Federal Register / Vol. 52, No. 234 f Monday, December 7. 1987 / Proposed Rules



### DEPARTMENT OF ENERGY

Office of Conservation and Renewable Energy



### 10 CFR Part 430

[Docket No

. CE-RM-87-1021 

### 46367

Energy Conservation Program for Consumer Products; Advance Notice of Proposed Rulemaking and Request for Public Comments Regarding Energy Conservation Standards for 3 Types of Consumer Products

AGENCY: Department of Energy. ACTION: Advance notice of proposed rulemaking.

SUMMARY: The Energy Policy and Conservation Act (EPCA), as amended by the National Energy Conservation Policy Act (NECPA) and the National Appliance Energy Conservation Act (NAECA), requires the Department of Energy to administer a program of energy conservation standards for 12 types of household appliances. This advance notice of proposed rulemaking addresses three requirements of NAECA: To consider amending the energy conservation standards for refrigerators, refrigerator-freezers, and freezers; to establish standards for small gas furnaces : and to consider establishing energy conservation standards for television sets. The purpose of this advance notice of proposed rulemaking is to: (1) Present for comment the product classes DOE. is planning to analyze; (2) present a detailed discussion of the expected analytical methodology and analytical models that the Department expects to use in performing. the analysis to support this three-product rulemaking: and (3) to facilitate the gathering of information prior to publishing the notice of proposed rulemaking.

DATE: Written Fomments in response to tMAdvance notice of proposed rulemaking must be received by the Department by February 5, 1988.

ADDRESSES: Written comments are to be
submitted to: U.S. Department of Energy.
Office of Conservation and Renewable 

### Federal Register 

## I Vol. 52. No. 234 

# J Monday. December 7. 1987 

## I Proposed Rules

DEPARTMENT OF ENERGY

Office of Conservation and Renewable Energy

10 CFR Part 430

[Docket No. CE-RM-87-1021 46367

Energy Conservation Program for Consumer Products; Advance Notice of Proposed RuJemaking and Request for Public Comments Regarding Energy Conservation Standards for 3 Types ofConsumer Products

AGENCY: 

### Department ofEnergy.

ACTION: 

### Advance notice ofproposed rulemaking.

SUMMARY: 

### The Energy Policy and ConservationAct (EPCAl. as amended by the National Energy Conservation Policy Act (NECPA) and the National Appliance Energy Conservation Act (NAECA). requires the Department of Energy to administer a program of
energy conservation standards for 1Z 

### types ofhousehold appliances. This advance notice ofproposed rulcmaking addresses three requirements of NAECA: To consider amending the
energy conservation standards for refrigerators. refrigerator-freezers. and freezers; to establish standards for s:r.all
gas furnaces: and to consider establishing energy consen'ation standards for television sets.

The purpose ofthis advance**notic~** 

### of proposed rulemaking is to: (1) 

### Present for comment the product classes DOE 

### is planning to analyze: (2) present a detailed discussion ofthe expected analytical methodology and analytical models thatthe Department expects to

use in performing.the analysis to support this three-product rulemaking: and (3) to 

### facilitate the gathering ofi!1formation prior to publishing the notice of proposedrulemaking.

DATE:

### Written**~omments** 

### in response to tlt1"dvance nonce

## 51" proposed rulemaking must be received 

### by the Departmentby February 5, 1988.
AODRESSES: 

### Written comments are to bf 

### submitted to: U.S. Department ofEnergy. OfficeofConservation and RenewablE'

### 46368 Federal Register / Vol. 52, No. 234 / Monday, December 7, 1987 / Proposed Rules

Energy, Office of Hearings and Dockets, Energy Efficiency Standards forConsumer Products, Docket No.CE-RM7-102, Room 6B-025, Forrestal Building, 300 Independence Avenue SW.. Washington, DC 20585, (20Z) 586-9320.

FOR FURTHER INFORMATION CONTACT: Michael J. McCabe, U.S. Department of Energy, Office of Conservation andRenewable Energy, Mail Station CE13Z, Forrestal Building, 1000 independence Avenue SW., Washington, DC 20585, (202) 586--9127 Eugene Margolis, Esq., U.S. Department of Energy, Office of General Counsel, Mail Station GC-12, Forrestal Building, 1000 Independence Avenue SW., Washington, DC 20585, (202) 586-9507

SUPPLEMENTARY INFORMATION:

1. Introduction a. Authority b. Background II. Methodology III. Models. Data and Assumptions a. Engineering Performance Models and Costing Analysis 1. Appliance Classes Z. Baseline units 3. Design options 4. Maximum technologically feasible designs 5. Performance models 6. Costing analysis 7. Price-efficiency relationships 8. Data sources 9. Outputs from the Engineering Analysisb. LBL Residential Energy Model (LBLREM) 1. Structure of the model 2. Housing stock submodel 3. Efficiency choice algorithm 4. Thermal integrity 5. Modeling efficiency standards 6. Turnover of appliance stocks 7. Calculation of market shares 8. Usage behavior 9. Energy consumption calculations 10. Model outputs 11. Other consumer impacts c. Manufacturer Impact Models 1. Conceptual approach 2. Measures of impact 3. LBL Typical Year Model (LBL-TYM) 4. Data sources d. Utility Impact Model e. Sensitivity Analyses IV. Comments a. Questions for Public Comment b. Comment Procedures

1. Introduction
a. Authority
Part B of Title III of the Energy Policy and Conservation Act (EPCA), Pub. L. 94-163, as amended by the National Energy Conservation Policy Act (NECPA), Pub. L. 95-619, and by the lational Appliance Energy ..onservation Act (NAECA), Pub. L 100- 12.' 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; room air conditioners; central air conditioners and central air conditioning heat pumps; water heaters; furnaces; dishwashers; clothes washers; clothes dryers; direct beating equipment; kitchen ranges and ovens; pool heaters; and television sets; as well as any other consumer product classified by the Secretary of Energy. See 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. The Department of Energy (DOE or Department), in consultation with the National Bureau of Standards (NBS), 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 provide for test results that reflect the energy efficiency, energy use, or estimated annual operating costs of each of the covered products. Section 323(b)(3). A test procedure is not required if DOE determines by rule that one cannot be developed. Section 323(d)(1). Beginning one hundred and eighty days after a test procedure for a product is adopted, no manufacturer may represent the energy consumption of, or the cost of energy consumed by the product except as reflected in tests conducted according to the DOE procedure. Section 323(c)(2). 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

r Part B of Title III of EPCA as amended by NECPA and NAECA. is referred to in this notice as the "Act_' Part B of Title IU is codified at 42 U.S.C.
6291 et seq. Part B ofTitle III of EPCA. as amended by NECPA only. is referred to in this notice as NECPA. require a different useful measure of energy consumption. Section 324(c). At the present time there is an FTC rule requiring labels under the Act for the 'following products. Room air conditioners, furnaces, clothes washers, dishwashers, water heaters, freezers,and refrigerators and refrigeratorfreezers. 44 FR 66475, November 19, 1979. The FTC has proposed a rule to require labels for central air conditioners. 45 FR 53340, August 11, 1980.
For each of 11 of the covered products, the Act prescribes an initial Federal energy conservation standard. Section 325(bHh). The Act establishes effective dates 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 three to ten years, also depending on the product. Section 325 (b) through (h). After the specified three- to ten-year period, DOE may promulgate new standards for each product; however, such standards may not be less stringent than those initially established by the Act. Section 325(l)(1). The Act also directs DOE to prescribe an energy conservation standard no later than January 1, 1989, for small gas furnaces, i.e., gas furnaces having an input of less than 45,000 Btu per hour and manufactured on or after January 1, 1992. Section 325(f)(1)(B). With regard to another covered product, television sets, the Act allows the Department to prescribe an applicable standard; however, such standard may not become effective before January 1, 1992. Section 325(i)(3). The Act also permits the Department to prescribe standards for any other type of consumer product that, using certain criteria, DOE may classify as a covered product. Section 325(i), (1) and (m). 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 (1)(2)(A).
Section 325(l)(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 bprdens, based, to the greatest extent practicable. on a weighing ofthe following seven factors: (1) The economic impact of the standard on the manufacturers and on the consumers of the products subject to such standard; 

### 46368 Fede[al Register 

## I Vol. 52. 

### No. 234 

## I Monday. December 

### 7, 1987 

## I Proposed Rules

Energy. Office ofHearings and Dockets. Energy Efficiency Standards for ConsumerProducts. Docket No.CE-RM- '7-102. Room 68--025. Forrestal Building.
JOO Independence Avenue SW.• Washington. DC 20585. (202.) 586-9320.

FOR FURTHER INFORMATION CONTACT:
Michael

## J. McCabe. U.S. Department of

Energy. Office ofConservation and RenewableEnergy. Mail Station CE132.. Forrestal Building. 1000 lndependence Avenue SW.• Washington. DC 20585. (ZOZ)**~9127** EugeneMargolis. Esq

.. U.S. Department

ofEnergy. Office ofGeneral Counsel. Mail Station GC-12. Forrestal Building. 1000 Independence Avenue SW

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

SUPPL.EMENTARY INFORMATION:

1. Introduction

a. Authority b. Background II. Methodology III.Models. Data and Assumptions

a. Engineering**~rformance** Mocrels and

Costing Analysis
1.Appliance Classes 

### z. Baseline units
3. Design options
4. Maximum technologically feasible designs
5. Perfonnance models
6. Costing analysis
7. Price-efficiency relationships

8. Deta sources 9. Outputs from the Engineering Analysis b. LBL Residential Energy Model (LBLREM) 1. Structure ofthe model Z. Housing stock submodel
3.Efficiency choice algorithm
4.Thermal integrity
5.Modeling efficiency standards
6. TW'Ilover ofappliance siocks
7. Calculation ofmarket shares
6. Usage behavior
9. Energy consumption calculations
10.Model outputs 11. Other consumerimpacts

c. Manufacturer Impact Models

1.Conceptual approach


### z. Measures ofimpact 3. LBLTypical YearModel (LBL-TYM)
4. Data sources d. Utility ImpactModel

e. Sensitivity Analyses IV. Comments

a. Questions for Public Comment**b.ConuneRt~ures** I. Introduction

D.

### Authority

Pari BofTitleIII ofthe Energy Policy andConservationAct (EPCA). Pub. 

### L. 94-163. as amended by the National Energy ConservationPolicy Act (NECPA). Pub. L. 95-619. and by the lational ApplianceEnergy ..:onservation Act (NAECA). Pub. L. 100- 

### l2. 1 created the Energy Conservation Program for ConsumerProducts other than Automobiles. The consumer products subject to this program (often referred to hereafter 

### as "covered prodncls'1 are: Refrigerators. refrigerator-freezers and freezers; room air conditioners; central airconditioners 

### and central air conditioningheal pumps; waterheaters; furnaces; dishwashers; clothes washers; clothes dryers; direct heating equipment; kitchen ranges and

ovens; 

### pool heaters: and television sets;

as well as any other consumerproduct classified by the Secretary ofEnergy. See section 322. To date., the Secretary has not so classified any additional products.

Under the Act. the program consists essentially 

### ofthree parts:Testing. labeling. andFederal energy conservation standards. The DepartmentofEnergy (DOE or Department). in consultation with the NationalBureau ofStandards (NBS). is required to amendorestablish new test procedures as appropriate for each of the coveredproducts. Section 323. The
purpose ofthe test procedures is to provide for test results that reflect the
energy efficiency. energy use. or estimated annual operating costs of each ofthe covered products. Section 323(b)(3). A test procedure is not required ifOOE determines by rule that

one cannotbe developed. Section 323(d)(1). Beginning one hundred and eighty days after a test procedure for a product is adopted. no manufacturer
may represent the energy consumption of. or the cost6fenergy consumedby the product except asreflected in tests conducted according to the DOE procedure. Section 323(c)(Z).

The FederalTrade Commission (FTC) is required by the Act to prescribe rules governing the labeling ofcovered products for which test procedures have been preSCribed by DOE. Section 324(a). These rules are to require that each particular model ofa covered product bears a lahel that indicates its annual operatingcost and the range of estimated annual operating costs for other models ofthatproduct. Section 324(c)(1). Disclosure 

### of estimated operatingcost is notrequired under section 324 ifthe FTCdetermines that such disclosure is not likely to assist

consumers inmaking purcha!ling decisions oris not economically feasible. In 

### such a case.FTC must

I Pari B ofTitle III ofEPCA al amended by NECPA and NAECA. is ",ferred 10In this notice 8S Ihe "AcL

- PIlrI BofTilleW ia codif>ed at 42U.S.C. 6.."91 e/ 8I!q. Pari BofTitleIII ofEPCA. as amended by NECPA only. is referred 10 ill this nolice as NECPA. require a different useful measure of
energy consumption. Section 324(c). AI the present time there is an FTC rule requiringlabels under the Act for the ·following

### products: Room air ronditioners. furnaces. clothes washers. dishwashers, water beaters. freezers. and refrigerators and refrigerator· freezers. 44 FR 66475, November 19. 1979.

### The 

### FTC has proposed a rule to require labels for central air conditioners. 45 FR 53340. August 11. 1980.

Foreach of11 ofthe covered products. the Act prescribes an initial Federal energy conservation standard. Section 325{bHh).The Act establishes effective dates 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 three to tenyears. also depending

on the product. Section 325 (b) through (h). Afterthe specified three· to ten·year period. DOE may promulgate new standards for each product; however. such standards may notbe less stringent than thoseinitially established by the Act. Section 325(1)(1}.

The Act also directs DOE to prescribe

an energy conservation standard no laterthan January 1.1989. for small gas

. furnaces. i.e

... gas furnaces having an input ofless than 45,000Btuper hour and manufactured on or afterJanuary 1. 1992. Section 325(f)(1)(B).

With regard to another covered product. television sets. the Act allows the Department to prescribe an applicable standard; however. such standardmaynot become effective before January 1. 1992. Section 325(i)(3).

The Act also permits the Department
to prescribe standards for any other type ofconsumerproduct that. using certain criteria. DOE may classify as a covered product. Section 3Z5(i). (I) and (m). 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 economicallyjustified. Section 325 (l)(Z)(A).

