-Specific Discussion

a. Clothes Washers

1. Efficiency Levels Analyzed. DOE

examined a range of standard levels,

including the 1988 NAECA standards for

two classes of clothes washers. As

discussed in the proposed rule, the

Department did not consider standards

for top loading semi-automatic, front

loading and suds saving clothes

washers. Today's final rule retains the

1988 NAECA standard for these three

classes. The impacts of any revised

standards for the two classes

considered were compared to the 1988

NAECA standards. The impacts of the

base case are generally not presented

because they are calculated to be zero.

Table 4-1 presents the efficiency

levels that had been selected for

analysis. Alternate levels were selected

to generate a range of impacts for

analysis. These efficiency estimates are

for standard and compact capacity, toploading clothes washers. Standard level

1 corresponds to efficiencies achieved

by elimination of all warm rinses; level 2

corresponds to efficiencies achieved by

adding a more efficient motor; level 3

adds thermostatic mixing valves and a

plastic tub; level 4 adds, to level 1. a

horizontal-axis tub rotation; and level 5

adds, to level 4, thermostatic mixing

valves and a plastic tub.

TABLE 4-1.-STANDARD LEVELS ANALYZED FOR TOP-LOADING CLOTHES WASHERS

Size

Compact •.......... __. _._...^_._ .._.. _ . _..........__..._ ..__..._. ......._.......... _.....

Standard • .._. ... ..._.._.._._ _._.....__.......... ............................... _......... .... .............. ....... _.-.__.

Capacity less than 1.6.fts

Capacity equal to or greater than 1.6 fts

Base the

0.67

0.88

1

Energy factor (cu. tL/kWh)

2

0.90

1.18

0.92

1.19

91

0.96

1.24

4

3.07

3.07

5

3.19

3.19

2. Payback Period. Table 4-2 presents class of product (standard clothes electric water heater, standard level I

the payback period for the efficiency washers). For standard capacity, top- satisfies the rebuttable presumption test,

levels analyzed for the most prevalent loading clothes washers connected to an i.e., the additional price of purchasing a

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product will be less than three times the

value of the energy savings that the

consumer will receive during the first

year. In addition, for standard capacity,

top-loading clothes washers connected

to a gas water heater, standard levels 1

and 2 satisfy the rebuttable presumption

test.

TABLE 4-2.-PAYBACK PERIODS OF DESIGN OPTIONS (YEARS) FOR STANDARD

SIZE, Top-LOADING CLOTHES WASHERS

Payback Period

Standard level With gas

water

heater

With

electric

water

heater

I ..................... _....................... 0 0

2 .............................................. 2.2 0.8

3 ..... _.... ........ ........................ 7.2 2.7

4 ............................................. 5.6 2.6

5 ...................... _...................... 6.8 3.2

3. Significance of Energy Savings. To

estimate the base case energy savings

by the year 2015 due to revised

standards, the energy consumption of

new clothes washers sold under the

NAECA standards, i.e., the base case, is

compared to the energy consumption of

those sold under the candidate standard

levels. For the candidate energy

conservation standards, the LBL-REM

projects that cover the period 1993-2015,

the following energy savings could

result for each:

Level 1--0.57 Quad.

Level 2-0.68 Quad.

Level 3-0.81 Quad.

Level 4-5.69 Quads.

Level 5-5.92 Quads.

4. Economic justification

A. Economic Impact on

Manufacturers and Consumers. The per

unit increased cost to manufacturers to

meet the level I efficiency is $1; to meet

levels 2-5, the manufacturers'

incremental cost increases are $7.50,

$19, $83.50, and $19, respectively, for a

standard, top-loading clothes washer.

See Technical Support Document, table

3.18.

At those levels of efficiency, the

incremental consumer price increases

are $0, $11.50, $30.30, $129.10, and $30.20

for standard levels 1-5, respectively. See

Technical Support Document, table 6.7.

The per unit reduction in annual cost

of operation (energy expense) at level 1

is $25.70 and $11.40 for a top-loading

standard-sized clothes washer

connected to an electric water beater

and a gas water heater, respectively;

standard level 2 would reduce energy

expenses by an additional $1.10 and

$1.10; standard level 3 by $0.60 and

$0.20; standard level 4 by $43.80 and

$23.80; and standard level 5 by $0.20 and

$0.10, respectively. See Technical

Support Document, Table 6.7.

The LBL-M. DA results for clothes

washers show that standard level I

would cause manufacturers to have a

decrease in ROE from 6.05 percent in the

base case to 5.86 percent (a decline of

3.1 percent). Standard levels 2, 4, and 5,

are projected to reduce a prototypical

manufacturer's ROE by 0.1 percent, 77.2

percent, and 80.8 percent, respectively,

while standard level 3 is projected to

raise it by 4.30 percent. See Technical

Support Document, Table 7.17. This

industry has displayed continuing

consolidation for several decades,

especially during periods of low

earrings. By decreasing profitability,

especially as DOE projects at standard

levels 4 and 5, standards could lead to

an increase in the financial burden on

the industry, thereby possibly

contributing to greater consolidation

and less competitiveness than is likely

in the base case. See Technical Support

Document, Section 7.4.

The Department assumed for the

Engineering Analysis that

manufacturers would elect to eliminate

the warm/warm setting and warm water

rinse option before adding other design

options, because these actions would

result in minimal increases in

manufacturer costs, i.e., $0.50 per design

option. All of the other design options

considered in the analysis, e.g.,

improved motor, plastic tub, would

cause a significant increase in

manufacturer costs in comparison to the

first two options. Unlike all other design

options considered in this analysis (for

clothes washers, clothes dryers, and

dishwashers alike) the elimination of the

warm/warm setting and warm water

rinse option is perceivable by the

consumer. Other design options,

improved motors for example, are

design features that would not be

apparent to the consumer. In the event

some consumers demand that the

warm/warm setting and warm water

rinse option be retained, manufacturers

may retain these features and use design

options which would have additional

greater fixed and variable costs than

estimated in order to meet the standard.

This was given great weight in today's

final rule as discussed below.

Furthermore, since financial data of

the type needed to characterize the

prototypical manufacturer are generally

not available, DOE had to make a

number of assumptions based on the

limited data publicly available, e.g.,

Securities and Exchange Commission

10K reports and company annual

reports.

This approach was originally

discussed in the Advance Notice of

Proposed Rulemaking (53 FR 17712, May

18, 1988), and the Department did not

receive any comments that indicated a

change in approach was warranted.

B. Life-cycle Cost and Net Present

Value. Compared to the base case, the

LCC analysis indicates that at each

possible standard level, the increase in

purchase price would be offset by

savings in operating expenses. See

Technical Support Document, Figure 6.7.

The lower life-cycle costs indicate that

no standard level would cause any

economic burden on the average

consumer. Of the five candidate

standard levels, level 4 had the lowest

consumer life-cycle cost. Of the levels

considered without horizontal axis, level

1 had the lowest consumer life-cycle

cost.

Compared to the base case, standard

level 1 would cause reductions in lifecycle costs of $106.30 and $43.00 for a

top loading standard-sized clothes

washer connected to an electric water

heater and a gas water heater,

respectively; standard level 2 would

reduce life-cycle costs by $89.10 and

$34.80; standard level 3, by $52.80 and

$2.30; standard level 4 would reduce life

cycle costs by $287.10 and $81.50; while

standard level 5 would result in

decreases of $225.60 and $42.60,

respectively, compared to the base case.

See Technical Support Document, Table

6.2.

Compared to the minimum LCC point

(standard level 1), standard level 2

would cause an increase in life-cycle

costs of $2.00 for a top-loading standardsized clothes washer connected to either

an electric or gas water heater; standard

level 3 would increase life-cycle costs

by an additional $25.00 and $28.00; while

standard level 4 would cause reductions

in life-cycle costs of $228.00 and $136.00

compared to level 1; and standard level

5 would result in an increase in lifecycle cost, compared to level 4, of $28.00

and $30.00, respectively. See Technical

Support Document, Section 6.1.3.

While DOE examined the effect of

different discount rates (2, 7, and 15

percent) on the LCC curves and

generally found little impact, the

Department did not consider higher

discount rates, since such rates would

be beyond the range of real, after-tax

rates that consumers would likely face

in financing the purchase of clothes

washers. Similarly, DOE did not

consider different energy prices,

including regional prices, in the LCC

analysis. Since any standard is to be a

national standard, DOE believed that

national average energy prices were

CE-RM-88-101 COMMENT 04
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appropriate. However, DOE did

examine the effect of a usage rate

different from the 416 cycles per year set

by the DOE test procedure. Recent

Procter and Gamble data appear to

indicate that the national average

clothes washer annual usage rate is 406

cycles per year, more than 2 percent less

than the test procedure representative

average use cycle. The slightly lower

usage numbers result in the lower lifecycle cost estimates that were presented

above. See Technical Support

Document, Section 6.1.1.

The NPV analysis, a measure of the

net savings to society, indicates that

standard level 1 would produce a NPV

of $528 million to consumers. The

corresponding NPV numbers for levels

2-5 are $508 million, minus $135 million,

$1.294 billion, and $196 million,

respectively. See Technical Support

Document, Table 5.13. The negative NPV

at standard level 3 indicates that at this

standard level, society would spend

more to purchase and operate washing

machines, as measured in 1987 dollars,

than under the base case.

C. Energy Savings. As indicated

above, standards will result in

significant savings of electricity

consumption for clothes washers.

