[Federal Register Volume 62, Number 185 (Wednesday, September 24, 1997)]
[Rules and Regulations]
[Pages 50122-50150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24978]



[[Page 50121]]

_______________________________________________________________________

Part III





Department of Energy





_______________________________________________________________________



Office of Energy Efficiency and Renewable Energy



_______________________________________________________________________



10 CFR Part 430



Energy Conservation Program for Consumer Products; Conservation 
Standards for Room Air Conditioners; Final Rule

Federal Register / Vol. 62, No. 185 / Wednesday, September 24, 1997 / 
Rules and Regulations

[[Page 50122]]


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DEPARTMENT OF ENERGY

Office of Energy Efficiency and Renewable Energy

10 CFR Part 430

[Docket Numbers EE-RM-90-201 and EE-RM-93-801-RAC]
RIN 1904-AA38


Energy Conservation Program for Consumer Products: Final Rule 
Regarding Energy Conservation Standards for Room Air Conditioners

AGENCY: Office of Energy Efficiency and Renewable Energy, Department of 
Energy (DOE).

ACTION: Final Rule.

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SUMMARY: The Department of Energy (DOE or Department) has determined 
that revised energy conservation standards for room air conditioners 
will result in a significant conservation of energy, are 
technologically feasible, and are economically justified. On this 
basis, the Department is today amending the existing energy 
conservation standards for room air conditioners. The Department 
projects the standards to save 0.64 quad of energy through 2030, which 
is likely to result in a cumulative reduction of emissions of 
approximately 95,000 tons of nitrogen dioxide and 54 million tons of 
carbon dioxide.

EFFECTIVE DATE: The effective date of the standards is October 1, 2000.

ADDRESSES: A copy of the Technical Support Document (TSD) for this 
product may be read at the DOE Freedom of Information Reading Room, 
U.S. Department of Energy, Forrestal Building, Room 1E-190, 1000 
Independence Avenue, SW., Washington, DC 20585, (202) 586-3142, between 
the hours of 9:00 a.m. and 4:00 p.m., Monday through Friday, except 
Federal holidays. Copies of the TSD may be obtained from: U.S. 
Department of Energy, Office of Energy Efficiency and Renewable Energy, 
Forrestal Building, Mail Station EE-43, 1000 Independence Avenue, SW., 
Washington, DC 20585. (202) 586-9127.

FOR FURTHER INFORMATION CONTACT:

Kathi Epping, U.S. Department of Energy, Office of Energy Efficiency 
and Renewable Energy, Forrestal Building, Mail Station EE-43, 1000 
Independence Avenue, SW., Washington, DC 20585, (202) 586-7425
Eugene Margolis, Esq., U.S. Department of Energy, Office of General 
Counsel, Forrestal Building, Mail Station GC-72, 1000 Independence 
Avenue, SW., Washington, D.C. 20585, (202) 586-9507.

SUPPLEMENTARY INFORMATION:

I. Introduction
    a. Authority
    b. Background
II. Summary of Final Rule
III. Discussion of Comments
    a. Room Air Conditioner Comments
    1. Classes
    2. Design Options
    3. Engineering Simulation Model
    4. Proposed Efficiency Standards
    5. Other Comments
    6. Other Comments Regarding FR Notice of January 29, 1997
    b. General Analytical Comments
IV. Analysis of Room Air Conditioner Standards
    a. Efficiency Levels Analyzed
    b. Significance of Energy Savings
    c. Economic Justification
    1. Economic Impact on Manufacturers and Consumers
    2. Life-cycle Cost and Net Present Value
    3. Energy Savings
    4. Lessening of Utility or Performance of Products
    5. Impact of Lessening of Competition
    6. Need of the Nation to Save Energy
    7. Other Factors
    d. Payback Period
    e. Conclusion
V. Procedural Issues and Regulatory Review
    a. Review Under the National Environmental Policy Act
    b. Review Under Executive Order 12866, ``Regulatory Planning and 
Review''
    c. Review Under the Regulatory Flexibility Act
    d. Review Under the Paperwork Reduction Act
    e. Review Under Executive Order 12988, ``Civil Justice Reform''
    f. ``Takings'' Assessment Review
    g. Federalism Review
    h. Review Under the Unfunded Mandates Reform Act
    i. Review Under Small Business Regulatory Enforcement Fairness 
Act of 1996

I. Introduction

a. Authority

    Part B of Title III of the Energy Policy and Conservation Act, Pub. 
L. 94-163, as amended by the National Energy Conservation Policy Act 
(NECPA), Pub. L. 95-619, the National Appliance Energy Conservation Act 
(NAECA), Pub. L. 100-12, the National Appliance Energy Conservation 
Amendments of 1988 (NAECA 1988), Pub. L. 100-357, and the Energy Policy 
Act of 1992 (EPAct), Pub. L. 102-486,<SUP>1</SUP> created the Energy 
Conservation Program for Consumer Products other than Automobiles. The 
consumer products subject to this program are called ``covered 
products.'' The covered products specified by statute include room air 
conditioners. EPCA, section 322, 42 U.S.C. 6292.
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    \1\ The Energy Policy and Conservation Act, as amended by the 
National Energy Conservation Policy Act, the National Appliance 
Energy Conservation Act, the National Appliance Energy Conservation 
Amendments of 1988, and the Energy Policy Act of 1992, is referred 
to in this notice as the ``EPCA.'' Part B of Title III is codified 
at 42 U.S.C. 6291 et seq.
---------------------------------------------------------------------------

    For room air conditioners, EPCA prescribes an initial Federal 
energy conservation standard effective in 1990 and specifies that the 
Department shall publish a final rule no later than January 1, 1992, to 
determine if the 1990 standards should be amended. A second review must 
be completed within five years after publication of this final rule. 
EPCA, section 325(c), 42 U.S.C. 6295(c). 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. EPCA, 325(o)(2)(A), 42 U.S.C. 6295(o)(2)(A). The Secretary 
may not prescribe any amended standard which increases the maximum 
allowable energy use or decreases the minimum required energy 
efficiency of a covered product. EPCA, section 325(o)(1), 42 U.S.C. 
6295(o)(1).
    Section 325(o)(2)(B) provides that DOE, in determining whether a 
standard is economically justified, must determine whether the benefits 
of the standard exceed its burdens, based, to the greatest extent 
practicable, on a weighing of the following seven factors:
    (1) The economic impact of the standard on the manufacturers and on 
the consumers of the products subject to such standard;
    (2) The savings in operating costs throughout the estimated average 
life of the covered product in the type (or class) compared to any 
increase in the price of, 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, as determined in 
writing by the Attorney General, that is likely to result from the 
imposition of the standard;
    (6) The need for national energy conservation; and
    (7) Other factors the Secretary considers relevant.
    In addition, section 325(o)(2)(B)(iii) establishes a rebuttable 
presumption of economic justification in instances where the Secretary 
determines that

[[Page 50123]]

``the additional cost to the consumer of purchasing a product complying 
with an energy conservation standard level will be less than three 
times the value of the energy savings during the first year that the 
consumer will receive as a result of the standard, as calculated under 
the applicable test procedure.''

b. Background

    The purpose of this rulemaking is to review the energy conservation 
standards for room air conditioners. In 1990, DOE published an advance 
notice of proposed rulemaking with regard to standards for nine covered 
products, including room air conditioners. 55 FR 39624 (September 28, 
1990) (hereinafter referred to as the September 1990 advance notice). 
The September 1990 advance notice presented the product classes that 
DOE planned to analyze and provided a detailed discussion of the 
analytical methodology and models that the Department expected to use.
    On March 4, 1994, DOE published a notice of proposed rulemaking 
(NOPR) concerning eight products, including room air conditioners. 59 
FR 10464 (March 4, 1994) (hereinafter referred to as the Proposed 
Rule). The standards the Department proposed for room air conditioners 
are shown in the following table:

     Table 1-1.--Proposed Standards Levels for Room Air Conditioners    
------------------------------------------------------------------------
                                          Energy efficiency ratio       
                                 ---------------------------------------
          Product class            Current standards  Standards proposed
                                  (effective January   in 1994 Proposed 
                                       1, 1990)              Rule       
------------------------------------------------------------------------
1. Without reverse cycle, with                                          
 louvered sides, and less than                                          
 6,000 Btu/h....................                 8.0                11.1
2. Without reverse cycle, with                                          
 louvered sides, and 6,000 to                                           
 7,999 Btu/h....................                 8.5                10.3
3. Without reverse cycle, with                                          
 louvered sides, and 8,000 to                                           
 13,999 Btu/h...................                 9.0                11.0
4. Without reverse cycle, with                                          
 louvered sides, and 14,000 to                                          
 19,999 Btu/h...................                 8.8                11.1
5. Without reverse cycle, with                                          
 louvered sides, and 20,000 Btu/                                        
 h or more......................                 8.2                 9.6
6. Without reverse cycle,                                               
 without louvered sides, and                                            
 less than 6,000 Btu/h..........                 8.0                10.7
7. Without reverse cycle,                                               
 without louvered sides, and                                            
 6,000 to 7,999 Btu/h...........                 8.5                 9.9
8. Without reverse cycle,                                               
 without louvered sides, and                                            
 8,000 to 13,999 Btu/h..........                 8.5                10.7
9. Without reverse cycle,                                               
 without louvered sides, and                                            
 14,000 to 19,999 Btu/h.........                 8.5                10.8
10. Without reverse cycle,                                              
 without louvered sides, and                                            
 20,000 Btu/h or more...........                 8.2                 9.3
11. With reverse cycle and with                                         
 louvered sides.................                 8.5                10.8
12. With reverse cycle and                                              
 without louvered sides.........                 8.0                10.4
------------------------------------------------------------------------

    DOE received over 8,000 comments during the comment period on the 
1994 Proposed Rule and from participants at public hearings held in 
Washington, DC on April 5-7 and June 7-8, 1994. Most of the comments 
related to other products; twelve of the comments dealt specifically 
with room air conditioners.
    After reviewing the comments on the proposed standards for room air 
conditioners, the Department concluded that a number of significant 
issues were raised which required additional analysis. In 1995, the 
Department revised the analyses regarding room air conditioners to 
account for the comments and data received during the public comment 
period. (This revised analysis became the basis for the 1996 Draft 
Report.)
    A moratorium was placed on publication of proposed or final rules 
for appliance efficiency standards as part of the FY 1996 
appropriations legislation. Pub. L. 104-134. That moratorium expired on 
September 30, 1996.
    In 1995 and 1996, the Department conducted a review of its process 
for developing appliance energy efficiency standards. This review 
resulted in the publication of a final rule, entitled ``Procedures for 
Consideration of New or Revised Energy Conservation Standards for 
Consumer Products'' (hereinafter referred to as the Process Rule). 61 
FR 36973 (July 15, 1996). Although the new procedures in the Process 
Rule do not apply to this rulemaking, 61 FR at 36980, DOE has employed 
an approach consistent with the new procedures in completing work on 
this rule. In keeping with the new process, and based on comments 
received in response to the Proposed Rule, DOE distributed for comment 
a Draft Report on the Potential Impact of Alternative Energy Efficiency 
Levels for Room Air Conditioners (hereinafter referred to as Draft 
Report). The Draft Report contained DOE's revised analysis, begun in 
1995, examining five alternative efficiency levels. The Draft Report 
was distributed to a mailing list that included all of the commenters 
on the proposed rule on room air conditioners on May 5, 1996. (EE-RM-
93-801-RAC <SUP>2</SUP> No. 1 and No. 2.) The letter invited comment on 
the Draft Report by no later than July 1, 1996.
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    \2\ EE-RM-90-201 refers to the docket for the September 1990 
advance notice and the 1994 Proposed Rule. Docket No. EE-RM-93-801-
RAC contains the 1996 Draft Report, comments to the 1996 Draft 
Report, comments to the 1997 reopening notice, and the supplemental 
analysis.
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    Between the beginning of June and the end of November 1996, DOE 
received six comments on the Draft Report and related issues. DOE 
officials also held meetings on September 26 with representatives of 
the Association of Home Appliance Manufacturers (AHAM) and interested 
manufacturers and on September 27 with the American Council For an 
Energy Efficient Economy (ACEEE), the Alliance to Save Energy, the 
Natural Resources Defense Council (NRDC), and State energy officials 
from California, Florida, and Oregon. (EE-RM-93-801-RAC No. 11 and No. 
12.)
    On the basis of these comments, DOE prepared a TSD which comprises 
the Draft Report and a supplemental analysis conducted on a candidate 
standard level not included in the Draft Report. The supplemental 
analysis focused on a set of efficiency levels for the same 9 classes 
analyzed in the proposed rule. (EE-RM-93-801-RAC No. 13.)
    In a Federal Register (FR) Notice dated January 29, 1997, the 
Department reopened the comment period for room air conditioners for 15 
days. This notice announced the availability of the supplemental 
analysis and gave indication of the standard levels the Department was 
inclined to promulgate in the final rule. The Department received 4 
comments in response to this notice.

II. Summary of Final Rule

    The standards set forth in today's rule are projected to save 
approximately 0.64 quad of energy through 2030. Although

[[Page 50124]]

the standards in the Proposed Rule were projected to save 2.2 quads, 
DOE has concluded, based on public comment and further analysis, that 
the proposed standards are not economically justified. The standard 
levels set forth in today's rule are significantly less costly than 
those standards in the proposed rule. The following table presents the 
standards established in today's rule:

------------------------------------------------------------------------
                                   Energy efficiency ratio, effective as
                                                    of                  
          Product class          ---------------------------------------
                                    January 1, 1990     October 1, 2000 
------------------------------------------------------------------------
1. Without reverse cycle, with                                          
 louvered sides, and less than                                          
 6,000 Btu/h....................                 8.0                 9.7
2. Without reverse cycle, with                                          
 louvered sides, and 6,000 to                                           
 7,999 Btu/h....................                 8.5                 9.7
3. Without reverse cycle, with                                          
 louvered sides, and 8,000 to                                           
 13,999 Btu/h...................                 9.0                 9.8
4. Without reverse cycle, with                                          
 louvered sides, and 14,000 to                                          
 19,999 Btu/h...................                 8.8                 9.7
5. Without reverse cycle, with                                          
 louvered sides, and 20,000 Btu/                                        
 h or more......................                 8.2                 8.5
6. Without reverse cycle,                                               
 without louvered sides, and                                            
 less than 6,000 Btu/h..........                 8.0                 9.0
7. Without reverse cycle,                                               
 without louvered sides, and                                            
 6,000 to 7,999 Btu/h...........                 8.5                 9.0
8. Without reverse cycle,                                               
 without louvered sides, and                                            
 8,000 to 13,999 Btu/h..........                 8.5                 8.5
9. Without reverse cycle,                                               
 without louvered sides, and                                            
 14,000 to 19,999 Btu/h.........                 8.5                 8.5
10. Without reverse cycle,                                              
 without louvered sides, and                                            
 20,000 Btu/h or more...........                 8.2                 8.5
11. With reverse cycle, with                                            
 louvered sides, and less than                                          
 20,000 Btu/h...................                 8.5                 9.0
12. With reverse cycle, without                                         
 louvered sides, and less than                                          
 14,000 Btu/h...................                 8.0                 8.5
13. With reverse cycle, with                                            
 louvered sides, and 20,000 Btu/                                        
 h or more......................                 8.5                 8.5
14. With reverse cycle, without                                         
 louvered sides, and 14,000 Btu/                                        
 h or more......................                 8.0                 8.0
15. Casement-Only...............             ( \1\ )                 8.7
16. Casement-Slider.............             ( \1\ )                 9.5
------------------------------------------------------------------------
\1\ Casement-only and casement-slider room air conditioners are not     
  separate product classes under standards effective January 1, 1990.   
  These units are subject to the applicable standards in classes 1      
  through 14 based on unit capacity and the presence or absence of      
  louvered sides and a reverse cycle.                                   

III. Discussion of Comments

a. Room Air Conditioner Comments.

    This section addresses comments to the 1994 Proposed Rule, the 1996 
Draft Report, and the 1997 reopening notice. The ``RAC'' notation 
signifies that the following comment is from Docket No. EE-RM-93-801-
RAC which contains comments to the 1996 Draft Report and the 1997 
reopening notice. All other comments are from Docket No. EE-RM-90-201 
which contains comments from the 1994 Proposed Rule. Note that the 
Draft Report addressed many of the comments to the 1994 Proposed Rule.
1. Classes
    In the 1994 Proposed Rule, the Department proposed fourteen classes 
of room air conditioners. These product classes consisted of five 
categories; units with side louvers, units without side louvers, units 
with reversing valve and with side louvers, units with reversing valve 
and without side louvers, and casement-type units. There were five 
class divisions by capacity within each of the two categories without 
reversing valves. Casement-type units were divided into the following 
two classes: casement only units and casement-slider units.
    Units with louvered sides and without reversing valves. The 
California Energy Commission (CEC) proposed a reduction in product 
classes from twelve to four, eliminating the class divisions based on 
capacity. They stated that the profusion of classes makes comparison of 
models difficult since the label-reading consumer does not compare all 
the models available. In addition, disincentives could be created that 
discourage manufacturers from making efficiency improvements to models 
near capacity breakpoints because design changes can push the capacity 
into the next category which has a higher or lower standard level. 
(CEC, No. 539 at 2-3.) Fedders Corporation (Fedders) proposed that the 
three smallest capacity classes for units with side louvers and without 
reversing valve be consolidated into a single class. It called for this 
consolidation due to the disparity in cost and dehumidifying capability 
that would arise from having significantly different efficiency 
standards promulgated for these three classes. (Fedders, April 7, 1994, 
Transcript at 120-122.) AHAM proposed that the Department retain the 
current five capacity class divisions for units with side louvers and 
without reversing valves. (AHAM, No. 1 at 2.)
    In the 1994 Proposed Rule, DOE explained that performance and 
installation constraints necessitate class divisions by capacity. 
Manufacturers limit their production of cabinets to three or four 
sizes. Units of similar capacity tend to be designed for the same 
cabinet size. The space and configuration limitations imposed by the 
cabinet tend to produce units with similar efficiencies. Because 
efficiency is essentially a function of cabinet size, and thus 
capacity, class divisions by capacity are warranted. In the Final Rule, 
the minimum efficiency standards for each of the four classes with 
louvered sides and capacities less than 20,000 Btu/h all have nearly 
the same efficiency value (efficiencies range from 9.7 to 9.8 EER), 
reducing the concern about inappropriate incentives to change product 
capacity to take advantage of capacity based standards. The Department 
agrees with AHAM that the current 5 capacity-based classes should be 
retained.
    Units without louvered sides and without reversing valves. AHAM, 
Frigidaire Company (Frigidaire), and Sanyo Electric Company (Sanyo) 
proposed that classes without louvered sides and without reversing 
valve be consolidated into two classes: units with capacities of less 
than 8,000 Btu/h and units with capacities greater than or equal to 
8000 Btu/h. (AHAM, No. 1 at 2; Frigidaire, No. 544 at 5; Sanyo, No. 771 
at 3.) AHAM states that the capacity classes established for units with 
side louvers and without reverse cycle are not particularly applicable 
to the other types of classes. (AHAM, RAC No. 4 at 1.) In support of 
making this recommendation, AHAM stated that since the 1990 minimum 
efficiency standards became effective, models without louvered sides 
have been produced only in the 6,000 to 7,999 Btu/h capacity class or 
the 8,000 to 13,999 Btu/h class. The sizes of existing sleeves and the 
efficiency standards have constrained capacities to these two classes. 
(AHAM, No. 1 at 20.) In its comments to the 1996 Draft report, AHAM 
again urged the Department to reduce the number of classes from five

[[Page 50125]]

to two for these units. (AHAM, RAC No. 4 at Attachment 1 pg. 1.)
    As discussed with respect to classes with louvered sides and 
without reversing valves, class divisions by capacity are warranted for 
units without louvered sides because of the effect that economic and 
installation constraints have on capacity and efficiency. Although 
manufacturers currently do not produce units in two of the existing 
five capacity classes, the Department has decided not to consolidate 
these classes into those units with capacities less than and greater 
than 8,000 Btu/h. However, the new standards for the two classes of 
units less than 8,000 Btu/h are the same (9.0 EER) and the new 
standards for the three classes of units with capacities of 8,000 Btu/h 
or more are the same (8.5 EER.) In the future, manufacturers might 
produce units in classes where none are currently being produced. For 
example, models are now being produced in the less than 6000 Btu/h 
class where models were not being manufactured previously. Therefore, 
the Department will retain all five of the existing classes for units 
without louvers and without reverse cycle.
    Units with reversing valves. AHAM and Sanyo proposed that units 
with reversing valves be consolidated into a single class if the 
efficiency standard specified for them is a single fixed EER difference 
below all other cooling-only classes (i.e., classes without reversing 
valve.) A fixed EER difference of 0.5 EER was proposed. (AHAM, No. 1 at 
2; Sanyo, No. 771 at 3.) This recommendation essentially creates as 
many classes for units with reversing valves as there are for units 
without reversing valves. Both Whirlpool Corporation (Whirlpool) and 
Fedders agreed with this recommendation. (Whirlpool, April 7, 1994, 
Transcript at 106; Fedders, April 7, 1994, Transcript at 136.) In a 
April 23, 1996 joint letter to AHAM, ACEEE and NRDC agreed with the 
fixed 0.5 EER difference between reverse-cycle classes and their 
corresponding ``cool-only'' classes. (ACEEE/NRDC, RAC No. 3 at 4.) In 
addition, during a meeting with ACEEE, Alliance to Save Energy, 
California Energy Commission, Florida Energy Office, Oregon Department 
of Energy, and NRDC, a recommendation was made to refer to reverse 
cycle products as ``heat pump air conditioners'' in the future. (RAC 
No. 10 at 2.) AHAM responded that these systems are not designed to be 
sophisticated heat pumps but rather to modify a room air conditioner by 
adding a reverse cycle to ``make it function as a heat pump within the 
confines of a relatively small enclosure.'' (AHAM, RAC No. 6 at 3.)
    The Department has determined its current class structure for units 
without reversing valves (two product classes: one for units with 
louvered sides and another for units without louvered sides) is not 
adequate. Therefore, the Department is adding two classes for units 
with reverse cycle to accommodate the concerns expressed in public 
comments. The two additional classes are class 13--units with reverse 
cycle, with louvers, and with a capacity of 20,000 Btu/h or more--and 
class 14--units with reverse cycle, without louvers, and capacity of 
14,000 Btu/h or more.
    Casement-Type Units. In the 1994 Proposed Rule, the Department 
proposed additional classes for casement-slider and casement-only room 
air conditioners because of the unique utility they offer to the 
consumer. Casement-type units offer a performance-related feature 
(fitting into casement windows) which other room air conditioners 
cannot provide. AHAM and Frigidaire supported the Department's proposal 
to establish separate classes for casement only and casement/slider 
units. In addition, AHAM stated that because of the limited number of 
models available and the narrow range of capacities, class divisions by 
capacity are not necessary for these unit types. (AHAM, No. 1 at 21-22; 
Frigidaire, No. 544 at 6.) In their comments to the Draft Report, ACEEE 
and NRDC recommended that casement-only units be combined in the same 
category as casement-slider units due to the fact that there is only 
one casement-only unit on the market. ACEEE and NRDC are also concerned 
that a loophole may be created because lower-priced casement units may 
be used in applications that do not require the special dimensions 
required by casement-only units. They commented that adjustable side 
panels can be used to enclose the space created when a window is wider 
than the air conditioner. (ACEEE/NRDC, RAC No. 5 at 4.)
    The Department believes that the size limitations imposed on 
casement-type units are more significant than those faced by typical 
units which are designed for double-hung windows. Since this 
performance-related feature justifies a lower efficiency standard, 
separate classes will be established for casement-slider and casement-
only units. The Department agrees with AHAM that class divisions by 
capacity are not necessary because of the narrow range of capacities in 
which models are currently available. According to AHAM's Directory of 
Certified Room Air Conditioners, casement-slider units range in 
capacity from 5,000 to 11,000 Btu/h, while there is currently only one 
casement-only unit, which has a capacity of 6,200 Btu/h. The Department 
believes that there is utility added by having a casement-only as well 
as a casement-slider class. In addition, the Department believes that 
the dimensions of casement units are restrictive enough to prevent a 
loophole.
    Ductless Split Systems. Fedders proposed that ductless split system 
air conditioners be regulated under room air conditioner efficiency 
standards as it believes that they are directly competing against room 
air conditioners for market share. (Fedders, April 7, 1994, Transcript 
at 123.) The NRDC agreed with the Fedders recommendation. (NRDC, No. 55 
at 28)
    The Department's efficiency standards for split system-type central 
air conditioners also apply to ductless split systems. The Department 
makes no distinction between split systems which deliver conditioned 
air with or without ducts. Thus, because split systems are covered 
under standards for central air conditioners, ductless split system air 
conditioners will not be established as an additional class for room 
air conditioners.
2. Design Options
    Commenters provided detailed comments on several of the design 
options that were analyzed by the Department for the proposed 
rulemaking.
    Rotary compressors. Compressor efficiency was the design option 
that drew the greatest amount of comment. AHAM, Amana Refrigeration, 
Inc. (Amana), Frigidaire, Fedders, Sanyo, Matsushita Electric 
Corporation (Matsushita), Whirlpool, and Tecumseh Corporation 
(Tecumseh) all provided comments stating that rotary compressors cannot 
attain the 11.5 to 12.0 EER efficiency levels assumed in the 
Department's analysis. They stated that the maximum efficiency of 
currently available rotary compressors falls in the 10.7 to 10.9 EER 
range. Compressor manufacturers stated that only minor efficiency 
improvements are expected within the next three to five years. The 
combined effect of these efficiency improvements would yield only a 
11.1 to 11.3 EER rotary compressor. And although efficiency increases 
of this magnitude may be theoretically achievable, they would require 
the development of high-efficiency motors which are currently not 
available, use of higher-grade materials in the rotary compressor