Section 325(l)(2)(B)(i) provides that beforeDOE determines whather a standard is economicallyjustified. it
must first solicit comments on a proposed standard. Afterreviewing
comments on the proposal. DOE must then determine that the benefits ofthe standard exceed its**~rdens.** based. to the greatest extent practicable. on a weighing ofthe follOWing seven factors:

ll}The economicimpact ofthe standardon the manufacturers and on the consumers ofthe products subject to such standard:

### Federal Register / Vol. 52, No. 234 / Monday, December 7, 1987 / Proposed Rules

(2) The savings in operating costs throughout the estimated average life of the covered product in this type (or class) compared to any increase in the price of, or in the initial charges for, or maintenance expenses of, the covered products which are likely to result from the imposition of the standard; (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, the Act specifies criteria for petitions to DOE in regard to amendments to standards. Section 325(k). Under the Act, any person may petition the Department to amend a Federal energy conservation standard for any covered product. Section 325(k)(1).
b. Background NECPA required the Secretary, by rule, to prescribe energy efficiency standards for each of 13 covered products.2 These standards were to be designed to achieve the maximum improvement in energy efficiency that was technologically feasible and economically justified. NECPA provided. however, that no standard for a product was to be established if there were no test procedure for the product, or if DOE determined by rule either that a standard would not result in significant conservation of energy, or that a standard was not technologically feasible or economically justified. In determining whether a standard was economically justified. the Department was directed to determine whether the benefits of the standard exceeded its burdens by weighing the seven factors set forth above. NECPA specified the priorities and procedures to be followed in adopting efficiency standards. Nine of the 13 covered products were given priority. These nine products were: Refrigerators

r The consumer products covered by NECPA
included: Refrigerators and refrigerator-f eezera freezers: dishwashers: clothes drys s: water beaten;
room air conditioners: home heating equipment not including furnaces: television sets

, kitchen ranges
and ovens: clothes washers: humidifiers and
dehunridifiers central air conditioners: and
furnaces. and refrigerator-freezers, freezers, clothes dryers, water heaters, room air conditioners, home heating equipment not including furnaces, kitchen ranges and ovens, and central air conditioners. The DOE published an advance notice of proposed rulemaking for the nine first priority products on January 2, 1979. 44 FR 20. On December 13,1979, the DOE published an advance notice of proposed rulemaking for dishwashers, television sets, clothes washers, and humidifiers and dehumidifiers. 44 FR 72276. An advance notice for central air conditioners (heat pumps) was published on January 23,1980. 45 FR 5602. After receiving comments on the advance notices, on June 30, 1980, DOE published its first proposed rulemaking for the nine products. 45 FR 43976. . (Hereafter referred to as the June 1980 proposal.) The June 1980 proposal set forth DOE's proposal concerning energy efficiency standards for these covered products. It also proposed comprehensive requirements for certification and enforcement of the standards and procedures for processing petitions by States that sought exemption for regulations subject to the general preemption requirements of NECPA. On April 2,1982, DOE issued a further notice of proposed rulemaking with respect to the nine priority products. 47 FR 14424. (Hereafter referred to as the April 1982 proposal). With respect to eight of the products, DOE proposed to make It determination that a standard would not result in significant conservation of energy and would not be economically justified.' The April 1982 proposal also proposed rules governing petitions to DOE both by States to obtain exemption from ' preemption of State or local energy efficiency standards, as well as by manufacturers to obtain preemption of State or local standards. On December =, 1982, DOE published a final rule in which DOE determined that efficiency standards were not warranted for clothes dryers and kitchen ranges and ovens. 47 FR 57198. (Hereafter referred to as the December 1982 final rule.) At that time, DOE also adopted final procedures by which States might obtain exemption for State or local efficiency standards from Federal preemption, and by which manufacturers might obtain preemption

s The April 1982 proposal did not propose any rule with respect to the product type "home heating equipment not induding furnaces " - or with respect
to that class of the product water heaters made up of beat pump water heaters or with respect to those
classes of the product central air conditioners that are heat prrApa. 

### 46369

of a State or local standard not otherwise preempted. On August.30,1983, DOE published a final rule with respect to the remaining six covered products: Refrigerators and refrigerator-freezers, freezers, water heaters, furnaces. room air conditioners and central air conditioners. 48 FR 39376. (Hereafter referred to as the August 1983 final rule). For each of the six products covered by the August 1983 final rule, except central air conditioners, DOE determined that an energy efficiency standard would not result in significant conservation of energy and would not be economically justified. With respect to central air conditioners, DOE found that an energy efficiency standard would result in significant conservation of energy, but would not be economically justified. On April 1, 1985, DOE published a proposed rule with respect to four covered products: Dishwashers, television sets, clothes washers and humidifiers and dehumidifiers. 50 FR 12966. (Hereafter referred to as the April 1985 proposal). For each of the four products covered by the 1985 proposal. DOE proposed that an energy efficiency standard would not be economically justified and would not result in a significant conservation of energy. During 1983, DOE's December 1982 and August 1983 final rules were challenged in a lawsuit brought by the Natural Resources Defense Council (NRDC) and others against the Department. On July 16, 1985, the U.S. Court of Appeals set aside DOE's December 1982 and August 1983 final rules. NRDC v. Herrington, 768 F.2d 1355 (D.C. Cir. 1985). Consequently, on March 5,1986, DOE published notices in the Federal Register removing the December 1982 and August 1983 final rules and withdrawing the April 1985 proposal. 51 FR 7549 and 5i FR 7582. The National Appliance Energy Conservation Act (NAECA), which became law on March 17. 1987, amended EPCA in part by. Redefining "covered products" (specifically, refrigerators/ refrigerator-freezers, and freezers were combined into one product type from two; humidifiers and dehumidifiers were deleted; and pool heaters were added); establishing Federal energy conservation tandards for 11 of the 12
covered products (with television sets being the exception); and creating a schedule for which the standard levels are each to be reviewed to determine if they should be amended. The Act directs DOE to publish an advance notice of proposed rulemaking, with a 60-day comment period, in 

### Federal Register 

## I Vol. 52. No. 

### 234 

## I Monday, 

### December 7. 1987 

## I Proposed Rules 

### 46369

(2) The savings in operating costs throughout the estimated average life of the covered product in this 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 10 result from the imposition ofthe standard;

(3) The total projected amount of
energy savings likely to result directly from the imposition of the standard;

(4) Any lessening ofthe utility or the performance ofthe covered products likely to result from the imposition ofthe standard:

(5) The impact ofany lessening of competition. determined in writingby the Attorney General. thatis likelyto result from the imposition ofthe standard;

(6) The need for national energy conservation; and

(7) Other factors the Secretary considers relevant. In addition. the Act specifies criteria for petitions to DOE in regard to amendments to standards. Section 325(k}. Under the Act, any person may petition theDepartment to amend a Federal energyconservation standard for any covered product. Section 325(k)(1).



### b. Background

NECPA required the Secretary. by rule. to prescribe energy efficiency standards for each of13 covered products. 2 These standards were 10 be designed to achieve the maximum improvement in energyefficiency that

was technologically feasible and economicallyjustified.

NECPA provided. however. that no standard for a product was to be established if there were no lest procedure for the product. or 

### ifOOE determined by rule either that a standard would not result in lignificant conservation ofenergy. or that a standard walnot technologically feasible or economicailyjustified. In determiningwhether a standard was economicallyjustified. the Department

was directed to determine wbether

### the benefits ofthe standard exceeded its burdens by weighing the seven factors
set forth above.

NECPA specified the priorities and procedures tobe followed in adopting efficiency standards. Nine ofthe 13 covered products weregiven priority. These nine products were: Refrigerators

• The consumerproduct. covered byNECPA included: RefrigeratOf'll and refrigerator·freezers: freezers: dishwashers:cIotl>es cIryen: waterbeaten:

room ,urconditioners;home heat"'l eqttipmenlltOl including furns£eI: television .et.;kilchen r""8'" andovens: clo!he. wlUlhe!ll: humlditlet'l and dehunridift<m centnli aircondilloners: and 

### ru"",,,,,,,. and refrigerator-freezers. freezers. clothes dryers, waterheaters. room air conditioners, home heatingequipment nol including furnaces. kitchenranges and ovens. and central air conditioners.

The DOE published an advance notice ofproposed rulemaking for the ninefirst priority products on January 2. 1979. 44 FR 20. On December 13, 1979. the DOE published an advance notice of proposed rulemaking for dishwashers. television sets. clothes washers. and humidifiers and dehumidifiers. 44 FR 72276. An advance notice for central air conditioners (heat pumps) was published on January 23. 1980. 45 FR 5602.

Afterreceiving comments on the advance notices. on June 30, 1980. DOE published its first proposed rulemaking for the nine products. 45 FR43976.

_ (Hereafterreferred to as the June 1000 pro!'{}sal.) The June 1980 pro!'{}ssl set forth DOE's proposal concerning energy efficiency standards for these covered products. Italsoproposed comprehensive requirements for certification and enforcement ofthe standards and procedures for processing petitions by States that sought exemption for regulations subject to the general preemption requirements of NECPA.

On April 2, 1982. DOE issued a further notice ofproposedrulemaking with respect to the nine priority products. 47 FR 14424. (Hereafter referred to as the April 1982 proposal). With respect to eight ofthe products. DOEproposed to make

## a determination that a standard would notresult in significant conservation ofenergy and would not be economicallyjuslified. 3 The April 1982 proposal also proposed rules governingpetitions to DOEboth by States to obtain exemption from I preemption ofState or local energy efficiency standards. as well as by manufacturers to obtainpreemption of Stale orlocal standards.

OnDecemberZ2. 1982. DOE published

a final rule in whichDOE determined that efficiency standards were not warranted for clothes dryers and kitchen ranges and ovens.47 FR 57198. (Hereafterreferred to as the December 1982 final rule.) At that time, DOE also adopted final procedures by which States might obtain exemption for State

orlocal efficiency standards from Federalpreemption. andby which manufacturers might obtain preemption

• The April 1982proposal did not propose any rule with

....peel to the product type**~home** b

...ting equiponent D01 incIudir18 furna.a" or with respecl
10 that cia

..ofthe product walei"beaten made np ofheal pump water heelers or with rHpecl \0 those cla_oIlbe product ",mlral air cODditionen thai**are"".t~** ofa State or local standard not otherwise preempted.

On August.3O, 1983. DOE published a final rule with respect to the remaining six covered products; Refrigerators and refrigerator-freezers. freezers. water heaters. furnaces. room air conditioners and central air conditioners. 48 FR 39376. (Hereafterreferred to as the Augusl1983 final rule). For each ofthe six products covered by the August 1983 final rule. except central air conditioners, DOE determined that an energy efficiency standard would not result in significant conservation of
energy and would not be economically justified. With respect to central air conditioners.DOE found that an energy efficiency standard would result in significant conservation ofenergy, but would notbe economically justified.

On April 1. 1985. DOE published a proposed rule with respect to four covered products: Dishwashers. television sets. clothes washers and humidifiers and dehumidifiers. 50 FR 12966. (Hereafterreferred to as the April 1985 proposal). For each ofthe four products covered by the 1985 proposal. DOE proposed that an energy efficiency standard would not be economically justified and would not result in a significant conservation ofenergy.

During 1983. DOE's December 1982 and August 1983 final rules were challenged in a lawsuit brought by the Natural Resources Defense Council (NRDC) and others against the Department. On July 16. 1985. the U.S. Court ofAppeals set aside DOE's December 1982 and August 1983 final rules. NRDC v. Herrington. 768 F.zd 1355 (D.C. Cir. 1965).

Consequently. on March 5. 1986, DOE published notices in the Federal Register removing the December 1982 and August 1983 final rules and withdrawing the April 1985 proposal. 51 FR 7549 and 51 FR 7582.

The National Appliance Energy Conservation Act (NAECA). which became law on March 17. 1987. amended EPCA in partby: Redefining "covered products" (specifically. refrigerators! refrigerator-freezers. and freezers were combined into one product type from two; humidifiers and dehumidifiers were deleted; and pool heaters were added); establishingFederal energy conservation;tandards for 11 of the 12 coveredprodUcts (with television sets being the exception); and creating a schedule for which the standard levels

areeach to be reviewed to delennine if they should be amended.

TheAct directs DOE to publish an advance notice ofproposed rulemaking. with a 6O-day comment period. in

### 46370 Federal Register / Vol, 52, No, 234 / Monday, December 7, 1987 / Proposed Rules

advance of the Department's r -risideration of prescribing a new or 'ded standard. Section 325(m)(1). cation of the final rule in the ....eral Register for which this document is an advance notice is scheduled by January 1, 1989.4 The purpose of this rulemaking is three-fold: (1) To review the minimum energy efficiency standards for refrigerators, refrigerator-freezers, and freezers (hereafter referred to as refrigerators) that have been established by the Act; to propose energy efficiency standards between 71 percent and 78 percent efficiency for small gas furnaces, i.e., those having an input rate less than 45,000 Btu per hour, and, to consider the establishment of an energy conservation standard for television sets.
H. Methodology This section provides a brief description of the analysis of the impacts of standards. It offers an overview of the analytic methodology, and discusses the major components of the analysis: The Engineering Analysis, the Manufacturer Analysis, and the Impact Analysis which includes the Consumer Analysis. The section also discusses the interrelationships among the components which ensure 'stency throughout the analysis. ter discussion, impact Models, and Assumptions, describes the computer models used in the analysis. The models predict the response of consumers, manufacturers, and utilities .to future changes in the economy, including the imposition of energy conservation standards. Quantitative estimates of the impacts of standards will be calculated from the outputs from the models. The models that will be utilized in the analysis are: • Engineering Performance Models • Consumer Impact Models • Manufacturer Impact Models • Utility Impact Model The function, data sources, assumptions and validity of the results for each model are discussed below. The impact of appliance conservation standards will be determined by comparing projections under the base case,5 with the projections under

• The Act requires DOE to publish a final rule for small furnaces by January 1. 1989, and for refrigerators, refrigerator-freezers. and freezers by July 1. 1989. DOE is combining these rulemaking
items into one action and is using the earlier rulemaking schedule. "Three different interpretations of base case are -'- sary when analyzing the three products of notice. For refrigerators. the base case s implementation of the conservation ,rds set by the Act. For television sets. the base case assumes no regulation. For small gas potential standards. These projections will first be made for a base case by use of the analytic models described below. The calculations will then be repeated imposing the potential standard levels. The differences between the projections of the energy consumption and economic variables in the base and standards cases provide quantitative estimates of the impacts of the. standards. To evaluate the significance of the differences, a sensitivity analysis will be performed on the key parameters and assumptions. 