D. Lessening of Utility or Performance

of Products. As indicated above, DOE

established classes of products in order

to assure that the standards analyzed

would not lessen the existing utility or

performance of clothes washers.

E. Impact of Lessening Competition.

The determination of this factor was

made by the Attorney General. In its

review of the proposed standards for

clothes washers, the Department of

justice (DOJ) concluded that "a

significant lessening of competition may

occur under certain conditions," such as

the need for the smaller competitors to

undertake substantial redesign or

retooling. (DO], NO. 38, at 4).

In the Notice of Proposed Rulemaking,

standard level I and 2 were met by

eliminating the warm rinse option and

adding thermostatic mixing valves. DOJ

found that "some manufacturers may

not be able to comply with the proposed

standards by making these design

changes and may need to undertake

more substantial redesign or retooling

that would impose substantial fixed

costs." If, as DOE believes, some

manufacturers may elect to retain the

warm/warm setting and warm water

rinse in response to marketplace

demands, then manufacturers will have

greater costs than estimated thus far,

and these increased costs are likely to

affect smaller competitors more severely

than larger ones.

F. Need to Save Energy. Clothes

washers use electricity directly and are

responsible for the water heater energy

consumption that is necessary to supply

the heated water to the clothes washer.

Water heater energy consumption is

either in electricity or natural gas,

depending upon the water heater.

Consequently, clothes washers are

responsible for both gas and electricity

consumption. In 1987,1.6 percent of

source electricity (or, .442 Quad) and 1.4

percent of natural gas consumption (or,

.241 Quad) were accounted for on a

national basis by clothes washers.

In addition, decreasing future

electricity demand as a result of

standards will decrease air pollution.

See Technical Support Document,

Appendix D 8. The greatest decreases in

air pollution will occur for sulfur oxides

(listed in equivalent weight of sulfur

dioxide, or SO2). For standard level 5, in

the year 2015, the estimated S02

reduction would be 89,418 tons. This

reduction represents 0.55 percent of the

United States SO2 emissions that are

expected to be emitted by power plants

in that year.

Standard level 5 would also result in a

decrease in nitrogen dioxide (NO2)

emissions for the year 2015 of 74.997

tons, This decrease represents 0.7

percent of the total NO2 emissions

expected to be emitted by power plants

in that year.

Another consequence of the standards

will be the reduction of carbon dioxide

(CO2) emissions. Standard level 5 is

estimated to reduce United States CO2

emissions by about 0.43 percent for the

year 2015. In 2015, standard level 4 is

expected to reduce SO2, NO2 and CO2

emissions by .53,.67, and .41 percent,

respectively. Standard level 3 reductions

As a result of provisions in the recently enacted

Clean Air Act Amendments of 1990 (Pub. L 101-W.

November 15, 1990), the calculated reductions of

SO2 and NO2 have been overestimated.

For SO2, any emission. reductions caused by

appliance standards prior to the year 2000, will be

part of much greater SCn reductions that are

required by the new amendments. After the year

2000, SO2 reductions achieved through appliance

standards or any other means by those emitting SO2

can be earned as credits. These are credits to emit

an amount of SO2 equivalent to the amount of the

SO2 reduction that created the credits. The new

amendments allow those earning the credits either

to sell them to others or to "bank" them for future

use. Therefore, after the year 2000, to the extent that

appliance standards result in SO2 credits being

earned, and to the extent that such standardsinduced credits are sold and used by others, the

National SO, reductions will not occur.

The new law also requires that utility boilers emit

lower levels of NO2. As a result, the expected

emissions of NO, will be less than was assumed in

the Department's estimation of the N02, savings

achievable through the present appliance standards

revisions. The actual NO2 reductions resulting from

today's standard revisions will be lees than those

presented here.

are expected to be .07,.09, and .06

percent for SO2, NO2 and CO2,

respectively in 2015.

For SO2, NO2, and CO2 emissions in

2015, the respective reductions under

standard level 2 are .06,.08, and .05

percent; for standard level 1, the

respective emissions reductions would

be .05, .06, and.04 percent,

G. Other Factors. After the closing

date of the record for the proposed rule,

DOE became aware of a new type of

washing machine now available in

Europe. DOE believes that this new

design, top-loading with horizontal-axis

rotation, has great energy savings

potential. However, since DOE did not

propose any standards based on this

design and there is no information on

this technology in the record, DOE does

not believe that it could establish a

standard based on this design in today's

final rule. Based on the limited data

acquired to date, DOE has analyzed

design options based on this technology.

The results are presented below;

however, DOE notes that all aspects of

these analyses are subject to change as

more data become available.

Based on the great energy savings

potential of this design, DOE is

evaluating this technology as soon as

possible and has included clothes

washers in the Advance Notice of

Proposed Rulemaking for Nine Products.

55 FR 39624, September 28, 1990. In light

of this, DOE considered whether to issue

a final rule for clothes washers today or

whether to repropose a new rule

instead. Because of the time involved in

reproposing and the energy savings thus

lost, DOE decided to issue a final rule

today for clothes washers to achieve

energy savings now but giving great

consideration to minimizing retooling

costs for manufacturers. Minimizing

retooling costs was given great weight in

today's Final Rule because DOE is

reconsidering clothes washer standards

presently. If this reconsideration results

in standards based on a top-loading

horizontal axis rotation design, major

redesign and retooling would be

necessary. DOE does not believe it

would be economically justified to

impose a major retooling at this time.

5. Conclusion. Section 325(l)(2)(A) of

the Act specifies that the Department

must consider, for amended standards,

those standards that "achieve the

maximum improvement in energy

efficiency which the Secretary

determines is technologically feasible

and economically justified."

Accordingly, the Department first

considered the max tech level of

efficiency, i.e., standard level 5, for

amended clothes washer standards.

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Of the standard levels analyzed, level

5 will save the most energy (5.92 quads

between 1993 and 2015). In order to meet

this standard, the Department assumes

that all clothes washers will be toploading, horizontal-axis machines. Such

machines are presently available in

Europe.

In addition to the top-loading,

horizontal-axis, technology, standard

level 5 would involve changes that can

presently be incorporated, namely, the

elimination of warm rinses, an improved

motor, thermostatic mixing valves, and a

plastic tub.

As mentioned above, the principal

technology on which this standard level

is based, top loading , horizontal-axis

rotation, was brought to the attention of

the Department after the close of the

comment period on the proposed rule.

Since no one has had a chance to

comment on it, and since no comments

on it were volunteered during the

comment period, the Department

believes that it cannot issue a final rule

based on this technology. Furthermore,

the results of the analysis are not

considered to be firm and are subject to

possible change following public

comment and further analysis in a

separate proceeding. Based on the

above and because the top-loading,

horizontal-axis rotation design

represents the predominant energy

saving feature in standard level 5,

standard level 5 was not considered for

this Final Rule.

Standard level 4, also, is based

principally on the same horizontal axis

technology as standard level 5. For the

reasons mentioned above, therefore, the

Department believes that it cannot

consider it for this final rule.

The next most stringent standard level

is standard level 3. This standard level

is projected to save 0.81 quad of energy

between 1993 . and 2015. Among the

level's other positive impacts are the

projections of lower LCC's than those

for the baseline (by $52.80 and $2.30 for

clothes washers connected to electric

water heaters and gas water heaters,

respectively). In addition, for

households with electric water heaters,

the payback for standard level 3 is

projected to be only 2 .7 years.

Furthermore, the LBL-MIM projects that

the ROE of a prototypical manufacturer

would be 6.31 percent, which would

exceed the base case projection of 6.05

percent. However, this standard would

preclude the purchase of the most costeffective unit; it would cause an

increase in LCC (compared to the

minimum LCC point) of $25.00 and

$28.00 for a top-loading standard-sized

clothes .vasher connected to an electric

water heater and a gas water heater,

respectively.

On the other hand, the payback to

consumers with gas water heaters

would be 7.2 years, half that of the

appliance's 14.1 years average lifetime.

In addition, this standard level would

raise the purchase price to consumers

by 11 percent, resulting in a decline in

shipments of nearly two million units

between 1993 and 2015. As a

consequence, the NPV of this standard

would be a negative $135 million, the

lowest of any standard level. The

negative NPV and increase in LCC

(compared to the minimum LCC point)

of this standard level are troubling to

the Department, for they indicate that at

this standard level, society would spend

more to purchase and operate washing

machines than under the base case.

Additionally, standard level 3 could

involve substantial increased costs to

manufacturers. As noted above, the

improved motor design option used to

achieve the energy savings of this

standard level added $7.50 to the per

unit cost of manufacturing clothes

washers. Analytically, the Department

treated this cost as a variable cost as it

asstuned that all parts would be

purchased. Earlier, however, it was

noted that Whirlpool had commented

that because an improved motor would

require an improved suspension system,

the company would have to undertake

$5 million in tooling costs for the

improved suspension system. While the

Department did not treat any of the

costs in its analysis for this standard

level as fixed costs, it recognizes that

fixed costs could be substantial for

some other manufacturers, as well.

While not treated as such in the

analytical output, DOE believes that

retooling costs for standard level 3 could

be significant. Since DOE has decided to

consider the horizontal axis technology

with its associated fixed costs as soon

as possible, the Department issues a

final rule today that imposes minimal

impacts on manufacturers' retooling

costs.

The Department, therefore, concludes

that the burdens of standard level 3 for

clothes washers outweigh the benefits,

and rejects the standard level.