[[Page 50126]]

mechanism, and new compressor production methods and equipment. Both 
AHAM and Amana additionally commented that physical samples of new 
compressors need to be available to room air conditioner manufacturers 
at least 36 months prior to the effective date of the standards to 
provide adequate time for development, reliability and field testing. 
(AHAM, No. 1 at 7; Amana, Inc., No. 347 at 1; Frigidaire, No. 544 at 2; 
Fedders, April 7, 1994, Transcript at 121-122; Sanyo, No. 771 at 7-9; 
Matsushita, April 7, 1994, Transcript at 88-90; Tecumseh, April 7,1994, 
Transcript at 97-99; Whirlpool, April 7, 1994, Transcript at 102-103.) 
ACEEE commented that compressor efficiencies have been improving in 
recent years and are still below the theoretical limit. It stated that 
according to trade press articles, rotary and reciprocating compressors 
with efficiencies exceeding 11.0 EER are already available and further 
increases in efficiency are being developed. It argues that if 11.5 to 
12.0 EER compressors are not realized, other technologies could be used 
to attain the Department's proposed efficiency levels. (ACEEE, No. 557 
at 21.) ACEEE and NRDC commented that slightly more efficient 
compressors which are likely to become available soon should be used in 
the analyses in future rulemakings. (ACEEE/NRDC, RAC No. 5 at 1.)
    The Department rejects AHAM's suggestion that design options must 
be available 36 months prior to the effective date of the standards. 
However, the prediction in the 1994 Proposed Rule that 11.5 to 12.0 EER 
compressors would be available by the year new efficiency standards 
would become effective was based on development plans of a compressor 
manufacturer to produce 11.6 to 12.0 EER compressors. Subsequently, 
those development plans were canceled. Because rotary compressor 
manufacturers state that they cannot produce compressors with 
efficiency levels approaching the 11.5 to 12.0 EER range, the 
Department, in the Draft Report, analyzed only rotary compressors which 
are currently on the market. Depending on their capacity, the most 
efficient rotary compressors range in efficiency from 10.7 to 11.1 EER. 
In its comments to the 1996 Draft Report, AHAM stated that the revised 
report addressed its concerns. (AHAM, RAC No. 4 at Attachment 1, pg 2.)
    Scroll compressors. Only AHAM provided comments regarding scroll 
compressors. It stated that scroll compressors are currently not 
available in capacities less than 18,000 Btu/h and that efficiencies 
are either no more or slightly more efficient than rotary compressors. 
In addition, scroll compressor application heights are typically three 
to five inches greater than comparable rotary compressors, therefore 
requiring a larger chassis. Copeland Corporation (Copeland), a scroll 
compressor manufacturer, was cited by AHAM as having announced plans to 
develop a new, smaller scroll design optimized in the 14,000 to 24,000 
Btu/h capacity range. AHAM stated this design could be expanded 
effectively into room air conditioner applications with more reasonable 
cost premiums and with efficiencies possibly in the 11.5 to 12.0 EER 
range, but because it is not possible to make these compressors 
available to manufacturers 36 months prior to the effective date of new 
standards, they should not be considered by the Department for this 
rulemaking. (AHAM, No. 1 at 8.) Again, ACEEE and NRDC in their joint 
comments to the Draft Report stated that slightly more efficient 
compressors which are likely to become available soon should be used in 
the analyses in future rulemakings. (ACEEE/NRDC, RAC No. 5 at 1.)
    Again, the Department rejects AHAM's suggestion that design options 
must be available 36 months prior to the effective date of the 
standards. Although Copeland Corporation is currently investigating 
this more efficient compressor technology in the 14,000 to 24,000 Btu/h 
capacity range, they could not commit to produce it. Because there was 
not sufficient evidence this technology would be available by the 
effective date of the standards, only Scroll compressors which are 
currently on the market were considered for the Department's Final Rule 
analysis. For compressors which would be suitable for room air 
conditioner applications, Copeland's scroll compressors currently range 
in efficiency from 10.8 to 11.1 EER. The lowest capacity scroll 
compressor offered by Copeland is 16,500 Btu/h. Thus, scroll 
compressors were only considered for room air conditioners with 
capacities of at least 16,000 Btu/h. The information DOE received from 
compressor manufacturers showed that scroll compressor heights are only 
1-2 inches greater than comparable rotary compressors. Moreover, 
because this design option was not contained in any of the standard 
levels the Department found to be economically justified, the 
Department does not consider this height differential to be an issue. 
AHAM commented that it was satisfied with the treatment of this issue 
in the Draft Report. (AHAM, RAC No. 4 at Attachment 1 pg. 2.)
    Reciprocating compressors. The Department's analysis of an advanced 
reciprocating compressor design called the inertia compressor received 
comments by AHAM, Frigidaire, and Bristol Compressors (Bristol.) All 
three commented that inertia compressors with efficiencies in the range 
of 11.5 to 12.0 EER are expected to be available within the next couple 
of years but only in capacities exceeding 18,000 Btu/h. Inertia 
compressors are significantly heavier, larger, and noisier than the 
rotary compressors that are currently used in room air conditioner 
applications. Larger chassis sizes would be required to accommodate the 
increased weight and size of the inertia compressor. In addition, sound 
blankets would be necessary to muffle the increased noise levels. Thus, 
cost premiums and the accompanying application costs make inertia 
compressors difficult to cost justify for room air conditioners. (AHAM, 
No. 1 at 8-9; Frigidaire, No. 544 at 2; Bristol, June 7, 1994, 
Transcript at 355-362.)
    Although the Department recognizes that advanced reciprocating 
compressors are heavier and larger than existing rotary compressors, no 
information was provided as to how great the application costs for 
enlarging and bracing the chassis would be for incorporating them into 
room air conditioner units. Thus, only the cost of the compressor 
itself, with its accompanying sound blanket, was explicitly included in 
the Department's Final Rule analysis. For those instances where the 
advanced reciprocating compressor exceeded the weight of the rotary 
compressor by a significant amount (over 30 percent), an increase in 
chassis size was assumed to be necessary for incorporating the larger 
and heavier compressor. Therefore, a design option which resulted in a 
chassis size increase (i.e., increased evaporator and condenser face 
areas) always preceded the incorporation of an advanced reciprocating 
compressor. The added costs for increasing the chassis were assumed to 
cover the expense of incorporating the reciprocating compressor. For 
compressors which would be suitable for room air conditioner 
applications, Bristol's inertia compressors currently range in 
efficiency from 11.2 to 11.8 EER. The lowest capacity inertia 
compressor offered by Bristol is 18,000 Btu/h. Thus, inertia 
compressors were considered only for room air conditioners with 
capacities of at least 18,000 Btu/h. In its comments to the 1996 Draft 
Report, AHAM indicated that this approach

[[Page 50127]]

addressed its concerns. (AHAM, RAC No. 4 at Attachment 1 pg 2.)
    Fan motor efficiency. Only AHAM provided comments with regard to 
improvements in fan motor efficiency. It stated that permanent split 
capacitor (PSC) fan motors are already used in 98 percent of room air 
conditioners. The efficiency of PSC fan motors fall in the range of 50 
percent to 70 percent with larger motors being more efficient. AHAM 
admitted that some modest gains may be achieved with PSC fan motors in 
specific applications. With regard to electronically commutated motors 
(ECM), otherwise known as brushless permanent magnet motors (BPM), AHAM 
stated that they cost 2.5 to 3 times more than standard PSC motors. In 
addition, they weigh approximately twice that of a standard PSC motor. 
ECM efficiencies range from 68 percent to 78 percent. ECMs are 
currently not available with the double ended shaft required for room 
air conditioner applications because controls block one end of the 
motor. AHAM believes that ECMs with double ended shafts are not likely 
to be made available in the foreseeable future. Even if ECMs were 
manufactured with double ended shafts, AHAM claimed that manufacturers 
would need physical samples 24 months before the effective date of 
standards. (AHAM, No. 1 at 10 and RAC No. 4 at 5.)
    The Department recognizes that most room air conditioner designs 
already incorporate permanent split capacitor fan motors. But for two 
of the product classes analyzed, the representative baseline units used 
inefficient shaded pole motors. Thus, for these two classes, 
significant efficiency gains were achieved by replacing the shaded pole 
motors with more efficient permanent split capacitor motors. For all 
other classes, the representative baseline units already incorporate 
permanent split capacitor motors. Further fan motor efficiency 
increases were assumed to be achieved only through the use of ECMs. 
Although current ECM controls are situated at one end of the motor, the 
Department believes that there is no reason why they cannot be moved to 
another location on the motor. Thus, it is assumed that ECMs can be 
manufactured with double ended shafts. Although the Department 
recognizes that ECMs weigh approximately twice as much as standard 
permanent split capacitor motors, no information was provided about the 
application costs for bracing the chassis to incorporate them into room 
air conditioner units. Thus, only the cost of the ECM itself was 
explicitly taken into account in the Department's Final Rule analysis. 
However, because the analysis showed that ECMs were not an advantageous 
design option, any cost increases due to increased ECM weight need not 
be considered further. In its comments to the 1996 Draft Report, AHAM 
indicated that the analysis, which assumes a fan motor efficiency of 30 
percent for shaded pole and 50 percent for permanent split capacitor 
(PSC) when changing from a shaded pole to a PSC, addresses its concern. 
(AHAM, RAC No. 4 at Attachment 1, pg. 2.)
    Variable speed compressors. AHAM stated that variable speed 
compressors are not currently used in room air conditioner applications 
and should not be considered a technically viable design option. AHAM 
commented that the cost premium is 30 percent to 50 percent above 
comparable single-speed compressors. Although variable speed 
compressors are available off-shore in capacities and sizes suitable 
for use in room air conditioners, improvements in efficiency cannot be 
measured with the Department's current test procedure. AHAM commented 
that the Department's current single condition test procedure 
adequately matches consumer usage patterns for room air conditioners. 
(AHAM, No. 1 at 12.) AHAM does not believe variable speed compressors 
are ``capable of being assembled into room air conditioners by the 
effective date'' and should not be considered a viable design option. 
(AHAM, RAC No. 4 at 5.)
    Although the Department recognizes that the current test procedure 
is not adequate for determining the benefits due to variable speed 
compressors, they are still analyzed as a design option for room air 
conditioners. As done for the Proposed Rule's analysis, efficiency 
gains are established based on estimates from central air conditioning 
applications. The efficiency improvement, because it is primarily a 
result of reduced cycling (i.e., reduced on and off operation), is 
reported in terms of the seasonal energy efficiency ratio (SEER). A 
minimum efficiency standard cannot be based on its inclusion because 
the current test procedure does not recognize a SEER rating as an 
appropriate measure of efficiency. In addition, variable speed 
compressors were not included in any of the efficiency levels DOE 
determined to be economically justified.
    Heat exchanger design options. A number of comments were received 
regarding design changes to improve heat exchanger (evaporator and 
condenser) performance. These improvements can be put into two 
categories: designs for increasing the heat exchanger surface area and 
designs for increasing the heat transfer coefficients. The heat 
transfer surface area can be increased by any of the following methods: 
increasing the frontal area of the coil by increasing the height or 
width; adding a subcooler to the condenser coil; increasing the depth 
of the coil by adding vertical tube rows; or increasing the fin 
density. The heat transfer coefficients can be increased by using an 
enhanced fin design or grooved (rifled) refrigerant tubing.
    With regard to heat exchanger improvements, manufacturers expressed 
great concern over design options that would require an increase in 
chassis size, namely, increases in heat exchanger size. AHAM claimed 
that tooling for a new chassis size can range in cost from $1.5 to $5.0 
million per manufacturer. In addition, it stated that there are limits 
to the efficiency that can be achieved through increases in coil size 
without causing problems with latent cooling capacity (i.e., 
dehumidification.) It also stated that if standards require larger 
chassis sizes, there will be loss of utility in terms of portability 
and availability of larger capacities that can fit into smaller 
windows. In addition, availability of very large capacities would be 
reduced. (AHAM, No. 1 at 11-12.) AHAM also stated that an increase in 
coil size could affect compressor reliability. It stated that if room 
air conditioner efficiency is increased by enlarging the coil, the 
compressor capacity must be reduced to maintain the capacity of the 
system. But because the unit now has more refrigerant as a result of 
enlarging the coil, it is more likely that the smaller compressor's 
maximum charge limitation would be reached. The closer the refrigerant 
charge comes to the compressor's charge limit, the more likely that 
compressor failure would occur. (AHAM, Transcript, April 7, 1994, at 
66.) Amana stated that its current coil designs are already optimized. 
(Amana, Inc., No. 347 at 1.) Sanyo stated that increasing the condenser 
surface area is not feasible as the chassis enclosure is already too 
crowded. (Sanyo, No. 771 at 9.)
    AHAM and several manufacturers commented that the Department's 
proposed efficiency standards would require increases in chassis size 
for all room air conditioner product classes because some design 
options that the Department assumed would be available, primarily 11.5 
to 12.0 EER compressors, would not exist by the time the proposed 
standards became effective. AHAM stated that even a small increase in 
the efficiency standard will cause some models to move to a larger 
chassis size. According to AHAM,

[[Page 50128]]

92 percent of total production would need to move to a larger chassis 
size to meet the standards proposed in the 1994 Proposed Rule. AHAM 
further commented that because chassis sizes vary widely among 
manufacturers, new standards will have significant competitive effects. 
(AHAM, No. 1 at 1, 14-18.) Amana, Whirlpool and Frigidaire all provided 
comments reinforcing AHAM's comments. Amana stated that to meet the 
Department's proposed standards it would need to redesign nine of 
thirteen basic models into a larger chassis. These manufacturers 
further commented that the higher prices resulting from chassis size 
increases place an unfair burden on low income consumers. (Amana, No. 
347 at 1; Whirlpool, No. 391A. at 1; Frigidaire, No. 544. at 3.)
    AHAM provided the Department with a graph which shows the 
percentage of production which would be required to change chassis size 
at each EER. (AHAM No. 1 at 14.) In its comments to the Draft Report, 
AHAM states that ``more stringent standards [than the standards 
proposed by AHAM] will cause a significant number of chassis size 
changes with step function-like cost implications to manufacturers and 
raise utility, marketing and competitive issues.'' (AHAM, RAC No. 6 at 
1.) AHAM stated the baseline model method of analysis does not 
realistically represent the impact on cost of increasing the chassis 
size. AHAM believes the Department should weight the cost of a larger 
chassis by the proportion of models needing a larger chassis to achieve 
specific efficiency levels. (AHAM, RAC No. 4 at 3.) In their most 
recent comments, ACEEE and NRDC state this approach is reasonable, but 
they believe the life cycle cost minimums, resulting when costs of 
chassis size increases are prorated, should be used to select 
standards. Referring to the graph provided by AHAM, ACEEE and NRDC 
state that the proportion of models requiring a larger chassis size at 
9.8 EER is ``scarcely different'' than the proportion required by 9.5 
EER and that only at EER levels above 9.8 EER do a significant 
proportion of models need a larger chassis. Furthermore, they state 
``to consider chassis size as an independent decision-making factor 
would overemphasize chassis size in making a final decision.'' (ACEEE/
NRDC, RAC No. 5 at 2.)
    The impact of increased heat exchanger size on dehumidification was 
assessed with the engineering computer simulation model. The simulation 
model not only estimates the efficiency increase that results from 
adding more coil area but also its effect on latent heat removal. For 
all the room air conditioners which were modeled, the heat exchanger 
increases which were analyzed resulted in latent heat ratios of at 
least 25 percent. The latent heat ratio is the latent heat rate removal 
of the air conditioner divided by its total cooling capacity. AHAM 
considers 25 percent to be the minimum acceptable latent heat ratio. 
With regard to the issue of compressor reliability, although the 
Department recognizes that an increase in coil size coupled with a 
decrease in compressor capacity could affect the reliability of the 
compressor, manufacturer data were not provided as to the maximum 
charge limit of room air conditioner compressors. The Department's 
analysis of larger coil sizes assumed that the compressor capacity 
would not have to be reduced when analyzing larger coil sizes. Thus, 
with regard to how the Department conducted its analysis, it is 
unlikely that compressor reliability would be negatively impacted. 
Moreover, increasing evaporator/condenser coil area was not contained 
in any of the standard levels DOE found to be economically justified.
    With regard to the issue that some manufacturers may be 
competitively disadvantaged by being required to increase chassis size, 
the Department carefully considered the information provided by AHAM 
which indicates that the proposed standards in the 1994 Proposed Rule 
would require 92 percent of manufacturers to increase chassis size. 
Both the Department and AHAM recognize that any change in efficiency 
standard will require some manufacturers to increase chassis size. The 
Department has attempted to reduce the number of chassis size changes 
as much as possible while still achieving the goal of promulgating 
standards which maximize energy efficiency consistent with economic 
justification. The standards set forth would require an increased 
chassis size for a substantially smaller subset--approximately 25 
percent--of products.
    The Department considered AHAM's recalculations of life-cycle cost 
minimums which prorated the cost of chassis size increases. (AHAM, RAC 
No. 9 at Attachment 3A.) DOE has selected standard levels corresponding 
to the minimum life cycle costs when chassis size cost is prorated for 
the classes for which AHAM provided this information (i.e., classes 1 
through 5).
    AHAM commented that manufacturers will make adjustments to the 
number of tube rows and the density of fins in order to optimize heat 
exchanger performance. Because heat exchangers are, in general, already 
optimized, however, adjusting either the tube rows or the fin density 
is not a significant factor in increasing system efficiency. (AHAM, No. 
1 at 9.) Sanyo stated that adding tube rows or fin material causes 
increased air flow restrictions and requires design changes to fan and 
fan motors. If motor speeds are increased to obtain high airflow, 
unacceptable noise levels result. (Sanyo, No. 771 at 9.)
    The Department agrees with AHAM and Sanyo that the number of tube 
rows and the fin density are already optimized to yield the greatest 
heat exchanger performance. In using the engineering computer 
simulation model, increases in either tube row density or fin density 
provided negligible increases in system performance. In its comments to 
the 1996 Draft Report, AHAM indicated that because the simulation model 
shows negligible increases in system performance by increasing the fin 
density and number of tube rows, AHAM is no longer concerned about this 
matter. (AHAM, RAC No. 4 at Attachment 1 pg. 2.)
    AHAM stated that enhanced fins are already used in 64 percent of 
the evaporators produced by manufacturers and 99 percent of the 
condensers. AHAM also commented that good projections for the 
efficiency improvement due to enhanced fins are not available. AHAM 
further commented that the increased use of enhanced fins in 
evaporators is likely to be limited because in some cases condensate 
drainage is a limiting factor. AHAM believes that additional 
significant improvements in fin design are not expected in the 
foreseeable future. (AHAM, No. 1 at 10.) Sanyo stated that many models 
already employ enhanced fins. (Sanyo, No. 771 at 9.)
    The Department recognizes that most room air conditioner designs 
incorporate enhanced fins. Consequently, most of the representative 
baseline units for the product classes analyzed by the Department 
already include enhanced (i.e., slit-type) fins. For those baseline 
units where enhanced fins could be added, efficiency improvements were 
based on information provided by room air conditioner and heat 
exchanger manufacturers. Publicly available research information was 
used to check the reasonableness of the data supplied by manufacturers. 
The manufacturer information also included data on how densely enhanced 
fins could be packed until condensate drainage became a problem. In 
accordance with this manufacturer data, the Department's