### The economic analysis will be performed in the following areas: • An Engineering Analysis, which establishes the technical feasibility and product attributes including costs of design options to improve appliance efficiency. • A Manufacturer Analysis, which provides an estimate of manufacturers' response to the proposed standards. Their response is quantified by changes in several financial performance

measures. • A Consumer Analysis, which forecasts appliance sales, efficiencies, energy use, and consumer expenditures. • A separate Life-Cycle Cost Analysis to evaluate the savings in operating expenses relative to increases in purchase price. • A Utility Analysis that measuresthe impacts of the altered energyconsumption patterns on electric utilities. • An Industry Impact Analysis that provides the financial and competitive impacts on the appliance industry. • A Cost-Benefit Analysis that collects the results of all the analyses into the net benefits and costs from a national perspective. Each analysis area will be performed for each of the three products under consideration. The results of the Engineering Analysis will be reviewed by DOE to determine whether standards for each product could yield measurable energy savings, If standards would not yield energy savings, for example, if there is no combination of design options that would result in improved product efficiency, the analysis will be terminated. If energy savings are possible, then a detailed analysis is performed. In the case of small gas furnaces, the Act asks for consideration of a range of efficiencies; therefore, the analysis is performed using a base case

furnaces

, the base case assumes no regulation even though no regulation is not an option under the Act.
This latter interpretation is necessary to allow for quantitative analysis of the impacts of the legislated candidate levels for small gas furnaces

, i.e., not less than 71 percent and not more than 78 percent AFUE. which assumes no regulation and standards cases at 71 and 78 percent. Since efficiencies between 71 and 78 percent are not well defined in terms of inherent design options, DOE believes that only these two standards cases should be analyzed. For television sets and refrigerators, refrigerator-freezers. and freezers, the analysis will be performed for a base case plus three levels of standards. The levels to be analyzed will be selected after the Engineering Analysis is completed and reviewed, There is interaction among the Engineering, Consumer, Utility and Manufacturer Analyses. The Engineering Analysis establishes appliance designs and related attributes such as efficiency and costs. Based on the relationships between the prices and efficiencies of design options, the Consumer Analysis forecasts sales and efficiencies of new and replacement appliances. These data are used as inputs to the Manufacturer Analysis, which uses them to determine the financial impacts on prototypical firms within the industry. The Consumer Analysis also forecasts energy savings and consumer expenditures on the purchase and operation of the appliances. Consumer expenditures (both purchase and operation) are employed in the Life-Cycle Cost Analysis to determine consumer impacts. Changes in sales, revenues. investments, and marginal costs of utilities are calculated from the energy savings in the Utility Analysis. Three periods of time are considered by the analysis. First, the analysis extends over a time period that is consistent with the lifetimes of each of the products. Second, the Manufacturer Analysis is performed for a typical year after the standards have been imposed. The typical year selected is the fifth, by which time all major impacts of a standard would have occurred. Third, the Engineering Analysis examines the technical feasibility of improving the efficiency of the covered productsbefore the standards are effectivewithin the next three to five years.
III. Models, Data and Assumptions
a. Engineering Performance Models and Costing Analysis
The Engineering Analysis addresses two statutory requirements. The first requirement is the Department's evaluation of the maximum improvements in energy efficiency that are technologically feasible. The second relates to the lessening of utility to the consumer of any of the covered products 

### 46370 Federal Register 

## I Vol. 52, No. 234 / Monday, December 7, 1987 

## I Proposed Rules

advance ofthe Department's

r n 

### '1sideration ofprescribing a new or 'ded standard. Section 325(m)(1). .::ation ofthe final rule in the

•**~**

### ...eralRegister for which this document is an advance notice is scheduledbyJanuary 1. 

### 1989.4 

### The purpose ofthis rulemaking is three-fold: (1) To review the minimum energy efficiency standardsfor refrigerators. refrigerator-freezers. and freezers (hereafterreferred to as refrigerators) that havebeenestablishedby the Act;
to propose energy efficiency standards between 71 percent and 78 percent efficiency for small gas furnaces. i.e.• those having an inputrate less than 45.000 Btu perhour; and. to consider the establishment ofan energy conservation standard for television sets.

II. Methodology

This section provides a brief description ofthe analysis ofthe impacts ofstandards. It 

### offers an overview ofthe analyticmethodology. and discusses the major components of the analysis: The Engineering Analysis. the ManufacturerAnalysis. and the Impact Analysis which includes the ConsumerAnalysis. The section also discusses the interrelationships among the components which ensure 'stency throughout the analysis. iter discussion. Impact Models.

. ... and Assumptions. describes the computer models used in the analysis. The models predict the response of

consumers. manufacturers. and utilities
.to future changes in the economy. including the imposition ofenergy conservation standards. Quantitative estimates ofthe impacts ofstandards will be calculatedfrom the outputs from the models. The models that will be utilized in the analysis are:

• Engineering Performance Models

• ConsumerImpact Models

• ManufacturerImpactModels

• Utility ImpactModel The function. data sources. assumptions andvalidity ofthe results for each model are discussedbelow.

The impact ofappliance conservation standards will be determined by comparing projections under the base

case.s with the projections under

• The Act require. DOEto publish a final rule for small furnaces by January 1. 1989. and for refrigerators. refrigerator-freezers. and freezers by July 1. 1989. DOEi.combining these rulemaking items inlo one aclion and is using the earlier rulemaking schedule.

•Three different interpretations ofbase case are**~--".sary** when analyzing the three products of

. notice. For refrigerators. the baaecase

s implementation o( the conservation .rds set by the Act. For television sets. the base case assumes no regulation. For small gas 

### potential standards.These projections will first be made for a base case by use ofthe analytic models described below. The calculations will then be repeated imposing the potential standardlevels

.

The differences between the projections ofthe energy consumption andeconomic variables in the base and standards casesprovide quantitative estimates ofthe impacts ofthe. standards.To evaluate the sigIlJficance ofthe differences. a sensitivity analysis will beperformed on the key parameters and assumptions.

The economic ana1ysis will be performed in the following areas:

• An Engineering Analysis. which establishes the technical feasibility and product attributes including costs of design options to improve appliance efficiency.

• AManufacturer Analysis. which provides an estimate ofmanufacturers'
response to the proposed standards. Their response is quantified by changes in several financial performance

measures.

• A Consumer Analysis. which forecasts appliance sales. efficiencies.
energy use. and consumer expenditures.

• A separate Life-Cycle Cost Analysis
to evaluate the savings in operating expenses relative to increases in purchase price.

• A Utility Analysis that measures the impacts ofthe altered energyconsumption patterns on electric utilities.

• An Industry Impact Analysis that provides the financial and competitive impacts on the appliance industry.

• A Cost-Benefit Analysis that collects the results ofall the analyses into the netbenefits and costs from a

nationaIperspective.

Each analysis area will be performed for each ofthe three products under consideration.The results ofthe Engineering AnalysiS will be reviewed by DOE to determine whether standards for each product could yield measurable energy savings. If

### standards would not yield energy savings. for example. if there is no combination ofdesign options that would result in improved product efficiency. the analysis will be terminated. If

### energy savings are possible. then a detailed analysis is performed. In the case ofsmall gas furnaces. the Act asks for consideration ofa range ofefficiencies;' therefore. the analysis is performed using a base case

furnaces. the base case assumes no regulation even though no regulation is not an option under the Act. This laUer interpretation i. necessary to allow for quantitative snaly.i. oflbe impact.of the legislated candidate level. for amall gal fumaces. i.e

.. not less than 71 percent and not more than 78 percent AFUE. 

### which assumes no regulation and standardscases at 71 and 78 percent. Since efficiencies between 71 

### and 78 percent are not well defined in terms of inherent design options. DOE believes that only these two standards cases should be analyzed. For television sets and refrigerators. refrigerator-freezers. and freezers. the analysis will be performed for a base case plus three levels ofstandards.The levels to be analyzed will be selected after the Engineering Analysis is completed and reviewed.

There is interaction among the Engineering. Consumer. Utility and ManufacturerAnalyses. The Engineering Analysis establishes appliance designs and related attributes such as efficiency and costs. Based on the relationshipsbetween the prices and efficiencies ofdesign options. the Consumer Analysis forecasts sales and efficiencies ofnew and replacement appliances. These data are used as inputs to the ManufacturerAnalysis. which uses them to determine the financial impacts onprototypical firms within the industry. The Consumer Analysis also forecasts energy savings and consumer expenditures on the purchase and operation ofthe appliances. Consumer expenditures (both purchase and operation) are employed in the Life-Cycle Cost Analysis to determine consumer impacts. Changes in sales. revenues. investments. and marginal costs of utilities are calculated from the energy savings in the Utility Analysis.

Three periods oftime are considered by the analysis. First. the analysis extends over a time period that is consistent with the lifetimes ofeach of the products. Second. the Manufacturer Analysis is performed for a typical year after the standardshave been imposed. The typical year selected is the fifth. by which time all majorimpacts ofa standardwould have occurred.Third. theEngineering Analysis examines the technical feasibility ofimproving the efficiency ofthe covered products before the standards are effectivewithin the next three to five ye.ars.


# m. Models, Data andAssumptions

a. 

### Engineering PerformanceModels and CostingAnalysis

The Engineering Analy!fis addresses
two statutory requirements. The first requirement is theDepartment's evaluation ofthe maximum improvements in energy efficiency that

are technologically feasible. The second relates to the lessening ofutility to the

consumer ofany ofthe covered products

### Federal Register i Vol.' 52, N. ii34 J Monday, December 7,'1G87 / Proposed Rules

due to the imposition of standards. In addition, the Engineering Analysis provides information on efficiencies, manufacturing costs, and appliance prices to other components of the overall analysis. The features of appliances that provide utility to the consumer are incorporated into the analysis through the creation of appliance classes. Classes are a subset of appliance types. For example, refrigerator-freezers and freezers comprise an appliance type, while top-mounted automatic defrost refrigerator-freezers comprise an appliance class. The Engineering Analysis develops cost and efficiency data for a set of design options within each appliance class. These data are the output of the engineering performance models and costing analysis discussed in subsections 5-9. below. 

### 1. Appliance Classes
The first step in the Engineering Analysis is to segregate product types into separate classes to which different energy conservation standards apply. Classes are differentiated by the type of energy use (oil, natural gas orelectricity), or capacity or performancerelated features that provide utility to the consumer and affect efficiency. Classes are differentiated in order to ensure that consumer products having different capacities or other performance-related features affecting efficiency and utility remain available to

consumers, For each of the three appliances, the following are the classes that the Department plans to review. DOE welcomes comments, in response to today's notice, on whether additional classes are needed.
(i) Refrigerators/Refrigerator

-Freezers/
Freezers The following are the classes of refrigerators for which the Act established standards. The Department is planning to use the same product classes in its review of standards. Refrigerators and Refrigerator-Freezers with manual defrost Refrigerator-Freezers-partial automatic defrost Refrigerator-Freezers--automatic defrost with:Top-mounted freezer without throughthe-door ice service Side

-mounted freezer without throughthe-door ice service Bottom

-mounted freezer without through-the-door ice serviceTop-mounted freezer with throughthe-door ice service Side-mounted freezer with throughthe-door ice service Upright Freezers with: 

### Manual defrost Automatic defrost Chest Freezers and all other freezers

(ii) Television Sets Two classes of television sets, color and monochrome (black and white), are specified in this notice. These classes are distinguished by their ability to reproduce images in color, a performance-related feature that affects utility and efficiency. Color television sets consume more energy than comparable monochrome television sets usually because of the use of multiple electron guns, whereas, monochrome television sets use only one electron gun. For this reason, energy efficiency levels achieved by monochrome television sets are not achievable for color television stets. Since color television sets and monochrome television sets offer distinct differences in utility to the consumer, DOE is specifying separate classes for color and monochrome television sets.

(iii) Small Furnaces

Two classes of small gas furnaces,'weatherized (outdoor) and nonweatherized (indoor), are specified in this notice. These classes are distinguished by their ability to beinstalled outdoors, a performancerelated feature that affects utility and efficiency. The weatherized (outdoor) furnace provides the owner with the utility 8f saving indoor space. The weatherized furnace is typically lessenergy efficient than a comparable nonweatherized (or, indoor) furnace because the "jacket" energy losses of a weatherized furnace will usually exceed the infiltration energy-losses of an indoor furnace. The test procedures for furnaces recognize these differences and prescribe different efficiency calculation methods for these two types of furnaces.

2. Baseline Units For the purpose of generating a cost/ efficiency relationship the Engineering Analysis needs to define a starting point or baseline. The Engineering Analysis uses information gathered from trade organizations, manufacturers, and consultants with expertise in specific product types to select a baseline unit.

s The Act requires the Department to establish minimum energy efficiency standards for gas furnaces (other than furnaces designed solely fat installation in mobile homes ) having an input of less than 95,000 Btu per hour. Although. by definitiom a
furnace could be a forced

-air furnace or a boiler, DOE has reviewed the legislative background regarding small gas furnaces and finds no mention of boilers. Consequently, the Department interprets this provision to be applicable only to gas, forcedair furnaces. 

### 46371

In past analyses a baseline unit represents a typical model within an appliance class sold during the base year of the analysis. For this analysis, DOE intends to use the same baseline units as in the April 1982 and April 1985 proposals." Once identified, each baseline unit is characterized by its efficiency-related design options.