Standard level 2 would save 0.68 quad

of energy between 1993 and 2015, and

would repay itself to the consumer in 0.8

years (for electric water heat), and 2.2

years (for gas water heat), thereby

passing the rebuttable presumption test

for both water heating fuels. Among the

level's other positive impacts are the

projections of lower LCC's than those of

the baseline (by $89.10 and $34.60 for

clothes washers connected to electric

water heaters and gas water heaters,

respectively),

However, compared to the minimum

LCC point, this standard level would

cause an increase in life-cycle cost of

$2.00 for top-loading standard-sized

clothes washers connected to either an

electric water heater or a gas water

heater. This standard level could

involve substantial increased costs to

manufacturers. As noted above, the

improved motor design option used to

achieve the energy savings of this

standard level added $7.50 to the per

unit cost of manufacturing clothes

washers. Analytically, the Department

treated this cost as a variable cost as it

assumed that all parts would be

purchased. Earlier, however, it was

noted that Whirlpool had commented

that because an improved motor would

require an improved suspension system,

the company would have to undertake

$5 million in tooling costs for the

improved suspension system. While the

Department did not treat any of the

costs in its analysis for this standard

level as fixed costs, it recognizes that

fixed costs could be substantial for

some other manufacturers, as well.

While not treated as such in the

analytical output, DOE believes that

retooling costs for standard level 2 could

be significant. Since DOE has decided to

consider the horizontal axis technology

with its associated fixed costs as soon

as possible, the Department issues a

final rule today that imposes minimal

impacts on manufacturers' retooling

costs.

In addition, as discussed above, DOE

believes that some manufacturers may

elect to continue to offer the warm/

warm setting and warm water rinse

option. If this were to occur, a standard

at this level could result in

manufacturers needing to undertake

more substantial redesign or retooling

which would impose substantial fixed

costs and which would likely affect

smaller competitors more severely than

larger ones.

Therefore, the Department concludes

that the burdens of standard level 2 for

clothes washers outweigh the benefits,

and rejects the standard level as not

being economically justified.

After carefully considering the

analysis, the Department is amending

the NAECA-imposed 1988 standard for

clothes washers with standard level 1

for clothes washers. The Department

concludes that standard level I for

clothes washers saves a. significant

amount of energy and is technologically

feasible and economically justified.

There would be significant energy

savings at this level of efficiency. During

CE-RM-88-101 COMMENT 04
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the period 1993-2015, these savings are

calculated to be 0.57 quad of primary

energy. Such savings would total more

than 4.7 percent of base case energy use.

In addition, the standard could have a

positive effect on the environment by

reducing the emissions of NO2 and SO2

by as much as 0.02 and 0.01 percent,

respectively, by the year 2015. However,

as discussed above, to the extent that

SO2 credits will be used, the SO2

reductions will not occur. Furthermore,

the standard will reduce emissions of

CO2 by 11.683 million tons, or 0.01

percent, over the forecast period.

The standard is also expected to

reduce water use by six billion gallons

over the forecast period.

The technologies that are necessary to

meet this standard are presently

available. The Department finds the

level to be economically justified. The

consumer payback of this standard level

is immediate since the small cost of

changing the controls to eliminate any

warm rinse settings is not expected to

be added to the retail.price of a clothes

washer. This standard has the lowest

LCC and is expected to result in a

reduction in LCC of approximately

$106.30 and $43.00 for clothes washers

connected to electric water beaters and

gas water heaters, respectively.

Additionally, the standard is expected

to have only a moderate impact on the

prototypical manufacturer's ROE,

causing a 0.19 percentage point decline.

Since this standard does not involve

substantial redesign or retooling, the

Department expects that it will not have

negative impacts on smaller

competitors.

b. Clothes Dryers

1. Efficiency Levels Analyzed.

Standard level 1 corresponds to

efficiencies achieved by the addition of

moisture- or temperature-termination;

level 2 corresponds to efficiencies

achieved by adding insulation; level 3

adds exhaust heat recycling efficiencies;

level 4 adds, to level 3 electric dryers,

microwave clothes drying efficiencies;

and level 5 adds, to level 3 for electric

dryers, efficiencies achievable with heat

pump clothes drying. These standard

levels are presented in Tables 4-3 and

4-4.

TABLE 4-3.-STANDARD LEVELS ANALYZED FOR STANDARD CAPACITY ELECTRIC AND GAS CLOTHES DRYERS

Standard level

Energy

factor (lb/Kwh)

gas electric

Baseline . .............................. 2.60 2.30

1 .........................................:..... 2.95 2.61

TABLE 4-3.-STANDARD LEVELS ANALYZED FOR STANDARD CAPACITY ELECTRIC AND GAS CLOTHES DRYERS-Continued

Standard level

Energy

factor

electric

(lb/Kwh)

gas

2 ....._ .........................................

3 ................................................

4 ................................................

5 ................................................

TABLE 4-4.-STANDARD LEVELS ANALYZED FOR COMPACT ELECTRIC

CLOTHES DRYERS

Energy Factor (1b/KWh)

Compact,

120V

Compact,

240V

Standard level baseline. 2.70 2.50

1 ............................... 3.07 2.84

2 ................................ 3.13 2.90

3 ................................ 3.33 3.08

4 ............. .................. 4.23 3.92

5 ................................ 8.95 8.28

3.01

3.21

4.07

8.61

Electricity

1993-2015, the following energy savings

from clothes dryers would occur:

22"

Z

71

G^

Gas

,58 Quad.......... .03 Quad.

.76'Quad.......... C5 Quad.

1.4 Quads........ .12 Quad.

3.63 Quads ...... .02 Quad.

6.61 Quads ...... .22 Quad.

The negative gas savings at levels 4

and 5 are a result of those standards

imposing such a large price increase on

electric clothes dryers that a substantial

switch to gas dryers occurs. This switch

is so great that aggregate gas

consumption exceeds that of the base

case, i.e., there are negative savings of

gas at those standard levels: See

Technical Support Document, Table

5.18.

4. Economic Justification. A.

Economic Impact on Manufacturers and

Consumers. The per unit increased cost

to manufacturers to meet the level 1

efficiency is $8 for a standard electric or

gas unit. To meet levels 2-5, the

additional cost increases, compared to

the baseline, are $14.60, $44.60, $102.10

and $164.60, respectively, for electric

dryers; for gas dryers, the additional per

unit cost, compared to the baseline, to

meet standard levels 2 and 3 are $14.60

and $44.60, respectively. See Technical

Support Document. Tables 3.22 and 3.25.

At these levels of efficiency, the

incremental consumer price increases,

compared to the baseline, for electric

clothes dryers are $13, $23.70, $72.30,

$167.50, and $395.30. For-gas dryers, the

consumer price increases at levels 1-3

are $13.00, $23.70, and $72.30,

respectively. See Technical Support

Document Tables 6.9 and 6.10.

The per unit reduction in annual cost

of operation (energy expense) of

standard electric clothes dryers at level

1 is $9.20, standard level 2 would reduce

energy expenses by an additional $1.30;

standard level 3 by $4.00; standard level

4 by an additional $13.10; and standard

level 5 by an additional $25.70. For gas

dryers, the annual cost of operation at

level 1 is reduced by $2.60; standard

level 2 would reduce energy expenses

by an additional $0.40; and standard

level 3 by $1.10. See Technical Support

Document, Table 6.9.

The LBL-MIM results for clothes

dryers estimate that standard level.l

would cause manufacturers to have an

increase in ROE from 6.8 percent in the

base case to 9.6 percent. At standard

levels 2 through 5, the ROE's (compared

to the base case ROE) are 7.9, minus 2.3,

minus 15.5 and minus 30.3 percent,

respectively. See Technical Support

Document, Table 7.25.

2. Payback Period. Table 4-5 presents

the payback periods for the efficiency

levels analyzed for the most prevalent

classes of product (standard electric and

gas). For standard-size electric clothes

dryers, only standard levels 1 and 2

satisfy the rebuttable presumption test;

these levels result in paybacks to the

consumer in less than 3 years.

For standard gas clothes dryers,

however, there is no standard level

whose efficiency improvement will

repay itself to the consumer in less than

3 years.

TABLE 4-5.-PAYBACK PERIODS OF DESIGN OPTIONS (YEARS) FOR STANDARD

ELECTRIC AND GAS CLOTHES DRYERS

Standard level

Payback periods

Gas

2 ................................................

3 ................................................

5 ..............................................

Electric

1.2

2.5

5.7

6.0

6.9

3. Significance of Energy Savings. The

Department estimated the energy

savings that are expected to result by

the year 2015 from the energy

consumption of new electric and gas

clothes dryers sold in the absence of

amended standards and compared it to

the energy consumption of new electric

and gas clothes dryers sold under

amended standards. When energy

conservation standards are imposed, the

LBL-REM projects that over the period

CE-RM-88-101 COMMENT 04
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The reason for the striking declines in

ROE under standard levels 3-5 is

thought to be the industry's price

elasticity of demand: These standard

levels cause such a large price increase

that a significant decline in the quantity

of dryers demanded occurs. In LBLMIM, this decrease in units demanded

causes a greater reduction in revenue

than in variable costs and, as a result, a

decrease in profit and ROR

This industry has displayed:

continuing consolidation for several

decades, especially during periods of

low earnings. By increasing profitability,

as DOE projects at standard: levels l and

2. standards could lead to a. reduction in

the rate of such consolidations,. thereby

possibly contributing to more robust

competitiveness than is likely in the

base case.