[[Page 50129]]

analysis limited enhanced fin densities before condensate drainage 
became a problem. In its comments to the 1996 Draft Report, AHAM 
indicated that this approach addressed its concerns. (AHAM, RAC No. 4 
at Attachment 1 pg. 2.)
    AHAM stated that grooved refrigerant tubes are already used in 97 
percent of the evaporators produced by manufacturers and 86 percent of 
the condensers. AHAM also commented that good projections for the 
efficiency improvement due to grooved tubes are not available. AHAM 
does not expect additional significant improvements in tube design in 
the foreseeable future. (AHAM, No. 1 at 10.) Sanyo stated that many 
models already employ grooved tubes. (Sanyo, No. 771 at 9.)
    As with enhanced fins, the Department recognizes that most room air 
conditioner designs already incorporate grooved refrigerant tubing. 
However, for many of the representative baseline units that were 
selected (with consultation from AHAM) for the Proposed Rule's 
analysis, grooved tubing was not incorporated into the design. For the 
Department's Proposed Rule analysis, manufacturer test data was used to 
determine the efficiency improvements due to grooved tubing. However, 
publicly available research data indicated the manufacturer test data 
overstated the possible improvement. In addition, the analysis 
conducted for the Proposed Rule did not account for the increase in 
refrigerant-side pressure drop due to the grooved tubing. Thus, for the 
Department's analysis for the Final Rule, efficiency and pressure drop 
estimates were based on research data published by the American Society 
of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE.) In 
its comments to the 1996 Draft Report, AHAM commented that this 
approach addressed its concern. (AHAM, RAC No. 4 at Attachment 1 pg. 
2.)
    In their comments to the Draft Report, ACEEE and NRDC state that 
the report seems to ignore a new heat exchanger technology by Modine 
Technology that can achieve ``at least a 0.75 increase in EER'' without 
changing chassis size. (ACEEE/NRDC, RAC No. 5 at 1.) The advocates 
recommend that new technologies such as this one be considered in 
future rulemakings. The Oregon Department of Energy also stated its 
belief that most manufacturers were in contact with Modine Technology. 
(RAC No. 10 at 2.)
    The efficiency improvement made possible by the new heat exchanger 
technology to which the energy efficiency advocates referred is based 
on theoretical calculations. Modine Technology's new heat exchanger has 
shown improvements in central air conditioners; however, it has not 
been tested in room air conditioners. The Department does intend to 
analyze this technology in future rulemakings.
    AHAM, Amana, Frigidaire, Fedders, and Sanyo all provided comments 
with regard to subcoolers. Test data was provided indicating that the 
efficiency improvement due to subcoolers is significantly lower than 
that estimated by the Department in the 1994 Proposed Rule. AHAM 
presented data indicating that, on average, the actual efficiency and 
capacity improvements are 44 percent and 67 percent, respectively, of 
that projected by the Department's simulation model. Also, according to 
the AHAM, four out of seven room air conditioner manufacturers do not 
currently use subcoolers and five of the seven manufacturers would need 
to make major tooling changes on all or some of their chassis. (AHAM, 
No. 1 at 6-7; Amana, No. 347 at 2; Frigidaire, No. 544 at 2-3; Fedders, 
No. 693 at 2-6; Sanyo, No. 771 at 9.)
    Based on comments, the Department used manufacturer test data to 
calibrate the subcooler efficiency increases that were estimated by the 
simulation model. For each room air conditioner model simulated, the 
temperature of the condensate into which the subcooler is immersed was 
adjusted until the simulated efficiency increase matched that indicated 
by the manufacturer test data. Depending on the capacity of the unit, 
the manufacturer test data demonstrates unit efficiency increases of 
between 1.4 percent to 3.0 percent, as compared to approximately 6 
percent increases found in the analysis for the Proposed Rule. The 
simulation model was adjusted based on this test data. AHAM indicated 
that this approach addressed its earlier concern. (AHAM, RAC No. 4 at 
Attachment 1 pg. 2.) In addition, DOE used manufacturer cost 
information provided by AHAM to calculate the economic impact of 
incorporating a subcooler as one of the room air conditioner design 
options.
    Design options already in use. Many manufacturers claimed that they 
already use many of the design options that are being considered by the 
Department for increasing energy efficiency. (AHAM, April 7, 1994, 
Transcript at 51-52; Amana, No. 347 at 1; Frigidaire, No. 544 at 4; 
Fedders, No. 693 at 1; Sanyo, No. 771 at 8.) Both Amana and Frigidaire 
stated that they already use high efficiency rotary compressors, 
grooved tubes, enhanced fins and permanent capacitor fan motors. Amana 
stated that the only design options available for increasing efficiency 
are more efficient compressors, larger coil sizes, larger chassis 
sizes, and the addition of a liquid line subcooler. (Amana, No. 347 at 
1; Frigidaire, No. 544 at 4.)
    The design options which are considered in the analysis are based 
on the characteristics of the representative baseline units. The 
baseline models used in this analysis were selected through 
consultation with AHAM. If a baseline unit does not include particular 
design options, then those options are analyzed as measures to improve 
the efficiency of the unit. Although some of these design options are 
already commonly used, they may not all be used simultaneously. For 
example, some of the baseline units used more efficient compressors to 
achieve a certain efficiency rating, while many of the units on the 
market used less efficient compressors but improved heat exchanger 
design options to achieve the same level of efficiency.
3. Engineering Simulation Model
    The Department received several comments regarding the engineering 
computer simulation model that it used in its analysis of efficiency 
improvements for room air conditioners. Comments were provided 
primarily by AHAM and can be categorized into three areas: (1) the 
accuracy of the simulation model; (2) the method in which the modeling 
analysis was conducted; and (3) the selection of baseline models for 
room air conditioners without louvered sides.
    In comparing simulation results from the Department's computer 
simulation model to test data gathered from four room air conditioner 
models, AHAM demonstrated that there is a marked tendency for the 
simulation model to overestimate system efficiency. It concluded that 
the simulation model has the potential for making errors of 5 percent 
or more, especially when extended well beyond the point where actual 
correlative test data exists. (AHAM, No. 1 at 3.) Frigidaire and Sanyo 
reinforced the AHAM's comments when they presented data demonstrating 
that the simulation model estimated higher benefits for design options 
than are realized in practice. (Frigidaire, No. 544 at 4; Sanyo, No. 
771 at 10-12.)
    The simulation model was extensively reviewed by the room air 
conditioner industry. For the 1994 Proposed Rule, simulation results 
were calibrated to manufacturer test data for all of the representative 
baseline units modeled. The Department recognizes that when simulation 
results are calibrated to a single manufacturer's test

[[Page 50130]]

data, it is possible that the model will yield errors of 5 percent or 
more when used to simulate the performance of other manufacturers' 
units. Where test data is not available, the Department expects to 
continue to use the simulation model to estimate the efficiency 
increases resulting from the incorporation of design options. When 
manufacturer test data is provided, as in the case of subcoolers, the 
Department will use it to adjust the simulation model.
    AHAM commented that several errors were made in the simulation 
modeling. The first pertains to compressor modeling and the fact that 
actual compressor performance data was used only in the modeling of 
baseline equipment. The Department derived performance data for more 
efficient compressors by multiplying the motor input values from the 
baseline compressor data by the ratio of the baseline and high-
efficiency compressor nominal energy efficiency ratios (EER.) This type 
of analysis shows overall room air conditioner efficiency improvement 
equal to 89 percent of the nominal compressor EER improvement. Limited 
test data shows that the overall room air conditioner efficiency 
increase is about 75 percent of the nominal compressor EER improvement. 
AHAM advocated using actual compressor performance data for the 
analysis of more efficient compressors but to limit maximum system 
efficiency improvements to 75 percent of the nominal compressor EER 
increase. It also stated that when deriving compressor coefficients for 
input to the simulation model, the Department must use compressor 
performance data that spans the entire range of evaporating and 
condensing temperatures under which the compressor might operate. 
Otherwise, incorrect input coefficients could be generated. (AHAM, No. 
1 at 3-6 and AHAM, RAC No. 4 at Attachment 1 pg 1.)
    The Department agrees with AHAM that actual compressor performance 
data should be used to model the performance of compressors. Nominal 
compressor performance is based on ratings at standardized temperature 
conditions, and actual compressor performance may be significantly 
different at actual room air conditioner operating conditions. Using 
the nominal efficiency to compare the performance between two 
compressors only provides the efficiency difference at the standardized 
conditions. Using actual compressor performance data to model 
compressor operation captures the effect that different operating 
conditions have on room air conditioner performance. Thus, actual 
compressor performance data, spanning the entire range of evaporating 
and condensing temperatures in which the compressor might operate, was 
used to model the performance of all the compressors analyzed for the 
Final Rule. The Department disagrees with AHAM that system efficiency 
improvements should be limited to 75 percent of the nominal compressor 
EER increase. The basis for using compressor performance data is to 
more accurately assess the system improvement due to more efficient 
compressors. Placing a ceiling on the efficiency improvement eliminates 
the possibility of gaining system EER increases due to more favorable 
compressor operating conditions. As it turned out, most of the 
compressors modeled as design options in the Final Rule analysis 
yielded system efficiency increases that were equal to or less than 75 
percent of the nominal compressor EER increase. Only one of the 
compressors analyzed yielded a system efficiency increase significantly 
above the AHAM's suggested 75 percent ceiling. This compressor was used 
at standard level 5, which was found to be not economically justified.
    According to AHAM, another error in the simulation modeling 
concerns the use of superheat. It noted that the Department incorrectly 
specified the input for superheat from manufacturer test data by using 
the difference between the mid-evaporator temperature and a temperature 
on the suction line. It claimed that the Department should have 
adjusted the superheat input to the simulation model until the 
difference between the averages of the simulated evaporator inlet and 
outlet temperatures and the simulated suction line inlet and outlet 
temperatures were equal to the test value. (AHAM, No. 1 at 5.)
    The Department's method for specifying the superheat was in 
accordance with recommendations made by AHAM in 1990. These 
recommendations included making modifications to the simulation model 
in order to account for the presence of an accumulator. The 
modifications were based on treating the inlet to the accumulator as 
the inlet to the compressor shell for rotary compressors. In order to 
account for superheating occurring within the accumulator, the 
simulation model was modified to include provisions to account for the 
temperature and pressure increases that occur within the accumulator. 
The location on the suction line where the temperature was measured was 
at the accumulator inlet (i.e., the suction line outlet). The superheat 
in the simulation model is defined as the difference between the 
compressor shell inlet's refrigerant and saturation temperatures; 
therefore, knowing that the suction line temperature was measured at 
the accumulator inlet provided confidence in using it to specify the 
superheat. Because the test data did not provide the accumulator 
inlet's saturation temperature, the mid-evaporator temperature was used 
as a close approximation of the evaporator saturation temperature, 
which is also a close approximation for the compressor shell inlet 
saturation temperature. Therefore, the Department believes it 
appropriate to use the difference between the mid-evaporator and 
accumulator inlet temperatures to specify the superheat. AHAM indicated 
in its comments to the Draft Report that this method addresses its 
concerns. (AHAM, RAC No. 4 at Attachment 1, pg. 1.)
    In estimating room air conditioner efficiency increases resulting 
from more efficient fan motors, AHAM commented that it was 
inappropriate to use combined fan and fan motor efficiencies as input 
to the simulation model. Rather than using efficiencies, it advocated 
using fan motor power as an input as it asserts that room air 
conditioner efficiencies will be overestimated by using fan and fan 
motor efficiencies. (AHAM, No. 1 at 5.)
    The simulation model was originally developed to model the 
performance of central air conditioners. Manufacturers generally agreed 
to this approach. However, some adjustments had to be made to model a 
different air delivery system. For room air conditioners, the 
evaporator and condenser fans are both driven by a single fan motor, as 
opposed to central air conditioners, in which each fan is driven by its 
own fan motor. For the room air conditioner model, the Department 
decided to describe the air delivery system with combined fan and fan 
motor efficiencies in order to account for the impact of evaporator and 
condenser air-side pressure drop on fan motor power use. This modeling 
scheme also assumed that the evaporator fan accounted for 40 percent of 
the total fan motor power while the condenser fan accounted for the 
remaining 60 percent. AHAM was in agreement with modeling the room air 
conditioner's air delivery system by using a ``40/60 split'' on the fan 
motor power. But due to this modeling scheme, only 60 percent of the 
fan motor heat loss was added to the condenser air stream. All of the 
heat loss from the fan motor should be added to the condenser air 
stream as the motor resides in the outdoor section of the room air 
conditioner. The Department

[[Page 50131]]

decided to change the simulation model in order to account for the fan 
motor's full heat loss. In the Department's analysis for the 1994 
Proposed Rule, simulation results were calibrated to test data for all 
the baseline models. Because accounting for the full heat loss slightly 
lowers the system efficiency, minor adjustments had to be made to the 
power and capacity correction factors contained in the input files in 
order to recalibrate the simulation results to the baseline model test 
data. In AHAM's comments to the 1996 Draft Report, AHAM indicated that 
this method addressed its concerns. (AHAM, RAC No. 4 at Attachment 1, 
pg 1.)
    AHAM claimed the simulation modeling analysis used incorrect power 
consumption penalties to account for reversing valves and for no 
louvers. With regard to reversing valves, AHAM noted that the TSD for 
the 1994 Proposed Rule reports two different power consumption 
penalties: 3 percent and 4 percent. AHAM noted that the Department's 
simulation analysis actually calculates a power reduction value of 2.5 
percent. AHAM recommended using a penalty of five percent when modeling 
reverse cycle units with the simulation model. With regard to the power 
consumption penalty used for units without louvered sides, AHAM claimed 
that the value of 4 percent used in the Department's simulation 
analysis does not account for the reduced airflow across the condenser 
coil due to the non-louvered sides. Although it proposed no alternative 
power penalty to account for non-louvered sides, it stated that the 
condenser face area being modeled should be decreased because outdoor 
air is drawn through the back of the unit rather than through louvered 
sides, and thus less condenser area is available for heat exchange. 
(AHAM, April 7, 1994, Transcript at 62-65.)
    For the 1994 Proposed Rule, power consumption penalties to account 
for reversing valves and to account for no louvers were applied only to 
the compressor's power consumption. Because the power penalty is 
assessed only to the compressor, the overall power increase for the 
entire room air conditioner is always slightly smaller than the 
reported power penalty value. The TSD for the Proposed Rule did 
mistakenly report two different penalties for reversing valves. The 
value that was actually used was 3 percent. The power penalty used to 
account for non-louvered sides was 4 percent. A 5 percent power penalty 
was used for the Final Rule to account for products with a reversing 
valve. Because an alternative power penalty value was not proposed for 
non-louvered sides, the Department retained the use of a 4 percent 
power penalty. This 4 percent power penalty was assumed to account for 
any degradation in performance due to drawing outdoor air directly 
through the condenser coil. Thus, the modeled condenser face area was 
not reduced.
    In its comments to the 1996 Draft Report, AHAM states that although 
the Draft Report indicates that power consumption penalties were used 
in the simulation model, it appears (referencing Table 1.6 of the Draft 
Report) that baseline data for actual models were used, and that these 
results are not consistent with actual practice. (AHAM, RAC No. 4 at 
2.) The Department did use the power consumption penalties in the 
simulation model for the Draft Report. Table 1.6 of the Draft Report is 
intended to show that the results produced by the simulation model are 
close to the actual test data.
    Both AHAM and Sanyo asserted that the Department selected baseline 
models for ``through-the-wall'' units (units without louvered sides) 
with efficiencies that were not representative of the class. They both 
stated that baseline models were derived from models with louvered 
sides, and thus, the analysis conducted for these products is 
meaningless. Sanyo stressed that the largest capacity size within the 
smallest enclosure for the particular product class of interest should 
be selected as a representative baseline model. (AHAM, No. 1 at 19; 
Sanyo, No. 771 at 6-10.)
    In the analysis for the 1994 Proposed Rule, representative baseline 
models for non-louvered and reversing valve classes were derived from 
the baseline models that were selected for louvered classes. The 
Department agrees with AHAM and Sanyo in that actual baseline units 
should be used to represent the non-louvered and reversing valve 
classes. Thus, the Department based its analysis of non-louvered and 
reversing valve classes on modeling of actual baseline units. With 
regard to non-louvered classes, manufacturer data were available only 
for two of the existing five capacity classes; 6,000 to 7,999 Btu/h and 
8,000 to 13,999 Btu/h. Thus, analyses were conducted only for the two 
classes where manufacturer data were available. Manufacturer data were 
also available for selecting representative baseline units for 
reversing valve classes, with and without louvered sides, and 
engineering analyses were conducted for both these classes.
    Based on its recommended changes for improving the performance of 
the engineering simulation model, AHAM re-ran the model for the five 
capacity classes with louvered sides and without a reversing valve. For 
all five classes, the efficiency levels determined by AHAM's simulation 
analysis were significantly lower than the Department's proposed 
efficiency standards. (AHAM, No. 1 at 26.) Using the version of the 
simulation model that the Department used for its Proposed Rule 
analysis, Sanyo conducted a simulation analysis for classes without 
louvered sides. With its analysis, it also concluded that efficiency 
gains were significantly below those that the Department demonstrated 
were possible for classes without louvered sides. (Sanyo, No. 771.) 
Like AHAM, Fedders also performed an efficiency analysis for the five 
capacity classes with louvered sides and without a reversing valve. But 
instead of using the Department's simulation model, it used test data 
(and interpolated estimates based on test data) to project efficiency 
increases. Fedders' results were similar to AHAM's in that the 
efficiency levels that were calculated were significantly lower than 
the Department's proposed standards for all five classes. (Fedders, No. 
693 at Sec. 1, 1-6.)
    Based on the comments received, DOE made a number of adjustments to 
the simulation model, as described above, and changed the method in 
which certain design options were analyzed. After these adjustments, 
the Department's simulation results were close to those reported by 
AHAM. For the five capacity classes being compared, these were the only 
two classes for which DOE and AHAM had efficiency results that differed 
by greater than 1 percent--the 6,000 to 7,999 Btu/h class and the 
14,000 to 19,999 Btu/h class.
    In the case of the 6000 to 7999 Btu/h class, the discrepancy 
(approximately 3 percent) between AHAM's simulation results and the 
Department's simulation results for the Final Rule can be attributed to 
an error in the earlier simulation model. This error, which was present 
in the simulation model that AHAM used and that the Department used in 
its analysis for the Proposed Rule, was corrected for the Department's 
Final Rule analysis. Thus, correcting this error in the version of the 
simulation model used by the AHAM would yield a predicted efficiency 
that would be closer to that estimated by the Department for the Final 
Rule. The error related acceptable difference between the calculated 
condenser exiting temperatures from the two subroutines--because the 
acceptable difference was too low, the model

[[Page 50132]]

converged at solutions that produced condenser heat transfer 
coefficients which were too small.
    In the case of the 14,000 to 19,999 Btu/h class, the discrepancy 
(approximately 3.5 percent) was primarily attributable to AHAM's method 
of estimating efficiency improvements due to an additional design 
option (condenser grooved tubes) that was analyzed by the Department 
but not by AHAM. If the Department had not considered this design 
option, the discrepancy would only be 0.6 percent.
    In AHAM's comments to the 1996 Draft Report, AHAM stated that it 
was ``satisfied with the efficiency analyses of models with side 
louvers and without reverse cycle up to the application of the BPM fan 
motor and the variable speed compressor'' and that after correcting for 
the errors described in the preceding paragraphs, ``the correlations 
would all be within an acceptable 1%''. (AHAM, RAC No. 4 at 2.)
    With regard to Fedders' estimates, the Department's revised 
efficiency estimates were still significantly different: discrepancies, 
on average, were over 3.5 percent. Unfortunately, Fedders did not 
provide detailed information on how it arrived at its estimates. Given 
the close agreement with the results reported by AHAM, the Department 
is comfortable with its revised simulation results.
    In its comments to the Draft Report, AHAM stated that the ``fine 
tuning of the simulation model has led to reasonably good 
correlations'' for models with side louvers and with a reverse cycle. 
However, AHAM stated that although the simulation model was calibrated 
to baseline data for actual models without louvers and actual models 
with a reverse cycle, ``the simulated effect of the applied design 
options is not consistent with actual practice.'' AHAM also stated that 
considerable time and effort would be required to ``get the same level 
of correlation that was achieved for models with louvers and without a 
reverse cycle.'' AHAM also states that the wide variability of results 
when comparing simulation model efficiency results to AHAM's results 
shows that there is a ``significant problem'' in simulating models with 
reverse cycle. (AHAM, RAC No. 4 at 2-4.) In addition, with regard to 
units with a reverse cycle, AHAM stated that ``poor correlation with 
these units is most likely due to the unusual restrictions in the 
refrigeration circuit due to the reversing valve and compromises made 
to balance both the heating and the cooling of the unit.'' (AHAM, RAC 
No. 4 at 4.) ACEEE and NRDC recommended in their joint comments that 
``problems with the simulation models can be dealt with by examining 
the efficiencies of units now on the market, in order to sanity check 
the simulation model results.'' (ACEEE/NRDC, RAC No. 5 at 3.)
    The Department agrees that its computer model may not accurately 
simulate actual performance for models without louvers (classes 6-10) 
or models with a reverse cycle (classes 11 and 12). Consequently, the 
Department has relied more heavily on the comments in selecting 
standards levels. For classes with a reverse cycle, the Department 
chose standard levels which took into consideration the comments by 
both the manufacturers and energy efficiency advocates. With regard to 
the recommendation made by ACEEE and NRDC, the Department consulted the 
AHAM directory when making decisions on the efficiency standards to set 
forth in this rule.
4. Proposed Efficiency Standards
    Support for proposed standards. Southern California Edison Company 
(SCEC), ACEEE, Central Hudson Gas & Electric Corporation (CHGEC), and 
Alabama Power Company (APC) all generally supported the Department's 
proposed standards. ACEEE stated that the standards proposed in the 
1994 Proposed Rule are supported due to the availability of products 
with high efficiency levels in the marketplace. ACEEE stated that 
according to AHAM's 1993 and 1994 directories, units with louvered 
sides and without a reversing valve are available with efficiencies 
exceeding 11.0 EER in the 6000 to 7999 Btu/h and 8000 to 13,999 Btu/h 
product classes. In the 14,000-19,999 Btu/h product class, models are 
available with efficiencies of 10.5 EER. The ACEEE asserted that even 
if the Department underestimated the extra first cost of the proposed 
standards by a factor of two, they would still be cost effective. 
(ACEEE, No. 557 at 20-22.) CHGEC stated that for its service area, the 
proposed standards would save approximately 103 kWh per unit for a 
typical 8000 Btu/h size. (CHGEC, No. 601 at 1.) SCEC and APC generally 
supported the rulemaking proposals. (SCEC, No. 14 at 1; APC, No. 696 at 
20.)
    Although the Department recognizes the comments supporting the 
proposed standards, lower efficiency standards are being promulgated in 
this Final Rule. Revisions made to both the engineering simulation 
model and the method in which certain design options were analyzed, 
based on public comment, resulted in lower efficiency standards being 
selected for all product classes.
    Proposed standard level 6. In addition to receiving comments in 
support of the proposed standards, the NRDC commented that the 
Department did not provide justifiable reasons for rejecting even the 
higher efficiency standards in the 1994 Proposed Rule. NRDC's argument 
included: (1) the Department's rejection of the higher standards 
(described as standard level six in the 1994 Proposed Rule) based on 
the standard level's long payback is legally unacceptable; (2) though 
short-term return on equity is reduced by standard level six, the long-
term return is not significantly reduced; and (3) manufacturer cost 
impacts are premised on the continuation of current practices for 
utility rate design under which residential peak kilowatt-hours do not 
carry a price premium. (NRDC, April 5, 1994, Transcript at 115-116.)
    There are significant differences between the candidate standard 
levels selected for the proposed rule and those levels selected for the 
final rule. These differences are a result of revisions made to the 
engineering analysis.
    In response to NRDC's specific comments, the Department recognizes 
that in determining whether a standard is economically justified, the 
Secretary cannot consider the failure to meet the rebuttable 
presumption criterion. EPCA, section 325(o)(2)(B)(iii), 42 U.S.C. 
6295(o)(2)(B)(iii). However, the Department does consider energy cost 
savings relative to incremental first cost. EPCA, section 
325(o)(2)(B)(I)(II), 42 U.S.C. 6295(o)(2)(B)(I)(II). The Department 
also considers both short run and long run return on equity as 
important factors in determining the rule's impact on manufacturers. In 
addition, the Department strives to fairly assess consumer cost 
impacts, including sensitivity analysis of high and low State energy 
prices.
    Adverse effects of standards. The Department received several 
comments regarding the adverse affects of promulgating the proposed 
standards. The greatest concern of manufacturers, that heat exchanger 
coils and cabinets would need to be expanded, at significant expense, 
in order to meet the Department's proposed standards, was discussed 
previously under comments pertaining to design options requiring 
increased chassis sizes. Other manufacturer concerns included: (1) The 
disparity in the proposed efficiency levels for class 1 (less than 
6,000 Btu/h, with louvers and without a reversing valve) and class 2 
(6,000-7,999 Btu/h, with louvers and without a reversing valve); (2) 
the effect of higher efficiency