3. Design Options
The Engineering Analysis identifies individual or combinations of design options with a potential for improving energy efficiency. Design options that are on the market or that are likely to be on the market by the time standards are effective will be considered. The following is a list of design options that will be examined: (i) Refrigerators and refrigerator-freezers (A) Foam insulation substitution in doors 

### (B) Increased door insulation thickness (C) High-efficiency compressor substitution (D) Double door gasket (E) Anti-sweat heater switch (F) Increased cabinet insulation thickness(G) Reduced heat load of through-thedoor-feature (H) Increased evaporator surface area (I) Hybrid evaporator 

### ()) Adaptive defrost control (K) Fan and fan motor improvement (L) Enhanced heat transfer surfaces (M) Mixed refrigerants 

### (N) Fluid control valves (0) Improved foam insulation (P) Evacuated insulation panels (Q) Two compressor system (R) Use of natural convection currents (S) Location of compressor and condensers (ii) Freezers (A) Foam insulation substitution in cabinet (B) Foam insulation substitution in door 

### (C) Increased cabinet insulation thickness (D) Increased door insulation thickness (E) High

-efficiency compressor substitution (F) Double door gasket (G) Adaptive defrost control (H) Fan and fan motor improvement (I) Enhanced heat transfer surfaces U) Mixed refrigerants

"See Consumer Products Efficiency Standards Engineering Analysis Document . March 1982. DOE!
CE-0030 and Technical Support Document Frnrtvy Use Projections for Four Consumer Products. DOE!
CS/20315-1. March 1985. 

### due to the imposition ofstandards. In addition, the EngineeringAnalysis provides information on 

### efficiencies, manufacturing costs, and appliance prices to other components ofthe overall analysis.

The features ofappliances thaI provide utility to the consumerare incorporated into the analysis through the creation ofappliance classes. Classes are a subset ofappliancetypes. 

### For example, refrigerator-freezers and freezers comprise an 

### appliance type, while top-mounted automatic defrost refrigerator-freezers comprise an appliance class. TheEngineering Analysis develops cost and efficiency data for a set ofdesign optionswithin each appliance class. These data are the output ofthe engineeringperfonnance models and costing analysis discussed in subsections 5-9. 

### below.

1. 

### Appliance Classes

The first step in the Engineering Analysis is to segregate product types into separate classes to which different
energy conservation standards apply. Classes are differentiated by the type of
energy use (oil, natural gas or electricity), or capacity orperformancerelated features that provide utility to the consumerand affecl efficiency. Classes are differentiated in order 10



### ensure that consumerproducts having different capacities or other performance-relatedfeatures affecting efficiency and utility remain available to

consumers.

For each ofthe three appliances, the following are the classes that the Department plans to review. DOE welcomes comments. in response to today's notice, on whether additional classes are needed. (i) Refrigerators/Refrigerator-Freezers

## I
Freezers

The following are the classes of refrigerators for which the Act established standards.The Department is planning to use the same product classes in its review ofstandards. Refrigerators and Refrigerator-Freezers with manual defrost Refrigerator-Freezers-partial automatic defrost Refrigerator-Freezers-automatic defrost with: Top-mounted freezer without throughthe-door ice 

### service Side-mounted freezer 

### without throughthe-doorice service Bottom-mounted freezer without

through-the-door ice service Top-mounted freezer with throUSlhthe-door ice service Side-mounted freezer with throughthe-door ice service Upright Freezers with: Manual defrost Automatic defrost ChestFreezers and all otherfreezers

(ii) 

### Televi5ion Sets

Two classes of

### television**~ts,** 

### color and monochrome 

### (blad: andwhile), are specified in

### this notice. These classes

are distinguished by theirability to reproduce images**~** 

### color, a performance-related feature that affects utility and efficiency.

Color television**se~** 

### consume more energy than comparable monochrome television setsusually because ofthe

use ofmultiple electron guns. whereas. monochrome television aets use only

one electrongun. Forthis reason, energy efficiency levels achieved by monochrome television sets are not achievable for color television**s~ts.** 

### Since color television sets and monochrome television sets offer distinct differences in utility to the

consumer. DOE is specifying separate classes for color and monochrome television sets.

(iii) 

### Small Furnaces

Two classes ofsmall gas furnaces,8 weatherized (outdoor) and nonweatherized (indoor). are 

### specified in this notice. These classes are distinguished by their ability to be installed outdoors, a performancerelated feature that affects utility and effiCiency. The weatherized (outdoor) furnace provides the ownerwith the utility**~f** 

### savingindoor space. The weatherized furnace is typically less
energy efficient than a comparablenonweatherized (or, indoor) furnace because the "jacket" energy losses ofa weatherized furnace 

### will usually exceed the infiltration energy-losses ofan indoor furnace. The test procedures for furnaces recognize 

### these differences and prescribe different efficiency calculation methods for these two types of

### furnaces.



## z. BaselineUnits

Forthe purpose ofgenerating a cost/ efficiency relationship the Engineering Analysis needs to 

### define a starting 

### point

orbaseline.The Engineering AnalysiS

uses information gathered from trade organizations. manufacturers. and consultants with expertise in specific product types to select a baseline unit.

• 1Re AcJ requires the Oepartmnt to establish minimum energy effiCiency standard. for 881 furn

..cea (other U.anfwuacel designed IOl.ely £or Installation in mobile ho=-) having an input of leu than 45.000 B(u per hOllr. Altboll@h. by definition. a furnace coulrl be 8 forced-air furnace or a boiler. DOE htu reviewed the l.eg.&i;,tive background regarding &maU lIll£ fumace5 lind finds no mention ofboilen. Consequently. the Department interprets this provision (0 be applicable only to gas, forcedair furnace•. 

### 463i1

In past analyses a baseline unit represents 

### a typical model within an appliance cla$s 

### IIOld during the base
yearofthe 

### analysis. For this analysis, DOE intends to use the same baseline units as in the April 1982 

### and April 1985 

### proposals.&\ 

### Once identified. each baseline unit is characterized by its efficiency-related design 

### options.

3. 

### Design Options

TheEngineering Analysis identifies individual orcombinations ofdesign options with a potential for improving
energy efficiency. Design options that

are on the market or that are likely to be

on the market by the time standar"ds are effecth'e will 

### be considered. The following is a list ofdesign options that will 

### beexamined: (i) 

### Refrigerators and refrigerator-freezers

(A) Foam insulation substitution in

doors (B) 

### Increased doorinsulation

thickness (C) 

### High-efficiency compressor

substitution 

### (OJ Double doorgasket (E) Anti-sweat heater switch (F) Increased cabinet insulation

thickness (G) 

### Reduced heat load of through-thedoor-feature (H) Increased evaporator surface area (I) 

### Hybrid evaporator [J) 

### Adaptive defrost control (K) 

### Fan and fan motorimprovement (L) 

### Enhanced heal transfer surfaces (M) 

### Mixed refrigerants (N) Fluid 

### control valves {OJ 

### Improved foam insulation (P) 

### Evacuated insulation panels (Q) 

### Twocompressor system (R) Use 

### ofnatural convection currents (S) 

### Location ofcompressor and

condensers (il) 

### Freezers

(A) Foam insulation substitution in

cabinet (B) 

### Foam insulation substitution in

door (C) 

### Increased cabinet insulation

thickness (D) Increased doorinsulation

thickness (E) High-efficiency compressor

substitution (F) 

### Double door gasket (G) 

### Adapti\Oe defrost control (H) 

### Fan and fan motor improvement (I) 

### Enhancedheat transfer surfaces 

# m Mixed 

### refrigerants

..SeeConsumer Products Effidenc

.. Standards**En~ineering** Analysis Docump.nl. MarCh 1982. DOE! CE-0030 andTechnical Support Document Ellen;:, Use 

### Proiections for Four Consumer Products. DOE!
CS/20315-1. March 1985.

### 483-72 =F.edieral

.Register / tirol.'52, '234 / Mont¥ay, December 7, 19'87' / -Prdpdsdd Rules

(K) Fluid control valves 'L) Improved foam insulation .M) Evacuated insulation panels (N) Use of natural convection currents (0) Location of compressor and condensers (iii) Television sets (A) Remote control (B) Electronic tuning (C) Automatic color control (D) Vertical interval reference (E) Brightness sensor 

### (F) Voltage regulating power source (G) Display device (H) One-gun tube (iv) Small furnaces (A) Increased heat exchanger surface

area (B) Intermittent ignition device (IID) (C) Power burner or power vent 

### (D) Increased insulation(E) Additional improvement of steadystate efficiency (F) Two-stage and modulating burners
4. Maximum Technologically Feasible Designs The analysis also will identify the combination of design options in each class that DOE believes would yield the highest efficiency and could be commercially produced by the time -tandards are effective. This represents e maximum technologically feasible .ficiency level given the design options currently in use or in prototypes.



### 5. Performance Models
Computer simulation models will be used to determine efficiency levels forvarious design options for refrigeratorfreezers, freezers and television sets. The refrigerator models were developed for the June 1980 proposal and include detailed heat transfer and refrigeration algorithms. Television set energy consumption is based on data collected by DOE, including data obtained from manufacturer testing. For small furnaces, the efficiency levels corresponding to various design options will be determined from laboratory test data. These data are found in the Directory of Certified Furnace and Boiler Efficiency Ratings published by the Gas Appliance Manufacturers Association (GAMA). Design options are the same as those in the GAMA directory. 

### 6. Costing Analysis

The manufacturer cost data are being obtained through a process that includes meetings and evaluation of manufacturing facilities, manufacturers' osting data, and review of the data ,eceived. The cost data that will be presented for each product class will represent the average of figures obtained from at least two different

sources. It will be in the form of incremental cost data disaggregated into labor, purchased parts, materials, shipping /packaging and tooling.
7. Price-Efficiency Relationships The results of the Engineering Analysis are summarized in the priceefficiency relationships that show the efficiency, unit energy consumption, and
cost of each design option, and combination of design options, for each appliance class. Manufacturer and dealer markups are applied to the manufacturing costs to determine the purchase price of the appliance. For furnaces, an installation cost and an annualized maintenance cost are included to get the overall cost. The price-efficiency relationships are a fundamental input to the Consumer Analysis.

8. Data Sources Shipments data will be based on information from industry sources and published data from industry trade associations. Cost of purchased materials and parts will be based on quotations from the suppliers of these items. Data on engineering and labor costs are to be taken from on-site visits to manufacturing plants and published

sources. 9. Outputs From the Engineering Analysis For each combination of design options considered, the models and data provide: • Energy efficiency (expressed as the DOE energy factor);' • Increased material, purchased parts, labor, and investment costs for medium8 and large manufacturers by product class; • Annual energy consumption per unit (based on DOE test procedures); 

### • The relationship between price and efficiency level by product class; and • Other information on product characteristics, such as maintenance
costs.b. LBL Residential Energy Model (LBLREM) Early energy demand modeling focused on engineering estimates or on the relationship between energy

' The energy factor is a measurement of energy efficiency derived from the DOE test procedure for that product.

• As was the case with the April 1982 proposal. small manufacturers were not analyzed separately. No general manufacturing approach could be identified for these firms because of the wide variability in their approach to manufacturing. Therefore. small manufacturers costs have been
assumed to equal those of medium manufacturers. consumption and economic growth. In the 1970's, Oak Ridge National Laboratory (ORNL) developed the first model to integrate these two important aspects, the Engineering-Economic Model of Residential Energy Use (ORNL Model). That model was brought to Lawrence Berkeley Laboratory (LBL) in 1979, and adapted to the analysis of Federal appliance efficiency standards. The ORNL Model used in the earlier rulemakings has been documented in the Consumer Products Efficiency Standards Economic Analysis Document, DOE/CE-029, March 1982. The ORNL Model has been updated by LBL, resulting in the LBL Residential Energy Model (LBL-REM) which is summarized below. The LBL-REM forecasts the appliance purchase choices that households make, as well as their subsequent appliance usage behavior and energy consumption. The model uses engineering estimates of the characteristics of particular designs of appliances, and calculates thenational impacts of a technologyspecific policy on the populations of appliances used in the households. The engineering data provide alternative designs, characterized by purchase price and efficiency, that are available for purchase. The output from the LBL-REM satisfies the legislative requirements regarding energy savings and consumer economic impacts (operating expenses and life-cycle costs). Engineering, economic, anddemographic data are used in the LBLREM. The engineering data for appliances are described above. Additional data include engineering data regarding alternative building shell construction measures and costs, unit energy consumption and efficiency of existing appliances, age distribution of existing appliance stock, and retirement functions. Economic data includes projected energy prices 9 and household income, and models of energy investment, appliance purchase and usage behavior, including fuel and technology choice for each end-use. Demographic data includes number of households by type, projected housing starts and demolitions, and initial appliance holdings.



### 1. Structure of the Model
The LBL-REM segra nts annual energy consumption into house types. end-uses, and fuel types. The house types are single family, multifamily, and

• The projections of energy prices will be taken
from the most recent Annual Energy Outlook, s publication of the Department's Energy Information
Administration. 

### 463:72 

### ,F.edi!ral.Regis1er 

### 11\1.01. '52,··No.,·ea4 I'Monl:¥ay, 

### December ·7.1987'**I'Pr6pds~R1iles**

(K) Fluid control valves 'L) Improved foam insulation ,M) Evacuated insulation panels (N) Use ofnatural convection currents (0) Location ofcompressor and

condensers (iii) Television sets

(A) Remote control (B) Electronic tuning (C) 

### Automatic color control (D) Vertical interval reference (E) Brightness sensor (F) Voltage regulating power source (G) Display device (H) One-gun tube (iv) Small furnaces

(A) Increasedheat exchanger surface

area (B) Intermittent ignition device (lID) (C) 

### Power burner or powervent (D) Increased insulation (El Additional improvement ofsteadystate efficiency (F) Two-stage and modulating burners

4. MaximumTechnologicallyFeasible Designs

The analysis also will identify the combination ofdesign options in each class that DOE believes would yield the highest efficiency and could be commercially produced by the time -tandards are effective. This represents

emaximum technologically feasible .ficiency level given the design options currently in use or in prototypes.

5. Performance Models

Computer simulation models willbe use'd to determine efficiency levels for various design options for refrigeratorfreezers, freezers and television sets. The refrigerator models were developed for the June 1980 proposal and include detailedheat transfer and refrigeration algorithms. Television set energy consumption is based on data collected byDOE, including data obtainedfrom manufacturer testing. For small furnaces. the efficiency levels corresponding to various design options will be determinedfrom laboratory test data.These data are found in the Directory ofCertified Furnace and Boiler Efficiency Ratings publishedby the Gas Appliance Manufacturers Association (GAMA). Design options

are the same as those in the GAMA directory.