The Department's characterization of

the prototypical manufacturer in the

base case assumes that manufacturers'

typical clothes dryer designs are based.

on the combination of options presented

in the Engineering Analysis for the

baseline unit. If manufacturers use a

different combination of design options

to produce clothes dryers that minimally

comply with the 1994 standard, the

Department may have inappropriately

characterized the financial posi.ti on of

the prototypical manufacturer in the

LBL-MIM. Furthermore, since financial

data of the type. needed to characterize

the prototypical manufacturer are

generally not available, DOE had to

make a number of assumptions based on

the limited data that is publicly

available, e.g., Securities and Exchange

Commission 10K reports. and company

annual reports.

This approach was originally

discussed in the advance notice of

proposed rulemaking (53 FR 17712, May

18,1988), and the Department did not

receive any comments that indicated a

change in approach was warranted.

S. Life-Cycle Cost and Net Present

Value. The LCC analysis indicates that

at each possible standard level for

standard electric dryers, but only at

level l for gas dryers, the increase- in

purchase price would be offset by

savings in operating expenses. See

Technical Support Document. Table 6.1.

Also, of the candidate standard levels,

standard level 2 for standard electric

clothes dryers and standard level I for

gas clothes dryers- had the lowest LCC.

This indicates that at these levels the

standard would not cause any economic

burden on the average consumer

because of the decreasing: LCC.

Based on 1988 usage patterns,

compared to the base case, standard

Ievel I would cause a reduction in, LCC

of $76.80 for standard electric clothes

dryers and $12.10 for standard gas

clothes dryers; standard level 2 would

reduce LCC from the base case for an

electric dryer by $42.20, but raise that of

a gas dryer by $1.50; standard level 3

would result in an LCC decrease from

the base case of $32.30 for a standard

electric dryer, but an increase of $39.30

for a gas clothes dryer; standard level 4

for a standard electric dryer would

result in a decrease in LCC of $66.20,

compared to the base case; and

standard level 5 would result in a $90.00

decrease in LCC, compared to the base

case. See Technical Support Document,

Table 6.1.

While DOE examined the effect of

different discount rates (2, 7, and 15

percent) on the LCC curves and

generally found little impact, the

Department did not. consider higher

discount rates. Since such rates would

be beyond the range of real, after-tax

rates that consumers would likely face

in financing the purchases of clothes

washers. Similarly, DOE did not

consider different energy prices,

including regional prices, in the LCC

analysis. Since this is to be, a national

standard, DOE believed the National

average energy prices were appropriate.

However, DOE did examine the effect of

a usage rate different from the 416

cycles per year set by the DOE test

procedure. Recent Procter and Gamble

data appear to indicate that the national

average clothes. washer annual usage

rate is 406 cycles per year, more than 2

percent less than the test procedure

representative average use cycle. The

slightly lower usage numbers•result in

the lower life-cycle cost estimates that

were presented above. See Technical

Support Document, section 6:1.1

The NPV analysis indicates that

standard level I would produce an NPV

of $1.263 billion over the forecast period

(of which $1.212 billion would be

attributed to the standard on electric

dryers). At standard level 2, the NPV

would be $1.301 billion, of which $1.292

billion would come from the. standard on

electric dryers. Standard level 3 would

produce an electric dryer NPV of $1.009

billion and a gas dryer NPV of minus

$231 million, for a total NPV for the

standard of $778. million. Standard level

4 would produce a $1.811 billion NPV for

electric. dryers, but, under this standard

level, the NPV for gas dryers would be a

negative $284 million, leaving the

standard's NPV at $1.527 billion. Lastly,

standard level 5. would produce an NPV

of $806 million (of which the standard

would produce an NPV of $1.285 billion

and minus $479 million on electric and

gas dryers, respectively): See. Technical

Support Document, Table 5.22.

C. Energy Savings. As indicated

above, standards will result in savings

of energy consumption by clothes

dryers. The cumulative energy savings

over the 1993-2015 period would range

from 0.61 Quad at standard level I to

6.39 Quads at standard level 5- See

Technical Support Document; Table

5.1&

D. Lessening of Utility or Performance

of Products. As indicated above, DOE

established classes: of products in order

to ensure that the. standards analyzed

would not lessen the existing utility or

performance of clothes dryers. -

E. Impact of Lessening Competition.

The determination of this factor wasmade by the Attorney General. In its

comments on the proposed rule, The

Department of justice. concluded that the

proposed standard was not likely to

produce a competitive impact (DOJ, NO;

38 at 4).

F. Need to Save•Energy. Clothes

dryers use electricity and natural gas as

their energysources.Between 1993 and

2015, without amended standards;

clothes dryers. are- expected to consume

14.84 quads of energy. Standard level 1

would save .61 quads, or 41 percent, of

that amount; while standard levels. 2-S

would save 55, 10.2, 24.3 , and 45,6,

percent, respectively. The- savings at

standard levels 4 and 5 are due almost

entirely to electric clothes dryers.

In addition, as noted above for clothes

washers, decreasing future electricity

demand as a result of standards will

decrease air pollution. See Technical

Support Document, Appendix D.9 The

greatest decreases in air pollution

caused by amended standards, on

clothes dryers will occur for. sulfur

oxides (listed in equivalent weight of

sulfur dioxide, or SO2). For standard

level 5, in the year 2015, the estimated

SO2 reduction would be 171,240 tong.

This reduction represents 1.06 percent of

the United, States SO2 emissions that are

expected to be emitted by power plants

in that year.

Standard level 5 would also result in a

decrease in nitrogen dioxide (NO2)

emissions for the year 2015 of 125,372

tons. This decrease represents 1.18

percent of the total NOz emissions

expected to be emitted by power plants

in that year. Standard level 5 is

estimated to reduce United States CO2

emissions by about 0.60 percent for the'

year 2015.

In 2015, standard level 4 is expected

to reduce SO2, NO-.,. and CO2 emissions

by .52..59 and .31 percent, respectively.

Standard. level 3 reductions are

expected to be .20,.23 and .13 percent

9 Asso see footnote numbers, above.

CE-RM-88-101 COMMENT 04
Federal Register / Vol. 56, No. 93 / Tuesday, May 14, 1991 / Rules and Regulations

for SO2, NO2 and CO2, respectively in

2015.

The reductions of SO2, NO2, and CO2

for standard level 2 in 2015 are expected

to be .11, .13, and .07 percent,

respectively, while the respective

reductions at standard level I are .08,

.10, and .05 percent.

G. Other Factors. There were no

additional factors affecting clothes

dryers considered in this review.

5. Conclusion. Section 325(I)(2)(A) of

the Act specifies that the Department

must consider, for amended standards,

those standards that "achieve the

maximum improvement in energy

efficiency which the Secretary

determines is technologically feasible

and economically justified."

Accordingly, the Department first

considered the max tech level of

efficiency, i.e., standard level 5, for

amended electric clothes dryer

standards. In this conclusion, discussion

of standards for electric clothes dryers

will be presented first, followed by the

discussion of standards for natural gas

clothes dryers.

A. Electric Clothes Dryers. Of the

standard levels analyzed, level 5 will

save the most energy (8.39 quads). The

technologies that would be involved in

meeting this standard level are

temperature- or moisture-sensing

automatic termination, insulation, and a

heat pump. The Department is not

aware of the existence of any

residential-sized heat pump clothes

dryers.

The consumer payback of this

standard is 6.9 years, less than one-half

the estimated 17.1 years average lifetime

of clothes dryers. At $921, this standard

level is at the LCC minimum, and is $127

less than the LCC of the baseline unit.

The standard, however, would increase

the purchase price of electric clothes

dryers by 132 percent ($395), thereby

precluding many consumers from being

able to purchase the product. Under this

standard, shipments of electric clothes

dryers are expected to decrease by

nearly 19 percent, or 16.3 million units

over the 1993-2015 period. The NPV is

estimated to be $1.285 billion.

Because of the decline in shipments,

resulting in large part from the great

price increase, the standard would have

a devastating impact on the prototypical

manufacturer's ROE, driving it down

from a positive 6.8 percent in the base

case to a negative 30.3 percent (a

decline of 548 percent). Such a loss

situation would undoubtedly have

adverse competition impacts. The

Department, therefore, concludes that

the burdens of this standard level

outweight the benefits, and,

consequently, rejects standard level 5.

The next most stringent standard level

for electric clothes dryers is standard

level 4. This standard level would save

the second greatest amount of energy

(3.63 quads).

The principal energy-conserving

technology in standard level 4 is

microwave energy. Microwave clothes

dryers have been built and undergone

limited testing.

The consumer payback of this

standard level in 6.0 years. It has the

second lowest LCC which, at $945, is

$103 below the base case. At $467, its

price is nearly 56 percent more

expensive that the baseline unit; this

would preclude many consumers from

being able to purchase the product.

Shipments would decrease by more than

15 percent, or 13.1 million units over the

1993-2015 period. The NPV is $1.811

billion, the highest of any standard level,

Because of the 15 percent decline in

shipments under standard level 4, the

prototypical manufacturer's ROE would

decline from a positive 6.8 percent in the

base case to a negative 15.5 percent (a

decline of nearly 328 percent). This

would also likely have adverse

competitive effects. The Department,

therefore, concludes that burdens of

standard level 4 outweigh the benefits,

and rejects standard level 4 for electric

clothes dryers.,

Standard level 3 for electric clothes

dryers, the next most stringent level,

would save 1.4 quads of energy.

This standard level would involve

automatic termination, insulation, and

recycling of exhaust heat, all designs

that can presently be found on clothes

dryers.

The consumer payback is 5.7 years.