[[Page 50133]]

standards on the replacement market for ``through-the-wall'' units 
(i.e., units without louvered sides) ; (3) the effect higher standards 
would have on sales of units with reversing valves; (4) the impact on 
the dehumidification capability of low capacity units; and (5) the 
impact on low-income consumers.
    The proposed standard of 11.1 EER for class 1 units was 
significantly greater than the proposed standard of 10.3 EER for class 
2 units. Both AHAM and Frigidaire claimed that this disparity in the 
efficiency levels will result in significantly higher consumer costs 
for class 1 units. They asserted that this disparity will eventually 
eliminate class 1 units from the marketplace because consumers would 
purchase less expensive class 2 units. They stated that eliminating low 
cost class 1 units would adversely effect low income consumers. With 
regard to energy consumption, for applications where class 1 units are 
more suitable, they stated that class 2 units might run less to provide 
the same amount of cooling, but their overall power consumption would 
be higher because they would operate at a lower efficiency. For units 
of equal efficiency providing cooling to environments with the same 
sensible and latent loads, limited manufacturer test data indicated 
that a class 2 unit (6,000 Btu/h capacity) consumes 6 percent more 
power than a class 1 unit (5,000 Btu/h capacity.) In addition, both 
AHAM and Frigidaire claimed that to offset humidity effects, class 2 
units would probably be run with a lower thermostat setting resulting 
in increased run times and increased energy use. Both commenters urged 
the Department to set standard levels for class 1 units that are no 
greater than the standards that are set for class 2 units. (AHAM, No. 1 
at 18-19; Frigidaire, No. 544 at 6-9.)
    ACEEE also noted the disparity in the proposed efficiency levels 
for class 1 and class 2 units. It noted that class 3 units (8,000 to 
13,999 Btu/h) have a significantly higher efficiency standard than 
class 2 units. ACEEE commented that promulgating a significantly lower 
standard for class 2 units would likely result in manufacturers 
concentrating a greater fraction of shipments in this size range, 
leading to lower than expected energy savings from the proposed 
standards. The ACEEE urged the Department to raise the standard for 
class 2 units to 11.0 or 11.1 EER. ACEEE claimed this level is 
``technically feasible according to the Department's analysis,'' citing 
that the top-rated model in the market in this capacity range has an 
11.0 EER. ACEEE believed that because the DOE life-cycle cost analysis 
showed only a slight increase in life-cycle cost going from an EER of 
10.25 to 10.74 for this capacity range, a ``small additional step to an 
EER of 11.0--11.1 should not have much of an impact on LCC either.'' It 
also urged the Department to raise the standard for the 6000 to 7999 
Btu/h product class without side louvers to the same levels being 
proposed for the less than 6000 Btu/h and 8000 to 13,999 Btu/h product 
classes. (ACEEE, No. 557 at 22.)
    The Department disagrees that ACEEE's extrapolation of the life-
cycle cost analysis of the 1994 Proposed rule indicates that an 
increase to 11.0--11.1 EER should have little impact on life-cycle 
cost. Moreover, the reanalysis provided in the Draft Report resulted in 
efficiency levels for classes 1 and 2 being approximately the same. 
AHAM indicated in its comments to the Draft Report that these results 
addressed its concerns. (AHAM, RAC No. 4 at Attachment 1, pg 3.) In 
addition, for the final rule, the Department has selected standards for 
class 1 and class 2 that are equal. ACEEE and NRDC also support these 
standard levels. (ACEEE/NRDC, RAC No. 14 at 3.)
    AHAM, manufacturers, and real estate organizations commented that 
the proposed efficiency standards would obsolete the replacement market 
for ``through-the-wall'' units (i.e., units without louvered sides.) 
Because of the unavailability of 11.5 to 12.0 EER compressors, chassis 
sizes would need to be increased to meet the proposed efficiency 
standards. But because of the overall size restrictions due to 
``through-the-wall'' sleeves already in service, chassis sizes cannot 
be increased without obsoleting the existing sleeves. If existing wall 
openings are expanded to accommodate larger units, retrofit costs are 
estimated to be between $250 and $500. These commenters argue that the 
proposed standards would force the discontinuation of higher capacity 
systems as only smaller capacity units would be able to fit into 
existing sleeve openings. (AHAM, No. 1 at 19; Given & Spindler 
Companies (G&S), No. 302 at 1-2; Frigidaire, No. 544. at 5; Institute 
of Real Estate Management (IREM), No. 553 at 7; Sanyo, No. 771 at 3-6; 
Friedrich Air Conditioning Co. (Friedrich), April 7, 1994, Transcript 
at 77-80.) Both IREM and G&S requested that the Department exempt 
``through-the-wall'' units because of the undue burden upon owners who 
will be forced to make retrofit changes without any financial 
compensation. (G&S, No. 302 at 1-2; IREM, No. 553 at 7.) Sanyo stated 
that the efficiency levels proposed in the 1994 Proposed Rule would 
force higher capacity units to be discontinued. (Sanyo, No. 771 at 3.) 
The AHAM presented data demonstrating that existing models meeting the 
current efficiency standards already employ all available design 
options. The AHAM stated that any increase in efficiency can only be 
accomplished by increasing chassis size or by further decreasing 
cooling capacity. (AHAM, No. 1 at 20.) Frigidaire stated that above 
8,000 Btu/h, any increase in the current standard ``will result in a 
lower BTUH capacity, thus reducing the utility of this product 
category.'' Frigidaire notes that in order ``to comply with the 1990 
Energy Standards, we were forced to reduce the capacity in this product 
class from 13,500 BTU to 10,700 BTU.'' (Frigidaire, No. 544 at 5.) In 
its comments to the 1996 Draft Report, AHAM reiterated the industry's 
struggle to achieve the current standards in the largest capacity 
models which has resulted in the reduction of the maximum capacity 
available. (AHAM, RAC No. 4 at 4.) Both the National Apartment 
Association (NAA) and the National Multi Housing Council (NMHC) 
requested that the Department adopt an efficiency standard for units 
without louvered sides that takes into consideration the adverse impact 
upon the multi-family housing industry. (G&S, No. 302 at 2; IREM, No. 
553 at 7.) Because the multi-family housing industry predominantly uses 
air conditioner units without louvered sides, NAA and NMHC are 
concerned about the impact of increased cabinet size (due to higher 
efficiency standards) on these ``through-the-wall'' units.
    The ACEEE opposed exempting ``through-the-wall'' units from more 
stringent standards. It stated that such an exemption would create a 
loophole that could result in a significant reduction in energy 
savings. It believed that manufacturers should be able to produce these 
units using the same or similar components used in louvered-type units. 
Through gains in economy of scale, costs with maintaining different 
product lines for models with and without side louvers could be 
avoided. (ACEEE, No. 557 at 23.) ACEEE and NRDC are particularly 
concerned about loopholes if standards are not increased for units 
below 14,000 Btu/h. (ACEEE/NRDC, RAC No. 5 at 3.) In February 1997, 
ACEEE and NRDC urged the Department to raise the standard for class 8 
(units without louvers, without a reverse cycle, and 8,000--13,999 Btu/
h) to 8.7 EER in an effort to reduce the likelihood of a loophole. In 
addition, they stated that according to the data provided by AHAM 
(AHAM, RAC No. 9 at Attachment 1), the 1994 sales weighted average for 
this class is 8.73

[[Page 50134]]

EER. (ACEEE/NRDC, RAC No. 14 at 3.) AHAM stated that these concerns are 
based ``on the incorrect view that these products are essentially the 
same except for the presence of side louvers.'' AHAM states that the 
elimination of side louvers causes extensive changes that result in ``a 
significant loss of efficiency for the same capacity.'' (AHAM, RAC No. 
6 at 2.) Furthermore, AHAM stated that increasing the standard for 
class 8 would eliminate higher capacity units, causing harm to building 
owners and consumers, and would ``violate NAECA's safe harbor rule in 
Section 325(n)(4).'' (AHAM, RAC No. 16 at 4.)
    In its comments to the 1994 Proposed Rule NRDC was concerned that 
the practice of using small sleeves may amount to a permanent 
constraint on how far energy efficiency can be increased. It suggested 
that the Department analyze what fraction of the market cannot accept 
design options that increase sleeve size. Then the Department should 
determine the economic impact of replacing design options that do 
require increased size with other less cost-effective options for that 
fraction of the market that cannot adapt. NRDC also suggested that the 
Department consider adopting a second tier of efficiency standards 
which would be available for states to adopt voluntarily through 
building codes. This way, room air conditioners could be designed to 
the optimum level for the new construction market without imposing 
unreasonable costs on the replacement market. (NRDC, No. 55 at 27.)
    The Department agrees with manufacturers and real estate 
organizations that added retrofit costs would be necessary for units 
which require larger sleeves and, as a result, larger wall openings. 
Thus, for units without louvered sides, an additional installation cost 
of $375 is assumed for design options which require a larger chassis 
(i.e., for increased evaporator and condenser face areas.) The 
Department was not provided with the necessary information to determine 
the percentage of existing sleeves which could not accept larger 
chassis sizes. Thus, the added retrofit cost of $375 was assumed to 
apply to all units requiring a chassis size change. In addition, since 
the percentage of units being used in new construction is believed to 
be small, all units were assumed to incur the added retrofit cost, 
regardless of application. The Department examined the 1997 AHAM 
Directory. It indicates that for higher capacity models (9,000 Btu/h or 
more), only one manufacturer currently produces units which could meet 
the advocates recommendation of 8.7 EER, despite the fact that this 
value is the 1994 shipment weighted average for this class. The 
Department agrees that there is reason to believe that increasing 
standards for units without louvers and without reverse cycle may 
result in eliminating higher capacity units from the market. Thus, the 
Department will not increase standards for ``through-the-wall'' units 
of 8,000 Btu/h capacity or more in today's rule. These standard levels 
minimize or eliminate the need to increase chassis size. Consequently, 
the Department does not believe the multifamily housing industry will 
be negatively impacted.
    As for the advocates concern over possible loopholes, the 
Department intends to monitor market trends for these classes and will 
consider these trends during its next review of room air conditioner 
standards. Regarding NRDC's suggestion that the Department adopt a 
second tier standard for states to adopt voluntarily through building 
codes, in accordance with the legislation, a recommendation for a 
second tier standard for adoption through voluntary building codes must 
be done separately from manufacturing standards. However, because the 
``through-the-wall'' units account for only about one-tenth of air 
conditioner energy use and because only a fraction of these units are 
in new construction, the Department does not believe this measure is 
warranted.
    In their comments to the 1994 Proposed Rule, AHAM and Whirlpool 
also expressed that, as a result of setting standards too high for 
units with a reversing valve, more electric resistance heat models will 
be sold because of their significantly lower cost. They stated that 
this will result in an overall increase in energy consumption. (AHAM, 
No. 1 at 21; Whirlpool, April 7, 1994, Transcript at 103-105.) The 
standards for units with a reverse cycle set forth in today's rule are 
significantly lower than those standards proposed in the 1994 Proposed 
Rule, so this concern should be mitigated.
    Fedders claimed that energy consumption due to reduced 
dehumidification is adversely affected by the standard levels proposed 
in the 1994 Proposed Rule for class 1 through class 3. Fedders 
presented calculations demonstrating that units meeting the proposed 
standard levels will consume more energy than units meeting existing 
efficiency standards. Fedders stated that units meeting the proposed 
standard levels will need to operate longer in order to dehumidify as 
effectively as units meeting the existing standards. (Fedders, No. 693 
at 1-5, Sec. 2.)
    Fedders' claims of longer run times for more efficient units are 
based on its estimates of the dehumidification capability of existing 
minimum efficiency units and those which comply with the Proposed 
Rule's proposed efficiency standards. Fedders' dehumidification data 
for units at the proposed efficiency levels were based on historical 
test data which were extrapolated to the proposed levels. The 
Department's engineering simulation model indicated that the proposed 
efficiency standards did not significantly reduce the dehumidification 
capability of the units which were modeled. The Department has 
questions about Fedders' assumptions used to calculate room air 
conditioner run times. For example, although Fedders acknowledges that 
sizing recommendations for room air conditioners are dependent on such 
things as building construction, window types and insulation levels, 
its cooling load calculations are based on a single room size and a 
single set of initial indoor room conditions. Most importantly, because 
the standards promulgated in this final rule are significantly lower 
than those proposed in the 1994 Proposed Rule, the dehumidification 
capabilities should no longer be in question.
    One of the country's largest retailers, the Sears, Roebuck and 
Company (Sears), asserted that the standards proposed in the 1994 
Proposed Rule impose disproportionate hardships on low income consumers 
as most room air conditioner consumers have lower than average incomes. 
Whirlpool substantiates this claim by presenting data on the income 
distribution of typical room air conditioner purchasers. (Sears, April 
7, 1994, Transcript at 115; Whirlpool, No. 391A at 1-2.)
    The standards set forth in the final rule will have substantially 
less impact on purchase price than those standards proposed in the 1994 
Proposed Rule and will have shorter payback periods. For example, class 
1 has an approximate first cost increase of $10, and a payback period 
of approximately 2 years, satisfying the rebuttable presumption 
criteria for economical justification. The Department does not believe 
the standards set forth today will have a substantial negative impact 
on low income consumers.
    Efficiency Standards Recommendations. Several commenters concerned 
about adverse effects of promulgating the efficiency standards proposed 
in the 1994 Proposed Rule recommended to DOE alternative levels

[[Page 50135]]

at which to set the standards for room air conditioners. For classes 
with louvered sides and without a reversing valve, Frigidaire 
recommended the following efficiency standards: 9.0 EER for the less 
than 6000 Btu/h class, 9.5 EER for the 6000 to 7999 Btu/h class, 9.5 
EER for the 8000 to 13,999 Btu/h class, 9.5 EER for the 14,000 to 
19,999 Btu/h class, and 8.5 EER for the greater than 20,000 Btu/h 
class. (Frigidaire, No. 544 at 10.) In its comments to the 1994 
Proposed Rule, Fedders called for consolidating the three smallest 
capacity classes into a single class and setting the efficiency 
standard at 10.0 EER. For the two largest capacity classes, Fedders 
agreed with the Department's proposed standards (11.1 and 9.8 EER). 
(Fedders, April 7, 1994, Transcript at 120-122.) The CEC recommended a 
single efficiency standard for all classes with louvered sides and 
without a reversing valve. It recommended setting the efficiency 
standard based on the level which the Department proposed (11.0) for 
the most popular class (i.e., the 8000 to 13,999 Btu/h class.) (CEC, 
No. 539 at 2,3.)
    For classes without louvered sides and without a reversing valve, 
AHAM, Frigidaire, and Sanyo recommended that the current five capacity 
classes be consolidated into two classes: units less than 8000 Btu/h 
and units greater than or equal to 8000 Btu/h. For the less than 8000 
Btu/h class, AHAM, Frigidaire, and Sanyo all recommended setting the 
efficiency standard at 9.0 EER. For the greater than or equal to 8000 
Btu/h class, they all recommended setting the standard at 8.5 EER. AHAM 
presented data demonstrating that existing models meeting the current 
efficiency standards already employ all available design options. They 
stated that any increase in efficiency can only be accomplished by 
increasing chassis size or by further decreasing cooling capacity. 
(AHAM, No. 1 at 20; AHAM RAC No. 4 at 1-2; Frigidaire, No. 544 at 5; 
Sanyo, No. 771 at 3.) Friedrich recommended that units without louvered 
sides be exempt from efficiency regulation. (Friedrich, April 7, 1994, 
Transcript at 84.) The CEC recommended a single efficiency standard for 
all classes without louvered sides and without a reversing valve. The 
Commission recommended setting the efficiency standard based on the 
level which the Department proposed (10.7 EER) for the most popular 
class (i.e., the 8000 to 13,999 Btu/h class). (CEC, No. 539 at 2,3.)
    For classes with a reversing valve, AHAM stated that the efficiency 
of a reverse cycle unit in the cooling mode is theoretically less than 
the efficiency for a cooling-only model due to the additional pressure 
drop caused by the reversing valve and inefficiencies created by the 
refrigerant charge being adjusted for an acceptable balance between 
cooling and heating performance. AHAM presented data demonstrating that 
the average reduction in efficiency due to a reversing valve is 0.42 
EER. In order to cover the majority of reverse cycle units, AHAM 
recommended setting a standard for reverse cycle units which is 0.5 EER 
less than the standard for a comparable cool-only model with or without 
louvered sides. (AHAM, No. 1 at 20, 21.) Both Sanyo and Whirlpool also 
recommended setting the same type of standard. (Sanyo, No. 771 at 3; 
Whirlpool, April 7, 1994, Transcript at 103-105.) The CEC proposed 
maintaining the current classification for units with a reversing 
valve; one class for units with louvered sides and another class for 
units without louvered sides. The CEC agreed the efficiency levels 
proposed by the Department for reverse cycle units. (CEC, No. 539 at 
2,3.)
    On April 23, 1996, ACEEE and NRDC sent a letter to AHAM with the 
following table of proposed standard levels (ACEEE/NRDC, RAC No. 3 at 
3.):

------------------------------------------------------------------------
                    Class                            Standard level     
------------------------------------------------------------------------
Units without reverse cycle and with louvered                           
 sides:                                                                 
    Capacity less than 20,000 Btu/h..........  10.0 EER.                
    Capacity 20,000 Btu/h and more...........  9.0 EER.                 
Units without reverse cycle and without        9.0 EER.                 
 louvered sides.                                                        
Slider/casement and casement-only units......  9.0 EER.                 
Units with reverse cycle, all capacities.....  0.5 EER less than the    
                                                standard for comparable 
                                                cool-only model.        
------------------------------------------------------------------------

    In its comments to the 1996 Draft report, AHAM proposed the 
following standards (AHAM, RAC No. 6 at 2):

------------------------------------------------------------------------
                    Class                            Standard level     
------------------------------------------------------------------------
Units without reverse cycle and with louvered                           
 sides:                                                                 
    Capacity less than 20,000 Btu/h..........  9.5 EER.                 
    Capacity 20,000 Btu/h and more...........  8.5 EER.                 
Units without reverse cycle and without                                 
 louvered sides:                                                        
    Capacity less than 8,000 Btu/h...........  9.0 EER.                 
    Capacity 8,000 Btu/h or more.............  8.5 EER.                 
Units with reverse cycle, with louvers.......  8.5 EER. ***             
Units with reverse cycle, without louvers....  8.0 ERR.***              
Casement-only................................  8.7 EER.                 
Casement-slider..............................  9.5 EER.                 
------------------------------------------------------------------------
*** AHAM would prefer to set the standard for reverse cycle units 0.5   
  EER less than the standard for its ``cool-only'' counterpart. This    
  recommendation results in ten classes for reverse cycle units. Because
  DOE did not support ten classes for reverse cycle units, AHAM stated  
  that the standard should be set in reference to the highest capacity  
  class. For example, if the standard for models without reverse cycle, 
  without louvers, 20,000 Btu/h or more were set at 8.5 EER, then the   
  standard for units with reverse cycle, without louvers, 20,000 Btu/h  
  or more should be set at 8.0 EER. (AHAM, RAC No. 6 at 2-3.)           