6. CostingAnalysis

The manufacturercost data are being obtained through a process that includes meetings and evaluation of manufacturingfacilities, manufacturers'

osting data, and review ofthe data .eceived. The cost data that will be presented for each product class will represent the average offigures obtained from atleast two different

sources. It 

### will be in the form of incremental cost data disaggregated into labor. purchased parts, materials, shipping/packaging and tooling.

7. Price-Efficiency Relationships

The results ofthe Engineering Analysis are summarized in the priceefficiency relationships that show the efficiency. unit energy consumption, and
cost ofeach design option, and combination ofdesign options, for each appliance class. Manufacturer and dealermarkups are applied to the manufacturing costs to determine the purchase price ofthe appliance, For furnaces. an installation cost and an annualized maintenance cost are included to get the overall cost. The price-efficiencyrelationships are a fundamental input to the Consumer Analysis.

8. Data Sources

Shipments data will be based on information from industry sources and published data from industry trade associations. Cost ofpurchased materials and parts will be based on quotations from the suppliers ofthese items. Data on engineering and labor
costs are to be taken from on-site visits
to manufacturingplants and published

sources.
9. Outputs From the Engineering AnalysiS

For each combination ofdesign options considered, the models and data provide:

• Energy efficiency (expressed as the DOE energy factor); 7



### • Increased material, purchased parts, labor, and investment costs for mediumS and 

### litge manufacturers byproduct class;

• Annual energy consumption perunit (based onDOE test procedures);

• The relationship betweenprice and efficiency level by product class; and

• Otherinformation onproduct characteristics, such as maintenance
costs.


### b. LBLResidentialEnergyModel(LBLREM)

Early energy demand modeling focused on engineering estimates or on the relationship between energy

'The energy factor is a measurement ofenergy effiCiency derived from the DOE test procedure for that product.

• As was the casewith the April 1982 proposal. small manufacturers were not analyzed separately, No general manufacturing approach could be identified for these firma because ofthe wide variability in their approach to manufacturing. Therefore. amall manufacturers cOBls have been assumed to equal those ofmedium manufacturers. 

### consumption and economic growth. In the 1970's, Oak Ridge National Laboratory (ORNL) developed the first model to integrate these two important aspects, the Engineering-Economic Model ofResidential Energy Use (ORNL Model). That model was brought to Lawrence Berkeley Laboratory (LBLJ in 1979. and adapted to the analysis of Federal appliance efficiency standards. The ORNL Model used in the earlier rulemakings has been documented in the ConsumerProducts Efficiency StandardsEconomic Analysis Document, 00E/CE-029,March 1982. The ORNL Model has been updated by LBL. resulting in the LBL Residential Energy Model (LBL-REM) which is summarizedbelow.

The LBL-REM forecasts the appliance purchase choices that households make,

as well as their subsequent appliance
usage behavior and energy consumption. The model uses engineering estimates of the characteristics ofparticular designs ofappliances, and calculates the national impacts ofa technologyspecificpolicy on the populations of appliances used in the households. The engineering data provide alternative designs, characterized by purchase price and efficiency, that are available for purchase. The output from the LBL-REM satisfies the legislative requirements regarding energy savings and consumer economic impacts (operating expenses and life-cycle costs).

Engineering, economic, and demographic data are used in the LBLREM. The engineering data for appliances are described above. Additional data include engineering data regarding alternativebuilding shell constructionmeasures and costs, unit energy consumption and efficiency of existing appliances, age distribution of existing appliance stock. and retirement functions. Economic data includes projected energy prices II 

### and household income. and models ofenergy investment. appliance purchase and
usage behavior. includingfuel and technology choice for each end-use. Demographic data includes number of households by type. projected housing
starts and demolitions, and initial appliance holdings.

1. Structure oftheModel

The LBL-REM segratmts annual
energy consumption into house types. end-uses. and fuel types. The house types are single family, multifamily. and

• The projections ofenergy prices wlll be laken from the most recentAnnualEnergy OutlooA, B publication ofthe Departmenr. Energy Information Administration.

### Federal Register / Vol. 52, No. 234 / -Monday, December 7, ° 1987 / Propt?sed Rules 46373

mobile homes. Calculations are performed separately for existing and new housing construction each year over the period, 1980-2015. The end-uses are space heating (including room and central), air conditioning, water heating, refrigeration, freezing, cooking, clothes drying, lighting, and miscellaneous. Up to four fuels are considered, as appropriate to each end use: Electricity, natural gas, heating oil, and LPG. The model exists in two versions: national (one region), and regional (10 Federal regions). Both versions are expected to be utilized in the analysis for this rulemaking. The model projects five types of activities: Technology/fuel choice: building shell thermal integrity choice; appliance efficiency choice; usage behavior; and turnover of buildings and appliances.
2. Housing Stock Submodel This submodel prepares data abouthousing stock projections for the LBLREM. The number of occupied households, by type, is taken from the 1980 Censuses of Population and Housing. An exogenous projection of housing starts is obtained and estimates of projected demolition rates by house type are calculated, assuming an exponential function. The housing submodel determines the projected housing stock each year, 1981-2015, by subtracting demolitions from existing stock, then adding starts. The annual demolition rates by house type will be calculated for single family, multifamily, and mobile homes, respectively.
3. Efficiency Choice Algorithm For refrigerators, refrigerator-freezers, and freezers, historical efficiency data are available for selected years for each class of appliance through 1985. The Federal energy conservation standards are expected to be met or exceeded for refrigerators in 1990. The transition from current efficiencies to those expected in 1990 is forecast to be a straight line progression from the current average efficiencies. After 1990, future efficiency improvements are assumed to be a function of designs available (according to the engineering analysis) and of electricity prices. DOE believes the forecasting algorithm is designed to allow annual shipment-weighted efficiency factors (SWEFs) to increase if either more efficient designs become available at lower prices, or electricity prices increase. Conversely, if electricity prices decrease, the SWEF may decline, but would have a lower bound at the 1990 Federal standard level. For small gas furnaces, the approach will be the same, For television sets, a similar approach or an alternate may be adopted. An alternate approach would become necessary if data on purchase price and usage elasticities cannot be produced. Presently, DOE has not decided on a particular alternative approach; any one that may be taken for television sets will depend on the quality of information available.
4. Thermal Integrity:. The projection of the level of investment in thermal integrity measures in new houses is based on a life-cycle cost calculation, analogous to that done for equipment efficiencies.10 Estimates of the incremental costs of thermal integrity measures are used in conjunction with current fuel prices and a discount rate.
5. Modeling Efficiency Standards-' The LBL-REM projects the average efficiency of new products, for example, refrigerators, purchased each year, in the absence of additional Federal regulations. A distribution of efficiencies is constructed around the average, based on efficiency distributions observed in the marketplace. This information includes information from industry sources, published data from the industry trade associations and industry-wide data obtained from Form CS-179." A new Federal standard level would eliminate part of the distribution: therefore, a new distribution isconstructed. The new shipmentweighted average efficiency then characterizes the efficiency of new units in that year. The same process is applied to all years after implementation of the standard. The model is then run again, for the standards case, with the adjusted average efficiencies, to calculate any changes in market shares. usage behavior, or investment in building shell thermal improvements that may occur due to standards, and to calculate the net energy savings.
6. Turnover of Appliance Stocks The initial age distribution of appliances in stock is characterized based on industry data about historical annual shipments. The fraction of each product that retires each year is based on the number of years since purchase of the product. For each year's purchase the model associates an average efficiency, so that when older

10 The equipment efficiency and thermal integrity decisions are not solved simultaneously. but recursively. The previous year's thermal integrity is assumed in projecting this year's equipment efficiency; then this year's equipment efficiency is used to calculate this year's thermal integrity. ' 1 Survey of Consumer Product Manufacturers through Trade Associations in 1979. appliances are retired, they are also recognized as less efficient. 12 The number of potential purchasers of an appliance in new homes is equal to the number of new homes constructed each year. The number of potential purchasers of appliances in existing houses is equal to the number of retiring appliances, plus some fraction of those households that did not previously own the product.

7. Calculation of Market Shares
Potential purchasers may purchase any competing technology within an end-use, or none. For refrigerators, the decision to purchase or not is modeled, and the fraction of the total that chooses each class, e.g., top-mount with automatic defrost, is specified exogenously. For refrigerators, long-term market share elasticities have been estimated with respect to equipment price, operating expense, and income respectively.13 The effect of standards is expected to be lower operating . expense and increased equipment price. The percentage changes in these quantities are used, together with market share elasticities, to determine changes in market share resulting from standards. The model assumes that higher equipment cost will decrease market shares, while lower operating expense will increase market shares. The net result (predicted market share) depends on the standard level selected, and associated equipment price and operating expense. For small gas furnaces, market share elasticities are used to estimate market share changes in existing houses. For new houses, in addition to that described above, the analysis utilizes a data set of individual households, and their probabilities of selecting one space-conditioning technology over another. These probabilities are a function of operating expenses, equipment prices, and income, and include interactions from competing products. such as baseboard heaters and electric heat pumps. The advantages of this household-specific approach are that: (1) Only those households that are candidates to purchase small gas furnaces are affected by the standard; and (2) no aggregation bias is introduced by attempting to average the individual
responses.

14 See Consumer Products Efficiency Standards Economic Analysis Document , DOE/CE-0029. March 1982

. pp. 412-13. "Eric Hirst and Janet Carney . "The ORNL Engineering

-Economic Model of Residential Energy Use." Oak Ridge National Laboratory. ORNL/CON24. July 1978. 

### Federal Register 

## I Vol. 52, No. 234 

## I -Monday. December 7.'1987 

## I Proposed Rules 46373



### mobile homes. Calculations are performed separately for existing and

new housing construction each year

over the period. 1980-2015. The end-uses

are space heating (including room and central). air conditioning. waterheating, refrigeration. freezing. cooking. clothes drying. lighting. and miscellaneous. Up
to four fuels are considered. as appropriate to each end use: Electricity. natural gas. heating oil. and LPG. The model exists in two versions: national (one region). and regional (10 Federal regions). Both versions are expected to be utilized in the analysis for this rulemaking.

The model projects five types of activities: TechnologyIfuel choice: building shell thermal integrity choice; appliance efficiency choice; usage behavior; and turnover ofbuildings and appliances.

2. Housing Stock Submodel

This submodel prepares data about housing stock projections for the LBLREM. The number ofoccupied households. by type. is taken from the 1980 Censuses ofPopulation and Housing, Anexogenous projection of housing startsis obtained and estimates ofprojected demolition rates by house type are calculated. assuming an exponential function, The housing submodel determines the projected housing stock each year. 1981-2015. by subtracting demolitions from existing stock. then adding starts.The annual demolition ratesby house type will be calculated for single family. multifamily. and mobile homes. respectively.

3. 

### Efficiency Choice Algorithm

For refrigerators. refrigerator-freezers. and freezers. historical efficiency data

are available for selected years for each class ofappliance through 1985. The Federal energy conservation standards

are expected to be met orexceeded for refrigerators in 1990, The transition from
current efficiencies to those expected in 1990 is forecast to be a straight line progression from the current average efficiencies. After 1990. future efficiency improvements are assumed to be a function ofdesigns available (according
to the engineering analysis) and of electricityprices. DOE believes the forecasting algorithm is designed to allow annual shipment-weighted efficiency factors (SWEFs) to increase if eithermore efficient designs become available at lower prices. or electricity prices increase. Conversely. ifelectricity prices decrease. the SWEF may decline. but would have a lower bound at the 1990 Federal standard level.

For small gas furnaces. the approach will be the same. For television sets. a similar approach or an alternate may be adopted. An alternate approach would become necessary if

### data on purchase price and usage elasticities cannot be produced. Presently, DOE has not decided on a particular alternative approach; anyone that maybe taken for television sets will depend on the quality ofinformation available.

4. Thermal Integrity"

The projection ofthe level of investment in thermal integrity

measures in newhouses is based on a life-cycle cost calculation. analogous to that done for equipment efficiencies.! 0 

### Estimates ofthe incremental costs of thermal integrity measures are used in conjunction with current fuel prices and

a discount rate.
5. Modeling Efficiency Standards·-

The LBL-REM projects the average efficiency ofnew products. for example. refrigerators. purchased each year. in the absence ofadditional Federal regulations. A distribution ofefficiencies is constructed around the average. based on efficiency distributions observedin the marketplace. This information includes information from industry sources. published data from the industry trade associations and industry-wide data obtained from Form C8-179. 1 

### ! A new Federal standardlevel would eliminate part of the distribution; therefore. a new distribution is constructed. The new shipmentweighte? average efficiency then characterizes the efficiency ofnew units in that year. The same process is applied to all years afterimplementation ofthe standard. The model is then run again. for the standards case. with the adjusted average efficiencies. to calculate any changes in market shares.
usage behavior. orinvestment in building shell thermal improvements that may occur due to standards. and to calculate the net energy savings,

6. Turnover ofAppliance Stocks

Theinitial age distribution of appliances in stock is characterized based on industry data about historical annual shipments. The fraction ofeach product that retires each year is based

on the number ofyears since purchase ofthe product. For each year's purchase the model associates an average efficiency. so that when older

'0 The equipment efficiency and thennal integril)' decisions are not solved simultaneously. but recursively. The previou5 year'. thermal integrity is assumed in projecting this year's equipment efficiency; then this year's equipment efficiency is used to calculate this yellr's thermal integrity.

" Survey ofConsumer Product Manufacturers through Trade Associations in 1979. 

### appliances are retired. they are also recognized as less efficient.I 2



### The number ofpotential purchasers of

an appliance in new homes is equal to the number ofnew homes constructed eachyear.The number ofpotential purchasers ofappliances in existing houses is equal to the number ofretiring appliances. plus some fraction ofthose households that did not previously own the product.