The LCC, at $979, is $69 below the

baseline. The purchase price, $372, is 24

percent more expensive that the

baseline unit, which could preclude

many consumers from being able to

purchase the product. Shipments would

decline by nearly 3 percent, or 2.4

million units over the forecast period.

The NPV is $1.009 billion, the lowest of

any standard level.

Because of the price increases and

shipments decline, the impact on the

prototypical manufacturer's ROE would

be to drop from a positive 6.8 percent in

the base case to a negative 2.3 percent

(a decline of 134 percent-this result

includes level 3 for gas dryers as well).

This could lead to adverse impacts on

competition. Accordingly, the

Department believes the burdens of

level 3 outweigh the benefits, and rejects

this standard level.

The next most energy-conserving

standard level is standard level 2. After

carefully considering the analysis, the

Department is amending the NAECA22273

imposed 1988 standard for electric

clothes dryers with standard level 2. The

Department concludes that level 2

standards for electric clothes dryers

save a significant amount of energy, are

technologically feasible and

economically justified.

As discussed above, there will be

significant energy savings at this level of

efficiency. During the period 1993-2015,

these savings are calculated to be 0.76

quad of primary energy. Such savings

would total more than 5 percent of base

case energy use. In addition, the

standards will have a positive effect on

the environment.

The technologies that are necessary to

meet this standard are presently

available. The Department finds the

level to be economically justified. The

consumer payback of this standard level

is 2.5 years for electric clothes dryers.

This standard also results in a reduction

in LCC of $79. In addition, the standard

will result in an NPV to the nation of

$1.292 billion. Additionally, the standard

is expected to have a positive impact on,

the prototypical manufacturer's ROE,

causing an increase from 6.8 percent in

the base case to 7.9 percent under this

standard.

Lastly, by increasing profitability, this

standard level could have positive

competitive effects.

B. Gas Clothes Dryers. Of the

standard levels analyzed, level 3 will

save the most energy (0.12 quad). The

technologies that would be involved in

meeting this standard level are

temperature or moisture termination,

insulation, and recycling of exhaust

heat. These technologies are all

presently available. The consumer

payback of this standard is 21.2 years.

At $582, it is at the LCC maximum, and

is $33 more expensive than the baseline

unit. The standard would increase the

purchase price of a gas clothes dryer by

$72, or 21 percent, thereby precluding

some consumers from being able to

purchase the product. Shipments of gas

clothes dryers are expected to decline

1.1 million units (5.1 percent) during

1993-2015. The net present value is a

negative $231 million.

The prototypical manufacturer's ROE

at level 3 would, as noted above, decline

from a positive 6.8 percent in the base

case to a negative 2.3 percent (which

includes the result at level 3 for electric

clothes dryers). This could lead to

negative competitive impacts. The

Department believes that the burdens of

this standard level outweigh the benefits

and, therefore, rejects standard level 3

for gas clothes dryers.

The next most energy-conserving

standard level is standard level 2. After

CE-RM-88-101 COMMENT 04
22274 Federal Register Vol. 56, No. 93 / Tuesday, May 14,. 1991 / Rules and Regulations

carefully considering the analysis, the

Department is amending the NAECA

imposed 1988 standard for gas clothes

dryers with standard level 2. The

Department concludes that level 2

standards for gas clothes dryers save a

significant amount of energy, are

technologically feasible and

economically justified, and that the

benefits of the standards outweigh the

burdens.

As discussed above, there would be

significant energy savings at this level of

efficiency. During the period 1993-2015,

these savings are calculated to be 0.05

quad of primary energy. Such savings

would total 4.1 percent of base case

energy use.

The technologies that are necessary to

meet this standard are presently

available. The Department finds the

level to be economically justified. The

consumer payback of this standard level

is 9.3 years. In addition, the standard

would result in an NPV to the nation of

$9 million. The standard. is expected to

have a positive impact on the

prototypical manufacturer's ROE,

causing a 1.1 percentage point increase

(this includes level 2 results for electric

dryer production, also). This standard

results in a reduction in LCC of $5. The

standard, however, is beyond the

minimum life-cycle cost point, thereby

precluding consumers from purchasing

the most cost-effective unit.

c. Dishwashers

1. Efficiency Levels Analyzed. Table

4-6 presents the efficiency level's

selected for analysis for 1993. Alternate

levels were selected to generate a range

of impacts for analysis. Initially, the

levels were selected for the class of

standard dishwasher (115 volt). Level 5

corresponds to the highest efficiency

level identified in the engineering

analysis. Levels 4 through I correspond

to successively lower efficiencies than

that of level S. Each level was analyzed

discretely in the engineering analysis.

Standard levels for the compact class of

dishwashers were based on the

combination of design options for the

standard dishwasher (115 volt).

TABLE 4-6.-ALTERNATIVE EFFICIENCY LEVELS FOR 1993 FOR DISHWASHERS (ENERGY FACTOR=LOADSIKWHIYR.)

Product class

Compact Dishwashers (115V) __.....» ............ ............ _.........

Standard Dishwasher (115V)......... _.....

2. Payback Period. Standard level 1

involves efficiencies achievable by

reducing the use of hot water from 12.0

to 9.5 gallons per cycle,. which was

achieved with an improved food filter,

level 2 involves additional efficiencies

achievable with an improved motor;

level 3 adds, to level 1. a booster heater

that heats 20 percent of the incoming

water, level 4 adds, to level 3, an

improved motor, and level 5 adds, to

level 4, an improved fill control. Table

4-7 presents the payback period for the

efficiency levels analyzed for the most

prevalent class of product (standard

dishwasher (115 volt)). For dishwashers

connected to an electric water heater,

all five standard levels meet the

rebuttable presumption test in that the

payback is less Than three years. For

dishwashers connected to gas water

heaters, however, only standard levels I

and 2 satisfy the rebuttable presumption

test.

TABLE 4-7.-PAYBACK PERIODS (YEARS)

STANDARD DISHWASHER ( 1 15 VOLTS)

Standard level

Payback period

With gas With electric

water water

heater il. heater

................... .._.._...... 1.9 0.7

2......._...._._._...__.._...., 26 1.2

3...._......... _.......... ._.._...... 4.2 1.1

4 ........... ................ ........__. 4.3 1.4

5..... .-•--. 5:8 2.0

Baseline.

0.49

0.32

3. Significance of Energy Savings. To

estimate the energy savings by the year

2015 due to amended standards, the

energy consumption of new dishwashers

sold in the absense of amended

standards is compared to amended

standards. When revised energy

conservation standards are imposed, the

LBL-REM projects that over the period

1993-2015, the following savings would

be attributable to the increased

standards:

Level 1-0.42 Quad.

Level 2.46 Quad.

Level 3--0.73 Quad.

Level 4-0.87 Quad.

Level 5-0.99 Quad.

4. Economic Justification. A.

Economic fmpact on Manufacturers and

Consumers. The per unit increased cost

to manufacturers to meet the level 1

efficiency (improved food filter) is $7.50,

while the addition of improved motor

efficiency in standard level 2 costs an

additional $4.00. Standard level 3

provides efficiencies obtained by

substituting for the improved motor a

booster heater that heats 20 percent of,

the water passing through it; this adds

another $6,in manufacturing costs.

Standard level 4 adds back an improved

motor to standard level 3, adding $4 to

manufacturing costs. Lastly, standard

level 5. the max tech level, achieves

efficiencies obtained by adding an

improved fill control to standard level 4:

this adds another $8 in manufacturing

costs. See Technical Support Document.

Table 3.3.

1

0.50

0.38

Level analyzed

2

0.60

0.39

3

0.62

0.45

4

0.63

0:4&

5

0.47

Compared' to the baseline, standard

level 1 ,would cause a price increase of

$10.80 for a standard dishwasher.

Standard level 2 would have a $17.10

higher price, while standard level 3's

dishwasher Would be $26 more

expensive. Under standard level 4, a

dishwasher would be $32.30 more

expensive while level 5's price would

exceed that of the baseline by $45. See

Technical Support Document, Table 6.4.

The per unit reductions in annual cost

of operation (energy expense) at level I

are $12.00 and $5.50 for a standard-sized

dishwasher connected to an electric

water heater and a gas water heater.

respectively; standard level2 would

reduce energy expenses by an

additional $1.00 and $1.00; standard

level 3 by $7.10 and $1.30; standard level

4 by $1.00 and $1.00; and standard level

5 by $1.20 and $0.60. respectively. See

Technical Support Document, Table 6A.

The LBL-MIM projects manufacturers'

long-run ROE to be 6.77 percent for

dishwashers in the base case. At level 1.

the LBL--MIM predicts that a

prototypical dishwasher manufacturer

would have an ROE of 6.65 percent.. a

decrease of 1.8 percent At level 2, the.

manufacturer's ROE is expected to be

6.59 percent, a 2.7 percent decline. At

level 3, the LBL-MLM projects that the.

prototypical dishwasher manufacturer's

ROE would be 6.45 percent, a decrease

of 4.7 percent from the base case. The

expected ROE for the prototypical

manufacturer at level 4 is 6.51 percent, a

decline of 3.8 percent, while the

CE-RM-88-101 COMMENT 04
Federal Register / Vol. 56, No. 93 / Tuesday, May 14, 1991 / Rules and Regulations 22275

expected ROE at level 5 is 6.74 percent,

a decline of only 0.4 percent from the

base case. See Technical Support

Document, Table 7.9.