    Following the meetings in late September 1996, ACEEE modified its 
recommendation to the following standards (ACEEE/NRDC, RAC No. 5 at 4-
5)

[[Page 50136]]



------------------------------------------------------------------------
                    Class                               Standard        
------------------------------------------------------------------------
Without reverse cycle and with louvered sides  9.7 EER.                 
 less than 6,000 Btu/h.                                                 
Without reverse cycle and with louvered sides  9.7 EER.                 
 6,000 to 7,999 Btu/h.                                                  
Without reverse cycle and with louvered sides  9.8 EER.                 
 8,000 to 13,999 Btu/h.                                                 
Without reverse cycle and with louvered sides  9.7 EER.                 
 14,000 to 19,999 Btu/h.                                                
Without reverse cycle and with louvered sides  8.5 EER.                 
 20,000 or more Btu/h.                                                  
Without reverse cycle and without louvered     9.0 EER.                 
 sides less than 14,000 Btu/h.                                          
Without reverse cycle and without louvered     8.5 EER.                 
 sides 14,000 or more Btu/h.                                            
With reverse cycle and with louvered sides...  9.0 EER.                 
With reverse cycle, without louvered sides...  8.5 EER.                 
Casement (Casement-only and Casement-slider).  9.5 EER.                 
------------------------------------------------------------------------

    For classes without louvered sides, ACEEE and NRDC stated in their 
November 1996 comments that they were willing to accept 8.5 EER for 
capacities of 14,000 Btu/h or more. However, ACEEE and NRDC emphasized 
their recommendation of 9.0 EER for the 8,000--13,999 Btu/h capacity 
class, stating that: this EER is the minimum life cycle cost point 
according to the Draft Report; the 1994 sales weighted average of 8.73 
EER approaches this recommendation; and 20 percent of 1996 models in 
this class meet or exceed this level according to the March 1996 AHAM 
Directory. They were concerned that AHAM's 8.5 EER recommendation could 
``create a loophole in that units without louvered sides at 8.5 EER 
would cost manufacturers less than units with louvered sides at 9.5 EER 
($240 vs. $263 according to the DOE draft analysis).'' (ACEEE/NRDC, RAC 
No. 5 at 3.) In its comments to the Draft Report, AHAM states that 
there is a significant cost and energy efficiency differential between 
models with and without side louvers. (AHAM, RAC No. 6 at 2.) In 
February 1997, ACEEE and NRDC urged the Department to raise the 
standard for class 8 to at least 8.7 EER. (ACEEE/NRDC, RAC No. 14 at 
3.)
    As discussed earlier, although manufacturers currently do not 
produce units in two of the existing five capacity classes, the 
Department has retained the five capacity-based classes. The Department 
conducted analyses only for the two classes for which manufacturer data 
were available (the 6,000 to 7,999 Btu/h and the 8,000 to 13,999 Btu/h 
classes.) In this Final Rule, the Department has applied the same 
efficiency standard (9.0 EER) to the 6,000 to 7,999 Btu/h class and the 
less than 6,000 Btu/h class. The efficiency standard for the 8,000 to 
13,999 Btu/h class (8.5 EER) is also applied to the 14,000 to 19,999 
Btu/h class and the 20,000 Btu/h or more class. According to 1997 AHAM 
Directory, the highest capacity ``through-the-wall'' unit currently 
manufactured has a capacity of 12,500 Btu/h, and only one manufacturer 
currently makes units at a capacity of 9,000 Btu/h or higher which meet 
the 8.7 EER standard proposed by ACEEE/NRDC. On this basis, the 
Department has determined that raising this standard is likely to 
result in higher capacity models being withdrawn from the market to the 
disbenefit of consumers.
    With regard to the comment that units without louvered sides at 8.5 
EER would cost manufacturers less than units with louvered sides at 9.5 
EER, ACEEE and NRDC appear to refer to the values found in tables 1.12 
and 1.16 in the Draft Report. The two units being compared have 
different capacities; therefore a direct cost comparison is not 
appropriate. However, the Department shares the general concern about 
the possibility that differences in standard levels for different 
classes may cause shifts in product use and sales, and as stated 
previously, the Department intends to monitor market trends for these 
classes. If it appears that products without louvers are used in lieu 
of units with louvers because of differences in energy efficiency 
standards, the Department will consider the need to set comparable 
standards during its next review of room air conditioner standards.
    In their comments to the Draft Report, ACEEE and NRDC recommend a 
9.0 EER for reverse cycle units with louvers and an 8.5 EER for reverse 
cycle units without louvers. They stated that these levels are well 
below the minimum life-cycle cost point of the Draft Report. 
Furthermore, they state that a third of the 1996 reverse cycle units 
with louvers and 80 percent of the 1996 reverse cycle units without 
louvers meet these levels. The advocates also note that the only 
reverse cycle unit in the 1996 AHAM directory above 20,000 Btu/h has a 
9.0 EER. (ACEEE/NRDC, RAC No. 5 at 3.) In addition, they are concerned 
about ``loopholes'' which may result if the standards are not raised. 
(RAC, No. 12 at 1.) AHAM counters that a loophole would not be created 
because the cost of building a unit with a reverse valve is ``quite 
significant.'' (AHAM, RAC No. 6 at 3.) The energy advocates also state 
that the Department's analysis appears to only evaluate cooling energy 
savings and not heating energy savings. (ACEEE/NRDC, RAC No. 5 at 2.)
    In response to comments, DOE has split classes 11 and 12. AHAM, 
NRDC, and ACEEE all recommended setting the standards for reverse cycle 
units at 0.5 EER less than their cool-only counterparts. (ACEEE/NRDC, 
RAC No. 3 and AHAM, No. 1 at 21.) For units with reverse cycle and 
louvered sides, the energy efficiency advocates believe an EER of 9.0 
is acceptable. (ACEEE/NRDC, RAC No. 5 at 5.) AHAM also finds this level 
to be acceptable for units with capacities less than 20,000 Btu/h. 
However, for units at 20,000 Btu/h or more, AHAM argues that the 
standard should not be higher than the standard for its ``cool-only'' 
counterpart. (AHAM, RAC No. 6 at 3.) The Department agrees. By 
splitting class 11 at 20,000 Btu/h, the Department can raise the 
standard for most of the units with reverse cycle and with louvers to 
9.0 EER, without raising the standard for units of capacities of 20,000 
Btu/h or more above the 8.5 EER of its cool-only counterpart.
    Similarly, the Department has split class 12 and set the standard 
for units less than 14,000 Btu/h at 8.5 EER while keeping the standard 
for units of 14,000 Btu/h or more at 8.0 EER. This split is largely 
consistent with the recommendations of ACEEE, NRDC, and AHAM for a 0.5 
EER differential between reverse cycle units and their ``cool-only'' 
counterparts for units without louvers, with the exception of units in 
the 8,000-13,999 Btu/h capacity range for which there is no 
differential. According to the 1997 AHAM directory, only one model with 
reverse cycle and without louvers in this capacity range does not meet 
an 8.5 EER. In response to the advocates question as to why the 
Department's analysis only evaluates cooling energy savings and not 
heating energy savings, the Department does not evaluate heating 
savings because the test procedure is unable to account for the heating 
energy savings.

[[Page 50137]]

    In their February 1997 comments to the notice reopening the comment 
period, ACEEE/NRDC stated that establishing separate classes with 
weaker standards for higher capacity units with a reverse cycle is 
unnecessary because all currently existing models at these capacity 
levels meet their recommended standards, without splitting the classes. 
(ACEEE/NRDC. RAC No. 14 at 3.) Although all currently existing models 
with louvers and with a reverse cycle at 20,000 Btu/h or more meet a 
9.0 EER, the Department does not believe new models entering the market 
should be required to meet a standard higher than the standard for a 
unit without a reverse cycle. In addition, the Department recognizes 
that no models currently exist with a reverse cycle and without louvers 
at 14,000 Btu/h or more; however, the Department believes that it 
should allow manufacturers the opportunity to design units without 
louvers and with a reverse cycle at higher capacities, and the evidence 
indicates that manufacturers could not meet a standard greater than 8.0 
EER at capacities of 14,000 Btu/h or more. Furthermore, in April 1996, 
the advocates supported AHAM's recommendation to make the standard for 
reverse cycle units 0.5 EER less than the standard for its cool-only 
counterpart. (ACEEE/NRDC, RAC No. 3 at 3.) This recommendation would 
create 10 classes for reverse cycle room air conditioners. Thus, the 
Department questions why the advocates suggest that promoting only four 
classes for reverse cycle units is superfluous.
    AHAM stated that casement-type units are already using all 
available design options and are limited in size because of their 
applications. (AHAM, No. 1 at 22.) In its comments to the Draft Report, 
AHAM recommended efficiency standards of 9.5 EER for slider/casement 
units and 8.7 EER for casement-only units. (AHAM, RAC No. 6 at 2.) In 
its comments to the 1994 Proposed Rule, Frigidaire recommended a 
standard of 9.0 EER for slider/casement units. (Frigidaire, No. 544 at 
6.) Because the 1994 Proposed Rule did not propose standards for 
casement-type units, ACEEE, CEC, NRDC, and the New York State Energy 
Office (NYSEO) urged the Department to collect the necessary data in 
order to perform an analysis and set efficiency standards for these 
units. ACEEE and NRDC stated that if data is not available to perform 
an analysis, standards should be set for casement-type units that are 
equivalent to those for typical room air conditioners. NRDC added that 
the Department is prohibited under NAECA from reducing the stringency 
of energy efficiency standards. The CEC asked the Department to clarify 
whether States may adopt efficiency standards for casement-type classes 
without preemption or whether another standard level applies to these 
products until the Department adopts a separate level. (ACEEE, No. 557 
at 23; CEC, No. 539 at 3; NRDC, April 5, 1994, Transcript at 116-117; 
NYSEO, June 8, 1994, Transcript at 18-19.) The Department considers 
casement-type units to be air conditioners. Therefore, these units are 
subject to the currently applicable standards based on unit capacity 
and the presence or absence of louvered sides and a reverse cycle.
    In their February 1997 comments, ACEEE and NRDC stated that a 
special class set aside for one casement-only model in existence is not 
necessary. They are concerned that a casement-only unit at an 8.7 EER 
will be less expensive to produce than a ``standard'' unit at 9.7 EER. 
They believe this cost disparity would cause manufacturers to 
capitalize on this niche class. (ACEEE/NRDC, RAC No. 14 at 2.) AHAM 
counters that casement units are expensive relative to their capacity 
and that there would be no economic incentive to exploit this class. 
Furthermore, casement-only units add a unique utility not provided by 
casement-slider units. (AHAM, RAC No. 16 at 3.) In addition, in 
February 1997, Friedrich provided information regarding the relative 
costs of casement room air conditioners as compared to ``standard'' 
models with side louvers and without a reverse valve. This information 
shows that casement-only and casement-slider room air conditioners are 
significantly more expensive than units that do not meet the size 
constraints of casement room air conditioners. (RAC No. 18.) Therefore, 
the Department has found no economical advantage to using casement-type 
units at lower energy efficiency ratings for standard room air 
conditioner applications. Thus, the Department has selected separate 
classes for casement room air conditioners. DOE has selected the 
efficiency standard recommended by AHAM, ACEEE, and NRDC for casement-
slider units (9.5 EER) (AHAM, RAC No. 6 at 2 and ACEEE/NRDC, RAC No. 5 
at 5) and the standard recommended by AHAM for casement-only units (8.7 
EER). (AHAM, RAC No. 6 at 2.) However, due to the energy efficiency 
advocates' concern about the possibility of ``loopholes,'' the 
Department will monitor market trends for these classes. If it appears 
that casement units are used in lieu of ``standard'' units because of 
differences in energy efficiency standards, the Department will 
consider the need to set comparable standards during its next review of 
room air conditioner standards.
    AHAM stated that its recommended standards would result in 
meaningful energy savings but would alleviate the economic burden on 
manufacturers. AHAM states that in light of the economic burden of 
chassis size increases, the cumulative burden of other rulemakings, and 
the relatively modest energy use of room air conditioners that ``more 
stringent standards than that proposed by industry would be 
unreasonable and unjustified.'' (AHAM, RAC No. 6 at 1.)
    The standards established in today's rule are similar to the 
standards recommended by AHAM. The Department selected slightly higher 
standards for the first four classes. AHAM's primary concern was the 
cost of increasing chassis size. Because the standard levels the 
Department has selected for the first five classes are based on the 
life cycle cost minimums when the cost of increasing chassis size is 
prorated, the Department believes the cost impact is reduced.
5. Other Comments
    Effective date of standards. Commenting on the 1994 Proposed Rule, 
Fedders proposed accelerating the effective date from January 1st to 
August 1st. It claimed this would prevent manufacturers from producing 
large quantities of less efficient units during the months of August 
through December. (Fedders, April 7, 1994, Transcript at 123-124.)
    AHAM urged the Department to set an effective date of October 1, 
2000, in order to coordinate with manufacturing cycles. AHAM stated 
that production begins in August or September and runs through June or 
July. AHAM stated that an arbitrary effective date of 3 years from the 
date of the rule, and likely in the middle of a manufacturing season, 
would cause severe economic hardships on manufacturers which are not 
accounted for in the manufacturing impact analysis. (AHAM, RAC No. 16 
at 3.)
    The Department agrees, due to the unique seasonal nature of room 
air conditioners, the effective date should be coordinated with 
manufacturing cycles. Thus, this rule will take effect on October 
1,2000.
    Units consuming less than 500 watts. Commenting on the 1994 
Proposed Rule, Fedders recommended that room

[[Page 50138]]

air conditioners consuming less than 500 watts be exempted from 
regulation. In support of this recommendation, it stated that a 3000 
Btu/h capacity unit at an efficiency of 8.0 EER consumes 375 watts 
compared to a 5000 Btu/h capacity unit at 11.1 EER that consumes 450 
watts. Fedders argued that this exemption would encourage development 
of units that are smaller and consume less energy and resources. 
(Fedders, April 7, 1994, Transcript at 122-123.) AHAM, Frigidaire, 
NRDC, and the ACEEE all opposed the Fedders' recommendation. AHAM 
disagreed with Fedders' claim that as many as two-thirds of the rooms 
in which 5000 Btu/h capacity units are installed could be adequately 
cooled with units as small as 3000 Btu/h. AHAM saw no reason that 
smaller units should be given an advantage by being exempted from a 
standard and ``strenuously disagreed with Fedders' proposed exemption 
for models of less than 500 watts.'' (AHAM, No. 1 at 23 and AHAM, RAC 
No. 4 at Attachment 1, pg 4.) Frigidaire stated that the recommendation 
by Fedders is counterproductive to saving energy as, under it, low 
capacity units of low efficiency will be introduced into the 
marketplace. (Frigidaire, No. 544 at 11.) The NRDC agreed with the 
motivation behind Fedders' suggestion but did not agree with the 
specifics of the recommendation as it would allow the creation of a new 
market driven entirely by low first cost. NRDC suggested that the 
Department consider a lower standard for a product class below 4000 
Btu/h in capacity based on comparable criteria to the standard set for 
the below 6000 Btu/h class. (NRDC, No. 55 at 28.) The ACEEE opposed the 
Fedders' recommendation as it believes it could lead to widespread use 
of inefficient smaller capacity units. (ACEEE, No. 557 at 22.)
    The Department agrees with both AHAM and ACEEE that room air 
conditioners which consume less than 500 watts should not be exempt 
from efficiency regulation. The Department recognizes that small 
capacity units may draw less power than larger capacity systems. But 
the Department does not agree with Fedders' claims that, for units in 
the less than 6000 Btu/h class, small capacity units will consume less 
energy than more efficient, larger capacity systems. In creating a 
separate product class for units with capacities below 6000 Btu/h, the 
Department has recognized that small capacity units are used 
differently than units in larger capacity classes. Applications for 
small capacity units tend to be for small rooms where the cooling load 
is relatively low. To further differentiate the less than 6000 Btu/h 
class by capacity would require field tests demonstrating that there 
are applications which are suitable specifically for units with 
extremely small capacities. Such field data has not been presented.
    Phase out of HCFC-22. With concern that the phase out <SUP>4</SUP> 
of HCFC-22 (the refrigerant used by all room air conditioners) might be 
accelerated, AHAM recommended, in its comments to the 1994 Proposed 
Rule, that the Department promulgate a second tier of standard levels 
for HCFC-free room air conditioners. AHAM stated that some replacement 
refrigerants show a drop in efficiency of 10 percent. AHAM proposed 
that the second tier be set initially at 10 percent less than the 
efficiency standards for room air conditioners using HCFC-22. AHAM 
proposed that second tier of standards would be effective upon the 
phase-out date of HCFC-22 and would not be available if the HCFC-22 
phase out date is not accelerated. (AHAM, No. 1 at 22,23.) Because 
compressor testing indicates that alternative refrigerant blends will 
decrease efficiency, Matsushita commented that any efficiency standards 
promulgated for room air conditioners should apply only to units 
charged with HCFC-22. (Matsushita, April 7, 1994, Transcript at 91-92.) 
Frigidaire urged the Department to consider possible energy penalties 
for HCFC-22 alternative refrigerants. (Frigidaire, No. 544 at 11.) NRDC 
did not support creating less stringent standards for room air 
conditioners using alternative refrigerants. NRDC believed that units 
with new refrigerant alternatives can attain the same efficiency level 
as units using HCFC-22. NRDC suggested that the Department collaborate 
with the Environmental Protection Agency on decisions regarding the 
phase out of HCFCs. Because the Department must promulgate another 
rulemaking before a phaseout would occur, NRDC stated that the phase 
out date of HCFC-22 is not within the period of applicability for room 
air conditioner efficiency standards. It urged that the Department 
should not plan around a phase out requirement that does not exist. 
(NRDC, No. 55 at 27,28.) ACEEE stated that alternative refrigerants, 
such as AZ-20, have been demonstrated to increase room air conditioner 
efficiency as compared to HCFC-22. (ACEEE, No. 557 at 21.)
---------------------------------------------------------------------------

    \4\ The EPA's final rule accelerating the phaseout of ozone-
depleting substances bans the production and consumption of virgin 
HCFC-22 unless it is used as feedstock or in equipment manufactured 
before January 1, 2010. The final rule also bans the production and 
consumption of HCFC-22 on January 1, 2020, except for limited 
exemptions specified by statute. 60 FR 24970 (Wednesday May 10, 
1995).
---------------------------------------------------------------------------

    In 1996, Fedders stated it has concern over replacement 
refrigerants. Fedders commented that the Montreal Protocol may require 
phase-out sooner than the current phaseout date of 2010. Fedders stated 
that the industry will be required to do extensive retooling if the new 
standards cannot be met with replacement refrigerants. Furthermore, 
Fedders stated that the U.S. is ``dangerously close to the legal caps 
of HCFC chemicals.'' Fedders was concerned ``the EPA will impose 
restrictions on production, thereby necessitating implementation of 
replacement refrigerants quickly.'' Therefore, Fedders recommended 
maintaining the current energy efficiency regulations until the issues 
related to refrigerant charges are ``resolved and implemented into 
commerce.'' (Fedders, RAC No. 7 and RAC No. 8.)
    In its comments to the 1996 Draft Report, AHAM stated that the 
issue of replacement refrigerants is a far more serious problem than 
the Department acknowledges. It states that because of the size 
restrictions of room air conditioners and because the compressor and 
condenser are located in a window, the potential adverse effects of 
high pressure refrigerants are higher, and low pressure alternates 
demonstrate efficiency penalties. (AHAM, RAC No. 4 at 5.) In February 
1997, AHAM requested that the Department make a provision for 
compliance problems which may result from the transition to HCFC-free 
refrigerants.
    In their comments to the Draft Report, ACEEE and NRDC stated that 
because the standard set forth in today's rule will cover the 2000-2005 
time period, alternative refrigerants will likely be an issue for the 
next statutorily required standard review but not this review. In 
addition, the advocates state that it is unlikely for replacement 
refrigerants to result in an energy penalty and may result in a slight 
energy efficiency increase. (ACEEE/NRDC, RAC No. At 3.)
    The Department agrees that the phase out date of 2010 for HCFC-22 
is far enough in the future that no adjustment to these standards is 
necessary. Replacements for HCFC-22 are being developed. Concerned over 
the impact that the phase out of HCFC-22 would have on the unitary air 
conditioner and heat pump industry, the Air Conditioning and 
Refrigeration Institute initiated the Alternative Refrigerant

[[Page 50139]]

Evaluation Program (AREP). AREP has identified several HCFC-22 
alternatives. Two of the more promising replacements include a low-
glide ternary blend consisting of HFC-32, HFC-125 and HFC-134a 
refrigerants, and an azeotrope consisting of H.C.-32 and H.C.-125 
refrigerants. A detailed discussion of replacement refrigerants can be 
found on page 1.18 of the TSD.
    Although two of the more promising alternatives demonstrate slight 
disadvantages compared to R-22, the Department expects that the 
performance characteristics of the available alternative refrigerant 
blends will improve as more experience is gained with their use in 
different formulations. The Department does not anticipate a problem 
with degradation of performance of refrigerants related to the HCFC-22 
phaseout. The EPA states that it does not intend to accelerate the 
HCFC-22 phaseout. (RAC No. 19.) The Department recognizes the 
possibility that the phaseout date could be accelerated or the 
availability of HCFC-22 could diminish. DOE will continue to monitor 
the situation and take appropriate actions.
    Based on this information, the Department declines to establish a 
two tier system that takes into account a possible degradation in 
system performance using replacement refrigerants.
    Exemption of refrigerant-gas free units. Fedders stated that in 
order to promote the research and development of alternative air 
conditioning systems, the Department should exempt refrigerant-gas free 
room air conditioners from efficiency regulation. (Fedders, April 7, 
1994, Transcript at 123.)
    The Department will not exempt refrigerant-gas free room air 
conditioners from efficiency regulation because the energy conservation 
policies underlying the EPCA do not support such an exemption.
    Installation Costs. A few commenters opposed the proposed standard 
because of increased installation costs. (G&S No. 302 at 2; Amana, No. 
347 at 2; Southwestern Public Service Co No. 495 at 5; Whirlpool, No. 
391A at 4; CHGEC, No. 601 at 1; and AHAM No. 1 for some classes.)
    The Department analyzed the net consumer benefit from the 
imposition of the standards, estimating costs, including installation 
costs, and benefits to the utility customer, and concluded that the 
benefits outweighed the increased costs.
6. Other comments regarding FR Notice of January 29, 1997
    Southern Company Services, Inc. stated that these standards appear 
reasonable and economically justified. (Southern Gas, RAC No. 15 at 1.) 
ACEEE and NRDC stated that the standards the Department indicated it 
was inclined to select for the final rule were generally reasonable, 
and they strongly supported those standards for the first five classes. 
For the remaining classes, they suggested a few changes which were 
addressed under ``Efficiency Standards Recommendations.'' (ACEEE/NRDC, 
RAC No. 14 at 3.) AHAM stated that under two critical conditions, the 
majority of their members accepted the standard levels the Department 
indicated it was inclined to select in the January 29 notice. These 
conditions concerned non-HCFC refrigerants and the effective date of 
the standards, discussed in the previous section. (AHAM, RAC No. 16 at 
1) Glenn Schleede of Energy Market & Policy Analysis, Inc. (EM&PA) 
stated that the economic analysis is based on outdated and invalid 
assumptions about potential energy costs. Mr. Schleede's comments dealt 
specifically with: overestimating national energy cost savings; using 
total residential electricity cost per kilowatt-hour to calculate 
national and consumer energy savings; the utility impact model; and the 
variables and assumptions used in the model. Mr. Schleede believes all 
calculations of life cycle costs, payback periods, and consumer energy 
cost savings in the TSD are based on unrealistically high estimates of 
future energy (particularly electricity) prices. He also believes the 
Department has not ``taken into account the interests of real 
consumers.'' (EM&PA, RAC No. 17.)
    In the analyses for the Draft Report, the Department utilized EIA 
forecasts that have not yet addressed the possible price effects of the 
electric utility regulatory reforms and industry restructuring that are 
anticipated. Due to this and other uncertainties in electricity price 
forecasts, the Department conducts sensitivity analyses to bound the 
possible ranges of impacts. The Department intends to increase the use 
of sensitivity analyses and scenario analyses in future rulemakings. 61 
FR at 36987 (to be codified at 10 CFR Part 430, Subpart C, Appendix A, 
section 11(e)(1)). The Department will continue to examine how to 
better account for these changes in the future.
    Various cases of Net Present Value (NPV) and life-cycle cost 
sensitivity to changes in energy price and equipment price were 
analyzed. These sensitivity analyses are discussed in section IV.c.2., 
``Life-cycle Cost and Net Present Value,'' of today's rule. These 
sensitivity analyses included the effect of using the lowest state 
energy prices on life-cycle cost and the use of energy price 
projections provided by the Gas Research Institute to calculate NPV and 
energy savings.
    As a complement to energy price sensitivities, the Department 
calculated the cost of conserved energy (CCE) for its appliance energy-
efficiency standards under consideration. The CCE is the increase in 
purchase price amortized over the lifetime of the appliance. The 
advantage of the CCE approach is that it does not require assumptions 
about future energy prices, because it uses only the purchase expense 
of the efficiency measure and the expected energy savings. The consumer 
will benefit whenever the cost of conserved energy is less than the 
energy price paid by the consumer for that end use. The CCE's 
calculated for the standards set forth in today's rule are all less 
than the energy prices projected by either the EIA or GRI. See 
Supplemental tables 4.10-4.18 in the TSD.
    For consumer impacts such as payback and changes in life cycle 
cost, which are measured at the effective date of the standard, the 
Department believes both fixed and variable costs should be included 
because these costs are currently reflected in consumer utility bills 
based on cost-of-service rates. It is not anticipated that the 
reductions in energy demand resulting from energy efficiency standards 
for room air conditioners are likely to have any significant effect on 
consumer electricity rates (or prices).
    In estimating the national net present value of the cost savings 
resulting from more stringent efficiency standards, it may be 
appropriate to distinguish between the expected cost impacts on 
individual consumers and the cost impacts on the nation as a whole. To 
determine whether there is a significant difference between consumer 
and national cost impacts, it would be necessary to distinguish between 
the long run fixed and variable costs of serving residential 
electricity demand. For example, if electricity demand is reduced, 
utilities will be able to cut back immediately on the fuel used to 
generate electricity and, over the long run, should also be able to 
reduce their power generating, transmission and possibly even their 
distribution capacity. However, reduced demand is unlikely to affect 
the cost to a utility of billing and servicing individual

