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

CAS-RM-87-102 COMMENT 01

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 of Consumer Products 

AGENCY: Department of Energy. 

ACTION: Advance notice of proposed 

rule making. 

SUMMARY: The Energy Policy and 

Conservation Act (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 of household appliances. This 

advance notice of proposed 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 of this advance notic~ 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 i!1formation 

prior to publishing the notice of 

proposed rulemaking. 

DATE: Written ~omments in response to 

tlt1"dvance nonce 51" proposed 

rulemaking must be received by the 

Department by February 5, 1988. 

AODRESSES: Written comments are to bf 

submitted to: U.S. Department of Energy. 

Office of Conservation and RenewablE' 
46368 Federal Register / Vol. 52, No. 234 / Monday, December 7, 1987 / Proposed Rules

Energy, Office of Hearings and Dockets,

Energy Efficiency Standards for

Consumer 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 and

Renewable 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 Analysis

b. 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 of Title 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 of the following seven factors:

(1) The economic impact of the

standard on the manufacturers and on

the consumers of the products subject to

such standard;

CAS-RM-87-102 COMMENT 01

46368 Fede[al Register I Vol. 52. No. 234 I Monday. December 7, 1987 I Proposed Rules 

Energy. Office of Hearings and Dockets. 

Energy Efficiency Standards for 

Consumer Products. Docket No.CE-RM-

'7-102. Room 68--025. Forrestal Building. 

JOO Independence A venue SW .• 

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

FOR FURTHER INFORMATION CONTACT: 

Michael J. McCabe. U.S. Department of 

Energy. Office of Conservation and 

Renewable Energy. Mail Station CE132.. Forrestal Building. 1000 

lndependence Avenue SW .• 

Washington. DC 20585. (ZOZ) ~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 

SUPPL.EMENT ARY 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. De ta sources 9. Outputs from the Engineering Analysis 

b. LBL Residential Energy Model (LBLREM) 

1. Structure of the model 

Z. Housing stock submodel 

3. Efficiency choice algorithm 

4. Thermal integrity 

5. Modeling efficiency standards 

6. TW'Ilover of appliance siocks 

7. Calculation of market shares 

6. Usage behavior 

9. Energy consumption calculations 

10. Model outputs 

11. Other consumer impacts c. Manufacturer Impact Models 

1. Conceptual approach 

z. 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.ConuneRt~ures 

I. Introduction 

D. Authority 

Pari 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-

l2.1 created the Energy Conservation 

Program for Consumer Products 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 air conditioners 

and central air conditioning heal pumps; 

water heaters; furnaces; dishwashers; 

clothes washers; clothes dryers; direct 

heating 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 OOE 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 6f energy consumed by 

the product except as reflected in tests 

conducted according to the DOE 

procedure. Section 323(c)(Z). 

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 lahel 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 purcha!ling 

decisions or is not economically 

feasible. In such a case. FTC must 

I Pari B of Title III of EPCA al amended by 

NECPA and NAECA. is ",ferred 10 In this notice 8S 

Ihe "AcL - PIlrI B of Tille W ia codif>ed at 42 U.S.C. 

6.."91 e/ 8I!q. Pari B of Title III of EPCA. 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 

requiring labels 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. 

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(1)(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 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 economically justified. 

Section 325 (l)(Z)(A). 

Section 325(l)(2)(B)(i) provides tha t 

before DOE determines whather 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 ~rdens. based. to 

the greatest extent practicable. on a 

weighing of the follOWing seven factors: 

ll} The economic impact of the 

standard on the manufacturers and on 

the consumers of the 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

CAS-RM-87-102 COMMENT 01

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 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 10 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 lest 

procedure for the product. or if OOE 

determined by rule either that a 

standard would not result in lignificant 

conservation of energy. or that a 

standard wal not technologically 

feasible or economicaily justified. In 

determining whether a standard was 

economically justified. the Department 

was directed to determine wbether 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 

• The consumer product. covered by NECP A 

included: RefrigeratOf'll and refrigerator·freezers: 

freezers: dishwashers: cIotl>es cIryen: water beaten: 

room ,ur conditioners; home heat"'l eqttipmenlltOl 

including furns£eI: television .et.; kilchen r""8'" 

and ovens: clo!he. wlUlhe!ll: humlditlet'l and 

dehunridift<m centnli air condilloners: and ru"",,,,,,,. 

and refrigerator-freezers. freezers. 

clothes dryers, water heaters. room air 

conditioners, home heating equipment 

nol 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 1000 

pro!'{}sal.) The June 1980 pro!'{}ssl 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 a determination that a standard 

would not result in significant 

conservation of energy and would not 

be economically juslified. 3 The April 

1982 proposal also proposed rules 

governing petitions to DOE both by 

States to obtain exemption from I 

preemption of State or local energy 

efficiency standards. as well as by 

manufacturers to obtain preemption of 

Stale or local standards. 