The Department's characterization of

the prototypical manufacturer in the.

base case assumes that manufacturers'

typical dishwasher designs are based on

the combination of options presented in

the Engineering Analysis for the

baseline unit. If manufacturers use a

different combination of design options

to produce dishwashers that minimally

comply with the 1993 standard, the

Department may have inappropriately

characterized the financial position of

the prototypical manufacturer in the

LBL-MTM. Furthermore, since financial

data of the type needed to characterize

the prototypical manufacturer are

generally not available, DOE had to

make a number of assumptions based on

the limited data publicly available, e.g.,

Securities and Exchange Commission

10K reports and company annual

reports.

This approach was originally

discussed in the Advance Notice of

Proposed Rulemaking (53 FR 17712, May

18,1988), and the. Department did not

receive any comments that indicated a

change in approach was warranted.

B. Life-Cycle Cost and Net Present

Value. The LCC analysis indicates that

for each possible standard level the

increase in purchase price would be

offset by savings in operating expenses.

Standard level 4 corresponds to the

minima of the LCC curves. See

Technical Support Document, Table 6.3.

This indicates that the standard level

would not cause any economic burden

on the average consumer. Compared to

the base case, standard level 1 would

cause reductions in LCC of $87.80 and

$34.30 for a standard dishwasher

connected to electric and gas-fired

water heaters, respectively; standard

level 2 would reduce LCC by $59.40 and

$24.30, respectively; level 3. would result

in decreases of $94.50 and $22.00,

respectively; standard level 4 would

reduce LCC by $96.50 and $24.00 for

dishwashers drawing water from an

electric- or gas-fired water heater.

respectively. Lastly, standard level 5,

the max tech level, would reduce LCC

by $92.10 and $15.50, respectively.

While DOE examined the effect of

different discount rates (2, 7, and 15

percent) on the LCC curves and

generally found little impact, the

Department did not consider higher

discount rates, since such rates would

be beyond the range of real, after-tax

rates that consumers would likely face

in financing the purchases of clothes

washers. Similarly, DOE did not

consider different energy prices,

including regional prices, in the LCC

analysis. Since this is to be a national

standard, DOE believed the National

average energy prices were appropriate.

However, DOE did examine the effect of

a usage rate different from the 32Z

cycles per year set by the DOE test

procedure. Recent Procter and Gamble

data appear to indicate that the national

average clothes washer annual usage

rate is 285 cycles per year, more than 11

percent less than the test procedure

representative average use cycle. The

slightly lower usage numbers result in

the lower life-cycle cost estimates that

were presented above. See Technical

Support Document, section 6.1.1.

The NPV analysis indicates that if a

standard were adopted at level 1, there

would be an NPV of $300 million from

energy savings over the period 1993-

2015. At levels 2-5, the corresponding

NPV's would be $327 million, $272 .

million, $434 million, and $129 million,

respectively. See Technical Support

Document,. Table 5.6.

C. Energy Savings. As discussed

above.. DOE concluded that standards,

at each candidate standard level,

resulted in a significant saving of

energy. The cumulative energy savings

over the 1993-2015 period would range

from 0.42 quad at standard level 1, to .99

quad at standard level 5. See Technical

Support Document, Table 5.3.

D. Lessening of Utility or Performance

of Products. As indicated above,. DOE

established classes of products in order

to assure that the standards analyzed

would not lessen the existing utility or

performance of dishwashers. However,

there is no assurance that future utility

or performance of dishwashers would

not be lessened as a result of standardsinduced disincentives to investments in

energy-using new features. In addition,

the Department believes adoption of any

of the design options considered will

also not affect utility or performance.

E. Impact of Lessening Competition.

The determination of this factor was

made by the Attorney General in the

Justice Department's review of the

proposed standards. In that review,

which is presented above, DOJ

concluded that the proposed standard

level for dishwashers would not result

in a lessening of competition. (DOJ, No.

38 at 31. DOJ did not, however, evaluate

the competitive effects of more stringent

standards.

F. Need to Save Energy. Dishwashers

use electricity as a primary energy

source, both for operation of the motors

and for the electric coils that are used in

the drying cycle. In addition, that

portion of water heater electricity

consumption that provides hot water to

the dishwasher is considered to be

indirect dishwasher electricity

consumption. Similarly, since some of

the hot water that is supplied to

dishwashers comes from gas water

heaters, dishwashers are responsible for

indirect gas consumption, too.

As with amended standards on the

other two product types in this notice,

decreasing future electricity demand as

a result of standards on dishwashers

will decrease air pollution. See

Technical Support Document, Appendix

D.10 The greatest decreases in air

pollution will occur for sulfur oxides

(listed in equivalent weight of sulfur

dioxide, or SO2). For standard level 5, in

the year 2015, the estimated SO2

reduction would be 15,090 tons. This

reduction represents .09 percent of the

United States SO2 emissions that are

expected to be emitted by power plants.

in that year.

Standard level 5 would also result in a

decrease of 12,490 tons of nitrogen -

dioxide (NO2) emissions for the year

2015. This decrease represents.12

percent of the total NO2 emissions

expected to be emitted by power plants

in that year.

Standard level 5 is estimated to

reduce United States C02 emissions by

about .07 percent for the year 2015.

In 2015, standard level 4 is expected

to reduce S02, NO2 and CO2 emissions

by .08, .10, and.06 percent, respectively.

Standard level 3 reductions are

expected to he .06,.08, and.05 percent

for SO2, NO2 and C02, respectively in

2015.

In 2015, standard levels 2 and I would

each reduce SO2 power plant emissions

by .04 percent. NO2 power plant

emissions by.05 percent, and U.S. COI

emissions by.03 percent..

G. Other Factors. As noted above, one

other factor considered in this

rulemaking was the water savings that

could result from more efficient

dishwashers.

5. Conclusian: As noted above, the

Act requires that, in establishing

standards, the Department look first at

that standard that maximizes- energy

savings, i.e., the max tech level of

efficiency. For dishwashers, the max

tech level is standard level S.

Of the standard levels analyzed, level

5 saved the most energy (0.99 quad). In

order to meet this standard, DOE

assumes that all dishwashers would

have booster heaters that allow the

consumer to reduce the thermostat

setting, on their water heaters to 120 F.

If this occurs; the energy savings

resulting from the standard are likely to

be even greater since the analysis

10 Also see footnote e , above.

CE-RM-88-101 COMMENT 04
22276 Federal Register / Vol. 56, No. 93 / Tuesday, May 14, 1991 / Rules and Regulations

accounts for only the savings in reduced

water heater energy consumption for

that water used by the dishwasher, not

the total household hot water

consumption. The total amount of the

savings, however, is unknown since

some consumers may elect not to reduce

their water heater thermostat setting. In

addition, this standard level had the

largest positive impact on the

environment due to reduced water use,

and reduced emissions of CO2, NO2, and

502.

The technologies required to meet this

standard level are reduced water use,

improved motor efficiency, booster

heater and improved fill control.

Although these technologies are

available now in some dishwashers, the

last item, improved fill control, requires

that the unit be installed levelly to

achieve its maximum energy savings.

Current product designs allow for

overfill in order to provide for units outof-level.

The consumer payback of this

standard ranges from 2 years for a

dishwasher connected to an electric

water heater to 5.9 years for one

connected to a gas water heater. The

payback for dishwashers connected to

gas water heaters is nearly half of the

product's 12.6 year average lifetime.

While the LCC of level 5 is lower than

that of the baseline unit, it is greater

than the minimum LCC point, thereby

possibly precluding consumers from

purchasing the most cost-effective unit.

The LCC would be approximately $138

and $32 lower for dishwashers

connected to electric water heaters and

gas water heaters, respectively. The

standards, however, are projected to

increase the purchase price of

dishwashers approximately 15 percent,

thereby precluding some consumers

from being able to purchase the product.

The sales of dishwashers are expected

to decrease by two percent due to

standards, or over two million units over

the period analyzed. As a result of the

decreasing sales, and increase in LCC

from the minimum, this standard is

expected to have an NPV of $129

million, the lowest of any standard leveL

The standard is expected to have

minimal impact on the prototypical

manufacturer, causing its ROE to

decrease by 0.03 percentage points.

As stated above, standard level 5 is

the max tech level which, by definition,

incorporates all of the design options

identified to improve energy efficiency.

In conducting the engineering analysis,

DOE did not make any provisions for

tolerances on performance estimates.

Given this fact, DOE is concerned about

establishing the standard at the max

tech level without consideration of a

tolerance. If one or more of the design

options do not perform exactly as

calculated, or if they do not perform as

efficiently in concert together as

expected, the manufacturers would have

no other design options to which to turn.

The max tech level therefore becomes a

special case that the Department

believes can be considered only with

allowance for tolerances. Since the

analysis did not consider tolerances,

DOE believes it must reject level 5, but

notes that level 4, which is being

selected, requires an energy factor

improvement from the baseline which is

only 7 percent less than that required by

level 5. Thus, level 4, as analyzed

without any tolerance, is equivalent, on

a performance basis, to level 5 with a 7

percent tolerance.

The next most energy-conserving

standard level is standard level 4. After

carefully considering the analysis, the

Department is amending the NAECAimposed 1988 standard for dishwasters

with standard level 4 for dishwashers.

The Department concludes that level 4

standards for dishwashers save a

significant amount of energy, are

technologically feasible and

economically justified.

As discussed above, there would be

significant energy savings at this level of

efficiency. During the period 1993-2015,

these savings are calculated to be 0.87

quad of primary energy. Such savings

would total more than 12 percent of

base case energy use. In addition, the

standard could have a positive effect on

the environment by reducing the

emissions of NO2 and SO2 as much as

0.10, and 0.08 percent, respectively, in

the year 2015. However, as discussed

above, to the extent that SO2 credits will

be used, the SO2 reductions will not

occur. Furthermore, the standard will

reduce emissions of CO2 by 17.864

million tons, or 0.06 percent, over the

forecast period.