[[Page 50140]]

customers. Furthermore, because virtually all consumer electricity 
rates are still based on average costs and do not reflect the 
variations in these costs that occur hourly, it is also possible that 
improving the efficiency of particular appliances will result in 
significant reductions in the high costs of meeting peak demand or, in 
other cases, may simply reduce utility base loads (resulting in much 
lower cost savings). Unfortunately, the Department does not have 
adequate information upon which to distinguish accurately between 
consumer cost savings and the cost reductions likely to be experienced 
by utilities or the nation as a whole. In the absence of such 
information, the Department believes that its use of retail prices as 
the basis for calculating the net present value of projected cost 
savings to the nation (national benefits) is a reasonable approach.
    In addition to the impact of energy savings in today's world, there 
is much speculation as to the impact of electric utility restructuring 
on future electric rates. However, with federal and state regulations 
being very undefined, the Department believes it would be pointless to 
attempt to reflect unknown future electric rate structures in today's 
analyses. In future rulemakings, the Department will consider such 
impacts as they become evident. The Department concludes from the 
information set forth above that it is properly calculating consumer 
energy cost savings and national net present value.
    With regard to the variables and assumptions used in the models, 
the assumptions regarding discount rates have been discussed 
extensively, and DOE used the discount rates it determined to be most 
appropriate. For future rulemakings, the Department always seeks and 
welcomes the most current information regarding its models and will 
continue to improve them.

b. General Analytical Comments

    This section discusses the general analytical issues raised by the 
comments to the 1994 Proposed Rule.
    The Engineering Analysis identified design options for improvements 
in efficiency along with the associated costs to manufacturers for each 
class of product. For each design option, these costs constitute the 
increased per-unit cost to manufacturers to achieve the indicated 
energy efficiency levels. Manufacturer, wholesaler, and retailer 
markups will result in a consumer purchase price higher than the 
manufacturer cost.
    In the analysis which supported the Draft Report, the Department 
used a computer model that simulates a hypothetical company to assess 
the likely impacts of standards on manufacturers and to determine the 
effects of standards on the industry at large. This model, the 
Manufacturer Analysis Model (MAM), is described in the TSD. (See TSD, 
Appendix C.) It provides a broad array of outputs, including shipments, 
price, revenue, net income, and short- and long-run returns on equity. 
An ``Output Table'' lists values for all these outputs for the base 
case and for each of the five standard levels analyzed. It also gives a 
range for each of these estimates. The base case represents the 
forecasts of outputs with a range of energy efficiencies which are 
expected if there are no new or amended standards. A ``Sensitivity 
Chart'' (TSD, Appendix C) shows how returns on equity would be affected 
by a change in any one of the nine control variables of the model. The 
Manufacturer Analysis Model consists of 13 modules. The module which 
estimates the impact of standards on total industry net present value 
is version 1.2 of the Government Regulatory Impact Model (GRIM), dated 
March 1, 1993, which was developed by the Arthur D. Little Consulting 
Company (ADL) under contract to AHAM, the Gas Appliance Manufacturers 
Association (GAMA), and the Air-Conditioning and Refrigeration 
Institute (ARI). (See TSD, Appendix C for more details.)
    Arthur D. Little, Inc. (ADL) submitted comments on the 1994 
Proposed Rule on behalf of AHAM, the Air-Conditioning and Refrigeration 
Institute (ARI), and the Gas Appliance Manufacturers Association 
(GAMA.) ADL and others criticized the methodology and analytical models 
used to assess standards. These comments raised concerns about the 
determination of the impact of standards on manufacturers, particularly 
the way the Department used the GRIM developed by industry, and the 
failure to consider the impact of multiple DOE and other agency 
regulations. Other analytical issues raised included the determination 
of consumer paybacks from energy savings, expected life of the product, 
economic assumptions, the use of prototypical firms, and other 
assumptions and variables used in the simulation model. (ADL, No. 665 
at 1, 8-10, 14-19; AHAM, Transcript April 7, 1994, at 173.) Amana 
commented that historical models are difficult to construct and that 
prices fluctuate, and therefore, the Department should not ``place too 
much stock in computer models.'' Basing its statement on the consumer 
price index (CPI), producer price index (PPI), and average energy use 
trends, Amana also stated that there is no evidence to suggest that 
capital cost increases due to efficiency improvements are passed on to 
the consumer. (Amana, No. 347 at 2-3.)
    In implementing the Process Rule, the Department is now undertaking 
a review of the manufacturing impact analysis model and methodologies. 
In developing its new methodology, the Department will take into 
account the comments received concerning its methodology. However, 
while DOE is committed to working with the interested public to improve 
these analytical tools, DOE believes the analytical approach used in 
conjunction with the Draft Report is a reasonable basis for assessing 
manufacturer impact.
    The Department recognizes that the manufacturers disagreed with the 
analytical method used in the 1994 Proposed Rule and the Draft Report 
regarding impacts on manufacturers. However, the Department assumes 
that the standards recommended by AHAM would not have adverse impacts 
on the industry or the individual manufacturers. The standards the 
Department sets forth in today's rule are quite similar to those 
recommended by AHAM. The Department has selected slightly higher (0.2-
0.3 EER) standards than those standards proposed by AHAM for the 
classes 1 through 4. AHAM's primary concern was the impact of the cost 
of chassis size increases on manufacturers. The Department took into 
consideration a graph provided by AHAM which shows the percent of 
production requiring a chassis size change at each EER level. In 
selecting the standard levels for classes 1 through 4, the Department, 
in an effort to mitigate the identified cost impact on manufacturers, 
was careful to avoid any significant increase in the percentage of 
production requiring a chassis size change.
    ACEEE recommended that DOE compile the best available data on two 
key variables: markup from manufacturer to the consumer and changes in 
purchase patterns in response to efficiency-induced price increases. 
This data should be used for the current analysis in both the 
Government Regulatory Impact Model (GRIM) and the Manufacturer Impact 
Model (MIM.) Over the long term, ACEEE suggested that DOE work with 
industry to co-fund a study on consumer purchase behavior in response 
to efficiency-induced price increases that would help improve the

[[Page 50141]]

usefulness of both GRIM and MIM. (ACEEE, No. 557 at 5.)
    DOE has decided to integrate the GRIM with the MIM which has 
resulted in the development of a new model entitled the Lawrence 
Berkeley Laboratory Manufacturer Analysis Model (LBL-MAM.) The 
Department will continue in its efforts to collect the best available 
data on markups to use in its analytical tools. With regard to consumer 
response to efficiency-induced price increases, the Department's 
consumer analysis contains, for each covered product, values that 
represent the likely response. These values were originally estimated 
by analyses of data concerning product purchases during the 1970's and 
have been updated. The Department continues attempting to update its 
assumptions where updates are warranted and welcomes ACEEE's 
suggestions. DOE will explore the feasibility of a cooperative study on 
empirically-verifiable updates on price elasticity.

IV. Analysis of Room Air Conditioner Standards

    Revised standards for room air conditioners shall be designed to 
achieve the maximum improvement in energy efficiency that is 
technologically feasible and economically justified. These and related 
statutory criteria are addressed below.

a. Efficiency Levels Analyzed

    The Department examined a range of standard levels for room air 
conditioners. Table 4-1 presents the five efficiency levels selected 
for analysis in the Draft Report, as well as the supplemental 
efficiency level. Level 5 corresponds to the highest efficiency level, 
max tech, considered in the engineering analysis. The Final TSD 
contains the information analyzed in the Draft Report and the 
supplemental analysis.
    After analyzing the comments received concerning the Draft Report, 
the Department decided to analyze an additional standard level, defined 
as the supplemental level. The Department calculated the energy 
savings, net present value, life-cycle cost, life-cycle cost 
sensitivity to energy prices, payback period, and environmental 
emissions reduction for this supplemental standard level. These tables 
can be found in the Supplemental section of the TSD.

                         Table 4-1.--Standard Levels Analyzed for Room Air Conditioners                         
----------------------------------------------------------------------------------------------------------------
                                                                 Suppl.                                         
           Product class              Level 1      Level 2       level       Level 3      Level 4      Level 5  
----------------------------------------------------------------------------------------------------------------
Without reverse cycle, with                                                                                     
 louvered sides, and less than                                                                                  
 6,000 Btu/h......................         9.32         9.71          9.7        10.00        10.38        11.74
Without reverse cycle, with                                                                                     
 louvered sides, and 6,000 to                                                                                   
 7,999 Btu/h......................         9.38         9.66          9.7         9.91        10.33        11.67
Without reverse cycle, with                                                                                     
 louvered sides, and 8,000 to                                                                                   
 13,999 Btu/h.....................         9.71         9.85          9.8        10.11        10.97        12.39
Without louvered sides, with                                                                                    
 reverse cycle, and 14,000 to                                                                                   
 19,999 Btu/h.....................         9.70         9.98          9.7        10.15        10.15        12.77
Without reverse cycle, with                                                                                     
 louvered sides, and 20,000 Btu/h                                                                               
 or more..........................         8.39         8.39          8.5         8.51         8.88        11.14
Without reverse cycle, without                                                                                  
 louvered sides, and less than                                                                                  
 6,000 Btu/h......................         9.10         9.10          9.0         9.23         9.23        11.52
Without reverse cycle, without                                                                                  
 louvered sides, and 6,000 to                                                                                   
 7,999 Btu/h......................         9.10         9.10          9.0         9.23         9.23        11.52
Without reverse cycle, without                                                                                  
 louvered sides, and 8,000 to                                                                                   
 13,999 Btu/h.....................         8.80         9.05          8.5         9.12         9.12        11.08
Without reverse cycle, without                                                                                  
 louvered sides, and 14,000 to                                                                                  
 19,999 Btu/h.....................         8.80         9.05          8.5         9.12         9.12        11.08
Without reverse cycle, without                                                                                  
 louvered sides, and 20,000 Btu/h                                                                               
 or more..........................         8.80         9.05          8.5         9.12         9.12        11.08
With reverse cycle and with                                                                                     
 louvered sides...................         9.05         9.05          9.0         9.27         9.27        11.16
With reverse cycle and without                                                                                  
 louvered sides...................         8.72         8.72          8.5         8.86         8.86        10.87
----------------------------------------------------------------------------------------------------------------

    Rather than presenting the results for all classes of room air 
conditioners in today's rule, the Department selected a class of room 
air conditioners as being representative, or typical, of the product 
and is presenting the results only for that class. The results for the 
other classes can be found in the TSD in the same sections as those 
referenced for the representative class. The representative class for 
room air conditioners is units with side louvers, without a reverse 
cycle, and with a capacity of 8,000-13,999 Btu per hour. This class of 
room air conditioners has the largest sales volume. For this 
representative class, trial standard level 1 accomplishes efficiency 
improvements from the baseline by increasing the compressor EER to 
10.8; level 2 adds a subcooler; level 3 adds evaporator and condenser 
grooved tubing; level 4 increases the evaporator and condenser coil 
area; and level 5 adds a variable-speed compressor and brushless 
permanent magnet fan motor. Similar design options are used to achieve 
the above efficiencies for the other classes and are found tabulated in 
Section 1.5 of the TSD. The supplemental level was not based on any 
specific configuration of design options, but rather it resulted from 
consideration of the comments DOE received regarding the Draft Report. 
The analysis used in the Draft Report became the basis for the TSD. 
Consequently, calculations in the TSD and today's rule are based on 
those energy price forecasts from the 1995 Annual Energy Outlook (AEO) 
of the Energy Information Administration (EIA) , the current forecast 
at the time of the analysis, unless otherwise noted. (DOE/EIA-
0383(95)). Supplemental calculations were performed where the 
Department determined it would be appropriate to reflect the most 
current prices.
    The Department believes that all the standard levels it examined 
are technologically feasible. The only questions which were raised by 
commenters about technological feasibility pertained to Brushless 
Permanent Magnetic (BPM) fan motors and variable speed compressors. 
These

[[Page 50142]]

design options were only considered at the most stringent standard 
levels.

b. Significance of Savings

    Under section 325(o)(3)(B) of EPCA, the Department is prohibited 
from adopting a standard for a product if that standard would not 
result in ``significant'' energy savings. The Department forecasted 
energy consumption by the use of the LBL-REM. (See Appendix B of the 
TSD.) To estimate the energy savings by the year 2030 due to revised 
standards, the energy consumption of new room air conditioners under 
the base case is compared to the energy consumption of those sold under 
the candidate standard levels. For the candidate energy conservation 
standards, the Lawrence Berkeley Laboratory-Residential Energy Model 
projects that over the period 1999-2030, the following energy savings 
would result for all classes of the product:

Level 1--0.36 Quad
Level 2--0.52 Quad
Supplemental Level--0.49 Quad
Level 3--0.69 Quad
Level 4--0.96 Quad
Level 5--0.72 Quad

    The preceding values of energy savings use AEO 1995 energy price 
forecasts; however, calculating the energy savings for the supplemental 
level using AEO 1997 produces an energy savings of 0.64 
Quad.<SUP>5</SUP>
---------------------------------------------------------------------------

    \5\ AEO 1995 projected higher energy prices in the future as 
compared to AEO 1997. Consequently, using AEO 1995 projections, a 
larger percentage of consumers are projected to purchase higher 
efficiency room air conditioners in the absence of standards (in the 
base case), as compared to the base case using AEO 1997 projections. 
This relative difference results in a larger projected energy 
savings between the base case and the standards case using AEO 1997 
projections as compared to AEO 1995 projections.
---------------------------------------------------------------------------

    While the term ``significant'' is not defined in EPCA, the U.S. 
Court of Appeals for the District of Columbia Circuit concluded that 
Congress intended the word ``significant'' to mean ``non-trivial.'' 
Natural Resources Defense Council v. Herrington. 768 F.2d 1355, 1373 
(D.C.Cir. 1985). Thus, for this rulemaking, DOE concludes that each 
standard level considered results in significant energy savings.

c. Economic Justification

    Section 325(o)(2)(B) of EPCA provides seven factors to be 
evaluated, to the greatest extent practicable, in determining whether a 
conservation standard is economically justified.
    1. Economic Impact on Manufacturers and Consumers
    The engineering analysis identified improvements in efficiency 
along with the associated costs to manufacturers for each efficiency 
level for each class of product. For each design option, these 
associated costs constitute the increased per-unit cost to 
manufacturers to achieve the indicated energy efficiency levels. 
Manufacturer, wholesaler, and retailer markups will result in a 
consumer purchase price higher than the manufacturer cost.
    To assess the likely impacts of standards on manufacturers and to 
determine the effects of standards on different-sized firms, the 
Department used a computer model that simulates hypothetical firms in 
the industry under consideration. This model, the Manufacturer Analysis 
Model (MAM), is explained in the TSD. (See TSD, Appendix C.)
    For consumers, measures of economic impact are the changes in 
purchase price, annual energy expense, and installation costs. The 
purchase price, installation cost, and cumulative annual energy 
expense, i.e., life-cycle cost, of each standard level are presented in 
Chapter 3 of the TSD. Under section 325 of the EPCA, the life-cycle 
cost analysis is a separate factor to be considered in determining 
economic justification.
    The per unit increased costs to manufacturers to meet the 
efficiency of levels 1-5 for the representative class are $6.11, $8.37, 
$13.17, $47.09, and $242.52, respectively. The increased per unit cost 
for the supplemental level falls within the range of $6-$9 for the 
representative class. See Tables 1.10-1.18 in the TSD.
    The consumer price increases for the representative class are 
estimated to be $11, $15, $23, $82, and $434 for standard levels 1-5, 
respectively. The consumer price increase for the supplemental level is 
estimated to be $13. See Tables 4.1-4.9 and Supplemental Tables 4.1-4.9 
in the TSD.
    The per-unit reduction in annual costs of operation (i.e., energy 
expense) for the representative class are $2, $3, $4, $8, and $13 for 
standard levels 1-5, respectively, and $2.5 for the supplemental level. 
See Tables 4.1-4.9 and Supplemental Tables 4.1-4.9 in the TSD.
    The Lawrence Berkeley Laboratory-Manufacturer Impact Model results 
for all classes of room air conditioners show that revised standards 
could cause a prototypical manufacturer to have some reductions in 
short-run return on equity from the 10.9 percent return in the base 
case. Standard levels 1 through 5 are projected to produce short-run 
returns on equity of 10.7 percent, 10.6 percent, 10.5 percent, 8.8 
percent, and 0.13 percent, respectively. The short-run return on equity 
for the supplemental level is projected to be in the range of 10.5-10.7 
percent. Revised standards have little or no effect on the prototypical 
manufacturer's long-run return on equity. Standard levels 1 through 5 
are projected to produce long-run returns on equity of 10.8 percent, 
10.8 percent, 10.8 percent, 10.3 percent, and 7.2 percent, 
respectively. For the supplemental level the long-run return on equity 
would also be approximately 10.8 percent. See Tables 5.1 and 5.3 in the 
TSD.
    2. Life-cycle Cost and Net Present Value
    One measure of the effect of proposed standards on consumers is the 
change in life-cycle costs, including recurring operating expenses, the 
purchase price, and the installation costs resulting from the new 
standards. The change in life-cycle cost is quantified by the 
difference in the life-cycle costs between the base case and candidate 
standard case for each of the product classes analyzed. The life-cycle 
cost is the sum of the purchase price and the cumulative operating 
expense, including installation and maintenance expenditures, 
discounted over the lifetime of the appliance. The life-cycle cost was 
calculated for the range of efficiencies analyzed in the ``Engineering 
Analysis'' section of the TSD, for each class, in the year standards 
are imposed, using real consumer discount rates of six percent.
    For the representative class, life-cycle costs at standard levels 
1-3 as well as the supplemental level are less than the baseline unit. 
Standard level 1 would reduce life-cycle costs for the average affected 
consumer of $6.76 for the representative class of room air conditioner; 
standard level 2 would reduce average life-cycle costs by $6.67, 
standard level 3 by $8.48, and the supplemental level by $6.59; for 
standard levels 4 and 5, the life-cycle costs are projected to increase 
$19.4 and $328, respectively, compared to the base case. Of the five 
candidate standard levels, a unit meeting standard level 3 would have 
the lowest consumer life-cycle cost for the representative class. See 
Figures 4.4, Tables 4.1-4.18, and Supplemental Tables 4.1-4.18 in the 
TSD.
    The Department's baseline method of analysis <SUP>6</SUP> 
calculated costs of increasing

[[Page 50143]]

chassis size at the standard level at which the baseline required a 
chassis size change. This analysis produced the preceding values for 
life-cycle cost. In addition, AHAM provided analysis in which the cost 
of increasing chassis size was prorated at each standard level. Using 
this method and the data provided by AHAM (AHAM, RAC No. 9 at 
Attachment 3A), for classes 1-5, which make up 85 percent of the 
shipments, the supplemental standard level has the lowest life-cycle 
cost when prorating chassis size cost.
---------------------------------------------------------------------------

    \6\  The engineering analysis is conducted on the basis of 
selecting a representative ``baseline'' unit for each room air 
conditioner product class. The selected ``baseline'' unit is an 
actual room air conditioner model that has an EER close to the 
existing minimum efficiency standard and a cooling capacity that is 
representative of most units in the product class. The physical 
characteristics of the ``baseline'' unit (e.g., compressor 
efficiency and heat exchanger design) dictate which design options 
can be considered to improve its efficiency and at what rate the 
manufacturer cost will be increased. The selected ``baseline'' 
unit's physical make-up is known not to be representative of all 
minimum efficiency equipment in its product classes. But because its 
EER and capacity are representative, it is assumed that the design 
options that are added to improve its efficiency will yield a 
manufacturer cost vs. efficiency relationship that is representative 
of all ``baseline'' units in the product class, irrespective of 
physical design.
---------------------------------------------------------------------------

    The Department examined the effect of different discount rates (2, 
6, and 15 percent) on the life-cycle cost curves and generally found 
little impact. See Figures 4.1-4.9 in the TSD. Life-cycle cost 
sensitivity to changes in energy price and equipment price were 
analyzed. See Figure 4.10, Table 4.19, and Supplemental Table 4.19 in 
the TSD. This analysis shows that the life-cycle cost minimums remain 
unchanged at high energy prices. For low State energy prices, any 
increase in standard above the baseline, shows a life-cycle cost 
increase; however, through standard level 3, this increase is less than 
$3 (and approximately $1 for the standards in today's rule).
    As previously addressed under Discussion of Comments, the 
Department also calculated life cycle costs and paybacks using energy 
prices calculated by the Gas Research Institute (GRI). (See the 
Supplemental Sensitivity Analysis subsection of the TSD.) The life-
cycle minimums resulting from the GRI projections remain unchanged from 
the analysis using the AEO price forecasts. The payback periods 
increase slightly, using the GRI forecasts, but remain well within the 
expected lifetime of the product.
    The Net Present Value analysis, a measure of the net savings to 
society, indicates that for all classes of room air conditioners, 
standard level 1 would produce an NPV of $0.40 billion to consumers. 
The corresponding net present values for standard levels 2-5 are $0.54 
billion, $0.59 billion, $-0.26 billion, and $-10.9 billion, 
respectively (based on AEO 1995 energy price projections). See Table 
3.6 in the TSD. The NPV for the supplemental level is $0.51 billion 
using AEO 1995, for basis of comparison. Using AEO 1997 data, the NPV 
of the supplemental level is calculated to be $0.45 billion. See the 
Supplemental Sensitivity Analysis subsection of the TSD.
    A sensitivity analysis was also conducted for energy savings and 
Net Present Value (NPV), using GRI forecasts for the following cases: 
the GRI fuel price projection, low equipment price, high equipment 
price, and high efficiency trend. (See the Supplemental Sensitivity 
Analysis subsection of the TSD.) The results of this analysis show that 
although the NPV and energy savings change in each scenario, both the 
NPV and the energy savings remain positive, indicating an overall 
benefit to the consumer and the nation.
3. Energy Savings
    EPCA requires DOE to consider the total projected energy savings 
that result from revised standards. The Department forecasted energy 
consumption through the use of the LBL-REM. (See Appendix B of the TSD 
for a detailed discussion of the LBL-REM.) The projected savings using 
AEO 1997 is 0.64 Quad for the supplemental level. See Supplemental 
Table 3.97 in the TSD. Also, see section IV.c. in today's rule for the 
energy savings of the other efficiency levels.
4. Lessening of Utility or Performance of Products
    In establishing classes of products and design options, the 
Department tried to eliminate consideration of any design option that 
would result in degradation of utility or performance. Thus, a separate 
class with a different efficiency standard was created for a product 
where the record indicated that the product included a utility or 
performance-related feature that affected energy efficiency. For 
example, the Department added classes for casement-only and casement-
slider room air conditioners. These room air conditioners offer the 
unique utility of fitting into slider and casement windows. In this 
way, the Department attempted to minimize the impact of amended 
standards on the utility and performance of room air conditioners.
5. Impact of Lessening of Competition
    The Energy Policy and Conservation Act directs the Department to 
consider the impact of any lessening of competition that is likely to 
result from the standards, as determined by the Attorney General.
    In a letter dated September 16, 1994, the Department of Justice 
(DOJ) expressed concern about the effects the standards proposed in the 
1994 Proposed Rule might have on industry. DOJ stated that there was 
evidence that some of the design options suggested in the 1994 Proposed 
Rule were less effective and more costly than the TSD indicated and 
that manufacturers may, among other things, need to redesign the 
chassis of some classes to comply with the standard. DOJ concluded that 
such redesigns could add to unit installation costs, make units larger 
and more cumbersome to install, and otherwise depress demand. 
Furthermore, DOJ noted evidence that at least one product, the five 
thousand Btu/h unit, may cease to be manufactured if the standard 
proposed in 1994 were adopted. DOJ was also concerned about the 
availability and efficacy of some design options suggested in the TSD 
for the Proposed Rule. DOJ concluded that the proposed standard could 
have a substantial negative impact on demand and rates of return, and 
could cause one or more firms to cease the manufacture and sale of some 
of these products, thus lessening competition. (DOJ, No. 840 at 5.) The 
September 16, 1994, letter is printed at the end of today's rule.
    The Department of Justice comments were based on the standards 
proposed in the 1994 Proposed Rule. The revised analysis contained in 
the 1996 Draft Report and the supplemental analysis, and commented upon 
by the public, addressed many of the concerns raised by DOJ. The 
standards promulgated in today's final rule have been adjusted from the 
proposed standards in order to mitigate the types of concerns raised by 
DOJ. For example, the Final Rule sets the same standard level for class 
1 as for class 2, addressing the concern that class 1 units would be 
eliminated from the marketplace as a result of the revised standards. 
The Department's revised analysis addressed concerns about the 
installation costs and chassis size increases, and the standards in the 
Final Rule reflect this revised analysis. The manufacturing impact 
analysis shows no significant shifts in manufacturer rates of return 
under the supplemental standards level. Thus, the Department of Energy 
concludes that the concerns raised by the DOJ have been addressed, and 
DOE does not expect competition to be negatively impacted by this final 
rule.
6. Need of the Nation to Save Energy
    Enhanced energy efficiency improves the Nation's energy security, 
strengthens the economy, and reduces the environmental impacts of 
energy production. In 1997, 3.4 percent of residential sector 
electricity consumption (corresponding to 0.38