7. Calculation ofMarket Shares

Potential purchasers may purchase
any competing technology within an end-use. or none. Forrefrigerators. the decision to purchase or not is modeled. and the fraction ofthe total that chooses each class. e.g

.. top-mount with automatic defrost. is specified exogenously. Forrefrigerators, long-term market share elasticities have been estimated with respect to equipment price. operating expense. and income respectively. 13 

### The effect of standards is expected to be lower operating
expense and increased equipment price, The percentage changes in these quantities are used. together with market share elasticities. to determine changes in market share resulting from standards. The model assumes that higher equipment cost will decrease market shares. while lower operating
expense will increase market shares. The net result (predicted market share) depends on the standardlevel selected. and associated equipment price and operating expense.

For small gas furnaces. market share elasticities are used to estimate market share changes in existing houses. For

new houses. in addition to that described above. the analysis utilizes a data set ofindiVidual households. and theirprobabilities ofselecting one space-conditioning technology over another. These probabilities are a function ofoperating expenses. equipment prices. and income. and include interactions from competing products. such as baseboardheaters and electricheat pumps. The advantages of this household-specific approach are that: (1) 

### Only those households that are candidates to purchase small gas furnaces are affected bv the standard: and (2) no aggregation bias is introduced

### ~;s;~t~:~~ing)O average the indi

....idual

..See Consumer Products Efficiencv Standards Economic Analvsis Document. DOE/CE-0029. March 1982.**pp~**412-13.

,.Eric Hirst and lanet Camey, "The**OR~L EngineerlO~-Economic**  Model ofResidenliaIEnergy Use:' Oak**Rld~e** National Laboratory. ORSl./CO>,,-
24. luly 1978_

### 419374 Fedeiral 'Register '/ `V'bl. 82, W.'24 / Mciiitlay, t ecember' 7, 1987 /'Proposed' Rues

No estimates of market share •sticities for television sets are )ected to be used in the analysis, ..nce no estimates are currently available and, in any event, DOE expects television sales to be inelastic relative to energy efficiency costs. Information that the Department has seen, to date, indicates that the manufacturers' costs for most potential energy efficiency improvements in television sets are likely to translate into relatively small increases in prices to

consumers. 8. Usage Behavior For some products, changing the operating expense results in changes in usage behavior. These changes are modeled using usage elasticities in operating expense and income. For refrigerators and television sets, we expect these elasticities to be at or near zero; usage behavior is not influenced by the cost of operating the appliance. For small gas furnaces, the usage elasticity is taken to be the same as for all gas furnaces. DOE assumes that the usage elasticity for furnaces is that the choice of thermostat setting is a function of operating expense of the heating unit such that usage will increase with -creasing efficiency but not to the point as to offset the efficiency drovement.
9. Energy Consumption Calculations The total energy consumption per house for each end-use and fuel by house type and vintage (existing or new) is the product of the unit energy consumption (accounting for efficiency and capacity changes), and usage factor, e.g., relative hours of full-load use for space heating. The corresponding energy consumption for all households is the consumption per house times the number of households of that type and vintage, times the fraction of those households owning that appliance. For space conditioning (heating and cooling), two additional terms are multiplied by the intermediate results: relative floor area (square feet of conditioned space), and relative thermal integrity (a measure of the effect of building shell characteristics on energy consumption). Aggregate energy consumption is obtained by summing intermediate results. For example, national electricity consumption for residential space conditioning in a particular year is the sum of house types and vintages of Qlectric central resistance heating, 3eboard and other electric room aters, electric heat pumps (heating and cooling), room air conditioners, and central air conditioners. National residential electricity consumption in that year is the sum of all end-uses of electricity consumption in the residential sector.
10. Model OutputsThe principal outputs from the LBLREM for each year are: • Energy consumption by end-use and fuel. • Per unit equipment price and operating expense by product. • Total residential energy consumption by fuel. • Projected annual shipments of residential appliances. • Differences in these quantities between a base and a standards case. These outputs are provided annually (or for selected years) and cumulatively over a period of time, e.g., 1990-2015. Energy savings are provided annually from implementation of standards to the end of the period. Net present value of standards is evaluated for each regulated product, and for the end-use(s) comprising the regulated and competing products," This will allow quantitative assessment of the impacts of any market share change for small gas furnaces. Energy savings are calculated as the difference in energy consumption between the base case and standards case. Energy consumption in both the base case and standards case includes building shell improvements, changes in fuel choice, or changes in usage behavior. Therefore, the energy savings capture the net energy savings due to regulation, including the effects induced by shifts in market share or changes in
usage behavior. Net present value, on the other hand, excludes these types of effects. Is Net present value is calculated from per unit changes in equipment'and operating costs, multiplied by base case shipments. If the net present value were calculated without normalizing to base case shipments, erroneous results would

'• For example, for small gas furnaces, the energy savings and net present benefit will be calculated not only for small gas furnaces

, but also for space heating and for space conditioning (heating and cooling) by all fuels.
i5 Present value is the discounted total value of energy consumption during the appliances' lifetimes

. plus the discounted equipment costs for those appliances that are purchased during those periods. with and without standards (for televisions). or at alternative standards levels (fur small furnaces and refrigerators Ifireezers/ refrigerator

-freezersl. The difference between each of the two cases is the net present value (NPV) attributable to standards (or amended standards). A positive NPV for an appliance at a given standard level indicates that, if that standard were adopted.

consumers of that appliance as a whole would save that much more money in fuel costs, discounted to the present, than they would pay in increased first cost for a more efficient appliance, discounted to the present, compared to the base case. be obtained: if standards caused decreased purchases of a product, this would appear an economic benefit, namely less money spent on purchasing and using appliances; 16 and if standards resulted in increased purchases, this would be incorrectly counted as a cost, when it reflectsconsumers' preference for the poststandards product. Base case usage is assumed in calculating the net present value, since any "rebound effect" 161 reflects the consumer's judgment that increased usage is worth more than the direct energy savings associated with keeping usage constant. Therefore, deduction of any foregone energy savings resulting from a possible "rebound effect" prior to calculating the net present value, would result in an underestimate of the true net present value associated with a given efficiency improvement.
11. Other Consumer Impacts

One measure of the effect of standards on consumers is the change in operating cost as compared to the change in purchase price. This is quantified by the difference in life-cycle cost between the base and standards case for the appliance classes analyzed. The LCC is the sum of the purchase price and the operating cost discounted over the lifetime of the appliance. It will be calculated at the average efficiency for each class in the year standards are imposed using consumer discount rates of five, seven, and ten percent. The purchase cost is based on the factory costs in the Engineering Analysis and includes a factory markup plus a distributor and retailer markup. The operating cost is calculated from the unit energy consumption derived in the Engineering Analysis adjusted for differences in usage. i.e., heating load hours, between the test procedure and the LBL Residential Energy Model.

15 Without normalization

, the greatest economic benefit would be obtained by a standard level that resulted in no future purchases of the produ ::t. Then no money would be spent on purchasing the product

, or on operating expenses

, and the ',slue of the savings would equal the amount of monet that would have been spent without the standard. This would clearly be a misrepresentation of the net present value of standards. " The "rebound effect" is the projected energy savings (from an efficiency improvement) that does
not occur

. This results when purchasers of more energy efficient appliances use them more intensively

, thereby saving less energy than the engineering estimates would have indicated. Empirical studies indicate that approximates; 15 percent of the potential energy savings is thus not achieved

. Therefore

, in calculating energy savings. the LBL-REM assumes that only 85 percent of the savings that are indicated by engineering estimates will actually be achieved. 

### 46374

No estimates ofmarket share 'sticities for television sets are >ected to be usedin the analysis.



### .•nce no estimates are currently available and. in any event. DOE expects television sales to be inelastic relative to energy efficiency costs. Information that the Department has

seen. to date. indicates that the manufacturers' costs for most potential
energy efficiencyimprovements in television sets are likely to translate into relatively small increases in prices to

consumers.

8. Usage Behavior

For some products. changing the operating expense results in changes in
usage behavior. These changes are modeled using usage elasticities in operating expense and income. For refrigerators and television sets. we expect these elasticities to be at ornear zero; usage behavior is not influenced by the cost ofoperating the appliance. For small gas furnaces. the usage elasticity is taken to be the same as for all gas furnaces. DOE assumes that the usage elasticity for furnaces is that the choice ofthermostat setting is a function ofoperating expense ofthe heating unit such that usage will increase with :"creasing efficiency but not to the point

'IS to offset the efficiency ,Jrovement.

9. Energy Consumption Calculations

The total energy consumption per house for each end-use and fuel by .house type and vintage (existing or new) is the product ofthe unit energy consumption (accounting for efficiency and capacity changes). and usage factor.
e.g., relative hours offull-load use for
space heating. The corresponding energy consumption for all households is the consumption perhouse times the number ofhouseholds ofthat type and vintage. times the fraction ofthose households owning that appliance. For space conditioning (heating and cooling), two additional terms are multiplied by the intermediate results: relative floor area (square feet of conditioned space), and relative thermal integrity (a measure ofthe effect of building shell characteristics on energy consumption).

Aggregate energy consumption is obtained by summing intermediate results. For example. national electricity consumption for residential space conditioning in a particularyear is the

sum ofhouse types and vintages of olectric central resistance heating. seboard and other electric room .llers. electricheatpumps (heating dnd cooling). room air conditioners. and central air conditioners. National residential electricity consumption in that yearis the sum ofall end-uses of electricity consumption in the residential sector.

10. Model Outputs

The principal outputs from the LBLREM for each year are:

• Energy consumption by end-use and fuel.

• Perunit equipment price and operating expense by product.

• Totalresidential energy consumption by fuel.

• Projected annual shipments of residential appliances.

• Differences in these quantities between a base and a standards case.

These outputs are provided annually (or for selected years) and cumulatively

over a period oftime, e.g" 1990-2015. Energy savings are provided annually from implementation ofstandards to the end ofthe period. Net present value of standards is evaluated for each regulated product. and for the end-users) comprising the regulated and competing products. H This will allow quantitative
assessment ofthe impacts ofany market share change for small gas furnaces.

Energy savings are calculated as the difference in energy consumption between the base case and standards

case. Energy consumption in both the base case and standards case includes building shell improvements. changes in fuel choice. orchanges in usage behavior. Therefore. the energy savings capture the net energy savings due to regulation, incltit:Hng the effects induced by shifts in market share or changes in usage behavior.

Netpresent value. on the other hand. excludes these types ofeffecls. 15 Net present value is calculated from per unit ch.;;mges in equipment'and operating
costs. multiplied by base case shipments. Ifthe net presentvalue were calculated without nonnalizing to base

case shipments, erroneous results would

14 For example. for small gas furnaces. the energy savings and net present benefil will be cakulaled
not only for small gas furnaces. bul also for space heating and for space conditioning (healing and cooling] by all**fu~ls.**

..Present value is the discounted total value of
energy consumption during the appliances' lifetimes. plus the discounted equipmenl costs for those appliances that are purchased during those periods. with and without standards (for televisions]. or at alternative .!andards levels (for small furnaces and refrigerators/freezersl refrigerator-freezers). The difference between each ofthe two cases is the netpresent value [!'<PV] attributable to standards (or amended standards]. A positive NPV for an appliance at 8 given standard level indicates that. ifthai siandard were adopted.

consumers ofthai appliance .s a whole would save thai much more monel' in fuel cosls. di$counted to the preBent. than they would pay in increased first cool for a more efficient appliance. discounted to the present. compared to the base case. be obtained: 

### ifstandards caused decreasedpurchases ofa product. this would appear an economic benefit• namely less money spenton purchasing and using appliances; 16 and if standardsresulted in increased purchases. this would be incorrectly counted as a cost. when it reflects consumers' preference for the poststandards product.

Base case usage is assumed in calculating the net present value. since
any "rebound effect" 16'\ reflects the consumer'sjudgment that increased
usage is worth more than the direct
energy savings associated with keeping
usage constant. Therefore. deduction of
any foregone energy savings resulting from a possible "rebound effect" prior 10 calculating the net present value, would result in an underestimate ofthe true net present valUe associated 1;\.'ith a given efficiency improvement.

11. Other ConsumerImpacts

One measure ofthe effect of standards on consumers is the change in operating cost as compared to the change in purchase price. This is quantified by the difference in life-cycle
cost between the base and standards

case for the appliance classes analyzed. The LCC is the sum ofthe purchase price and the operating cost discounted

over the lifetime ofthe appliance. 1t will be calculated atthe average efficiency for each class in the year standard" are imposed using consumerdiscount rates offive. seven. and ten percent. The purchase cost is based on the factory
costs in the Engineering Analysis and includes a factory markup plus a distributor and retailer markup. The operating cost is calculated from the unit energy consumption derived in the Engineering Analysis adjusted for differences in usage. Le

.. heating load hours. between the test procedure and the LBL ResidentialEnergy Model.

10 Without nonnalizCltion, thf? grealest economIc benefit would be obtained by B standard le\'Oi that resulted in no future purchases ofthe produc\. Then

no mone} would be spenl on purchasing the product. or on operating expenses. and the ,alu" of the savings would equal Ihe amount ofmane' (PHI would have been apent without the standard. ThIS would clearly be a misrepresentation of the nel present value ofstandards.

''''The "rebound effect" is the projected mcrey savings (from an effiCiency irrpltovement] Iha: does
not occur. This reaults when purchasers ofmore energy efficient appliances use them more intenSively. thereby saving less energy than the engineering estimates would have indicated. Empirical studies indicale that approximalel) 15 percent ofthe potential energy savings is thus not achieved. Therefore. in calculating energy sanng3. the l.BL-REM assumes thai only 65 percent of the savings that are indicaled by engineering eSlimales will actually be achieved.