The standard is also expected to

reduce water use by more than 200

billion gallons over the forecast period.

The technologies that are necessary to

meet this standard are presently

available. The Department finds the

level to be economically justified. The

consumer payback of this standard level

ranges from 1.4 years for dishwashers

connected to electric water heaters to

4.3 years for one connected to a gas

water heater. This standard is also at

the minimum of the LCC curve, resulting

in a reduction in LCC of approximatelay

$142 and $39 for dishwashers connected

to electric water heaters and gas water

heaters, respectively. In addition, the

standard would result in an NPV to the

nation of $434 million, the largest of any

standard level. Lastly, the standard is

expected to have only a modest impact

on the prototypical manufacturer's ROE,

causing a 0.26 percentage point drop.

V. Environmental, Regulatory Impact,

Federalism, and Regulatory Flexibility

Reviews

The Department has reviewed today's

proposed action in accordance with the

Department's obligations under:

• The National Environmental Policy

Act of 1969 (NEPA) (42 U.S.C. 4321 at

seq.), the Council on Environmental

Quality regulations implementing the

procedural provision of NEPA

regulations (40 CFR part 1500 et seq.),

and the Department's own NEPA

regulations (10 CFR part 1021);

• Executive Order 12291 (46 FR 13193,

February 19, 1981) which pertains to

agency review of the impact of Federal

regulations;

• Executive Order 12612 (52 FR 41685,

October 30,1987) which pertains to

agency consideration of Federal actions

that would have a substantial direct

effect on States, on the relationship

between the Federal Government and

the States, and on the distribution of

power and responsibilities among the

various levels of government; and

• The Regulatory Flexibility Act (5

U.S.C. 601 at. seq.) which requires, in

part, that an agency prepare an initial

regulatory flexibility analysis for any

proposed rule unless it determines that

the rule will not have a "significant

economic impact on a substantial

number of small entities." In the event

that such an analysis is not required for

a particular rule, the agency must

publish a certification and explanation

of that determination in the Federal

Register.

a. Environmental Review

In issuing the proposed-rule, the

Department prepared an Environmental

Assessment (EA) (DOE/EA-0386) that

was published within the Technical

Support Document (DOE/CE-0267, July

1989). The environmental effects

associated with various standard levels

were found not to be significant, and a

Finding of No Significant Impact

(FONSI) was published along with the

proposed rule. (54 FR 32766, August 9,

1989)

In conducting the analysis for the final

rule, the Department included and

evaluated several design options

suggested by comments on the proposed

rule. As a result, the energy savings

estimates and resulting environmental

effects in the final rule differ slightly

from those presented in the proposed

CE-RM-88-101 COMMENT 04
Federal Register / Vol. 56 -No. 93 1 Tuesday, May 14, 1991 1 Rules and Regulations

rule. Nevertheless, most of the

environmental effects analyzed for the

final rule fall within the range of impacts

that were described in the EA that was

prepared for the proposed rule.

For example, in the year 2010, the

savings of sulfur dioxide (SOs), nitrogen

dioxide (NO2), and carbon dioxide

(C02) from the standard on clothes

washers are expected to be 8,449 tons,

6,556 tons, and 730,000 tons,

respectively. In the EA, savings of

SO2, NO2, and CO2. in 2010 from the

clothes washer standards totalled up to

21.598 tons, 15,875 tons, and 1,677

million tons, respectively. Since the

FONSI was issued for these larger

savings, the final rule's smaller savings

can, the Department concludes, also be

considered not significant

Similarly, in the year 2010, the savings

of SO2, NO2 and CO2 from the standard

on clothes dryers are expected to be

17,725 tons, 12,200 tons, and 1.157

million tons, respectively. These

expected savings are all less than the

amounts reported in the FONSI, wherein

the SO2, NO2, and CO2 savings totalled

up to 38,230 tons, 25,641 tons, and 2.398

million tons, respectively.

The SO2, NO2, and CO2 savings from

the dishwasher standard are expected to

be 13,867 tons, 10,366 tons and 1.102

million tons, respectively, in 2010. These

environmental effects fall outside the

results reported in its FONSI.

Nevertheless, they fall within the range

of impacts which were discussed in the

paragraphs above for clothes washers

and clothes dryers, and for which

FONSI's were issued.

. Since all of the environmental effects

expected from this final rule fell within

ranges of environmental impacts that

have been found not to be significant,

the Department has concluded that

these environmental effects also are not

significant. Therefore, the Department

has determined that an Environmental

Impact Statement (EIS) was not

required. Nevertheless, as noted above,

the environmental effects were

considered in selecting the final

standards for these appliances.

b. Regulatory Impact Review

Executive Order 12291 (46 FR 13193.

February 19, 1981) directs that, in

proposing a major rule," an agency

""Major rule" means any regulation that is likely

to result in: (1) An annual effect on the economy of

$100 million or more; (2) A major increase in costs

or prices for consumers, individual industries,

Federal, State, or local government agencier. or

geographic regions; or (3) Significant adverse effects

on competition, employment. investment,

productivity, innovation. or on the ability of United

Stotea-based enterprises to compete with foraignhased enterprises in domestic or export markets.

perform a regulatory analysis. Such an

analysis presents major alternatives to

the regulation that could substantially

achieve the same regulatory goal at

lower cost, as well as a description of

the costs and benefits (including

potential net benefits) of the proposed

rule.

DOE has determined that this

proposed rule is a "major rule."

Accordingly, a Final Regulatory Impact

Review has been prepared and

submitted to the Office of Management

and Budget (OMB). OMB has reviewed

the Regulatory Analysis under

Executive Order 12291.

The Regulatory Analysis is

summarized below. This summary

focuses on the major alternatives

considered in arriving at the proposed

approach to improving the energy

efficiency of consumer products. The

reader is referred to the complete draft

"Regulatory Impact Analysis," which is

contained in the TSD, available as

indicated at the beginning of this notice.

It consists of: (1) A statement of the

problem addressed by this regulation,

and the mandate for government action;

(2) a description and analysis of the

feasible policy alternatives to this

regulation; (3) a quantitative comparison

of the impacts of the alternatives; and

(4) the economic impact of the proposed

standard.

It should be noted at the outset that

none of the alteratives that were

examined for these three products saved

as much energy as the proposed rule.

Also, most of the alternatives would

require that enabling legislation be

enacted, since authority to carry out

those alternatives does not presently

exist.

Alternatives for Achieving Consumer

Product Energy Conservation Six major

alternatives were identified by DOE as

representing feasible policy alternatives

for achieving consumer product energy

efficiency. These alternatives include.

• No New Regulatory Action.

• Informational Action.

-Product labeling

-Consumer education

• Prescriptive Standards-

• Financial Incentives,

-Tax credits

-Rebates

• Voluntary Energy Efficiency

Targets.

• The Proposed Approach

(Performance Standards).

Each alternative has been evaluated

in terms of its ability to achieve

significant energy savings at reasonable

costs, and has been compared to the

effectiveness of the final rule.

22277

If no new regulatory action were

taken, then no new standards would be

Implemented for dishwashers, clothes

washers, and clothes dryers. This isessentially the "base case" for each

appliance. In this case, between the

years 1993 and 2015 there would be

expected energy use of 34.18 Quads of

primary energy, with no energy savings

and a zero net present value.

Several alternatives to the base case

can be grouped under the heading of

informational action. They include

consumer product labeling and DOE's

public education and information

program. Both of these alternatives are

mandated by the Act. One base case

alternative would be to estimate the

energy conservation potential of

enhancing these programs. To model

this possibility, the Department assumed

that market discount rates wouldbe

lowered by five percent for purchasers

of these three products. This resulted in

energy savings equal to.01 Quad, with

expected consumption equal to 34.18

Quads. The net present value is

estimated to be $10 million.

Another method of setting standards

would entail requiring that certain

design options be used on each product,

i.e., prescriptive standards. For these

three products, prescriptive standards

are assumed to be implemented as

standards at one level below the

performance standards, with the

exception of clothes washers which are

already at standard level 1. For

example; prescriptive dishwasher

standards are assumed to be at standard

level 3 instead of level 4 as in the

performance standards. The lower

standards level entails slightly smaller

expenditures for tooling and purchased

parts. Consequently, the economic

impacts that are expected before the

implementation date should be slightly

smaller for prescriptive standards. This

resulted in energy consumption,

between 1993 and 2015, of 32.14 Quads,

and say: ings of 2.04 Quads. The net

present value, in 1987 dollar's, was $212

billion.

Various financial incentive

falter natives were tested. These included

tax credits and rebates to consumers, as

well as tax credits to manufacturers.