[[Page 50144]]

quad source energy) was accounted for on a national basis by room air 
conditioners. The Department estimates that over 30 years the revised 
standards will save approximately 0.64 quads of primary energy.
7. Other Factors
    Decreasing future electricity demand by means of standards will 
decrease air pollution. Standards will result in a decrease in nitrogen 
dioxide (NO<INF>x</INF>) emissions. For standard levels 1-5, over the 
years 2000 to 2030, the total estimated NO<INF>x</INF> emission 
reduction would be 55,000 tons; 80,000 tons; 104,000 tons; 141,000 
tons; and 60,000 tons, respectively. For the supplemental level the 
reduction is estimated at 74,000 tons using the AEO 1995 energy prices 
and 95,000 tons using AEO 1997 energy prices. See Tables 7.1-7.5 and 
Supplemental Tables 7.6 and 7.7 in the TSD.

d. Payback Period

    Another consequence of the standards will be the reduction of 
carbon dioxide (CO<INF>2</INF>) emissions. For standard level 1, over 
the years 2000 to 2030, the total estimated CO<INF>2</INF> emission 
reduction would be 30 million tons. For standard levels 2-5, the 
reductions would be 44 million tons; 57 million tons; 79 million tons; 
and 55 million tons, respectively. For the supplemental level the 
reduction is estimated at 41 million tons using AEO 1995 energy prices 
and 54 million tons using AEO 1997. See Tables 7.1--7.5 and 
Supplemental Tables 7.6 and 7.7 in the TSD.
    Energy associated with these standards would also reduce the costs 
associated with SO<INF>2</INF> compliance.<SUP>7</SUP> See Tables 7.1--
7.5 and Supplemental Tables 7.6 and 7.7 in the TSD.
                              ___________


<SUP>7</SUP> Decreases in SO<INF>2</INF> emissions will not occur 
because the Clean Air Act places a ceiling on SO<INF>2</INF> 
emissions that will be met under any regulatory regime. In the case 
of SO<INF>2</INF> therefore, the emissions reductions should be 
interpreted as reduced costs to electricity generators for 
controlling SO<INF>2</INF>. For all classes of room air 
conditioners, over the years 2000 to 2030, the estimated need to 
control SO<INF>2</INF> is estimated to be reduced by 59,000 tons; 
86,000 tons; 111,000 tons; 149,000 tons; and 43,000 tons, for 
levels 1-5, respectively. For the supplemental level the reduction 
is estimated at 79,000 tons. However, using AEO 1997, the reduction 
is estimated at 100,000 tons. This reduced need to control 
emissions will be reflected in lower costs of pollution control at 
utilities or lower price allowances.

    If the increase in initial price of an appliance due to a 
conservation standard would repay itself to the consumer in energy 
savings in less than three years, then it is presumed that such 
standard is economically justified.<SUP>8</SUP> EPCA, Section 
325(o)(2)(B)(iii), 42 U.S.C. 6295(o)(2)(B)(iii). This presumption of 
economic justification can be rebutted upon a proper showing. Failure 
to qualify for this presumption shall not be taken into consideration 
in determining whether a standard is economically justified. Id.
                              ___________


<SUP>8</SUP> For this calculation, the Department calculated cost-
of-operation based on the DOE test procedures. Therefore, the 
consumer is assumed to be an ``average'' consumer as defined by the 
DOE test procedures. Consumers who use the products less than the 
test procedure assumes will experience a longer payback while those 
who use them more than the test procedure assumes will have a 
shorter payback.

    Table 4.2 presents the payback periods <SUP>9</SUP> for the 
efficiency levels analyzed for the representative class of the product. 
For this representative class, none of the standard levels satisfy the 
rebuttable presumption test. Standard level 4 meets the rebuttable 
presumption criteria for classes 4 and 12. Standard level 3 meets the 
rebuttable presumption criteria for classes 1, 4 and 12. The standards 
set forth in today's rule meet the rebuttable presumption criteria for 
classes 1, 2, 4, 8-10, and 12. Payback periods for all classes of room 
air conditioners may be found in Tables 4.10--4.18 and Supplemental 
Tables 4.10--4.18 in the TSD.
                              ___________


<SUP>9</SUP> These payback periods are weighted averages. They 
compare the portion of the projected distributions of designs in 
the base case that are less efficient than the standard level to 
the design at the standard level. Designs with energy consumption 
at or below the standard level are not affected by the standard and 
are excluded from the calculation of impacts.

      Table 4-2.--Payback Periods of Design Options (Years) for the     
              Representative Class of Room Air Conditioners             
------------------------------------------------------------------------
                                                                Payback 
                        Standard level                           period 
------------------------------------------------------------------------
1............................................................        3.8
2............................................................        3.9
Supplemental.................................................        3.8
3............................................................        4.2
4............................................................        8.3
5............................................................       27.2
------------------------------------------------------------------------

e. Conclusion

    1. Additional Product Classes. The Department has added four new 
product classes. First, the Department is adding two classes for 
casement-type units because of the unique utility they offer the 
consumer. The size limitations imposed on casement-type units are more 
significant than the limitations of typical units designed for double-
hung windows, and the performance-related feature (fitting into 
casement windows) justifies a lower efficiency standard. The two 
additional product classes for casement units are casement-only units 
and casement-slider units. In today's rule, definitions for these terms 
are being added to Section 430.2 Subpart A of 42 U.S.C. 6291-6309. For 
today's rule, the Department has selected the efficiency standard 
recommended by AHAM, ACEEE, and NRDC for casement-slider units (9.5 
EER) (AHAM, RAC No. 6 at 2 and ACEEE/NRDC, RAC No. 5 at 5) and the 
standard recommended by AHAM for casement-only units (8.7 EER). (AHAM, 
RAC No. 6 at 2.)
    Second, the Department is splitting each of two classes for reverse 
cycle units into two classes. Splitting of these two classes 
accommodates the concerns expressed in public comments. The class of 
units with a reverse cycle and louvered sides is split between 
capacities of less than 20,000 Btu/h (class 11) and 20,000 Btu/h or 
more (new class 13). The class of units with reverse cycle and without 
louvered sides is split between capacities of less than 14,000 Btu/h 
(class 12) and capacities of 14,000 Btu/h or more (new class 14).
    2. Standards. Section 325(o)(2)(A) of the Act specifies that the 
Department must establish standards that ``achieve the maximum 
improvement in energy efficiency which the Secretary determines is 
technologically feasible and economically justified.'' EPCA, section 
325(o)(2)(A). Technologically feasible design options are 
``technologies which can be incorporated in commercial products or in 
working prototypes.'' 10 CFR part 430, Appendix A to Subpart C, 
4(a)(4)(I).

[[Page 50145]]

A standard level is economically justified if the benefits exceed the 
burdens. EPCA, section 325(o)(2)(B)(I).
    A maximum technologically feasible (max tech) design option was 
identified for each class of room air conditioners. The max tech levels 
were derived by adding energy-conserving engineering design options to 
the baseline units for each of the respective classes in order of 
decreasing consumer payback. The max tech level includes higher 
efficiency fan motors, which were added as one of the first design 
options, and variable speed compressors, which were added as one of the 
last design options because of their slower payback. A complete 
discussion of each max tech level, and the design options included in 
each, is found in the Engineering Analysis in the TSD, Chapter 3.
    Table 5-1 presents the max tech performance levels for all classes 
of the subject product:

  Table 5-1.--Maximum Technologically Feasible Standard Levels for Room 
          Air Conditioners Expressed in Energy Efficiency Ratio         
------------------------------------------------------------------------
                                                              Energy    
                      Product class                         efficiency  
                                                               ratio    
------------------------------------------------------------------------
Without reverse cycle, with louvered sides, and less                    
 than 6,000 Btu/h.......................................            11.7
Without reverse cycle, with louvered sides, and 6,000 to                
 7,999 Btu/h............................................            11.7
Without reverse cycle, with louvered sides, and 8,000 to                
 13,999 Btu/h...........................................            12.4
Without reverse cycle, with louvered sides, and 14,000                  
 to 19,999 Btu/h........................................            12.8
Without reverse cycle, with louvered sides, and 20,000                  
 Btu/h or more..........................................            11.1
Without reverse cycle, without louvered sides, and less                 
 than 6,000 Btu/h.......................................            11.5
Without reverse cycle, without louvered sides, and 6,000                
 to 7,999 Btu/h.........................................            11.5
Without reverse cycle, without louvered sides, and 8,000                
 to 13,999 Btu/h........................................            11.1
Without reverse cycle, without louvered sides, and                      
 14,000 to 19,000 Btu/h.................................            11.1
Without reverse cycle, without louvered sides, and                      
 20,000 Btu/h or more...................................            11.1
With reverse cycle and with louvered sides..............            11.2
With reverse cycle and without louvered sides...........            10.9
------------------------------------------------------------------------

    Accordingly, the Department first considered the max tech level of 
efficiency, i.e., standard level 5. Of the standard levels analyzed, 
level 5 would save the most energy (4.1 quads between 1999 and 2030.) 
However, because many consumers would not purchase room air 
conditioners due to the high first cost associated with this standard 
level, purchases of central air conditioners and heat pumps will 
increase, resulting in a reduction of savings for room air 
conditioners. After accounting for this offset, the net savings is 0.72 
quad. Also, in order to meet this standard, the Department assumes that 
all room air conditioners would incorporate larger and improved heat 
transfer devices in addition to high efficiency, variable-speed fan 
motors and compressors. However, at this standard level, the payback 
period of 27 years for the representative class, and up to 107 years 
for other classes, exceeds the 12.5-year life of the product. The life-
cycle cost increases are $328 for the representative class and up to 
$911 for other classes. This level also drives the short-run 
manufacturer return on equity from 10.9 percent to 0.13 percent. The 
Department therefore concludes that the burdens of standard level 5 for 
room air conditioners outweigh the benefits and that this standard 
level is not economically justified, and thus the Department rejects 
the standard level.
    The next most stringent standard level is standard level 4. This 
standard level is projected to save 1.34 quads of energy. However, many 
consumers would not purchase room air conditioners due to the high 
first cost associated with this standard level, resulting in increased 
purchases of central air conditioners and heat pumps and a reduction of 
savings for room air conditioners. After accounting for this offset, 
the savings are 0.96 quad. For the representative class this level 
produces a life-cycle cost increase of $19 compared to the base case. 
Classes 4 and 12 meet the rebuttable presumption criteria. However, the 
payback period for the representative class is 8.3 years, with payback 
periods of up to 10.6 years for the other classes (80 percent of the 
average product lifetime of 12.5 years). This level also reduces 
manufacturer short-run return on equity from 10.9 percent to 8.8 
percent, a reduction of nearly 20 percent. The Department therefore, 
concludes that the burdens of standard level 4 for room air 
conditioners outweigh the benefits and that this standard level is not 
economically justified, and thus the Department rejects the standard 
level.
    The next most stringent standard level is standard level 3. 
Standard level 3 is projected to save 0.79 quad of energy. After 
accounting for the increased use of central air conditioners and heat 
pumps, the savings become 0.69 quad. For the representative class, the 
analysis shows this level produces a life-cycle cost decrease of $8.5 
compared to the base case and a payback of 4.2 years. This standard 
level meets the rebuttable presumption criteria for classes 1, 4 and 
12. The manufacturer impact analysis for this level shows a 
manufacturer short-run return on equity reduction from 10.9 percent to 
10.5 percent. Although the feedback generated from the LBL-MAM 
indicated acceptable manufacturer impact, the comments received from 
manufacturers on the 1996 Draft Report indicated burdens to 
manufacturers which were not identified by the model. The Department 
believes these impacts must be considered. A class-specific approach 
was taken to consider these impacts.
    For classes 1 through 5, the manufacturers disagreed with the 
Department's baseline method of analysis wherein, for each class, a 
specific model was simulated for improvement up to and including a 
chassis size change, when necessary for that model. AHAM commented that 
this method does not adequately account for the cost of increasing 
chassis size. AHAM believes the cost of increasing chassis size should 
be prorated for each efficiency level analyzed, because at each 
efficiency improvement, some models within each class would need to 
undergo a chassis size change, even though the specific model being 
analyzed did not necessarily need a chassis size change. AHAM provided 
the Department with a graph depicting the percent of production 
required to change chassis size at each standard level for each of the 
first five classes. (AHAM, No, 1 at 14.) AHAM calculates that 
efficiency level 3 would require 39 percent of production to move to a 
larger chassis size. However, because the baseline method of analysis 
does not prorate the cost at each level, the impact of 39 percent of 
production requiring a

[[Page 50146]]

larger chassis is not considered by the model. (AHAM, No. 4 at 3.)
    For classes 6 through 12, AHAM argues that because the engineering 
simulation model was designed using units with louvered sides and 
without a reversing valve, the simulation does not provide a good 
simulation for units without louvers or units with a reversing valve. 
AHAM commented that this inaccuracy understates the extreme differences 
between the air flow patterns on the condenser side of units with and 
without louvers, as well as the refrigeration circuit restrictions 
caused by the reversing valve and concessions made to balance both 
cooling and heating in one unit. As addressed in section III, 
``Discussion of Comments,'' manufacturers emphasize that increasing the 
standards could eliminate higher capacity models from the market due to 
the impracticality of increasing the chassis size for these units. 
(AHAM, RAC No. 4 at 3-4.)
    For these reasons, the Department concludes the burdens of standard 
level 3 outweigh the benefits and that the standard level is not 
economically justified, and thus, the Department rejects this standard 
level.
    Based on the comments received regarding the 1996 Draft Report, the 
Department next considered a supplemental efficiency level. The 
comments the Department received in response to its 1996 Draft Report 
contained recommended standards from AHAM and from ACEEE and NRDC. 
These recommended standards fell in the range between efficiency levels 
1, 2 and 3, depending on the product class.
    For classes with louvered sides and without a reversing valve, 
ACEEE and NRDC recommended 10.0 EER for the first four classes, while 
AHAM recommended 9.5 EER for the first four classes. For class 5, all 
three organizations supported an 8.5 EER. AHAM calculated the life 
cycle costs when prorating the cost of increasing the chassis size for 
each of the efficiency levels. The life cycle cost minimums fell in the 
9.7-9.8 range for the first four classes and 8.5 EER for class 5. The 
Department concluded that these life-cycle cost minimums should be 
considered in the supplemental efficiency level.
    For classes without louvered sides and without a reverse cycle, the 
Department also received comments and recommendations for efficiency 
standards. For most of these classes, both AHAM and the efficiency 
advocates agreed upon standard levels. Consequently, these levels were 
selected for the Department's supplemental efficiency level. For class 
8, upon which AHAM and the efficiency advocates had differing 
recommendations, the Department concluded, after analyzing the AHAM 
Directory, that there is evidence that increasing standards for units 
without louvers and without reverse cycle may result in eliminating 
higher capacity units from the market. Thus, the Department chose 8.5 
EER for this class.
    For classes with a reverse cycle, the Department again took the 
comments and recommendations it received into consideration in adding 
and establishing efficiency levels to examine as part of the 
supplemental efficiency level. In response to public comment, the 
Department split the two classes for reverse cycle units in order to 
address the concerns of AHAM, ACEEE, and NRDC.
    After carefully considering the analysis, the Department is 
amending the existing statutory standard for room air conditioners with 
the supplemental standard level for room air conditioners. The 
Department concludes that the supplemental standard level for room air 
conditioners saves a significant amount of energy and is designed to be 
technologically feasible and economically justified.
    This level of efficiency will result in significant energy savings. 
During the period 2000--2030, these savings are calculated to be 0.64 
quad <SUP>10</SUP> of primary energy. In addition, the standard is 
expected to have a positive effect on the environment by reducing the 
emissions of NO<INF>X</INF> and CO<INF>2</INF> by 95,000 tons and 54 
million tons, respectively.
---------------------------------------------------------------------------

    \10\ This value was calculated using AEO 1997 and factoring in 
the offset from the increased use of central air conditioners and 
heat pumps.
---------------------------------------------------------------------------

    The technologies that are necessary to meet this standard are 
presently available. The Department finds this level to be economically 
justified. The consumer payback of this standard level is 3.8 years for 
the representative class and no more than 5 years for any class. This 
standard is at or close to the lowest life-cycle cost for all classes 
and is expected to result in a reduction in life-cycle cost of 
approximately $6.6 for the representative class and up to $23 for the 
other classes. Additionally, the standard is expected to have a small 
impact on the prototypical manufacturer's short run return on equity 
and no impact on their long run return on equity, as calculated by the 
Department. Furthermore, the efficiency levels are reasonably close to 
the standards recommended by AHAM, which presumably reflect acceptable 
manufacturer impacts. Although stakeholder consensus was not reached, 
the public comments converged following the reanalysis, meetings with 
stakeholders, and the notice reopening the comment period. The 
efficiency levels selected for today's rule fall within the small range 
of difference between the stakeholder recommendations. These efficiency 
levels address the concerns raised by the Department of Justice with 
regard to the standards in the 1994 Proposed Rule. In addition, since 
this standard does not involve substantial redesign or retooling, the 
Department expects that it will not have negative impacts on smaller 
competitors. Moreover, for classes 1, 2, 4, 8-10, and 12 there is a 
payback period of less than 3 years and thus a presumption of economic 
justification. For these reasons, DOE concludes that these standard 
levels are economically justified and thus promulgates them as 
revisions to the existing standards.