### Federal Register / --Vol. 52, No. 234 / Monday, December, 7, 1987 / Proposed -Rules

Projected energy efficiencies and usages are taken from the results of LBL-REM.
Two other measures of economic impact are useful in evaluating the impacts on consumers. The payback period measures the amount of time it takes to recover, through lower operating costs, the additional expenditure on increased efficiency. Numerically, it is the ratio of the increase in first cost between the base and standards cases to the decrease in annual operating costs. Both the numerator and denominator of this expression are evaluated at the average efficiency in the year standards come into effect and at the energy prices in that year. The cost of conserved energy is the increase in first cost amortized over the lifetime of the appliance at the consumer discount rate divided by the annual energy savings. The consumer will benefit whenever the cost of conserved energy is less than the price of energy for that end use.
c. Manufacturer Impact Models
1. Conceptual Approach
The Manufacturer Impact Analysis estimates both the overall impact of new or amended standards " on manufacturers as well as the distribution of effects among different manufacturers.
2. Measures of Impact
The analysis examines three types of long-run impact: Profitability; growth; and, competitiveness. To do this, three measures of impact are tracked for the industry as a whole and for any segments that may exist. The three impact variables are: return-on-equity (ROE); assets; and labor. ROE provides the primary measure of profitability, although gross margin,return-on-assets (ROA), and return-onsales (ROS) are also reported. Assets and labor provide the measures of growth (positive or negative). The impact on competitiveness is analyzed by looking at the relative changes in growth and profitability for large and small firm segments.

!' Today's three product analyses vary in that refrigerators/refrigerator-freezers/freezers already have legislated standards and the analysis is a comparison of existing standards and increased
standards: small gas furnaces are legislated to have standards, but the level has not yet been determined, and therefore, the analysis is being done to determine the impacts of various standards levels: and television sets have no standards as of yet. therefore, the analysis is a comparison of a without-standards case to a with

-standards case in this section, the terms "imposition of standards" and "proposed standards" refer to the new or increased standard that may be proposed. rather than the existing standards. Two short-run impacts are also analyzed. First, the ability for the industry as a whole and for specific segments of the industry to provide the one-time investments required to meet the new standard is examined. These expenditures are compared to available cash and to their historical variation. Second, if standards result in decreased sales for the particular industry being analyzed, the possibility of a price war in the time period when the industry is adjusting to a lower sales volume is examined.
3. LBL Typical Year Model (LBL-TYM)
In order to estimate the impacts of energy efficiency standards a computer spreadsheet model, the Lawrence Berkeley Laboratory Typical Year Model (LBL-TYM), was developed.' The LBL-TYM uses a "typical year" approach rather than a dynamic approach. This approach models a "typical year" for the industry both in the with-standards case (or the modifiedstandards case) and in the withoutstandards case (or the existing-standard case). The typical year chosen for the model is the fifth year after the imposition of standards. Five years is considered long enough to capture any major impacts from the standard, such as profitability changes or firm entry into or exit from the industry. Ideally, a manufacturer analysis should look at the impact of a proposed regulation on every firm that does business in the industry under question. However, because the industries being analyzed have many manufacturersmaking a particular product, a firm-byfirm analysis would be a very expensive undertaking. In addition, the engineering and financial data for most manufacturing firms are proprietary and are not routinely available for public analysis. Because of these limitations on data and resources, the analysis estimates the impact of the standards by using prototypical firms. A prototypical firm is a hypothetical firm representative of a particular portion of an industry. The goal of defining the prototypical firms is to characterize firm-to-firm variations in the industry as best as possible. Prototypical firms are defined in terms of parameters that have importance in determining the level of impact and are consistent with industry data for that particular portion of the industry. Important parameters used in the model include the cost and marketing strategies. An important simplifying assumption of the LBL-TYM is that each prototypical firm offers products to 

### 46375

several different markets. The product offerings are generally differentiated by using the product classes established by the Act. Different markets are defined in terms of the technological characteristics of the products, e.g.. manual defrost vs. automatic defrost refrigerator/freezer. At times this market segmentation plays an important role in determining a firm's profits. Generally, appliance manufacturers are thought to be able to charge different markups for different products. Firms are able to charge higher markups on products that have desirable characteristics, such as a large refrigerator, a highly efficient gas furnace, or a color TV with remote control. Products on the low end of this spectrum are generally bought in larger quantities at lower prices by consumers who are more highly price conscious, and thus the markups for these products are lower. The per unit profits made by manufacturers for these different products may differ significantly. The model incorporates this market reality by allowing firms to charge different markups on different products. The model sets product prices in the new-standards case in two stages. In the first stage the price is computed by assuming that the industry's gross margin remains unchanged under the new standards. This is the pricing rule most often referred to by the industry. Stage two drops the assumption of a constant gross margin, and instead assumes that firms face a downward sloping demand curve and set price to maximize profit. Economic theory states that this is done by setting price equal to the long-run marginal cost (LMC) times a markup that depends only on the elasticity of the demand curve. Stagetwo begins by dividing costs into longrun fixed costs and LMC, and then estimating the firm's markup. Before using the markup, a new LMC is computed which includes any additional unit variable costs and the variable part of levelized capital and engineering costs. Once the new LMC is computed. this figure is multiplied by the markup factor to determine the new price. A change in standard level affects the analysis in three distinct ways. Increased levels of standards will require additional investment, will raise production coots, and will affect revenue both through price and demand. The most obvious investment induced by standards is the purchase of new plant and equipment . This cost first is evaluated from engineering data. and then averaged by taking into account the life of the investment, the date on which it is made, tax laws, and the appropriate 

### Federal Register / ··V(;)1. 52, No. 

### 234 / 

### Monday. Oecemb-er· 

### 7, 1987 / -Proposed -Rules 

### 46375

Projected energy efficiencies and usages

are taken from the results ofLBL-REM.

Two other measures ofeconomic impact are useful in evaluating the impacts on consumers. The payback period measures the amount oftime it takes to recover. through lower operating costs. the additional expenditure on increased efficiency. Numerically, it is the ratio ofthe increase in first cost between the base and standards cases to the decrease in annual operating costs. Both the
numerator and denominatorofthis expression are evaluated at the average efficiency in the year standards come into effect and at the energy prices in that year. The cost ofconserved energy is the increase in first cost amortized

over the lifetime Dfthe appliance at the

consumer discount rate divided by the annual energy savings. The consumer 

### will benefit whenever the cost of conserved energy is less than the price Dfenergy for that end use.

c. 

### ManufacturerImpactA10dels

1. CDnceptual Approach

The ManufacturerImpactAnalysis estimates both the overall impact ofnew

or amended standards 17 on manufacturers as well as the distribution ofeffects among different manufacturers.

2. Measures ofImpact

The analysis examines three types of long-run impact: Profitability; growth; and. competitiveness. To do this, three

measures Dfimpact are tracked for the industry as a whole and for any segments that may exist. The three impact variables are: return-on-equity (ROE); assets; and labor.

ROE provides the primary measure of profitability. although gross margin,
return-on-assets (ROA), and return-onsales (ROS) are also reported. Assets and laborprovide the measures of growth (positive or negative). The impact on competitiveness is analyzed by 10Dking at the relative changes in growth and profitability for large and small firm segments.

11 Today's three product analyses vary in that ref

rigeratorsIrefrigera**tor·ftee~ers**Ifreezers aIready have legislated standards and the analysis is a comparison ofexisting standards and increased standards: small gas furnaces are legislated to have standards. but the level has not yet been determined. and thereCore. the**anal~'sis** is being done to determine the impacts oC variousstandards levels: and television 8ets have no standards as of yet. therefore. the analysis is a comparison ofa without·standards case to a with-standards case In this section. the terms "imposition ofstandards" and "proposed standards" refer to the new or increased standard that may be proposed. rather than the eXIsting standards. Two short-run impacts are also analyzed. First, the ability for the industry as a whole and for specific segments ofthe industry to provide the one-time investments required to meet the new standard is examined. These expenditures are compared to available cash and to theirhistorical variation. Second. 

### ifstandards result in decreased sales for the particl!\.ar industry being analyzed, the possibility ofa price war in the time period when the industry is adjusting to a lower sales volume is examined.

3. LBL Typical YearModel (LBL-TYM)

In order to estimate the impacts of
energy efficiency standards a computer spreadsheet model. the Lawrence Berkeley Laboratory Typical Year Model (LBL-TYM), was developed':

The LBL-TYM uses a "typical year" approach ratherthan a**d~'namic** approach. This approach models a "typicalyear"for the industry both in the with-standards case (or the modified standards case) andin the withoutstandards case (or the existing-standard case). The**t~rpical** yearchosen for the model is the fifth year after the imposition ofstandards. Five years is considered long enough to capture any major impacts from the standard, such

as profitability changes orfirm entry into or exit from the industry.

Ideally, a manufacturer analysis should look at the impact ofa proposed regulation on every firm that does business in the industry under question. However, because the industries being analyzed have many manufacturers making a particular product, a firm-byfirm analysis would be a very expensive undertaking. In addition, the engineering and financial data for most manufacturingfirms are proprietary and

arenot routinely available for public analysis. Because ofthese limitations on data and resources, the analysis estimates the impact ofthe standards by using prototypical firms.

A prototypical firm is a hypothetical firm representative ofa particular portion ofan industry.The goal of defining the prototypical firms is to characterize firm-to-firm variations in the industry as best as possible. Prototypical firms are defined in terms ofparameters that have importance in determining the level ofimpact and are consistent with industry data for that particularportion ofthe industry. Important parameters used in the model include the cost and marketing strategies.

An important simplifying assumption ofthe LBL-TYM is that each prototypical firm offers products to several different markets. The product offerings are generally differentiatpd by using the product classes established by the Act. Different markets are defined in
terms ofthe technological characteristics Dfthe products. e.g

.. manual defrost vs. automatic defrost refrigerator/freezer. At timeE this market segmentation plays an illlpOi'tont role in determining a firm's profits. Generally, appliance manufacturers are thought to be able to charge different markups for different products. Firms

are able to charge higher markups on products that have desirable characteristics. such as a large refrigerator. a highly efficient gas furnace, or a colorTV with remote control. Products on the low end of this spectrum are generally bought in larger quantities at lower prices by consumers who are more highly price conscious. and thus the markups for these products

are lower. The perunit profits made by manufacturers for these different products may differ significantly. The model incorporates this market reality by allowing firms to charge different markups on different products.

The model sets product prices in the new-standards case in two stages. In the first stage the price is computed by assuming that the industry's gross margin remains unchanged under the

new standards.This is the pricing rule
most often referred to by the industry.

Stage two drops the assumption of a constant gross margin, and instead

assumes that firms face a downV\'ard sloping demand curve and set price to maximize profit. Economic theory states that this is doneby setting price equal to the long-run marginal cost (LMC) times

8 markup that depends only on the elasticity of the demand curve. Stage
two begins by dividing costs into long·

run fixed costs and LMC, and then estimating the firm's markup. Before using the markup, a new LMC is computed which includes any additional unit variable costs and the variabie part oflel.'elized capital andengineering
costs. Once the new LMC is computed. this figure is multiplied by the markup factor to determine the new price.

A change in standard level affects the analysis in three distinct ways. Increased levels of standards will require additional investment. V\'i11 raise production cOllts, and will affect revenue both through price and demand.

The most obvious investment induced by standards is the purchase ofnew plant and equipment. This cost first is evaluated from engineering data. and then averagedby taking into account the life ofthe investment. the date on which it is made. tax laws, and the appropriate

### 46376 Federal Register / Vol. 52, No. 234 / Monday; December, 7, 1987'/ -Prdposed Rules

"ost of funds. An additional and metimes larger investment takes place the old inventory is replaced with more expensive new units. The model assumes previous inventory ratios are maintained. A third form of investment tracked by the model is the change in the transactions demand for cash that accompanies a change in revenues. Increased costs of production are modeled by coupling engineering data on changes in unit costs caused by standards with data from LBL-REM on the marketplace demand of the product. Revenue is affected by both price and shipments. Price is computed from costs in two stages. First, a constant gross margin pricing rule is used. Then a markup over long-term marginal costs is computed and used to determine an optimal price. Demand is determined by measured price and operating cost elasticities, coupled with the changes in price and operating costs resulting from the standards. The LBL-TYM produces several outputs used in analyzing the impact of standards on manufacturers. A simplified pro forma income statement is prepared for each prototypical firm. In addition to the income statement, the outputs present four measures of 'rformance: gross margin, return on les, return on total assets, and return ,,n equity. The results are presented for the without-standards case and the with-standards case, and the relative difference between the two is also given. Another output table analyzes the source of changes in income, expenses, and assets from an economic point of view, while a third output table analyzes price and profitability changes under the two pricing scenarios mentioned above.

4. Data Sources

The LBL-TYM needs data that characterize both a particular industry and prototypical firms within that industry. Estimates of data are based on information from five general sources: LBL business consultation groups; the Engineering Analysis; the Consumer Analysis, public financial data: and industry profiles. 