The tax credits to consumers were

assumed to be 15 percent of the

increased expense for higher energy

efficiency features of these appliances,

while the rebates were assumed to be 15

percent of the increase in equipment

prices. The tax credits to consumers

showed a modest change from the base

case, saving .24 Quad with a net present

value of $720 million. Consumer rebates

showed more sizable changes; they

CE-RM-88-101 COMMENT 04
22278 Federal Register / Vol. 56, No. 93 / Tuesday, May 14, 1991 / Rules and Regulations

would save 1.16 Quads with a net the relationship between the Federal

present value of $1.86 billion.- Government and the States, or on the

Another financlal'incentive that was distribution of power and -

considered was tax credits to responsibilities among various levels of

manufacturers for the production of government. If there are sufficient

energy-efficient dishwashers, clothes substantial direct effects, then Executive

washers, and clothes dryers. In this Order 12612 requires preparation of a

scenario, an investment tax credit (ITC) federalism assessment to be used in all

of 20 percent was assumed. The tax decisions involved in promulgating and

credits to manufacturers had almost no implementing a regulation or a rule.

effect; the energy consumption estimates The Department finds that today's

are 34.19 Quads with savings equal to final rule will not have a substantial

-.01 Quad, and a net present value direct effect on State governments. State

equal to $220 million. regulations that may have existed on

The'impact of this scenario is so small these three products were preempted bybecause the ITC was applicable only to the Federal standards established in

the tooling and machinery costs of the NAECA. States could petition the

firms, i.e., the firms' fixed costs, and Department for exemption from such

most of the design improvements that preemption, and none have done so.

would likely be adopted to manufacture Today's final rule has no added effect

more efficient versions of these products on States. Thus, based on the foregoing,

would involve purchased parts. the Department finds that the

Expenses for purchased parts would not preparation of a federalism assessment

be eligible for an ITC. for this rulemaking is not warranted.

Two scenarios of voluntary energy The Act provides for subsequent State

efficiency targets were examined; in the petitions for exemption from

first one, the proposed energy preemption, which necessarily means

conservation standards were assumed that the determination as to whether a to be voluntarily adopted by all the State law prevails must be made on a

relevant manufacturers in five years, case-by-case basis using criteria set

and, in the second scenario, the forth in the Act. When DOE receives proposed standards were assumed to be

adopted in 10 years. In these scenarios, such a petition, it. will be appropriate to

would result in consider preparing a federalism the five year delay

energy consumption by these appliances

of 32.62 Quads, energy savings of 1.56

assessment consistent with the criteria

in the Act.

Quads, and a net present value of $860 d RegulatwyFlexibilityReview

million; the 10 year delay would result in

33.28 Quads of energy being consumed, Regulatory Flexibility Act of 1980 ,

0.90 Quad being saved, and a net (Pub. L. 96-354) requires an assessment

present value of $530 million. of the impact of regulations on small

These scenarios assume that there businesses. Small businesses are

would be universal voluntary adoption defined as those firms within an

of the energy conservation standards by industry that are privately owned and

these appliance manufacturers, an less dominant in the market.

assumption for which there is no In this rulemaking, three different

reasonable assurance. products and, hence, industries are

Lastly, all of these alternatives must being addressed. Regulatory flexibility

be gauged against the performance issues will be discussed for the

standards that are being proposed in dishwasher, clothes washer, and clothes

this notice. Such performance standards dryer industries for which standards are

would result in energy consumption of being prescribed.

dishwashers, clothes washers, and First, the energy conservation

clothes dryers to total an estimated

31.92 Quads of primary energy over the

1993-2015 time period. Savings would be

2.26 Quads, and the net present value

would be an expected $2.26 billion.

As noted at the beginning of this

section, none of the alternatives that

were considered for these products

would save as much energy as the

proposed rule.

c. Federalism Review -

standard on those dishwasher

manufacturers who could be considered

small businesses will be discussed.

Dishwasher manufacturing firms can

be divided into two groups: Those that

compete on large sales-volume products

and those that compete in small,

specialized markets. Small firms are

generally forced to specialize in small

market niches that offer some protection

from the cost advantage that large firms

hold when they can produce in volume.

Executive Order 12612 (52 FR 41685, This effect can even be observed among

October 30,1987) requires that the major producers in the tendency of

regulations or rules be reviewed by any the smaller major producers to produce

substantial direct effects on States, on somewhat more specialized products.

There are significant differences

among the major firms. As the

Department learned from discussions

with industry consultants, average cost

has an inverse relationship to firm size.

Thus, the industry. has economies of

scale, and large firms (to the extent that

their facilities are up-to-date) have

lower average costs than small firms.

This fact, coupled with increasing

competitiveness of the national and

international markets, probably

accounts for the continuing

consolidation that has been occurring

for several decades. The fact that the

consolidation has been producing larger

firms strongly corroborates the finding

that large firms have a cost advantage.

A principal implication of

consolidation is that the smaller of the

firms will be, on average, in more

danger of failing or being bought out

than will the large firms. Because of the

greater precariousness of smaller firms,

any decrease in average profitability is

more likely to damage seriously a

smaller firm, and an increase in average

profitability, is more likely to mean the

difference between success and failure

for a smaller firm.

From the point of view of

competitiveness, a decrease in average

profitability could speed up the process

of consolidation, producing a less

competitive industry, while an increase

in average profitability could help

maintain the current levels of

competition. Either effect might well be

temporary, because, in the long run, the

number of firms should be determined

by the industry's cost structure and by

the way a single firm's elasticity of

demand relates to the number of

competing firms.

Although larger firms have a cost

advantage due to economies of scale,

the very small firms in the dishwasher

manufacturing industry have found

market niches in which to survive

profitably. The small firms sell

dishwashers primarily to the

replacement and kitchen remodel

markets, which tend to offer higher

profit margins than does the builder

market. As a. result, it is possible,

according to industry consultants, that

small firms would have an easier time

passing through increased variable costs

that result from the standard, and thus

may be affected more positively than

the large firms.

Second, the impact of the energy

conservation standard on clothes

washer manufacturers needs to be

addressed. The standard is an efficiency

level that was achieved by the

elimination of a warm rinse option. For

those manufacturers who choose to

CE-RM-88-101 COMMENT 04
Federal Register / Vol. 56, No. 93 / Tuesday, May 14, 1991 / Rules and Regulations

meet the standard by eliminating that

option, there will be essentially a zero

cost increase resulting from the

standard.

Finally, the impact of the energy

conservation standards on clothes dryer

manufacturers needs to be addressed.

The LBL-MJM indicates, through its

prediction of an increase in typical ROE,

that the proposed standards are likely to

slow down the consolidation process

temporarily. This would lead to a

temporary slowing down of the

continuing decrease in this industry's

competitiveness. However, this

prediction would be tempered by the

observation that if standards were

technologically difficult to meet, they

could hurt some smaller firms the most.

since smaller firms tend to have less

sophisticated research and development

capabilities. This is not a eignifir-,

issue since tl,' os ru1ard levels on

nin+t s aryers will not be

technologically difficult to meet.

In view of the foregoing, the

Department has determined and hereby

certifies pursuant to section 605(b) of the

Regulatory Flexibility Act that today's

action will not have a "significant

economic impact on a substantial

number of small entities."

In conclusion, for each of these three

industries, the Department finds that the

standard levels prescribed in today's

Final Rul^ will not "have a significant

economic impact or. a substantial

number of small entities," and it is not

necessary to prepare a regulatory

flexibility analysis.

List of Subject:, in 10 CFR Part 430

Administrative practice and

procedure, Energy conservation,

Household appliances.

22279

In consideration of the foregoing, part (2) Clothes washers manufactured on

430 of chapter II of Title 10, Code of or after May 14,1994, shall have an

Federal Regulations, is amended as set energy factor no less than:

forth below.

Issued in Washington, DC, April 25, 1991. Energy factor (Cu Product class .

ft /Kwh/cycle) J. Michael Davis, .

Assistant Secretary, Conservation and

Renewable Eneby.

PART 430-ENERGY CONSERVATION

PROGRAM FOR CONSUMER

PRODUCTS

1. The authority citation for Part 430 is

revised to read as follows:

A 'horityy: 42 U.S.C. 8291-5309.

_...a section 43U.12, paragraphs (f), (g)

and (h) are revised to read as follows:

§ 430.32 Energy conservation standards

and effective dates.

* * * *

(f) Dishwashers. (1) Dishwashers

manufactured between January 1, 1988,

and May 14, 1994 shall be equipped with

an option to dry without heat.

(2) Dishwashers manufactured on or

after May 14,1994, shall have an energy

factor no less than:

Product class

I. Compact Dishwasher (less than

22 Inches in exterior width)...........

ii. Standard Dishwasher (equal to

or greater than 22 Inches in

exterior width) .................................

Energy factor

(cycles/KWh)

0.62

0.46

(g) Clothes washers. (1) Clothes

washers manufactured between January

1, 1988, and May 14, 1994, shall include

an unheated rinse water option.

I. Top Loading, Compact

(less than 1.6 fL3 capacity).

ii. Top Loading, Standard

(1.6 ft.' or greater capacity).

iii. Top Loading, Semi-Automatic.

iv. Front Loading ......................

v. Suds saving ..........................

0.90.

1.18.

Not Applicable.'

Not Applicable.'

Not Applicable.'

' These classes shall have an unheated rinse

water option.

* * *

(h) Clothes dryers. (1) Gas clothes

dryers manufactured between January 1,

1988, and May 14,1994, shall not be

equipped with a constant burning pilot.

(2) Clothes dryers manufactured on or

after May 14, 1994, shall have an energy

factor no less than;

Product class

i. Electric, Standard (4.4 ft 3 or greater

capacity) ...................................................

ii. Electric, Compact (120v) (less than

4.4 ft a capacity) ......................................

Iii. Electric, 'Compact (240v) (less than

4.4 ft 3 capacity) ......................................

iv. Gas ..........................................................

* * * * *

[FR Doc. 91-10285 Filed 5-13-91; 8:45 am]

BILLING CODE 6450-01-M

Energy

factor (lbs/

KWh)

3.01

3.13

2.90

2.67

CE-RM-88-101 COMMENT 04