On December Z2. 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 

• The April 1982 proposal 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 .. of the product walei" beaten made np 

of heal pump water heelers or with rHpecl \0 those 

cla_ oIlbe product ",mlral air cODditionen thai 

are"".t~ 

of a 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. (Hereafter referred to as the 

Augusl1983 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.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 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 delennine if 

they should be amended. 

The Act directs DOE to publish an 

advance notice of proposed 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 measures

the 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 products

before 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

CAS-RM-87-102 COMMENT 01

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

advance of the Department's 

r n '1sideration of prescribing a new or 

'ded standard. Section 325(m)(1). 

.::ation 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. 

II. 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. 

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 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.s with the projections under 

• The Act require. 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 i. combining these rulemaking 

items inlo one aclion 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 baae case 

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 

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 sigIlJficance 

of the differences. a sensitivity analysis 

will be performed 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. 

• 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 measures the 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 

na tiona I 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 laUer interpretation i. necessary to allow for 

quantitative snaly.i. of lbe 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 

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 products 

before the standards are effectivewithin the next three to five ye.ars. 

m. Models, Data and Assumptions 

a. Engineering Performance Models and 

Costing Analysis 

The Engineering Analy!fis addresses 

two statutory requirements. The first 

requirement is the Department's 

evaluation of the maximum 

improvements in energy efficiency tha t 

are technologically feasible. The second 

relates to the lessening of utility to the consumer of any of the 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 or

electricity), 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 service

Top-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 be

installed 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 less

energy 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.

CAS-RM-87-102 COMMENT 01

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 thaI 

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 perfonnance 

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 or performancerelated features that provide utility to 

the consumer and affecl efficiency. 

Classes are differentiated in order 10 

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) Refrigera tors/Refrigera tor-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 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 service 

Top-mounted freezer with throUSlhthe-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) Televi5ion Sets 

Two classes of television ~ts, color 

and monochrome (blad: and while), are 

specified in this notice. These classes 

are distinguished by their ability to 

reproduce images ~ color, a 

performance-related feature that affects 

utility and efficiency. 

Color television se~ consume more 

energy than comparable monochrome 

television sets usually because of the 

use of multiple electron guns. whereas. 

monochrome television aets use only 

one electron gun. For this 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 of small 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 owner with the 

utility ~f saving indoor space. The 

weatherized furnace is typically less 

energy 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. 

z. 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. 

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

furn .. cea (other U.an fwuacel 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 

of boilen. 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 

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 standar"ds are 

effecth'e 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 

(OJ 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 

[J) Adaptive defrost control 

(K) Fan and fan motor improvement 

(L) Enhanced heal transfer surfaces 

(M) Mixed refrigerants 

(N) Fluid control valves 

{OJ Improved foam insulation 

(P) Evacuated insulation panels 

(Q) Two compressor system 

(R) Use of natural convection currents 

(S) Location of compressor and 

condensers 

(il) 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) Adapti\Oe defrost control 

(H) Fan and fan motor improvement 

(I) Enhanced heat transfer surfaces 

m Mixed refrigerants 

.. See Consumer Products Effidenc .. Standards 

En~ineering Analysis Docump.nl. MarCh 1982. DOE! 

CE-0030 and Technical 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 for

various 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 the

national 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, and

demographic 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.

CAS-RM-87-102 COMMENT 01

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 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 (lID) 

(C) Power burner or power vent 

(D) Increased insulation 

(El 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 

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 

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 

associa tions. 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); 7 

• Increased material, purchased parts, 

labor, and investment costs for mediumS 

and litge 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 firma because of the wide 

variability in their approach to manufacturing. 

Therefore. amall manufacturers cOBls 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 (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 

Consumer Products Efficiency 

Standards Economic 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 

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 the 

national 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, and 

demographic data are used in the LBLREM. The engineering da ta 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 II 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 segratmts annual 

energy consumption into house types. 

end-uses. and fuel types. The house 

types are single family, multifamily. and 

• The projections of energy prices wlll be laken 

from the most recent Annual Energy OutlooA, B 

publication of the 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 about

housing 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 is

constructed. 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 Efficienc y 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.