### d. Utility Impact Model The Utility Analysis serves several purposes within the overall assessment

.of the impact of the proposed standards. It contributes to quantifying the energy savings by determining the reduction in fossil fuels used for electricity ,eneration. The reduction in fossil fuel )nsumption is also an input to the environmental Assessment. By calculating utility avoided costs, this area of the analysis provides marginal electricity costs to be used in evaluating the societal benefits of standards. Finally, it examines the impacts on the electric utility industry in terms of changes in investment, revenue requirements, the need for new generating capacity, and residential load factors. The Utility Analysis adopts the standard convention that the value of electricity savings can be broken down into energy (or marginal cost) savings and capacity (or reliability) savings. The energy impact measures the production costs avoided by reduced electrical demands, valued at the marginal energy
costs of the utility. The capacity impact

measures the reliability value of reduced loads during system peak periods, which is, by convention, valued at the cost of a combustion turbine that would have been needed to meet the load. The analysis characterizes these avoided costs per kWh of heating, cooling, and baseload energy saved.18 These values are used to calculate societal benefits from reduced electricity consumption. The utility impact model calculates avoided energy costs based on a disaggregation of the generation fuel mix to the National Electric Reliability 'Council (NERC) regions and a simplified load duration curve for each region. First, the model allocates national electricity savings that are forecasted by the LBL-REM to NERC regions in proportion to their current consumption of heating, cooling, and baseload energy. The regional proportions are derived from data on regional appliance saturations, efficiencies, and hours of use. The fraction of the electricity that would have to be generated at the margin from oil and gas is calculated from the total regional oil and gas fraction and the simplified load duration curve. Projected utility natural gas and coal prices, weighted by the oil and gas fraction and the non-oil and gas fraction respectively, are used to calculate utility marginal costs over the forecast period. The marginal costs are adjusted to account for seasonal differences. The avoided capacity cost calculation in the model is based on conservation load factors (CLFs) for the energy savings attributable to the standards, as well as the capacity value of a combustion turbine. A conservation load factor is defined as the average hourly
energy savings of a conservation measure divided by its peak load

"For the purposes of calculating utility avoided
costs

, electric heating appliances are defined as electric heat pumps and electric resistance heat. cooling appliances are defined as room and central air conditioners plus heat pumps , and basetoad appliances are defined as all other appliances. savings. The CLFs are a convenient way of characterizing the peak demand savings of a conservation measure. They are used to convert the capacity value of the standards into the per kWh values described above. The NERC forecasts of capacity requirements for each region are used to account for regional variations in reserve margin. If NERC forecasts an adequate reserve margin in a region for a given year, no reliability value is given to the capacity savings in the region. The inputs needed for the utility impact model are conservation load factors, state-level utility fuel prices, appliance saturations, efficiencies, and hours of use, as well as electricity generation by fuel type and capacity need by NERC region. The outputs of the analysis are the fuel savings, the reduction in the need for new generating capacity, and the avoided energy and capacity costs for heating, cooling. and baseload appliances per million Btu of resource energy. These marginal costs are used to calculate societal costs and benefits of standards.
e. Sensitivity Analyses
Sensitivity studies are performed to determine how changes in technical and operational parameters affect key engineering and economic indicators used in evaluation of appliance standards. This makes it possible to place limits on the overall results of the analysis and to gain an understanding of which variables are most important in producing these results. Sensitivity analyses are developed in a series of
distinct steps. For each component analysis in the overall analysis, critical input parameters are identified and
reasonable ranges of variation determined. The sensitivity of the model to changes in the value of each important parameter is then estimated by running the model for both the base case and the standards cases. The results of the sensitivity analyses are examined to determine the sensitivity of the forecasts to exogenous variables and assumptions and the sensitivity of' the differences between the base and standards cases (impacts of standards).

IV. Comments
a. Questions for Public Comment 41 DOE is interested in receiving comments and data concerning the accuracy and workability of this methodology. Also, DOE welcomes discussion on improvements or alternatives to this approach. In particular, DOE is interested in gathering data on the incremental costs 

### 46376 

### Federal Register 

## I Vo!' 52. 

### No. 234 

## f Monday: December·7. 

### 1987'/**·Prdpos~d** 

### Rules**~ost** 

### offunds. An additional and

metimes larger investment takes place

J 

### the old inventory is replaced with

more expensive new units. The model

assumes previous inventory ratios are maintained. A third form ofinvestment tracked by the model is the change in the transactions demand for cash that accompanies a change in revenues.

Increased costs ofproduction are modeled by coupling engineering data

on changes in unit costs caused uy standards with data from LBL-REM on the marketplace demand ofthe product.

Revenue is affected by both price and shipments. Price is computed from costs in two stages. First. a constant gross margin pricing rule is used. Then a markup over long-term marginal costs is computed and used to determine an optimal price. Demand is determined by measured price and operating cost elasticities. coupled with the changes in price and operating costs resulting from the standards.

The LBL-TYM produces several outputs used in analyzing the impact of standards on manufacturers. A simplified pro forma income statement is prepared for each prototypical firm. In addition to the income statement. the outputs present four measures of**~rformance:** 

### gross margin, return on

les. return on lolal assets. and return .In equity. The results are presenled for the without-standards case and the with-standards case. and the relative difference between the two is also given. Another output table analyzes the

. source ofchanges in income. expenses,

and assets from an economic point of view, while a third output table analyzes price and profitability changes under the two pricing scenarios mentioned above.

4. Data Sources

The LBL-TYM needs data thai characterizeboth a particular industry and prototypical firms within that industry, Estimates ofdata are based on information from five general sources: LBL business consultation groups; the Engineering Analysis: the Consumer Analysis, public financial data; and industry profiles.


### d. UtilityImpactModel

TheUtility Analysis serves several
purposes withinthe overall assessment .ofthe impact of.the proposed standards. It

### contributes to quantifying the energy savings by determining the reduction in fossil fuels used for electricity 'eneration.The reduction in fossil fuel

msumption is also an input to the .::nvironmentalAssessment. By 

### calculatingutility avoided costs, this

area of the analysisprovides marginal electricity costs to be used in evaluating the societal benefits ofstandards. Finally, it 

### examines the impacts on the electricutility industry in terms of changes in investment, revenue requirements. the need for new generating capacity, and residential load factors.

The Utility Analysis adopts the standard convention that the value of electricity savings can be oroken down into energy (or marginal cost) savings and capacity (orreliability) savings, The
energy impact measures the production
costs avoided by reduced electrical demands, valued at the marginal energy costs ofthe utility. The capacity impact

measures the reliability value ofreduced loads during system peakperiods. which is, by convention, valued at the cost ofa combustion turbine that would have been needed to meet the load. The analysis characterizes these avoided
costs perkWh ofheating, cooling. and baseload energy saved. 18

### These values

are used to calculate societal benefits from reduced electricity consumption.

The utility impact model calculates avoided energy co.sts based on a disaggregation ofthe generation fuel mix
to the National Electric Reliability 'Council (NERC) regions and a simplified load duration curve for each region. First, the model allocates national electricity savings that are forecasted by the LBL-REM to NERC regions in proportion to their CUITent consumption ofheating, cooling. and baseload energy. The regional proportions are derived from data on regional appliance saturations, efficiencies. and hours of

use. The fraction ofthe electricity that would have to be generated at the margin from oil and gas is calculated frpm the total regional oil and gas fraction and the simplified load duration

curve. Projectedutility natural gas and coal prices. weighted by the oil andgas fraction and the non-oil and gas fraction respectively, are used to calculateutility marginal costs over theforecast period. The marginal costs are adjusted to accountfor seasonal differences.

The avoided capacity cost calculation in the model is based on conservation load factors (CLF's) for the energy savings attributable to the standards, as well as the capacityvalue ofa combustion turbine. A conservation load factor is defined as the average hourly
energy savings ofa conservation

measure divided by its peak load

IIFor the purposes ofcalculatingutility avoided costs, electric heating appliances are defined 8S electric heat pump. Bnd electric reshHBoce heaL cooling appliances are defined aa room and centrwl air conditione" plus heat pumps, and baseload appliances are defined as aU other appliances, 

### savings.The CLF's are a convenient way ofcharacterizing the peak demand savings ofa conservation measure.They

are used to 

### convert the capacity value of the standards into the perkWh values described above. The NERC forecasts of capacity requirements for each region

are used to account for regional variations in reserve margin. If

### NERC forecasts an adequate reserve margin in

a region for a given year, no reliability value is given to the capacity savings in the region.

The inputs needed for the utility impactmodel are conservation load factors, state-level utility fuel prices, appliance saturations, efficiencies, and hours ofuse, as well as electricity generationby fuel type and capacity needbyNERC region. The outputs ofthe analysis are the fuel savings, the reduction in the need for new generating capacity, and the avoided energy and capacity costs for heating, cooling, and baseload appliances per million Btu of

resource energy. Thesemarginal costs

are used to calculate societal costs and benefits ofstandards.



### e. Sensilh'ityAnalyses

Sensitivity studies are performed to determine how changes in technical and operational parameters affect key engineering and economic indicators used in evaluation ofappliance standards, This makes it 

### possible to place limits on the overall results ofthe analysis and to gain anunderstanding of whichvariables are most important in producing these results. Sensitivity analyses are developed in a series of distinct steps. For each component analysis in the overall analysis, critical input parameters are identified and reasonable ranges ofvariation determined. The sensitivity ofthe model
to changes in the value ofeach important parameteris then estimated by running the model for both the base

case and the standards cases.The results ofthe sensitivity analyses are examined to delennine the sensitivity of the forecasts to exogenous variables and assumptions and the sensitivity of· the differences between the base and standards cases (impacts ofstandards).

IV. Comments

G, 

### QuestionsforPublic Comment**~**



### DOE is interested in receiVing
comments anddata concerning the
accuracy andworkability ofthis methodology. Also, DOE welcomes discussion on improvements or alternatives to this approach. In particular, DOE is interested in gathering data on the inc.l":!mental costs

### Federal Register / -Vol. 52, No. 234 / Monday, December 7, 1987 / Pt•oposed Rules 46377

of improving the energy efficiency of refrigerators, refrigerator-freezer, freezers, gas-fired furnaces and television sets. The design options listed above can be used as a starting point; however, data for additional design options would be welcome. Although, as stated earlier, small manufacturers'
costs are assumed to equal those of medium manufacturers, the Department is especially interested in manufacturer costing data from small manufacturers of the products under consideration. For television sets, data on the power demand characteristics of various color, and black and white models would be appreciated. For the LBL Residential Energy Model, DOE requests interested parties to provide historical data on shipments and average efficiencies by class for the products subject to the proposed rulemaking. A regional breakdown of the information for gas furnaces would be desirable. Data on consumer prices, and on the installation and maintenance costs of furnaces are also needed. The manufacturer analysis needs the financial data from the product division level, i.e., refrigerators, freezers, small gas furnaces, and television sets, All of these data are available at the firm level, but firms are typically much larger than the relevant division, and thus firm .data may give a misleading indication of the division's finances. An income statement and balance sheet at the division level would be most helpful. If this is not available, then data on the following variables are considered most essential: Net income, revenue, selling and general and administrative expenses, engineering expenses, cost of goods sold, interest, taxes, debt-to-equity ratio, net depreciable assets, net assets, capital investment, and long-term debt. The Department also would welcome current data on unit sales and revenue for the industry as a whole, e.g., in 1985, there were 1.2 million refrigerators sold, resulting in $480 million in revenue for the industry.


### b. Comment Procedure Interested persons are invited to submit written comments to DOE. Comments should be identified on the outside ofthe envelope and on the documents submitted to DOE with the designation CE-RM--87-102. Six copies are requested to be submitted. All comments received by the date specified at the beginning of this notice and all other relevant information will be considered by DOE before the Department continues this rulemaking proceeding. Pursuant to 10 CFR 1004.11,

any person submitting information which he or she believes to be confidential and exempt by law from public disclosure should submit one complete copy of the document and five copies, if possible, from which the information believed to be confidential has been deleted. DOE will make its own determination with regard to the confidential status of the information and treat it according to its determination. Factors of interest to DOE when evaluating requests to treat as confidential information that has been submitted include: (1) A description of the item; (2) an indication as to whether and why such items of information have been treated by the submitting party as confidential, and whether and why such items are customarily treated as confidential within the industry; (3) whether the information is generally known or available from other sources: (4) whether the information has previously been made available to others without obligation concerning its confidentiality; (5) an explanation of the competitive injury to the submitting person which would result from public disclosure; (6) an indication as to when such information might lose its confidential character due to the passage of time; and (7) whether disclosure of the information would be in the public interest.
Issued in Washington. DC, November 24. 1987. Donna R. Fitzpatrick, Assistdnt Secretary. Conservation and Renewable Energy.

[FR Doc. 87-28006 Filed 12-4-87; 8:45 am]

BILLING CODE 8456-O1-M 

### Federal Register / Vol. 52, No. 234 / Monday, December 7, 1987 / Proposed Rules

ufimproving the energy efficiency of refrigerators, refrigerator-freezer. freezers, gas-fired furnaces and television sets. The design options listed above canbe used as a startingpoint; however, data for additional design options would be welcome. Although, as stated earlier, small manufacturers'
costs are assumed to equal those of medium manufacturers, the Department is especially interested in manufacturer costing data from small manufacturers ofthe products underconsideration. For television sets, data on the power demand characteristics ofvarious color. and black and white models would be appreciated.

For the 

### LBL Residential Energy Model. DOE requests interested parties to provide historical data on shipments and average efficiencies by class for the products subject to the proposed rulemaking. A regional breakdown of the information for gas furnaces would be desirable. Data on consumerprices. andon the installation and maintenance
costs offurnaces are also needed.

The manufacturer analysis needs the financial data from the product division level, Le., refrigerators. freezers, small
gas furnaces. and television sets. All of these data are available at the firm level. but firms are typically much larger than the relevant division, and thus firm ·data may give a misleading indication of the division's finances.

An income statement and balance sheet at the division level would be
most helpful. If

### this is not available. then data on the following variables are considered most essential: Net income,

revenue, selling and general and administralive expenses, engineering
expenses. cost ofgoods sold. interest.
taxes. debt-to-equity ratio. net depreciable assets, net assets. capital investment. and long-term debt.

The Departmentalso would welcome
current data on unit sales and revenue for the industry as a whole, e.g

.. in 1985. there were 1.2 million refrigerators sold. resulting in $480 million in revenue for the industry.



### h. Comment Procedure

Interested persons are invited to submit written comments to DOE. Comments should be identified on the outside ofthe envelope and on the documents submitted to DOE with the designation CE-RM-8i-10Z. Six copies

are requested to be submitted. All
comments received by the date specified
at the beginning ofthis notice and all otherrelevant information will be considered by DOE before the Department continues this rulemaking proceeding. Pursuant to 10CFR 1004.11. 

### any person submitting information which he or she believes to be confidential and exempt by law from public disclosure should submit one complete copy ofthe document and five copies, ifpossible, from which the information believed to be confidential has been deleted. DOE will make its

own determination with regard to the confidential status of the information and treat it 

### according to its determination.
o.



### Factors ofinterest to DOE when evaluating requests to treat as confidential information that has been submitted include: (1) 

### A description of the item; (Z) an indication as to whether and why such items ofinformationhave been treated by the submitting party as confidential. and whether and why such items are customarily treated as confidential within the industry; (3) 

### whether the information is generally known or available from other sources; (4) 

### whether the information has previously been made available to others without obligation concerning its confidentiality; (5) an explanation ofthe competitive injury to the submitting
person which would result from public disclosure; (6) an indication as to when such information might lose its confidential character due to the
passage oftime; and (7) 

### whether disclosure ofthe information would be in the public interest.

Issued in Washington. DC. November 24. 1987.
Donna R. Fitzpatrick. AssistdntSecretary. Conservation ond RenewableEnergy. [FR Doc. 87-28006 Filed 12-4-87; B:45 am]

BILLING CODE 6450-01-101 

### 46377