V. Procedural Issues and Regulatory Review

a. Review Under the National Environmental Policy Act

    In issuing the proposed rule, the Department prepared an 
Environmental Assessment (EA) (DOE/EA-0819) that was published within 
the Technical Support Document for the Proposed Rule. (DOE/EE-0009, 
November 1993.) The environmental effects associated with various 
standard levels were not found to be significant, and a Finding of No 
Significant Impact (FONSI) was published. 59 FR 15868 (April 5, 1994).
    In conducting the analysis for the final rule, the Department 
evaluated several design options suggested in comments on the proposed 
rule. As a result, the energy savings estimates and resulting 
environmental effects in the final rule differ somewhat from those 
presented in the proposed rule. For example, by the year 2030, the 
reductions in nitrogen dioxide (NO<INF>2</INF>) and carbon dioxide 
(CO<INF>2</INF>) emissions from the standard on room air conditioners 
are expected to be 95,000 tons and 54,000,000 tons respectively. The 
environmental effects expected from the final rule fall within ranges 
of environmental impacts that DOE found in the FONSI not to be 
significant.

b. Review Under Executive Order 12866, ``Regulatory Planning and 
Review''

    Today's regulatory action has been determined to be an 
``economically significant regulatory action'' under Executive Order 
12866, ``Regulatory Planning and Review.'' 58 FR 51735 (October 4, 
1993.) Accordingly, today's action was subject to review under the

[[Page 50147]]

Executive Order by the Office of Information and Regulatory Affairs 
(OIRA).
    Pursuant to E.O. 12866, DOE prepared a draft regulatory analysis. 
Six major alternatives were identified by DOE as representing feasible 
policy alternatives for achieving consumer product energy efficiency. 
Each alternative was evaluated in terms of its ability to achieve 
significant energy savings at reasonable costs and has been compared to 
the effectiveness of the rule. 59 FR 10464, 10525-6 (March 4, 1994.) No 
new data has been received concerning this review, and no substantive 
changes have been made to this action since the review of the draft by 
OIRA. The non-regulatory alternatives analyzed in the draft Regulatory 
Analysis were evaluated for the eight products in aggregate. None of 
the alternatives analyzed saved as much energy as the standards in the 
Proposed Rule. The Department believes that the non-regulatory 
alternatives for each product would have energy savings proportional to 
the savings for all eight products. Therefore, the Department concludes 
that non-regulatory alternatives are not likely to meet or exceed the 
energy savings expected from the standards set forth in today's rule.

c. Review Under the Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., requires an 
assessment of the impact of regulations on small businesses unless an 
agency certifies that the rule will not have a significant economic 
impact on a substantial number of small businesses and other small 
entities. To be considered a small business, a manufacturer of room 
air-conditioners and its affiliates may employ a maximum of 750 
employees. (Small Business Administration size standards, 61 FR 3280.) 
In the notice of proposed rulemaking, DOE certified pursuant to section 
605(b) of the Regulatory Flexibility Act that the proposed action would 
not have a ``significant economic impact on a substantial number of 
small entities,'' and, thus, a regulatory flexibility analysis was not 
prepared.
    The Department has not identified any firms that both manufacture 
room air conditioners covered by EPCA, and have, together with their 
affiliates, 750 or fewer employees. The Department estimates there are 
approximately nine domestic firms and six foreign firms that 
manufacture room air conditioners covered under EPCA, with three 
domestic companies holding approximately 70 percent of U.S. room air 
conditioner sales. Many room air conditioner manufacturers are 
affiliated with larger U.S. or foreign firms which manufacture full 
product lines of home appliances.
    DOE's notice of proposed rulemaking elicited no public comments on 
the economic impact of the proposed rule on small businesses. One 
commenter did criticize the Manufacturer Impact Model (MIM) and claimed 
that the model is inadequate for estimating the impact of standards on 
small firms. The comment was not supported by any data to cause the 
Department to conclude that this final rule would have a significant 
impact on small businesses subject to the regulation.
    Today's final rule contains less stringent room air conditioner 
energy efficiency standards than the proposed rule. The final rule 
establishes standards in a range from 8.0 to 9.8 EER, and it would add 
four new product classes to accommodate room air conditioners with and 
without side louvers and reverse cycle as well as casement room air 
conditioners. These changes in the final rule will significantly reduce 
any potential economic impact of the rule on small businesses. 
Therefore, DOE certifies that this final rule will not have a 
significant economic impact on a substantial number of small entities.

d. Review Under the Paperwork Reduction Act

    No new information or record keeping requirements are imposed by 
this rulemaking. Accordingly, no Office of Management and Budget 
clearance is required under the Paperwork Reduction Act. 44 U.S.C. 3501 
et seq.

e. Review Under Executive Order 12988, ``Civil Justice Reform''

    With respect to the review of existing regulations and the 
promulgation of new regulations, section 3(a) of Executive Order 12988, 
``Civil Justice Reform,'' 61 FR 4729 (February 7, 1996), imposes on 
Executive agencies the general duty to adhere to the following 
requirements: (1) Eliminate drafting errors and ambiguity; (2) write 
regulations to minimize litigation; and (3) provide a clear legal 
standard for affected conduct rather than a general standard and 
promote simplification and burden reduction. With regard to the review 
required by section 3(a), section 3(b) of Executive Order 12988 
specifically requires that Executive agencies make every reasonable 
effort to ensure that the regulation: (1) Clearly specifies the 
preemptive effect, if any; (2) clearly specifies any effect on existing 
Federal law or regulation; (3) provides a clear legal standard for 
affected conduct while promoting simplification and burden reduction; 
(4) specifies the retroactive effect, if any; (5) adequately defines 
key terms; and (6) addresses other important issues affecting clarity 
and general draftsmanship under any guidelines issued by the Attorney 
General. Section 3(c) of Executive Order 12988 requires Executive 
agencies to review regulations in light of applicable standards in 
section 3(a) and section 3(b) to determine whether they are met or it 
is unreasonable to meet one or more of them. DOE reviewed today's final 
rule under the standards of section 3 of the Executive Order and 
determined that, to the extent permitted by law, the final regulations 
meet the relevant standards.

f. ``Takings'' Assessment Review

    It has been determined pursuant to Executive Order 12630, 
``Governmental Actions and Interference with Constitutionally Protected 
Property Rights,'' 52 FR 8859 (March 18, 1988) that this regulation 
would not result in any takings which might require compensation under 
the Fifth Amendment to the United States Constitution.

g. Federalism Review

    Executive Order 12612, ``Federalism,'' 52 FR 41685 (October 30, 
1987) requires that regulations, rules, legislation, and any other 
policy actions be reviewed for any substantial direct effect on States, 
on the relationship between the Federal Government and the States, or 
on the distribution of power and responsibilities among various levels 
of government. If there are substantial direct effects, then Executive 
Order 12612 requires preparation of a federalism assessment to be used 
in all decisions involved in promulgating and implementing a regulation 
or a rule.
    The Department finds that this final rule will not have a 
substantial direct effect on State governments. State regulations that 
may have existed on the products that are the subject of today's rule 
were preempted by the Federal standards established in EPCA. States can 
petition the Department for exemption from such preemption based on 
criteria set forth in EPCA. None has done so. Accordingly, the 
Department finds that the preparation of a federalism assessment for 
this rulemaking is not warranted.

h. Review Under the Unfunded Mandates Reform Act

    With respect to a proposed regulatory action that may result in the 
expenditure by the private sector of $100 million or more (adjusted 
annually for inflation), section 202 of the

[[Page 50148]]

Unfunded Mandates Reform Act of 1995 (UMRA) requires a Federal agency 
to publish estimates of the resulting costs, benefits and other effects 
on the national economy. 2 U.S.C. 1532(a), (b). Section 202 of UMRA 
authorizes an agency to respond to the content requirements of UMRA in 
any other statement or analysis that accompanies the proposed rule. 2 
U.S.C. 1532(c).
    The content requirements of section 202(b) of UMRA relevant to a 
private sector mandate substantially overlap the economic analysis 
requirements that apply under section 325(o) of EPCA and Executive 
Order 12866. The Supplementary Information section of the notice of 
proposed rulemaking and ``Regulatory Impact Analysis'' section of the 
TSD for the 1994 Proposed Rule responded to those requirements.
    Under section 205 of UMRA, the Department is obligated to identify 
and consider a reasonable number of regulatory alternatives before 
promulgating a rule for which a written statement under section 202 is 
required. DOE is required to select from those alternatives the most 
cost-effective and least burdensome alternative that achieves the 
objectives of the rule unless DOE publishes an explanation for doing 
otherwise or the selection of such an alternative is inconsistent with 
law. As required by section 325(o) of the Energy Policy and 
Conservation Act (42 U.S.C. 6295(o)), this final rule establishes 
energy conservation standards for room air conditioners that are 
designed to achieve the maximum improvement in energy efficiency which 
DOE has determined to be both technologically feasible and economically 
justified. A full discussion of the alternatives considered by DOE is 
presented in the ``Regulatory Impact Analysis'' section of the TSD for 
the 1994 Proposed Rule.

i. Review Under the Small Business Regulatory Enforcement Fairness Act 
of 1996

    Consistent with Subtitle E of the Small Business Regulatory 
Enforcement Fairness Act of 1996, 5 U.S.C. 801-808, DOE will submit to 
Congress a report regarding the issuance of today's final rule before 
the effective date set forth at the outset of this notice.

List of Subjects in 10 CFR Part 430

    Administrative practice and procedure, Energy conservation, 
Household appliances.

    Issued in Washington, D.C., on September 12, 1997.
Joseph J. Romm,
Acting Assistant Secretary, Energy Efficiency and Renewable Energy.

    For the reasons set forth in the preamble Part 430 of Chapter II of 
Title 10, Code of Federal Regulations, is amended as set forth below.

Part 430--ENERGY CONSERVATION PROGRAM FOR CONSUMER PRODUCTS

    1. The authority citation for Part 430 continues to read as 
follows:

    Authority: 42 U.S.C. 6291-6309.

    2. Section 430.2 of Subpart A is amended by adding new definitions 
for ``Casement-only room air conditioner'' and ``Casement-slider room 
air conditioner'' in alphabetical order, to read as follows:

Subpart A--General Provisions


Sec. 430.2  Definitions.

* * * * *
    Casement-only means a room air conditioner designed for mounting in 
a casement window with an encased assembly with a width of 14.8 inches 
or less and a height of 11.2 inches or less.
    Casement-slider means a room air conditioner with an encased 
assembly designed for mounting in a sliding or casement window with a 
width of 15.5 inches or less.
* * * * *
    3. Section 430.32 is amended by revising paragraph (b) to read as 
follows:


Sec. 430.32  Energy conservation standards and effective dates.

* * * * *
    (b) Room air conditioners.

                                                                        
------------------------------------------------------------------------
                                             Energy efficiency ratio,   
                                                  effective as of       
              Product class              -------------------------------
                                           Jan. 1, 1990    Oct. 1, 2000 
------------------------------------------------------------------------
1. Without reverse cycle, with louvered                                 
 sides, and less than 6,000 Btu/h.......             8.0             9.7
2. Without reverse cycle, with louvered                                 
 sides, and 6,000 to 7,999 Btu/h........             8.5             9.7
3. Without reverse cycle, with louvered                                 
 sides, and 8,000 to 13,999 Btu/h.......             9.0             9.8
4. Without reverse cycle, with louvered                                 
 sides, and 14,000 to 19,999 Btu/h......             8.8             9.7
5. Without reverse cycle, with louvered                                 
 sides, and 20,000 Btu/h or more........             8.2             8.5
6. Without reverse cycle, without                                       
 louvered sides, and less than 6,000 Btu/                               
 h......................................             8.0             9.0
7. Without reverse cycle, without                                       
 louvered sides, and 6,000 to 7,999 Btu/                                
 h......................................             8.5             9.0
8. Without reverse cycle, without                                       
 louvered sides, and 8,000 to 13,999 Btu/                               
 h......................................             8.5             8.5
9. Without reverse cycle, without                                       
 louvered sides, and 14,000 to 19,999                                   
 Btu/h..................................             8.5             8.5
10. Without reverse cycle, without                                      
 louvered sides, and 20,000 Btu/h or                                    
 more...................................             8.2             8.5
11. With reverse cycle, with louvered                                   
 sides, and less than 20,000 Btu/h......             8.5             9.0
12. With reverse cycle, without louvered                                
 sides, and less than 14,000 Btu/h......             8.0             8.5
13. With reverse cycle, with louvered                                   
 sides, and 20,000 Btu/h or more........             8.5             8.5
14. With reverse cycle, without louvered                                
 sides, and 14,000 Btu/h or more........             8.0             8.0
15. Casement-Only.......................               *             8.7
16. Casement-Slider.....................               *            9.5 
------------------------------------------------------------------------
* Casement-only and casement-slider room air conditioners are not       
  separate product classes under standards effective January 1, 1990.   
  These units are subject to the applicable standards in classes 1      
  through 14 based on unit capacity and the presence or absence of      
  louvered sides and a reverse cycle.                                   

* * * * *
    Note: The following letter will not appear in the Code of 
Federal Regulations.

September 16, 1994

Honorable Christine A. Ervin
Assistant Secretary for Energy Efficiency and Renewable Energy
United States Department of Energy, Forrestal Building, 1000 
Independence Ave., S. W., Washington, D.C. 20585

Dear Ms. Ervin:

    By letter dated March 14, 1994, the Department of Energy 
(``DOE'') transmitted to the Attorney General a Notice of Proposed 
Rulemaking (59 FR 10464) addressing energy

[[Page 50149]]

standards for eight classes of household appliances. Those classes 
are: room air conditioners, water heaters, direct heating equipment, 
mobile home furnaces, kitchen ranges and ovens, pool heaters, 
fluorescent lamp ballasts and television sets. Section 325 of the 
Energy Policy and Conservation Act, as amended in 1992 (42 U.S.C. 
6295) (``the Act''), requires the Attorney General to determine the 
impact, if any, of any lessening of competition likely to result 
from the proposed standards. This letter contains the competitive 
impact determination of the Department of Justice (``Department'').

Summary

    The evidence available to the Department does not indicate that 
any significant lessening of competition is likely to result from 
the imposition of the proposed standards for mobile home furnaces 
and pool heaters contained in the Notice. For television sets, 
fluorescent lamp ballasts and professional-style or high-end kitchen 
ranges it is the Department's judgement based on the available 
evidence that significant anticompetitive effects are likely to 
occur. For electric water heaters the evidence indicates that a 
significant anticompetitive effect could take place if sufficient 
time is not permitted firms to develop, produce and market products 
complying with the new standard. For microwave ovens, oil-fired 
water heaters, room air conditioners, and direct heating equipment 
the evidence indicates that anticompetitive effects could result; 
the Department is unable on the basis of the available evidence to 
determine whether such effects are likely. Finally, the evidence 
indicates that the cumulative effects of these and other regulatory 
standards could be to lessen competition in certain markets for 
household appliances.
    In preparing these comments the Department has considered the 
Notice, the Technical Support Document (TSD) prepared by Lawrence 
Berkeley Laboratory, written comments and oral comments collected by 
the department in the time allowed and without the benefit of 
compulsory process.

Discussion

    Adoption of standards requiring greater energy efficiency in 
household appliances could affect competition in a number of ways. 
First, by raising the cost of appliances and reducing design and 
feature choices, standards may lower demand. If standards impose 
costs on manufacturers that can not be passed to consumers they can 
lower manufacturers' rates of return. Either one or both of these 
effects could cause manufacturers to exit the market with the effect 
of lessening competition and raising prices. Second, imposition of 
standards may lessen or discourage competition in the design and 
development of new product features or technologies; such 
competition benefits consumers and the economy.
    The record in this proceeding raises many factual issues 
relating, among other things, to the technical feasibility of 
certain standards, their economic impact on manufacturers and 
consumers and consumer reaction to the changes in products that they 
might require. In numerous instances, industry representatives and 
technical consultants retained by them have challenged assumptions 
and conclusions in the Notice and TSD. The Department is not in a 
position to resolve many of these contested issues on the basis of 
the available record. Accordingly, in some instances, the Department 
is unable to reach a conclusion about the impact of the proposed 
standards on competition.

Fluorescent Lamp Ballasts

    One technical issue that has been raised is whether the proposed 
standards for fluorescent lamp ballasts are attainable with 
currently available technology. Numerous ballast manufacturers 
assert that in many instances they are not. The Department concludes 
that the doubts raised about the technical feasibility of the 
standards are serious and affect a substantial number of ballast 
classes. Thus, if the proposed standards were adopted some or all 
manufacturers would likely have to cease the production of many 
products and competition in the sale of those products would cease 
or diminish.

Television Sets and Related Technologies

    1. The weight of available evidence is that adoption of the 
proposed standard for television sets could force all or many 
manufacturers to revise their products to lessen the number and 
quality of their features. Many in the industry contend that the 
only way to produce products that will comply with the standard 
would be to reduce or eliminate features that consume electricity 
such as brighter pictures, remote control, picture-in-picture, 
improved sound and in-set program guides and other features 
presently being developed. Development and marketing of product 
improvements and new features has been an important factor driving 
competition in the market for television sets. Reducing or retarding 
the development of such features could substantially reduce demand 
for sets, retard development and refinement of technology, and 
reduce utility of the product.
    Manufacturers might attempt to circumvent the proposed standard 
by letting features ``migrate''--incorporating them in units to be 
sold separately or packaged with television sets. It is claimed that 
disaggregating features in this manner will decrease overall 
television energy efficiency. There is evidence that it could also 
lessen competition because the development and marketing of features 
in such attached units could be costly and cumbersome, among other 
things encountering receivers that receive cable signals.
    There is evidence that the proposed standard for television sets 
could affect competition in other markets. Representatives of the 
television industry assert that as the ``Information Highway'' 
develops television manufacturers intend to expand the capabilities 
of their products to include new features to enable them to serve as 
in-home devices for data transmission and communication. They argue 
that the TV receiver, already located in virtually every American 
home, could be a uniquely efficient vehicle for the introduction of 
new data-processing and communication devices. The Department does 
not make final judgement on this contention but does conclude that, 
given the apparent difficulties in the marketing of new features as 
part of attached units, the standard is likely to retard the 
development of technology and inhibit the ability of television 
manufacturers to compete with computer manufacturers and others in 
the development of new technologies and features for the Information 
Highway.

Professional-Style and Standard Ranges

    The Notice proposes a single set of standards for gas ovens and 
cooking tops in household ranges. There is substantial evidence that 
one category of home range cannot be manufactured to meet these 
proposed standards without losing so much of its distinct 
characteristics that it is no longer marketable. Professional-style 
or high-end ranges are products designed to provide some of the 
performance characteristics of professional or restaurant ranges for 
home kitchens. Some of these characteristics which differentiate 
them from standard kitchen ranges, such as high performance burners 
and ovens, involve considerably more energy consumption than do 
standard ranges; the special uses and appeal of these products, and 
their premium in price, depends in good measure on these features. 
Representatives of the range industry assert that high-end ranges 
cannot be modified to comply with the proposed standards without 
giving up so much of the special features of the product that they 
are no longer marketable. The Department concludes that it is likely 
that competition in the manufacture and sale of these products will 
be eliminated if the proposed standards are adopted.
    While not as strong as the evidence relating to professional 
style ranges there is evidence challenging the conclusions in the 
TSD that the proposed standards for standard gas and electric range 
ovens and cooking tops will not require significant retooling or 
redesign and will have not more than minimal impact on 
manufacturers' long run rates of return on equity. The Association 
of Home Appliance Manufacturers contends that the standard could 
have a destructive impact on the range industry. It and various 
range manufacturers claim that design options suggested in the TSD 
are not effective and that compliance would require substantial 
investment in redesign and retooling. The Association also insists 
that suppliers of equipment and technology necessary to comply may 
not be able to respond simultaneously and evenly to range 
manufacturers, a problem that could impose a competitive handicap on 
some range manufacturers.
    A range manufacturer has commented that compliance with the 
standard could seriously weaken it and its ability to compete. There 
is also evidence that the cumulative costs of compliance with this 
standard and with other and future appliance standards could induce 
or force ``full line'' appliance manufacturers to exit one or more 
of the markets that they serve. The range market is concentrated 
and, while there is conflicting evidence, the Department concludes 
that there is a possibility that this proposed standard could force 
one or more

[[Page 50150]]

firms out of the manufacture of standard ranges thus lessening 
competition.

Microwave Ovens

    The Notice and the TSD conclude that the proposed standard for 
microwave ovens will not involve any substantial redesign or 
retooling by manufacturers and will have little impact on their long 
run returns on equity. Representatives of the industry strongly 
challenge these conclusions. For example, a representative of MCD 
Corporation has testified that compliance with the standard would 
require that her company, a manufacturer of microwaves, make large 
investments in retooling, and would threaten its viability. The 
Association of Home Appliance Manufacturers contends that the 
standard will in all likelihood eliminate all U.S. Production of 
microwaves and concentrate U.S. sales in the hands of one or two 
companies. The Department is not in a position to resolve all of the 
contested technical and financial issues but concludes that this 
proposed standard could force some significant producers from this 
concentrated market and substantially lessen competition in it.

Room Air Conditioners

    The Notice and TSD conclude that this proposed standard will not 
involve substantial redesign or retooling and, while it may produce 
some reductions in the short run, will have little or no effect on 
manufacturers' long run returns on equity. This conclusion has been 
challenged by firms in the industry. There is evidence that some of 
the design options suggested in the Notice are less effective and 
more costly than the TSD assumes and that manufacturers may, among 
other things, need to redesign the chassis of some classes to comply 
with the standard. Such redesigns could add to unit installation 
costs, make units larger and more cumbersome to install, and 
otherwise depress demand. There is evidence that at least one 
product, the five thousand BTU unit, may cease to be manufactured if 
the standard is adopted. There are also unresolved issues about such 
matters as the availability and efficacy of some design options 
suggested in the TSD. The Department is not able to resolve these 
issues but concludes that the standard could have a substantial 
negative impact on demand and rates of return, and cause one or more 
firms to cease the manufacture and sale of some of these products, 
thus lessening competition.

Direct Heating Equipment

    Manufacturers of direct heating equipment contend that this 
standard will seriously depress demand for their product and likely 
force some, perhaps all, manufacturers out of this business. Among 
other things, they contend that the TSD substantially underestimates 
the added costs of manufacture, and also the added installation 
costs for venting and wiring, that will be required. They insist 
that consumer cost increases will seriously depress demand for their 
product and that their profit margins will suffer because it will be 
impossible to pass on much of the increased manufacturing costs to 
consumers. The Department cannot resolve many of these issues but 
concludes that there is a possibility that several of the five 
companies that account for most of the production of these products 
might exit the market if the standard is adopted thus substantially 
lessening competition.

Water Heaters

    Manufacturers of oil-fired heaters contend that the proposed 
standard for their product class would threaten the survival of the 
product, likely forcing all or most producers out of this business. 
Some claim that it may not be possible with presently available 
technology to design and manufacture a product that would comply. 
Manufacturers assert that the added costs of producing a product in 
compliance with the standard would, in any event, be considerably 
higher than the TSD indicates and that increases in price would very 
seriously depress consumer demand for this product. Five firms, two 
of them Canadian producers, account for most of the sales of this 
product in the U.S. The Department is not able to resolve all the 
questions raised regarding this standard; it concludes that there is 
at least a possibility that the standard might force one or more of 
these competitors to exitthe U.S. market. Another firm has been 
taking steps to enter the oil-fired water heater market; adoption of 
the standard may deter it from doing so. The loss of one such firm 
could result in a substantial lessening of competition.
    DOE's proposed standard for electric water heaters would, in 
effect, require that such products have an integral heat pump. DOE 
concedes that this would involve major changes and might cause one 
or more existing firms to cease the marketing of electric water 
heaters but believes that other firms such as air conditioner 
manufacturers may begin producing electric water heaters as a result 
of the standard. There are complex and unresolved issues as to what 
would happen to demand for electric water heaters if consumers were 
required to purchase heat pumps with them. It seems clear that the 
price of such units will be considerably higher than that of the 
electric resistance heaters that the standard would remove from the 
market, but the range of future prices, costs of installation and 
maintenance and degree of consumer acceptance of a product that has 
not been widely accepted until now are very difficult to predict. 
Heat pump water heaters may be useful and economically attractive to 
many consumers but serious issues have been raised in this 
proceeding as to whether certain kinds of consumers, such as 
households with relatively little demand for hot water, will derive 
a benefit from the product.
    Even if the heat pump water heater is eventually widely accepted 
in the market the Department has concluded that it is likely that 
competition will be adversely affected for some period of time if 
adequate time is not permitted for the phasing in of the standard. 
Three million units or more of electric resistance units are now 
sold annually in the U.S. Only a few thousand heat pump units are 
now produced annually in this country, by two firms. It could take a 
considerable time for other firms to design new product lines and 
being substantial ne production capacity on line. There is also 
evidence from those with experience with the product that heat pump 
water heaters require special maintenance and servicing. 
Considerable time may be required for firms to develop and train 
adequate distribution and service networks if they are to compete 
effectively. If adequate time for phasing in the standard is not 
allowed, for a considerable period of time there could be fewer 
companies competing effectively in the electric water heater 
business than there are now, and competition in this concentrated 
market could be substantially lessened.

Cumulative Effects of Regulation

    Many of the manufacturers of appliances subject to the proposed 
standards manufacture several different types of appliance, each 
subject to those standards or to others authorized by the Act. As 
indicated above, there is evidence that compliance with some of 
these standards may require manufacturers to make considerable 
investments. It is anticipated that future standards for other 
appliances could require manufacturers to make similar investments. 
Full-line manufacturers such as General Electric, Whirlpool, 
Frigidaire, Amana and Maytag could thus be required to make changes 
in several product lines.
    As the TSD recognizes, it is difficult for manufacturers to pass 
redesign and retooling costs on to consumers. And the impact of a 
single product redesign may fall more heavily on firms with small 
shares of the market since they must write off their costs against 
less sales volume. There is some evidence that firms, particularly 
the smaller ones, facing the prospect of repeated redesigns 
involving several different products, may be induced to cease 
manufacturing one or more of such product lines. Thus to a degree 
that we cannot fully assess there is a possibility that the 
cumulative effect of these and future energy efficiency standards 
could be to lessen competition in one or more home appliance 
markets.

Sincerely yours,

Anne K. Bingaman,
Assistant Attorney General.
[FR Doc. 97-24978 Filed 9-23-97; 8:45 am]
BILLING CODE 6450-01-P