CAS-RM-87-102 COMMENT 01

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. 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 Ifuel 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 about 

housing 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 ra tes 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; anyone 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.! 0 

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 

C8-179. 1 ! A new Federal standard level 

would eliminate part of the distribution; 

therefore. a new distribution is 

constructed. The new shipmentweighte? 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 

'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 of Consumer Product Manufacturers 

through Trade Associations in 1979. 

appliances are retired. they are also 

recognized as less efficient. I 2 

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 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 of Residenl ia I Energy 

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 Outputs

The 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 reflects

consumers' 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.

CAS-RM-87-102 COMMENT 01

46374 

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 transla te 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 

'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 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 

olectric central resistance heating. 

seboard and other electric room 

.llers. electric heat pumps (heating 

dnd 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 Outputs 

The 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-users) 

comprising the regulated and competing 

products. H 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, incltit:Hng the effects induced 

by shifts in market share or changes in 

usage behavior. 

Net present value. on the other hand. 

excludes these types of effecls. 15 Net 

present value is calculated from per unit 

ch.;;mges in equipment'and operating 

costs. multiplied by base case 

shipments. If the net present value 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 

of the two cases is the net present value [!'<PV] 

attributable to standards (or amended standards]. A 

positive NPV for an appliance at 8 given standard 

level indicates that. if thai siandard were adopted. 

consumers of thai 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: 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 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'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 10 

calculating the net present value, would 

result in an underestimate of the true net 

present valUe associated 1;\.'ith 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. 1t will 

be calculated at the average efficiency 

for each class in the year standard" 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. Le .. heating load 

hours. between the test procedure and 

the LBL Residential Energy Model. 

10 Without nonnalizCltion, thf? grealest economIc 

benefit would be obtained by B standard le\'Oi that 

resulted in no future purchases of the 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 of mane' (PHI 

would have been apent without the standard. ThIS 

would clearly be a misrepresentation of the nel 

present value of standards. 

'''' The "rebound effect" is the projected mcrey 

savings (from an effiCiency irrpltovement] Iha: does 

not occur. This reaults when purchasers of more 

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 of the 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 modified

standards 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 manufacturers

making 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. Stage

two 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

CAS-RM-87-102 COMMENT 01

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 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 Df 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 

Df energy for that end use. 

c. Manufacturer Impact A10dels 

1. CDnceptual Approach 

The Manufacturer Impact Analysis 

estimates both the overall impact of new 

or amended standards 17 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 Df 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 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 rigera tors I refrigera tor·ftee~ers I freeze rs a Iread y 

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 thereCore. the anal~'sis is being 

done to determine the impacts oC various standards 

levels: and television 8ets 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 particl!\.ar 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 d~'namic 

approach. This approach models a 

"typical year" for the industry both in 

the with-standards case (or the modified 

standards case) and in the withoutstandards case (or the existing-standard 

case). The t~rpical 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 manufacturers 

making 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 

several different markets. The product 

offerings are generally differentiatpd by 

using the product classes established by 

the Act. Different markets are defined in 

terms of the technological 

characteristics Df the 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 efficien t 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 rea lity 

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 done by 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 

of lel.'elized 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. V\'i11 raise 

production cOllts, 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 
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

CAS-RM-87-102 COMMENT 01

46376 Federal Register I Vo!' 52. No. 234 f Monday: December· 7. 1987' / ·Prdpos~d Rules 

~ost of funds. 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 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 uy 

standards with da ta 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 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 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 thai 

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 

msumption is also an input to the 

.::nvironmental 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 oroken 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 tha t 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 co.sts 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 CUITent 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 

frpm 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 (CLF's) 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 

II For the purposes of calculating utility 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 

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. Sensilh'ity 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 delennine 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 

G, Questions for Public Comment ~ 

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 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 of the 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

CAS-RM-87-102 COMMENT 01

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

uf improving the energy efficiency of 

refrigera tors, 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, Le., refrigera tors. 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 

administra live 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. 

h. Comment Procedure 

Interested persons are invited to 

submit written comments to DOE. 

Comments should be identified on the 

outside of the 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 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. o. 

Factors of interest 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 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 ond 

Renewable Energy. 

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

BILLING CODE 6450-01-101 

46377